crm lesson plan report · 2019-01-14 · crm lesson plan report perform personal financial...

CRM LESSON PLAN REPORT

PERFORM PERSONAL FINANCIAL MANAGEMENT TRAINING (PFMT)

805A-AAF6B100 / 4.4 ©

Approved 08 Sep 2017

Effective Date: 08 Sep 2017

SCOPE: None ____________________________ Distribution Restriction: Approved for public release; distribution is unlimited. Destruction Notice: None Foreign Disclosure: FD1 - This training product has been reviewed by the training developers in coordination with the SSI, FMB, Fort Jackson, SC foreign disclosure officer. This training

product can be used to instruct international military students from all approved countries without restrictions.

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SECTION I. ADMINISTRATIVE DATA

All CourseMasters/POIsIncluding ThisLesson

Courses

CourseNumber

Version Title Phase Status

None

POIs

POI Number Version Title Phase Status

062-88K10 09.0 © Watercraft Operator 0 Approved

542-36B10 5.0 © FINANCIAL MANAGEMENTTECHNICIAN

0 Analysis

Task(s)Taught(*) orSupported

Task Number Task Title Status

ReinforcedTask(s) Task Number Task Title Status

Knowledge Knowledge Id Title Taught Required

K26138 Know how to perform personal financial managementtraining

Yes No

Skill Skill Id Title Taught Required

S4792 Ability to identify car buying Yes No

S4789 Ability to manage a checking account Yes No

S4791 Ability to review consumer awareness Yes No

S4793 Ability to measure your insurance needs Yes No

S4794 Ability to review investing / thrift savings plan Yes No

S4790 Ability to identify essentials of credit Yes No

S4788 Ability to develop spending plan Yes No

S4786 Ability to review financial ethics Yes No

S4787 Ability to analyze leave and earning statement / myPay Yes No

Administrative/AcademicHours

The administrative/academic (50 min) hours required to teach this lesson are as follows:

Academic Resident Hours / Methods

Yes 8 hrs 0 mins Discussion (Small or Large Group)

________________________________________________________________________

Total Hours(50 min): 8 hrs 0 mins

InstructorActionHours

The instructor action (60 min) hours required to teach this lesson are as follows:

Hours/Actions

0 hrs 5 mins Classroom Breakdown

0 hrs 10 mins Classroom Setup

________________________________________________________________________

Total Hours (60 min): 0 hrs 15 mins

Test Lesson(s) Hours Lesson Number Version Lesson Title

None

2

PrerequisiteLesson(s) Hours Lesson Number Version Lesson Title

None

TrainingMaterialClassification

Security Level: This course/lesson will present information that has a Security Classification of: U - Unclassified.

ForeignDisclosureRestrictions

FD1. This training product has been reviewed by the training developers in coordination with the SSI, FMB, FortJackson, SC foreign disclosure officer. This training product can be used to instruct international military studentsfrom all approved countries without restrictions.

ReferencesNumber Title Date

TRADOC PAM 600-4 The Soldiers Blue Book 23 Jun 2017

TRADOC REG 350-6 Enlisted Initial Entry Training Policies andAdministrationhttp://www.tradoc.army.mil/tpubs/regs/TR350-6.pdf

30 Jan 2018

Student StudyAssignment All Students must review training schedule and scan for all reading assignments and all

regulations in advance.

InstructorRequirements Instructor must review lesson plan material and associated multi-media one day prior to the actual date of instruction.

Instructorr should be prepared to add relevant experience to assist in learning.

Demonstrators: All demonstrators should rehearse their demonstration one day prior to demonstrating any lesson

material. A positive, non-toxic and motivating experience should be the result of all demonstrations.

All facilitators must meet requirements below:

a. Must be of the grade authorized by the TDA series.

b. Must meet physical qualifications IAW AR 40-501.

c. Must document successful completion of a TRADOC approved Facilitator Training Course within the past five years.

d. Must provide documentary evidence of their facilitator qualification.

e. Every instructor must meet the qualification standards established in AR 350-1, AR 614-200,TR 350-70, TR 350-10

and the proponent school instructor certification program.

SupportPersonnelRequirements

Assistant Instructor: All lesson plans material must be reviewed one day prior to facilitation. AI's will be alert to the

needs of the learners and assist as necessary. Must be prepared to take over class in the event of an interruption or

emergency.

AdditionalSupportPersonnelRequirements

NameStudent

Ratio QtyMan

Hours

None

3

EquipmentRequiredfor Instruction

ID - Name StudentRatio

InstructorRatio Spt Qty Exp

3610-01-C92-5429 - Printer, ColorLaserjet: HP Color Laserjet 5550DMRemarks:

0:0 0:0 Yes 3 No

5815-01-126-7670 - VIEWINGSCREENRemarks:

0:0 0:0 Yes 2 No

5820-00-912-3248 - MONITORRemarks:

0:0 0:0 Yes 1 No

5860-01-363-8730 - Laser PointerRemarks:

0:0 0:0 Yes 1 No

5920-01-144-7878 - Surge ProtectorRemarks:

0:0 0:0 Yes 27 No

5965-01-C11-8844 - MicrophoneDynamic, w/Connector and Cable:Desktop Gooseneck ShureRemarks:

0:0 0:0 Yes 1 No

5965-01-T00-0117 - Indoor Speakers:DI5 TannoyRemarks:

0:0 0:0 Yes 12 No

6515-01-416-0797 - Calculator,AnesthesRemarks:

1:1 0:0 No 0 No

6720-01-C15-4950 - Imaging Camera:Wolf Vision VZ8LTGRemarks:

0:0 0:0 Yes 2 No

7010-01-567-9212 - ComputerSystem, Digital, Desk Top, WorkStation: Dell Precision M6300Remarks:

1:1 1:1 No 0 No

7021-01-C93-4261 - Laptop,Toughpad, Panasonic FZ-G1Remarks:

1:1 1:1 No 0 No

7025-01-507-0697 - Disk Drive Unit,External, DVD PlayerRemarks:

0:0 0:0 Yes 1 No

7025-01-C09-1799 - Touchpanel,Color: TPS-3100l CrestronRemarks:

0:0 0:0 Yes 2 No

7025-01-C16-9129 - Whiteboard,Walldisplay Digital Interactive: SharpPNL702BRemarks:

0:0 0:0 Yes 1 No

7050-01-C14-4309 - Interactive PenDisplay: ID422W SmartRemarks:

0:0 0:0 Yes 1 No

7195-01-C05-1326 - Mr PodiumMP42-T LecternRemarks:

0:0 0:0 Yes 1 No

(Note: Asterisk before ID indicates a TADSS.)

MaterialsRequired Instructor Materials:

Each primary instructor should possess a lesson plan, slide deck, course handouts, and a summary sheet containing

the above noted references.

Student Materials:

Student's should possess all required printed reference material, course handouts, a summary sheet containing the

above noted references and standard classroom supplies.

Note: All required printed reference material, and technical manuals will be provided by the Schoolhouse.

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Classroom,Training Area,and RangeRequirements

ID - Name Quantity StudentRatio

SetupMins

CleanupMins

17120-M-1200-30Classroom, Multipurpose, 1200 Square Feet, 30 StudentsRemarks:

1:25 0 0

AmmunitionRequirements DODIC - Name Exp

StudentRatio

InstructRatio

SptQty

None

Instructional Guidance/Conduct of Lesson NOTE: Before presenting this lesson, instructors must thoroughly prepare by studying this

lesson and identified reference material.

Throughout this lesson, solicit from students the challenges they experienced in the current operational environment

(OE) and what they did to resolve them. Encourage learners to apply at least 1 of the 8 critical variables: physical

environment, political stability of the state, sociological demographics, infrastructure, military capabilities, information,

time, and economics.

Proponent LessonPlan Approvals Name Rank Position Date

Reid Bonig Not available Approver 08 Sep 2017

5

SECTION II. INTRODUCTION

Method of Instruction: Discussion (Small or Large Group)

Mode of Delivery: Resident Instruction

Instr Type (I:S Ratio): Military - ICH (1:25) (Every instructor must meet the qualification standardsestablished in AR 350-1, AR 614-200,TR 350-70, TR 350-10 and theproponent school instructor certification program.)

Time of Instruction: 5 mins

MotivatorWhatever your reason for joining the Army there is one unavoidable fact: it is your duty as a Soldier to fulfill your

financial obligations and to provide for your family. The purpose of this training is to provide information that will help

you prepare for your financial readiness.

TerminalLearningObjective

NOTE. Inform the students of the following Terminal Learning Objective requirements.

At the completion of this lesson, you [the student] will:

Action: Perform Personal Financial Management TrainingConditions:

As a new Soldier in a classroom environment using doctrinal and administrative publications,

practical exercises, handouts, and discussion.

Standards:With at least 75% accuracy, students must demonstrate proficiency with:

1. Review Financial Ethics

2. Review Retirement / Thrift Savings Plan

3. Analyze Leave and Earning Statement / myPay

4. Developing a Spending Plan

5. Managing a Checking Account

6. Identify the Essentials of Credit

7. Review Consumer Awareness

8. Assess the Car Buying Process

9. Assess Your Insurance Needs

LearningDomain - Level:

Cognitive - Understanding

No JPME LearningAreas Supported: None

SafetyRequirements In a training environment, leaders must perform a risk assessment in accordance with DA PAM 385-30, Risk

Management. Leaders will complete a DD Form 2977 DELIBERATE RISK ASSESSMENT WORKSHEET during the

planning and completion of each task and sub-task by assessing mission, enemy, terrain and weather, troops and

support available-time available and civil considerations, (METT-TC). Local policies and procedures must be followed

during times of increased heat category in order to avoid heat related injury. Consider the work/rest cycles and water

replacement guidelines IAW TRADOC Regulation 350-29.

Risk AssessmentLevel

Low - Electrical Shock, Fire, Slippery Floors, Physical Injure/Strain, Tripping Tight

Spaces in Classroom, and Influenza

Assessment: Low

Controls: Primary Facilitator (PF) will ensure: All electrical cords are properly stored under desks, liquid containers

have lids on them and all spills are immediately cleaned and mopped and allowed to completely dry before allowing

learners/personnel to walk on them. All chairs are ergonomically designed, adjust to individual preference and that all

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learners are awake and paying attention in class. All cables/cords are properly plugged in, sheathed, and secured

along tables, walls, and ceilings. No damaged or frayed cords/cables will be used. PI will brief proper hand washing

techniques, the use of hand sanitizer, and evacuation procedures. All trash will be removed daily.

Leader Actions: Detailed in-brief covering all aspects of safety to include daily classroom inspections, spills cleaned

immediately, emergency exit plans, leader checks, hygiene procedures, and weekly safety briefings.

EnvironmentalConsiderations NOTE: Instructor should conduct a risk assessment to include environmental considerations

IAW the current environmental considerations publication, and ensure students are briefed on

hazards and control measures.

Environmental protection is not just the law but the right thing to do. It is a continual process and starts with deliberate

planning. Always be alert to ways to protect our environment during training and missions. In doing so, you will

contribute to the sustainment of our training resources while protecting people and the environment from harmful

effects. Refer to ATP 3-34.5 Environmental Considerations and GTA 05-08-002 ENVIRONMENTAL-RELATED RISK

ASSESSMENT.

InstructionalLead-in The proper management of your personal finances can have a long-lasting and far-reaching impact on you as a Soldier

or a civilian. The last thing you want to be thinking about while patrolling the mountains of Afghanistan is if you are

being paid properly or if your Family is financially stable back at home.

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SECTION III. PRESENTATION

TLO - LSA 1. Learning Step / Activity TLO - LSA 1. Review Financial Ethics



Instr Type (I:S Ratio): Military - ICH (1:25)(Every instructor must meet the qualificationstandards established in AR 350-1, AR 614-200,TR 350-70, TR 350-10 and the proponent school instructor certification program.)


Media Type: Handout / PowerPoint Presentation

Other Media: Unassigned

Security Classification: This course/lesson will present information that has a SecurityClassification of: U - Unclassified.

SHOW SLIDE 01-1: Financial Ethics

1. Learning Step / Activity 1: Review Financial Ethics

Method of Instruction: DSL – Discussion (Small or Large Group)

Instructor to Student Ratio: 1:25

Time of Instruction: 00 hrs. / 30 mins

Media: PowerPoint Presentation, Handout

Required Student Materials:

• Student Handout

• Calculator

• Pencil

Corresponding Activity: (None)

SHOW SLIDE 01-2: Why Are We Here?

Instructor’s Note: Ask students the question. “WHY ARE YOU HERE?” (Wait for students to answer.)

Why Are We Here:

• Several recent analyses have shown that many junior Army personnel have problems managing their

money.

• These problems adversely affect both individual members, and the Army, as a whole.

SHOW SLIDE 01-3: Why Should I Care?

Instructor’s Note: Instructor read and discuss with students using the slide.

Why Should I Care:

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• In a 2012 Military Survey of the National Financial Capability Study conducted by the Financial Industry

Regulatory Authority (FINRA) Investor Education Foundation, 41% of active duty service members reported

at least some difficulty making ends meet.

Note: This is a 5% increase from the same study conducted in 2009.

SHOW SLIDE 01-4: Why Should I Care? (Cont.)


Why Should I Care: (Cont.)

• More than one out of every three junior service members have taken out a non-bank loan product (payday

loan).

• Payday loans, which tends to be more expensive than bank loans and can carry a higher interest rate.

• Resorting to taking out a payday loan can be indicative of a poor financial situation.

SHOW SLIDE 01-5: Why Should I Care? (Cont.)


EFFECTS ON THE ARMY:

• Substantial administrative costs for processing Letters of Indebtedness, wage garnishments, and bad

checks

• Roughly, 6 out of every 10-security clearances are revoked because of a service member encountering

severe financial problems--problems that could ultimately make them more vulnerable to approaches by

enemy agents.

• Millions of dollars in bad checks are written at Army Exchanges worldwide each month.

SHOW SLIDE 01-6: Army Core Values

Instructor’s Note: Ask the class how Core Values apply to their personal finances.

Army Core Values:

Note: Focus for just a moment on what you think the relationship of the Army Core Values is to your

personal financial management.

• Loyalty – Bear true faith and allegiance to the U.S. Constitution, the Army, your unit, and other Soldiers

• Duty - Duty means fulfilling your obligations. It often takes courage to meet your financial responsibilities.

Resisting personal desires and peer pressure to spend beyond your means, particularly at this state of your

lives, often requires great inner strength.

• Respect - Treat people as they should be treated

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• Selfless-Service - Put the welfare of the Nation, the Army, and your subordinates, before your own.

• Honor - Live up to all of the Army values. Applying “Honor” directly to this subject, it means being

completely honest about your financial obligations and current situation. It also means facing the reality of

what constitutes a reasonable lifestyle, and learning how to live within your means.

• Integrity – Always do what’s right, both legally and morally

• Personal Courage - Face fear, danger, or adversity head-on. This value includes being committed to

positive change and striving for constant improvement. You must first be committed to yourself, in order to

maintain sound finances.

SHOW SLIDE 01-7: Common Problem Areas Affecting Personal Finance


Common Problem Areas Affecting Personal Finance:

• There are five areas where Army lawyers and financial counselors often see problems.

• Legal assistance offices are located on nearly every base, ship, and installation. You can find your nearest

legal assistance office by visiting the “My Army Benefits” website, or by using the Legal Services Locator at:

o http://myarmybenefits.us.army.mil

Instructor’s Note: Inform students during these discussions, to please remember that I am not a lawyer.

However, you do have legal advice readily available to you, and I strongly encourage you to seek that advice

any time you are not sure of your legal rights or responsibilities.

SHOW SLIDE 01-8: Domestic Relations


Domestic Relations:

• Definitions for each type of domestic relation. The corresponding slides that follow tell the Soldier what to

do in each of these situations, but does not provide a definition of what each really means

• The first problem area affecting Soldiers that we will cover is in regards to domestic relations.

• This lesson will address your responsibilities when it comes to:

o Legal separation

o Divorce

o Spousal support

o Child support

SHOW SLIDE 01-9: Separation or Divorce


10

http://myarmybenefits.us.army.mil/

Separation or Divorce:

• If you find yourself in a separation or divorce situation, organize all your personal documents and marital

property, and close all joint credit accounts. Create a new financial plan according to your changed status.

BE SURE to have any agreements reviewed by an attorney. Check your credit report to avoid surprises.

After a divorce, re-title property and change legal documents and insurance papers.

Note: Discuss that “marital property” generally means items acquired by the parties during the marriage.

Note that your retired pay is usually considered marital property. The Uniformed Services Former Spouse

Protection Act (USFSPA) governs division of retired pay during a divorce.

• If a Soldier would like more information on USFSPA, guide them to:

o http://www.military.com/benefits/military-legal-matters/uniformed-services-former-spouse-protection-

overview.html

SHOW SLIDE 01-10: Spousal and Child Support


Spousal and Child Support:

• The Army provides counseling services to family members and also requires commands to counsel service

members when a nonsupport complaint is received. To take advantage of the counseling available to you,

contact or visit your installation’s Army Community Service Center.

• The Army does not have the direct authority to force a service member to provide support. However, the

DoD Financial Management Regulation (DoD FMR) states that when service members receive BAH at the

“with dependents” rate, that money is to be used for the support of their dependents.

• Failure to comply could result in recoupment of the difference between the “with dependents” and “without

dependents” rates via wage garnishments, involuntary allotments, and disciplinary action up to a court

martial.

SHOW SLIDE 01-11: Child Support


Child Support:

• Failure to meet court-ordered support payments usually results in a judgment against the member, which is

enforced by garnishment or involuntary allotment. Be aware that an involuntary allotment for child support

will take priority over all other debts, except those owed to the Government.

• A few additional words about child support. If you are responsible for child support, pay it! Keep records of

what you pay and when.

• If paternity is in doubt, get a paternity test, and refrain from doing anything that could be construed as

11

http://www.military.com/benefits/military-legal-matters/uniformed-services-former-spouse-protection-overview.html

http://www.military.com/benefits/military-legal-matters/uniformed-services-former-spouse-protection-overview.html

support until the results of the test are in.

• If you are due child support and are not receiving it, visit your local child support enforcement office and

seek help from the Army Legal Service Office and/or the Army Community Service (ACS) Center.

SHOW SLIDE 01-12: Landlord/Tenant Transactions


Landlord/Tenant Transactions:

• Another place Army lawyers see many problems is in the area of Landlord/Tenant transactions. There are

a few items you should consider before becoming a tenant.

o You should begin your search for suitable housing by visiting the Housing Office, where you can find

information on where and where not to rent. For more information, visit

o https://www.housing.army.mil/

o If you should rent an apartment or house, make sure your lease specifies the exact rental period as well

as the lease termination procedures.

o There is no Federal law requiring a "military clause“ in a lease; however, several states do require one.

You should always insist on adding a military clause since it will allow you to terminate your lease if you are

transferred, ordered to move into base housing, or discharged.

o You should always carry a separate renter's insurance policy to cover your personal belongings. The

landlord is only liable for your property if it is damaged due to his negligence.

• Inspect the premises thoroughly before moving in and note any discrepancies IN WRITING. Make sure to

bring these discrepancies to the attention of the landlord, in order to ensure any pre-existing problems with

the property are acknowledged and documented. State laws regarding a landlord's ability to keep a renter’s

security deposit vary widely. Normally, your deposit may not be retained unless you damage the property in

some way.

SHOW SLIDE 01-13: Credit Contracts


What is a Credit Contract?

• A credit contract or credit agreement is a legal contract in which a financial institution makes an

arrangement to loan a customer a certain amount of money for a specified amount of time. The agreement

includes all of the rules and regulations associated with the contract, including interest rates that must be

paid on said loan.

• These contracts are legally binding and difficult to cancel. Always read the fine print, and make sure that

the whole contract is filled in--leave no blanks! Above all, never sign anything under pressure. If you are

unsure, take a copy of the contract to your local Legal Services Office.

• Remember, it is ok to step away and return to the bank the next day if necessary.

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https://www.housing.army.mil/

SHOW SLIDE 01-14: Service Members Civil Relief ACT


Service Members Civil Relief ACT:

• Another problem area deals with the ServiceMembers Civil Relief Act. Army Legal Service Offices receive

many inquiries about what exactly is protected under this act, often because Soldiers mistakenly believe this

act offers them more protection than is actually the case.

• There is much more in the Act than we can cover during this lesson, so we encourage you to read the act

yourself.

• An overview of the SCRA can be located at:

o http://www.military.com/benefits/military-legal-matters/scra/servicemembers-civil-relief-act-overview.html

• A full PDF version of SCRA can be found by visiting the US Department of Justice at:

o https://www.justice.gov/sites/default/files/crt/legacy/2011/03/23/scratext.pdf

• The SCRA also covers Reservists and National Guardsmen while on Active Duty. It applies to Reservists

from the point of receipt of orders to the point that Active Duty is terminated. For National Guardsmen, they

are also included if they have more than 30 consecutive days of service when called to respond to National

Emergency.

SHOW SLIDE 01-15: Service Members Civil Relief ACT (Cont.)


Examples of protections and allowances under SCRA:

• SCRA protects service members from being taxed by multiple states or jurisdictions when the individual

relocates to a different state due to their military orders, protecting them from double taxation. The applies to

both state income taxes and personal property taxes.

• Active Duty Service members and their family members are also protected from eviction from a rental

property if the monthly rent does not exceed $3,217.18/month (as of 2014). The landlord must first obtain a

court order, and even then, the servicemember can request a delay in the execution of that order for up to 90

days.

• The SCRA also allows service members to terminate housing and automobile leases without penalty,

based on the length of time they are called to service.


13

http://www.military.com/benefits/military-legal-matters/scra/servicemembers-civil-relief-act-overview.html

https://www.justice.gov/sites/default/files/crt/legacy/2011/03/23/scratext.pdf


6% Interest Cap:

• The SCRA allows service members to place a 6% cap on the interest rates of credit cards, mortgages, and

loans (to include student loans), that were obtained before the individual entered active duty. The 6% cap

remains each year that you remain on active duty.

• In order to qualify for this interest cap, you must prove that serving on active duty has greatly impacted

your ability to pay back the loan.

*For example, going on active duty required you to take a considerable pay cut.

Note: Regarding credit card debt, the interest cap includes debt accrued prior to service entry-but not if debt

was added after entry to service.



What SCRA Does Not Provide:

• Assisting in the avoidance of attending a court hearing for criminal charges

• Exemption from local real estate taxes

• Helping you rescind a rental or purchase agreement entered into after you entered the service;

SHOW SLIDE 01-18: Military Spouse Residency Relief ACT (MSRRA)


MSRRA:

• A military spouse is exempt from income taxes in a state where income was earned when all four

qualifications are met:

1. The spouse currently resides in a state different than the state of his or her domicile;

2. The spouse resides in the state solely to live with the service member;

3. The service member is present in the state in compliance with military orders; and

4. The spouse and service member are both able to claim the same domicile.

Notes: Spouse pays income taxes for state domiciled, if state taxes income.

• Some states may still tax spouse on income that is not earned income or income from services provided–

such as rental income, some business income, and capital gains.

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• If service member gets a second job – it is taxed in the state, he or she has the job.

• Some states provide that ONLY military pay earned while living outside of a particular state such as Ohio,

Pennsylvania, Oklahoma, etc. is exempt in the domiciled state. No state provisions for spouse pay earned

outside of state. This simply means that a spouse CANNOT get out of paying tax unless their domicile is in

a state that does not have state withholding from pay. Most states require proof that the Military Spouse

Residency Relief Act applies.

• Service members and their spouses are encourages to seek free and confidential advice regarding

MSRRA from their local Military Legal Assistance Office.

SHOW SLIDE 01-19: Federal Student Loans


Federal Student Loans:

• To defer payments, current law requires service during wartime, national emergency, or certain

contingency operations. You may be able to stop the accrual of interest as well, but certain requirements

must be met.

• For the Public Service Loan Forgiveness, payments must be made for 10 years (120 payments) and then

the balance of student loans can be forgiven. For more information regarding this program, visit:

o https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

Note: Some private student loan providers offer some relief, modifications, and other options to make

repayment easier. At least one allows military members to defer for 3 years. But you need to ask and

research. Often it takes more effort than just talking to the first representative you get on the phone. Make

sure you understand any repercussions that any action you take may have.

SHOW SLIDE 01-20: Sources of Assistance


Sources of Assistance:

• Throughout this course, we will emphasize that you, as members of the military, have a wide range of

assistance available to you absolutely free of charge. Among these are the Army Community Service

Center and Army Emergency Relief. Rely on these sources for help.

• The Consumer Financial Protection Bureau (CFPB) is a relatively new Federal agency that provides

protection for consumers. You can file complaints regarding many of the financial products and practices we

will be talking about today. CFPB even has a department that specializes in assisting military members and

their families.

• The CFPB also provides financial coaches at no charge for anyone considered a veteran that is not

activated, meaning members of the National Guard and Reserves are also eligible to use this service.

• For more information on CFPB, including services offered, where to file a complaint, and how to speak to

15

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

one of their financial coaches, visit: http://www.consumerfinance.gov/

• Finally, Militaryonesource.mil provides free financial counseling available over the phone, as well as the

ability to schedule face-to-face counseling if desired.

Check on Learning:SHOW SLIDE 01-21: LSA 1 Check On Learning

Instructor’s Note: Conduct a check on learning with the students and

summarize the key points learned during Lesson One

Note: Animated slide, click enter to reveal answers.

Q1: About six times out of ten, when a security clearance is revoked, it is

because the member has financial problems.

A1: True

SHOW SLIDE 01-22: LSA 1 Check On Learning (Cont.)

Instructor’s Note: Continue check on learning with the students.


Q2: You should always insist on including a Military Clause in a housing

lease.

A2: True

Review Summary:SHOW SLIDE 01-23: LSA 1 Summary

Instructor’s Note: Ask students the following summary questions.

Summary Questions:

1. What is your personal obligation toward good financial management?

2. Where can I go to get a contract reviewed prior to signing it?

3. Why should I get a contract reviewed prior to signing it?

4. Where can I go for help with my finances?

Summary:

During this lesson, we discussed why this course is important to you, and

how the Army Core Values apply to your responsibility for sound financial

management. We also discussed the most common problem areas

16

http://www.consumerfinance.gov/

encountered by Soldiers as seen by Army lawyers and financial

counselors.

Instructor’s Note: Prep to transition into LSA #2 titled, Review Retirement

/ Thrift Savings Plan (TSP)

TLO - LSA 2. Learning Step / Activity TLO - LSA 2. Review Retirement / Thrift Savings Plan




Time of Instruction: 2 hrs 20 mins




SHOW SLIDE 2-1: Retirement/Thrift Savings Plan (TSP)

2. Learning Step / Activity 2: Review Retirement/Thrift Savings Plan






• Student Handout (Learning Activity 2: Retirement / Thrift Savings Plan)

• TSP-U-1 Form

• Calculator

• Pencil

SHOW SLIDE 2-2: Today’s Retirement Concept


• Retirement has changed significantly from the past. Many people are spending 20, 30, or even more years

retired.

• They retire younger, live longer, and are usually quite healthy.

• Retirees not only live independently, but also enjoy more of the fruits of their labors.

• Retirement income may need to equal or, depending on activities, even exceed pre-retirement income.

SHOW SLIDE 2-3: Regarding Investment Information

17


• Keep in mind as we start discussing investments that we will be providing you with very basic investment

information.

• We are not financial-planners, nor are we qualified to recommend investing in any particular stocks, bonds,

or mutual funds.

• You will need to make these decisions for yourself as you mature and become more knowledgeable about

investment strategies.

SHOW SLIDE 2-4: Sources of Retirement Income


• Retirement income is often described as a three-legged stool.

• The three legs are:

o Social Security benefits;

o Retirement and/or pension payments;

o and Investment income.

SHOW SLIDE 2-5: Social Security


Social Security/FICA:

• The FICA withholding you see on your Leave and Earnings Statement (LES) is your Social Security

contribution. Persons your age will be eligible to draw full Social Security benefits beginning at age 67. It

will probably be about $1,300 a month or less in terms of today's dollars.

• After you have been working for a year or two, you should ensure the Social Security Administration is

tracking your employment by requesting an Earnings and Benefits Estimate.

• Go to www.socialsecurity.gov to get a copy of your Social Security Statement online.

SHOW SLIDE 2-6: Types of Retirement Plans


Types of Retirement Plans:

• The second leg of the retirement income stool is Retirement Benefits and Pensions. Some of you may

retire from the military, begin a second career, and retire again. Others may leave the service prior to

retirement and become employed in the civilian world.

• In either case, I strongly suggest you examine an employer's retirement plans and pension benefits when

18

http://www.socialsecurity.gov/

deciding to take, or remain in, any specific job. At this time in your life, you are in the military and we will

concentrate on military retirement benefits. There are two types of retirement plans, Defined Benefit and

Defined Contribution.

• Today's Army has both.

SHOW SLIDE 2-7: Defined Benefit Plans


Defined Benefit Plans:

• Defined Benefit Plans are the more traditional type. The employer funds them, and one must usually work

a relatively long time to become eligible for a pension check. The amount of monthly pension is normally

based on salary and the number of years worked, and is guaranteed for life. These plans may or may not

include cost of living increases (Military retirement does).

• For you the Uniformed Services offers the current High-3 System, and starting January 1, 2018, the

Blended Retirement System (BRS).

SHOW SLIDE 2-8: Defined Contribution Plans


Defined Contribution Plans:

• Defined Contribution Plans have become increasingly popular over the last 20 years or so. These plans

allow employees to contribute up to a certain amount of their salary each month, before taxes, to a fund that

they have a significant amount of control over. Sometimes, frequently in the civilian world, employers will

match a portion of each month's contributions. The most common are 401(k) plans, named after the

regulating paragraph in the Federal Income Tax Code.

• There is no guarantee with this type of plan. Many workers have options on how they want to receive their

funds at retirement. The options are a lump sum payout, which they can then invest for future income;

deferment of the distribution for a later date; converting their funds to an annuity and then receiving periodic

payments from the annuity; or installment payments from their plan. These sums can be quite large,

however, the amount depends on how much the worker has invested, and the earning of the specific

investment plan.

SHOW SLIDE 2-9: Two Types of Defined Contribution Plans


• Generally, when money is withdrawn in retirement from a traditional plan, it is taxed. It is paid with tax

deferred dollars and continues to grow tax deferred until withdrawn when you are taxed on the money you

withdraw.

• For a Roth plan, when the money is withdrawn in retirement it is not taxed. A Roth account is paid with

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after tax dollars and grows tax free, even when withdrawn (some restrictions apply).

SHOW SLIDE 2-10: Blended Retirement System Opt-In Course


• This course is designed to provide Service members eligible to opt into the new Blended Retirement

System (BRS) sufficient information to make an educated decision about their retirement system.

SHOW SLIDE 2-11: Course Overview


• Congratulations! You are part of a select group of Service members who get to choose your retirement

benefit system. It is vital you take the time to understand how both of the retirement systems work so that

you can make an informed decision that’s right for you and your family.

• Currently, you are part of the legacy “High-3” retirement system, which provides a defined retirement pay

benefit if you complete 20 years or more of service. In addition, you have access to a non-matching, portable

retirement system component known as the Thrift Savings Plan (TSP), where you may already be

contributing.

• You may choose to remain in the legacy "High-3" retirement system, or elect to participate in the

modernized retirement system, commonly referred to as the Blended Retirement System (BRS). The BRS

combines a reduced-rate defined-benefit pension, plus a TSP account where the Government will

automatically contribute an amount equal to one percent of your basic pay and match your contributions up

to an additional four percent, for a total contribution of up to five percent. Additionally, even if you do not

complete a 20-year career in the service, the majority of individuals who opt into BRS will receive some

portable retirement benefit upon separation.

• This course is designed to inform, educate, and empower you to make the best decision for the future you

are planning for yourself and your family.

SHOW SLIDE 2-12: Course Overview (Cont.)


