Transcript You and Your Money - Virginia Guilford

You & Your Money
Class 2, Part 1 – Your Budget
International Center
at Catholic Charities Community Services
December 2013
Instructor: Virginia Guilford
Class Schedule
• Class 1 - Thursday December 5, 3:30 -5 PM
– Your Income
– Your Taxes
• Class 2 – Thursday December 12, 3:30 -5 PM
– Your Budget
– Your Bank Accounts
• Class 3 – Thursday December 19, 3:30 -5 PM
– Your Credit
– Learning More
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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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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 Attitudes Toward Money
Influence of Your Parents
• How your parents dealt with money when you were
a child can influence how you feel today.
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Frugal Parents?
Your Parents Spoiled You?
Charitable Parents?
Your Parents Never Talked About Money?
Your Parents Thought Investing Was Not Safe?
Your Parents Were Extravagant
Your Mother Was Dependent
Your Parents Divorced
Your Attitudes Toward Money
Influence of Your Money Personality
• Take the Money Personality Quiz
– The questions ask what you would do in different
situations.
– Choose the answer that most closely matches
what you would do.
Your Attitudes Toward Money
Influence of Your Money Personality
• Money Personality Quiz Scoring
– Score your answers
• Give yourself 2 points for every A answer
• Give yourself 1 points for every B answer
• Give yourself 0 point for every C answer
– Your Money Personality
• 14 – 20 points – Shopaholic (emotional, entitled)
• 7 – 13 points – Sensible Spender (rational, planner)
• 0 – 6 points – Scrooge (stingy, pessimistic)
Your Attitudes Toward Money
Dealing With Your Money Personality
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Shopaholic
– You spend as much as you can, and you have trouble using your money for savings or to
pay down debt.
– People from countries that provide more of a ‘safety net’ may not realize the need in the
US to save for emergencies, like sickness or job layoffs.
– Try to make shopping not your only reward – remember sports and hobbies that you
enjoy.
– Arrange for automatic payroll savings plans wherever possible – if you don’t have it, you
can’t spend it.
Scrooge
– You tend to be pessimistic and fearful about the future, and you are reluctant to spend
anything more than the minimum necessary. Friends and family may feel neglected and
disrespected.
– Think about setting aside a specific amount of money that you plan to use for gifts or
contributions. That way you won’t feel that these expenses will overwhelm you.
– Consider investing some of your savings. If you can see your savings grow, maybe you
can become more comfortable spending some of your money.
Sensible Spender
– You usually make rational, informed decisions about your money.
– Continue learning. Regularly read the personal finance pages in your newspaper, or look
at CNN Money or Yahoo Finance.
– You, too, should consider investing – a sensible, diversified investment plan can help you
fund your retirement.
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
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Estimating Your Income
• Employee with a fixed salary
– Monthly or Twice a Month
– Every Two Weeks
• Scholarships & Grants
– Monthly Stipend
– Annual Payment
• Irregular Income
– Paid on Commission – your pay rises and falls, depending on
how much you sell.
– Paid by the job – your pay rises and falls, depending on how
many projects you are hired to do.
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Estimating Your Expenses
• Write down a list of what you estimate your
expenses will be
– Review your checkbook
– Keep a list for a month
• Analyze your Expenses
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Fixed Expenses
Flexible Expenses
Required Expenses
Optional Expenses
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How to Manage an Irregular Income
• “Making Your Nut”
• Giving Yourself a Salary
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How to Manage an Irregular Income
• “Making Your Nut”
– Know what your ‘nut’ is – the minimum you
need to cover basics
• First earn enough to make your ‘nut’
• Then – think about extras
– Good if you earn lots of small amounts of
money
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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
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Put Savings First
Saving for Emergencies
– Enough to cover 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
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You & Your Money
Class 2, Part 2 – Your Bank Accounts
International Center
at Catholic Charities Community Services
December 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.
– 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
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Kinds of Accounts & Bank Offerings
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Checking Accounts
Savings Accounts
CDs
Money Market Accounts
Tax-Advantaged Accounts
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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
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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
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CDs
CD (Certificate of Deposit)
– You agree not to take out the money for specified
amount of time
– 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
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Money Market Accounts
Money Market Accounts
– A 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
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Tax-Advantaged Accounts
Tax-Advantaged Accounts
• Federal & State tax laws allow you to shelter
some income from income tax
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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
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Access to your Bank Accounts
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Deposits
Withdrawals at the Bank Branch
ATM Withdrawals
Debit Card Withdrawals
Check Payments
Certified Checks
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Access to your Bank Accounts
• Deposits of cash or checks
– Deposit Ticket
– ATM deposit
– Smart phone deposit (checks only)
• Direct Deposit
– Employer
– Tax refunds
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Access to your Bank Accounts
• Withdrawals at the Bank Branch
– 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’
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Access to your Bank Accounts
ATM Withdrawals
–Bank-provided ATM card
–Debit card
• Avoid out-of-network ATMs
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Electronic Access – Debit Card
• Debit Card Withdrawals
– A bank card that allows the cost of purchases to be
immediately deducted from your bank account
• Not a credit card – you must have the money in your
account when you use it.
• May be used for withdrawing cash from the ATM
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Access to your 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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Access to your 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
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Electronic Access to your Bank
Accounts
• On-Line Banking
• Approved Automated Withdrawals /
ACH Debit
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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
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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
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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)
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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
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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
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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
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You & Your Money Glossary
• Contains simple definitions of the most
commonly used financial terms.
• Log on to www.virginiaguilford.com and
download the Word document from the “Docs
and Links” page. (The PowerPoint
presentations used in this class are also
available there)
• Or send your request to
[email protected]
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