View
2
Download
0
Category
Preview:
Citation preview
3/2/2016
1
“More Month Than Money
and Extra Credit”
Sean L. Mabey
smabey@neamb.com
Why are you here?
� Introductions:
� Name
� What you do
� Expectation of the session
� Answer the following:
� What is your philosophy of money?
� List three or four financial goals that you have.
Why People Don’t Plan
� Procrastination
� Intimidation
� Where to begin?
Cash Management: Overview
• Understanding cash management
• Age old questions: “Where oh
where does our money go?”
• Making a budget
• Living within that budget
• It doesn’t always take more
money, sometimes it takes better
choices.
Benefits of developing a budget
• What are they?� It allows you to choose how you will spend
your money
� It gives you control over where your money goes.
� It provides against financial emergencies.
� It helps prevent impulse buying.
� It helps financial goals become a reality.
� Others?
Budgeting Rules
• Set realistic financial goals.
• Distinguish between wants and needs.
• Establish an emergency fund of 9-12 months of after tax income.
• Shop wisely.
• Establish credit.
• Don’t let your money sleep on the job (NO LAZY MONEY).
• Track income and expenditures.
• PAY YOURSELF FIRST!
3/2/2016
2
Steps in Developing Your Budget
• Step 1: Track your expenses
�EVERY SINGLE PENNY
�Give it a category
�Homework: Expense Sheet
♦1 month
Steps in Developing Your Budget
• Step 2: Determine your
income
� Include only your net
income
� Do not include over-time or
bonuses
� Homework:
♦Document income
Steps in Developing Your Budget
• Step 3: Determine your fixed expenses
� Includes rent or mortgage, utilities, car
loans, student loans, insurances, etc…
� PAY YOURSELF FIRST!
Steps in Developing Your Budget
• Step 4: Determine your flexible expenses
• Easier to control, reduce, or cut
� Includes clothing, entertainment, eating out, food, etc…
Steps in Developing Your Budget
• Step 5: Determine your variable expenses
� Can be a problem if not properly budgeted
� Includes things like insurances, taxes, annual fees, etc…
� Divide the number of months by the projected costs and set aside each month
Steps in Developing Your Budget
• Step 6: Create Your Monthly
Budget
• After 3 months of tracking
expenses and completing your
cash flow, create a budget.
3/2/2016
3
Steps in Developing your budget
• Step 7: Re-evaluate your budget periodically
�Budget should reflect you and changes in your life. Marriage, divorce, birth, kids moving out, kids moving in (and bringing others with them ☺)
• Net Worth Statement
Years of
Continuous
Membership
Death Benefit AD&D Benefit Occupation /
Association
Leader AD&D
Benefit
Unlawful
homicide while
at work
1 year $200 $1,000 $50,000 $150,000
2 years $400 $2,000 $50,000 $150,000
3 years $600 $3,000 $50,000 $150,000
4 years $800 $4,000 $50,000 $150,000
5 or more
years
$1,000 $5,000 $50,000 $150,000
CTA Death and Dismemberment Plan
Example: A CTA member with eight years of continuous membership experiences a fatal automobile accident. The spouse informs CTA of the accidental death, and files the claims. The spouse would be entitled to a combined death and accidental death benefit of $9,600 from CTA.
Travel the Road of Life with CTA and NEA Member Benefits
Resources: Books
� David Bach
♦ Fight for Your Money
♦ Automatic Millionaire Homeowner
♦ Smart Women Finish Rich
♦ Automatic Millionaire
♦ Start Late, Finish Rich
� Jean Chatzky
♦ The Difference: How Anyone Can Prosper in Even the Toughest
Times
♦ The Ten Commandments of Financial Happiness
� Ric Edelman
♦ The Lies About Money
� Dave Ramsey
♦ The Total Money Makeover: A Proven Plan for Financial Fitness
Resources: Books
� Suze Orman
♦ Suze Orman’s 2009 Action Plan
♦ Women and Money
♦ The Road to Wealth
♦ 9 Steps to Financial Freedom
♦ You’ve Earned It/Don’t Lose It
♦ The Courage to Be Rich
♦ The Laws of Money, The Lessons of Life
♦ Young, Fabulous & Broke
� Liz Pulliam Weston
♦ Your Credit Score: How to Fix, Improve and Protect the 3-Digit
Number that Shapes Your Financial Future
NEA Magazine Service
• www.neamb.com/get2
18
3/2/2016
4
Extra CreditAll you need to know about your
Credit Report and Credit Score
Credit
• Why is it important to establish credit?
