financial basics 101 welcome to. introduction budgeting credit report credit score agenda 1 2 3 4
TRANSCRIPT
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Financial Basics 101
Welcome to
Budgets and Credit
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Introduction
Budgeting
Credit Report
Credit Score
Agenda
1
2
3
4
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IntroductionBanks vs Credit Unions
Banks Credit Unions
Customers –Banks are owned by investors. Members – Credit unions are member owned. Each person who deposits money becomes a member.
Profits – Investors get share of profits. Not-For-Profit – Profits are given back to members in the form of lower loan rates, higher dividends and free or low cost services.
FDIC – Federal Deposit Insurance Corporation NCUA – National Credit Union Association.
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Budget
Learning to Manage Your Money also known as
Setting up a Budget
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BudgetBenefits of Managing (Budgeting) Your Money
• Free up time → do things you enjoy
• Less Stress → better health
• Achieve goals → satisfaction
•Greater Control → peace of mind
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Budget
Ask Yourself: Do you….• Spend more than you make?
• Live beyond your means?
• Pay yourself first?
• Charge items instead of saving for them?
• Think about an emergency fund, but fail to have one?
• Spend uncontrollably?
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Budget
Establishing anEmergency Fund
Emergency Fund
$1,000
3 – 6 months living expenses
Retirement
401KIRA
Savings Account Savings AccountMoney Market
CD IRA
Remember to PAY YOURSELF FIRST!
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BudgetSet SMART Financial Goals
Specific
Measurable
Adjustable
Realistic
Time-Oriented
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BudgetSet Three Types of Goals
Short Term Goal within next six months
Mid Term GoalWithin next one to five years
Long Term GoalMore than five years away
BUDGET
SAVE
INVEST
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BudgetFinancial Goal Chart
Targe
t Date
Total Neede
d
Pay Periods
Until Target Date
Savings Needed Per Pay Period
Savings Per Week
Savings Per Day
Short Goal
Intermediate Goal – pay off $1,200 debt
One year
$1,200 12 $100 $25 $3.57
Long Range Goal
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BudgetFive Steps to a
Successful Spending Plan
1. Identify all income sources2. Determine monthly expenses
fixed and variable expenses
3. Balance income and expenses
4. Review and Revise
5. Manage
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Budget
BudgetingBasics
http://hffo.cuna.org/budget_blueprint.html
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BudgetSTEP 1: List All Income Sources
Paycheck BonusDividends GiftsInterest Child Support/AlimonyPension Tax RefundSocial Security OtherRental Income
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BudgetSTEP 2: Determine Monthly Expenses
• Fixed - mortgage, car payment
• Flexible - food, clothes, utilities, gifts
• Periodic - insurance, taxes
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BudgetExpenses
Necessary – shelter, food, utilities, insurance, taxes.
Discretionary – vacations, entertainment, lattes.
Personal – don’t have to account for every penny.
Miscellaneous – unplanned expenses.
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BudgetWhere Does Your Money Go??Track your daily expenses
Fast FoodSodaCoffeeVideo Rental Tobacco products
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BudgetSTEP 3: Balance Income and Expenses
How does your CA$H flow?
If Income > Expenses – save more!If Expenses > Income – make changes
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BudgetSTEP 4: Review and Revise
• Continue to track expenses• Find places to save (eliminating leaks)• Does your plan fit with your goal?
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BudgetSTEP 5: Manage Your System
• Track expenses regularly• Pay bills regularly• Balance checkbook monthly• Review goals annually or after major life change.•Does plan still fit with your goals?
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Credit Report
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Credit Report
www.experian.com/credit_report_basics/pdf/samplecreditreport.pdf
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Credit Report
How long does information stay on your credit report?
• Positive information can remain forever.• Negative information can remain up to seven years – from time you take care of it.• Bankruptcies can remain seven to 10 years.
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Credit ReportIf your credit report has errors….
• Write a letter to credit bureau explaining why you think information is inaccurate.
• Credit bureau has 30 days to investigate, notify you of results and delete inaccurate or unverifiable information.
• If you disagree with investigation results, write a dispute statement to appear in your file.
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Credit Score
•How your credit score can affect your life•Employment•Landlord•Insurance underwriting•Extending future credit
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Credit Score
FICO Credit ScoreRange from 300-850, higher is betterMost lenders base approval on themHigher scores mean lower interest ratesScores are based on your rating in five general categoriesThe median FICO® score in the U.S. is 723
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How Credit is Calculated
Payment History
•Timely payments=positive points•Late/delinquent=negative points
Length of Credit
Type of Credit• Unsecure vs secure debt• High risk vs low risk
Amount Owed• % of credit used• # of accounts• Aggregate credit limits
New Credit• # of new accounts• # of inquiries
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Vehicle Loan Example
Credit Score $25,000 5 year note*
Monthly Payment
700 – 850 4.50% $466
660 – 699 6.25% $486
600 – 659 9.25% $522
599 – below 17.50% $628
*for illustration purposes only
$162.00/month difference = $9,720 over a five year loan.
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Credit ScoreWays to Improve your credit score
• Pay down debt• Pay on time• Cancel cards you don’t need - with caution
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Financial Traps
•Check Cashing Services•Pay Day Lenders•Car Title Loan Companies•Rent-to-Own Retailers•Zero Interest Deals•Rapid Refund Loans
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Do You Ever Feel Like This?
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Debt Collectors
http://ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm
http://www.credability.org/en/homepage.aspx
Debt Collection FAQs: A Guide for Consumers
CredAbility
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Brought to you by:
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Budget Worksheet emoryacu.com → About Emory ACU → Resources → Home & Family Finance Magazine → Search for Budget.
Free Copy of Your Credit Report - freecreditreport.com
Credit Bureaus - experian.com • transunion.com • equifax.com
Debt Collection FAQs - http://ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm
CredAbility –
Don’t forget - the credit union is here to assist youwith all your financial needs. 404.329.6415 • emoryacu.com
Resources
http://www.credability.org/en/homepage.aspx