Finance Basics. Organize Your Financial Life. Live Your Financial Life. Get Out of Debt, Free. Financial Education Resources. Assistive Technology

Transcription

1 Finance Basics Organize Your Financial Life Live Your Financial Life Get Out of Debt, Free Financial Education Resources Assistive Technology Assistive Technology Resources

2 Table of Contents Introduction iv Chapter 1: Finance Basics Banks and Credit Unions Checking vs. Savings Accounts Credit and Debit Cards How to Balance Your Checkbook Step 1: Update Your Checkbook Register Step 2: Update Your Checking Account Statement Where Does All My Money Go? Keep All Your Cash Receipts in a Spending Jar Determine Your Income and Expenses Basic Monthly Income Worksheet Do You Receive SSI and Also Work? Types of Expenses Chapter 2: Organize Your Financial Life Step 1: Gather Your Financial and Personal Paperwork Step 2: Organize Your Home Office Step 3: Designate Files as Permanent or Temporary Monthly Bills to Pay Checking and Savings Accounts Income/Wages/Financial Assistance Health Insurance Social Security Assistive Technology and Out-of-Pocket Medical Expenses Other Important Files to Consider Keeping How to Sort Your Mail: The Five-Minute Mail Game Junk Mail Papers to File Bills and Action Items Documents to Carry with You Documents to Place in Your Car Documents to Leave Home and Why Chapter 3: Live Your Financial Life Why You Need a Livable Budget Create a Livable Budget Setting Up a Cash Envelope System Save for Your Future Pay Yourself First Set Up an Emergency Fund Save Three to Six Months Worth of Expenses Expenses Worksheet Start an Assistive Technology Fund Start a Retirement Fund Make a Long-Range Plan for Your Future ii

3 Chapter 4: Get Out of Debt, Free Your Credit Report: Why It s Important How to Get a Copy of Your Credit-Report Skip the Free Reports How to Read Your Credit Reports Can Shopping for the Best Interest Rates Affect Your Credit Score? How to Handle Mistakes on Your Report Steps to Correct Your Credit Report How to Improve Your Credit Score You Can Free Yourself from Debt Myths vs. Facts: The Truth about Credit and Debt Create a Financial Plan and a Debt-Reduction Plan The Debt Snowball Technique Fifteen Quick Tips to Cut Spending Chapter 5: Financial Education Resources Centers for Independent Living Internet Resources: Major Financial Web Sites Chapter 6: Assistive Technology and Insurance Implications Private Insurance Medicare Medicaid Funding Options: DME and AT Differences Finding the Right Assistive Technology Basic Insurance Terms and Concepts Covered Service/Item Copayment Deductible Medical Necessity Certificate of Medical Necessity Tips for Documenting Medical Necessity of DME and AT Chapter 7: Assistive Technology Resources Internet Resources: Major AT Web Sites Centers for Independent Living (CIL) and Peers Assistive Technology and Independent Living Fairs Tips for Choosing the Right Vendors Funding for Assistive Technology: Federal, State, and Community Resources Federal- and State-Funded Programs Community Resources What Is Assistive Technology? Is it Assistive Technology or Durable Medical Equipment? Understanding Insurance Conclusion Acknowledgments iii

4 Introduction There s no question about it: Living with a disability is expensive. Federal and state budget cuts, changes in insurance coverage, continued difficulties in finding quality jobs, and rising costs of living have contributed to making people with disabilities some of the poorest in the United States. That s why learning the financial skills that can empower you to make smart money decisions is one of the best investments you can make in yourself. Learning how to manage your money rather than letting your money manage you will help you now and for the rest of your life. You ll be better able to access the assistive technologies and services you need to live independently, and you ll help ensure a financially secure future. Alpha One and NEFE have provided the information in this booklet to help you gain the money management skills that will support you along your path to financial freedom. You can also use this workbook in a class or peer group setting. We have created a professional companion guide with helpful hints and group exercises along with additional information about financial tips. Download this companion guide from our Web site:. iv

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6 1 Finance Basics This chapter explains the money terms you need to know. It will help provide the basic foundation for your financial decision making by discussing where to keep your money, how to balance your checkbook, and providing tools to examine where your money goes each month which can be a positive first step in creating your livable budget. Banks and Credit Unions A bank is a for-profit, financial institution controlled by a board and stockholders. Bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 for any account (except retirement accounts, for which the limit is higher). A checking account is a service many banks provide to ensure their customers an efficient way to pay bills and deposit money. Checking accounts seldom generate interest. (Interest is money the bank pays you in exchange for keeping your money in the bank account.) A minimum balance is sometimes required and some A credit union is a member-owned, not-for-profit financial cooperative. Credit union deposits are insured by the National Credit Union Share Insurance Fund (NCUSIF). Checking vs. Savings Accounts Understanding the difference between checking accounts and savings accounts is important when it comes to learning how to manage your money. 2