• Given an instructional presentation on the “High-3” Uniformed Services retirement system, Blended

Retirement System, time value of money and other financial planning concepts, and potential retirement

savings outcomes; the student will be able to understand the importance of saving for retirement, differences

between the “High-3” retirement system and blended retirement system, and the tools and resources

available to help them make their decision. Upon completion of this course, you will be able to:

(1) Identify the requirements for eligibility to opt into the BRS Recognize the opt-in period

(2) Understand the importance of planning and saving for retirement Understand the concept of a pension

for Uniformed Services retirement pay Define vesting and understand the requirements of the “vesting

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period” Recognize the value of compound interest

(3) Recognize the advantages of investing in the Thrift Savings Plan

(4) Understand the basic components of the legacy “High-3” Uniformed Services retirement system

Understand the basic components of the Blended Retirement System

(5) Understand the concepts of, and eligibility requirements for, Continuation Pay and the Lump Sum Option

Understand the factors necessary to make an informed retirement system choice by December 31, 2018

(6) Identify (and access) tools and resources available to provide you with information and education for

making financial decisions Understand how to use the BRS calculator to perform a financial comparison of

your retirement planning options

SHOW SLIDE 2-13: Opt-In Basics

Instructor’s Note: Splash Page for transition to Lesson 1 on Opt-In Basics.

SHOW SLIDE 2-14: Opt-In Basics Introduction


• In this lesson you’ll learn about the eligibility requirements for opting into the Blended Retirement System

(BRS), the period of time you will have in which to make your opt-in decision, and be introduced to the

similarities and differences between the legacy “High-3” Uniformed Services retirement system and the BRS.

SHOW SLIDE 2-15: Opt-In Basics Objectives


• After completing this lesson you will be able to:

(1) Identify the requirements for eligibility to opt into the BRS

(2) Recognize the Opt-In period

(3) Recognize similarities and differences between the legacy “High-3” Uniformed Services retirement

system and the BRS

SHOW SLIDE 2-16: Opt-In Eligibility


• You are taking this training because as of December 31, 2017 you are either:

• An Active Component (AC) member who has served fewer than 12 full years from your Pay Entry Base

Date (PEBD), or A Reserve Component (RC) member with fewer than 4,320 points

• This makes you eligible to opt into the BRS, or remain in the legacy “High-3” military retirement system. If

you do not choose to opt into the Blended Retirement System, you will remain in the “High-3” system. This is

your decision to make!

• Please note, no one who is currently serving as of December 31, 2017, or who has previously served, is

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automatically enrolled in the BRS. All Service members who enter service, or who sign a contract to serve,

on or before December 31, 2017 are grandfathered into the “High-3” retirement system that is more fully

described later in this lesson and in Lesson 4. It is strongly recommended that you discuss this decision with

your family, and take full advantage of the financial counseling and education opportunities available to you

as a Service member. But only you can make the decision whether to opt into the BRS or remain in the

“High-3” retirement system.

SHOW SLIDE 2-17: Opt-In Period


• You will be able to make a decision on your retirement system beginning January 1, 2018. Any eligible

Service member wishing to opt in must do so during calendar year 2018. Completion of opt-in training is

required prior to making the election. You may choose to remain covered by your legacy retirement system;

in which case nothing will change.

• But should you decide you want to switch to the BRS, you will have to record that opt-in decision. This

decision is irrevocable, or final, and cannot be changed at a later date.

• Members of the Reserve Component must be performing duties in a paid status during 2018 to opt in. If

not in a paid status during 2018, but otherwise eligible based on having accumulated fewer than 4,320

retirement points, those Reserve Component members will have an opportunity at a later date, if returning to

a paid status, to make their opt-in decision.

SHOW SLIDE 2-18: Opt-In Period Important Notes


• Reentrants will have the remainder of 2018, or depending upon when they return to service, a limited

period of time after 2018, to opt in if they desire. Stay alert for Service-specific instructions for opt-in

procedures.

• ROTC/Service Academy/Reentrants

• If you are taking this training while completing training through ROTC or a Service Academy, or are in an

unpaid Reserve Component status, you will have 30 days upon commissioning to active service or from the

time, you enter a paid status to make your election.

SHOW SLIDE 2-19: Differences between the “High-3” and the BRS


• The primary differences between the “High-3” retirement system and the BRS are described here.

(1) Under the “High-3” system, you will receive a pension in return for 20 years of active duty, or 20

qualifying (creditable) Years of Service (YOS) for the Reserve Component. Your monthly retired pay will be

calculated as shown here, 2.5% times your Years of Service times the average of your highest 36 months of

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basic pay.

(2) Under the BRS, you will still receive a pension for 20 Years of Service, though the multiplier is reduced

from 2.5% to 2.0%. If you choose to opt into the BRS, you will enroll in a U.S. Government Thrift Savings

Plan (TSP), a defined contribution plan currently available to Government workers. TSP is portable and,

once vested, all contributions and earnings stay with the Service member even after leaving the Service.

You will also receive an automatic Government contribution to your TSP equal to 1% of your basic pay, and

depending on your own contributions to TSP may be eligible for Government-matching contributions up to an

additional 4% of your basic pay. So, if you choose to leave the service before completing 20 years, under the

BRS you would separate with your contributions to your TSP and up to a total of 5% Government

contributions.

(3) It is important that you understand that all Service members today have the option to participate in the

TSP. The difference is that those who choose to remain in the “High-3” system will not receive Government-

matching funds or the 1% automatic contribution.

(4) You must decide which of the retirement systems is best for you and your family based on your future

financial needs, and your plans and goals for your Service career. You’ll get more information about the

differences in the two retirement systems later in this course.

SHOW SLIDE 2-20: Opt-In Check on Learning

Note: Conduct a check on learning and summarize this portion of the learning activity.

SHOW SLIDE 2-21: Opt-In Check on Learning (Cont.)

Instructor’s Note: Conduct a check on learning with the students.


Q1. All Service members who enter service, or who sign a contract to serve, on or before December 31,

2017 are automatically enrolled in the Blended Retirement System.

o True

o False

A1. Answer: False


Instructor’s Note: Continue with check on learning with the students.


Q2. The Opt-In Election Period is _________ to ___________.

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o January 1, 2017, December 31, 2017




A2. Answer: Opt-In period = January 1, 2018 to December 31, 2018


Instructor’s Note: Continue with check on learning with the students.


Q3. Out of these options, which do you think is the best description of how the legacy “High-3” retirement

system and the Blended Retirement System (BRS) are similar?

o They each provide an automatic Government TSP contribution of 1% of a Service member’s basic pay

o Service members are eligible for Government- matching TSP contributions in both systems

o Both require 20 Years of Service to qualify for a pension

o There are no similarities between the “High-3” and the BRS

A3. Answer: Both require 20 Years of Service to qualify for a pension

SHOW SLIDE 2-24: Opt-In Basics Summary

Instructor’s Note: During this lesson, we completed Lesson 1 on Opt-In Basics.

• You should now be able to:

(1) Identify the requirements for eligibility to opt into the BRS

(2) Recognize the opt-in period

(3) Recognize similarities and differences between the legacy “High-3” uniformed services retirement system

and the BRS

SHOW SLIDE 2-25: The Importance of Lifelong Financial Security

Instructor’s Note: Splash Page for transition to Lesson 2 on Lifelong Financial Security.

SHOW SLIDE 2-26: The Importance of Lifelong Financial Security Introduction


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• Your retirement may seem like it is many years in the future, but that is exactly the reason you need to plan

and begin saving for your retirement now!

• In this lesson, you’ll learn about the costs and uncertainties of retirement that many people recognize too

late, and be introduced to some 4 simple steps you can take to make your own future a little less uncertain.

SHOW SLIDE 2-27: The Importance of Lifelong Financial Security Objective



o Understand the importance of planning and saving for retirement

SHOW SLIDE 2-28: Why is Lifelong Financial Security Important?


• Retirement probably seems far off to you at this point in your life, and so it’s difficult to imagine what your

needs might be 50 years into the future. Today’s generation at or near retirement age had the same problem

when they were young. Consider some of these facts published by the U.S. Government General

Accounting Office and the Bureau of Labor Statistics:

(1) You can probably expect to live a good long life, into your mid-80’s.

(2) Many people approaching retirement age today have limited financial resources, and roughly, half have

no retirement savings at all. Those who have retirement savings probably don’t have enough, the average

savings for households 55-64 is about $104,000.

(3) The average American will need adequate savings and income to cover well over $50,000 per year in

living expenses between age 55 and 80.

(4) Experts advise you may need around 80% of your pre-retirement income to maintain your quality of life.

• While Social Security may cover some of your expenses, retirement savings will play a critical role in

ensuring you can maintain the standard of living you desire in retirement. The decisions you make today

when you are in your 20s or 30s may determine how you live during retirement.

SHOW SLIDE 2-29: Uncertainties of Retirement


• No one can predict the future. Your retirement is full of uncertainties. Consider just a few.

(1) Life expectancy will continue to go up as health care is improving, meaning you’ll need more money to

live on after your retirement.

(2) You’ll need to budget for living expenses, and unexpected health care expenses can disrupt the best

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plan. You have a standard of living to which you are accustomed, is that what you intend for your retirement?

(3) Social security was never intended to be your primary income during retirement.

(4) This is your opportunity to invest in your future NOW! Market fluctuations will impact your investments.

Diversifying and starting early will help mitigate those issues. Your best strategy for protecting yourself

against an uncertain future is to ensure you are actively planning and investing in your future.

SHOW SLIDE 2-30: Cost of Retirement


• You are going to need money after you retire.

(1) The U.S. Bureau of Labor Statistics (BLS) conducts regular surveys of consumer spending. Based upon

the most recent available survey results, in 2014 Americans over age 55 spent an average of $53,495 each

year. Total expenditures were highest from age 55-64 and decreased to an average of $36,673 for

Americans over age 75.

(2) It is important to compare expenditure data against income data since the decrease in spending may be

most attributable to decreases in income. In 2014, survey data indicates a steady decline in pretax income

from age 55 to age 75. One must consider that declines in expenditures could be the result of declining

income rather than consumer choices to reduce expenditures for other reasons. Keep in mind that this

information is based on history, and that you are still years away from your own retirement.

(3) Another uncertainty to consider is how much these costs may increase by the time you retire. For most

people, the essential costs of retirement include:

o Housing - The largest portion of these expenditures is housing which accounted for nearly $18,000 or

33.3 % of the total annual expenditures for this population segment. The data is further segmented for

Americans age 55-64, 65-74, and 75 and older. Based upon the BLS data, the share of housing costs

relative to total expenditures decreased with age until age 75 and over. Americans over 75 spent fewer

dollars on housing, but total annual expenditures also decreased for this population. As a result, housing

represented a larger share of total expenditures at 36.5%. Transportation

o Transportation - The next largest category of retirement spending was transportation at 17%, or a little

over $9000. Transportation costs increased from age 55 to age 74 and then declined substantially. This is

likely due to reduced mobility among the elderly population.

o Food - Food was the third highest category at 12.6%, or about $6,700. The food share of spending

remains fairly constant across the subcategories of age, but total dollar expenditures decrease with total

expenditures and total pretax income as age increases.

o Healthcare - Health care consumed an average of 8% of total expenditures for this population overall,

but the health care share of total expenditures rose dramatically from age 55 to age 75 and over. Total dollar

expenditures for this category were mostly consistent across the age subcategories, averaging about

$4,300.

(4) What Does It Mean? In categories where dollar spending remains constant while total expenditures and

total income falls, it is reasonable to assume the population had to reduce spending in other areas to

maintain spending in the constant dollar categories. Further, where total share of expenditures remain

26

constant, it is reasonable to assume cutbacks were made as a result of decreased total income.

SHOW SLIDE 2-31: Cost of Retirement (Cont.)

Instructor’s Note: Continue to read and discuss with students using the slide.

• Service Retirees Benefits

(1) Service members who retire from the military may have access to military retiree healthcare benefits,

commissary and exchange privileges, and access to military quality of life facilities such as gyms, recreation

areas, theaters, etc. As a result, total spending for this population may be lower since there are significant

cost savings for Service members who utilize military health care, commissaries, exchanges, and quality of

life facilities. In addition, military retirees may be eligible for special local and state tax treatment of their

retired pay and property in their home states.

(2) Maintaining Your Standard of Living. The term “Standard of Living” has a variety of definitions and

meanings, but what is important here is YOUR standard of living and what you want it to be during your

retirement. How do you define your current standard of living? The answer to this question may be similar for

most individuals in their 20s and 30s, but may be individually defined by the size of the family, location of the

home, type of car, cost of entertainment, and preferences for travel and leisure. It is up to you to determine

your current standard of living, your desired standard of living, and the standard of living you wish to have in

retirement. Do you want the same, better, or a lesser standard of living when you are 40, 50, 60 or older?

What will be your standard of living in retirement, since the costs of goods, services, and luxuries you desire

will most likely have gone up?

(3) “Standard of Living” Definition. The necessities, comforts, and luxuries enjoyed or aspired to by an

individual or group. A minimum of necessities, comforts, or luxuries held essential to maintaining a person or

group in customary or proper status or circumstances.

SHOW SLIDE 2-32: Retirement Income Streams


• Once you have an idea when you want to retire and have considered all of the relevant factors, like the

standard of living you want, you are ready to calculate the income you will need and how much you need to

save each month (or year) to reach your goal.

• There are four sources of retirement income, also known as “income streams”:

(1) Your personal savings and investments

(2) Employer-provided pensions

(3) Social Security retirement benefits, and

(4) Earned income if you choose (or need) to continue working

SHOW SLIDE 2-33: Retirement Income Streams (Cont.)


27

Example:

• E-6 Mike Smith

(1) Mike Smith is an E-6 with 10 years of service.

(2) He entered the military at 24 and plans on retiring in 16 years with 26 years of service. He hopes to make

E-8 or higher before he retires.

(3) Mike has made some estimates and determined he would like to have $70,000 a year when he retires for

good at age 65. When he retires, he has decided to plan for a 25-year retirement (when he will reach age

90). Using today’s dollars, he estimates that he will have the following annual retirement income:

o $33,000 from his military pension plan

o $21,000 from Social Security

(4) That leaves a gap of $16,000 a year that will either need to come from personal savings and

investments, or be provided through continued employment.

Mike needs to determine how much he needs to save each month/year to fill that gap, and what types of

saving and investment vehicles he will use. And if he does not save enough, how long will he have to

continue working to earn the income to live on?

SHOW SLIDE 2-34: Retirement Income Streams (Cont.)


• Be an Active Participant! Let’s do a quick recap of what we’ve covered so far.

(1) You want to stop working someday, and you need to plan ahead for how you will fund your retirement.

Recent studies show most people who are at or near retirement age today either don’t have any money

saved for retirement, or don’t think they have saved enough.

(2) You face many uncertainties with your retirement, but the best protection against those uncertainties is to

ensure you have adequate savings for retirement. Costs of retirement will include housing, transportation,

food, and medical care, and you can expect all of those costs to be higher by the time you reach retirement

age.

(3) You also need to plan for the standard of living you want to maintain after you stop working.

(4) As a member of the Uniformed Services, you will have a number of opportunities throughout your career

to receive financial literacy training and education. You also have access to other resources such as

Personal Financial Managers and Counselors. Regardless of the retirement system you choose, you should

take full advantage of these opportunities and resources to help you create financial security for

yourself and your family. Specific tools and resources available to help you with financial planning are

discussed in more detail later in this course.

(5) You need to be an active participant in your own future!

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SHOW SLIDE 2-35: Lifelong Financial Security Check on Learning


SHOW SLIDE 2-36: Lifelong Financial Security Check on Learning



Q1. Most people approaching retirement age today have adequate savings and investments to fund their

retirement for the rest of their lives.

o True

o False

A1. Answer: False

SHOW SLIDE 2-37: Lifelong Financial Security Check on Learning (Cont.)



Q2. For most people, the essential costs of living in retirement include (Select all that apply):

o Travel and Leisure

o Transportation

o Healthcare

o Housing

o Food

A2. Answer: All EXCEPT Travel and Leisure

SHOW SLIDE 2-38: The Importance of Lifelong Financial Security Summary

Instructor’s Note: During this lesson, we have completed Lesson 2 on the importance of planning for

retirement. You should now be able to:

• Understand the importance of planning and saving for retirement

SHOW SLIDE 2-39: Financial Planning Concepts and the TSP

Instructor’s Note: Splash Page for transition to Lesson 3 on Planning Concepts and the TSP.

29

SHOW SLIDE 2-40: Financial Planning Concepts and the TSP Introduction


• In this lesson, you’ll learn about some of the important terms and concepts you’ll need to understand in

order to be prepared to compare your retirement system options.

• You’ll also learn about the advantages of investing in the Thrift Savings Plan (TSP), which is the U.S.

Government’s version of the 401(k) investment plan.

SHOW SLIDE 2-41: Financial Planning Concepts and the TSP Objectives



(1) Understand the concept of a pension for Uniformed Services retirement pay

(2) Define vesting and understand the requirements of the “vesting period”

(3) Recognize the value of compound interest

(4) Recognize the advantages of investing in the Thrift Savings Plan

SHOW SLIDE 2-42: Financial Planning Concepts


• Planning Concepts

(1) What is a Pension? A pension, which is a type of “defined-benefit plan”, is a retirement system in which

an employee is promised that they will continue receiving a regular income, paid in intervals, even after they

retire. Usually, qualifying for a pension is based on completing a certain number of years of employment; in

exchange, the employee is guaranteed a monthly income even after he or she stops working. The Uniformed

Services’ legacy retirement systems, such as the “High-3,” are pension plans based on creditable years of

service – usually 20 years. Upon qualifying for retirement, you know you are guaranteed to receive a

monthly retirement paycheck for the rest of your life.

(2) What is a Defined Contribution Plan? Defined contribution plans, such as the Thrift Savings Plan and

401(k) plans, allow you to save for your own retirement through contributions from your pay into an

investment account that you can manage. Often, your employer contributes additional amounts to that

account enhancing your ability to invest and save for retirement. Like a pension, a defined contribution plan

allows you to receive income in retirement. But the income is not guaranteed and is based on how much

you and your employer contribute during your working years, and how well the investments perform over

time.

(3) What is Employer Matching? Employer matching is when your employer contributes a certain amount of

money to your defined contribution plan, such as TSP, based on how much you contribute. This is additional

money that comes from the employer, not from your pay, that goes into your retirement account, which you

30

manage.

(4) What is Portability? Portability is the ability of an employee to take their retirement investment account

with them when they leave one employer and move to another. Under defined contribution plans, such as

TSP, the rules allow you to take all of the money you invested in your account and move that money to

another retirement account when you leave the organization. Also, depending on the rules for “vesting”,

which we’ll discuss on the next page, you may be able to take the money your employer invested in your

retirement account with you. With portability, you can re-invest that account in your new employer’s program

or convert it to a different type of investment. You also have the option to leave your money in the TSP and it

will continue to grow, even after you leave the service. Separating members also have the option to cash out

of their TSP accounts, however, this option carries significant tax implications.

o For more information on portability, see your installation Personal Financial Manager (PFM) or visit the

TSP website. If a PFM or other Unit financial counselor is not available, consult with your Unit leadership or

seek guidance through Military OneSource.

(5) What is Vesting? Vesting is the right an employee has to keep the money, and interest earned on that

money, their employer contributed to their retirement account. Usually, vesting is based on the length of

time you work for that employer or participate in the retirement system. Once “vested,” the amount of money

in your retirement account is yours to keep and the employer cannot take it back.

(6) What is Compound Interest? According to Albert Einstein, "The most powerful force in the universe is

compound interest.“ Compound interest is interest added to the principal of a deposit or loan so that the

added interest also earns interest from then on. This addition of interest to the principal is called

compounding. Compound interest allows you to make money on the contributions you make to your

retirement account from your basic pay, any Government-provided contributions you receive, and from the

money earned by those contributions. Compounding makes it possible for your retirement savings to

increase exponentially.

• For example, if you invest $100, and over the course of a year earn a 5% rate of return, at the end of the

first year you’ll have $105. If you leave that money alone, and the next year you earn another 5% rate of

return, you’ll have $110.25. So in the second year, you’ve earned 5% on your original $100 contribution, plus

another 5% on the $5 you earned during the first year. At this rate, your original investment would double in

less than 15 years.

• Compounding is most effective the more years it has to work. So it’s best to start saving as soon as you

can, and to save consistently.

SHOW SLIDE 2-43: The Thrift Savings Plan (TSP)


• TSP.

(1) As a member of the Uniformed Services, you have the opportunity to participate in the Thrift Savings

Plan, a retirement savings plan similar to 401(k) retirement plans offered to private sector employees.

31

(2) The purpose of the TSP is to give you the ability to participate in a long-term retirement savings and

investment plan.

(3) TSP Advantages:

o Saving for your retirement through the TSP provides many advantages, including the following:

Automatic payroll deductions.

o A diversified choice of investment options, including professionally designed lifecycle funds. A choice of

tax treatments for your contributions:

o Traditional (pre-tax) contributions and tax-deferred investment earnings, and Roth (after-tax)

contributions with tax-free withdrawals at retirement (including withdrawals of earnings if you satisfy the IRS

requirements). Low administrative and investment expenses (e.g., as of 2016 TSP management fee is .03%

per year).

o Contributions from your service (Government-automatic [1%] contributions and Government-matching

contributions up to an additional 4% of your basic pay that you contribute) if you are enrolled in the BRS.

Under certain circumstances, access to your money while you are still a member of the Uniformed Services.

o A beneficiary participant account established for your spouse, or anyone you designate, in the event of

your death.

o A variety of withdrawal options.

SHOW SLIDE 2-44: The Thrift Savings Plan (TSP) (Cont.)

Instructor’s Note: Instructor continue to read and discuss with students using the slide.

• TSP (Cont.)

(1) TSP Vesting. Vesting refers to the time-in-service requirement that you must satisfy before you’re entitled

to keep your Government-automatic (1%) contributions (and their earnings). For BRS members, this

requirement is 2 years. All of your time as a member of the Uniformed Services counts toward vesting, not

just service while you are a TSP participant. So, if you opt into the BRS, and have already have 2 or more

full YOS, you will be fully vested in your Government-automatic contributions. The date your vesting period

begins is determined by your Pay Entry Base Date (PEBD), which your service reports to the TSP. Your

PEBD is shown along with other vesting information on your quarterly and annual TSP participant

statements. If you leave the Uniformed Services before you satisfy the vesting requirement, your

Government-automatic (1%) contributions and their earnings must be forfeited. However, if you die before

separating from service, your beneficiaries are automatically considered vested in all of the money in your

account. You are immediately vested in your own contributions plus their earnings, as well as vested in any

Government-matching contributions, plus earnings on those matching contributions. You do not need to

serve for 2 years in order to keep Government-matching contributions.

(2) Tax-Exempt Pay. If you are serving in a combat zone, you can contribute tax-exempt pay to your

traditional account or to your Roth account. If you contribute tax-exempt pay to your traditional account, the

amount you contribute will be tax-free when withdrawn. If you contribute tax-exempt pay to your Roth

account, both the amount contributed and associated earnings will be tax-free when withdrawn (if you satisfy

the regular Roth withdrawal requirements).

32

SHOW SLIDE 2-45: Planning Concepts and the TSP Check on Learning


SHOW SLIDE 2-46: Planning Concepts and the TSP Check on Learning



Q1. A pension is a type of ________; a retirement system in which an employee is promised that they will

continue receiving a regular income even after they retire.

o defined-benefit plan

o defined contribution

o tax-exempt plan

o 401(k) plan

A1. Answer: defined-benefit plan

SHOW SLIDE 2-47: Planning Concepts and the TSP Check on Learning (Cont.)



Q2. Once “vested” in your retirement account, _______.

o the money contributed to your account by your employer, and the interest earned on that money, is yours

to keep

o your employer will begin making contributions to your defined contribution plan, such as the TSP

o your employer may contribute to your account, but has the right to take that money back

o you can re-invest that account in a new employer’s program

A2. Answer: the money contributed to your account by your employer, and the interest earned on

that money, is yours to keep




33

Q3. Compound interest is when your employer contributes a certain amount of money to your defined

contribution plan, such as the TSP, based on how much you contribute.

o True

o False

A3. Answer: False




Q4. Advantages of the Thrift Savings Account include (Select all that apply):

o Automatic payroll deductions

o Contributions from the Government if you are enrolled in the BRS

o A diversified choice of investment options, including professionally designed lifecycle funds

A4. Answer: ALL answers are correct

SHOW SLIDE 2-50: Financial Planning Concepts and the TSP Summary


• You have completed Lesson 3 on financial terms and concepts, and the Thrift Savings Plan (TSP). You

should now be able to:

• Understand the concept of a pension for Uniformed Services retirement pay

• Define vesting and understand the requirements of the “vesting period”

• Recognize the value of compound interest

• Recognize the advantages of investing in the Thrift Savings Plan

SHOW SLIDE 2-51: Differences in the “High-3” and BRS

Instructor’s Note: Splash Page for transition to Lesson 4 on “High-3” and BRS.

SHOW SLIDE 2-52: Differences in the “High-3” and BRS Introduction


• In this lesson, you’ll learn more about the differences between the components of the Uniformed Services’

legacy “High-3” retirement system and the BRS.

34

SHOW SLIDE 2-53: Differences in the “High-3” and BRS Objectives



(1) Understand the basic components of the “High-3” Uniformed Services retirement system

(2) Understand the basic components of the Blended Retirement System

(3) Understand the concepts of, and eligibility requirements for, Continuation Pay and the Lump Sum Option

SHOW SLIDE 2-54: Differences in the “High-3” and BRS


• “High-3” and BRS

(1) The “High-3” Retirement System. The legacy "High-3" retirement system for the Uniformed Service is

based on a pension, or defined-benefit plan.

o Under the “High-3” system, Active Component (AC) members today who serve for 20 years are vested

in the system and will receive monthly regular retirement pay upon retirement. Reserve Component (RC)

members under the “High-3” system can start receiving non-regular retirement pay after 20 years of

qualifying service and reaching age 60 or earlier based on your qualifying active service.

o The formula for regular retirement pay under the “High-3” system for AC Service members is 2.5% X

Years of Service (YOS) X the average of the highest 36 months of basic pay, which results in a monthly

retired pay benefit of 50% of the average of your highest 36 months of basic pay, based on 20 Years of

Service. For members of the RC, Years of Service is equal to the Service member’s accumulated retirement

points divided by 360.

(2) The Blended Retirement System. The new Blended Retirement System takes effect on January 1, 2018.

Like the “High-3” retirement system, the new Blended Retirement System provides a pension, or defined

benefit, of monthly retired pay, though the formula changes.

o The new formula for both Active and Reserve Components is: 2.0% x your Years of Service x the

average of your highest 36 months of basic pay, which results in a monthly retired pay benefit of 40% of the

average of your highest 3 years of basic pay based on 20 Years of Service. Years of Service is calculated

based on an individual's Pay Entry Base Date (PEBD), also known as Pay Date, for the AC, and based on

Total Years of Qualifying Service for the RC. For RC members, Total Years of Qualifying Service is still

computed by dividing the number of accumulated retirement points by 360. The defined-benefit pension is

reduced when the multiplier decreases from 2.5% to 2.0% under the new BRS. However, depending upon

your own contribution rate to the TSP and investment returns, the addition of Government automatic and

matching contributions could allow you to achieve nearly the same or better total retirement benefit when

compared to the current retirement system.

35

• The qualifying service for the AC to receive regular retirement pay in the BRS is still at least 20 qualifying

Years of Service, the same as for the current system. For members of the RC qualifying for a non-regular

retirement, the vesting point remains 20 years of qualifying service, although the member will not begin

receiving retired pay until age 60. Some members of the RC could begin receiving retired pay sooner if they

have certain types of qualifying service that reduces his or her retirement age.

SHOW SLIDE 2-55: Differences in the “High-3” and BRS (Cont.)


• “High-3” and BRS (Cont.)

(1) Defined Contributions. A major difference between the “High-3” retirement system and the new BRS is

that the new blended system includes a TSP account for Service members where the Government will

contribute to the account along with the member. If you choose to participate in the BRS, you will be able to

set up a TSP account if you do not already have one.

o Upon opting into the BRS, you will choose the percentage contribution you want to make from your

basic pay each month. For those members who already have a TSP account, you may still determine your

contribution level upon opting in.

o The Government will begin automatically contributing an amount equal to 1% of your basic pay, and will

continue these contributions until you separate, retire, or complete 26 years of service, whichever occurs

first. You will begin seeing this contribution the next pay period after you opt-in.

o In addition, the Government will begin matching your contributions up to 4% of basic pay each month.

o If you opt into the BRS, you are immediately vested in your own contributions plus their earnings, as

well as vested in any Government-matching contributions, plus earnings on those matching contributions.

You do not need to serve for 2 years in order to keep Government-matching contributions.

o You must serve at least 2 complete years from your PEBD to be vested in your Government-automatic

(1%) contributions and their earnings. However, if you already have 2 or more full Years of Service when you

opt in, you will be fully vested in your Government-automatic contributions and their earnings. These

Government matching contributions will continue as long as you continue contributing, and until you

separate, retire, or complete 26 Years of Service.

(2) Continuation Pay. With the introduction of the new BRS, Congress authorized a Continuation Pay (CP)

bonus, which may be provided to you mid-career for your commitment to at least 3 more Years of Service.

o Continuation Pay will be paid to members covered by the BRS anywhere between eight to 12 years of

service depending on guidelines that will be put out by your Service. This pay, which is like an incentive or

bonus, is designed to encourage members to continue serving at critical points in their career. The amount

of Continuation Pay and when it is paid will be determined by your Service based on unique aspects of each

career field.

o While Continuation Pay is not part of a Service member’s retirement benefit, it is a factor in your

decision between opting into the BRS or remaining in the “High-3” retirement system.

36

(3) Basis for CP Amounts. Your Service may decide that a particular career field is in high demand, and they

must retain as many members in that career field as possible. This might lead your Service to pay a higher

Continuation Pay bonus to members with that particular skill at the mid-career point.

o The amounts paid to each career field may vary from year to year, although they will always be in the

range of a minimum of 2.5 months of basic pay up to a maximum of 13 months of basic pay for an AC

member, and a minimum of 0.5 months of basic pay to a maximum of 6 months of basic pay for an RC

member, calculated as if that member was serving on active duty.

o Active Guard/Reserve and Full-Time Support members will be paid at least the minimum of 2.5 months

of basic pay if they are serving on active duty.

(4) Important CP Information for RC Members. Some members of the RC will be eligible to opt into BRS

because they have less than 4,320 retirement points, but will be past the 12 year point in their career.

o Those members may opt into BRS but will not be eligible for the Continuation Pay bonus.

o Only those members with fewer than 12 years of service measured from their Pay Entry Base Date will

be eligible for Continuation Pay.

SHOW SLIDE 2-56: Differences in the “High-3” and BRS (Cont.)


• “High-3” and BRS (Cont.)

(1) Lump Sum. One of the most significant changes to the BRS, when compared to the High-3 system, is the

opportunity for Service members to get a portion of their retired pay as a lump sum upon retirement. This

means you can receive money upfront as an advance on your own retired pay. The Lump Sum Option could

be a very valuable opportunity for Service members entering retirement. This payment may provide you the

opportunity to pay off debts, buy a house, or even to start a business. It is important to understand, though,

that there is a cost to receiving your retired pay upfront. The amount you receive will be less than you would

have gotten if it were spread out over normal monthly payments. This is because the money you would

receive in the future is not as valuable as money you receive in today’s dollars. If you elect the Lump Sum,

your future stream of retired pay is discounted to account for the time value of money. Also, there are tax

considerations to understand, and the Lump Sum payment may even impact any disability compensation

you are entitled to from the Department of Veterans Affairs. The Lump Sum Option is a valuable option

under the BRS and creates opportunities not available with the legacy retirement systems. But it is

important to learn more about the pros and cons of this option prior to retirement.

