Transcript Financial Literacy

Financial Literacy
Learning How to Manage Your
Money
Create a Budget and Stick To It
• Step 1: Record your total monthly income
• Step 2: Record all of your expenses
• Step 3: Categorize your spending
– “Non-discretionary” spending—things you can’t live
without (housing, food, utilities, etc.)
– “Discretionary” spending– things that aren’t true
necessities (eating out, concert tickets, beer $$$)
• Step 4: Target Discretionary Spending
• Step 5: Balance your budget—do this monthly and make
sure you’re not spending more money than you earn
Not Just for Writing Checks Anymore
• Checking Account Basics
– Convenient and fast way to manage your money and
access it to pay your bills
• Online & Mobile Banking—keep track of deposits &
withdrawals, pay your bills online
• Get fast cash at an ATM—watch out for those fees
• Debit Card—comes directly out of your account, so make
sure you have money in there
• Checks—make sure you keep track of checks that haven’t
cleared so they don’t bounce
• Saves you $$$ b/c you don’t have to pay bills by
money orders or cashier’s checks anymore
To Save or Not to Save?
• It’s never too early to start saving!
• Choose a savings account with a good interest
rate & few penalties to help grow your savings
• Watch for fees that may apply to minimum
balance requirements or withdrawal limits
• A good rule of thumb is to pay your bills first and
put the rest into savings. Consider saving at least
10% of your income.
• Keep track of deposits, withdrawals and transfers
to avoid unexpected service charges
Watch Out For Those Pesky Bank Fees!
• Overdraft & Insufficient Funds Fees
• Monthly Service Fees
• Overdraft Protection Transfer Fees
• ATM Fees
• Excess Withdrawal Fees
• Late Payment & Overlimit Fees
Your bank should provide a list of fees when
you first open an account there.
Credit Cards—Friend or Foe?
• If used responsibly, credit cards can offer these
benefits:
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Help you build credit
Don’t have to carry cash or write checks
Can be used for unexpected emergencies
If you don’t have cash available for necessities, you
can still purchase them
– You can keep track of purchases with monthly
statements
– Consolidate your spending into a single monthly
payment
Credit Cards—A Cautionary Tale
• Young college students are heavily targeted by credit card
companies because they:
– Need to built credit
– Are notorious for being broke, image conscious, & impulse
buyers
– Sometimes forgo making payments because other things are
more pressing…late fees & higher interest rates are just $$$ in
the CC company’s pocket
– Will pay high interest rates because most don’t know any better
• Beware of impulse buying most…it adds up way faster than
you think
• Mismanagement of credit cards can lead to late fees,
overlimit fees, higher interest rates and averse affects on
your credit score that can last for years
Staying out of Credit Card Hell
• ALWAYS pay at least the minimum amount due.
If you can pay the entire balance, that’s even
better
• Make your payments on time, every time
• NEVER spend more than you can afford to pay
back
• Make sure the total of all your transactions
doesn’t exceed your Total Credit Limit (don’t
forget to factor in that interest)
• Don’t fill out every credit card application you
receive…your credit takes a hit every time
What’s in a Credit Report?
• Credit Report is a complete file of your financial history that
shows:
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Whether you’ve paid credit card & loan bills on time
How you’ve handled necessary expenses, like rent & utilities
How much credit is available to you, on cards you already have
The total amount of debt you have outstanding
• Who can check your credit report?
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Banks
Landlords
Employers
Auto Insurance Providers
Cell Phone Companies
Auto Dealerships
Credit Score—More Than Just a
Number
• Based off of your Credit Report
– Credit history is a good indicator of whether you will
be a high or low risk borrower in the future
– Based on a scale of 850-350…the higher, the better
• Higher end of scale (700-850)—Moderate to low risk; more
likely to receive a competitive interest rate on loans
• Middle of scale (600-700)—Fair to good risk; interest rates
on loans will be higher, but you should still qualify
• Lower end of scale (350-600)—High risk; lenders will be
wary about extending loans or credit to you; improving score
should be a priority to you
– The higher your score, the more likely you are to
obtain the financial tools you need
Identify Theft—Not a Victimless Crime
• Identify Theft is fast becoming one of the most common types of crime all
over the world
• Protect yourself
– Check your credit reports regularly—you are entitled to one free credit report
every 12 months from the three credit bureaus…TransUnion, Equifax, and
Experian. Just go to www.annualcreditreport.com
– Watch statements for fraudulent charges
– Keep identity information private & in a secure location
– Make sure websites are secure before you enter any personal information
– Limit the amount of personal information you provide on social networking
sites
– Be cautious about messages you receive on social networking sites that
contain links
– Install Firewall/Antivirus/Anti-spyware software on computer
– Sign the back of your card
– Make a list of your credit card numbers
– NEVER give out personal information over the phone
Identify Theft Victim—What Now?
• If you believe you are a victim of identify theft or fraud,
there are steps that can be taken:
– Step 1: Contact one or more of the consumer credit
reporting companies
– Step 2: Close the accounts you know or believe have been
tampered with or opened fraudulently
– Step 3: File a report with your local police
– Step 4: File a complaint with the Federal Trade
Commission
• Call the Identity Theft Hotline 1-877-IDTHEFT
• Mail the Identify Theft Clearinghouse, Federal Trade Commission,
600 Pennsylvania Ave. NW, Washington, DC 20580
• Online at www.ftc.gov
How In the World Do I Pay for College?
• Understand the total cost of your education
– Tuition, fees, books, supplies
– Living & transportation costs
• Complete the FAFSA (Free Application for Federal Student
Aid) every academic year…the earlier the better!
• Fill out scholarship applications! Most schools have a
general scholarship application on their websites
• Review your financial aid package
• Set up a budget
• Determine if additional resources are needed
– Federal Loans and Private Alternative Loans are available, but
always considered a last resort. Explore all of your options
before putting yourself too far in debt!
Student Loans—Don’t Get in a Bind
• If you do take out school loans, don’t over-borrow. Only take out
what you need
• If at all possible, make small payments on your loans while in school
• Don’t forget to complete online Exit Counseling at
www.studentloans.gov if you withdraw or graduate/transfer
• Figure out how much you owe and who your servicer is at
www.nslds.ed.gov
• When you graduate, remember you only have six months before
you start paying your federal loans back, so prepare accordingly
• Talk to your servicer about what repayment plan will work best for
you
• If you get in a bind and can’t make your monthly payments, talk
with your servicer about deferment or forbearance options…they
are there to help!
And the Consequences Are…
• Consequences of Delinquent Payments and Default
(Loans are considered defaulted after 270 consecutive
days of non-payment)
– The entire amount of your loan can become immediately
due and payable
– Delinquency & default will be reported to all national
credit bureaus
– Legal action can be taken against you
– A collection agency can be hired to collect the loan balance
– Your wages can be garnished and your federal tax return
withheld to pay the loan balance
– You will not be eligible for any other federal financial aid
until your loan is in acceptable payment status