7 banks charge monthly fees. However, the benefits of having a checking account include that you do not have to use money orders or carry large amounts of cash for items such as rent or making a mortgage payment. There is usually a branch or Automated Teller Machine (ATM) nearby and you can access tele-banking/online banking. A savings account is an account that holds your money for future use or emergencies. Savings accounts normally pay you a small amount of interest, which is typically higher than the interest rates that checking accounts generate. You may be able to access your money in a checking or savings account through an ATM using a debit card or ATM card. ATMs are convenient they allow you 24-hour access to money without having to go to the bank or credit union in person. 1 Finance Basics Banks and Credit Unions You may hear the following terms in relation to savings and checking accounts. A withdrawal is money taken out of your account. Debit is another term that simply means money taken out of your account. A debit transaction is an electronic transfer of money from your account. A deposit is money put into the account. A direct deposit is an electronic transfer of money into your checking or savings account. Direct deposits can come from your paycheck, your Social Security check, your pension, perhaps your IRS refund, etc. Credit and Debit Cards A debit card operates like cash or a check. When you make a purchase using a debit card, the bank or credit union withdraws money from your checking or savings account that is linked to the card. With a debit card, the money is taken directly from your account when you make the purchase, so you must have the money in your account to cover the cost. Your bank may charge you a transaction fee or require you to pay interest if you spend more than what is in your account or if you use the bank s overdraft protection. 3

8 1 Finance Basics Banks and Credit Unions The credit-card company or bank may also charge you fees. There may be an annual fee for having the card. There might also be fees charged by the bank or credit union for such things as overdraft protection, online banking, minimum balance, teller use, cash advances, and ATM fees. Your credit limit describes the amount of money you may borrow. The amount depends on your credit history, credit record, length of time as a customer of the financial institution, and so on. Your credit limit is not the same as how much money you have in the account it is not free money and it must be paid back. You have a certain amount of time, called a grace period, from when you make the purchase to when you receive the bill. If you pay the bill in full before the grace period expires, you won t be charged interest on the account. If you pay late after the grace period you will be assessed a late fee. A credit card allows you to purchase now and pay later. It is important to remember that a credit card works like a loan. The credit company or bank is agreeing to allow you to use a predetermined amount of money that you will pay back with interest. To pay the least amount of interest, pay your entire credit card bill at the end of each month. This way, you won t have a balance carried forward, so no interest will be charged on the remaining balance. 4

9 How to Balance Your Checkbook Now that you understand the basic banking terms and ATM Withdrawals and Debits: Make sure you have how banks and credit unions operate, it is time to learn subtracted all recent ATM withdrawals and debits from to balance your checkbook. This helps you get a better your checkbook register. If not, write them into the handle on your money. checkbook register now and subtract the amounts from your total checkbook balance. Learning how to balance your checkbook will help you keep track of exactly how much money you have in your Now look at your checking account statement checking (or savings) account at any point in time. So for fees and interest. grab your checkbook register (the little book with lines Fees: Your checking account statement will list any and spaces), your checking account statement (the recent fees or charges that you may not have subtracted statement your bank sends you to show your from the total balance of your checkbook register. Look transactions over the past month), all your deposit slips, for things like printing charges, overdraft (bounced debit slips, ATM withdrawal receipts, and a calculator to check) fees, or ATM withdrawal fees. If you find fees that learn how to successfully balance your checkbook. you have not already entered into your checkbook Step 1: Update Your Checkbook Register First, be sure your checkbook register is up to date. Here are tips to do that. Deposits: In your checkbook register, make sure you have added all recent deposits. If not, write them into your checkbook register now and add the amount(s) to your total checkbook balance. register, write these in your checkbook register and subtract the amounts from your total checkbook balance. Interest: Your checking account statement will list any credits (money added to your account) that you may not have added to the total balance of your checkbook, such as interest you earned or a refund of charges. 1 Finance Basics 5

10 1 Finance Basics How to Balance Your Checkbook Write these amounts in your checkbook register and add the amounts to your total checkbook balance. After you have made these changes in your checkbook register, circle the checkbook balance. Step 2: Update Your Checking Account Statement Your checking account statement may not show every deposit or withdrawal you have made. Your statement will cover a certain timeframe (for example the 1st to the 30th of the month) so remember that any deposits, checks you wrote, ATM withdrawals, or debits made after that last date might not be on the statement. Do not assume that either the statement balance from the bank or your own checkbook balance is the current balance in your checkbook. To find out your current balance, you need to know which transactions have cleared at the bank or are still waiting to be cleared. Cleared means that the bank or credit union has not yet recorded these transactions in its system). Your checking account statement lists all the deposits, checks, debits, and other transactions in order by date and by check number. Ten Steps to Balancing Your Checking Account 1. Enter your checkbook balance $ 2. Add: any deposits not recorded in your checkbook 3. Subtotal = 4. Subtract: any checks or deductions not recorded in your checkbook 5. Equals: revised checkbook balance $ 6. Next, enter your account balance shown by your bank statement 7. Add: any deposits not included in this statement period 8. Subtotal = 9. Subtract: any outstanding checks see worksheet below (outstanding checks are those that have not yet cleared your account, as shown on your statement). 10. Equals: revised bank balance $ Outstanding Checks Check number + $ + Amount Compare the statement and your checkbook register. Total $ 6

