CREDIT: ACCESSING IT, UNDERSTANDING IT, USING IT WISELY Today s Webinar is Sponsored By
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Today s Moderator Elizabeth Jennings Director of Training & Technical Assistance National Disability Institute
Today s Agenda Welcome Financial Wellness and Individuals with MS Understanding debt and your personal level of debt. Strategies for reducing and eliminating debt. Taking on good credit behaviors. Questions & Answers Suggested Next Steps & Wrap Up 8
Special THANK YOU to our sponsor Acorda Therapeutics 9
National Disability Institute A national research and development organization with the mission to promote income preservation and asset development for persons with disabilities and to build a better economic future for Americans with disabilities.
What is Financial Wellness? We define financial wellness as the state of a person s finances with the intent of working towards financial behaviors that limit stress and the impact of stress on one s daily life. 11
Why is Financial Wellness Important? Impacts mental and physical health. Positively impacts self-concept. Changes status with other community stakeholders. Directly impacts quality of life. 12
Financial Wellness Understanding Public Benefit rules Building and Maintaining Assets Being Financially Literate Accessing Affordable Financial Services Accessing Available Healthcare Subsidies Understanding work and long-term disability options Utilizing Favorable Tax Provisions Budgeting 13
National Poverty Estimates Individuals ages 18-64 For individuals without disabilities, 12.4% had income below the poverty level over the past 12 months For individuals with disabilities, more than 2x that rate 28.8% had income below the poverty level. Source: U.S. Census Bureau, 2013 American Community Survey 14
Financial Wellness and MS A recent survey conducted by MSAA and NDI involving individuals with MS indicated: 55.1% of households earn less than $35k annually, 16.4% earn less than $50k but more than $35k annually. When asked about the ability to pay all of their bills in a typical month, 32% have a very difficult time paying their bills in a typical month, 46.9% reported a somewhat difficult time. 43% of respondents reported that their financial status has affected their ability to access medical care at some point. 15
Financial Wellness and MS A recent survey conducted by MSAA and NDI involving individuals with MS indicated: 71.7% of respondents do not have enough savings to cover 3 months expenses. 67.1% of respondents reported that their finances were worse since their MS diagnosis. 73.7% of Respondents reported that they were not aware of/have not used financial stability programs (EITC, IDA, FSS, PASS you will learn about these in subsequent webinars) 16
The Americans With Disabilities Act The Nation s proper goals regarding individuals with disabilities are to assure equality of opportunity, full participation, independent living, and economic self-sufficiency for such individuals; 42 U.S.C. 1201(a)(8) (2005) the continuing existence of unfair and unnecessary discrimination and prejudice denies people with disabilities the opportunity to compete on an equal basis and to pursue those opportunities for which our free society is justifiably famous, and costs the United States billions of dollars in unnecessary expenses resulting from dependency and non-productivity. 42 U.S.C. 1201(a)(9) (2005) 17
For millions of working age adults with disabilities a dependence on public benefits for income, health care, food, and housing becomes a trap that requires staying poor to stay eligible 18
Financial Wellness Strategies Exist Financial Literacy Budgeting Credit Repair Getting Banked Use of work incentives Use of tax incentives Volunteer Income Tax Assistance Earned Income Tax Credit State Medicaid Buy-In Programs Family Self-Sufficiency Programs Individual Development Accounts Assistive Technology Loan Funds Student Loans Retirement Accounts Post-secondary Education Employment Self-employment Micro-Enterprise Home Ownership Protection and Advocacy, Taxpayer Advocates, Credit Counseling Volunteer Income Tax Assistance, Work Incentive Planning & Assistance 19
Today s Guest Presenter Dara Duguay Executive Director Credit Builders Alliance
The Wise Use of Credit November 19, 2014 2013 Credit Builders Alliance, Inc. Some rights reserved. CREDIT BUILDERS ALLIANCE and the accompanying Logo are trademarks of Credit Builders Alliance, Inc. This document is licensed under a Creative Commons Attribution-Noncommercial-Share Alike License (US/v.3.0). Noncommercial uses are permitted on the condition that you include an attribution to Credit Builders Alliance. If you alter, transform, or build upon this work, you may distribute the resulting work only under the same or similar license to this one. More information regarding the license is at: http://creativecommons.org/licenses/by-nc-sa/3.0/. Requests for permissions beyond the scope of the license should be directed to Credit Builders Alliance, Inc., at www.creditbuildersalliance.org/. Credit Builders Alliance ("CBA"), a not-for-profit organization, makes this information available for informational purposes only. This information is not intended as legal, financial, www.creditbuildersalliance.org other advice, and you and your clients should consult qualified info@creditbuildersalliance.org advisors before making any decisions. CBA does not represent 2013 Credit that Builders any of the Alliance, information Inc. Some will rights produce reserved. results.
