Banking & Budgeting Basics: Making the most of your money

Transcription

1 Growing Dollars and $ense Workshops Banking & Budgeting Basics: Making the most of your money Presented by The Coalition for Debtor Education 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 Other than being musicians, what do Billy Joel - MC Hammer Mozart Ted Nugent Willy Nelson, Dave Crosby, and Wayne Newton have in common?

3 They all went bankrupt!

4 Making the Most of your Money Spending - Plan your spending - Assess your situation: Where are you now? Where do you want to go? Saving/ Banking - Know the basics - Keep fees under control Borrowing - Good credit/ bad credit - Credit cards and debit cards - Credit reports and scores: Why do they matter? - Managing debt and debt collectors

5 Making the Most of your Money Your Family Financial Plan Establish a starting point Define your goal Put financial tools to work Create a workable monthly budget Making your bank work for you Understand and use credit wisely Manage borrowing

6 BEGIN TODAY! WHERE ARE YOU NOW? What you Own - What you Owe =$ Your Net Worth

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

8 Plan Your Spending List your priorities what do you need? Tip: Keep a spending diary for a week

9 Daily Spending Diary Daily Expense Work Sheet Keep track of all your daily expenses (include EVERYTHING on which you spend money) Expense Amount Paid $ $ $ $ $ $ $ $ 9

10 What do you WANT? Plan Your Spending

11 Your Personal Monthly Budget: Make a list of your sources on INCOME 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. = Total monthly Expenses

13 PERSONAL MONTHLY BUDGET Income 1 PERSONAL CARE Projected Cost Actual Cost MONTHLY INCOME Extra income Total monthly income Medical Hair/nails HOUSING Projected Cost Actual Cost Clothing Mortgage or rent Dry cleaning Phone Health club Electricity Organization dues or fees Gas Other Water and sewer Subtotals Cable Other Waste removal Subtotals Maintenance/ repairs LOANS Projected Cost Actual Cost Supplies Personal Other Student Subtotals Credit card TRANSPORTATION Projected Cost Actual Cost Credit card Vehicle payment Credit card Bus/taxi fare Other Insurance Subtotals Licensing TAXES Projected Cost Actual Cost Fuel Federal Maintenance State Other Local Subtotals Other INSURANCE Projected Cost Actual Cost Subtotals Home SAVINGS OR INVESTMENTS Projected Cost Actual Cost Health Retirement account Life Investment account Other Other Subtotals Subtotals FOOD Projected Cost Actual Cost GIFTS AND DONATIONS Projected Cost Actual Cost Groceries Dining out Subtotals Other LEGAL Projected Cost Actual Cost Subtotals Attorney PETS Projected Cost Actual Cost Alimony Food Payments on lien or judgment Medical Other Grooming Subtotals Other TOTAL COST Subtotals BALANCE

14 Planning tool: A monthly payment calendar Write down when each of your monthly expenses is due on a calendar 14 14

15 Monthly Payment Calendar Month - Sunday Monday Tuesday Wednesday Thursday Friday Saturday $2,000 pay check $100-savings $100-groceries $700 rent $104 MetroCard $40 phone bill $200 credit card child care

16 WHERE DO YOU WANT TO BE? Set your financial goal savings goal education car new home retirement travel etc

17 WHERE DO YOU WANT TO BE? What is your most important goal? How much will it co$t? Put a price on your dream! When do you want to reach your goal?

18 WHERE DO YOU WANT TO BE? How much do you need to save to reach that goal? Each year? Each month? Each week? Each day?

19 Your bank can help you reach your financial goals Track expenses and pay bills securely Build a nest egg for emergencies Checking account Savings account Put your extra money to work earning interest CDs Buy your own home Mortgage

20 Your bank can help you reach your financial goals Send money to your family. Prepare for your children s future education Plan for your family s financial security Insurance Plan for a secure retirement International Remittances 529 plans Term IRA/Roth IRA

21 Benefits Earnings Earn interest on your money Security FDIC insurance, up to $250,000( per institution) Convenience Offers service in person, by phone, online or mobile banking Issues debit cards Issues credit cards Transfers money between other banks and businesses Recordkeeping Statements provided by mail and/or online) Lending Obtain loans for autos, homes and other major purchases

22 Is your Money Safe? FDIC: Federal Deposit Insurance Corporation Guarantees up to $250,000 per depositor per bank Guarantees up to $250,000 on Individual Retirement Accounts (IRAs) Are you fully covered under FDIC? Go to to make sure. It s completely secure and in just a few moments, you ll know if your accounts are within the FDIC coverage limits.

23 Choosing a Checking Account Key questions How many checks do you write a month? How much money do you expect to keep in your checking account? Are the Branches or ATM locations convenient for you? Do you prefer to pay bills online? Is there a minimum balance requirement for free checking or savings? Ask about special accounts with limited fees? (College Account, Basic Account, child s account, custodial account) What are the fees associated with the account?