11 Does the new statement balance match the balance you circled in your checkbook? If it does, congratulations! You have balanced your checkbook! If your checkbook balance and the new statement balance do not match, don t panic! It is usually a simple matter of detective work. Here is what to do: Recheck your math in your checkbook and in your totals. Are they correct? Make sure you correctly transferred the balance amount from one page to the next page in your checkbook register. Verify the following for accuracy: deposits on the statement and in your checkbook withdrawals on the statement and in your checkbook ATM and debit transactions money transfers the bank or credit union s math the amount of the check written in your check register matches the amount in the bank statement Give your checkbook a second look. Double-check the math one more time and rework your calculations. If the balances don t match, ask if a trusted family member or friend that s good with money matters can help you. Or, take your statement and all other information to your bank or credit union and ask for assistance. Many banks and credit unions will offer you free (or low-cost) and confidential help in learning how to balance your checkbook. HINT: If you would like more practice, make a copy of the checkbook balance sheet sent monthly by your bank or credit union to practice balancing your checkbook. You can also use the same process to balance your savings account. Next month, you will be able to balance your checkbook in even less time. The more you do it, the easier it gets! 1 Finance Basics How to Balance Your Checkbook If the balances still do not match, take a break and come back to it tomorrow. 7

12 1 Finance Basics Where Does All My Money Go? Keep All Your Cash Receipts in a Spending Jar Find a large jar, or a basket, or shoe box. For one month, any time you use cash to pay for something no matter how small the cost put the receipt in the jar. If you forget to get a receipt, just write down what you bought and the amount you think you spent on a piece of paper and put it in the jar. Do you know where all your money goes each month? If not, you are not alone. Many people have no idea where they spend their money each month. Therefore, they live month to month, hoping to make ends meet. We will show you some quick and easy ways to find out where all your money goes, and to start taking control of your money. With this knowledge, you can help you start to manage your money wisely. This is a tool that can be used to help you live the life you deserve, rather than having your money concerns manage you. At the end of the month, gather all the receipts and separate them into categories. Here are some that may apply to your purchases: groceries incidentals dining out transportation (such as bus tickets, taxis, gas, or tolls) clothing entertainment Add the total money spent for each category, such as groceries $300, clothing $25. Then, total all the amounts. 8

13 Do your spending habits surprise you? Do you see any patterns to your spending? For example, on weekends do you spend more due to impulse buying or dining out? You can learn about your spending habits from what the receipts indicate. Going through your past month s expenses will help you keep track of your spending and curb what you feel is unnecessary spending. Keep this up for at least three months even better is six months to a year if you can. It will give you a clear idea of your spending habits. 1 Finance Basics Where Does All My Money Go? For people who use debit cards or credit cards as well as cash it may be easier to keep a spending diary. A spending diary is a notebook you carry with you to help you keep track of all purchases made whether with cash, your debit card, or your credit card. You would simply enter every item you purchase, how much you spent on it, and how you paid for it. For example: Movie theatre, $8.50, cash. Now you are beginning to know where all your money goes and that is an important first step in taking control of your finances. Determine Your Income and Expenses Income is all of the money you receive each month. There are two basic types of income: Earned income is money you receive in exchange for working. Unearned income is money that you receive from pensions, Social Security Retirement, Social Security Disability or Supplemental Security, long-term or short-term disability, workers compensation, VA pension, in-kind support, or ongoing gifts of money. 9

14 1 Finance Basics Where Does All My Money Go? There are two ways to understand or count how much earned income you have: Gross earnings: Your hourly wage multiplied by the hours worked, or your full annual salary. Net earnings: Your gross earnings minus deductions. Deductions are amounts of money subtracted from your gross earnings to pay for a variety of taxes or benefits, such as: Federal income tax: this money goes to the federal government State income tax: this money goes to your state government Social Security tax: this money goes into the Social Security trust fund to pay for retirement or disability benefits Medicare tax: this money supports the Medicare system When figuring out how much income or money you have each month, always use your net earnings. Now that you understand the differences between net and gross earnings, unearned income, and earned income, you are ready to figure out how much income you have each month. Basic Monthly Income Worksheet Net Wages/Income: $ Social Security Retirement: $ Supplemental Security Income (SSI): $ Social Security Disability Income (SSDI): $ Other: $ TOTAL: $ Do You Receive SSI and Also Work? If you receive Supplemental Security Income (SSI), there is a basic calculation that the Social Security Administration uses to figure out how much SSI to pay you each month. The following example is meant to give you a basic idea of how the Social Security Administration figures SSI amounts for individuals who are working. For exact information on your situation, contact a Community Work Incentives Coordinator (CWIC) or Social Security office in your area. This example does not include the effects of wages on SSDI beneficiaries or retirees. 10