(2) How the Lump Sum Option Works. You may choose to receive either 50 percent or 25 percent of the

discounted present value of your future retirement payments in exchange for reduced monthly retired pay

from when you retire until when you reach the Social Security “full retirement age”, which for most people is

age 67. At age 67, your retired pay goes back to its full amount. The discounted present value is determined

by estimating what your retired pay will be and then reducing it to its value in “today’s dollars” by using a

formula that is based on market conditions and other factors.

(3) What this means:

37

o 90 days prior to retirement, you may elect to receive either 50 percent or 25 percent of your retirement

from when you retire until age 67. Upon retirement, you will receive a lump sum payment that is the reduced

“discounted present value” of this portion of your retired pay.

o You will continue receiving monthly retired paychecks, but only 50 percent or 75 percent of what you

would have otherwise received, depending on which lump sum option you chose. When you reach age 67,

your monthly retired pay will go back to what it otherwise would have been – you will start receiving full

retired paychecks again.

(4) Important Lump Sum Information for RC Members. Like their active duty counterparts, Reserve

Component members participating in the BRS have the option of electing a lump-sum payment of retired

pay. Like all retired pay, though, Reserve Component members qualifying for a “non-regular retirement” are

not eligible to get this lump sum until becoming eligible for retired pay – after the “gray area.” Usually this is

age 60, but your age of eligibility may be reduced if you have certain types of qualifying active service.

Otherwise, the Lump Sum Option works the same for Reserve Component members. Upon eligibility for

retired pay, you may elect 50 percent or 25 percent of your retired pay for the time period:

o From: Your retired pay eligibility date (usually when you turn 60),

o To: Full Social Security Retirement Age (usually age 67)

(5) Other Important Considerations. The Lump Sum Option is a valuable opportunity for members to receive

a portion of their retired pay upfront; but there are important considerations:

o You will get the discounted present value of this portion of your retired pay, meaning you will not get as

much as you would have if you took the retired pay in normal monthly installments.

o Like all retired pay, this lump sum payment is subject to tax; in many cases, receiving a large sum of

money may change your tax liability considerably. This can be potentially mitigated by choosing to take your

lump sum payment in installments over several years (maximum of 4 installment, 1 per year), although

members need to understand the tax implications and consult a professional before electing the Lump Sum

Option. Those retirees who anticipate they will receive a disability rating from the Department of Veterans

Affairs need to know their disability compensation could be impacted or delayed if they take the Lump Sum

Option.

SHOW SLIDE 2-57: Lump Sum Option: Regular Retirement


• Enlarged Graphic of Lump Sum Option: Regular Retirement

SHOW SLIDE 2-58: Lump Sum Option: Non-Regular Retirement


• Enlarged Graphic of Lump Sum Option: Non-Regular Retirement

38

SHOW SLIDE 2-59: “High-3” and BRS Check on Learning


SHOW SLIDE 2-60: “High-3” and BRS Check on Learning



Q1. The formula for retired pay under the "High-3" retirement system is ___ x Years of Service x the average

of the highest 36 months of the Service member's basic pay, while under the BRS the formula is ____x

Years of Service x the average of the highest 36 months of the Service member's basic pay.

o 2.0%, 2.0%

o 2.0%, 2.5%

o 2.5%, 2.0%

o 2.5%, 2.5%

A1. Answer: 2.5%, 2.0%

SHOW SLIDE 2-61: “High-3” and BRS Check on Learning (Cont.)



Q2. Under the BRS, Service members who elect to opt in are eligible for .

o up to an additional 4% Government-matching contributions to a TSP account

o automatic 1% Government contributions to a TSP account

o neither of these

o both of these

A2. Answer: both of these

SHOW SLIDE 2-62: “High-3” and BRS Check on Learning (Cont.)



Q3. The __________ allows Service members to take 25% or 50% of their retired pay up front as an

39

advance upon retirement.

o Continuation Pay

o Lump Sum option

o Thrift Savings Plan

o “High-3” Retirement System

A3. Answer: Lump Sum Option

SHOW SLIDE 2-63: Differences in the “High-3” and BRS Summary


• You have completed Lesson 4 on the differences between the “High-3” Uniformed Services retirement

system and the BRS. You should now be able to:

(1) Understand the basic components of the current Uniformed Services retirement system

(2) Understand the basic components of the Blended Retirement System

(3) Understand the concepts of, and eligibility requirements for, Continuation Pay and Lump Sum

SHOW SLIDE 2-64: Important Factors to Consider

Instructor’s Note: Splash Page for transition to Lesson 5 on Factors to Consider.

SHOW SLIDE 2-65: Important Factors to Consider Introduction


• In this lesson, you’ll learn about some important factors you may need to think through before deciding

whether to participate in the legacy “High-3” retirement system or the BRS.

SHOW SLIDE 2-66: Important Factors to Consider Objective


After completing this lesson, you will be able to:

• Understand important factors necessary in order to make an informed retirement system selection (whether

to opt into the Blended Retirement System or remain in the legacy “High-3” system) by December 31, 2018

SHOW SLIDE 2-67: Personal Goals and Other Considerations


40

• Personal Goals and Other Considerations

(1) Short-Mid-Long Term Goals. Someone in your life has probably talked to you about goals and goal-

setting. It may have been your parents, your High School counselor, or a member of your Service

leadership. Among the many good reasons to set goals are that they direct your attention to the things that

are most important to you, and help you sustain the effort and motivation to achieve them. You can have

short-term, mid-term, and long-term goals.

o Short-term goals are goals that can be accomplished in 1-2 years. An example of a short-term goal in

your Service career might be to complete training program for a set of skills you are trying to develop.

o Mid-term goals are those that take between 2 and 5 years to accomplish. You may have a mid-term

goal to get a promotion or complete a Bachelor’s degree.

o Long-term goals are those that extend beyond five years. Your retirement goals are long-term goals.

o You need to consider your goals when you are thinking about the Uniformed Services retirement

system you plan to choose. How long do you plan to serve, and what factors may influence that decision?

(2) Your Service Career Goals. How do your Service career goals relate to any goals you might have for

working in the private sector? These are just a few important things to think about that might impact your

retirement system decision. While you’re thinking about these things, you might want to write them down for

future reference. A worksheet has been provided as an attachment to this document for this purpose. Take

some time to think about your career in the Uniformed Services.

o What are your Service career goals? Have you thought about serving 20 years or more? Maybe you’re

looking for a college degree, or a professional military education. What do you want to achieve?

o Do you expect to be active duty for your full career, or have you considered continuing with the Reserve

Component later on? At the end of this lesson, you’ll have an opportunity to review some examples of what

other Service members are considering with regards to their family, career, and long-term financial planning.

(3) Personal and Family Considerations. Your personal and family obligations, plans, and goals may be

some of your most important considerations as you plan for retirement and select a Uniformed Services

retirement system.

o For example, do you have a spouse? Does he or she have a career and, if so, what is their income?

o Is your family situation going to change? For example, maybe you’re single now, but planning to get

married soon.

o And what are your current family expenses? Things like saving for children to go to college, providing

care or financial support for aging parents, or large purchases such as a new home, car, or boat.

o Also, if you are part of the Reserve Component and have a civilian job, should discuss limitations on

contributions between your civilian and military retirement accounts with your PFM.

• These are all items that must be considered in your long-term financial and retirement plans. If you have a

family, you need to discuss your retirement options with them as part of your process for getting ready to

make your retirement system selection.

41

SHOW SLIDE 2-68: The “Working-Age Retiree”


• The “Working-Age Retiree”

(1) Even if you choose to remain in the Service for a full career or 20 years or more, you may eventually

become a “working-age retiree,” someone who has retired from the Service, but continues to work after

leaving the Service.

(2) Consider a Service member who enters military service at age 18 and serves 20 years. While that

member qualifies for military retirement, at age 38 they will likely continue to work in another job capacity for

another 20 or 25 years or more.

(3) These members have the advantage of military retiree benefits, but may still have children at home and

living expenses that exceed the monthly retirement pay they receive. So, while they are retired when viewed

from the military perspective, they are not retired in the “no longer working” sense.

o A great advantage of being a working age retiree is the additional income provided by the military

retirement pay. This extra income can mean that a member can pursue a passion with less regard for total

salary since their retirement pay provides a bit of cushion.

o In addition, military retirees have access to health care benefits, installation services, and programs that

provide cost savings to the beneficiary.

o Perhaps one of the greatest surprises for military members who leave service is the loss of non-taxable

allowances and health care with little or no out of pocket cost. These issues must be considered as part of

long-term planning for retirement.

SHOW SLIDE 2-69: Factors to Consider Check on Learning


SHOW SLIDE 2-70: Check on Learning



Q1. Which of the following are important considerations when you are thinking about and planning which

retirement system you will participate in?

(Select all that apply)

o Long-term goals

o How long you plan to serve

o Personal and family considerations

42

o Whether you’ll be a “working age retiree”


SHOW SLIDE 2-71: Activity #1: Review Service Member Profiles (Factors to Consider) AC, E-6, 20

YOS


• Activity 1 Purpose: This activity is designed to give you an opportunity to review the important factors some

Service members may be considering as they plan to make their own decision whether to stay in the “High-

3” retirement system or opt into the BRS.

Example:

• AC, E-6, 20 YOS: Mike Smith

SHOW SLIDE 2-72: Activity #1: Review Service Member Profiles (Factors to Consider) AC, O-1, 6 YOS


Example:

• AC, O-1, 6 YOS: John Wright

SHOW SLIDE 2-73: Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, E-4,

20 YOS


Example:

• AC to RC, E-4, 20 YOS: Jason Rice

SHOW SLIDE 2-74: Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, E-3,

8 YOS


Example:

• AC to RC, E-3, 8 YOS: Erika Harris

SHOW SLIDE 2-75: Activity #1: Review Service Member Profiles (Factors to Consider) RC, W-2, 20

43

YOS


Example:

• RC, W-2, 20 YOS: Ryan McCormick

SHOW SLIDE 2-76: Activity #1: Review Service Member Profiles (Factors to Consider) RC, E-2, 8 YOS


Example:

• RC, E-2, 8 YOS: Samantha Baker

SHOW SLIDE 2-77: Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, O-3,

10 YOS


Example:

• AC to RC, O-3, 10 YOS: Derek Roberts

SHOW SLIDE 2-78: Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, O-2,

10 YOS


Example:

• AC to RC, O-2, 10 YOS: Andrea Knowing

SHOW SLIDE 2-79: Important Factors to Consider Summary


• You have completed Lesson 5 on the important considerations you need to think through before deciding

which Uniformed Services retirement system you’ll choose to participate in.


o Understand important factors necessary in order to make an informed retirement system selection

(whether to opt into the Blended Retirement System) by December 31, 2018.

44

SHOW SLIDE 2-80: Tool and Resources

Instructor’s Note: Splash Page for transition to Lesson 6 on Tool and Resources.

SHOW SLIDE 2-81: Tool and Resources Introduction


• In this lesson, you’ll learn about the tools and resources available to you to help you with retirement

planning and decision making so you can make an informed decision about which retirement system you

want to participate in. As previously discussed, the decision whether to remain in the legacy “High-3”

retirement system or opt into BRS is your decision to make. These resources are available to support you

making that decision, not to tell you what decision to make.

SHOW SLIDE 2-82: Tool and Resources Objectives



• Identify (and access) tools and resources available to provide you with information and education for

making financial decisions

• Understand how to use the BRS calculator to perform a financial comparison of your retirement planning

options

SHOW SLIDE 2-83: Tool and Resources


• Tool and Resources

• You are the person who will decide which retirement plan to choose.

• No one else should make this decision for you.

• But that doesn’t mean you have to make this decision in a vacuum. There are a variety of tools and

resources available to inform and educate you about financial planning for your future.

• Where to Go for Guidance. Your Service has personal financial counselors and educators, and Retirement

Services Officers (RSOs), who can help guide you through the financial planning process.

o You will have the opportunity to attend classes and seminars on financial planning over the course of

your career, and instruction on the Opt-In Decision, in addition to this course, is available.

o On an installation, the primary source of financial education or counseling is the Personal Financial

Manager (PFM). Members who do not have access to an installation PFM may contact Military OneSource.

o In addition, Personal Financial Counselors (PFCs) and RSOs may be available through your unit. Navy

and Marine Corps personnel can access training and counseling at the unit level through the unit Command

Financial Specialist (CFS). RC, as well as AC, personnel living near a military installation may have access

45

to an installation PFM or RSO. Other resources for RC personnel include PFCs assigned to units or

installation and Military OneSource.

o Remember, these counselors are there to provide you with information and education that will help you

make an informed decision on your retirement system, not to make the decision for you.

SHOW SLIDE 2-84: Tool and Resources (Cont.)

Instructor’s Note: Continue and discuss with students using the slide.

• Tool and Resources (Cont.)

• BRS-related Websites. Various websites are available to provide you with information. A comprehensive

list of those links is provided below. And the BRS calculator will enable you to run the numbers to help

decide which system is your best option.

• Thrift Savings Plan:

o https://www.tsp.gov/index.html

• Military Pay:

o http://militarypay.defense.gov/BlendedRetirement/

• Military OneSource:

o http://www.militaryonesource.mil/financial-and-legal/personal-financial-management-and-taxes

• My Army Benefits (includes National Guard):

o http://myarmybenefits.us.army.mil/

• Navy:

o http://www.public.navy.mil/bupers-npc/support/21st_Century_Sailor/readiness/Pages/Personal-

Financial-Management.aspx Air Force

Note: Requires CAC access:

o https://mypers.af.mil/app/answers/detail/a_id/32562/kw/blended%20retirement/p/8%2C9

• Marines:

o https:/www.manpower.usmc.mil/CommandersSmartPack https://www.manpower.usmc.mil/

• USCG/NOAA:

46

https://www.tsp.gov/index.html

http://militarypay.defense.gov/BlendedRetirement/

http://www.militaryonesource.mil/financial-and-legal/personal-financial-management-and-taxes

http://myarmybenefits.us.army.mil/

http://www.public.navy.mil/bupers-npc/support/21st_Century_Sailor/readiness/Pages/Personal-Financial-Management.aspx

http://www.public.navy.mil/bupers-npc/support/21st_Century_Sailor/readiness/Pages/Personal-Financial-Management.aspx

https://mypers.af.mil/app/answers/detail/a_id/32562/kw/blended%20retirement/p/8%2C9

https://www.manpower.usmc.mil/

o https://www.uscg.mil/hq/cg1/docs/Blended_Retirement_System.pdf

o https://www.uscg.mil/hr/blended_retirement.asp

• USPHS:

o https://dcp.psc.gov/ccmis/bulletin/Blended_Retirement_System.aspx

SHOW SLIDE 2-85: BRS Calculator


• BRS Calculator

(1) The BRS calculator is an online comparison calculator that will enable you to enter information about

your current and projected Service status in order to estimate your potential retirement savings and income.

(2) You will be able to access and use the BRS calculator on your own, but it is recommended that you use it

while consulting with one of your Service’s financial counselors or educators so they can help you fully

understand the results.

(3) The BRS calculator will enable you to compare, side-by-side, your potential retirement benefits from the

legacy “High-3” retirement system and the BRS. The calculator will also enable you to compare the results of

different TSP contribution rates, allowing you to see the significant difference over time between contributing

1% or more of your basic pay.

(4) Active Component Information. Current Component: Active

o Anticipated Separation/Retirement Component: Active/Reserve Personal Information

o Date of Birth

o Pay Entry Base Date (PEBD) Current pay grade

o Estimate of Service at Separation/Retirement (years, months)

o Anticipated BRS Opt-In Date

o Anticipated Transition to RC Date (if applicable)

o Retirement Information

-- Life Expectancy TSP Withdrawal Age

-- TSP Contribution Rate TSP Rate of Return Other

o Anticipated Career Progression

o Anticipated Bonuses and Payments (if applicable)

o Anticipated Lump Sum (if applicable)

(5) Reserve Component Information Current Component: Reserve

o Anticipated Separation/Retirement Component: Reserve Personal Information

47

https://www.uscg.mil/hq/cg1/docs/Blended_Retirement_System.pdf

https://www.uscg.mil/hr/blended_retirement.asp

https://dcp.psc.gov/ccmis/bulletin/Blended_Retirement_System.aspx

o Date of Birth

o Pay Entry Base Date (PEBD) Current pay grade

o Estimate of Service at Separation/Retirement (years, months) Anticipated BRS Opt-In Date

o Points earned to date Current creditable years

o Number of Active Service days served during your career

o Future RC points

o Anticipated creditable years at retirement

o Retirement Information

• Life Expectancy TSP Withdrawal Age

• TSP Contribution Rate TSP Rate of Return Other

o Anticipated Career Progression

o Anticipated Bonuses and Payments (if applicable)

o Anticipated Lump Sum (if applicable)

SHOW SLIDE 2-86: How to Opt-In


• How to Opt-In

(1) Let’s say you have completed the BRS Opt-In Course, discussed your retirement system options with

your Service-provided financial professional and your family, and participated in retirement planning and

financial literacy education provided by your Service, and you decide you want to opt into the BRS. How do

you opt in?

(2) Members of the Army, Navy, and Air Force who elect to opt-in, will be able to do so by logging onto

myPay on or after January 1, 2018 to make their election.

(3) Members of the Marine Corps will make their elections through Marine Online.

(4) And members of the Coast Guard, Public Health Service, and NOAA will be advised by their Service on

the procedures for opting in, if they choose to do so.

SHOW SLIDE 2-87: Check on Learning

Note: Conduct a check on learning and summarize the learning activity.

SHOW SLIDE 2-88: Tool and Resources Check on Learning



Q1. Which of the resources listed are available to inform and educate you about financial planning for your

48

future? (Select all that apply)

o Personal financial counselors and educators

o Retirement Service Officers (RSOs)

o Classes and seminars on financial planning

o Websites

o BRS calculator


SHOW SLIDE 2-89: Tool and Resources Check on Learning (Cont.)



Q2. Which of the items listed is information Service members must enter into the BRS calculator?

o Current pay grade

o Date entered the service

o Current creditable years (RC only)

o Average future active duty days (RC only)

o All of the above

o None of the above

A2. Answer: All of the above

SHOW SLIDE 2-90: Activity #2 Review Service Member Profiles (Calculator Results) AC, E-6, 20 YOS


• Activity 2 Purpose: This activity is designed to give you an opportunity to see the inputs some Service

members entered into the BRS calculator, compare the results, and gain familiarity with the capabilities of

the calculator to enable you to compare the potential retirement benefits of the legacy “High-3” retirement

system and the BRS.

• The calculator results you’ll see in these profiles and the information used to generate those results, are

only examples to help you understand your options, and may not precisely fit your specific individual

circumstances. The Service member profiles shown here should NOT be used as the model for making your

personal and individual retirement system choice.

Example:

• AC, E-6, 20 YOS: Mike Smith

SHOW SLIDE 2-91: Contribution Rates (3% and 5%) and Decision

49


• Contribution Rates (3% and 5%) and Decision

(1) 3% Contribution Rate: see left graphic

(2) 5% Contribution Rate: see right graphic

(3) Service Members Decision: After discussing retirement plans with his wife, reviewing the calculations,

and talking to a professional military financial counselor, Mike decide to remain in the legacy retirement

system, as it is more advantageous for his family’s long-term financial goals.

SHOW SLIDE 2-92: Activity #2 Review Service Member Profiles (Calculator Results) AC, O-1, 6 YOS


Example:

• AC, O-1, 6 YOS: John Wright






(3) Service Members Decision: John elects to enroll in BRS. He later leaves active duty at the completion of

his term, and takes five years’ worth of contributions, matching, and interest with him. He is hired by a

private-sector employer. He considered rolling over his TSP to a civilian 401(k), but decided to keep his

Uniform Services TSP because of the lower fees associated with TSP versus a civilian 401(k). He continues

to contribute to a separate employer 401(k) plan in order to reach his retirement goals.

SHOW SLIDE 2-94: Activity #2 Review Service Member Profiles (Calculator Results) AC to RC, E-4, 20

YOS


Example:

• AC to RC, E-4, 20 YOS: Jason Rice

50






(3) Service Members Decision: Upon completion of his enlistment, Jason leaves active duty and joins the

National Guard. Jason and his partner considered his eligibility for Continuation Pay at year 12 in the

National Guard in order to pay for his school, but finally decided that he will use the Post-9/11 GI Bill to fund

his education. They also discussed the fact that the loss of TSP matching for the 8 years he had already

served would affect the long-term growth of his retirement annuity under BRS. He and his partner discussed

their options and Jason decided remaining in the legacy retirement system was the right decision for him.

SHOW SLIDE 2-96: Activity #2 Review Service Member Profiles (Calculator Results) AC to RC, E-3, 8

YOS


Example:

• AC to RC, E-3, 8 YOS: Erika Harris






(3) Service Members Decision: After talking to a military educational counselor and a professional financial

military counselor, Erika decided to major in nursing and will likely leave the Reserve at the end of 1

enlistment term. She decided to opt into BRS, so she could take advantage of the Government-automatic

and matching contributions. After fulfilling her 8-year obligation, Erika will leave the Service and take her

Uniformed Service TSP benefit with her under the BRS System.

SHOW SLIDE 2-98: Activity #2 Review Service Member Profiles (Calculator Results) RC, W-2, 20 YOS


Example:

51

• RC, W-2, 20 YOS: Ryan McCormick




o (1) 3% Contribution Rate: see left graphic

o (2) 5% Contribution Rate: see right graphic

o (3) Service Members Decision: After talking with his wife and evaluating their long-term goals, Ryan

opts into BRS and his wife will remain in the legacy retirement system. While the legacy retirement plan is

more beneficial monetarily for Ryan, his goal of using the 50% Lump Sum to open a Bed and Breakfast was

the overriding factor in his decision. With only 9 current years of service, he will soon receive Continuation

Pay to stay in the Reserve at his mid-career point, which he can add to his TSP. Ryan understands the time

value of money, and considered the long-term growth difference in his retirement annuity if he takes a Lump

Sum, but this will fulfill his retirement goal of owning a business with his wife. Furthermore, as a TSP

contributor now, he is interested in receiving the automatic and matching contributions immediately to grow

his Uniformed Services TSP account that much more quickly. Total points at 20 YOS will equal 4,120.

SHOW SLIDE 2-100: Activity #2 Review Service Member Profiles (Calculator Results) RC, E-2, 8 YOS


Example:

• RC, E-2, 8 YOS: Samantha Baker






(3) Service Members Decision: After reviewing her options, Samantha wants to start her TSP account so

she can take advantage of the Government’s automatic and matching contributions, otherwise when she

completes her service, she would leave with no tangible Government retirement benefit.

SHOW SLIDE 2-102: Activity #2 Review Service Member Profiles (Calculator Results) AC to RC, O-3,

10 YOS

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Example:

• AC to RC, O-3, 10 YOS: Derek Roberts






(3) Service Members Decision: Derek and his wife worked together on their retirement planning, and Derek

decided to opt into BRS. They chose not to take the Lump Sum in order to maximize the future value of their

retirement annuity. They will contribute to the TSP, but only up to the 5% Government contribution since

Derek has a company 401(k) that also matches up to 6%. After speaking to a financial counselor who made

him aware of the IRS contribution limits per individual, he will contribute the maximum amount to both

accounts up to the IRS limit and when the time comes to buy their dream retirement home in Florida, he will

take advantage of one of the TSP allowable non-penalty withdrawal options to put a down-payment on their

primary home.

SHOW SLIDE 2-104: Activity #2 Review Service Member Profiles (Calculator Results) AC to RC, O-2,

10 YOS


Example:

• AC to RC, O-2, 10 YOS: Andrea Knowing






(3) Service Members Decision: As prior service, upon her return to military service, Andrea is given the

option to choose between her legacy retirement system or the new BRS. Andrea chooses BRS because

she still doesn’t plan to stay in the military for 20 years and she spends the majority of her extra time taking

care of her father. She realizes that when she decides to leave the National Guard, she can receive a

53

portable Government retirement benefit by opting into the BRS. She can add 4% Government matching on

her base military pay plus the 1% Government-automatic contribution while receiving 4% Federal-agency

matching plus a 1% Government-automatic contribution on her federal civilian pay—maximizing both

retirement plans. She will eventually roll her Uniformed Services TSP over into her Federal-government

TSP, or another qualifying 401(k)-type savings plan at retirement.

SHOW SLIDE 2-106: Tools and Resources Summary

Instructor’s Note: Instructor reads ad summarize this portion of the learning activity.

• You have completed Lesson 6 on the tools and resources available to help you with retirement planning

and understanding the factors associated with your decision to choose one of the available Uniformed

Services retirement systems.


• Identify (and access) tools and resources available to assist (provide information, assistance, and

education) in making financial decisions Understand how to use the BRS calculator to compare your

retirement planning options

SHOW SLIDE 2-107: BRS Opt-In

Instructor’s Note: Splash Page for transition to BRS Opt-In summary

SHOW SLIDE 2-108: BRS Opt-In Summary


• Congratulations! You have completed the BRS Opt-In Course.

• Here are some important points to keep in mind:

• The Blended Retirement System takes effect on January 1, 2018.

• You are eligible to opt into the BRS if, as of December 31, 2017 you are either an Active Component (AC)

member who has served fewer than 12 full years from your Pay Entry Base Date, or a Reserve Component

(RC) member with fewer than 4,320 points.

• Most Service members will have the entire 2018 calendar year to decide whether to remain in the legacy

“High-3” retirement system or opt into the BRS.

• Your decision whether or not to opt into the BRS is an individual decision. No one else can make it for you.

• If you choose to opt into the BRS, your decision is final. It cannot be changed at a later date.

Note: Continue summary on next slide

SHOW SLIDE 2-109: BRS Opt-In Summary (Cont.)

Instructor’s Note: Continue and read summary for BRS Opt-In with students using the slide.

• Key Points continued: There are significant differences between the legacy “High-3” retirement system and

54

the BRS, and you should take full advantage of the financial literacy information and education available to

you through your Service including:

• Completing this course

• Discussing your retirement system options with your Service-provide financial professionals

• Participating in upcoming classes or workshops on the retirement systems being provided by your Service

o Members of the Army, Navy, and Air Force, who elect to opt into the BRS, will be able to do so by

logging onto MyPay on or after January 1, 2018 to make their election.

o Members of the Marine Corps will make their elections through Marine Online.

o And members of the Coast Guard, Public Health Service, and NOAA will be advised by their Service on

the procedures for opting in, if they choose to do so.

SHOW SLIDE 2-110: Questions?

Instructor’s Note: Splash Page for transition to Q & A

Note: Ask students if there are any questions needing answers before starting on the next and final session

of the learning activity.

SHOW SLIDE 2-111: Thrift Savings Plan (TSP)


• In addition to your Defined Benefit Plan (High-3, CSB/REDUX), you and all other service members will

have access to a Defined Contributions Plan—the Thrift Savings Plan.

• We will discuss the basics of TSP.

• You can go to the TSP website to learn more about the program and the various investment funds.

• We’ll look at how it works and what it can do for you.

• Benefits of TSP

(1) It's easy to enroll and maintain your investment plan.

(2) Costs for management of the program by the TSP Management Board was .029% per $1,000 invested

annually (for 2016).

(3) Money contributed to a Traditional TSP account is Pre-Tax Dollars. It is NOT counted as taxable income.

You will eventually have to pay taxes upon withdrawal.

(4) Money contributed to a ROTH TSP account is taxed when earned. When withdrawn in retirement ROTH

TSP withdrawals may be tax free.

• How to Enroll in TSP.

• Enroll at the myPay website or by completing and submitting a paper form.

Note: Unit should provide TSP-U-1 forms for the students.

55

• Your local Finance Office or PAC will have the forms. Forms are also available at www.tsp.gov. Follow the

prompts to download and/or print.

SHOW SLIDE 2-112: Thrift Savings Plan (TSP) (Cont.)


• TSP Contribution Sources.

(1) You can begin making regular employee contributions at any time. These are payroll deductions that are

made from your basic pay. Each pay period, your agency or service will deduct your contribution to the TSP

from your pay in the amount or percentage that you indicated when you submitted your contribution election

information.

(2) You can elect to contribute from incentive pay, special pay, or bonus pay, even if you are not currently

receiving them. These contributions will be deducted when you do receive any of these types of pay.

(3) You cannot contribute from sources such as housing or subsistence allowances.

(4) If you are receiving tax-exempt pay (i.e., pay that is subject to the combat zone tax exclusion), your

contributions from that pay will also be tax-exempt. You may also contribute more of your pay to the TSP

during the year.

Note: Be aware that if you do contribute tax-exempt pay, your total contributions from all types of pay must

not exceed the Internal Revenue Code (I.R.C.) section 415(c) annual addition limit for the year. This limit

does not include catch-up contributions you may make during the year (see next slide for more information

on catch-up contributions).

(5) You cannot make catch-up contributions from incentive pay, special pay, or bonus pay. You are allowed

to use tax-exempt pay to make Roth catch-up contributions but not to make traditional catch-up

contributions.

(6) Select all the contribution sources boxes on the TSP Enrollment Form even if you are not receiving

special, incentive, or bonus pays. If you do not select the special, incentive, or bonus blocks and then start

receiving them, you cannot contribute those moneys into TSP until you resubmit the form.

(7) Especially important is the bonus selection. If you do not select the contributing from bonus block and

you eventually receive one, you cannot put any of the money into TSP. Once you receive the bonus money,

you cannot put it into your TSP account.

(8) If you stop contributing from base pay all other sources of contributions stop.



TSP Contribution Amounts.

• You can contribute up to 100% of your base pay and up to 100% of any special pays, incentive pays, or

56

http://www.tsp.gov/

bonuses up to the IRS maximum, currently at $18,000 per year (2017). If you are age 50 or older, you can

make an additional $6,000 in catch-up contributions. In a combat zone, the limit is higher, up to $54,000 per

year (2017). However, contributions to the Roth TSP are still limited to $18,000. These limits change

periodically.

• If you are a member of the Ready Reserve and you are contributing to both a uniformed services and a

civilian TSP account as a FERS employee, the elective deferral and catch-up contribution limits apply to the

total amount of employee contributions you make in a calendar year to both accounts. If you are called to

active duty and make tax-exempt contributions to the TSP while deployed in a designated combat zone, the

sum of the employee and agency contributions to your civilian account as well as the tax-exempt

contributions made to your uniformed services account cannot exceed the annual addition limit ($54,000).

Note: Currently there is no employer matching dollars from the Government, unless you opt-in for the

Blended Retirement System (see slide 13).



• Control of your TSP Funds.

o Your contributions belong to you and you have control over them.

o This control is exercised by directing which of six funds your money is invested in.

o These funds are known as the G, F, C, S, I and L funds.

SHOW SLIDE 2-115: TSP “G” FUND


• TSP “G” FUND

(1) The G Fund will invest in Government securities and is guaranteed against loss.

(2) Invested in non-marketable U.S. Treasury Securities with 1 to 4 day maturities.

(3) No risk of loss (negative returns) in "G" Fund.

(4) The "G" fund has never lost money although the rate of return on your investment is usually between 1.5

and 7%. It has averaged 5.43% since its inception date of 04/01/87.

SHOW SLIDE 2-116: TSP “F” FUND


• TSP “F” FUND

(1) The F Fund will invest in corporate and Government bonds.

(2) Invested in a bond index fund.

57

(3) U.S. Government: U.S. Treasury and Agencies.

(4) Mortgage-backed securities.

(5) Rate of Return - Between (-1.68%) and 18%. It has averaged 6.66% since its inception date of 01/29/88.

SHOW SLIDE 2-117: TSP “C” FUND


• TSP “C” FUND

(1) The C Fund will basically track performance of the stock market.

(2) Invested in a Standard & Poor's (S&P) 500 stock index fund.

(3) S&P 500 index contains common stocks of 500 companies that represent the U.S. stock markets.

(4) Historical Returns Between (-37%) and 37%. It has averaged 10.43% since its inception date of

01/29/88.

SHOW SLIDE 2-118: TSP “S” FUND


• TSP “G” FUND

(1) The S Fund invests in small to medium sized U.S. companies.

(2) Invested in a Wilshire 4500 stock index fund.

(3) Wilshire 4500 index contains all common stocks (except those in the S&P 500 index) actively traded in

the U.S. stock markets on a daily basis.

