12/5/2013. Cash Management: Overview. More Month Than Money and Extra Credit. Why are you here? Benefits of developing a budget

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1 12/5/2013 Cash Management: Overview More Month Than Money and Extra Credit Sean L. Mabey 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. 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. 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? Why People Don t Plan Procrastination Intimidation Where to begin? 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! 1

2 12/5/2013 Steps in Developing Your Budget Provident was founded in 1950 as the credit union for CTA as an institution for educators, by educators 19 branches in Northern California plus you can use over 350 CU Service Centers California locations at no charge Free ATM s you can use CU Service Centers CO-OP ATM s surcharge free, 28,000 nationwide Savings, Super Reward Checking, Auto home home loans, mortgages, home equity and lines of credit, of of credit, IRA s, bill paying, and more CTA New Teacher Loan Free Chapter or Pac Fund Accounts Step 3: Determine your fixed expenses Includes rent or mortgage, utilities, car loans, student loans, insurances, etc PAY YOURSELF FIRST! or Travel the Road of Life with CTA and NEA Member Benefits 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 4: Determine your flexible expenses Easier to control, reduce, or cut Includes clothing, entertainment, eating out, food, etc 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 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 2

3 12/5/2013 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. 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 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 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 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 ormore years $1,000 $5,000 $50,000 $150,000 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 3

4 12/5/2013 NEA Magazine Service 19 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 Extra Credit All you need to know about your Credit Report and Credit Score Credit Reporting Agencies Equifax PO Box Atlanta, Georgia Experian PO Box 2104 Allen, Texas TransUnion PO Box 1000 Chester, Pennsylvania 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. 4

5 12/5/2013 What s in your credit report? Identifying information Trade Lines Real estate Installment Revolving Other Inquiries Public Record and Collection Items 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 How scoring works FICO Scores range from 300 to : 2% : 5% % : 12% : 15% : 18% : 27% : 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 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 What a FICO Score Considers Length of Credit History 15% 10% 10% Score 35% Payment History Amounts Owed Length of Credit History New Credit 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 30% 5

6 12/5/2013 Types of Credit in Use Approximately 10% Considers: What kind of credit accounts you have How many of each you have 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 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 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 What FICO Score Ignores Disputing Items on Your Credit Report Race Religion National origin Gender Marital status Age Salary Occupation Employment history Title Employer Hire date Where you live Interest rates on credit cards or other accounts Any information not found in 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. 6

7 12/5/2013 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? 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. 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. 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. Reducing Expenses Get a handle on credit cards (give them a credit card haircut) Did you know By 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? 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 7

8 12/5/ Establish Credit In Your OWN Name! 8

9 Finish Rich File Folder System Iwouldliketosharewithyouasimpleyetpowerfulwaytoorganizeyourfinancialaffairsat home. This information comes from the book, Smart Women Finish Rich, by David Bach. First,youwillneedaboxof50manilafilefoldersandadozenhangingfoldersforyourfile cabinet. I want you to label your hanging folders as follows: 1. TaxReturns:Insideputeightmanilafolders,oneforeachofthepastsevenyears,and oneforthecurrentyear.marktheyearoneachfolderandputallyourimportanttax documentsforthatyearineachfolder.asarule,youshouldkeepoldtaxrecordsforat least 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 thing tokeepionthesefoldersisthequarterlystatements.attheendofeachyearyoucan throw away the quarterly s and keep just the annual statement. 3. Social Security: You should keep the most recent Social Security Benefits Statement in eachfolder.ifyouhaven tgottenonerecentlyyoucangoonlineatwww.ssa.govand request one. 4. Investment Accounts: In this folder put files for each investment account that you have that 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 should contain all receipts for work you do on your home home improvement costs can be addedtothecostbasisofyourhomewhenyousellit),homemortgage(forallmortgage statements). If you are a renter, this folder should contain your lease, all of your security deposit information, and receipts for rental payments. 7. CreditCardDebt:Youshouldcreateafilefolderforeachcreditcardaccountyouhave (hopefully, this will not be one of your larger files). 8. Other liabilities: This file should contain separate folders for such things as college loans, car loans, personal loans, etc. They should contain the loan notes and your payment receipts. 9. Insurance: You should create a folder for each insurance policy you have, including health, life, car, homeowners or renters, disability, long term care, etc. In these folders put the appropriate policy and all related payment records. 10.FamilyWillorTrust:Thisshouldcontainthemostcurrentcopyofyourwillorliving trustdocuments.youshouldalsohaveabusinesscardoftheattorneywhosetthemup. 11. Children s Accounts: It should contain all statements and other records of college savings accounts and other investments that you have made for your kids. 12. Finish Rich Inventory Planner: This folder will contain the Finish Rich worksheet that willhelpyoudetermineyournetworth.thisfolderwillalsocontainafileinwhichyou keeparunningsemiannualtotalofyournetworth-avitalrecordthatwillhelpyoukeep track of your financial progress.

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