15 Step 1: Step 2: Step 3: Write down your gross wages for the month. This means you must gather one month s worth of pay stubs and add up the gross wages on each of them. That total is your gross wages. Remember gross wages are before taxes and deductions. Subtract $20. This is the General Income Exclusion (GIE). Subtract $65. This is the Earned Income four-paycheck month, Susie will earn $800 gross income or wages. Susie s net (after taxes) income is $740. She also receives SSI income that will be $245. Here is how this is calculated: Step 1: Gross wages: $ Step 2: Subtract GEI: $20.00 = $ Finance Basics Where Does All My Money Go? Exclusion (EIE). Step 3: Subtract EIE $65.00 Step 4: Divide the new total by 2. = $ Step 5: Step 6: This amount is what Social Security will use to determine your new SSI amount. It is your countable income. Subtract your countable income from the amount of your SSI check. Step 4: Divide by 2. $ = $ (Rounded up to $358.00) Step 5: Susie s countable income is $358. Step 6: $603.00** $ = $ Step 7: This is the amount of your new SSI check. Step 7: $245 is Susie s new SSI check amount. Step 8: Add this amount to your net wages. This becomes your total income for the month. Here is an example: Susie works 25 hours a week at a local grocery store as a cashier. She is paid $8 per hour, earning a total of $200 gross income each week. In a Step 8: Add net wages and the SSI check amount or $245 + $740 = $985. When Susie adds her net wages (after taxes) to her new SSI check amount as in Step 8, she ll know how much real income she has for the month. **This figure is the Federal Benefit Rate, which changes each December with the Cost of Living Allowance (COLA). 11

16 1 Finance Basics Where Does All My Money Go? Each state has a Work Incentives Planning and Assistance Program (WIPA). If you are working, consult with your local CWIC or Social Security office to ask about the effects of earned income on their particular set of benefits. To find your state s WIPA, look on the Social Security Web site under the Ticket to Work program. Types of Expenses Now you are ready to look at your expenses. There are three types of expenses: fixed expenses, flexible expenses, and discretionary expenses. Fixed Expenses are items in your budget that cost the same every month. Here are some examples of fixed expenses: rent or mortgage payment property taxes insurance payments for automobiles or health care medical needs: doctor visits, dentist visits monthly prescription costs and co-pays loan payments for automobiles, home equity loans, etc. Flexible Expenses can vary from month to month. Here are some examples of flexible expenses: groceries electric bill heating bill gasoline for your car telephone bill or cellphone bill credit-card payments Discretionary Expenses are items you can spend money on after you ve paid your Fixed Expenses and Flexible Expenses, such as: dining at restaurants going to movies new clothing magazine subscriptions cable TV or satellite TV The money left over after paying fixed and flexible expenses some people refer to as discretionary income. 12

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18 If you ever ask yourself Where did I put that bill? or Which pile is that receipt in? then this chapter is for you. We have all been in this situation at one time or another. 2 Organize Your Financial Life Why sort financial records and keep accurate files? It will help you to know what you owe to whom, when you need to make a payment, and it will give you quick access to important documents in an emergency. Good recordkeeping will also give you easy access to information if the Social Security Administration or any other agency asks for your financial or personal information. When you ve organized your financial papers, it will be much easier for you to create a working, livable budget. This is covered in Chapter 3. Organizing your files and creating a budget will give you a solid handle on your overall financial situation and allow you to set long-term goals that will help you attain the assistive technology and other services you need today, and plan for a more secure financial future. Step 1: Gather Your Financial and Personal Paperwork Schedule a time to locate and to pull together all of your important papers, bills, insurance, and other financial records. Once you have all the paperwork together, separate the papers into their own category piles: telephone bills, electric bills, rent or mortgage, health insurance, and so on. Next, take each pile and put the documents in order with the most recent month on top and the oldest on bottom. Therefore, if it is June, June is on top, followed by May, April, and so on. This will help you see if you are missing any papers. If you are missing anything, make a note on a piece of paper and place the paper where the missing document should be. If you cannot find it, then call the company and get a copy sent to you. 14

