Growing Dollars and $ense: Personal Financial Planning Seminar

Transcription

1 Growing Dollars and $ense: Personal Financial Planning Seminar The Coalition for Debtor Education Kimberly Allman This program is made possible by a grant from the FINRA Investor Education Foundation through Smart investing@your library, a partnership with the American Library Association.

2 Growing Dollars and $ense Seminars Money it s not that simple! Over the next 6 months, we ll present the following classes as part of this series: Personal Finance Planning: Cultivate Your Finances Today Banking and Investment Landscape: What s Out There Tax Planning: Protecting Your Harvest Retirement Planning: Growing the Nest Egg Now Selecting the Right Investments: Weeding Out the Good From the Bad Safeguarding Your Investments: Watching Out For Predators

3 What is one lesson you remember being taught about money as a child?

4 Smart Your Library 1.Cultivating your Finances Begin at the Beginning: Establish a starting point Set Your Goals Create a workable monthly budget Understand and use credit wisely Manage debt

5 WHERE ARE YOU NOW? What you Own - What you Owe =$ Your Net Worth

6 Your Personal Balance Sheet Assets (Own) $ Savings Account $ Checking Account $ Investments $ Life Insurance Policy $ Pension Equity $ Retirement Fund/ 401 (k) $ Personal Property $ Real Estate (Including Home) $ Other Total =$ Liabilities/Expenses (Owe) $ Credit Card Bills $ Unpaid Medical and Dental Bills $ Mortgage Balance $ Home Equity Loans $ Personal Loans $ Student Loans $ Car Loans $ Unpaid Taxes $ Other Total = $

7 Your Net Worth Total assets $ - Total liabilities $ = Net worth $

8 WHERE DO YOU WANT TO BE?

9 WHERE DO YOU WANT TO BE? What is your most important goal? Put a price on your dream! How much will it co$t? When do you want to reach your goal? How much do you need to save Each year? Each month? Each week? Each day?

10 WHERE DO YOU WANT TO BE? Example: What is your most important goal? College for your son or daughter Put a price on your dream! How much will it cost? $30,000 When do you want to reach your goal? 8 years How much do you need to save? Each year $3,750 Each month $ Each week $78.13 Each day $11.16 $$$ What can you do to save $11 a day? $$$ PS This example doesn t even include interest or dividends your savings may earn!

11 Your Personal Monthly Budget: Add up your sources of income (monthly basis) Wages Commissions Tips Alimony Child Support SSI Anything else? = Total Monthly Income

12 Your Personal Monthly Budget: List and total your Monthly Expenses Housing Transportation Food Personal Care Entertainment Loans/credit card debt Taxes Savings/Investments Pets/Gifts/Donations/Legal expenses etc., etc., etc.

13 Where does it go? Expenses Housing and utilities % Transportation % Insurance, pensions, health care % Food % Entertainment % Clothing and personal care % Savings % TIP: Keep a diary of everything you spend for the next week

14 Expenses: Based on national averages Housing and utilities 33% Transportation 19% Insurance, pensions, health care 18% Food 14% =84% Entertainment? % Clothing and personal care? % Savings? % = 16%

15 Credit & Debt NOW THAT YOU KNOW WHERE YOU ARE, AND WHERE YOU WANT TO BE, LET S LOOK AT SOME OF THE TOOLS YOU MAY USE TO ATTAIN YOUR GOALS AND THE HURDLES TO AVOID.

16 Give yourself credit! How credit cards work Understanding their language Are those credit card offers as good as they seem? Learning to read the fine print Building a credit history Shopping for credit Credit Reports and Scores - Obtaining and reading your credit report - Finding and fixing errors - Why it matters

17 When do you spend money? Could you get along without a credit or debit card? Why is it easier to use plastic than cash?

18 Borrowing Good credit / bad credit - Mortgage - C redit cards - Small Business loan - Store cards - Student loan - Pawn shops - Car loan - Pay day loans Tip: Use an online calculator to estimate how much your mortgage or car payment will be

19 Credit and Debit Cards The Good The Bad The Ugly

20 The Good Credit cards build credit history (debit cards do not) Convenient Safer than carrying cash: $50 max liability Need for certain purchases

21 The Bad Maybe too convenient High interest rates Fees!! Late Cash advances Foreign transactions Returned checks Over the limit Debit cards - less protection if lost or stolen

22 The Ugly Too much debt Fees and late payments increase amount owed Stress/Depression Judgments can result if not successfully challenged Bankruptcy stays on your credit report for 10 years

23 Be wary of those attractive credit card offers: any USING credit Office of the President Anybank, N.A. 50 Worth Street New York, NY Joe Consumer 123 Jones St Brooklyn, NY wisely MARKETING 0% Start saving now with a 0% APR on balance transfers until March 1, 2010 with the Anybank Platinum Card and pay NO annual fee.