(4) Historical Returns Between (-38%) and 43%. It has averaged 9.19% since its inception date of 05/01/01.

SHOW SLIDE 2-119: TSP “I” FUND


• TSP “I” FUND

(1) The I Fund invests entirely in non-U.S. companies.

(2) Will be invested in a Europe, Australasia, and Far East (EAFE) stock index fund.

(3) EAFE contains stocks that cover approximately 60% of the stock markets of the 20 countries included in

the index.

(4) Historical Returns Between (-42%) and 38%. It has averaged 4.51% since its inception date of 05/01/01.

58

SHOW SLIDE 2-120: TSP “L” FUND


• TSP “L” FUND

• The L Funds, or "Lifecycle" funds, use professionally determined investment mixes that are tailored to meet

investment objectives based on various time horizons. The objective is to strike an optimal balance between

the expected risk and return associated with each fund.

• The strategy assumes that:

(1) The greater the number of years you have until retirement, the more willing and able you are to tolerate

risk (fluctuation) in your TSP account value to pursue higher rates of return.

(2) For a given risk level and time horizon, there is an optimal mix of the G, F, C, S, and I Funds that

provides the highest expected return.

(3) Use the L Funds if you are looking for a simple, low maintenance way of investing money in your TSP

account. The L Funds make the investing process easy for you because you do not have to figure out how to

diversify your account or how and when to rebalance.

(4) The L Funds are designed so that 100% of your TSP account can be invested in the single L Fund that

most closely matches your time horizon (or in the two L Funds closest to your time horizon). Any other use of

the L Funds may result in a greater amount of risk in your portfolio than is necessary in order to achieve the

same expected rate of return.

Choose If your target date is:

L 2050 2045 or later

L 2040 2035 through 2044

L 2030 2025 through 2034

L 2020 Now through 2024

L Income If you are already withdrawing your account in monthly payments.

(5) Historical Returns Between (-32%) and 26%. It has averaged 4.42% (L), 5.98 (L2020), 6.56% (L2030),

6.93% (L2040), and 10.83% (L2050) since their inception date of 08/01/05 (L – L2040) and 01/31/11

(L2050).

SHOW SLIDE 2-121: TSP Contribution Allocation


• TSP Contribution Allocation

(1) After your initial enrollment and election request has been processed, TSP will deposit your first

contribution in to the G Fund.

59

(2) Once the first contribution is received you will then receive a TSP PIN. You can then begin making

contribution allocations among the various funds using the TSP Thrift line, Website, or via mail.

(3) Allocations must be made between the funds in increments of 1%. E.g. If you elect to contribute 3%,

you may want to put 1% in the "G" Fund and 2% in the "C" Fund.

SHOW SLIDE 2-122: Additional TSP Benefits


• Additional TSP Benefits

(1) Loans. Two types of loans can be made from your TSP account, a general purpose loan, or a loan for a

primary residence. All loan payments, plus interest, is paid back directly into your TSP account. Remember,

TSP is an investment for your retirement. It is not recommended to take a loan from your account as it has a

negative impact on the compound interest feature of the TSP plan.

(2) Rollovers. On separation or retirement, you can roll the funds in TSP to a qualified 401k plan. While on

active duty, you can rollover a qualified Individual Retirement Account (IRA) into TSP.

(3) Interfund Transfers. You can move your invested money between the various funds, once a month, 12

times a year.

(4) Financial hardship withdrawals. Verifiable financial hardship. E.g. Medical bills. All contributions to TSP

will be terminated for six months after a hardship withdrawal.

(5) Contribution allocations. You can increase or decrease the percentage you allocate to each fund as

often as you are paid, or twice a month.

SHOW SLIDE 2-123: TSP Options upon Retirement or Separation


• TSP Options Upon Retirement or Separation

(1) Leave your money in the TSP. You cannot make further contributions but your money continues to

accrue.

(2) Take a Single payout. The payment is made directly to you after a deduction for Federal Income Tax as

required. Rollover into an IRA or 401k.

• Receive Monthly payments starting at age 59 ½. There are substantial penalties for withdrawing the

money prior to 59 ½.

o You may decide that you want income from your TSP account every month. You have a couple of

options:

-- If you have a specific monthly dollar amount in mind, you can indicate it when you complete your

withdrawal request form. You will receive payments in the amount that you request until your entire account

balance has been paid to you. Note: The amount of each monthly payment must be at least $25.

-- If you want the TSP to compute a monthly amount for you based on your life expectancy, you can

choose that option when you complete your request form. Your initial payment will be based on your age and

60

your account balance at the time of the first payment. Each year thereafter, the TSP will recalculate the

amount of your monthly payments based on your age and your account balance at the end of the preceding

year.

o You may have certain expenses in retirement that you know will continue throughout your lifetime. If

you need a guaranteed stream of payments to cover some of those expenses, you could consider

purchasing a life annuity. A life annuity is a monthly benefit that is paid to you every month for the rest of

your life. The cost of an annuity depends on the type you choose and the options and features you select.

You don't have to use your entire TSP account balance to purchase the TSP annuity, but the minimum

purchase amount is $3,500.

SHOW SLIDE 2-124: Your Responsibilities


• Your responsibilities with TSP.

• Once enrolled in TSP you have additional responsibilities:

(1) Make contribution elections.

(2) Make investment and allocation decisions.

(3) Keep accurate up-to-date personal information.

• Designate a beneficiary.

TSP Website:

• For more in-depth information on the TSP program go to www.tsp.gov.

• Then look under Uniformed Services. Frequently Asked Questions is an excellent source.

SHOW SLIDE 2-125: Savings Vs. Investment


• Saving vs. Investing.

• Recall that the third leg of our retirement planning stool is investment income. There are several

differences between investing money and merely saving it. Recognize that the ultimate purpose of saving

money is to eventually spend it. Savings accounts are virtually 100% safe, as most are insured by the

Federal Government.

• Conversely, the purpose of investing money is to allow it to grow. Investing is generally thought of in terms

of a significant time span, five years or more. Even optimum savings instruments have limited ability to

overcome the effects of inflation and taxes, both of which decrease the value of our money. Wise

investments will mitigate these effects.

• Investing involves some degree of risk. However, the greatest risk is not making prudent investments, and

61

http://www.tsp.gov/

therefore not growing your money to meet your retirement needs. Because saving and investing have

different purposes, different instruments are used for each.

• Instruments of Savings. Savings instruments that are highly safe, and liquid, but provide relatively low

yields include:

o Regular or share savings accounts.

o Certificates of deposit (CD).

o Money market accounts.

o U.S. savings bonds. Series I bond is tied to rate of inflation.

• Investment Assets. Investment instruments fall into one of two categories:

o Equity assets, you invest as an owner.

-- Growing assets are designed to grow your investment. They include investments such as shares,

alternative investments and property.

-- Hard assets are investments with intrinsic value such as oil, natural gas, gold, silver, farmland,

natural colored diamonds and commercial real estate.

o Debt assets, you invest as a lender. Bonds (some can be used by companies and varying levels of

government).

SHOW SLIDE 2-126: Investment Instruments


• Instruments of Investment.

• As you become more financially capable and knowledgeable about investing you may want to consider

other investment instruments in addition to TSP, such as:

(1) Individual Retirement Account (IRA). Similar to TSP funds, but purchase through financial institutions

like banks, credit unions, or investment firms. Note: Unlike TSP, there will be fees, paid to the financial

institution, associated with opening an IRA.

(2) Direct purchase of bonds or stocks through a brokerage house. Note: Unlike TSP, there will be fees,

paid to the brokerage house, associated with purchasing bonds or stocks.

(3) Mutual Funds. Purchase of stocks and bonds with a pool of investors who have similar goals. Note:

Unlike TSP, there will be fees associated with purchasing mutual funds.

Note: Historically, since 1926, large stocks returned an average of 9.8%, while long-term government bond

returns averaged 5% to 6%. However, you should recognize that there are years, and periods of several

years, where bonds significantly out-performed stocks.

SHOW SLIDE 2-127: Rule of 72


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Rule of 72:

• One quick and way to determine the effect of any particular return on an investment is to use the Rule of

72. To apply the Rule, divide 72 by the expected annual percent of return on your investment. The answer

will be the number of years it will take for your investment to double at the expected rate of return.

• For example, if you earn 3% on your investment, it will take 24 years to double your money. If you earn

7.2% on your investment, it will take 10 years to double your money. If you earn 10%, you will double your

money in 7.2 years. If you can earn a 15% annual return, your money will double every 4.8 years.

SHOW SLIDE 2-128: 7 Steps to Accumulate Wealth


7 Steps to Accumulate Wealth:

• No matter how you choose to invest your money, there are seven proven techniques that will assist you in

accumulating the funds necessary for savings and investment:

(1) The first rule is "Pay yourself first." Develop a spending plan that reduces debt and provides a positive

cash flow, set aside a certain amount for savings and investment at the top of your plan. Savings allotments

and contributions to the TSP are two excellent ways to "pay yourself first." You never miss the money

because you never see it.

(2) The second rule is to establish a realistic spending plan to systematically put money aside.

(3) The third rule is to maximize tax-deferred investment opportunities. The TSP and civilian 401(k) plans

are excellent vehicles for this purpose. Individual Retirement Accounts, or IRAs, are another. Make sure you

increase your knowledge about investing before looking at the many instruments available to you.

(4) The fourth rule is to don’t lose money. Greed causes people to invest in scams that promise unrealistic

returns – Taking prudent risks are OK but speculation is at best a 50/50 deal.

(5) The fifth rule is to persevere. If you see your account has grown, resist the urge to spend it. After all, if

it’s spent, it’s gone for good.

(6) The sixth rule is to compound your money. The royal road to riches is compounding. It’s the safe road,

the sure road, and fortunately, anybody can do it. But it takes perseverance.

(7) The seventh rule is dollar cost averaging. Invest a set amount every month regardless of market

performance. No one can predict the market. Over time, dollar cost averaging will compensate for the market

ups and downs.

SHOW SLIDE 2-129: Creative Savings Strategies


• Creative Savings Strategies

• Some of you may be saying this is all well and good, but where do you get the money to save and invest?

Let's look at a few things you can do:

(1) One way to quickly pad a savings account is to shift debt payments to savings when the debt is paid off.

Just start banking this amount when the loan is paid.

(2) If you unexpectedly receive a sum of money, put it directly into your savings account and watch it grow.

63

(3) Select one month during the year and really be a miser. Only doing it for a month may help to develop

some excellent habits that will carry over into the future.

(4) Be very aware of just how much you spend on fast food and snacks. Keep a list of what you spend for

fast food and snacks for one month. That could be $50 a month going into your savings and investment

accounts.

(5) When living off-post, see how much you can cut back on utilities for one month. Be energy conscious.

You could easily save 10% - 20% on your utility bill. Put the difference in savings!

SHOW SLIDE 2-130: Savings Deposit Program


• Savings Deposit Program

(1) Eligible if serving in an SDP-eligible combat zone , once you are deployed for a minimum of 30

consecutive days or at least one day in each of three consecutive months.

(2) A total of $10,000 may be deposited for each deployment

(3) Earns 10% interest annually, compounding quarterly. Interest is taxable. This is guaranteed, so it

compares favorably to the stock market.

(4) Cannot close account while deployed. Money will continue to draw interest for 90 days after you have

returned.

(5) 120 days after returning, your money will be direct deposited, but you may request it before the 120

days, via myPay.

(6) You can withdraw money for an emergency withdrawal. This must be approved by CO.



• There is an art to choosing ways to invest your savings.

• Good investments will make money; bad investments will cost money.

• Do your homework.

• Gather as much information as you can.

• Seek advice from personnel at your bank or other trained financial experts.

• Read newspapers, magazines and other publications.

• Identify credible information sources on the Internet.

• Join an investment club.

Check on Learning:SHOW SLIDE 2-132: LSA 2 Check on Learning

Note: Conduct a check on learning and summarize this portion of the

learning activity.

SHOW SLIDE 2-133: LSA 2 Check on Learning

64



Q1. What is the difference between savings and investing?

a. Savings is for short term buys and emergencies

b. Savings is for your retirement

c. Investing is for short term buys and emergencies

d. Investing is for impulse buying

A1. a. Savings is for short term buys and emergencies

SHOW SLIDE 2-134: LSA 2 Check on Learning (Cont.)



Q2. Which of the following is an example of an investment instrument?

a. Passbook Savings Account

b. Term Life Insurance

c. Certificate of Deposit

d. TSP/IRA

A2. d. TSP/IRA




Q3. True or False? ROTH TSP contributions are tax free.

A3. False (unless contributions are made in a combat zone)



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Q4. How many investment funds are available in the Thrift Savings Plan?

a. 3

b. 4

c. 5

d. 6

A4. d. 6




Q5. In the Thrift Savings Plan, you must contribute first from what pay

source in order to contribute from future bonus pays?

a. Incentive Pay

b. Base Pay

c. Combat Pay

d. Hazardous Duty Pay

A5. b. Base Pay


Instructor’s Note: Inform students that retirement may look a long, long

way off to most of you right now, and may not be high on your priority list.

Unfortunately, there are many people who reach an age where they would

like to retire, but fail to have the resources necessary to do so; people

didn't plan to fail, they simply failed to plan!

Summary:

• During this long lesson, we’ve covered a lot of very important information

during this lesson. We started by looking at how the concept of retirement

has changed in just a few short years. We then examined the three-legged

stool of retirement income. We talked about Army retirement systems, with

particular emphasis on those that will affect you. We discussed the Thrift

Savings Plan, a new benefit that can significantly assist you in saving for

your retirement years. We examined the differences between saving and

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investing and talked about why each is important. We examined various

vehicles you may use to invest for your future and discussed proven

techniques that will assist you in forming sound financial habits.

Instructor’s Note: Prep to transition into LSA #3 titled, Analyze Leave and

Earning Statement / myPay.

TLO - LSA 3. Learning Step / Activity TLO - LSA 3. Analyze Leave & Earnings Statement /myPay Account








SHOW SLIDE 3-1: Leave and Earning Statement/myPay Account

3. Learning Step / Activity 3: Analyze Leave & Earnings Statement / myPay






• Student Handout

• Calculator

• Pencil

Corresponding Activity:

• Sample LES Statement, Student Handout page 2

Introduction: During this learning activity, we will discuss the importance of monitoring your pay and

entitlements as reflected on your Leave and Earnings Statement, or LES. We will examine the components

of the LES and talk about how to identify any errors in your net pay.

SHOW SLIDE 3-2: Logging in to myPay

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myPay Login:

• During in-processing, all of you signed up for a bank account in order to receive your pay from the Army.

Once your pay account is established and you start receiving pay, you can sign up for a myPay account.

• Sign on to the myPay website at https://myPay.dfas.mil You will have two options:

(1) If you have already established an account, enter your Login ID and password (you have the option of

typing in your password OR, if you prefer more security, you can click on the On-Screen Keyboard link and

then select the “Go” button.

(2) If you have not established an account, enter your Social Security Number (SSN), select the “Go” button,

and follow the instructions to establish your account.

• You will then be directed to a System Message screen. Review the information provided, select the “I

agree to the terms of the User Agreement” statement, and then click on the “OK” button.

• You are now at the “Main Menu” screen where you will have access to your myPay account.

Note: You may also use your Department of Defense Common Access Card (DoD CAC) or Health and

Human Services Employees ID badge (HHS PIV) ID badge to sign into myPay. Simply select the SmartCard

Login box to proceed.

SHOW SLIDE 3-3: myPay Main Menu


myPay Main Menu:

• Located on the myPay main menu are several tools that allow you to manage your finances online, without

having to fill out any paperwork at the S-1 or finance office.

(1) Leave and Earnings Statement (LES). View and print your last 12 LES statements as an active duty

member. If you are a reservist, you will be provided access to your last three LES statements.

(2) Personal Statement of Military Compensation (PSMC). View and print your PSMC. This statement is

intended to outline the total value of your military pay, allowances, and benefits. By making your

compensation more “visible,” this statement is useful when applying for credit cards or loans (including home

loans), from businesses or lending institutions.

(3) Savings Deposit Program (SDP) Statement/Withdrawal Request. Here you are able to view and print a

copy of your SDP statement. Members of the Armed Forces serving in specified combat zones, or are

supporting a contingency operation, are authorized to make deposits or request to withdraw money from

their SDP account.

(4) Pay Changes. Start, change, or stop allotments. Start or change Savings Bonds (you cannot stop bonds

through myPay) The Combined Federal Campaign (CFC) option allows military personnel to establish a CFC

allotment within the CFC open season Turn on or off hard copy delivery of your LES

(5) Direct Deposit. You can change your direct deposit information in myPay under the Direct Deposit

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https://mypay.dfas.mil/

option.

o Net Pay EFT: You can view or change your Direct Deposit for your paycheck

o Travel EFT: You can setup or change your travel pay to be directly deposited to a bank

o Miscellaneous EFT: You can view or setup/change your Direct Deposit for miscellaneous

reimbursements

(6) Taxes.

o Change your Federal or State marital status and exemptions

o View and print your W-2

o If you are in the Student Loan Repayment Program (SLRP), you can view and print your SLRP W-2

o Turn on or off hard copy delivery of your W-2

o View and print a SDP tax statement (1099-INT)

o Turn on or off hard copy delivery of your IRS Form 1095 (you’ll need this form to report Affordable Care

Act health insurance information starting with your 2015 federal income tax return)

(7) Traditional Thrift Savings Plan (TSP) and Roth TSP. You can start enrollment of TSP at any time, unless

you make a financial hardship withdrawal. You may not make contributions for six months following the

withdrawal. You can start or change percentages at any time, and cancel (stop) contributions at any time.

We will discuss the TSP in more detail later.

(8) TSP Catch-Up – Traditional and Roth. If you are age 50 or over or will become 50 this calendar year, you

may be eligible to make additional contributions to TSP, called “catch-up contributions". For the initial start of

your catch-up contributions, if you have a current regular traditional or Roth election, you may use myPay to

submit your elections.

(9) View Court Orders. Allows Soldiers to view documents issued by U.S. civil courts or military service

related to any garnishment on their pay.

(10) Travel Voucher Advice of Payment (AOP). You may be called on to perform Temporary Duty (TDY)

travel. You will file a travel voucher when you complete your TDY. When DFAS pays your travel, you will

receive an Advice of Payment statement. If DFAS-Cleveland, DFAS-Indianapolis, or DFAS-Columbus pays

your travel vouchers, you can view and print your Travel Advice of Payment (AOP) on-line.

(11) Email Address. You can add, change or delete a personal email address. To change a pre-

registered/work email AKO - us.army.mil), contact your local site’s email administrator or go to

https://www.us.army.mil. myPay receives and updates these email addresses weekly.

(12) Security Questions for Password Resets. You have the option to change the security questions for

resetting your password.

(13) Personal Settings Page. Click on the “Click here for details” area to receive information on how you

can update your personal settings.

SHOW SLIDE 3-4: Sample LES

Instructor’s Note: Guide students to page 2 of their student handout, where they will find this same LES

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https://www.us.army.mil/

form to review during the lesson. Ask them to follow along as you present and explain the different sections

of the LES.

• This statement is called the Leave and Earning Statement, or LES for short. The LES is your detailed pay

statement, which is issued at the end of each month. It shows your entitlements, deductions, and

allotments, and also provides a summary of all pay transactions.

• It also shows your end-of-month pay and where your pay is being deposited. It is your duty to review the

LES and ensure the information is correct. If you find an error, report it to your chain of command

immediately. By honestly reporting any pay discrepancies, you uphold the Army values of honor and

integrity.

Note: For more information about how to read your LES, go to:

http://www.dfas.mil/militarymembers.html

• Click on Army under the “UNDERSTANDING YOUR LES” topic near the bottom of the page.

SHOW SLIDE 3-5: Personal Information


• The top portion of the LES contains information about the member to whom it was issued, the office that

issued it, and the pay period covered by the statement.

(1) The first block contains your name in Last, First, Middle Initial format.

(2) The next block is your Social Security Number (SSN). Make sure it is correct!

(3) Your pay grade is next - a good thing to check the next payday after you get promoted.

SHOW SLIDE 3-6: PAYDATE


• PAYDATE

(4) Pay Date. The next box is a very important one. It is your Pay Date. Note that this is NOT the day on

which you are paid, but rather the date you entered active duty for pay purposes. Like your Social Security

Number, it should NEVER change, unless it is inaccurate and you yourself take steps to correct it.

(5) The next box reflects a two-digit number showing the number of whole years of creditable service you

have completed. Check to see that this number changes every time you complete a full year of service. It is

very important to make sure this number is correct, because some of your entitlements increase with years

of service.

(6) The ETS box shows the expiration date of your current term of service. It is a six-digit figure with the first

two digits indicating the year, the second two the month, and the last two the day.

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http://www.dfas.mil/militarymembers.html

(7) Your branch of service is shown next.

(8) The ADSN/DSSN is the code that identifies the finance office that maintains your pay records.

SHOW SLIDE 3-7: Pay Period


• PAY PERIOD

(9) The last block on the top line shows the pay period covered by the LES. Note that it is NOT the same as

your Pay Date.

**Remember: Pay Date is the day you entered into service, not the day you got paid.

SHOW SLIDE 3-8: Entitlements, Deductions, Allotments, & Summary


Entitlements, Deductions, Allotments, & Summary:

• The following row on the LES will probably be the first place you look.

• This is where your net pay will be displayed, along with the items used to calculate it.

• These items include:

o Entitlements

o Deductions

o Allotments

SHOW SLIDE 3-9: Entitlements



Entitlements:

• This block names the entitlements and allowances being paid out to you for the pay period, such as Basic

Pay, BAS, BAH, CONUS COLA, etc. This also includes any retroactive monies.

• There is space allotted for fifteen entitlements, any additional shall be listed in the “REMARKS” block.

SHOW SLIDE 3-10: Deductions

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Deductions:

• Includes items such as taxes, SGLI, Mid-month pay, and dependent dental plan, as well as any retroactive

deductions. There is space allocated for fifteen deductions to be listed.

• Any additional are to be printed in the “REMARKS” block.

SHOW SLIDE 3-11: Allotments



Allotments:

• Includes discretionary and non-discretionary allotments for savings and/or checking accounts, insurance,

bonds, etc. There is space allotted for fifteen allotments. Any additional are to be printed in the “REMARKS”

block.

• If you have more than one allotment of the same type, for instance two savings allotments, the only

differentiation may be the dollar amount.

• Some allotments, however, are prohibited, such as new allotments to purchase, lease, or rent personal

property.

Examples of prohibited allotments include:

o Vehicles (e.g., automobiles, motorcycles, boats);

o Appliances or household goods (e.g., washer, dryer, furniture);

o Electronics (e.g., laptop, iPad, cell phone, television)

SHOW SLIDE 3-12: LES Summary


• The next section provides a math summary that leads to the "bottom line" or your End of Month (EOM) pay.

EOM is the actual amount of the payment to be paid to the member of the End-of-Month payday.

• Summary Line 1 – Amt. FWD: The Amount Forwarded shows the amount of all unpaid pay and allowances

(if any), due to you from the prior LES. The totals found in the Entitlements, Deductions, and Allotments

blocks will appear in this summary. Make sure they are correct!

• Summary Line 2 – TOT ENT: This is the total of all entitlements and/or allowances listed, and should match

the amount found at the bottom of the “Entitlements” section of your LES.

• Summary Line 3 – TOT DED: This is the total of all deductions listed, and should match the amount found

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at the bottom of the “Deductions” section of your LES.

• Summary Line 4 – TOT ALLT: This is the total of all allotments listed, and should match the amount found

at the bottom of the “Allotments” section of your LES.

• Summary Line 5 – NET AMT: The Net Amount will be the amount of your entitlements minus your

deductions and any allotments.

• Summary Line 6 – CR FWD: Carried Forward, is the dollar value of all unpaid pay and allowances due to

reflect on the next LES as the +AMT FWD.

• Summary Line 7 – EOM PAY: The End of Month Pay shows the actual amount of the payment to be paid

to the member on End-Of-Month payday. This is the amount that should be deposited in your account!

SHOW SLIDE 3-13: DIEMS


DIEMS:

• This box contains the date you initially entered the military service. Please note that this date may be

different from your Pay Date if you came in on the delayed entry program.

Note: This date is SOLELY to indicate which retirement plan a member is under.

SHOW SLIDE 3-14: Retirement Plan


RET PLAN:

• In this box, you will find your choice of a Retirement plan. If you have less than 15 years of service, no

choice will be shown.

• If a Retirement Plan is selected, it will be either High 36 or Redux.

o High 36: Average of highest 36 months of basic pay.

o Redux: Same as the High 36 with reduction of one percentage point for each year short of 30 years of

service.

Instructor/Student Note: The High 36 calculator is also known as the High-3. Inform students if they hear

“High 36” or “High-3”, it is referring to the same thing.

SHOW SLIDE 3-15: Leave


Leave:

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• Now we will cover the Leave portion of your LES.

Regarding your Leave benefits:

• You earn 2.5 days per month = 30 days per year

• You may accrue (bank) up to 60 days of leave as of 1 October each year (certain special cases can accrue

more)

SHOW SLIDE 3-16: Leave Info


Leave Info:

• BF BAL: This is the brought forward leave balance.

• ERND: This block shows the cumulative amount of leave earned in the current fiscal year of current term of

enlistment if the member reenlisted/extended since the beginning of the fiscal year. This number increases

by 2.5 days each month.

• USED: The cumulative amount of leave used in the current fiscal year or current term of enlistment if the

member reenlisted/extended since the beginning of the fiscal year.

• CR BAL: The current leave balance as of the end of the period covered by the LES

• ETS BAL: The projected leave balance to the member’s Expiration Term of Service (ETS).

• LV LOST: The number of days of leave that have been lost

• LV PAID: The number of days of leave paid to date

• USE/LOSE: The projected number of days of leave that will be lost if not taken in the current fiscal year on

a monthly basis. The number of days of leave in this block will decrease with any leave usage.

Note: If you have a significant number of days in this block, it’s time to talk to your supervisor about when

you may be able to take some leave without adversely affecting operational readiness.

SHOW SLIDE 3-17: Federal Taxes


Federal Taxes:

• Just to the right of your leave information, you will find information about your Federal Income Tax

Withholding, or FITW.

• WAGE PERIOD: The amount of money earned this LES period that is subject to Federal Income Tax

Withholding (FITW).

Note: Remember that some of your entitlements are NOT taxable.

• WAGE YTD: The money earned year-to-date that is subject to FITW.

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• M/S: The marital status used to compute the FITW. NOTE: Make sure this status is accurate. An incorrect

status could result in too much money being withheld from each paycheck, or worse, not enough, leaving

you with a large tax bill at the end of the year.

• EX: The number of exemptions used to compute the FITW. Always check to make sure this number is

accurate.

• ADD’L TAX: The member specified additional dollar amount to be withheld in addition to the amount

computed by the Marital Status and Exemptions.

• TAX YTD: The cumulative total of FITW withheld throughout the calendar year to date.

Note: The number indicated in this block on your December LES could prove useful in regards to getting an

idea of what your possible tax refund, or tax liability, may be, prior to receiving your W-2 forms.

SHOW SLIDE 3-18: Social Security & Medicare


Social Security & Medicare:

• The section of the LES immediately below your leave information deals with Social Security and Medicare

taxes. These fall under the Federal Insurance Contributions Act, otherwise known as FICA.

• WAGE PERIOD: The amount of money earned this LES period that is subject to FICA. NOTE: This will

probably not be the same figure as the WAGE PERIOD figure for Federal Income Taxes depending on your

entitlements.

• SOC WAGE YTD: The wages earned year-to-date that are subject to FICA.

• SOC TAX YTD: Cumulative total of FICA withheld throughout the calendar year.

Note: The amount of Social Security you will draw when you become retirement eligible will be based on the

wages you made throughout your working life. Therefore, it's a good idea to keep all your end-of-December

LES’s in a secure spot to document your Social Security wages -- at least until you start to receive letters of

eligibility from the Social Security Administration.

• MED WAGE YTD: The wages earned year-to-date that are subject to Medicare.

• MED TAX YTD: Cumulative total of Medicare taxes paid year-to-date.

SHOW SLIDE 3-19: State Tax


State Tax:

• The area to the right of the FICA information contains information about state income taxes. It contains

much of the same information as the section relative to Federal taxes with one key addition, the “ST” block.

• ST: Contains the two-letter postal identifier of the state where you claim domicile. NOTE: As mentioned

75

earlier, several states do not have a state income tax and there are legal and ethical ways to establish your

domicile in one of them.

Note: As mentioned earlier in our presentation, The Service Members Civil Relief Act (SCRA) prohibits

states from collecting state income tax on military pay of members who are stationed in that state, but

domiciled elsewhere. However, the state may collect these taxes on monies you or your spouse earns from

civilian employment.

SHOW SLIDE 3-20: Additional Info


Additional Info:

• The last line of your LES titled Pay Data contains information that is used to determine the rate and type of

your dependent entitlements, as well as information about your charitable deductions.

• BAQ: The Basic Allowance for Quarters, (also referred to as BAH-Basic Allowance for Housing) and BAQ

dependents blocks are used to determine the amount of money you will be paid for housing. It is your

responsibility to ensure this number is correct.

• VHA ZIP: Shows the ZIP code used to determine your housing allowance (BAH). Because your housing

allowance is designed to defray actual expenses, the amount you receive varies based on your location. For

example, you would not receive as much of an allowance being stationed in El Paso, as you would being

stationed in or around Washington, D.C.

• Rent Amt: Reflects the amount of rent paid for housing, if applicable.

• Share: Number of people with which the service member shares housing costs.

• JFTR: Stands for Joint Federal Travel Regulation. Many of the allowances you may receive during your

career will be based on comparative cost figures contained in this manual. On the LES, the JFTR code is

used to determine your eligibility for, and amount of, any Cost of Living Allowance (COLA) you may be able

to draw due to assignment, or the location of your dependents, in a high-cost area.

• BAS Type: Reflects the type of Basic Allowance for Subsistence you are receiving.

o STAND - Separate Rations

o (blank) - Rations-in-kind not available

o OFFIC - Officer Rations

• Charity YTD: The cumulative amount of any charitable contributions you made during the calendar year.

• TPC: This Block is not used for the Active Component. Army Reserves and National Guard use this field to

identify Training Program Codes.

o A - Normal pay status code for a regular service member on regular duty.

o C - Funeral Honors Duty.

o M - Annual training tours over 30 days.

o N - Death.

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o O - Training for HPSP, ROTC, and Special ADT over 30 days.

o T - ADT over 29 days. (School)

o U - Undergraduate pilot training, in-grade pilot, navigator, and advance flying training officers.

o X - Stipend Tour of HPIP participants or subsistence for ROTC participants.

o Z - Administrative and support training (exclusive of recruiting). , if there is an entry in this block, it is

reason to check the accuracy of your LES with your local finance office.

SHOW SLIDE 3-21: Thrift Savings Plan (TSP) Info


Thrift Savings Plan (TSP) Info:

• The TSP blocks on your LES show the percentages and amounts that have been withheld from your

various pays.

• They also give your year to date balances.

• We will discuss the Thrift Savings Plan in more detail in another lesson.

SHOW SLIDE 3-22: Remarks


Remarks:

• The “Remarks” section at the bottom of your LES is used to provide you with general notices from varying

levels of command, as well as the literal explanation of starts, stops, and changes to pay items in the entries

within the “ENTITLEMENTS”, “DEDUCTIONS”, and “ALLOTMENTS” fields.

• YTD ENTITLE: The cumulative total of all entitlements for the calendar year.

• YTD DEDUCT: The cumulative total of all deductions for the calendar year.



learning activity.




Q1. How often will you receive an LES?

77

a. Every six months

b. Once a year

c. Every two weeks

d. Once a month

A1. Answer: d. Once a month




Q2. In what column on your LES would you find your End of Month Pay?

a. Deductions

b. Allotments

c. Entitlements

d. Summary

A2. Answer: d. Summary




Q3. Which of the following is true concerning the “Pay Date” shown on your

LES?