19 HINT: Reviewing a year s worth of bills can show you what you actually spend on each bill in an average month, quarter, or year. This way, you can also see the seasonal costs of each expense. This is a more accurate way of determining your expenses than averaging out your last few months bills. Also, many federal and state agencies require a year s worth of proof of payment of utilities or other household expenses before determining your eligibility for services. At the end of the calendar year, sort through the files and discard old bills you no longer need. In many cases such as with mortgages, student loans, and credit card debts you will want to keep the bills as proof of payment until the loan, debt, or mortgage is paid off in full. Step 2: Organize Your Home Office Create a home office area to keep all of your files in one safe, accessible place. It doesn t have to be a separate room, but simply a desk or a table. Keeping all your files in one place eliminates stress and confusion caused by trying to locate missing bills or paperwork in different piles around your home. It is helpful to have a few pens, envelopes, stamps, a recycle paper bin, a trash can, a pair of scissors or a shredder, and some file folders in the same area as your files and bills. You can ask family and friends if they have office supplies they no longer need. You might also want to check out the local dollar store or recycling center. Many times, office supplies are available at recycling centers and they will give them to you free of charge. You can buy an inexpensive file box or a cardboard box to hold your finished files. Just make sure whatever you use is big enough to hold the files standing up so you can read the labels and not bend the files. Step 3: Designate Files as Permanent or Temporary How long should you keep the paperwork in your files? It varies. The following sections describe important files you might want to keep and when you might be able to safely throw away files. Monthly Bills to Pay Place all incoming bills in the Monthly Bills to Pay file. Organize them so that the bills due at the beginning of 2 Organize Your Financial Life 15

20 2 Organize Your Financial Life Designate Files as Permanent or Temporary the month are in front, bills due mid-month are in the middle, and the bills due the end of the month are last. Placing bills in the order they need to be paid can help you to remember to pay them on time. Once you pay a bill, get in the habit of writing the date you paid the bill and the check number on the bill. This will help you follow up on the bill if you need to at a later time. Then, put each paid bill into the individual bill files that you have already created. For example, after paying your electricity bill, place it in the electricity bill folder, and keep it separated from the yet-to-be paid bills. HINT: To make it easy to remember when to pay bills, you can find a bill holder that has a slot with each day of the month at dollar stores. Just remember when filing each bill that it needs to be paid and mailed about a week to 10 days before the due date. Checking and Savings Accounts Place all balanced monthly statements from your bank or credit union in this file. Once you have balanced your checking and/or savings account statements, staple that month s canceled checks, ATM receipts, and any transaction records and deposit slips to the back of that statement. Keep account statements in monthly order with the most recent month on top and the oldest on the bottom. It is a good idea to save your checking and savings accounts statements because many entities providing benefits such as fuel assistance, general assistance, or food stamps may request them. Also, if you are involved with buying a house, your mortgage broker may request these. HINT: If you have separate checking and savings account statements, create two separate files. Keep at least a year s worth of statements until you get your year-end statement. Keep the statements longer if needed for tax purposes. Income/Wages/Financial Assistance Make a separate file folder for each job you have. Place all of your paycheck stubs and letters from your employer in each job file. Make separate files for your Social Security benefits income, SSDI, SSI, or workers compensation, food stamps, and so on. Place all letters, notices that you receive, letters you send, and proof of direct deposits in these files. 16

21 HINT: Use the Income and Support Worksheet and fill in the totals for each job or income source to make a list of your monthly gross income. A master list with your total income broken down by its source and with monthly totals can help you with preparing your taxes and verifying your income if needed. Keep at least a year s worth of income records until you get your yearend wage statements (W-2s, 1099s, etc.). Keep them longer if needed for tax purposes. Health Insurance In this file folder, place your most recent paid insurance bill on top and previous paid bills in order underneath going backwards in time. Also, in this file folder place your health insurance policy, a copy of your insurance card, and any letters or statements that the agencies might send you, as well as copies of letters you send to them. Social Security Create file folders for your Social Security benefits records. Social Security will send you annual notices around your birthday as to what you can expect to receive if you retire at a certain age. This file needs to be separate from the files you might have already created for insurance benefits (Medicare, Medicaid) or income payments you are receiving (SSDI or SSI). If you are paying down an overpayment to the Social Security Administration, create a separate file for the overpayment issue. Keep a clear record of all payments to you or payments you are making on an overpayment. Keep all letters from the Social Security Administration as well as copies of letters you send. In most cases, keep your Social Security file forever. Keep income records at least until you get your year-end statement or your overpayment is settled. Keep income records longer if needed for tax purposes. 2 Organize Your Financial Life Designate Files as Permanent or Temporary 17

