You & Your Money

Class 2, Part 1 – Your Budget

International Center at Catholic Charities Community Services April 2013 Instructor: Virginia Guilford

Class Schedule

• • • Class 1 - Thursday April 11, 4:00 – 5:00 PM – Your Income – Your Taxes Class 2 – Thursday April 18, 4:00 – 5:00 PM – Your Budget – Your Bank Accounts Class 3 – Thursday April 25, 4:00 – 5:00 PM – Your Credit – Learning More 2

Please Be Aware

• • This course does not give you professional advice – I am not a lawyer.

– I am not an accountant.

– I am not a banker.

This course explains the basic concepts and vocabulary that you need for understanding work, taxes, budgeting, banking and credit.

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Please Be Aware

• • This course does not give you professional advice – I am not a lawyer.

– I am not an accountant.

– I am not a banker.

This course explains the basic concepts and vocabulary that you need for understanding work, taxes, budgeting, banking and credit.

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Your Budget

• • You will want to make sure that the money you earn will take care of your needs A budget is a kind of plan that lists your expected income (your net income) and your estimated expenses 5

Estimating Your Income

• • Employee with a fixed salary – Monthly or Twice a Month – Every Two Weeks Scholarships & Grants – Monthly Stipend – Annual Payment 6

Estimating Your Expenses

• Write down a list of what you estimate your expenses will be – Review your checkbook – Keep a list for a month 7

Analyzing Your Expenses

• • Analyze your Expenses – Required Expenses – items you need to survive – Optional Expenses – items that are ‘extras’ – – Fixed Expenses – the same from month to month Flexible Expenses – different from month to month Examples • • • Required Fixed Expenses – rent/mortgage, monthly metro card Required Flexible Expenses – groceries, laundry/dry cleaning Optional Fixed Expenses – car payment, standard phone plan • Optional Flexible Expenses - entertainment, clothing, gifts 8

How to Manage an Irregular Income

• • “Making Your Nut” Giving Yourself a Salary 9

How to Manage an Irregular Income

• “Making Your Nut” – Know what your ‘nut’ is – the minimum you need to cover your basic required expenses • First earn enough to make your ‘nut’ • Then – think about extras – Good if you earn lots of small amounts of money 10

How to Manage an Irregular Income

• Giving Yourself a Salary – Know what is a sensible amount for a salary that will cover most of your needs • Put all income into a savings account • Transfer the salary amount each month to your checking account – Good if you get large amounts of money at different times 11

Put Savings First

Saving for Emergencies – Enough to cover 3-6 months basic expenses • Saving for Retirement – Even if you are young, try to put away something.

– Use tax advantaged accounts • Saving for a Goal – Decide how much you will need, and when you will need it – Calculate how much you will need to save each pay period to reach your goal 12

You & Your Money

Class 2, Part 2 – Your Bank Accounts

International Center at Catholic Charities Community Services April 2013 Instructor: Virginia Guilford

Kinds of Banks

• • There are different kinds of banks – Commercial Banks – Savings Banks – Credit Unions – Internet Banks In earlier times, each different type of bank was only allowed to provide a specific kind of bank service. But now, most types of banks can do all the same basic things.

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Choosing Your Bank

• • • Convenience – Branches /ATMs located near your home or work place – – International branches, if you need international services Open at convenient times for you Services – Offers the kind of bank accounts you need – Safe online banking that is easy to use Fees – Reasonable fees compared to other banks. Verify at “Find A Better Bank” ( www.findabetterbank.com

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FDIC Protection

• • • The Federal Deposit Insurance Corp (FDIC) protects against the loss of deposited money if an FDIC-insured institution fails – Does cover funds in checking accounts, savings accounts, money market accounts, and CDs – Does not cover stocks, bonds, mutual funds, life insurance, annuities or municipal securities Most commercial banks, savings banks and credit unions will post signs indicating that they are FDIC-insured. Credit unions can make use of NCUA, a federal agency that regulates credit unions and insures deposits for up to $250,000.

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Kinds of Accounts & Bank Offerings

• • • • • Checking Accounts Savings Accounts CDs Money Market Accounts Tax-Advantaged Accounts 17

Checking Accounts

• Checking Accounts – Allows you to take money out whenever you want – Money can be withdrawn by using a check, or an ATM/Debit card – Some checking accounts also pay interest on money in the account 18

Savings Accounts

• Savings Accounts – Allows you to take out money whenever you want – Money can be withdrawn by a visit to the branch, or with an ATM/Debit card – Savings accounts pay a small amount of interest on the money left in the account 19

CDs

CD (Certificate of Deposit) – You agree not to take out the money for specified amount of time, until a specified ‘maturity date’ – CDs have maturity dates that range from 3 months to 5 years or more – CDs usually pay a higher amount of interest than savings accounts – CDs in higher amounts, with longer maturity dates pay more interest 20