� Allows you to enjoy major purchases.
� Offers advantages of convenience and safety.
� Enables you to take advantage of sales and investments.
Credit Score
• FICO (Fair Isaac Corporation)
� Predictive Model Builder and Analytical Provider
� Risk Level
� How credit scoring help you
♦ Obtain loan decisions quicker
♦ Credit decisions are faster
♦ Older credit blemishes count less
♦ More credit is available
♦ Rates can be lower overall
Home and auto insurance
Mortgage
Home equity
Credit Reporting Agencies
• Equifax
� PO Box 740241
� Atlanta, Georgia 30374-0241
� www.equifax.com
• Experian
� PO Box 2104
� Allen, Texas 75013
� www.experian.com
• TransUnion
� PO Box 1000
� Chester, Pennsylvania 19022
� www.transunion.com
What’s in your credit report?
• Identifying information
• Trade Lines
�Real estate
� Installment
�Revolving
�Other
• Inquiries
• Public Record and Collection Items
3/2/2016
5
How scoring works
• FICO Scores range from 300 to 850� 300-499: 2%� 500-549: 5%� 550-599 8%� 600-649: 12%� 650-699: 15%� 700-749: 18%� 750-799: 27%� 800-850: 13%
• You have more than one FICO score
• Your scores will be different among the three credit reporting agencies
• Source: Your Credit Score: Second Edition
� Liz Pulliam Weston, page 16
What a FICO Score Considers
35%
30%
15%
10%
10%
Score
Payment History
Amounts Owed
Length of Credit History
New Credit
Types of Credit in Use
Payment History
• Approximately 35%
• Considers:
� Payment information on types of accounts
� Public records and collection items
♦ Bankruptcies
♦ Foreclosure
♦ Suits
♦ Wage attachments
♦ Liens
♦ Judgments
� Details on late or missed payments and / or delinquencies
� Number of accounts with no late payments
Amounts Owed
• Approximately 30%
• Considers:
� Amounts owed on all accounts
� How many accounts have balances
� How much of the total credit line is being used
� How much of installment loan accounts are still owed compared to the original loan amounts
Length of Credit History
• Approximately 15%
• Considers:
� In general, how long your credit accounts have been established
� How long specific credit accounts have been established
� How long it has been since you used certain accounts
Types of Credit in Use
• Approximately 10%
• Considers:
� What kind of credit accounts you have
� How many of each you have
3/2/2016
6
New Credit
• Approximately 10%
• Considers:
� How many new accounts you have
� How long it has been since you opened a new account
� How many recent requests for credit you have made
� Length of time since credit report inquiries
� Whether you have a good recent credit
� History, following past payment problems
What FICO Score Ignores
• Title
• Employer
• Hire date
• Where you live
• Interest rates on credit
cards or other accounts
• Any information not
found in your credit
report
� Race
� Religion
� National origin
� Gender
� Marital status
� Age
� Salary
� Occupation
� Employment history
How the FICO Score Counts Inquiries
• Types of inquiries
� Hard Inquiry
� Soft Inquiry
• Inquiries do not affect scores that much
� Many inquiries not counted at all
� The score looks for “rate shopping”
• Interpreting your score
How do mistakes get on my credit report?
• You applied for credit under a different name
• Someone made a clerical error in reading or entering your
name or address
• Inaccurate Social Security Number was given or misread
• Loan or credit card payments were applied to the wrong
account
Disputing Items on Your Credit Report
• If you find an error on your credit report:
� Contact the Credit Reporting Agency
� Send in written documentation of the inaccuracy to the reporting agency
♦ The credit reporting agency and/or reporting source will review the information and conduct their investigation if needed
♦ The credit reporting agency will then make all appropriate changes to your credit file based on the investigation and notify you of the update.
Identifying Financial Stress
• Do you routinely spend more than you earn?
