Securing Your Financial Future

Cash Management

Presented by Teresa Muench

NEA Member Benefits

April 4, 2015

Cash Management

• Understanding Cash Management

• Where oh where does our money go?

• Making a budget

• Living within that budget

• IT DOESN’T ALWAYS TAKE MORE $$$, Sometimes it takes smarter choices!!

Cash Management

Benefits of Developing A Budget• It allows you to choose how you will spend your

money.

• It gives you control over where your money goes.

• It provides against financial emergencies.

• It helps prevent impulse buying.

• It helps financial goals become a reality.

Cash Management

• Budgeting Rules– Set realistic financial goals– Distinguish between wants and needs– Record monthly expenses– Limit monthly debt payments to 20% of

net income (excluding mortgages)– Establish an emergency fund (3 to 6

months of after tax income)

Cash Management

• Budgeting Rules– Track income and expenditures

– No lazy money

– Establish credit

– Shop wisely

Cash Management

• Steps in Developing Your Budget– Determine your income

• Include only your net income• Do not include over-time or bonuses

– Determine your fixed expenses• Includes rent or mortgage, savings utilities,

car payment, etc.• Pay yourself first!!!!

Cash ManagementSteps in Developing Your Budget

– Determine your flexible expenses• Easier to control or reduce• Includes clothing, food, entertainment

– Determine your variable expenses• Can be a problem if not properly budgeted for• Include things like insurance, taxes, annual

fees, etcIf the payment is due every year, divide by 12 and put aside

every month

Cash Management

• Steps in Developing Your Budget– Record monthly expenses

• Keep organized records– Re-evaluate your budget periodically

• Budget should reflect you and changes in your life

Credit…A Key Element of Cash Management

Understanding Credit– Why is it important?

– How to build credit reputation?

– How are lending decisions made?

Cash Management

Why is it important to establish credit?– Allows you to enjoy major purchases

– Offers advantages of convenience and safety

– Enables you to take advantage of sales and investments

Cash Management

• Understanding credit– The cost of credit

– Getting your credit report

– Some tips

Cash Management

• Understanding Credit– Finance Charges

• Average daily balance- gives you credit from the day the creditor receives payment

• Two-Cycle Billing – if balance is not paid in full, interest can become retroactive back to date of purchase – essentially wiping out your grace period

Cash Management

• Understanding Credit– Balance Transfers

• Promotional rates (usually 0% - 3.9%) offered by credit card issuers to balance transfer balances from a competitors credit card

• Typically lasts from four to nine months

Cash Management

• Understanding Credit– Balance Transfers

• “We may allocate your monthly payments to your promotional APR balance(s) before your non-promotional APR balances.”

Cash Management

• Understanding Credit– Other Charges & Fees

• Annual Fee – for the privilege of using the card

• Cash Advance Fee – transaction fee for cash advances

• Over Credit Limit Fee – fee assessed for exceeding the stated credit limit

• Transaction Fee – fees charged for using an ATM, debit card, purchase of money orders, wire transfers, etc.

Cash Management• Understanding Credit

– Other Charges & Fees• Insufficient Funds Fee – charged

assessed for checks returned or insufficient funds

• Late Payment Fee – fee for late payment• Minimum Finance Charge – minimum

finance charge of $0.50 if your purchase or finance charge is less than $0.50

• Low Activity Fee – fees charged if a transaction is not recorded regularly or if no balance is carried

Cash Management

• Identifying Financial Stress– Do you routinely spend more than you earn?– Are you forced to make day-to-day

purchases on credit?– Are able to make only the minimum

payments on monthly credit card bills?– Are you having difficulty stretching your

paycheck to meet monthly bills?

Cash Management

• Identifying Financial Stress– Are bill collectors calling?

– Would you have difficulty paying next month’s bills if you lost your job?

Cash Management

• Reducing Expenses– Cut Spending – Eliminate unnecessary

spending such as eating out and purchasing expensive entertainment. Clip coupons, shop sales, and avoid impulse buying

– Consolidate Debt – Check into mortgage refinancing, home equity loans, and personal loans.

Cash Management

Get a Handle on Credit Cards

By paying $100 towards a $3,000 balance (and not charging any more to the account), it would take 41 months to pay off the balance (18% interest rate) and you would incur $1,042 in interest charges.

Cash Management

Building a Good Credit Reputation– Use credit before you need it

– Keep within obligation of your agreement

– Live up to the terms of the contract

Questions?