Money Market Accounts

Money Market Accounts – An MMA is an FDIC-insured deposit account • • • Pays slightly higher interest rates Usually has a minimum balance Usually limits the number of withdrawals – Not the same as a Money Market Fund (MMF) • • An MMF is a kind of mutual fund An MMF is not FDIC insured 21

Tax-Advantaged Accounts

• • Tax-Advantaged Accounts Federal & State tax laws allow you to shelter some income from income tax – IRA Retirement Account – ROTH IRA Retirement Account – HSA Health Savings Account – ESA Coverdell Education Savings Account Most banks and brokerage firms offer tax-advantaged accounts 22

Access to your Bank Accounts

• • Deposits Withdrawals – At the Bank – ATM Withdrawals – Using Your Debit Card – Check Payments – Certified Checks 23

Deposits to your Bank Accounts

• Deposits of cash or checks – – ATM or Teller Deposit Smart Phone Photo Deposit – some banks provide an app for your phone to allow check deposits and some other banking transactions – Endorsing your Check for Deposit • Add your signature on the back • Add the words “for deposit only” underneath your signature • Direct Deposit – Employer – Tax refunds 24

Withdrawals from Bank Accounts • Cashing a Check at the Bank – Most easily done at your own branch (where you opened your account) • Your own branch will have your signature on file • You may be personally known to someone at the branch – Give the teller a check written on your account made out to ‘cash’ – You may also be able to use your Debit or ATM card to get money from the teller without a check 25

Withdrawals from Bank Accounts • ATM Withdrawals – Bank-provided ATM card – Debit card Avoid out-of-network ATMs 26

Withdrawals from Bank Accounts • Checks – Blank checks may be free, or there may be a small charge – The ‘Float’ is the time between when you write the check and when the money leaves your account.

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Withdrawals from Bank Accounts Certified Checks – Large purchases (car, down payment) may require payment with a certified check – A check that is guaranteed by the bank – Must be requested at the branch • Bank verifies that you have enough money to cover the certified check • Bank ‘freezes’ that amount of money in your account • No ‘float’ time between when you write the check and when the money comes out of your account 28

Withdrawals from Bank Accounts • Electronic Access – Debit Card Purchases • Use a bank Debit Card to immediately pay for purchases or make cash withdrawals from your bank account – Automatic Transfers & Bill Payment • • Automatic Transfers between Accounts Online Banking Bill Payment • Vendor Activated Bill Paying Options – Approved Automated Withdrawals / ACH Debit 29

Electronic Access – On-line Banking • • On-Line Banking – Check your balance – Pay bills – Transfer money Is It Safe?

– Most banks offer secure Internet banking – https – indicates the connection is secured by encryption – Internet security is a complicated issue • • Be cautious Be careful 30

Electronic Access - ACH Debit • Approved Automated Withdrawals / ACH Debit – Only for limited amounts and limited time – Only from trustworthy companies • • Companies that you know well Companies that you would not have trouble with if you wanted to change or cancel your payment – YES for major utilities, public colleges/universities, government offices – NO for private profit-based schools, small companies in other countries 31

Special Banking Services •

Wire Transfers

– Money is sent electronically from one bank account to another – Often used for international transfers of money – Wire transfers use networks like CHIPS (Clearing House Interbank Payments System) or Fedwire (the Federal Reserve Banks network) 32

Special Banking Services

• Overdraft Protection – A check is ‘bounced’ when you don’t have enough money in your account to pay it – Banks may charge high fees if a check bounces – as much as $20 or $30 – Overdraft protection is offered at some banks. The bank gives you an automatic loan if you don’t have enough money to cover a check you wrote.

• • • Look carefully at any overdraft protection How much will it cost?

Is there a charge only if you use it or is there a monthly charge?

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Special Banking Services • • • • Stop Payment Orders If a check you have written is lost or stolen, or if you don’t want to pay it for some other reason, you can put a ‘stop payment’ order on that check – – – – Check payee Check amount Check date Check number A fee may be charge for a stop payment order The stop payment order may only be good for a specific amount of time – for example 6 months 34

Special Banking Services • • • Automatic Transfers You can set up a regular, automatic transfer that will happen on the same day, at regular intervals – – Once a month On your payday If you have online banking, you can set up a regular transfer through your online interface You can also ask the bank to do make the transfer for you 35

You & Your Money Glossary

• • • A list of commonly used financial terms with definitions..

Go to www.virginiaguilford.com

class are also available there) and download the Glossary from the “Docs and Links” page. (The PowerPoint presentations used in this Or send your request to [email protected]

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