• Are you forced to make day-to-day purchases on credit?
• Are you able to only make the minimum payments on monthly credit card bills?
• Are you having difficulty stretching your paycheck to meet monthly bills?
• Are bill collectors calling?
• Would you have difficulty paying next month’s bills if you lost your job?
3/2/2016
7
Reducing Expenses
• Cut spending: eliminate unnecessary spending such as eating out, going to movies each week, expensive entertainment.
• Clip coupons, shop sales, and avoid impulse buying.
• Consolidate debt: check into mortgage refinancing, home equity loans, and personal loans.
• Pay cash for purchases when possible.
Reducing Expenses
• Get a handle on credit cards (give them a credit card haircut)
� Did you knowIBy paying $100 towards a $3,000 balance (and not charging anything more to the account), it will take 41 months to pay off the balance (assuming 18% interest) and you would incur $1,042 in interest charges?
Building a good credit reputation
• Use credit before you need it.
• Keep within the obligations of your agreement.
• Live up to the terms of the contract.
How to rebuild damaged credit
• Open new accounts and pay them off.
• Start small� Credit cards from department stores, NEA Member Benefits,
or your local credit union can be helpful.
• Consider asking for help� If you can’t qualify on your own, ask a friend or family
member to co-sign for a small loan or credit card.� Remember, if you don’t make the payment it not only
damages YOUR credit but ALSO the person who co-signed on the loan or credit card.
How to rebuild damaged credit
• Consider a secured credit card� Make sure the grantor reports payment histories to one of the three
major credit reporting agencies:♦ Trans Union♦ Equifax♦ Experian
• Use your new accounts in moderation
• Keep your balances low� Avoid carrying a balance that is more than 30% of your credit limit
(creditors may view this as excessive debt).
• If you are not able to make a payment, call the creditor and make arrangements� If you get nowhere, politely hang up, wait ten minutes, call again and
speak with a different service representative.� Document who you speak with and when
Establish Credit In
Your OWN Name!
�SecuringYourFinancialFuture�Goals
FinancialGoalor
Objective
Time
Frame:
Immediate,
Short,Mid,
LongTerm
Amount
Needed
toSave
Dead-
line
Invest-
ment
Vehicle
ActionPlan
1.
2.
3.
4.
5.
Step 6: Record monthly expenses:EVERY SINGLE PENNY!!!
Categories:1. Housing 2. Transportation 3. Insurance 4. Groceries5. Eating out 6. Pets 7. Personal Care 8. Entertainment9. Loans 10. Savings 11. Charity 12. Other
Date CategoryPlace Amount Date CategoryPlace Amount
Complete this form and then transfer the information toyour CASH FLOW STATEMENT
Step 1. Determine your MONTHLY income: (examples: your income, significant (or in-significant) other income)
Income Source: TOTAL AMOUNT
Income Source 1:
Income Source 2:
Income Source 3:
Amount Frequency: (Monthly,Weekly, Semi-Weekly)
TOTALS: XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX $
Step 2: Determine your fixed expenses: (examples: mortgage, rent, car payment utilities)
Amount
Fixed Expense 1:
Fixed Expense 2:
Fixed Expense 3:
Fixed Expense 4:
Fixed Expense 5:
Fixed Expense 6:
Fixed Expense 7:
MONTLY TOTALS: $
Step 3: Determine your flexible expenses: (examples: clothes, fast food, entertainment)
Flexible Expenses (change from one month to the next): Amount
Flexible Expense 1:
Flexible Expense 2:
Flexible Expense 3:
Flexible Expense 4:
Flexible Expense 5:
Flexible Expense 6:
Flexible Expense 7:
MONTLY TOTALS: $
Step 4: Determine your variable expenses: (examples: auto and home insurance, holi-day shopping, utilities)
Variable Expenses (get a bill once a quarter, every six months,once a year)
Amount per
Variable Expense 1:
Variable Expense 2:
Variable Expense 3:
Variable Expense 4:
Variable Expense 5:
Variable Expense 6:
Variable Expense 7:
MONTLY TOTALS: $
Length of
(ex. 3 months, 6months, 12months)
Amount to setaside each month(divide amount bythe length of