24 Bank Fees ASK! Checking Account ask how to get FREE checking Service Charges Online banking ATM/Debit Card Fees Savings Account

25 Know How Your Account Works Avoid extra fees Use only your own bank s ATMs Don t overdraft your debit card Don t bounce a check Ask about transaction fees: Is there a minimum balance requirement What are the fees for Wire Transfers Is the a fee for writing more than a stated number of checks per month How can you qualify for free checking 25 25

26 It s Cheaper: Banks vs. Check Cashers Check cashers may charge only up 1.86% per check cashed. Less than 2 percent may not seem like much, but consider all the paychecks you get over the course of a year. If you bring home: $15,000 you will pay at least $273 PER YEAR $20,000: you will pay at least $364 $30,000:you will pay at least $546 $40,000:you will pay at least $728 $50,000: you will pay at least $910 - PLUS fees for Money orders and bill pay services Try to find a FREE checking account and save a week s pay every year 26 26

27 Basic Banking Account All New York State banks are required by law to offer lowcost or "lifeline" accounts called Basic Banking Accounts.* Basic Banking accounts require that a customer may Open with $25 or less Maintain with a balance of one cent Receive a minimum of eight free withdrawals per billing cycle (includes Debit Card usage) Pay a maximum charge per cycle of $3 per month. Also, ask about programs like Safe Start and Bank On Manhattan that may offer even more benefits. To open a Basic Banking Account the bank may require that you be a New York State Resident and that you not maintain any other transaction account at the bank.

28 Savings Accounts Make it a Goal: At least $2000 in liquid emergency savings Earn extra money. Most banks pay interest on savings accounts Make it easy on yourself. Ask about Automatic Transfer into savings Your account is liquid, that is, you can get your money anytime There s less temptation to spend when the money is in the bank

29 Certificates of Deposit (CD) Higher rate of interest than regular savings account Restrictions on withdrawals Interest is forfeited if withdrawn before maturity (due date) and you may also pay a penalty Interest is quoted as APY (Annual Percentage Yield) ex: a 6-month CD with a 2% APY actually pays 1% for the duration of the CD.

30 Learn the language APY or APR Interest Compound interest Maturity IRA/ Roth IRA

31 Debit Card v. ATM Card What is a Debit Card? How does it differ from an ATM Card?

32 Debit Card Overdrafts You choose whether you wish to allow overdrafts If you choose (opt-in) to allow overdrafts, you will be charged and over-the-limit-fee each time you overdraft your account.

33 Cards: Credit, Debit or Pre-Paid? Credit Cards Borrowed money If lost or stolen: $50 maximum liability Fees if you opt to allow overdrafts Can help build a good credit history Debit Cards Money in your own bank account $50 max liability only if reported within 2 days; could be up to $500. Many banks have a zero liability policy. But don t assume - check first! Little or no legal protection if reported after 60 days Generally can only spend what you have so no extra debt is incurred. Risk of overdraft fees is you opt to allow overdrafts Not included on your credit report Pre-paid Debit Cards No bank account needed $50 max liability only if reported within 2 days; could be up to $500. Little or no legal protection if reported after 60 days Generally can only spend what you have so no extra debt is incurred. Not included on your credit report Complicated billing cycles and interest rates structures Linked directly to a checking account Limitations on depositing and writing checks Other fees such as: Late payment fee Overdraft fee Cash withdrawal Foreign transaction fee Other fees such as : Overdraft fee Inactive fee Non-bank ATM fees Other fees such as: Enrollment fee Bank teller fee Non-bank ATM fee Fees for extra card for parent Inactive fee

34 Credit & Debt ONCE YOU KNOW WHERE YOU ARE, AND WHERE YOU WANT TO BE, LOOK AT SOME OTHER TOOLS YOU MAY USE TO ATTAIN YOUR GOALS AND THE HURDLES TO AVOID.

35 Borrowing KNOW before you OWE - Mortgage - Credit 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. Try bankrate.com

36 Plastic! The Good The Bad The Ugly

37 The Good Credit cards: Credit cards build credit history (debit cards do not) Convenient Credit cards - safer than carrying cash: $50 max liability Provides purchasing power

38 The Good Debit cards: Convenient No interest charges because you are using your own money Avoids going into debt (if you don t overdraft!)

39 The Bad Credit cards may be too convenient Credit cards charge interest; rates can be as high as 24.99% a year Fees!! Late Cash advances Foreign transactions Over the limit Debit cards - provide less protection if lost or stolen Debit card use doesn t build credit

40 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

41 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 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.

42 Reading the fine print.. What to know before opening a credit card account 1. What is the annual interest rate? Is the interest rate fixed or variable? (You want a FIXED rate) 2. What is the fee for going over your credit limit 3. What are the fees for late payment 4. How long do you have to pay the monthly bill the grace period? 5. What are the fee and the interest rate for cash advances? 6. If you are responding to an offer to transfer balances, is there a transfer fee?

43 Credit Reports and why they matter Order your FREE credit report TRANS UNION EQUIFAX EXPERIAN

44 Credit REPORTS: Include all borrowing for the past 7 years. Shows payment history do you pay on time? Your recent credit behavior is more important than aged records Shows total amount of credit available, and amount that is outstanding Review for inaccuracies Contact the credit agency with corrections Credit cards or other loans that are not yours may mean identity theft

45 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

46 Paying Down Debt; Get rid of highest interest rate debt first 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 Interest rate Min. due Min. + $10

47 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 Int rate Min pymt Min+ $10 Visa $ % Visa $100 20% $25 $35 $10 $20 MC $600 25% Totals $1600 $15 $45 $40 $100 TIP: Pay off Highest interest rate or smallest balance first

48 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

49 Smart your Library Thank you! Please join us for our next session of on June 21 What s your dream? Saving to attain your goals