• It is the day on which you are paid

• It is the date you entered the Army for pay purposes

• It is the last day of your current enlistment

• It will always be the first day of the current month

A3. Answer: b. It is the date you entered the Army for pay purposes

Review Summary:SHOW SLIDE 3-27: LSA 3 Summary Sources Of Help

Instructor’s Note: Inform students that the Leave and Earnings Statement

is certainly a "busy" document, but the information is presented in a logical

format that will allow you to determine the accuracy of your pay and

entitlements each month.

78

• Remember that it is your personal responsibility to do so. If you ever

believe that information shown on your LES is not accurate, visit your local

finance office as soon as possible to discuss your concerns.

Summary:

• During this lesson, we stressed the importance of monitoring your Leave

and Earning Statement to detect any errors in your pay and allowances.

• We discussed all of the information provided in the various sections of the

LES, and we identified where you should go for help if you believe your pay

and allowances are not accurate. I hope you will use this information to

keep your pay and allowances accurate throughout your military career.

• We also discussed myPay to include how to sign up and what options you

have.

Instructor’s Note: Prep to transition into LSA #4 titled, Developing a

Spending Plan.

TLO - LSA 4. Learning Step / Activity TLO - LSA 4. Developing a Spending Plan








SHOW SLIDE 4-1: Develop a Spending Plan

4. Learning Step / Activity 4: Develop a Spending Plan






• Student Handout

• Calculator

• Pencil

79

Corresponding Activities:

• Statement of Net Worth, Student Handout Page 3

• Preparing a Monthly Spending Plan, Student Handout Page 4

• Debt-to-Income Ration Exercise, Student Handout Page 5

Introduction: During this learning activity, we will discuss the importance of developing and following a

financial plan that will provide you with a sound and secure future.

We will:

• Examine the key elements of a successful financial plan.

• Determine what components make up a spending plan.

• Learn how to identify and distinguish between discretionary and non-discretionary spending.

SHOW SLIDE 4-2: Why Have A Game Plan?


• A good game plan is the key to success in any endeavor.

• I am not here to tell you what to do with your money.

• I'm here to challenge you to think before you spend.

• The most effective way to get your dollars’ worth is to ensure that you have a written plan.

SHOW SLIDE 4-3: Why Have A Spending Plan?


• You may have already heard about a personal spending plan, also commonly referred to as a budget. But

why would anyone need it? A good spending plan can improve your life in several ways.

o Its most immediate contribution will be helping you live within your income

o It can reduce stress that is often associated with financial problems. Remember we talked about this

as one of the major problem areas for young Soldiers.

o It will help you establish and maintain a good credit history.

• Creating a successful spending plan will help you start on the road to financial success and achievement of

personal goals.

SHOW SLIDE 4-4: Elements of Personal Financial Success


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Three Elements of Personal Financial Success:

• In addition to a spending plan, two other components must be met in order to really meet desired financial

success.

• They are:

o Knowing your current Net Worth

o Goal Setting

Instructor’s Note: Inform students that we will begin by investigating these parts first.

SHOW SLIDE 4-5: Determining Your Net Worth

Instructor’s Note: Instructor read and discuss with students and direct students to page 3 of their Student

Handout to the activity “Statement of Net Worth”.

• Encourage the students fill out this page to determine their individual net worth.

Note: Not all students will have the information necessary to fill the statement out on hand. Inform them if

they don’t know all of the required information, they can fill the statement out at a later time.

Determining your Net Worth:

• It's difficult to chart a course to a destination if you don't know where you are. That's the primary reason for

determining your net worth.

• Your net worth is defined as the total amount of your assets, minus your liabilities. For an individual, it

represents the properties owned, less any debt the person has.

• An asset is anything you own that has value. A car is a good example. A liability is something for which

you owe. Recognize that the fact that decreasing, or making a conscious decision not to increase your

liabilities, directly and positively affects your net worth.

SHOW SLIDE 4-6: The Financial Planning Pyramid


Financial Planning Pyramid Four Levels:

Level One Protection:

• Life Insurance

• Emergency Fund

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• Debt Reduction

• Wills and Power of Attorney’s

Level Two Savings and Wealth Accumulation:

• Home Ownership

• Fixed Interest Plans

• Mutual & Segregated Funds

Level Three Growth & Diversification:

• Bonds

• Mortgage Pay down

• Equity Securities

Level Four Speculation:

• Real Estate Investments

• Business Interests

SHOW SLIDE 4-7: Setting Goals


• There are two categories of goals.

• Short-term goals: those that can be accomplished in a year or less.

• Long-term goals: May take years to achieve. These goals require a higher degree of commitment to your

spending plan.

• The most important thing about setting goals is getting started. If you have a financial dream, doing

nothing will get you nowhere.

SHOW SLIDE 4-8: S.M.A.R.T. Goal Setting


Specific:

• The more specific the goal, the more likely you are to achieve it.

• Example: eat out once a week to spend less money.

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Measurable:

• You must establish criteria that measures your progress towards attaining your goal.

• Example: Save $20 a week in savings account.

Achievable:

• Understanding what needs to be done to reach the goals that are important to you, and adjusting your

habits to reach that goal.

• Example: maybe saving $50 a week is too much, but $50 a month can be done.

Realistic:

• A goal must represent an objective towards which you are willing to work. Realizing that making certain

changes will put you closer to achieving your goal.

• Example: You can visit coffee shops less frequently to save money, but you can still enjoy drinking coffee

by brewing it at home.

Time Bound:

• – have a start date and an end date for your goal. With no timeframe tied to your goal there is no sense of

urgency.

• Example: Plan to have accumulated $1,000.00 in your savings account by the first of the New Year.

SHOW SLIDE 4-9: Spending Plan

Instructor’s Note: Direct students to page 4 in their handout: Preparing a Monthly Spending Plan.

• After you have determined your net worth and set some specific and realistic goals, it will be time to

develop your personal spending plan.

Definition of a Personal Spending Plan:

• A personal spending plan is a document used to determine the cash flow of an individual or family. Similar

to a budget, it determines the income you have coming in each month and where it is going.

• Developing a personal spending plan allows you to identify your spending habits, acknowledge any

weaknesses, and keep your spending in check.

• A spending plan is flexible, so it is able to keep up with the ebbs and flows of your changing finances.

• Think of your spending plan as a roadmap--you wouldn't want to take a trip without it!

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SHOW SLIDE 4-10: DISCRETIONARY Vs. Non-Discretionary Spending


Discretionary vs. Non-Discretionary Spending:

• The biggest obstacle many people, and particularly young people, face when starting to save for the future

is that money allotted to savings must be "paid" with discretionary funds.

(1) Discretionary funds are used for WANTS; they are the dollars left over after paying your monthly

expenses. These are the dollars used for savings.

(2) Non-discretionary funds are used for living expenses and debts. This is the money used for your

NEEDS. There are three things you can do if you want to increase the amount of discretionary funds

available for savings.

SHOW SLIDE 4-11: Where Does Your Discretionary Money Go?


Increasing your discretionary funds:

• The first way to increase your discretionary funds is to control your spending. Take a closer look at what

you are spending your money on each day. Where can you reduce spending?

• To give you an idea of how much discretionary income you use in a year, look at this slide. Imagine if you

cut down on eating fast food for a year. You could save up to $1,800 or more!

• Reducing your discretionary spending will increase your ability to save.

SHOW SLIDE 4-12: Three Ways to Increase Discretionary Funds



• Three Ways to Increase Discretionary Funds.

(1) The first way to increase discretionary funds is to control spending. Take a careful look at what you are

spending your money on, and see where you could possibly cut back.

(2) The second way to increase discretionary funds is to GET PROMOTED!

(3) The third and final way for you to increase your discretionary funds is to reduce your debt.

SHOW SLIDE 4-13: Characteristics of a Spending Plan

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Characteristics of a spending plan:

• A good spending plan is a guide. Here are some characteristics of a sound plan.

(1) A spending plan is a general guide. Everything does NOT have to be figured down to the penny.

(2) It is UNIQUE to you and therefore reflects YOUR needs, wants, values, and goals.

(3) To be practical and realistic, your plan should be based on your current income and expenses, yet still

allow for future possibilities.

(4) Times and circumstances change, so your plan should be FLEXIBLE enough to adapt.

(5) A reasonable plan should allow for LEISURE as well as necessities.

SHOW SLIDE 4-14: Preparing a Monthly Spending Plan

Instructor’s Note: Once again, direct students to page 3 of their handout where they will find a pre-

populated Monthly Spending Plan to use as a guide to help them create their own.


• We will now spend some time reviewing the personal spending plan of PVT. Smith.

• Remember that this plan is a living document, and I strongly encourage each of you to create your own

personal spending plan.

SHOW SLIDE 4-15: Debt-to-Income Ratio


Debt-to-Income Ratio Definition:

• The debt-to-income ratio is a percentage assigned the amount of your debt in relationship to your income.

• Simply speaking, this is the amount of your monthly debt payments divided by your monthly income, times

one hundred.

• Mortgage payments, if you have them, are not included as debt because real estate is considered an

investment.

SHOW SLIDE 4-16: Debt-to-Income Ratio Exercise

Instructor’s Note: Direct the students to page 4 of their handout to complete the Debt-to-Income Ratio

exercise.


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• Not all students will have the necessary information on hand to complete this exercise.

• Inform the students that if they aren’t sure of exact numbers, they can complete this exercise at a later

time.

• Still encourage the students to follow along as you go through the exercise, and be readily available to

answer any questions regarding this activity.

SHOW SLIDE 4-17: Debt-to-Income Ratio


Debt-to-Income Ratio:

• 17.38% of individuals fall in the 15-20% fully extended range.

• In this example, what can be done to decrease the ratio?

Note: Flip back to the previous slide so students can answer the question.

SHOW SLIDE 4-18: Online Budgets and Computer Software


• Advantages

(1) Many of the calculations are done for you

(2) Saves time compared to manual methods

(3) You can have automatic updates for account values

(4) May be able to view and update with mobile devices

(5) You may be able to run reports on various categories

Note: Discuss the advantages of financial planning online.

SHOW SLIDE 4-19: Online Budgets and Computer Software Cont.


• Disadvantages

(1) Manual financial planning ensures you understand all aspects of spending plans and personal allotments

(2) There can be a tendency to enter data and forget

(3) Potentially increased security risk or risk of identity theft- choose secure passwords!

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Note: Discuss the disadvantages of financial planning online.

SHOW SLIDE 4-20: Online Budgets and Computer Software Cont.


Notes:

• Mint.com was described as “the best overall site” for budgeting by Kiplinger’s Success With Your Money

quarterly magazine (Winter 2012).

• However, each website or software option works differently and if you choose to use one of these options

you should first explore several and pick the one that is best for you.

• Powerpay.org is also very useful in developing a spending plan and also to develop a debt elimination plan.




• If you think, you are already in debt trouble, or if you need help in the future with any of the things we

discuss in this course, don't be timid about seeking assistance from any of the sources shown here.

• *Contact information for each installation’s ACS is located on the PFMC website as an easily accessible

resource for the Soldiers.

SHOW SLIDE 4-22: Questions

Instructor’s Note: Ask students if they have any questions.



learning activity.

SHOW SLIDE 4-24: LSA Check on Learning



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Q1: How can you increase your discretionary funds?

A1. Answer: b. get promoted




Q2. True or False. A spending plan is unique to you and reflects your

needs, wants, and goals.

A2. Answer: True




Q3. Which of the following is true concerning your personal spending

plan?

A3. Answer: b. It will help you live within your means.




Q4. Which of the following statements best describes the purpose of a

spending plan?

A4. Answer: a. Spending plans help you live within your income.




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Q5. What are Discretionary Funds used for?

A5. Answer: b. wants

Review Summary:SHOW SLIDE 4-29: LSA 4 Summary (Can You Afford This?)

Instructor’s Note: Conduct LSA summary for this lesson.

Summary:

• During this lesson, we've talked about the advantages of creating a sound

spending plan and the steps you need to take to begin preparing your

personal plan.

• We discussed some key economic concepts such as debt-to-income ratio

and the discretionary funds that are necessary to establish a savings

program.

• We also identified ways to increase discretionary funds and identified

sources of assistance regarding any of your financial concerns.

Instructor’s Note: Prep to transition into LSA #5 titled, Managing a

Checking Account.

TLO - LSA 5. Learning Step / Activity TLO - LSA 5. Managing a Checking Account








SHOW SLIDE 5-1: Managing a Checking Account

5. Learning Step / Activity 5: Managing a Checking Account






• Student Handout

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• Calculator

• Pencil


• Practicing Check Writing, Student Handout Page 6

• Transaction Records, Student Handout Page 7

• Sample Bank Statement, Student Handout Page 8

• Monthly Bank Reconciliation, Student Handout Page 9

SHOW SLIDE 5-2: Dishonored Checks (1 of 2)


Dishonored Checks:

• Before we start our discussion of personal checks, deposit slips, and withdrawal slips, let us talk about

dishonored checks (bad checks) and what can happen to you if you write a dishonored check. By knowing

what can happen, you may take this training more seriously. If you should write a dishonored check, one or

more of the following consequences occur:

(1) Your bank and the institution to which the check was written or debit card used may each assess a

service charge, as much as $25.00 or higher.

(2) Your reputation and credit rating may be damaged. If your credit rating is damaged, it will cost you more

to get credit, if you can get it at all.

(3) You will be counseled by your chain of command, regardless of the circumstances.

(4) You may be added to the dishonored (bad check) list on post.

(5) Your check cashing/ debit card privileges may be suspended on post for six months, a year, or

indefinitely. This means you will not be able to write checks or use your debit card on post.

(6) You may be reprimanded by your supervisor or commander.

SHOW SLIDE 5-3: Dishonored Checks (2 of 2)


• Dishonored Checks (Cont.)

(7) You may be given a bad efficiency report.

(8) You may be reduced in rank.

(9) You may receive an Article 15 or court-martial.

(10) You may be barred from reenlistment.

(11) You may be separated from the Army.

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(12) The punishment you receive depends on how many times you have written dishonored checks. As you

can see, the Army takes writing dishonored checks seriously. This crime is punishable under the Uniform

Code of Military Justice (UCMJ), Article 123a – Making, drawing, or uttering check, draft, or order without

sufficient funds. Your loyalty to the Army, your unit, your family, and yourself requires you to manage your

finances efficiently. Any indebtedness may require administrative action, which means the involvement of

your supervisor, commander, and other Army personnel. Consequences could also include an adverse

effect on the unit’s mission as well as the Army’s reputation.

SHOW SLIDE 5-4: Writing a Personal Check


Note: Inform students that checks must always be filled out in ink and must be legible. *Refer students to

Page 6 of their handout to view examples of blank checks. Encourage the students to practice writing checks

using this activity.

• Most transactions you perform with your checking account can be accomplished with a debit or ATM card.

However, some transactions, such as paying rent or utility bills may require you to write a check

• First, determine the amount for the check, verify that your current account balance is enough to cover the

amount of the check and any check fees, and obtain the next available blank check.

#1: Write the current date on the check

#2: Write the full name of the payee (the person or company to whom you are writing the check)

#3: Write the money amount on the check, using figures

#4: Write the same money amount in longhand, this time using words; include both dollars and cents. Cents

are written as “XX/100” Make sure to begin writing as far to the left as possible on this line and then draw a

line after the written money amount extending to the preprinted word “Dollars.”

Note: Explain that this action is necessary for security to prevent someone else from altering the amount.

#5: Although not required, it is good practice to write a short description or key word representing the

transaction in the MEMO space

#6: Sign the check. This signature should match the one you used when you opened the account

SHOW SLIDE 5-5: Writing a Personal Check, (Cont.)


Please Note: If you make a mistake, you must start over; you cannot erase or cross out errors. Write “VOID”

in large letters on the incorrect check. Make a note in your checkbook register, indicating that check number

XXXX was voided and destroyed. This will help you maintain an accurate account.

A Couple More Notes on Writing Checks:

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• On occasion, you may need to deposit a check or cash to your account. Many banking institutions offer

ATM machines that you can make deposits. Therefore, you need not physically make a deposit slip for the

transaction. If you do need to make a deposit with a teller, however, follow the requirements of your banking

institution for making a deposit in person.

• You may also have to make a withdrawal from your banking institution. If you have an ATM or Debit Card,

you don’t have to fill in a withdrawal slip. If you do need to make a withdrawal with a teller, however, follow

the requirements of your banking institution for making a withdrawal in person.

SHOW SLIDE 5-6: Check Register



• There are five basic types of transactions that must be posted to a checkbook register:

(1) Debit card transactions.

(2) Personal checks written by you. Also, include voided check(s).

(3) All deposits to the checking account (in person, ATM, SURE PAY, etc.).

(4) Withdrawals (not by check) from the checking account (in person, through an ATM, preauthorized

transfer (PAT), etc.).

Instructor’s Note: Define PAT as recurring withdrawals automatically taken from the account. Examples:

insurance premiums, car payment, savings transfer, etc.

(5) Monthly adjustments (fees, interest, etc.).

• ATM/PAT withdrawals are often the culprits in accounts that are overdrawn or cannot be balanced.

Remember, your personal honor and integrity are at risk when you fail to properly manage your finances.

Note: Demonstrate. Have the students go to page 7 of their handout. Click the mouse on Slide 5-6 each

time you describe the following steps and have the students follow along by writing each step in their check

register in the handout:

(1) Write check number 2047 in the number column (#1). NOTE: Click mouse once.

(2) Write the date of the transaction in the date column (#2) (4/01). NOTE: Click mouse once.

(3) Write a description in the “description of” transaction column (#3) (AAFES DPP Payment).

(4) Write the money amount ($200.00) in the appropriate column (record withdrawals and/or checks in the

payment/debit column or record deposits in the deposit/credit column) (#4).

(5) Subtract or add the money amount to the balance figure (numbers in the payment/debit column are

subtracted or numbers in the deposit/credit column are added) (#5). NOTE: Click mouse once.

6) Write the new calculated balance in the checkbook register (#6).

SHOW SLIDE 5-7: Using Debit Cards

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What is a debit card?

• A debit card is a card that is issued by a bank allowing the holder to make transactions that pull the

necessary funds from the holder’s account immediately.

Note: Sometimes a debit card is free to use. Sometimes you will pay a fee to use the card.

Why use a debit card?

• Debit cards let you buy things without carrying cash. You can use your debit card in most stores to pay for

something. You just swipe the card and enter your PIN number on a key pad.

• Debit cards take money out of your checking account immediately. Therefore, you should always keep a

receipt when using your card so you can post it to your checkbook register. This enables you to keep track

of your debit card use and your current account balance.

• Debit cards let you get cash quickly. You can use your debit card at an automated teller machine, or ATM,

to get money from your checking account. You also can get cash back when you use a debit card to buy

something at a store.

What is a PIN?

• A “PIN” is a security code that belongs to you. PIN stands for personal identification number. A bank or

credit union gives you a PIN when you get a debit card. You can change your PIN to a number you will

remember.

• When you use your debit card, you need to enter your PIN on a keypad. This is one way the bank tries to

stop dishonest people from using your debit card to get your money. NEVER share your PIN with anyone.

Remember it. Do not keep it in your wallet or on your card.

How do debit cards work?

• When you open a checking account at a bank or credit union, you usually get a debit card. A debit card

lets you spend money from your checking account without writing a check.

o You can use your debit card to buy things in a store

o You can use it at an ATM to get cash

o When you pay with a debit card, the money comes out of your checking account immediately. There is

no bill to pay later.

SHOW SLIDE 5-8: Using Debit Cards (Cont.)


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How do I know where I used my debit card?

• Every time you use your debit card, you should receive a receipt, which you should keep to post to your

checkbook register. Your bank or credit union gives you a “statement” every month.

• Your statement shows:

o Where you paid with your debit card and how much you spent

o Where you used the ATM, how much you withdrew, and what fees you paid

o Who you wrote a check to and for how much

• Your statement can help you track your spending and create a budget.

Can I use my debit card to buy things online?

• Your debit card will work online. But debit cards are not a good way to pay when you shop online. Credit

cards are safer to use when you buy things online:

o You might have a problem with something you buy online. It is easier to get your money back if you use

a credit card.

o Someone might steal your credit card number online. The law says you can lose only $50 if you report it

right away.

o Someone might steal your debit card number online. The thief can take all your money out of your bank

account.

What if I use all the money in my checking account?

• You might not have enough money in your checking account. That means your debit card will be

“declined.” Some banks and credit unions might let you sign up for “overdraft protection.” That means you

can use your debit card even when you do not have enough money to pay for the things you are buying, but

you might have to pay a fee to the bank.

• Some banks might charge this fee for every purchase until you put enough money in your account to pay

for the things you are buying.

Note: Make sure to always keep track of your spending so you don’t overdraft!

SHOW SLIDE 5-9: Using Debit Cards (Cont.)


How do I choose a debit card?

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• A bank or credit union usually gives you a debit card when you open a checking account. Compare the

services and fees at a few banks and credit unions. Go to the website or visit in person.

• Find out what the fee is if you:

o Have a checking account

o Use a debit card

o Get cash from ATMs at other banks

o Have less money in your account than the bank requires

o Spend more money than you have in your account

• Compare the answers. Find the bank or credit union that meets your needs.

How can I protect my debit card?

• Keep your debit card number and PIN private.

• Do not use your debit card to buy things online.

• If you lose your debit card, report it to your bank or credit union right away. Ask your bank to cancel the

card and send you another card.

• Ask for account alerts by email or text message. This can let you know if your account has less money in it

than you think.

How can I keep track of my money?

• Write down how much money you spend with your debit card (keep receipts and post all transactions to

your checkbook register).

• Write down how much money you take out of the ATM. Remember to add the fees (keep receipts and post

all transactions to your checkbook register).

• Use your monthly budget to schedule payments for regular bills.

• Look at your bank statement whenever it comes. Make sure it is what you expected (balance your

checkbook register to your bank statement).

• Ask your bank or credit union to send you email or text alerts. Some banks contact you if your balance

goes below an amount you set.

SHOW SLIDE 5-10: Debit Cards vs. Credit Cards


How is a debit card different from a credit card?

• When you buy something with a credit card, you are borrowing money from the credit card company. The

95

credit card company will send you a bill every month for the money you borrowed to buy things.

• When you use a debit card, you are using money in your checking account to buy things.

• Debit Cards

o You can get a debit card from the bank when you open a checking account

o Money comes out of your checking account when you pay with a debit card

o You don’t pay extra money in interest when you pay with a debit card

o You can use a debit card at an ATM to get money from your checking account

o You do not build a credit history using a debit card

• Credit Cards

o You apply for a credit card at a bank or store

o You get a bill once a month for everything you buy with a credit card

o You might pay extra money in interest if you don’t pay all of your credit card bill every month

o You can use a credit card as a safer way to pay for things online

o You can build a credit history using a credit card if you pay the whole bill every month when it is due

SHOW SLIDE 5-11: Bank Statement


Note: Refer students to page #8 of their handout to follow along with the “Bank Statement” slide.

• Your monthly bank statement is a summary of the financial transactions that have occurred over a given

period of time (usually a month), for a bank account held by a person or a business with a financial

institution.

• This slide shows a sample of a bank statement. Taking the time to review and understand your own bank

statement can help you:

o Track your receivables vs. your expenditures (make sure you are sticking to your monthly spending

plan)

o Detect errors

o Monitor any fees being accumulated such as annual service fees or overdraft charges

o Detect fraudulent charges to your account

• Use the statement received from the bank to also determine which debit card transactions, checks,

deposits, or withdrawals have been processed by the bank.

Note: Only those items appearing on the statement can be counted as processed.

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12: Bank Statement


Note: HAVE STUDENTS REFER TO THE CHECKBOOK REGISTER THEY FILLED OUT EARLIER. THEY

WILL USE IT ALONGSIDE THE BANK STATEMENT ON PAGE 8.

• Place a mark beside each item in your checkbook register only if it appears on the bank statement.

• Find the last balance in your checkbook register (where you have entered your most recent transaction)

• Draw a line in the checkbook register under the last item shown processed in your bank statement. This is

the balance you will reconcile.

Note: Explain that there may be checks, withdrawals, and/or deposits “unmarked” in the register. These will

be taken care of later in the reconciliation process).

• Add to the subtotal calculated above any interest that you earned during the month on your account

balance, if your account is an interest bearing account. Calculate a new total. This is your adjusted

checkbook register balance. Make sure to enter the amount of earned interest in your checkbook register

and check it off by placing a mark beside it.

• Using the bank statement you received, find the ending checking account balance, and write it down next

to the adjusted checkbook register balance.

• Look at your checkbook register to find the balance you underlined:

• Are there any deposits above the line that have not been marked off yet? If there are, the bank has not

processed them yet. Add the deposit amounts to the ending checking account balance shown on your bank

statement. Subtotal.

• Are there any checks which are not checked off yet that make up your underlined checkbook register

balance? If there are, subtract them from the subtotal and calculate a new adjusted statement balance.

Note: Emphasize that deposits and checks made after the underlined balance in your checkbook register

should not be used for reconciliation, whether they are marked off or not.

Slide 5-13: Bank Statement (Cont.)


Bank Statement (Cont.):

• Compare your adjusted checkbook register balance with your adjusted statement balance. If they match

exactly, your account is reconciled.

• If the two balances don’t match, check your calculations to make sure that you added and subtracted

correctly.

• If your calculations are correct and the two balances do not match:

• Make sure you wrote all debit card, ATM, or PAT transactions in your checkbook register.

• Make sure you added or subtracted any charges that the bank processed against your account:

97

o Interest you earned on your account (add)

o Monthly service charge (subtract)

o ATM charges (subtract)

o Flat fee for each check written (subtract)

• Make sure that you did not count checks or deposits made after the underlined balance in your checkbook.

• Verify that the withdrawals, canceled checks, and/or deposit amounts listed on your bank statement exactly

match what you wrote in your checkbook register.

• Check the bank statement from last month for a check that was not cleared from last month. Some people

may hold a check for several months before they cash it.

o If you cannot find your error, have your spouse or a friend help you look for the mistake.

o If you still cannot find your error, take your statement and all receipts to your immediate supervisor for

help in reconciling your account.

o If your chain of command cannot find and resolve the error, the bank must be contacted for help in the

reconciliation of your account.

o Again, remember that your honor and integrity are to a great degree measured by your financial

trustworthiness.

o Make sure you accurately balance your accounts to avoid financial difficulty.

Note: Emphasize that this should be the last resort, since most banks charge a fee to perform the

reconciliation service. Many banks do not provide this service at all.

SHOW SLIDE 5-14: Online Banking


• Online banking is has become a very common way for individuals to manage their finances.

Some services offered through online banking:

o Access to accounts and transaction history

o Paying bills online

o Transferring money between accounts

o Deposit checks by scanning checks

o Automatic payments

o Paperless statements

• Many people use online banking to effectively monitor their financial transactions and even link their

accounts with financial software that helps them with budgeting.

• Remember; always safeguard your username and password. If someone were to gain access of this

information, it could have a devastating effect on your finances.

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learning activity.




Q1. What must you do before you write checks or use your debit card on a

new account?

A1. Answer: Verify your pay was deposited in your new account by

first reviewing your LES or checking your account online.




Q2. Name three consequences that could happen to you if you write a bad

check.

A2. Possible Answers Include:

• Separation

• Barred from re-enlisting

• UCMJ action

• Reduced in rank

• Bad efficiency report

• Reprimand,

• Check cashing privileges suspended

• Counseling

• Bank service charges

• Damaged reputation

• Damaged credit report


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Q3. What must you always verify before you write a check?

A3. Verify you have enough money in your account to cover the

amount of the check.




Q4. Why do you start the words of the amount of the check as far to the

left as possible and draw a line after the cents all the way to the word

“Dollars”?

A4. For security, so no one can alter the amount of the check.




Q5. What are the five types of transactions you must post to your check

register?

A5.

• Debit card transactions

• Personal checks written by you

• Deposits

• Withdrawals (not by check)

• Adjustments such as interest, ATM charges, etc.




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Q6. What is a PAT and give an example?

A6. Preauthorized transactions are reoccurring withdrawals you

arrange to be automatically deducted from your account such as car

payments, insurance payments, utility bill payments, etc.




Q7. Why must you keep up with posting all transactions to your checking

account?

A7. Therefore, you don’t over draw your account.




Q8. What is the bank form you use to reconcile your checkbook register

to?

A8. The checking account bank statement.


Note: Summarize this portion of the learning activity.

Summary:

• During this lesson, we discussed how to write checks, and how to

balance your checkbook. We also talked about debit cards, reconciling

your checkbook, and online banking. Keeping your finances in order is

your duty as well as your responsibility. Remember, bouncing checks is a

crime in the Army and is punishable under the UCMJ.

Instructor’s Note: Prep to transition into LSA #6 titled, Identify the

Essentials of Credit

TLO - LSA 6. Learning Step / Activity TLO - LSA 6. Identify the Essentials of Credit

101








SHOW SLIDE 6-1: Identify the Essentials of Credit

6. Learning Step / Activity 6: Identify the Essentials of Credit






• Calculator

• Pencil

SHOW SLIDE 6-2: The Essentials of Credit


• The word credit is defined as the ability of a customer to obtain goods or services before payment, based

on the trust that payment will be made in the future. If a person has good credit, opens up numerous

possibilities, including taking out a loan or receiving a credit card. Your ability to do these things, however,

are dependent on the Essentials of Credit.

o Some examples of the Essentials of Credit include:

o Credit history

o Interest rates

o Fees22

o Payment schedules – do you make your payments on time?

o Impulse buying – do you use your credit card without considering the purchase?

• This lesson will focus on the essentials of credit, as well as ways you can improve your credit

trustworthiness.

SHOW SLIDE 6-3: Types of Credit


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• There are three types of credit:

(1) Credit cards

(2) Short-term loans

(3) Long-term loans

SHOW SLIDE 6-4: Credit Card Facts


Note: Animated Slide

• Click and open hyperlink on the blank screen.

• Time of Video: 02 minutes 16 seconds

• Play video and prepare discussion.

• As we discussed in the previous lesson, a credit card is a card issued by a bank that allows the holder to

purchase goods or services with payments due at a later date.

Credit Card Facts:

• VISA International has determined that just placing a credit card in someone’s hand will cause an increase

in spending of 32%

• U.S. consumers possess over $886 million in credit card debt

• Over 26% of Americans have 4 or more credit cards (2014 FINRA Financial Capability Study).

• The average household carries $5,700 in credit card debt (March 2014 Survey of Consumer Finances by

the U.S. Federal Reserves)

• Average indebted credit card balance is $7,743 based on a June 2014 sample of credit reports from

Experian.

• Overall, credit card debt per household is down. Unfortunately, falling indebtedness is largely due to

defaults rather than repayments. CreditCards.com reported that the average annual percentage rate (APR)

on credit card balance is 15.00 percent (as of July 2015) and the Federal Reserve reported that the total

U.S. consumer debt was $3.4 trillion (as of May 2015).

SHOW SLIDE 6-5: Credit Example


Look at this credit example:

• Say you have a credit card with a balance of $5,000.00 at 18% interest.

• Each month, you only pay the minimum of 2% of the balance.

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• This credit card will take you 30+ years to pay off, and will end up costing you an extra $12,556.38 in

interest.

• That means you will have paid a total of $17,556.38!

SHOW SLIDE 6-6: Short-Term Loans


• In order to use credit to your advantage, you need to understand the differences between short-term and

long-term loans.

• First, let’s start with learning a little bit about short-term loans. A short-term loan is designed to meet short-

term financing needs.

Advantages:

• Provides you with the money you need quickly.

• Often does not put a heavy emphasis on the borrower’s credit history.

• Short-term loans usually offer a better interest rate than longer-term loans. In addition, even if rates are the

same, the short-term loan will save you money in interest over a longer loan.

Disadvantages:

• They add to the problem. Often people who take out short-term loans are short on cash. They cannot

afford to keep up with their bills, so they take out a short-term loan. However, these individuals often face the

problem of not having the money to pay back the loan once it is due. This adds to the total amount of the

loan and makes your payments higher.