List of Expenses FixedExpense
Mortgage or rent
Phone (landline)
Phone (cell)
Electricity
Gas
Cable
Water
Garbage
FlexibleExpense
VariableExpense
Maintenance or repairs
Supplies
Car payment
Auto Licensing
Gas
Auto Maintenance
Auto Insurance
Home Insurance
Health Insurance
Groceries
Dining Out
List of Expenses FixedExpense
Pet Food
Pet Medical
Pet Grooming
Pet Other
Medical Care
Hair, nails, beauty care
Clothing
Dry Cleaning
FlexibleExpense
VariableExpense
Health Club
Professional Dues
Video DVD rental
Movies
Concerts
Sporting events
Personal Loan
Charity
Other
Other
HOUSING Projected Cost Actual Cost Difference ENTERTAINMENT Projected Cost Actual Cost Difference
Mortgage or rent Video/DVD
Phone CDs
Electricity Movies
Gas Concerts
Water and sewer Sporting events
Cable Live theater
Waste removal Other
Maintenance or repairs Other
Supplies Other
Other Subtotals
Subtotals
LOANS Projected Cost Actual Cost Difference
TRANSPORTATION Projected Cost Actual Cost Difference Personal
Vehicle payment Student
Bus/taxi fare Credit card
Insurance Credit card
Licensing Credit card
Fuel Other
Maintenance Subtotals
Other
Subtotals TAXES Projected Cost Actual Cost Difference
Federal
INSURANCE Projected Cost Actual Cost Difference State
Home Local
Health Other
Life Subtotals
Other
Subtotals SAVINGS OR INVESTMENTS Projected Cost Actual Cost Difference
Retirement account
FOOD Projected Cost Actual Cost Difference Investment account
Groceries Other
Dining out Subtotals
Other
Subtotals GIFTS AND DONATIONS Projected Cost Actual Cost Difference
Charity 1
PETS Projected Cost Actual Cost Difference Charity 2
Food Charity 3
Medical Subtotals
Grooming
Toys LEGAL Projected Cost Actual Cost Difference
Other Attorney
Subtotals Alimony
Payments on lien or judgment
PERSONAL CARE Projected Cost Actual Cost Difference Other
Medical Subtotals
Hair/nails
Clothing
Dry cleaning
Health club
Organization dues or fees
Other
SubtotalsTOTAL DIFFERENCE
TOTAL ACTUAL COST
Personal Monthly Budget
Income 1
Extra income
Total monthly income
ACTUAL MONTHLY INCOME
PROJECTED MONTHLY INCOME
Income 1
Extra income
ACTUAL BALANCE
(Actual income minus expenses)
Total monthly income
TOTAL PROJECTED COST
PROJECTED BALANCE
(Projected income minus expenses)
DIFFERENCE
(Actual minus projected)
Personal Balance Sheet � Net Worth Statement
LIABILITIES
Short Term _________Credit Card _________Bills Payable _________Short Term Loans _________Property Taxes _________Other _________
Subtotal _________
Long TermHome Mortgage _________Other Mortgage _________Automobile Loans _________Education Loans _________Life Insurance Loans _________Other _________
Subtotal _________
TOTAL LIABILITIES _________
ASSETS
Cash Equivalent _________Checking Accounts _________Savings& Credit Union Accounts _________Money Market Accounts _________Other _________
Subtotal _________
InvestmentsStocks _________Bonds _________Government Securities _________Mutual Funds _________Real Estate _________Investment Collectibles _________Certificates of Deposit _________Other _________
Subtotal _________
Personal PropertyHome _________Automobiles _________Household Furnishings _________Art/Antiques/Collectibles _________Clothing/Furs _________Jewelry _________Metalware _________Other _________
Subtotal _________
TOTAL ASSET S _________
Total Assets ____________
Minus Liabilities ____________
Equals Net Worth _____________
Personal Information
Personal Papers
Insurance Policies
One of the difficulties facing your heirs after your death will be locating all the relevant documents to help dispose of your estate in the manner your directed. This Personal Document Locator will help you record the location of your valuable papers, assets and other important items. It will prove
invaluable to others in locating these items after your passing.
Should you keep all your important documents in a safe deposit box? No. Safe deposit boxes are excellent for most important financial and legal documents, but there are some documents you shouldn t keep there.