22 2 Organize Your Financial Life Designate Files as Permanent or Temporary HINT: Take notes on all face-to-face or telephone conversations you have with Social Security, health insurance agency caseworkers, or insurance company staff. Log the time and date of the conversation, the name of the person you spoke with, their job title, the purpose of the conversation, what was decided, and what will happen next. Place these notes in the file folders so you can follow up with a second telephone call or a written letter if needed. It is a good practice to keep these notes as long as you have the insurance policy, Social Security benefit, or other benefit. Assistive Technology and Out-of-Pocket Medical Expenses Place any receipts for your purchases of assistive technology or out-of-pocket medical expenses (things that were not paid for or reimbursed by any insurance) in this file. Items that qualify include copays, small or large equipment purchases, auto repairs, transportation to and from medical-related appointments, parking fees and tolls, hotel stays, and even food expenses if you travel long distances for treatment. deductible from your taxes or deducted from your gross income to lower your income, which may make you eligible for additional financial assistance or social services. (One example of this would be a potential rent reduction if you live in subsidized housing.) Keep these files for one year or until you file your tax return. Keep these longer if you are awaiting reimbursement from your insurance company. Other Important Files to Consider Keeping Using the same steps as before, decide if you want to create new files for categories such as life, home/rental, or automobile insurance; automobile or other loans; your medical records; and so forth. The list can vary between insurance companies, so keep track of what you use or buy that is in any way related to your disability. Some expenses might be 18

23 How to Sort Your Mail: The Five-Minute Mail Game Try to get in the habit of placing all your mail in your home office area. When you first bring in your mail, do a quick sort into three categories: Junk Mail (shred, trash, or recycle), Papers to File, and Bills and Action Items. Junk Mail Cut up or use a paper shredder and then throw into the trash any junk mail with your name and any identification on it. Do not risk placing it in a recycling bin where someone might find it. Throw all other junk mail into the recycle bin. Be honest with yourself about catalogs. Will you really have time to look at them this week, or even this month? If you know you will read them within the month, keep them. Or, if you know you can find the information you need later online, recycle them as soon as you get them. Papers to File Create a folder named Papers to File. Place papers you need to file in this folder. If you have time, file them as soon as you finish your quick five-minute mail sort. Or, file them when you sit down to pay your bills. Bills and Action Items Place any bills in your Monthly Bills to Pay file. Place other important mail you need to act on (such as making a call or writing a response) in a file called Action File. When you sit down to pay bills, respond to these items and then file them as needed. If you get in the habit of doing this sort each day, you will have fewer piles of paper in your home. You will be free from paper clutter and more organized. 2 Organize Your Financial Life 19

24 Documents to Carry with You 2 Organize Your Financial Life Make a list of these documents for your home file so you and your family will know where they are. Be sure to carry these documents with you at all times. Driver s License: This is widely accepted as a major form of personal identification, evidence of your legal eligibility to drive, and proof of where you live. Personal Identification Card: This card is available in most states to non-drivers at your state Department of Motor Vehicles. It is widely accepted as a major form of personal identification and proof of where you live. Emergency Contact Card: A small card that has your name, address, and telephone number and the name of a person(s) to notify in case of emergency. Medical Emergency Card or Bracelet: This lists information including your preferred doctor (name, address, and telephone numbers); blood type; allergies to drugs; whether you have diabetes, epilepsy, or another health condition; and any other critical information needed for emergency treatment. Insurance Cards: Carry your private insurance, Medicare, or Medicaid insurance cards unless there is a Social Security number on it (yours or a family member s). This is your primary way to receive coverage and benefits when admitted to a hospital. HINT: If your Social Security number is on any card, make a photocopy and then use a permanent marker to cross out the last four numbers of your Social Security number on the copy. Carry the photocopy with you, but leave the original card at home unless you know you will need it for a specific appointment that day. This is one way to protect yourself against identity theft. Documents to Place in Your Car Insurance companies provide extra insurance cards for your wallet and your car. Place one insurance card in your wallet and the other in your glove box along with your car registration. 20

25 Documents to Leave Home and Why Do not carry your Social Security card or any other card having your Social Security number on it. Do not carry bank/credit union or savings account cards unless you plan to use them that day. HINT: Here is an interesting article about identity theft from the Washington Post on Oct. 14, 2006, written by Fred H. Cate, director of the Indiana University Center for Applied Cybersecurity Research, Identity theft is most commonly the result of information being obtained directly from victims, not through security breaches. According to a 2005 Javelin Strategy & Research survey, the most common source was a lost or stolen wallet, checkbook, or credit card. Additionally, cited was thirty-five percent of identitytheft cases in which the perpetrator was identified involved a family member or relative, and 18 percent a friend or neighbor. This means that roughly half of all known identity thieves were not strangers. 2 Organize Your Financial Life This article indicates that by following the simple steps outlined here and keeping your private information private, you can reduce your chances of being a victim of identity theft. 21