Debt Red Flags Do any of these statements apply to you? I avoid totaling my debt I have a delinquent credit card account I ve maxed out my credit card limits I take cash advances or obtain payday loans to pay bills I make only the minimum payment on my credit cards I don t have an emergency fund (unable to save) I ve asked for increases in my limit on my credit cards www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Debt Red Flags Do any of these statements apply to you? I can t survive the month without using credit cards for basic needs I am not surprised when my credit application is denied I make periodic efforts to pay down my credit cards only to find it necessary to use the cards again due to lack of cash I live from paycheck to paycheck When deciding which credit card to use, I favor the one with the most credit available www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Why Debt Occurs Most Americans don t save nearly enough. Why? Culture of instant gratification Easy mortgages and credit Rising housing costs Soaring college tuition Keeping up with the Joneses www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Cost of Credit If you owe $1,000 at 18.5 percent interest, and pay the minimum ($20-$25) monthly, your total bill will come to $1,737. that includes your original debt, plus interest. Credit card would be paid off in 6 years and 8 months assuming no new purchases and the bill is paid on time. www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Calculate Your Monthly Debt Percentage Calculate Your Monthly Debt Percentage Debts Average Payments TOTAL $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Calculate Your Monthly Debt Percentage Calculate Your Monthly Debt Percentage 1. Total your monthly debt payments $ (including your mortgage) 2. Enter your monthly gross income $ (income before taxes & other deductions) 3. Divide #1 by #2 to calculate your debt percentage % www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Calculate Your Monthly Debt Percentage Calculate Your Monthly Debt Percentage What is your temperature? 51% or more= Danger 39%- 50%= High 24%- 38%= Fair 16%- 23%= Good 15% or less= Great www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Reduce or Eliminate Credit Card Debt Pay the full amount (this should be your objective) If this is not possible, then strive to pay more than the required minimum payment Increase payments to highest interest rate cards first This method will result in the most savings in the long run An alternate approach is to target the smallest balances first, so that progress is obvious as accounts are paid-off Pay your bill as soon as you receive it Cut-up and stop using all but 2-3 credit cards Consolidate debt on lowest-rate card www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Reduce or Eliminate Credit Card Debt Consolidate debt with Home Equity Loan Lower interest rate than credit cards Interest is often tax deductible Be aware... Loan is now secured Credit cards are now at zero balance www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Speed up Pay-off... Really Pays Off Credit Card Credit Card Balance Percent Monthly Payments Card #1 $ 3,000 15 $ 67.50 Card #2 $ 4,000 15 $ 90 Card #3 $ 5,000 15 $112.50 Total $12,000 $270 Total interest paid over 26 years and 9 months is... $14,305! www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Look at the Savings! If $100 extra per month is paid, total interest over (6 years 3 months) is $5,190...$9,115 in interest savings If $200 extra per month is paid, total interest over (3 years 8 months) is $3,307...$10,998 in interest savings If $300 extra per month is paid, total interest over (2 years 7 months) is $2,444...$11,861 in interest savings www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
What is Your Credit Costing You? Subprime Loans cost much more than Prime Loans $20,000 car paid over 5 years Rate Monthly Payment Cost of Credit 7% $396.02 $3,761.12 14% $465.37 $7,922.20 $100,000 home paid over 30 years Rate Monthly Payment Cost of Credit 7% $655.30 $139,508.00 11% $952.32 $242,835.20 www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Predatory Lending Predatory or abusive lending practices can include: Packaging a loan with single-premium credit insurance products, such as credit life insurance, and not adequately disclosing the inclusion, cost, or any additional fees associated with the insurance. Repeatedly refinancing a loan within a short period of time, and charging high points and fees with each refinance. Charging excessive rates and fees to a borrower who qualifies for lower rates and/or fees offered by the lender. www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Warning Signs of Predatory Mortgages Multiple refinancing, also called flipping A