• Because the term of the loan is shorter, the monthly payments are often higher.

SHOW SLIDE 6-7: Long-Term Loans


• For larger expenses, long-term financing is often the better option.

• Some advantages of a long-term loan include:

o Higher borrowing limit

o Longer repayment terms

o Lower monthly payments

Disadvantages:

• Higher interest paid.

• Items purchased can wear out and may need replaced before the loan is paid in full.

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SHOW SLIDE 6-8: How Credit Worthy Are You?


Ask yourself: Are you a good credit risk?

• Before deciding whether or not to grant you a loan, or other types of credit, and at what interest rate, a

financial institution or company will evaluate the probability that you will make required payments on time.

The three factors that weigh heavily in those decisions are:

o Character

o Capacity

o Collateral

• These three are otherwise known as your “Creditworthiness”

SHOW SLIDE 6-9: Character


• A lender can decide whether or not you possess the honesty and reliability to repay a debt, based on your

credit history. This is called determining your “Character”.

• Some factors that are taken into consideration include:

o Have you used credit before?

o Do you pay your bills on time?

o How long have you lived at your current address?

o How long have you been at your present job?

• If you've bounced checks, moved frequently from job to job, or have been late on your bills, it may prevent

you from obtaining credit.

SHOW SLIDE 6-10: Capacity


• Capacity refers to your ability to repay the debt. The lender will look to see if you have been working

regularly in an occupation that is likely to provide enough income to support your credit use. They will also

look at your current credit debt, and your ability to pay on the credit cards you already have.

• Some questions that will help the lender determine this include:

o What is your current salary?

o How many other loan payments do you have?

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o What are your current living expenses?

o What are your current debts?

o How many dependents do you have?

SHOW SLIDE 6-11: Collateral


• A lender will also want to know if you have valuable assets such as real estate, personal property,

investments, or savings with which to repay the debt if income is unavailable. This is otherwise known as

Collateral.

• Collateral is normally required for any large loan, such as for a home or car.

SHOW SLIDE 6-12: The ABC’s of Appropriate Credit Use


Appropriate uses for credit:

• The best use of credit is to purchase assets - things that will grow or increase in value over time, like your

own business or buying a home or a rental property.

• Credit is also useful for conveniences, such as being able to avoid having to carry large sums of cash, or

as a management tool.

• Wise use of credit virtually always falls into one of the following two categories: Assets or Convenience.

• Sometimes, however, the use of credit for major consumer goods (so-called "Big Ticket" items) cannot be

avoided. For example, few of us could/can afford purchase our first car without a loan. Purchasing a car with

a loan would be considered an acceptable use of credit.

SHOW SLIDE 6-13: Inappropriate Uses of Credit


Inappropriate:

• Credit becomes more dangerous when it is used to purchase consumables. Items such as furniture,

clothing, sporting equipment, and vacations lose much or all of their value immediately after purchase.

• Such unwise use of credit is often motivated by one of the four following factors.

o Impulse Buying

o Spending for Status

o Retaliatory Spending

o Spending to Feel Good

SHOW SLIDE 6-14: Motivations to Abuse Credit

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Abuse Credit:

• Impulse Buying - Availability of credit can lead to a "buy now, pay later" mentality. Impulse buying on credit

can result in your purchasing an item you would never have bought if you had to pay cash. Distinguish

between needs and wants.

• Spending for Status - Spending on credit to impress others is another common trap. An example would be

advertisements portraying people using a credit card to treat their friends. This can be a huge temptation.

Living within your means can prevent unwise decisions.

• Retaliatory Spending – A common problem in marriages is the lack of, or failure to adhere to, an agreed-

upon family spending plan. This behavior can be another cause of an unwise use of credit. Your partner

deviates from the plan, and so therefore, you feel you can do the same. These behaviors are preventable.

Communication regarding your saving plan and financial goal is the key.

• Spending to Feel Good - Believe it or not, spending to feel good can become an addictive behavior. Avoid

this trap by asking yourself if you really need the item you wish to purchase, as well as if you can afford to

pay for it.

SHOW SLIDE 6-15: Debt Warning Signs


Warning signs of too much debt:

• There are several signs (in addition to your debt-to-income ratio) that might hint that you are going down

the wrong road financially.

They include:

• Not paying off most of your cards every month - This could be a sign of trouble, especially if higher and

higher percentages of each month's pay go to service your debt. When you start to fall behind on payments,

and/or need loans or cash advances for daily living expenses, it's time to seek help! Try to limit the number

of credit cards you have to only one or two.

• Not having at least one month’s pay in savings.

• Being at or near the limit on all of your credit cards.

• Relying on a second job or spouse’s income to make ends meet.

Note: Remember that outside income and your spouse's employment can be impacted by an extended

deployment or Permanent Change of Station.

SHOW SLIDE 6-16: Consequences of Delinquent Accounts


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• Delinquency commonly refers to a situation where borrowers are late or overdue on a payment, such as

student loans, income taxes, mortgage loans or automobile loans.

• There are long-term consequences for delinquency, depending on the type of loan, and the duration and

cause of the delinquency.

Example 1:

• A Soldier takes out a loan from a bank and then becomes 90 days delinquent.

• He risks suffering the following:

o A decrease in his credit score for a considerable period (7-10 years if he applies for bankruptcy)

o Defaulting on the loan, which could cause the bank to foreclose on his home (long-term delinquency).

o Further negative effects on his credit rating, which would make it difficult for him to obtain credit cards,

mortgages, or automobile loans.

Example 2:

• Assume a recent college graduate obtained student loans throughout his stay at college. Suppose too he

fails to make his first loan payment. Consequently, his loan becomes delinquent until he repays the owed

amount.

• If his loan remains delinquent for 270 days, it goes into default and he must pay the entire balance and

fees immediately.

• The long-term effects of his delinquent account include damage his credit rating, making it harder for him to

obtain other loans, and garnishment of his wages and withholding of his tax refunds.

SHOW SLIDE 6-17: Indications of Serious Credit Problems


• You should acknowledge that things are critical when you start exhibiting the following behaviors:

o Skipping some bill payments

o Using credit to pay credit

o Using or even considering a debt consolidation loan

o Being denied additional credit

o Hiding bills and lying to members of your family.

SHOW SLIDE 6-18: Credit Bureaus


Credit Reports:

• A credit report is information about you and your credit experiences, such as:

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o Bill-paying history

o The number and type of accounts you have

o Late payments

o Collection actions

o Outstanding debt

o Age of your accounts

• A good credit report can open many doors for you, but a bad report will be a major obstacle in realizing

your future goals and aspirations.

• We'll discuss who keeps these reports, what they contain, how they are used, and what you should do to

ensure your report is accurate.

Credit Bureaus:

• Most credit reports are compiled by three major companies: Equifax; Experian; and TransUnion. The Fair

Credit Reporting Act (FCRA) requires each of these bureaus to provide you with a free copy of your credit

report, at your request, once every 12 months.

• The contact information for these companies can be found on the PFMC website.

Note: These companies are competitors, so they do not share their information, and therefore, the

information in your report with each of them may be different.

SHOW SLIDE 6-19: Report Components


Components of a credit report:

• Your credit report has four major components:

• Personal Information. Your name, address, former address, SSN, and estimated date of birth. You may

not want a great deal of personal information to go on file, however, if you refuse to provide it, a creditor can

deny you credit.

• Credit History. This section contains the history of all your accounts of which they have information. It

shows all of your credit information including the type of account, the date it was open, your payment history,

and the current status of the account. This information is used in evaluation of your creditworthiness. It will

also will contain your history of late or missed payments - definite adverse entries. You should ensure all

closed accounts are reflected as such, because potential credit, as well as actual debts, may be used by the

lender to compute your debt-to-income ratio. Be sure the report shows that such accounts were closed at

your request; otherwise, it is left open to question that it might have been closed for cause, which means

more potential adverse information.

• Public Records. This section will contain any judgments that have been entered against you. Any

bankruptcy information will remain on your report for 10 years from the date of filing. Unpaid tax liens may

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be reported depending on your state of residence. Paid tax liens may be reported for 7 years from date of

payment. Other judgments such as foreclosure, criminal convictions, and even some driving infractions may

be found on your credit report. You may be required to explain public record items to potential creditors.

• Inquiries. This section contains a record of all who have requested and been provided with copies of your

report. It is especially useful if correcting erroneous information - the credit bureau is required by law to

provide corrections to all who received your report within the past six months.

SHOW SLIDE 6-20: Credit Scoring System


Scoring System:

• Credit Scoring System.

• Creditors use the credit scoring system to determine whether or not you are a good credit risk. Points are

awarded for each factor that predicts reliability for debt repayment. Each of the 3 major credit bureaus

(Equifax, Experian & Trans Union) uses a different variation of the Classic FICO (Fair, Isaacs, and

Company) formula.

Note: The differences between each of the credit bureaus' credit scores and the Classic FICO formula are

miniscule, and they all basically share the same formula/algorithm. One difference between FICO and

Beacon scores is the scale. Classic FICO runs from 300–850, while Beacon Credit Score runs from

350–850. For this reason, your Equifax Beacon score will not be the same as your score from Experian or

Trans Union.

Credit Scores:

• The three credit bureaus charge for your credit score if you request it more than once per calendar year.

There are other places where you can receive your credit score free of charge at any time.

• FINRA Investor Education Foundation. Accessed through your local Army Community Service Center, this

not-for-profit foundation has a website (SaveAndInvest.org) that provides financial tools and information for

military families. There is a free credit score and analysis tool that enables you and your spouse to get your

FREE FICO score. To use the tool, your first step is to contact a military financial educator (sometimes

called a “PFM”) at your nearest Army Community Service or ACS equivalent). Your Financial Educator or

PFM can assist you in obtaining your free credit score. See more at:

http://www.saveandinvest.org/ControlDebt/CreditScore/P124370#sthash.EpdvSNkr.dpuf

• Credit Karma at creditkarma.com. Most “free credit score” companies, when you sign up for their service,

asks for your credit card, and charge you after a month. After going back to read the fine print, you’ll notice

that free was really only free for the first month, and if you didn’t cancel your subscription, you would be

charged monthly, hence why they asked for your credit card in the first place. Credit Karma does not ask for

your credit card, but you do have to provide your SSN, in order for them to pull up your credit report. You will

have to supply your SSN with all the credit bureaus, and all other credit score sites or credit providers out

there any time you apply for credit. Once you provide specific information, Credit Karma will provide you with

a completely free look at any collections, credit card utilizations, and late payments listed on your credit

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http://www.saveandinvest.org/ControlDebt/CreditScore/P124370#sthash.EpdvSNkr.dpuf

report. This information is pulled from information from both TransUnion and Equifax.

• Credit.com. Like, Credit Karma, Credit.com does not ask for a credit card. They ask basically the same

questions as Credit Karma and you receive your basic data in a snapshot that provides information on all of

your accounts, as well as credit scores from both Experian and a Vantage Score 3.0. Credit.com also show

you on a scale where your score falls compared to the state you reside in, as well as the national average.

You will also receive a letter grade for each of the categories that make up your score (Payment History

35%, Debt Usage 30%, Credit Age 15%, Account Mix 10%, and Credit Inquiries 10%). They also provide

expert advice in the way of articles geared towards you, based on your credit profile and action plan.

SHOW SLIDE 6-21: What Is A Good Credit Score?


Good Credit Score:

• While there are many credit-scoring systems, it is generally accepted that any score above 720 is

considered a GOOD credit score. To help you visualize this, here’s a rating scale

Note: There are no official brackets and this is just an approximation of a continuous range:

Credit Score:

• What are you eligible for?

o 751+ Excellent credit score. You should qualify for the best interest rate and loan terms.

o 720 – 750 Good credit score. There won’t be any problem in getting a loan at a good interest rate.

o 641 – 719 Average credit score. You may qualify for the loan but not at a good interest rate.

o 581 – 640 Poor credit score. You will have a tough time getting a loan or a credit card.

o Below 580 Bad credit score. It’s doubtful that you will qualify for a loan or a credit card.

• Read more: http://www.moolanomy.com/1805/credit-score-rating-and-scale/#ixzz2TxELz5uZ

SHOW SLIDE 6-22: Who Uses Credit Reports?


How Credit Reports Are Used:

• Your credit report is pulled and used for a variety of different reasons, including:

o Potential employers accessing your credit report as a character check.

o Potential landlords,

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http://www.moolanomy.com/1805/credit-score-rating-and-scale/#ixzz2TxELz5uZ

o Mortgage companies,

o Banks and other lending institutions,

o Merchants offering charge accounts and credit cards

• Your credit report is used by companies to determine how creditworthy you are. Additionally, Insurance

agents have also begun using credit reports to determine whether or not you are a good risk for their

insurance policies.

SHOW SLIDE 6-23: Ensuring Accurate Reports


Ensuring Accurate Reports:

• Approximately 20% of all credit reports contain inaccurate information. It's up to you to ensure erroneous

information is corrected, or that the most updated information is included in your file.

• Follow these steps to ensure your credit report is accurate:

1. Get Copies. The first step you must take is to get copies of all your credit reports. As discussed earlier,

The Fair Credit Reporting Act (FCRA) requires each of the 3 nationwide credit reporting companies —

Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request,

once every 12 months. The three nationwide credit-reporting companies have a central website, a toll-free

telephone number, and a mailing address through which you can order your free annual report. To order,

visit annualcreditreport.com, call 1-877-322-8228, or go to http://www.consumer.ftc.gov/articles/0155-free-

credit-reports and download the free Annual Credit Report Request Form and mail it to: Annual Credit

Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Note: Do not contact the three nationwide credit-reporting companies individually. They are providing free

annual credit reports only by requests submitted through the contact information provided. You may order

your reports from each of the three nationwide credit-reporting companies at the same time, or you can order

your report from each of the companies’ one at a time.

2. Disputed Items. If you dispute an item on your report, by law, the credit bureau must investigate it, and if

it is found to be incorrect, they must correct it. If they do not complete the investigation within 30 days, they

must drop the disputed item from your report.

3. Your version. If the information in your report is accurate, you have the right to have a statement of your

version of what happened included in your report. The credit bureau must send a copy of it to anyone who

received a copy of your report in the past 6 months. If the information is confirmed, however, it becomes

very difficult to remove;

Note: There are no quick "fixes" available for a bad credit record, credit repair takes time!

SHOW SLIDE 6-24: Consumer Credit Protection Laws

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http://www.consumer.ftc.gov/articles/0155-free-credit-reports

http://www.consumer.ftc.gov/articles/0155-free-credit-reports


• Consumer Credit Protection Laws

1. Truth in Lending Act. The Truth in Lending Act of 1968 and its amendments ensures customers are given

information about the cost of the credit for which they are applying. Lenders must disclose the cost of any

loan expressed both as the annual percentage rate of interest and as the total finance charge in dollars. It

applies to single purchases made on credit, as well as purchases by credit cards. Additionally, the Act

allows three business days during which you may cancel a transaction that used your home as security, or

that took place at your residence (door-to-door sales). You must do this in writing. This does not apply to

all purchases, however. For example, there is no cooling off period on car purchases. This law also limits

your liability for lost or stolen credit cards to $50 per account, as long as you notify the issuing company.

Contact them immediately to report your lost or stolen card, and make sure to follow up in writing.

2. Fair Credit Billing Act. This act protects you from billing errors and allows you to dispute charges in writing

within 60 days. You may also withhold payment for items purchased on your credit card, which do not meet

the quality standards the seller promised if your good faith try to remedy with the seller fails. You should

review your statement each month to be sure you recognize all charges.

3. Fair Credit Reporting Act. This act provides for your right to know what is on your credit record and

provides for the dispute and deletion of inaccurate information. The credit bureau must first request

confirmation from the business that originally made the disputed entry if unable to get confirmation, the

information is supposed to be removed, as the consumer has the benefit of doubt. This act also allows you

a free credit report if denied credit, and limits the amount of time information stays on your credit file.

Note: Remember, this act also requires each of the nationwide credit reporting companies — Equifax,

Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once

every 12 months.

4. Fair Debt Collection Practices Act. This act determines the means by which debt collectors can contact

you. Debt collectors can not contact you before 0800 or after 2100 your local time. You are also protected

from unfair practices from third party debt collectors. They cannot be abusive, harass you, tell anyone else

about your debt, or threaten you. You may also write to debt collectors and tell them to stop contacting you.

If they do not comply, you can sue them for breaking this law.

SHOW SLIDE 6-25: Consumer Credit Protection Laws (Cont.)


• Consumer Credit Protection Laws (Cont.)

5. Equal Credit Opportunity Act. This act provides allows the granting of credit regardless of race, gender,

marital status, age, religion, color, national origin or RECEIPT OF PUBLIC ASSISTANCE.

6. Fair Credit and Charge Card Disclosure Act. This act requires that credit card solicitations inform you of

their total cost. This includes APR; grace period, annual fee, finance charge, and other fees. They must also

supply their method for calculating the balance.

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7. Credit Card Act. The Credit CARD Act (2009) provides numerous consumer credit protections. For

example, your credit card company generally cannot increase the rate on your existing balance, and must

tell you forty-five days before increasing the rate for new transactions. The Act also places new limits on

fees and rate increases, and requires consistency in payment dates and times.

8. State Protection. Federal laws do not regulate the interest rates lenders may charge you! However, some

states may provide additional protection in credit matters. Unfortunately, not many states have credit or

consumer protection laws. For example, in some states, there is no effective cap on interest rates. This is

why it is extremely important that you read any credit applications and agreements carefully!!

SHOW SLIDE 6-26: Dealing With Creditors


Dealing With Creditors:

• Even though you are entitled to the legal protections we just discussed, there are both right ways and

wrong ways to deal with creditors. If you should find yourself in financial difficulty, here are some positive

actions you can take:

1. Stay in contact. Keep an open line of communication with your creditors, and let them know if there is a

problem. If a friend owed you money and was avoiding you or not returning your phone calls, you would

think he or she was trying to “stiff” you. Businesses are the same way. Don’t avoid the situation, just talk to

them. Also, if you change your address or phone number, make sure to contact your creditors right away, so

no attempts at communication fall through the cracks.

2. Be honest. Life doesn’t always go according to plan. Being upfront and honest with your creditors.

3. Have a plan. Approach your creditors with a plan to of action to resolve your debt. Be careful of promising

more than you can deliver.

SHOW SLIDE 6-27: Situations to Avoid


Situations to Avoid:

• As stated, there are both right and wrong ways to deal with your creditors. Here are some situations you

should avoid:

1. Credit clinics. These companies charge up-front fees promising to “clean up your credit report” fast and

get you out of debt. They cannot do anything for you that you cannot do for yourself. Charging upfront fees

for debt counseling is illegal in a number of states.

2. Debt consolidation loans. Debt consolidation loans are not always bad, but they only a temporary fix, at

best. A debt consolidation loan will never work, unless you exhibit a change in your spending behavior. A

study by American Express indicated 78% of all consumers who take out bill consolidation loans have a

higher debt-to-income ratio 18 months later than when they first took out the loan.

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3. Bankruptcy. Declaring bankruptcy does not allow you to walk away from all past problems. This is a last

resort option that may have lasting consequences. It can severely impact your ability to get credit in the

future, in addition to having potentially negative career implications.

SHOW SLIDE 6-28: Credit Repair Scams


Credit Repair Scams:

• Credit Repair clinics make many offers to miraculously erase negative information from your credit files.

• Not true. Only time, a deliberate effort, and a personal debt repayment plan will improve your credit.

SHOW SLIDE 6-29: Credit Repair Crime


Credit Repair Crime:

• Some credit repair schemes promise you that they can "hide" bad credit by helping you to establish a new

credit identity.

• If you pay a fee for such a service, the company may direct you to apply for an Employer Identification

Number (EIN) from the Internal Revenue Service, and will tell you to use the EIN in place of your social

security number when you apply for credit.

• You may also be instructed to use a new mailing address. This practice, known as file segregation, is a

federal crime. You could face fines or even a prison sentence.

SHOW SLIDE 6-30: How to Establish Credit


• How to establish credit.

• Check your credit. If you haven't established credit, this advice may seem odd. However, children are

sometimes the prime target of identity theft. There have been instances where young adults go to apply for

credit for the first time, only to discover that their information has already been used by someone else to get

credit, oftentimes a close relative!

• Get your first credit reference. Your first credit reference will establish your credit history but it can "take

credit to get credit." That's why a secured credit card is often a popular way to get started. With a secured

card, you'll place a security deposit with the financial institution, and in turn, receive a card with a credit limit

that is usually equal to the deposit. Besides a secured card, a gas card or a department store card are

typically the easiest to get. Be wary of the interest rates on these cards, however, they can be high. Take the

time to shop around for the card that fits you best.

• Use it but don't abuse it. Use your new secured card to make purchases, but don't charge it up to its limit.

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Ideally, you want to use about 10% to 20% of your available credit in order to maintain a positive "debt-to-

available-credit ratio." That means that if you have a card with a $300 credit limit, you'll want to charge only

about $30 to $50 a month on the card.

• Get another card and round out your references. The best credit scores belong to individuals with a well-

rounded credit history that includes different types of loans.

• Monitor Credit report – Maintain your credit to make sure it remains accurate and at a good rating.

• Remember, you can get your free credit reports each year at www.AnnualCreditReport.com.

• You can also get a free credit score or approximation of your credit score at www.credit.com or

www.creditkharma.com.

SHOW SLIDE 6-31: How to Improve Your Credit


• How to Improve Your Credit.

• Pay your bills on time each month. Your payment history counts for about a third of your credit history, so

make sure you pay your bills on time. One late payment can mean a big drop in your credit score. Set up

online alerts or mark your calendar so you don't let a due date slip by. You can set up automatic payments

from your bank account to help you pay on time, but be sure you have enough money in your account to

avoid overdraft fees.

• Understand how your credit score is determined. During this lesson, we’ve discussed the factors that

determine your credit score. Use the knowledge you’ve gained to help understand your credit score, as well

as ways you can work to improve it.

• Learn the legal steps to take to improve your credit report. You can find information regarding disputing

errors on your credit report, tips on dealing with debt, and more by visiting The Federal Trade Commission at

https://www.ftc.gov/. www.credit.com also has information on how to dispute errors.

• Beware of credit-repair scams. Sometimes doing it yourself is the best way to repair your credit. The

Federal Trade Commission's “Credit Repair: How to Help Yourself” explains how you can improve your

creditworthiness and lists legitimate resources for low-cost or no-cost help.




• As a member of the military, there are several sources you can turn to for assistance to assist you in

properly managing credit.

• They are:

o Chain of Command

o Your PAC is always a good place to start.

o Army Community Service Centers. Your local ACS center may have a Financial Educator on staff to

provide personal financial information and counseling. They normally work closely with the PAC’s at the

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http://www.annualcreditreport.com/

http://www.credit.com/

http://www.creditkharma.com/

https://www.ftc.gov/

http://www.credit.com/

local commands.

o Legal Services can provide assistance in a dispute over a bill or contract. They strongly encourage

service members to come in with a copy of the contract before signing it when making any major purchase.

o Financial Institutions often have financial counselors available who can provide a range of services to

members, up to and including full-scale debt management programs.

o Army Emergency Relief provides no-cost financial counseling and emergency financial assistance.

SHOW SLIDE 6-33: Questions

Instructor’s Note: Ask students if they have any questions.



learning activity.

SHOW SLIDE 6-35: LSA 6 Check On Learning



Q1. True of False. A credit repair company can erase a poor credit

history.

A1. False




Q2. Name Five Warning Signs of Financial Trouble.

A2.

• Debt Consolidation Loans

• Using Credit for Basic Needs,

• Falling Behind on Payments

• At or Near Credit Limits

• Lack of Savings


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Q3. True of False. You will have lower monthly payments with a long-term

loan.

A3. True




Q4. True of False. If someone uses your lost or stolen credit card, you are

liable for no more than $50.

A4. True




Q5. True of False. If you pay a bill late, your creditor can report this

information to a credit bureau.

A5. True




Q6. Under the Truth in Lending Act, what is one thing a lender MUST

disclose to you when you apply for a loan?

A6. a. Annual Percentage Rate


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Summary:

• During the lesson we've talked about credit is something you will use

throughout your lifetime. It can be a valuable tool, or, it can be a source of

long lasting difficulty. The availability and over extension of credit has

contributed significantly to the rise in personal bankruptcy rates in the past

20 years.

• Wise use of credit can be a key element in achieving financial

independence, while misuse can be a ticket to financial ruin.

• To help you make wise credit decisions, we have discussed factors that

affect the cost of credit, appropriate and inappropriate uses of credit, and

warning signs of too much debt.

• We also discussed what credit reports are and steps you should take to

ensure yours is accurate and reflects favorably on your ability to manage

your finances.

• Lastly, we identified sources of help should you encounter problems

properly using credit.

Instructor’s Note: Prep to transition into LSA #7 titled, Review Consumer

Awareness.

TLO - LSA 7. Learning Step / Activity TLO - LSA 7. Review Consumer Awareness








SHOW SLIDE 7-1: Consumer Awareness

7. Learning Step / Activity 7: Review Consumer Awareness






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• Calculator

• Pencil

Introduction: Unfortunately, a large percentage of our population doesn't see anything wrong with

"exaggerated product claims," or high-pressure sales tactics. Young military members and their spouses are

common targets of frauds and cons. It is impossible to cover all of the frauds, cons, and rip-offs currently in

existence, and new scams are popping up every day. Gathering accurate statistics about the number of

frauds committed is also difficult, because some people are embarrassed to admit that they've been a victim.

• During this lesson we will cover some of the most common types of fraud, cons, and rip-offs, how

marketing and advertising play a part, and where you can go to receive assistance and file a complaint.

• We will also explore what identity theft is, and how you can protect yourself from becoming a target.

SHOW SLIDE 7-2: The Psychology of Advertising


Psychology of Advertising:

• To better understand how a person becomes susceptible to being scammed, you must first be able to

recognize the psychology being used on the consumer. One of the most prevalent areas psychological

tactics are used to scam consumers is in advertising.

• Let's look at a few ways that advertising and marketing can influence the decisions you make.

• Types of Advertising - The goal of advertising is to get you to buy a product or service, to buy more than

you planned to buy, to spend more than you intended to spend, and, if possible, to get you to buy something

that you did not want or need in the first place. There are several common types of advertising.

(1) Personalized - Designed to make the individual think that the salesperson or advertiser wants him or her,

personally, for a customer. May include 'personalized' junk mail or phone calls. Preys on the idea that we all

want to have friends, and here is one - as long as you buy their product.

(2) Association - Uses familiar people from the entertainment and sports industry to sell the product. The

idea is that you can associate with or relate to that person on a personal level if you buy the product they

endorse.

(3) Buzz Words - Words and phrases created to catch your attention and make you think the product is

somehow special or better than the competition's version. The idea is to make you want to get rid of the

other stuff and buy this one in order to have the newest, latest, best. This is often called "baiting a sale".

Examples include "Clearance," "Sale," "Closeout," and "Liquidation.“

(4) Fear - Part of the emotional appeal approach. Plays on your fear of rejection or loss if you don't use the

favored product. This often includes the idea of personal ruin if this product is not used or purchased.

(5) Berating (Put Down) - The goal is to convince you that something is wrong with you if you don't buy their

products.

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SHOW SLIDE 7-3: Defining Deception


Defining Deception:

• Now that you have a little knowledge about how people influence you, let's look at some of the techniques

they use. You've seen them everywhere -- people trying to convince you that you must have or need

something. There are a number of ways that they can convince you of those needs.

• Here are the most common types of misrepresentations.

o Fraud - Fraud is a deliberate deception. It is intentional and usually relies on a twisting of the facts. For

example, individuals who convince others they are someone they really aren’t, are frauds.

o Con - A con is similar to fraud except that the manipulator, or con artist, first wins the CONfidence of the

person being defrauded. They convince the unwitting person that they are a friend, and as such, they have

their best interests in mind.

o Rip-Off - Rip-off’s are unfair acts of exploitation, but they are not necessarily illegal. Rip-off’s take

advantage of areas where there are no consumer laws to provide protection.

• Remember, the bottom line for all of these scams is to separate you from your money.

SHOW SLIDE 7-4: The Scoop on Scams


Scoop on Scams:

• There are a number of ways unwitting people become targets of dishonest dealings.

• Here are some of the most common scams that you should be aware of.

• We will now discuss each of these scams in further detail.

SHOW SLIDE 7-5: Auto Repair Rip-Offs


Auto Repair Rip-Offs:

• Auto repair rip-offs consistently rank as the number one consumer complaint throughout the nation.

• Common dishonest practices you may see with auto repair:

o Misdiagnosing -- telling you, a major repair is needed when only a minor one will do.

o Installation of a lesser quality part than what you were charged for. Request to see your old part. A

"rebuilt" part should look new. A dirty or rusty part may have been "salvaged" from a junkyard for about 10%

of the cost of a rebuilt or refurbished part.

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• Be aware that most states have laws that require auto repair facilities to give you a written estimate of what

their work will cost. If they exceed the written estimate by more than 10% without your permission, you are

not required to pay.

SHOW SLIDE 7-6: Bait and Switch


Bait and Switch:

• In this ruse, stores advertise fabulous bargains just to get you in the door, and then try to sell you a more

expensive product.

• More often than not, the advertised item is not available for a number of reasons: there aren't any left. . .

you can't get delivery for six months, etc.

• If you encounter a "bait and switch", leave immediately.

Note: IF IT SEEMS TOO GOOD TO BE TRUE, IT PROBABLY IS.

SHOW SLIDE 7-7: Investment Schemes


Investment Schemes:

• Investment schemes promise high rates of return with minimal risk.

• The most commonly known investment scheme is the Ponzi, or Pyramid Scheme. This is when money

from new investors is used to provide a return to previous investors. The problem becomes when the money

owed to the investors is greater than the money that can be raised from new ones. These schemes always

eventually collapse.

• Promoters of investment schemes often operate a particular scam for a short time, quickly spend the

money they take in, then close down before they can be detected.

• In their sales pitch, they'll say that they have high-level financial connections; that they're privy to inside

information; that they'll guarantee the investment; or that they'll buy back the investment after a certain time.

• To close the deal, they often serve up phony statistics, misrepresent the significance of a current event, or

stress the unique quality of their offering.

• These schemes are a good investment for the promoters, but not for the participants.

SHOW SLIDE 7-8: Prize Promotions


Prize Promotions:

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• Have you ever surfed the net and found that while you were visiting various sites, blinking boxes suddenly

appear, congratulating you on winning a fabulous prize? Most times, you are presented the offer to buy the

“prize” for an attractive price, because you have been “specially selected” for this opportunity.

• If you think this sounds fishy, you’re right.

• The idea behind this particular scam is that the unsolicited email is actually sent to thousands, sometimes

even millions, of recipients at the same time.

• If you've won a cruise, it may actually be on a tugboat, or the hotel accommodations you've won are in a

shabby motel. Then, if you want something better, you may be required to pay an additional fee.

• Remember, if you buy into this scheme, you'll get what you pay for.

SHOW SLIDE 7-9: Title Loans


Title Loans:

• A ‘Car Title Loan’ is a short-term loan in which the borrower’s car title is used as collateral. The borrower

must be the lien holder (i.e. own the car outright). These loans are usually less than 30 days.

• In a title loan transaction, you keep your vehicle and drive it. The lender keeps your car’s title as security

and usually, a copy of your keys.

• Say for instance you need $1,000. If you take your vehicle title to a title loan officer, he'll give you a loan

for $1,000 at an enormous interest rate--using your car as collateral. Forget to make one payment and your

car will be immediately repossessed--even if it's the last payment you owe.

• The lender will sell it, and pocket whatever money they get. They are allowed to do this, because you gave

them your title and keys when you took out the loan.

• Stay away from these loans!!

SHOW SLIDE 7-10: Title Loan Example


Title Loan Example:

• Take a look at this example of the amount of interest you would pay on a $1,000.00 loan.

• As discussed earlier, most conventional loans factor in an individual’s entire financial picture that includes

their income, credit, and debt, to ensure they have the ability to afford the loan payments.