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27 Failure to plan for the financial future can affect your life today, and tomorrow. If your disabilities cause you to live near or below the poverty line and struggle financially, you may be tempted to use credit as a means to pay for basic living expenses such as rent and groceries, and to fund assistive technology and adaptive equipment not covered by insurance. One way you can stop this pattern is to gain more control over your financial situation and to make informed decisions about your spending. One of the best tools you can use to achieve this is a Livable Budget. Why You Need a Livable Budget Budgets (also known as spending plans) are for everyone but too few people take the time to create a budget. Many people fear money and feel like they are doing math homework when they think of creating a budget. Or, they think that creating and maintaining a budget takes too much time, or that it will be restrictive. your money. A budget allows you to decide where you want your money to go before you spend it. It shows you how much money you have and how to rearrange your budget in order to stay on track. The fact is, with the sample budget forms in this booklet, computer-based budgeting programs, or free downloadable budget software, once you set up your monthly budget it takes very little time to maintain it. 3Live Your Financial Life Even if you don t have a budget, you still make decisions every day about where your money goes. However, if you have a budget, it will help you manage 23

28 3Live Your Financial Life Taking the time to create a Livable Budget may help reduce your fears and lower your level of financial stress. A budget may help you get out of debt or build your savings. A budget may also be a tool that helps you talk with your family, spouse, or partner about short-term and long-term financial goals. Your budget may help you set long-term, realistic financial goals to plan for large purchases such as assistive technology that you might need, to start saving for an emergency fund, or to begin contributing to a savings account. In short, creating a Livable Budget may help you find ways to help your money work for you. Create a Livable Budget To create a budget that fits you, gather your financial information including the files containing bank statements, pay stubs, Social Security statements, bills, and the totals of the cash receipts from your spending jar. These will be the first tools you need to create your initial Livable Budget. Using all your financial information and bills, start entering the totals into one of the sample budget forms provided in the forms section of this book. We provide a quick budget form and a more detailed budget form you can use. Starting with the quick budget form, fill in the categories that apply to you. Do not forget to break down into monthly amounts any expenses that are due quarterly (four times a year), semiannually (twice a year), or annually (once a year) that you will need to set aside money for (for example, yearly car insurance $ months = $50 a month). Most importantly, remember the budget is yours to control it is a reflection of how you want to spend your money. It is a tool to help you be more independent. Set time aside every week to go over your budget and see if you are still on track with your spending. At the end of each month, review your expenses and see how well you followed your budget. If you need to rearrange some budget amounts, do that for next month s budget. If you didn t meet your budget goals, reevaluate your expenses and your spending habits so next month you may be able to meet your budget. Your expenses might vary a little from month to month, but by sticking to your Livable Budget, you will begin to move toward your goals. 24

29 number of envelopes full of cash you have on hand and thus limit the temptation to borrow from your envelopes. Having all your money in envelopes may also place you at risk of being robbed, so try using just a few cash envelopes for your small basic cash-based or discretionary expenses. Just like the spending jar, which helped you set up your budget, the cash envelope system is a simple but powerful tool for tracking your cash expenses and for helping you stay within your budget goals. 3Live Your Financial Life Setting Up a Cash Envelope System Once you have a budget in place, think about how you would like to handle the things you normally pay for with cash. Would paying them by check be easier or safer? Today, with many options available for free checking accounts, it s safer and easier to track your money if you play for most expenses with checks rather than cash. For the few remaining cash items in your budget, consider using cash envelopes. The cash envelope method of managing money has been around a long time. It s a good idea to limit the First, create a few envelopes with the names of the expenses you are planning to use cash for this month. Each expense will have its own envelope. For example, take an envelope and write the word Food on it. Second, place in the envelope the budgeted amount of money you have decided to spend on the expense. Do this with all your other cash expenses such as clothing, gas, and so on. The money for each expense should stay in its separate envelope until you need it for that expense. Each day, take with you only the envelopes you need that day. For example, take your Food envelope if you plan to go food shopping or your Clothing envelope when you go clothes shopping. The key is to spread the 25

30 3Live Your Financial Life money out over the month and only spend the total amount you budgeted. When the envelope is empty, unless it s a true emergency, do your best to stop spending on that category for the rest of the month. If you must borrow from one envelope, track the transfer amount so you know to increase or decrease that item in your budget next month. Save for Your Future Even small amounts of money, saved regularly, add up over time. It can be easier to save if you plan for your savings. Make savings an expense item on your budget. Set aside money in your budget each month for savings but do not save money if it means you cannot pay your bills. Begin by using money you do not need to spend on bills each month. Following are a few steps you could take to help you start saving for your future. Pay Yourself First You may have every intention of saving the money that s left over at the end of every month. However, the reality probably is that there won t be money left over. It all gets used up for other expenses. Instead, change the equation. Rather than saving what s left over, put some money no matter how small an amount into savings right at the beginning of the month. This way, it won t get eaten up by other expenses and you won t be tempted to spend it. Save $5, $10, $20, or whatever amount you decide. Ideally, you can strive for saving at least 10 percent of 26