lender refinances a loan to generate fee income without providing any real benefit to the borrower. Unnecessary debt consolidation A predatory lender may collect fees by offering a debt consolidation loan that has little or no benefit to the borrower. Negative amortization A loan is structured so that the monthly payment is insufficient to cover accrued interest, which means that the outstanding loan balance increases every month. www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Debtor Terminology Delinquent Payments Written notices that credit payments are past due. Default Notices If delinquent payments are not acknowledged, written notices are sent from the creditor warning that more serious steps will be taken if credit is not paid. Repossessions When the creditor takes back an item that has been purchased, because of nonpayment. www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Debtor Terminology, cont d Judgment Lien When a creditor has received no response from previous attempts to collect a debt, the creditor may be able to obtain a court order placing a claim on property owned by the individual to recover the costs of the debt. Garnishment If the borrower does not pay the credit bills, the creditor may be able to obtain a court order requesting that an employer deduct a percentage of the employee s paycheck and send it to the creditor before the paycheck is given to the employee. Collection Agencies When a creditor has not received any response to written notices of nonpayment, the account can be turned over to a business that specializes in collecting unpaid debts. www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Collection Agency Pointers Don t put your head in the sand Don t make promises you can t keep Don t send post-dated checks Attempt to negotiate a settlement Collectors may not call before 8am or after 9pm If you notify in writing, they may not contact you at work Don t accept no without speaking to a supervisor first www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Bankruptcy Types of Bankruptcy Chapter 7 wipes out all allowable debts and allows certain personal property exemptions. The debtor gives up all property unless the state deems it necessary to support the debtor and his or her dependents. Eligibility is determined by a means test that measures income against expenses. Chapter 13 is a court-approved repayment plan. The debtor keeps all of his or her property and makes regular payments on the debts after filing for bankruptcy. Chapter 11 is typically used for business bankruptcies. It is not commonly used by individual consumers. www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Tips for Good Credit Shop around for the best credit terms Understand the terms of the agreement before you sign Set a monthly limit for charges and stick to it Shop as carefully with credit as you do with cash Don t take on monthly credit payments you can t meet Pay bills promptly and in full to keep finance charges low www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Consumer Financial Protection Bureau Established by the Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010). CFPB Vision is a consumer finance marketplace where customers can see prices and risks up front and where they can easily make product comparisons in which no one can build a business model around unfair, deceptive, or abusive practices that works for American consumers, responsible providers and the economy as a whole
Ask CFPB ConsumerFinance.gov/askcfpb Curated homepage content Search autocomplete Filter search results by audience or topic 42
Questions? www.creditbuildersalliance.org info@creditbuildersalliance.org 2013 Credit Builders Alliance, Inc. Some rights reserved.
Suggested Next Steps 1. Calculate Your Monthly Debt Percentage to gauge your temperature. 51% or more = Danger 39%- 50% = High 24%- 38% = Fair 16%- 23% = Good 15% or less = Great 44
Suggested Next Steps 2. Review the strategies for reducing debt and take action on one of the strategies. 3. Set a goal to complete items 1 and 2 over the next three months. 4. Share with us your experience.» We will send out emails over the next few months to offer you a chance to share your experience. 45
Tyze is an online tool that helps people care for an individual who requires assistance through the use of a customized personal support network that brings together friends, family, community members, and healthcare staff. Interested? Let us know in the webinar post-survey!
Special THANK YOU again to our sponsor Acorda Therapeutics 47
Contact Information National Disability Institute www.realeconomicimpact.org Credit Builder s Alliance www.creditbuildersalliance.org Elizabeth Jennings ejennings@ndi-inc.org 48
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