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Zach Teutsch, DirectorInvestor Education ProjectNational Labor College

Financial Empowerment

Responding to the Foreclosure Crisis

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Origins of the Foreclosure Crisis: Productivity Grew—Wages Didn’t

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Productivity

Wages

The Housing Market Bubble

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Homeowners are not to blame!

The foreclosure crisis was caused by:

Wall Street Greed

Regulatory Failures

Unstable Economy

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Advice for Homeowners: Tip #1: Start Early

The sooner you take action, the more likely you will be able to save your home.

Homeowners should take action when they first have trouble paying their mortgage

Do not wait for a foreclosure filing before seeking help

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Advice for Homeowners:Tip #2: Seek Help

Seek help - you wouldn’t try to negotiate a grievance with the boss alone

Work with a non-profit housing counselor who is familiar with loan modifications

Free help is available from government-qualified housing counselors

Be wary of scams offering help for a fee

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Advice for Homeowners:Tip#3: Stick With It

The mortgage modification process can take a long time to complete

Keep copies - the bank may ask for the same document multiple times

Continue to seek a modification even if you also receive a foreclosure notice

Stay in contact with your bank and HUD approved housing counselor

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Finding a housing counselor Be wary of scams asking for money Free home counseling is available to

homeowners facing foreclosure Housing and Urban Development maintains a

list of free, government-approved counselors www.makinghomeaffordable.gov Hotline Number: (888) 995-HOPE

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Neighborhood Assistance Corporation of America

Founded with assistance of the Boston Hotel and Restaurant Employees Union Local 26

Save the Dream mortgage modification events Organizes campaigns to challenge predatory

lending and encourage banks to modify mortgages

Visit www.naca.com or call (888) 404-6222

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Affordable Housing Centers of America

Formerly the ACORN Housing Corporation Home Equity Loss Prevention (HELP) program Offices in 19 cities, 14 states, and DC Help homeowners in person, via phone or via

internet Visit www.ahcoa.org or call (888) 409-3557

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Union Plus--Save My Home Hotline

Housing counselors are available 24/7 Run by Money Management International

(MMI) with 46 years of credit counseling experience

If you have a Union Plus Mortgage, you may also be eligible for additional assistance

Visit www.unionplus.org or call (866) 490-5361

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Questions?

Do you save money every paycheck?

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1. Yes2. No

Is an increasing percentage of your income going towards paying down debts?

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1. Yes2. No

Is your savings cushion adequate?

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1. Yes2. No

Can you only make the minimum payments on your credit cards?

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50%50%1. Yes2. No

Are you often late paying bills?

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50%50%1. Yes2. No

Are you using credit to pay for things you used to buy with cash?

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50%50%1. Yes2. No

If you lost your job, would you be under immediate financial strain?

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50%50%1. Yes2. No

Do you know how much you owe?

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50%50%1. Yes2. No

Are you being threatened by collectors with possible legal action?

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50%50%1. Yes2. No

Financial Security: The Basics

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Becoming Financially Secure There are no secret

shortcuts to financially security.

The keys are patience, time and discipline.

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Four Steps to Financial Security

Spend Less Than You Earn

Eliminate Debt

Emergency Fund

Invest

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Spend Less Than You Earn

Every month we get richer or poorer. If we take in more money than we spend, we

get richer. If we take in less than we get poorer. We can build a surplus at any salary.

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Saving $1,000 Per Year

Ditch the latteNix the lottery ticketsBring a brown bag lunchsometimes

Reduce smokingGet the right cell phone plan

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What are some ways to Save $3 per day?

Expensive Ways to Spend Money

More than 20% of Americans use Payday Lenders, Pawnshops, etc.

Over half of households carry a credit card balance from month-to-month.

These are ways that we end up spending much more than the price of items we buy.

If we pay only the minimum on our credit cards we end up paying as much as 5 times our original bill.

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Credit Card Companies How do credit card companies

make profits? What sort of customers do they

love? Why?

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Eliminate Debt

High-Interest Debt is Crippling

Eliminate Debt as Soon as Possible.

Two Approaches Highest Interest Rate First Smallest Balance First

Don’t Let the Credit Card Company Own Your Life.

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Emergency Fund

Before We Talk About Investments…

Emergency Fund Experts Say That We Should

Set Aside 2-6 Months Salary in case there are unexpected expenses.

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Retirement at a Glance

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Personal Investments

Social

Security

Pensions

The 3-Legged Retirement

Stool

One-Legged Retirement Approach

No Pension No Social Security Just Savings/Investment Wobbly! Unstable! Avoid!

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The 2-Legged Retirement Approach Most Americans have only

two legs to their retirement. Social Security Personal Savings

Stable as long as it leans on something: Generous employer

contributions Strong stock market

performance Be Careful!

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Defined Benefit Pensions Are Important!

Defined Benefit = payments are guaranteed. Pension benefit is based on salary and years

served. The stock market doesn’t impact your ability

to retire. Employer takes on risk, not employee. Money managed by investment professionals.

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Financial Security: Investing

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Time To Invest

Once we have gotten rid of our debt and setup our emergency fund, we can set aside money every month for investment.

Automate so we don’t have to remember every month. Auto-pay ourselves first!

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Money Grows

“The most powerful force in the universe is compounding interest.”

The sooner you start saving and investing, the sooner you will have the resources you need.

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$1,000 Over 30 Years

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$1,000 A Year for 30 Years

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Mutual Funds

Each person owns a share of the basket of investments

Professionally managed

Fund types: Actively managed funds (staff buy and sell

stocks or bonds to try to make money) Index funds (passive, fees are usually lower)

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Index Funds

Lower Fees

Lower Taxes

Diversified

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Asset Allocation

Asset classes are different types of investments

- stocks, bonds, real estate, etc

Allocation means the percent of total money available that you invest in each class.

The investment mix should give you the highest return for the lowest level of risk for your particular circumstance.

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“Do not put all your eggs in one basket”

Age and Asset Allocation

The younger you are the more risk should be in your portfolio (including Deferred Comp) to increase it’s likely return.

The older you are the more conservative you should be so you can minimize risk.

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Questions?

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401(k) Plans

401(k) Plans Two Kinds of Tax Advantages

Help Now 401(k) 403(b) 457

Help Later Roth IRA Roth 401(k)

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401(k) Plans

Contain Mutual Funds Look for Low Fees. Diversify Yourself or

Choose a Pre-Diversified Fund.

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401(k) Plans Is it a Good Deal?

Match? Mutual Fund Options?

Fees

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Smart Choices in Difficult Times Try hard to conserve funds

meant for retirement. Understand the tax bite

Withdrawals before 59½ can carry a 20-30% tax that can be avoided but by waiting until 59½.

20% will be held by plan manager to insure tax payment.

If you rollover, do it directly to avoid taxes.

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Wrapping Up

Other Resources Investor Workshops:

http://www.nlc.edu/investor-education.html Available 24/7 Workshops in chunks of 20 minutes or less. Objective. User-friendly.

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Putting Learning Into Practice Write down two things you’d

like to accomplish financially in the next three months on the worksheet.

Put your address on the envelope.

Put the worksheet in the envelope, seal it, and return it to me.

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Acknowledgements

This program is made possible by a generous grant from the FINRA Investor Education Foundation. The FINRA Investor Education Foundation, supports educational projects that give investors the tools and information they need to better understand the basic principles of saving and investing. For details about grant programs and other new initiatives of the Foundation, visit www.finrafoundation.org.

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