24 USING credit wisely Disclosure: Interest Rates and Interest Charges 11.99% Annual percentage rate (APR) This APR will vary with the market based on the for purchases Prime Rate Other APR Balance transfer APR: 0% until March 1, 2011 APR for Cash Advances 23.99% This APR will carry with the market, based on the Prime Rate Variable rate information Your APRs may vary for each billing cycle. The rate for purchases and balance transfers is determined monthly by How to Avoid Paying Interest on Purchases For Credit Card Tips from the Federal Reserve Board Fees Annual Fee Transaction Fees Balance Transfer Cash Advance Overdraft Protection Foreign Transaction Penalty Fees Late Payment: $19 on balances up to $100 $29 on balances from $100 $250 $39 on balances of $250 or more Over Limit: $39 adding 8.49% to the prime rate. Your dues date is 23 days after the close of each billing cycle. We will not charge you interest on purchases if you pay your entire balance by the due date each month. To learn more about factors to consider when applying for or using a credit card, visit the website of the Federal Reserve Board at reserve.gov/credit card. None -Either $5 or 3% of the amount of each transfer, whichever is greater* Either $10 or 4% of the amount, whichever is greater $10 per occurrence 3% of each transaction in US Dollars

25 USING credit wisely Education Learning to read the fine print 1. What is the annual interest rate for Transferred Balances? 2. Does this letter guarantee that you can open a credit card account? 3. What is the annual interest rate for NEW purchases? 4. What is the fee for going over your credit limit? 5. What are the fees for late payment? 6. How long do you have to pay the monthly bill the grace period? 7. Can the interest rates ( or APRs) ever change? If so, when? 8. Do you have the right to sue the credit card company?

26 New changes in credit card laws An issuer cannot raise a customer s rate on an existing balance unless the consumer is more than 60 days behind on a payment Prohibits applying interest rate charges to two full cycles of card balance ( so can t impose retroactive charge) Requires mailing bills 21 days before the due date

27 Clear Disclosure on statements

28 New changes in credit card laws You must OPT-IN for overdraft for a debit card.

29 BUT No cap on interest rates Companies may cut credit limits Many cards charge higher fees for cash advances and foreign transactions Variable rates are still subject to change on a monthly basis Annual membership fees may return

30 Credit Reports: Why they matter Forewarned is forearmed: KNOW what s on your credit reports if you are shopping for a loan; correct any errors asap. Checked by lenders for mortgages, car loans, credit cards Often checked by potential employers, insurers and landlords

31 What you can do now Check your credit limit monthly to see if it has been reduced don t wait to learn this when you are paying for a purchase and your card is declined! Call your credit card company directly to negotiate your rate and limit (if the loan is active and has NOT been sold to a collection agency.) Check your statement due date so you pay on time TIP: Convert your credit card interest rate to a FIXED rate.

32 Tips for using credit responsibly 1 Understand your credit card terms 2. Don t be a revolver ; try to pay off your full balance each month 3. If you can t pay off the entire balance due, pay more than the minimum 4. Say no to cash advances 5. Pay on time 6. Stay well within your credit limits.

33 Order your FREE credit report You are entitled to one free credit report from each company per year. or go online for each company TRANS UNION EQUIFAX EXPERIAN

34 Credit Scores- and why they matter Credit scores can determine what a loan will cost CREDIT MAY BE AVAILABLE, BUT ONLY AT MUCH HIGHER COSTS SUB-PRIME ELIGIBLE FOR A CONVENTIONAL HOME MORTGAGE GOOD HIGHEST SUBPRIME

35 The HIGHER your score, the LOWER your interest rate..and so the LOWER your payment! FICO Score APR Monthly Payment % $1, % $1, % $2, % $2, % $2,702 Source: fico.com

36 Tips to increasing your credit score Pay your bills on time Check your credit report and correct any inaccuracies Pay down outstanding balances Generally, use no more than 30% of your credit card limit Limit new debt Limit transferring old balances from an established credit card to a new card; this may lower your score Be aware that paying off a collection account, or closing an account on which you previously missed a payment, will not remove it from your credit report

37 Paying Down Debt Make a chart or spreadsheet of your current credit card balances and payments. Based on the total amount you have budgeted for credit card payments, add a little more on each card payment and apply the balance to pay off the card with the highest interest rate Card Balance Min payment Min+ $10 Interest rate

38 Paying Down Debt Example: If you have $100 for credit card repayments, add $10 to each minimum payment due and the balance to the card with the highest rate Card Balance Min pymt Min+ $10 Int rate Visa $1000 $25 $35 15% Visa $100 $10 $20 20% MC $600 $15 $45 25% Totals $1600 $40 $100 TIP: Pay off Highest interest rate or smallest balance first

39 Managing Debt: Lifecycle of a debt $1000 in credit card charges Debt charged off after a few months. Sold to collection agency for less than $1000 Collection agency earns profit if they collect more than they paid for the loan You can negotiate terms. You are protected from harassment.

40 Dealing with Debt Collection Agencies Know your rights Ask for privacy Open your mail! Verify the debt Beware of debt consolidation scams Find a credit counselor to help you call 311

41 INCOME sources exempt from debt collection Social Security SSI Veteran s, survivor s benefits Private or public pensions IRAs Alimony Unemployment Disability Child support Worker s compensation benefits Any other form of public assistance

42 Thank you! DON T FORGET TO ATTEND THE NEXT SESSION: BANKING AND INVESTING DECEMBER 2 dollars