• Title loans, however, do not factor in the borrower’s ability to repay the loan.

Note: Avoid These!

SHOW SLIDE 7-11: Payday Loans


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Payday Loans:

• Next, we will talk about payday loans. Like title loans, they can be dangerous and may land you in greater

financial trouble than before you took out the loan in the first place!

o DON’T DO IT!

o DON’T EVEN THINK ABOUT IT!

o NOT NOW!

o NOT EVER!

o NOT UNDER ANY CIRCUMSTANCES!

SHOW SLIDE 7-12: What Is A Payday Loan?


What Are Payday Loans?

• Payday loans (also called post-dated check loans) are small loans lent at a high interest rate upon the

agreement that it will be repaid when the borrower receives their next paycheck.

• Most of these places have you write a post-dated check for collateral. The lender holds on to the check and

cashes it on the agreed upon date (next payday).

• The typical interest for a payday loan can be as much as 500%.

Note: The Truth in Lending Act we discussed in the last lesson requires payday lenders to disclose their

finance charges.

• However, these establishments still have a bad reputation for their predatory lending practices.

SHOW SLIDE 7-13: Facts about Payday Loans


Facts about Payday Loans:

• Here are some interesting statistics on Payday Loans

o The typical two-week payday loan has an annual interest rate ranging from 391 to 521 percent

o Since its inception in the 1990’s, the payday lending industry has established over 22,000 locations

which generate an estimated $27 billion in annual loan volume

o The typical payday borrower remains in payday loan debt for 212 days of the year

o Studies have shown that payday borrowers are more likely to have credit card delinquency, unpaid

medical bills, overdraft fees leading to closed bank accounts, and even bankruptcy

• As you can see it is easy to get trapped with these loans, so please, try to avoid them at all cost.

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SHOW SLIDE 7-14: Charity Fraud


Questionable Charities:

• At some point in time, you will receive solicitations asking for donations to what may seem like worthy

causes. The problem is, how do you distinguish between the ones that are for legitimate legitimate

charitable causes and the ones that are scams?

Keep in Mind:

• Solicitors requesting donations for law enforcement or emergency services groups cannot claim that you

may receive reduced services if you fail to donate.

• Donating to a law enforcement "association" will NOT save you a possible ticket.

• Just because the charity may have the words “military families” or “veterans” in their name, doesn’t

necessarily mean that these service members or their families will benefit from the money you are donating.

• Copycat organizations may use a name similar to a well-known charity in an effort to confuse you into

giving. Beware!

• If you are sincerely interested in donating to a particular cause, request that the information be mailed to

you.

• That way, you'll have it in writing and can keep a personal record of your donation.

SHOW SLIDE 7-15: Tips on Internet Shopping


Internet Shopping:

• The Internet provides consumers with a wide range of information, as well as provides sellers with a new

way to promote their products "Cyber shopping," "banking online," and other conveniences allows an

increasing number of consumers to do business by computer. But crooks also recognize the potential of

cyberspace. The same scams that have been conducted by mail or phone can now be found on the Internet,

and new technologies are resulting in new ways to commit crimes against consumers. Let's look at a few

ways to protect yourself.

• Do business with companies you know and trust. Be sure you know who the company is and where it is

physically located. Businesses operating in cyberspace may be in another part of the country or in another

part of the world. Resolving problems can be more complicated in long-distance or cross-border

transactions. You can also ask consumer agencies and the Better Business Bureau about the company's

complaint record. But keep in mind that fraudulent companies can appear and disappear quickly, especially

in cyberspace.

• Understand the offer. Look carefully at the information about the products or services the company is

offering, and ask for more information, if needed. A legitimate company will be glad to provide it; a fraudulent

marketer won't. Be sure you know what is being sold, the total price, the delivery date, the return and

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cancellation policy, and the terms of any guaranty. Print out the information so that you have documentation

if you need it.

• Be careful with financial or other personal information. Don't provide bank account numbers, credit card

numbers, social security number, or other personal information unless you know the company is legitimate,

the site is secure, and the information is necessary for the transaction. Even with partial information, con

artists can make unauthorized charges, deduct money from your account, and impersonate you to get credit

in your name.

• Take your time to decide. While there may be time limits for special offers, high-pressure sales tactics are

often danger signs of fraud.

• Be aware that there are differences between private sales and sales by a business. All sorts of goods and

services are sold or traded by individuals through unsolicited e-mails, newsgroup postings, chat room

discussions, web auctions and online classified advertisements. While most people are honest, your legal

rights against the seller may not be the same as with a business, and you could have difficulty pursuing your

complaint if merchandise is misrepresented, defective or never delivered.

• You may be better off paying by credit card than with a check, cash or money order. When you use your

credit card for a purchase and there is a problem, you have the right to notify your card issuer that you are

disputing the charge, and you don't have to pay it while your dispute is being investigated.

• Don't judge reliability by how nice or flashy a website may seem. Anyone can create a website; it's

relatively easy and inexpensive. Know that people in cyberspace may not always be what they seem.

Someone sharing a "friendly" tip about a money-making scheme or great bargain may actually have a piece

of the action. "Friendly" people can turn out to be crooks!

SHOW SLIDE 7-16: Identity Theft


Identity Theft:

• Whenever you use a credit card, write a check, or give your name and address, you are sharing your

personal information –information that can be used by identity thieves.

• In this part of the lesson, we will learn how to protect yourself from identity theft.

SHOW SLIDE 7-17: Identity Theft – Facts


Identity Theft - Facts:

• A Billion records leaked. According to IBM, more than one billion records containing personally identifiable

information were leaked in 2014 alone. An identity thief only needs a few key data points like the ones found

in many data breaches to tap into your financial life.

• There Is No Anonymity. You can do everything right and still get “got.” The fraudsters out there mining the

veins of personal data for financial gain are good at what they do. However, if you assume you are going to

be a victim, then take proactive steps – including monitoring your bank and credit accounts regularly for

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signs of fraud – in many cases you can have a head start when it actually happens. (Keeping a tight rein on

your social media posts and making them private can also give fraudsters less access to you.)

• Your Medical History Can Be Compromised. With more than 2.32 million victims thus far — 500,000 last

year alone — medical identity theft is a crime on the rise. It can cause medical histories to be changed and

the use of benefits fraudulently by others, which can bar a victim from getting necessary medical treatments.

Unlike credit card fraud where liability is often zero, a recent study by the Medical Identity Theft Alliance

found that more than 60% of medical fraud victims had to pay an average of $13,500 to resolve the crime

committed against them. Your best bet is to check every medical statement that comes in, making sure the

treatments listed on your Explanation of Benefits (EOB) summary sent out by your insurer matches the care

you’ve received.

• Your Tax Refund Is Under Attack. Tax-related identity theft is a big-money crime, and the statistics prove it.

The IRS blocked 19 million suspicious tax returns last year, stopping more than $63 billion in fraudulent

refunds, Even so, a whopping $5.8 billion in tax refunds were paid out to fraudsters. In 2012, the Treasury

Inspector General for Tax Administration projected that fraudsters would net $26 billion by year 2017.

• It’s Becoming More Common For The Ones Stealing Your Identity To Be Those Closest To You. Studies

have shown that it’s becoming more common for the ones stealing your identity to be those closest to you.

One study found 32% of identity theft victims discovered a family member or relative was responsible for

stealing their identity. That same study found 18% were victimized by a friend, neighbor or in-home

employee.

SHOW SLIDE 7-18: Identity Theft - How?


Identity Theft - How:

• No one can steal your identity without some amount of personal information.

• Here are a few ways someone can get their hands on your personal information:

o A stolen wallet or purse,

o Bought from "inside sources,"

o Going "dumpster diving“, obtaining it from bills and receipts carelessly deposited in your garbage

o Stealing or re-directing your mail.

SHOW SLIDE 7-19: Identity Theft - What?


Identity Theft - What:

• Armed with enough information, a crook can open a bank account in your name and write bad checks on

it.

• They can use your credit card, or apply for a new card in your name.

• If they have diverted your bank statements, you may not be aware of what is happening to you until it is

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too late.

• They could even obtain a driver’s license in your name.

SHOW SLIDE 7-20: Preventing Identity Theft


Note: Animated Slide

• Click and open hyperlink on the blank screen.

• Time of Video: 01 minutes 25 seconds

• Play video and prepare discussion.

• Preventing Identity Theft

(1) One way to protect yourself from identity theft is to minimize personal information, credit cards carried.

• Use a cross-cut shredder to dispose of receipts, copies of credit applications, insurance forms, checks,

bank statements, expired charge cards, and any credit offers you get in the mail prior to discarding.

• Use strong passwords for all of your online accounts. Use at least eight characters, alpha numeric,

symbols, and upper/lower case.

(4) Read credit reports annually by going to Annualcreditreport.com for a free credit report.

SHOW SLIDE 7-21: Your Identity Stolen


• What to do if your identity is stolen.

• Contact the fraud department of one of the three major credit bureaus. The company you call must tell the

other companies about your fraud alert. An initial fraud alert can make it harder for an identity thief to open

more accounts in your name. When you have an alert on your report, a business must verify your identity

before it issues credit in your name, so it may try to contact you. Be sure the credit reporting companies

have your current contact information so they can get in touch with you. The initial alert stays on your report

for 90 days. It allows you to order 1 free copy of your credit report from each of the 3 credit reporting

companies. Remember that a credit report details all of your financial transactions for approximately seven

years and it can give you some indication of how much damage to your credit has been done.

• Contact your creditors, even those that have not been opened by you. Follow up with a letter.

• File a report with your local police department. Keep a copy in case your creditors need proof of the crime.

• As an identity theft victim, you have protections under federal law for ATM or debit card transactions.

Federal law also limits your liability for the unauthorized electronic transfer of funds that result from identity

theft. It’s best to act as soon as you discover a withdrawal or purchase you didn’t make or authorize. Many

card issuers have voluntarily agreed that an account holder will not owe more than $50 for transactions

made with a lost or stolen ATM or debit card. However, under the law, the amount you can lose depends on

how quickly you report the loss. If you don’t report within 60 days of the day your institution sent you the

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account statement showing the unauthorized withdrawals, you could lose all the money an identity thief took

from your account.

• An identity thief may steal your paper checks, misuse the account number from the bottom of your checks,

or open a new account in your name. If this happens, contact your bank or financial institution and ask them

to close the account as soon as possible. Federal law doesn’t limit your loss if a thief forges your signature

on your checks or uses your account number to buy something by phone, but most states hold banks

responsible for losses from those fraudulent transactions. However, banks expect their customers to take

reasonable care of their accounts. That means you might be responsible for a loss if you know about a

problem but don’t report it to your bank quickly.

• Your liability for credit card charges that you didn’t authorize is limited to $50 per card. To dispute

fraudulent charges, contact the credit card issuer within 60 days of the day the credit card issuer sends you

the bill showing the fraudulent charges. What if an identity thief changed the address on your account and

you don’t get your statement? You are responsible for keeping track of your statements. If your statement

doesn’t arrive on time, contact your credit card company.

• If you believe someone filed for bankruptcy in your name, contact the U.S. Trustee in the region where the

bankruptcy was filed. The U.S. Trustee Program refers cases of suspected bankruptcy fraud to the United

States Attorneys for possible investigation and prosecution. The U.S. Trustee can’t provide you with legal

help, so you may need to hire an attorney.

SHOW SLIDE 7-22: Protect Yourself


How to protect yourself:

• There are several things you can do to protect yourself from Identity Theft.

• Be a Skeptic. No one is going to give something for nothing. If somebody has a business proposition to

make thousands of dollars in your spare time, they aren't going to be selling it in a newspaper ad for $50.

• Do Research. Find out how long the company has been in business and research its past successes and

failures. Check out the person or business your dealing with. Call the Better Business Bureau or a research

the company at the local library or on the Internet.

• Get it in writing. There's an old quote that says, "A verbal promise isn't worth the paper it's written on." If

you don't have it in writing, it is your word against the salespersons.

• Use caution. Be leery when dealing with unknown businesses that are located out of state, use P.O. Box

addresses, and when buying over the Internet. It can be very difficult and expensive to recover your money

if the business is hard to locate and fraudulent companies know this. If you need to speak with a person

directly, you may be out of luck.

• Think before you buy. Analyze your needs and wants before you buy. Nothing is a bargain if you didn't

need it in the first place.

• Save your receipts. Keep your receipts and take prompt action if the product isn't what you want or doesn't

live up to advertising or the salesperson's claims.

• Remember that nothing is really free. Companies can't stay in business if they give away their

merchandise. There will ALWAYS be a hidden cost or ulterior motive.

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learning activity.




Q1. When should you consider getting a payday loan?

A1. Answer: d. You should never consider a payday loan.




Q2. True or False. A company that creates a connection between a

celebrity and a product uses ‘association’ in their advertising.

A2. Answer: True




Q3. What type of advertising presents “just the facts?”

A3. Answer: b. Informative




Q4. What is the first step you should take when your identity has been

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stolen?

A4. Answer: c. place a fraud alert with the credit bureaus




Q5. What does a criminal need to steal your identity?

A5. Answer: b. Your social security number




Q6. What is the best way to successfully wipe out excessive debt?

A6. Answer: b. Time



Summary:

During this lesson we've briefly touched over on the following

subjects/topics;

• The Psychology of Advertising

• Deception

• Scams

• Rip-Offs

• Bait and Switch

• Investment Schemes

• Title and Payday Loans

• Charity Fraud

• Identity Theft

• Protecting Yourself

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• Please inquire assistance whenever possible on any of the subjects

mentioned to the listed sources displayed on the screen for further and

more in depth information and guidance.


• In the area of consumer awareness, as is the case in most other topics

we've covered, you are not alone. Several of the sources of assistance

shown on this slide are available only to you, the military member.

• More specific information on how to contact each of these sources is

included in your handouts. Remember, both spouses are legally and

financially liable for debt.

Instructor’s Note: Prep to transition into LSA #8 titled, Identify Car Buying.

TLO - LSA 8. Learning Step / Activity TLO - LSA 8. Assess the Car Buying Process








SHOW SLIDE 8-1: Car Buying

8. Learning Step / Activity 8: Assess the Car Buying Process






• Calculator

• Pencil

SHOW SLIDE 8-2: Do Your Research


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• Many people begin the car-buying process by visiting a dealership, but this should be one of the last things

they do.

• Unfortunately, for the average consumer, the process often ends right there, with the purchase of a vehicle

at too high a price.

• Dealers will ask about financing and trade-ins before offering a bottom-line price. They will then use this

information to calculate their profits to your disadvantage.

• You can save yourself hundreds, if not thousands, of dollars on your next purchase by doing some

homework BEFORE you step on the lot.

• Doing your research puts YOU in control of the buying process. Let's look at some areas that warrant

attention before you set out on your journey.

SHOW SLIDE 8-3: Steps to Successful Purchases


• The following steps can help ensure that you are satisfied with your purchase.

o Determine how much you can afford. Refer to your spending plan.

o Determine the type of vehicle you want to buy that fits into your budget.

o Determine where you will buy the vehicle.

SHOW SLIDE 8-4: How Much Can You Afford?


How Much Can You Afford:

• Determine what you can reasonably pay, and then select a car and options that fall within that range.

Four factors should be considered:

• Total Cost. Shopping for a vehicle based on what you want to spend each month is one of the most

common errors consumers make. You risk paying too much for the vehicle when using this logic.

• Down Payment The more you put down, the less you have to finance. This will lower both your monthly

payments and total cost.

• Monthly Costs. Face Reality! You won’t enjoy your car very much if you don’t have enough money to put

gas in it. What will your monthly expenses be? We’ll talk about how much you should plan on spending for

monthly costs in a moment.

• Insurance Costs. This cost is considerable for Soldiers at your age. Shortly, we’ll look at a slide that

provides an example of what your insurance costs could be. Be sure to include an insurance estimate in

your budget when determining how much you can pay for a car payment.

SHOW SLIDE 8-5: Monthly Costs

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Monthly Costs:

• Financial advisors suggest keeping total car expenses to no more than 25% of your net (after tax) income.

• This includes car payments plus expenses, such as:

o Insurance

o Maintenance

o Operating costs (fuel, oil, etc.)

• As a general guide, you can use 15% of your net income for the car payment and 10% for associated

costs.

• You should always compute what your debt-to-income ratio would be with any loan you are contemplating.

Most financial institutions won't grant you a loan that has a high potential to get you in trouble. Beware,

however, that some dealers might do just that. Borrowing from a relative can only worsen your plight. It is

always better to live within your means.

SHOW SLIDE 8-6: Automobile Insurance Costs


Insurance Costs:

• As you can see by this slide, auto insurance can be a huge cost when purchasing a car.

• It is imperative that you add these costs when calculating your monthly payments.

• Otherwise, you might find yourself overextended.

SHOW SLIDE 8-7: Selecting a Car


Selecting a Car:

• What type of car should you consider? The vehicle you purchase must strike the right balance between

what you want, what you need, and what you can afford. Everyone has different preferences.

Factors to consider include:

• Size – (Compact, Sedan, Coupe, etc.)

• Manual or Automatic Transmission

• 2-, 4-, or all-wheel drive

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• Use (family, recreation, commuting)

• Style

• Safety

• Ownership and Operating Costs.

• Performance vs. Practicality?

SHOW SLIDE 8-8: New or Used?


New or Used:

• Once you have made choices about the type and style of car you would like to purchase, you have another

choice that will significantly affect the cost of ownership – should you purchase a new car or a used one.

• Both choices have positive and negative aspects. There are no absolute answers to the question of new

vs. used.

• You might consider "splitting the difference" with a "Program Car" that was a lease or rental unit and still

has a good part of the new car warranty remaining.

SHOW SLIDE 8-9: New Car Considerations


New Car Considerations:

• Cost - more than a used car of same make and model.

• Mechanical problems - likely fewer than a used car.

• Depreciation - The value of a new car diminishes rapidly following its purchase, anywhere from 10% to

40% in the first year. To get the full value of a new car, many consumers plan on owning it for several years

(four, five, or more).

• Warranties - New cars usually come with a 3 yr./36,000 mile warranty, which can be extended if desired,

but at a significant cost.

SHOW SLIDE 8-10: Used Car Considerations


Used Car Considerations:

• Cost - Often less than a new car.

• Mechanical Problems - Likely to have more than a new car. Repair costs can significantly increase the cost

of owning and operating a car.

• Depreciation - Usually less than with a new car, because much of its depreciation may have already

occurred.

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• Warranties - May or may not have any remaining. Service contracts will add significantly to the cost of the

car.

SHOW SLIDE 8-11: Where Should You Buy?


Where Should You Buy:

• Car buyers should research a minimum of three potential sellers before deciding on where to purchase

their car.

• There are no absolute guidelines to follow when selecting a dealer, a salesperson, or an individual from

whom to buy a car.

• If you take your time and do your homework, you should get a fair deal no matter where you buy.

• If you're looking for a new car, you'll have to go to a dealer eventually.

SHOW SLIDE 8-12: Evaluating Dealers


Evaluating Dealers:

• Here are some things to consider when evaluating dealerships:

• Years in business: Although being in business for a long time does not necessarily mean the dealer is

straightforward, the worst dealers (in terms of how buyers are treated) seem to go out of business fairly

quickly.

• Complaints: Check with the Office of Consumer Affairs of the (state) Attorney General, the Better Business

Bureau, and any professional associations to which the dealer belongs to, for any complaints filed against

them.

• Salesperson and mechanics: How long have they been with the company? Are the mechanics certified by

an accredited agency, such as ASE (Automotive Service Excellence)? Don't be reluctant to ask questions.

• References - Senior enlisted and some of your contemporaries that have been assigned to your duty

station for a while may have some recommendations. You can probably trust these references, but be leery

of references volunteered by a dealer.

• Professional memberships - Membership in the Better Business Bureau, National Automobile Dealers

Association, or National Independent Automobile Dealers Association doesn't guarantee you a fair deal. It

does, however, give you some reassurance that there are avenues for you to address problems that may

arise that cannot be resolved with the dealership.

SHOW SLIDE 8-13: Fair Purchase Price


Fair Purchase Price:

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• Auto dealers have a right to make a reasonable profit on the sale of a car. What constitutes a reasonable

profit?

• To know this you must know what fair price is.

• Fair Purchase Price – The price you should pay for a new car. This price usually falls in the middle of Fair

Market Range.

• Fair Market Range – The range of prices that Kelley Blue Book estimates most people will pay for a

specific vehicle type this week.

• This is determined by considering:

o Recent Transactions

o Supply & Demand

o Market Changes

SHOW SLIDE 8-14: Information Sources


Information Sources:

• All pricing components, including base and option costs at invoice, Manufacturer's Suggested Retail Price

(MSRP), and destination charges, are available from a variety of resources.

• If you price your vehicle at invoice, subtract any dealer holdback or incentives, and add a 3-5% profit, you

will have a good price goal for your vehicle. When working with a dealer who provides you with pricing

information, make sure you know the source of the pricing - it could be biased. Your best bet will be to do

price research on your own from sources you know are reliable. Some sources include:

• Public Libraries - One of the very best sources of information on car pricing is the public library. Most Army

bases have libraries as well.

• Kelley Blue Book - Lists suggested retail and loan values for specific makes and models of used cars. This

is a guideline, not a law. Factors such as mileage, options, and physical condition of the car will affect its

value. This will give a good ballpark figure. It can be found on the internet at www.kbb.com.

• IntelliChoice Car Cost Guides - Besides the dealer cost and sticker prices, this lists items such as resale

value, economic value, maintenance, costs, etc. The site www.cars.com uses IntelliChoice pricing.

• Consumer Reports/Consumer Union Price Service - Each April issue is devoted to cars and pricing, and

they offer a low cost service to provide the dealer cost for particular makes, models, and options.

• Edmund's Car Prices Buyer's Guide - Available in hard copy as well as at their internet site. Similar to

IntelliChoice guide.

• Car-Buying Services. Many organizations offer their members buying services, in which the consumer

indicates the make, model, year and exact options they want and the organization does the shopping for

them.

SHOW SLIDE 8-15: Purchase Negotiations

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http://www.kbb.com/

http://www.cars.com/


Purchase Negotiations:

• Salespeople are trained in the art of selling. In the majority of instances, their pay includes a commission

that is based on the sale price of the vehicle. This means they have a vested interested in getting as high a

price as possible for the car.

• Your goal is to get as much car as you can for as little as you can. Determining a price, trade-in value, and

financing options are three separate events.

• Don’t offer what you know about your car before finding out what the price will be for the car, it could affect

how much you’ll pay.

• We will now discuss some negotiating tips that will help you hone your skills.

SHOW SLIDE 8-16: Negotiating Tips


Negotiating Tips:

• Information - The salesperson's goal is to get as much personal information about you as possible. With

your name, military status, and particularly your social security number, a car dealer can determine what you

might pay for a car and institute a credit history check (without your knowledge or permission!). You need

only give them your first name.

• Trade-Ins - The dealer will try to combine purchase price, financing, and your trade-in. You need to keep

them apart. Practice saying "That's not important right now." You will probably get more for your vehicle if

you are willing to sell it yourself. This may be difficult if you owe more on the vehicle than it is worth, but in

that case, you shouldn't be buying a new car.

• Credit Check – There is no need for them to check credit until you have decided to buy and borrow, and

you should know your credit status before you go into the dealership.

• Deposit - Don't advertise how you will pay for the car. Again, use the phrase "That's not important right

now." If they ask for a deposit, do not pay it. (Unless you are absolutely certain you will buy the car).

Research shows that people who put down a deposit are much more likely to buy, even if they prefer

something else! You’ll have to return if you change your mind, and may have trouble getting your money

back. If the car you were looking at is sold, they will find another for you to purchase, so don't feel pressured.

• Don’t like the car. One of the salesperson's goals is to get you to say you "like" the car. The sooner they

establish an emotional connection between you and the car, the more likely you are to buy it. Stay detached.

SHOW SLIDE 8-17: More Negotiating Tips


More Negotiating Tips:

• Discounts - If the salesperson offers a discount, ask if it will apply a week from now (in many cases, it will).

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If they don't bring up the subject, ask for one. Even the "one price/no haggle" dealers might agree to a

discount. You never know unless you ask.

• Shop Twins - Some models have identical twins on other car lots with different nameplates on them (for

example, the Chevrolet Blazer and GMC Jimmy). If a car you are interested in is one of them, be sure to

consider its twin and choose the one that gets you the best deal.

• Financing - Stating up front that you intend to pay cash could work against you. The dealership and the

salesperson make money when they find financing for you. If you tell the salesperson that you will use 100%

financing, they may give you a better deal on the sale because they can make up the profit on the back end.

This gives them an incentive to offer a discount. The best route, however, is to refuse to address financing at

all until you have negotiated a fair price.

• Options - Dealer-installed options are frequently available at other sources and are much cheaper than

buying through the dealer. Often, they are unnecessary (like rust proofing), cheaper if done yourself (like

fabric and paint protection) and can sometimes even void your warranty (like undercoating). If there are

already options on a car that you don't need, tell them to remove the options. Many times, they will just leave

them on and not charge you.

• Road Test - This is one of the most overlooked steps in buying a car (particularly a used car). When you

road test a car, ROAD TEST THE CAR! Drive it as closely as you can to your actual driving conditions: stop

and go traffic, long trips, highway acceleration, rough roads, etc. Turn the radio off and listen carefully. Try

every knob and switch. Leave the salesperson behind if possible. If not, ask him or her to be quiet, or even

sit in the back seat. If you are considering buying a used car, be sure to have a trusted independent

mechanic check it out before you make the purchase.

SHOW SLIDE 8-18: More Negotiating Tips (Cont.)


More Negotiating Tips: (Cont.)

• Extended Warranty - They are meant to take over when the manufacturer's warranty runs out. New cars

have excellent reliability, often making an extended warranty completely unnecessary. If you do decide to

purchase an extended warranty, shop around. This is something you can always do later.

• Best Time to Buy - There is absolutely no consensus among experts as to when is the best time to buy.

Therefore, buy only when you need a new vehicle and have done all of your homework.

• Walk Away - If you don't like what you hear, don't be shy about turning around and leaving. Remember: It's

your money and your decision!

• Don't Rush - Never buy the first thing you see. Sleep on such a major decision overnight. There will always

be others to choose from if "your car" is sold.

SHOW SLIDE 8-19: Tricks of the Trade


Tricks of the Trade:

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• Most salespeople are reasonable, honest individuals. Some, however, are not above techniques designed

to pressure you into making a commitment. Be aware of these tactics. Should you encounter them, ask to

see a different salesperson, or simply leave.

(1) Bait and Switch. The dealer advertises a certain car or model at an unbelievable low price. Problem is

that car has just been sold, but the salesperson will show you more expensive models.

(2) Mutt and Jeff. This is like "good cop, bad cop" where the salesperson is the good guy and the sales

manager is the bad guy. They may even stage fake arguments in front of you. Once you believe the

salesperson is on your side, you become an easy mark.

(3) Low-Balling. Here the salesperson quotes you a price well below the going market. This will get you to

return before you buy elsewhere, at which time the "bad old sales manager" just won't let the car go for the

low ball price given you (verbally, of course) by the salesperson.

(4) High-Balling. In this twist, the salesperson quotes you a price for your trade-in that is significantly above

fair market value. Of course, when you return to actually do the deal, that trade-in value won't be approved

by the "nasty old manager.“

(5) Put-to-Ride. Here the salesperson convinces you to take the car home for the night or even the weekend.

You'll have to leave your potential trade-in with the dealer (so you can't show it to other dealers). They want

you and your family to become attached to the car. Also, you may feel pressure to buy, less your friends

think you couldn't afford the "new" car you were driving.

(6) Padding. This involves adding charges for things such as undercoating, rust proofing, protection

packages, etc. to the contract before you sign it. Negotiate these out of the contract before you sign.

(7) Name-Dropping. Be leery if the salesperson uses the name of someone you know, or may know of, as a

third-party endorsement of the dealership.

(8) Ownership. Be aware of any comments the salesperson makes about "your" car. The idea is to get you

to believe that the car actually is, or at least should be "yours," and you join the salesperson to overcome

any obstacles to "rightful” ownership.

(9) Fixed-Price. If a dealership claims to offer only one firm fixed-price, you can bet the invoice has been

marked up considerably and/or there are a lot of unnecessary add-ons (padding). Turn to leave and see if

the price becomes "un-fixed" before you get to the door.

SHOW SLIDE 8-20: Financing


Financing:

• There are a number of places to finance your new car. Take your time and weigh out your options before

you decide. Rates could differ greatly depending on where you go.

o Credit Unions - A good place to look because of their nonprofit status and competitive terms. By law,

federal credit unions can only calculate interest using the "simple" method. Also, your credit union may have

an in-house buying service available. You must be a member and have fairly good credit.

o Banks - Usually the next best thing after a credit union, but still requires good credit.

o Auto Dealerships - Usually don't have the amount of cash on hand needed to finance a purchase, so

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they commonly have a relationship with a finance company for this purpose.

o Finance Companies - These vary widely in interest rates, and often cater to credit risks by charging

very high rates. Some are affiliated with a particular manufacturer and can have special rates as incentives.

SHOW SLIDE 8-21: Finance Charges


Finance Charges:

• You'll need to know some financing terms in order to understand your financing.

• First, let's talk about different types of interest.

• Interest is defined as money paid regularly at a particular rate for the use of money lent, or for delaying the

repayment of a debt.

• Interest is expressed as an Annual Percentage Rate (APR), but is computed in several different ways.

SHOW SLIDE 8-22: Add-On or Simple Interest?


Add-On or Simple Interest:

• Add-on interest - A method of calculating interest where the interest payable is determined at the beginning

of a loan and added to the principle (the money used to pay down the balance of a loan).

o This is an expensive option, since you pay interest on the entire loaned amount for the entire year, even

though you are reducing the balance you owe each month. For example, financing $1,000 for one year at

12% add-on interest would result in a finance charge of $120.00.

• Simple interest - Determined by multiplying the daily interest rate by the principal by the number of days

that elapse between.

o This is by far the most reasonable to the consumer. Credit unions are required by federal law to charge

simple interest only. For example, financing $1000 for one year at 12% simple interest would result in a

finance charge of $66.19.

SHOW SLIDE 8-23: USURY Laws


Usury Laws:

• Regulations governing the amount of interest that can be charged on a loan.

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o Some states have no usury laws

o Know what the limits are in your state and read your contract thoroughly before signing.

• As we discussed earlier, the Federal Truth-in-Lending law requires that the Annual Percentage Rate (APR)

be disclosed in the financing documents.

• Read the fine print and have legal review your contract for free.

SHOW SLIDE 8-24: Contracts


Contracts:

• Dealers make a profit from the sale of the car, as well as from extra fees, options, and services they add to

the contract. Carefully considering which options or services you need ahead of time will help you avoid any

unnecessary expenses. If you are not prepared, the first you will hear of some of these extra profit-makers

will be when negotiating the contract.

• Let's look at some practices regarding your contract to purchase a car.

o Read the Fine Print. Be sure you understand every word on the contract. Take it to your Legal Services

Office for an explanation before you sign. If the dealer refuses to let you take it with you before signing,

WALK AWAY; this is a sure sign something is not quite right!

o Federal Truth-in-Lending Disclosures. Federal law requires these boxes to have a certain appearance,

and to also include the annual percentage rate, total finance charge, total amount financed, total of

payments, and the sales price. Look for, read, and understand all of them.

o Physical Damage Insurance. This is required, but can almost always be obtained elsewhere at a more

reasonable rate. The property liability insurance offered by some dealers is only for their protection, not

yours. In the event the car is totaled, it will compensate them for their loss and do nothing for you.

o Credit Life/Disability Insurance. Credit life or disability insurance is seldom necessary for members of

the military. Often it is very high-priced for the amount of coverage involved and protects the only the dealer

or finance company.

o Options - Examine these carefully and ensure you really need it, and it cannot be obtained more

cheaply elsewhere (they usually can).