Keep your will and life insurance policies somewhere else. Generally, your safe deposit box will be locked upon your death just when these important documents will be needed most.
Name Date
Residence address
Office address
Safe deposit boxNumber Bank
Address
Birth certificate
Baptismal certificate
Medical records
Burial records
Letter of last instruction
Other
Life
Disability
Health/Medical
Long-term health care
Homeowner s/rental
Other
Person
al D
ocum
ent L
ocator
Legal Documents
Financial Documents
Titles and Deeds
Marriage certificate
Divorce papers
Social Security card
Power of Attorney
Will and trust agreements
Veteran s papers
Living will and health care proxy
Other
Mortgage papers
Bank/brokerage houseAccount papers
Stock/bond certificates
Income tax returns
Gift tax returns
Employee benefit data
Other
Automobile
House
Other real estate
Cemetery plot
Other
Person
al D
ocum
ent L
ocator
Important People
AccountantName
Address
Phone
AttorneyName
Address
Phone
BankerName
Address
Phone
EmployerName
Address
Phone
Financial management professional Name
Address
Phone
Insurance agentName
Address
Phone
Stock BrokerName
Address
Phone
Primary PhysicianName
Address
Phone
OtherName
Address
Phone
OtherName
Address
Phone
Person
al D
ocum
ent L
ocator
Institutions
Bank (savings)Name
Address
Phone
Bank (checking)Name
Address
Phone
Credit unionName
Address
Phone
Money market fundName
Address
Phone
Savings and loanName
Address
Phone
OtherName
Address
Phone
OtherName
Address
Phone
OtherName
Address
Phone
OtherName
Address
Phone
OtherName
Address
Phone
Person
al D
ocum
ent L
ocator
Finish Rich File Folder System
I would like to share with you a simple yet powerful way to organize your financial affairs athome. This information comes from the book, Smart Women Finish Rich, by David Bach.
First, you will need a box of 50 manila file folders and a dozen hanging folders for your filecabinet. I want you to label your hanging folders as follows:
1. Tax Returns: Inside put eight manila folders, one for each of the past seven years, andone for the current year. Mark the year on each folder and put all your important taxdocuments for that year in each folder. As a rule, you should keep old tax records for atleast 7 years.
2. Retirement Accounts: This is where you keep all of your retirement account statements.You should create a file for each retirement account you have. This most important thingto keep ion these folders is the quarterly statements. At the end of each year you canthrow away the quarterly�s and keep just the annual statement.
3. Social Security: You should keep the most recent Social Security Benefits Statement ineach folder. If you haven�t gotten one recently you can go online at www.ssa.gov andrequest one.
4. Investment Accounts: In this folder put files for each investment account that you havethat is not a retirement account.
5. Checking and Savings Accounts: If you have separate checking and savings accounts,create separate folders for each of them. Keep your monthly statements in here.
6. Household Accounts: If you own your home, you should have the following folders:Home title (this should contain your title information), Home Improvements (this shouldcontain all receipts for work you do on your home�home improvement costs can beadded to the cost basis of your home when you sell it), Home Mortgage (for all mortgagestatements). If you are a renter, this folder should contain your lease, all of your securitydeposit information, and receipts for rental payments.
7. Credit Card Debt: You should create a file folder for each credit card account you have(hopefully, this will not be one of your larger files).
8. Other liabilities: This file should contain separate folders for such things as collegeloans, car loans, personal loans, etc. They should contain the loan notes and yourpayment receipts.
9. Insurance: You should create a folder for each insurance policy you have, includinghealth, life, car, homeowners or renters, disability, long term care, etc. In these foldersput the appropriate policy and all related payment records.
10. Family Will or Trust: This should contain the most current copy of your will or livingtrust documents. You should also have a business card of the attorney who set them up.
11. Children�s Accounts: It should contain all statements and other records of collegesavings accounts and other investments that you have made for your kids.
12. Finish Rich Inventory Planner: This folder will contain the Finish Rich worksheet thatwill help you determine your net worth. This folder will also contain a file in which youkeep a running semiannual total of your net worth- a vital record that will help you keeptrack of your financial progress.
Recommended