31 your income, but the more important thing is to start (or a few days after) your paycheck is deposited. saving now and making it a lifetime habit. Try putting $1 a day, plus pocket change, into a large Establishing a savings fund will go a long way in helping you build an emergency fund, save for assistive technology that will help your quality of life, pay off debt, and start toward a more financially secure future. envelope or a jar. At the end of the month, deposit that money into your savings account. This can add up to a few hundred dollars per year. Put any tax refund, raise, or bonus you receive into savings rather than spending it. Tips for Paying Yourself First If you think that paying yourself first is easier said than done, here are some ideas to get started: Include savings as part of your spending plan. Make it a priority above spending for things like movies or eating out. If possible, have your employer automatically deduct money from your paycheck and deposit it into a savings account. What you don t see, you won t miss. Even if the amount is small (say $10, $15, or $20 a week), you ll be amazed at how fast your money grows. When looking for a better job, give preference to employers who offer good benefits, such as health coverage and life insurance. If your employer provides these benefits, you won t have to pay for your own coverage. When you purchase a product, send in any rebate forms. Most people fail to take advantage of this savings tool. When you need items, shop first at thrift stores and garage sales. You can pick up some great bargains this way. 3Live Your Financial Life Save for Your Future Another option is to have your financial institution automatically deduct a set amount from your Break costly habits, such as excessive clothes-buying and smoking, and save the difference. checking account each month and deposit it into your After paying off a loan, put the same amount each savings account. Your financial institution usually can month into savings if the money isn t already going set the date of the automatic transfer for the day to paying off another loan. 27

32 3Live Your Financial Life Save for Your Future Set Up an Emergency Fund We all know that unexpected and costly events can happen. The car breaks down, the refrigerator stops working, or you have another type of unexpected but unavoidable expense. To help avoid a serious financial problem, you may want to set up an emergency fund. If you are living on a fixed income, saving for emergencies may seem difficult, but you can set a reasonable goal. For example, if you are living on SSDI or SSI or your income is under $20,000 a year, you could start saving towards a $500 emergency fund. If you are living on more than $20,000 a year, you could start saving for a $1,000 emergency fund. Save Three to Six Months Worth of Expenses Once you have your Emergency Fund established, you may want to start saving at least three to six months worth of your expenses. Keep this money in a savings account so you can access it for a major crisis such as losing your job or experiencing a sudden illness, and so that it s not so easy to access you re tempted to spend it. If you are receiving SSDI or SSI, check with a CWIC in your area to find out how much you can save without risk to your benefits or medical coverage. Do not worry if it takes you a while to get there. Remember to pay yourself first, and set aside a certain amount each month. Then, add a little more when you have it. Try not to touch this money for purchases or vacations. Keep it just for emergencies. 28

33 Expenses Worksheet To figure the amount you should save to cover three months worth of expenses, fill out this worksheet. Then, double the amount to figure the total for six months worth of expenses. Grocery bill for 1 month Gas/oil, electric, and water for 1 month Mortgage or rent for 1 month Car payment or bus fare for 1 month Other debt payments for 1 month Total amount I will need to cover three months of expenses x 3 months = $ x 3 months = $ x 3 months = $ x 3 months = $ x 3 months = $ Start an Assistive Technology Fund = $ Assistive Technology (AT) is a planned major purchase. Start a fund in which you can begin to save money for any assistive technology, independent living, or adaptive equipment needs not covered, or only partly covered, by your insurance. When saving for AT, you may want to include repairs and maintenance of the equipment as well as the purchase price in your total savings goal (much like budgeting for a vehicle). AT is discussed in more detail in Chapters 6 and 7. Start a Retirement Fund Start building a safety net for your future. The more money you set aside for your future, the easier it will be for you financially as you get older. Start to save for the time when you will be unable to work or when you need more income to cover living expenses or health-care costs not covered by insurance. Better yet, consider speaking with a financial planner about the best way to plan for your future. They may suggest a pre-tax retirement plan at work or another type of retirement account such as an IRA account, 401(k), or 403(b) plan. Speak to the professional about how much of your gross income you should plan to invest or set aside. Make a Long-Range Plan for Your Future Like many people with disabilities, you may find that Social Security programs (SSDI, SSI, or Social Security Retirement Benefits) are not enough to live comfortably on and meet your goals. Talk to a CWIC or your local Center for Independent Living about ways to go back to work, generate income, or save income. Also, ask where to go to learn about a living trust, a special needs trust, or a health care trust to maximize your benefits and save on taxes. 3Live Your Financial Life Save for Your Future 29