EMORY FINANCIAL WELLNESS Homeownership, Insurance, Debt. February 24, 2011

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Sarah Lamb
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2 This is a 3-Part Series February 17 February 24 March 2 Set the Strategy Solidify the Core Leave a Legacy Market Trends Financial Strategy The 5S System, Homeownership Insurance Debt Management Retirement Investing 2

Market Trends Financial Strategy The 5S System,

3 The Financial 5S System S 1 Set the Foundation Maximize Income Budgeting Process Banking Retirement Match S 2 Stabilize your Finances Sanity Money Housing Mandatory Exp Cars Insurance/Estate Emergency Fund 1 S 3 Surface from Debt Payoff Debt Debt Responsibility Credit Cards Student Loans Credit Reports Emergency Fund 2 S 4 Save for the Future Saving Funnel Retirement College Savings Personal Savings Investing S 5 Spend with Confidence Good Life Smart Spending Money & Relationships Generational Wealth 3

Responsibility Credit Cards Student Loans Credit Reports Emergency Fund 2 S 4 Save for the Future Saving Funnel Retirement

5 Home values over time Housing bubble Source: Case-Shiller Home pricing indices 5

6 What s your situation Buying Refinance Underwater 6

7 Buyers Questions Buying Do you have a 1-month emergency fund and low credit card debt? Do you have enough savings to make a 20% down payment? Can you afford a home in a good location? Do you have the stability to purchase? 7

8 Can I refinance?? Refinancing Loan is not government backed + Have <2.5% equity 8

9 Ship is sinking?? Underwater House worth: You owe: $275K Think before you act Refinance $245K Can you afford the payments? Loan Modification Are you in a good Short Sale location? How is Foreclosure the rental market? How is Do your Nothing credit? 9

11 Insurance: Say No to Risk I need to protect myself Health Life Disability/LTC I need to protect my stuff Homeowners Auto Personal Property Umbrella Coverage Insurance companies need to protect profits 11

stuff Homeowners Auto Personal Property Umbrella

12 More life insurance? Term Temporary for stated amount of time 20-year term (also 10yr, 30 yrs) Permanent Permanent insurance with cash value Buy Term and Invest Whole life Universal life Variable universal life And all other permutations the Difference $1K/yr $8-15K/yr 12

30 yrs) Permanent Permanent insurance with cash value Buy Term and

13 Umbrella Policy What if you don t have enough insurance to cover the damages? 1 2 Sued for $1M in car accident Auto liability insurance pays first ($300K) Umbrella policy pays remaining ($700K) 13

14 Documents and Documentation Beneficiary designations Titling Written will Are you Advanced Medical Directives Financial Power of Attorney Trust (if needed) Letter of instruction Family Discussion intestate? Use the Checklist 14

Financial Power of Attorney Trust (if needed) Letter of

16 Paying off debt 16

17 Situation?? Smith family have the following debt Home - $180,000 Car 1 - $14,000 Car 2 - $10,000 Credit Card 0% interest - $5,000 Other credit cards - $11,000 Federal subsidized student loans - $3,000 IRS - $4,000 What should they do? 17

18 The debt ladder Before S 4, payoff After S 4, you can choose to payoff Auto Home / HELOC Student Loans Mob Credit Cards Tax Debt and 401(K) loans Time 18

19 Credit reporting competition Credit Report Provides information about your credit (aka debt) history. 3 bureaus provide reports Credit Score Converts your credit report into a score that is used to make decisions on giving you a loan. 2 types of scores 19

3 bureaus provide reports Credit Score Converts your credit

20 Credit Scores Remember Excellent Good Fair Bad Excellent Good Fair Bad Your score is based on your credit report. If the report has inaccuracies, so will your score. Scores have reason codes that will help you understand the drivers of your score and how you can improve it Very Bad Very Bad Your credit score is about your past you only have control over your future. 20

Bad Your score is based on your credit report. If the report has inaccuracies, so will your score.

21 Drivers of your credit score New credit applications Available Credit Mix of credit Bill payment Recent Credit Bill payment Length of credit history Credit usage Balances Length of credit history Credit usage Source: myfico.com, vantagescore.com 21

22 Think about it. If you re desperately looking for loan and can t get one. 22

23 Next Steps February 17 February 24 March 2 Subscribe to the free blog blog.smartpathonline.com Market Trends Financial Strategy The 5S System, Need a Financial Coach? Set the Strategy Solidify the Core Leave a Legacy coach@smartpathfinancial.com Homeownership Insurance Debt Management Retirement Investing 23

HELLO, MY NAME IS DEBT

HELLO, MY NAME IS DEBT SCHEDULE Topic Get Your Money Right Hello, My Name is Debt Date Complete Today Homeownership: The Cash Black Hole 10/16 Picking Your 401(k) Investments Pt 1 10/23 Picking Your 401(k)