SHOW SLIDE 8-25: Other Contract Tips


Other Contract Tips:

• Taxes, License, Registration, Title, and Processing Fees. Try to pay as many of these up front as possible,

to avoid having to pay interest on them if they are included in the financing. Be sure they are itemized so that

you know which fees are truly the government fees and which are processing fees (pure profit for the

dealer).

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• Power of the Pen. If you don't understand or approve of something in the contract, line it out and initial it.

This legally removes the item. Better yet, demand a new contract with the offending items removed.

• Don't Leave Any Blanks. Everything should be filled in, and items left off should read "$0.00", "N/A," be

lined out, or otherwise denoted. Something simply left blank could be filled in later to your detriment.

• Take it to Legal before Signing It. If you aren't 100% sure of every word in the contract, take it to legal for

an explanation BEFORE YOU SIGN IT! Again, if the dealer refuses to let you take it with you before signing,

walk away - this is a sure sign something is wrong.

SHOW SLIDE 8-26: Leasing Considerations


Leasing Considerations:

• We've discussed the purchasing aspect of vehicles, now let's look at another possible option, leasing.

• Again, you need to do your homework before making any decisions, as there are numerous options and

plans to choose from. Before deciding to lease there many things to consider.

• To Lease or Not to Lease. That's the choice you face when mulling over the different makes and models,

trying to decide which leasing option best meets your needs. Leasing a car is not the same as buying one.

When you buy, you own the car, but when you lease, you are paying to drive someone else's. Although

leasing can involve lower monthly payments than a loan, at lease end you will have no ownership or equity

in the car.

• Extra Charges. Ask whether extra charges will be assessed for excessive mileage, wear and tear,

disposition and early termination. Find out the amount of these charges. In most cases, leases restrict

taking the vehicle out of state or out of the country. Auto insurance costs may also be higher, so make sure

you ask the question before agreeing to the lease.

SHOW SLIDE 8-27: Negotiating a Lease


Negotiating a Lease:

• You should always try to negotiate the terms of the lease, including the price of the vehicle. Lowering the

lease price will help reduce your monthly payments. Make sure you get all the terms agreed upon in writing.

o Bargain on Price and Mileage. Just like a purchase, lease costs are negotiable. Bargain for the best

cost and mileage prices.

o Pay fees up front. It will be to your long-term financial advantage to pay any fees up front if possible,

including security deposits, taxes, destination charges, etc., to avoid paying finance charges on them.

o Understand your lease. Before you sign the deal, take a copy of the contract to Legal Services for

review. This step is crucial to ensuring you understand the terms completely.

SHOW SLIDE 8-28: Consumer Protection

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Consumer Protection:

• Consumers have some rights under federal laws, but additional rights vary from state to state. Once again,

the best legal preparation is to research the car purchase and know what you are agreeing to before signing

any contracts.

o State Lemon Laws. Most states have a Lemon Law, which enables consumers to get either a new

vehicle or get their money back when the vehicle cannot be repaired to conform to the standards of the

warranty. Some states also have Lemon Laws for used cars.

o Odometer Reading. It is illegal to ever turn back or reset an odometer, even if a new engine is installed

on the car. A statement of the odometer miles is required with every purchase. Average mileage per year in

America is 15,000 miles. The DMV can provide you with the number of owners your vehicle has had, and

this information, plus the age and condition of the car, can help you estimate whether the mileage is

suspiciously low.

Note: The Attorney General estimates that one-third of all vehicles have had their odometers spun.

o "As Is" vs. Implied/Expressed Warranty. This sticker is required by federal law to be placed in the window

of all used cars sold by dealers. For your own protection, any used car should be inspected by an outside

mechanic before you buy, and any promises made by a dealer should be put in writing. Very few assurances

are provided by "implied" warranties, and you want everything to be "expressed."

o Magnuson-Moss Warranty Act. This is a federal law that protects the buyer of any product that costs

more than $25.00 and comes with an express written warranty. This law applies to any product that you buy

that does not perform, as it should, including cars. A consumer may pursue legal action in any court of

general jurisdiction in the United States to enforce rights under this law.

SHOW SLIDE 8-29: Complaint Resolution

Instructor’s Note: Instructor read and discuss with students using the slide

Complaint Resolution:

• If you experience a problem, you should follow these guidelines:

o Speak to the dealer first. In many cases, dealers have a reputation to protect and may be willing to

quickly resolve problems at this level.

o If the dealer is part of a chain, speak next to the regional representative of the company, since he or

she also has an interest in preserving the company's good name.

o If you don't get resolution from the regional rep, you should contact the manufacturer directly and

address your complaints.

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learning activity.

SHOW SLIDE 8-31: LSA 8 Check On Learning



Q1. What should you consider when evaluating a car dealer?

A1. Answer: c. Years in business




Q2. The Manufacturer’s Suggested Retail Price (MSRP) can be found in

what publication?

A2. Answer: b. Kelly Blue Book




Q3. When should you walk away from a car deal?

A3. Answer: d. All of the above




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Q4. True or False. You should always finance your car through the auto

dealership.

A4. Answer: False




Q5. True or False. You should always compute your Debt-to-Income

Ratio before you take out any loan.

A5. Answer: True




Q6. Which of the following is the best way to determine how much you can

afford when buying a car?

A6. Answer: c. Refer to your spending plan




Q7. A warranty that does not allow for future auto repairs once you

purchase a car is called?

A7. Answer: c. An “As Is” Warranty




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Q8. True or False. The terms of an auto lease cannot be negotiated.

A8. Answer: False



Summary:

• During this lesson, we discussed how to be a more informed consumer

when purchasing a vehicle.

• We covered the steps you should take as part of the car-buying process,

including determining what you can afford, researching the right car for

you, selecting a dealer, negotiating a contract, and your legal rights as a

consumer.

• Various sources of assistance you may rely on were also discussed at

several points in the lesson.

Instructor’s Note: Prep to transition into the final LSA of PFMT lessons,

LSA #9, titled Meeting Your Insurance Needs.

TLO - LSA 9. Learning Step / Activity TLO - LSA 9. Assess Your Insurance Needs








SHOW SLIDE 9-1: Assess Your Insurance Needs

Learning Step/Activity 9. : Meeting Your Insurance Needs

Method of Instruction: Classroom/Discussion


Time of Instruction: 30 Min.

Media: Large Group Instruction


• Calculator

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• Pencil


• Determining Your Life Insurance Needs, Student Handout Page 10

Introduction: Managing risk is a serious business and is a big part of your financial future. Insurance should

be a major part of your risk-management strategy.

• What is insurance, and how does it work?

o Insurance is the transfer of risk for a loss you cannot afford to a third party (the insurance company) in

exchange for your payment of premiums to the company.

• In this lesson, we will discuss the different types of insurance and how to define your individual insurance

needs.

• We will briefly review some of your insurance requirements, as well as identify scams, frauds, and high-

pressure tactics often associated with the insurance industry. You will also be provided guidance on where

to go for assistance when you need it.

SHOW SLIDE 9-2: Types of Insurance


• There are four types of insurance.

o Renter’s/Homeowners

o Automobile

o Life

o Health

SHOW SLIDE 9-3: Renter’s Insurance


Renter’s Insurance:

• Renter's insurance covers the loss of your possessions due to fire, theft, or storm and provides you

personal liability protection.

• Many of you will need this type of insurance when you rent an apartment, house, store your possessions in

a storage unit, or if you live in government quarters.

• You should always have your personal property insured.

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Note: This type of insurance does not cover the structure, since you don’t own the property.

SHOW SLIDE 9-4: Homeowner’s Insurance


Homeowner’s Insurance:

• Homeowner's insurance is a combined policy that provides coverage for fire, windstorms, or theft as well as

some level of liability protection.

• The premiums are relatively low and the policy covers a particular structure and its contents.

• It is mandatory coverage if you own a home with a mortgage. If you don't want to lose all of your savings in

a fire, tornado, or lawsuit, you will want to have this coverage.

• Certain risks like earthquake, flood, war, or nuclear accident are usually not covered. Coverage for these

risks are available, often for an additional premium.

Did you know:

• If your dog bites a neighbor, a homeowner's policy will cover the medical expenses and damages awarded

as a result of a lawsuit.

SHOW SLIDE 9-5: Automobile Insurance


Automobile Insurance:

• Automobile insurance provides five basic protections; Collision, Comprehensive; Liability; Medical; and

Uninsured/Underinsured Motorists. To make informed decisions about your particular needs, you must

understand what each of these does for you.

o Collision. Collision coverage pays for damage done to your car by YOU. It has a separate deductible

and premium. Collision coverage is expensive, as the probability of damage from collision is the highest risk

of car ownership. If you finance your car, the lender will require this insurance, most likely with a very low

deductible. Most deductibles are $250 to $1,000. The higher the deductible, the lower the premium. If you

have the cash, raise the deductible. Put the money you save into a savings account.

o Comprehensive. Comprehensive covers damage done by OTHERS or damage while you are not in the

car, such as vandalism, broken glass, and so forth. Like Collision coverage, Comprehensive has a separate

premium and deductible.

o Liability. This is the most important part of your coverage. It insures the damage you do to the "other

guy". Physical damage to his/her car, and any lawsuit you may encounter. Liability coverage is mandatory

for all cars in every state. Liability is less expensive than collision (unless you are under 25 or have some

traffic tickets) yet it is the most important coverage you can carry. Buy all that you can afford. A judgment

against you can follow you for the rest of your life - make sure you have enough liability coverage.

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o Medical. This portion of your policy covers you and your passengers for immediate medical treatment,

regardless of who caused the accident. Typical coverage here ranges from $1,000 to as high as $10,000. It

is very inexpensive and provides immediate help.

o Uninsured/Underinsured Motorist. You will need this coverage in the event that the person who hits you

has little or no insurance. If this happens, your insurance company will pay you. They will then sue the

uninsured/underinsured driver and try to get any assets he may have, but the important point is you don't

have to do that. If you carry this coverage, your insurance company does it for you.

SHOW SLIDE 9-6: Auto Insurance Tips


Here are a few additional tips on auto insurance:

• If you get traffic tickets or have several accidents, you will have to pay a much higher rate. In fact, if your

driving record is so bad that your carrier cancels your insurance, you may have to pay a very high rate for

what is called the "assigned risk pool" of bad drivers. Drive Safely!!

• Shop for insurance. There are a lot of different rates.

• If you have had drivers training, get the certificate and provide it. Most companies will reduce your

premium.

• Anti-theft systems can reduce your premium as well.

• Carry as high a deductible as your cash situation, or your lender, will allow.

• Carry as much liability as you can afford.

SHOW SLIDE 9-7: Life Insurance


Life Insurance:

• Life Insurance pays out a sum of money either on the death of the insured person of after a set period of

time. Simply put, it insures protection against the loss of your future income, in the event that you should

pass away. It also ensures protection for your family members. If you don't have anyone depending on you

for their financial wellbeing, then you don't need life insurance. If you do, then you need to understand it and

know how to calculate how much and what type you need.

Determining your life insurance needs:

• Over the next 2-3 years, many of you will marry, and many of you will start families. So listen up. The goal

of life insurance is to provide a measure of financial stability for your family after you die. Those who do not

purchase a life insurance policy risk subjecting their family members to great suffering, as they may be

unable to maintain their standard of living without it.

Note: Refer students to page 10 of their student handout to complete the “Determining the Life Insurance

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Need’s” exercise

SHOW SLIDE 9-8: Types of Life Insurance


Types of Life Insurance:

• If you decide you need additional life insurance over and above the maximum you already get in your Army

SGLI coverage, you will need to understand the various types available to you.

• There are two basic types: Term insurance and Permanent insurance.

SHOW SLIDE 9-9: Term Life Insurance


Term Life Insurance:

The advantages of term policies include:

• Term premiums are lower than those for permanent insurance so you get more insurance coverage for less

money. This allows you to buy more coverage when you need it the most, such as when you have young

children.

• Because term provides insurance for a specific period of time, it is ideal for covering specific financial

needs such as covering your life until your children are through college, until they are self-supporting, or

covering your life until you pay off your mortgage.

The disadvantages of term policies include:

• Premiums increase every time a policy is renewed, so the cost of term insurance can become prohibitive

as you near your late 50’s and 60’s.

• Term life doesn't provide a savings feature known as cash value. Term policies only pay benefits if you die

while the policy is in force.

• If your insurance company wants you to take a medical exam when you want to renew your policy, you

may be turned down if your health condition has deteriorated.

• You could outlive your coverage. Term insurance is generally not renewable after age 70 or 75, depending

on your state’s insurance regulations.

SHOW SLIDE 9-10: Servicemembers Group Life Insurance (SGLI)


SGLI:

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• A term policy you should be aware of is your Serviceman's Group Life Insurance (SGLI).

o Provided to each member of the Army for the ridiculously low price of 65 cents per ten thousand per

month.

o Can provide up to $400,000 in life insurance and includes a mandatory rider for Traumatic Injury

Protection under Servicemembers' Group Life Insurance (TSGLI). This policy should be your first life

insurance consideration.

o TSGLI payments are designed to help traumatically injured Servicemembers and their families with

financial burdens associated with recovering from a severe injury.

o TSGLI payments range from $25,000 to $100,000 based on the qualifying loss suffered.

o SGLI has also expanded to include Family Coverage.

o Reservist and National Guardsmen qualify for full SGLI if they drill 12 times a year.

SHOW SLIDE 9-11: SGLI-Family Coverage


SGLI-Family Coverage:

• Spouses and children of active duty members, who are listed on the service member's personnel file, are

eligible for low cost insurance coverage.

o Family coverage is available only to members insured under the SGLI program.

--It is not available to those insured under the VGLI program.

o If you are covered under full-time SGLI, you are eligible to insure your spouse, regardless of whether

your spouse is on active duty, retired, or is a civilian.

o Coverage starts at $10,000 and is available in increments of $10,000 up to $100,000 at a cost of $0.50

per $10,000 of coverage for spouses under the age of 35.

o Children are automatically covered for $10,000 at no cost to the service member.

o SGLI family coverage is AUTOMATIC unless it is declined, in writing. To do so, you must obtain a

waiver statement from your personnel office.

SHOW SLIDE 9-12: SGLI and Other Life Insurance


SGLI and Other Life Insurance:

• If you decline SGLI (not recommended) or decide to add to it, ensure that any other policies.

o Specifically cover loss of life due to war and combat.

o Cover loss of life due to suicide.

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SHOW SLIDE 9-13: Survivor Benefits (While On Active Duty)


Survivor Benefits:

• The death gratuity is $100,000, (100% tax free) and is paid to the next of kin for the following armed

service members:

o A member of an armed force under his jurisdiction who dies while on active duty or while performing

authorized travel to or from active duty; A Reserve of an armed force who dies while on inactive duty training

(with exceptions);

o Any Reserve of an armed force who assumed an obligation to perform active duty for training, or

inactive duty training (with exceptions) and who dies while traveling directly to or from that active duty for

training or inactive duty training;

o Any member of a reserve officers' training corps who dies while performing annual training duty under

orders for a period of more than 13 days, or while performing authorized travel to or from that annual training

duty; or any applicant for membership in a reserve officers' training corps who dies while attending field

training or a practice cruise or while performing authorized travel to or from the place where the training or

cruise is conducted; or

o A person who dies while traveling to or from or while at a place for final acceptance, or for entry upon

active duty (other than for training), in an armed force, who has been ordered or directed to go to that place,

and who Has been provisionally accepted for that duty; or Has been selected for service in that armed force.

• Burial Benefits. DoD will process, transport, and inter remains. It provides a casket, vault and headstone for

interment in a government cemetery or may reimburse costs of up to $7,700, if the family elects to make

private arrangements. Transportation to the burial for the immediate family is provided by the government at

no charge, or may be reimbursed up to the government rate. It is recommended that family members make

no travel arrangements until they have spoken with their casualty assistance officer. The casualty assistance

officer will guide the family through the specific requirements and paperwork for the particular branch of

service involved. Specific information about burial benefits and military honors is available at:

www.militaryfuneralhonors.osd.mil.

• Round Trip Travel and BAH. P.L.109-163 made permanent the extended time that surviving families may

occupy government quarters or be paid housing allowances from 180 to 365 days. Those eligible for Basic

Allowance for Housing (BAH) will be paid in one lump sum. Survivors are also authorized one relocation

move at government expense, which must be completed within one year following the death of the service

member. Spouses are eligible for Commissary, Exchange, and Morale, Welfare and Recreation activities

privileges indefinitely unless they remarry. Children maintain eligibility until age 18 or 23, if still enrolled full-

time in college. Military exchanges forgive Military Star credit card debt owed by families when their service

member is killed in combat. Survivors are also eligible for legal assistance advice on benefits and

entitlements, insurance or taxation.

• Arrears in Pay and Leave. Arrears of Pay is a one-time payment made to a beneficiary after your death.

The arrears of pay payment to your beneficiary will include: The pro-rated amount of your final month’s pay,

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and any other money owed to you at the time of your death, to include accumulated leave.

• Social Security. A one-time payment of $255 can be paid to the surviving spouse if he or she was living

with the deceased. If there is no surviving spouse, the payment is made to a child who is eligible for benefits

on the deceased’s record in the month of death. Certain family members may be eligible to receive monthly

benefits, as well. For more information go to www.socialsecurity.gov or call toll-free, 1-800-772-1213.

• Dependent’s Indemnity Compensation (DIC). DIC is a monthly benefit paid to eligible survivors of the

following:

o Military service member who died while on active duty, OR Veteran whose death resulted from a

service-related injury or disease, OR Veteran whose death resulted from a non service-related injury or

disease, and who was receiving, or was entitled to receive, VA Compensation for service-connected

disability that was rated as totally disabling for at least 10 years immediately before death, OR since the

veteran's release from active duty and for at least five years immediately preceding death, OR for at least

one year before death if the veteran was a former prisoner of war who died after September 30, 1999.

• DIC Eligibility. The surviving spouse is eligible if he or she was married to a service member who died on

active duty. Dependency and indemnity compensation is paid to a surviving spouse at the monthly rate of

$1,254.19. Add $310.71 per child for each dependent child under age 18.

SHOW SLIDE 9-14: Permanent Life Insurance


Permanent Life Insurance:

• The other type of life insurance, other than term, is permanent insurance.

• Permanent insurance provides lifelong protection.

o As long as you pay the premiums, the death benefit will be paid.

• They are designed for you to keep over a long period of time.

• If you don't intend to keep the policy for the life, this may be the wrong type of insurance for you.

• There are a variety of permanent policies; whole, adjustable, universal, and variable.

SHOW SLIDE 9-15: Permanent Life Insurance (Cont.)


Permanent Life Insurance Advantages/Disadvantages:

The advantages of permanent insurance are:

• You lock in a premium rate at whatever age you start the policy and the benefits are guaranteed for as long

as you live.

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• Your policy accumulates cash value that grows tax-deferred. Your premiums are invested by the insurance

company in stocks, bonds, real estate, venture capital and other funds, and you receive a return on your

money in the form of annual dividends, which increase your cash value.

• You can tap that cash value while you are alive with low-cost loans. Any outstanding loans will reduce your

policy’s cash value by the amount of the loan. Or you can withdraw the cash value, though you will have to

pay income taxes on those withdrawals. You can also convert your cash value into an annuity that will

provide fixed-income throughout your retirement years.

• If you surrender your policy by discontinuing to pay premiums, you will receive any accumulated cash

value.

• Dividends can be used to pay your premium in whole or in part.

• Once you have passed the medical tests and have been issued a policy, your policy cannot be cancelled

for medical or any other reasons if you continue to pay the premium.

The disadvantages of permanent insurance are:

• It is far more expensive than term insurance. This means that you can usually afford far less permanent

coverage than you can afford term. If you start a permanent policy and then must drop it because you cannot

afford the premiums, you will have lost a great deal of money.

• Insurance companies invest your cash value quite conservatively so it is possible that you could earn

higher returns on your own if you are a skillful and knowledgeable investor.

• The return you earn on your cash value is determined by current interest rates in money markets. So, if

interest rates are high, your cash value will grow much more quickly than if interest rates are low.

• Periodically, the insurance company deducts its expenses and a mortality charge from your cash balance.

The mortality charge is the amount of money, based on a premium rate per thousands of dollars of death

benefits, required to provide you with life insurance. The company will guarantee a minimum interest rate

and a maximum mortality charge. Some will also guarantee a maximum expense charge.

SHOW SLIDE 9-16: Army Health Coverage


Army Health Coverage:

• The Army health umbrella covers all of your Medical and Dental needs, while also affording low-cost

options to your dependents.

Medical Coverage:

• Health insurance covers several things, including doctors’ visits, diagnostic tests, surgery, hospital stays,

and prescription drugs. It also includes disability insurance and policies that provide "no-strings" payments

for such dreaded diseases as cancer. It is probably the least of your insurance concerns.

• While you are on active duty, the U.S. Army is going to take care of the health care needs of you and your

family. Army medical coverage is furnished by TRICARE providers. They might be located in a TRICARE

facility or a local Military Hospital. If there are no care facilities local to you or your dependents, you could be

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responsible for a small percentage of medical costs if care must be obtained in the civilian environment. If

you have large medical considerations, a TRICARE supplement is available. Such policies usually have a

very low monthly cost.

Dental Coverage:

• The TRICARE Dental Program (TDP) is a voluntary, high quality, cost-effective dental care benefit for

eligible Family members of all active duty Soldiers as well as Reserve Component Service members and/or

their Families. TDP is offered by the Department of Defense (DoD) through the TRICARE Management

Activity (TMA). The Metropolitan Life Insurance Company (MetLife) administers and underwrites TDP for the

TMA.

TRICARE Reserve Select (TRS):

• Is available worldwide to most Selected Reserve (National Guard and Reserve) members and their

Families when the military member is NOT on active duty orders. It is less expensive than many healthcare

plans and it has co-pays and deductibles. As with other insurance, you should shop around to find out what

has the best coverage and cost for you. For 2015, Member Only-$50.75 per month; Member and Family-

$205.62. per month.

SHOW SLIDE 9-17: TRICARE Plus for Secondary Dependents


Tricare Plus provides at zero cost:

• Primary Care at participating Military Treatment Facilities.

o You must enroll to participate.

o Your enrollment is only for the hospital or clinic where you enrolled.

• Prescriptions at a Military Pharmacy

Tricare Plus DOES NOT provide:

• Specialty Care. TRICARE won’t pay for care by civilian providers, even if the military hospital or clinic

provides a referral.

• You are responsible for the full cost of the care.

Note: For more information: http://www.tricare.mil/Plus

SHOW SLIDE 9-18: Making a Relative a Secondary Dependent


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Making a Relative a Secondary Dependent:

Secondary Dependents are:

• Parent, parent-in-law, stepparent, parent by adoption, or “in-loco parentis” (any person who stood in place

of your parent for at least five years).

• Unmarried children ages 21 and 22 who are enrolled in an accredited institution of higher education on a

full-time basis.

• Ward of the court, unmarried, and placed in the permanent legal physical custody of the member, or if not

permanent custody for a period of at least 12 consecutive months.

• Unmarried child over age 21 incapable of self-support because of mental or physical incapacity that

occurred while the child was considered a dependent of yours as a member or retired member, or is

considered the dependent of a deceased member (while under age 21 or under age 23 and a full-time

student).

To qualify as a Secondary Dependent:

• The individual’s income, not including your contribution, must be less than one-half of the actual living

expenses.

• The law requires the individual to be ‘in fact’ dependent on you, the service member.

• Your contribution must be more than one-half of the dependent’s actual monthly living expenses.

Required Documentation:

• Service member's/Spouse’s birth certificate & proof of relationship to family member.

• DD Form 137-3 and DD Form 1172-2.

• Proof of support.

Note: For more information: http://www.dfas.mil/militarymembers/SecondaryDependency/SDC.html

SHOW SLIDE 9-19: Frivolous Insurance


Frivolous Insurance:

• There are several types of insurance policies that you should probably be quite leery of:

o Hospital Indemnity. This guarantees you continue to be paid while hospitalized. As an active duty

member of the military, you have little need to worry about this coverage.

o Dreaded Disease(s). These policies, written for specific diseases such as cancer, usually only pay for

inpatient care. If you ever need a hospitalization policy, it should cover required care regardless of cause.

o Student Accident Insurance. These policies normally have very low limits on what they will pay. As a

student, you are medically covered by the Army. Your dependents are covered also.

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o Credit Life Insurance. These policies offer to pay off specific debts should you die or, in some cases,

become disabled. They are profit generators for the companies selling them and seldom are a good value.

o Credit Card Loss. These policies are often quite expensive, and you should know that your liability is

generally limited to $50 per card.

SHOW SLIDE 9-20: More Frivolous Insurance


More Frivolous Insurance:

• Rental Car Collision (CDW). If you own a car, chances are your policy will cover you when you are driving a

rental. It also likely that your credit card provides some degree of coverage. Be sure you really need this

expensive addition to the cost of renting a car before you agree to it at the counter.

• Accidental Death or Dismemberment. This feature, for an additional premium, doubles your life insurance

payoff if you die from an accident. Your insurance amount should be based on your survivor's requirements,

regardless of how you die. Also, keep in mind that most people, even those who die young, do so of natural

causes.

• Flight Insurance. For example, you pay $14 per flight for a million dollar payoff if you die on the flight. Better

to buy 14 lottery tickets. You don't have to die to collect if you hit the jackpot.

• Pet Insurance. Policies cost from $40 to $100 per year. They often don't cover leukemia or other major

illnesses.

• Extended Warranties. Most major purchases come with sufficient warranties to protect you in the event

you purchase a "lemon". Companies wouldn't offer these extended warranties if they didn't think they would

make money off them.

SHOW SLIDE 9-21: Insurance Scams


Insurance Scams:

• Most individuals who work in the insurance industry are honest and ethical. However, young Soldiers are

often targeted by those who are not.

• A recent investigation by the DOD Inspector General documented several instances of improper insurance

sales practices including misleading presentations, presentations by unauthorized personnel, and agents

trying to sell during duty hours or in the barracks.

• Two tactics known to have been used by unethical salespersons are convincing the young Soldier to drop

SGLI because it does not build cash value, and claiming non-existent dependents to decrease income tax

withholding in order to "invest" the "additional" take-home pay in high-cost cash value life insurance.

• In this latter case, the Soldier gets a rude shock on April 15 when he or she discovers they must write a

sizable check for income taxes.

SHOW SLIDE 9-22: Sound Advice

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Sound Advice:

• Here are some tips to help you through the insurance jungle:

• As with any major purchase, don't be rushed in to making a decision. Any "good deal" available today will

likely be there tomorrow. Sleep on it, and be sure to have any contract reviewed by Army Legal Services

PRIOR to signing.

• Be sure to consider your military benefits when determining your insurance requirements and don't get

pressured into a decision, like buying auto insurance at a car dealership. Shop hard using several agents

and the internet. A few hours spent now can mean thousands of dollars over your lifetime.




• As a member of the military, you have several sources of help in determining your insurance needs and

meeting your requirements.

• Army Legal Services is always ready to review any contract you are considering. In addition, there are

several internet sites, not aligned with any insurance company that will assist you in finding the lowest cost

insurance policies to meet your needs.



learning activity.




Q1. What does Renter’s Insurance cover?

A1. Answer: b. Your possessions only



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Q2. What is the most important, mandatory coverage in your auto

insurance policy?

A2. Answer: b. Liability




Q3. What is one way to reduce your auto insurance premium?

A3. Answer: a. Attend a driver’s training class




Q4. Permanent life insurance which is designed to provide lifelong

protection is called?

A4. Answer: d. All of the Above




Q5. What is the maximum amount of Serviceman’s Group Life Insurance

(SGLI) coverage available to Soldiers?

A5. Answer: d. $400,000



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Q6. True or False. You should never buy any insurance under pressure.

A6. Answer: True




Q7. True or False. SGLI family coverage is automatic unless waived in

writing.

A7. Answer: True


Instructor’s Note: Conduct final LSA summary for the final lesson for

PFMT.

Summary:

• In this lesson, we discussed a subject of vital interest to you for the rest of

your lives - insurance.

• We covered four primary types of insurance with particular emphasis on

the different automobile policy provisions and types of life insurance

available.

• We reviewed the military benefits that you should consider when

determining your personal insurance requirements and we talked about

some frivolous insurance you might be tempted to purchase.

• We concluded this lesson by telling you where you can find assistance

with your insurance needs.

Instructor’s Note: Prep to transition into both TLO Check on Learning

questions and Summary.

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SECTION IV. SUMMARY

Method of Instruction: Discussion (Small or Large Group)Mode of Delivery: Resident InstructionInstr Type(I:S Ratio): Military - ICH (1:25) (Every instructor must meet the qualification standards

established in AR 350-1, AR 614-200, TR 350-70, TR 350-10 and theproponent school instructor certification program. )


Check onLearning Show Slide #4: TLO Check On Learning

Note: Return to the remaining two slides at (TLO Check on Learning & TLO Summary) at the conclusion of LSA #9.

Instructor's Note: At this time, break class into equal groups. Each group take out paper and as a group, write down a

few questions from the lesson that they just received. Give them enough time to get their questions written. Once all

groups have a sufficient amount of good questions, have each group pass their questions to another group and have

them answer them. Allow sufficient time for them to answer the questions. Once all questions have been answered,

have each group read their questions and answers.

Review/Summary Show Slide #5: TLO Summary

Instructor’s Note: Read TLO

Action: Perform Personal Financial Management Training

Conditions: As a new FM Soldier in a classroom environment using doctrinal and administrative publications, practical

exercises, handouts, and discussion.

Standard: With at least 75% accuracy, students must demonstrate proficiency with:

1. Review Financial Ethics

2. Review Retirement / Thrift Savings Plan

3. Analyze Leave and Earning Statement / myPay

4. Developing a Spending Plan

5. Managing a Checking Account

6. Identify the Essentials of Credit

7. Review Consumer Awareness

8. Assess the Car Buying Process

9. Assess Your Insurance Needs

“Or”

The proper management of your personal finances can have a long-lasting and far-reaching impact on you as a Soldier

or a civilian. The last thing you want to be thinking about while patrolling mountains of Afghanistan is if you are being

paid properly or if your Family is financially stable back at home. Whatever your reason for joining the Army there is

one unavoidable fact: it is your duty as a Soldier to fulfill your financial obligations and to provide for your family.

Hopefully, this training provided you with the ammunition you need to prepare you for your financial readiness.

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“Or”

Instructor's at this time, have several students explain the most important take away to them from this lesson. Facilitate

a discussion on each answer.

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SECTION V. STUDENT EVALUATION

TestingRequirements There are no evaluations, assessments at the end of the lesson. After all LSAs have been presented, the measurement

of the learning the students received will be measured via Check on Learning questions given throughout the lessons.

FeedbackRequirements An AAR will be conducted after each module. There is an end of course critique that will be conducted at the end of the

course.

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Appendix A - Viewgraph Masters

Perform Personal Financial Management Training (PFMT)805A-AAF6B100 / Version 4.4 ©

Sequence Media Name Media Type

1 805A-AAF6B100 Perform Personal Financial Management Training(PFMT)

PPTX

2 01 Review Financial Ethics PPTX

3 02 Review Retirement-Thrift Savings Plan PPTX

4 03 Analyze Leave and Earning Statement - myPay PPTX

5 04 Developing a Spending Plan PPTX

6 05 Managing a Checking Account PPTX

7 06 Identify the Essentials of Credit PPTX

8 07 Review Consumer Awareness PPTX

9 08 Assess the Car Buying Process PPTX

10 09 Assess Your Insurance Needs PPTX

A-1

Appendix B - Assessment Statement and Assessment Plan

Assessment Statement: None.

Assessment Plan: None.

B-1

Appendix C - Practical Exercises and Solutions

PRACTICAL EXERCISE(S)/SOLUTION(S) FOR LESSON 805A-AAF6B100 Version 4.4 ©

C-1

Appendix D - Student Handouts

Perform Personal Financial Management Training (PFMT)805A-AAF6B100 / Version 4.4 ©

Sequence Media Name Media Type

11 PFMT Student Handout PDF

D-1

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