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NABA Money Sense for Adults.ppt

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  • Tee up your audience….ask the question “ What do want to get from this session? Are these Business Professionals who are worried the economy and how to strectch a dollar? Are these low income who are looking for a dollar? Determine by the crowd how to approach the subject of Financial Education and what it means to them
  • The first 3 slides are designed to help audience think about their money mindset by sharing some related quotes.
  • Poll the audience: Ask how many of you can relate to more than one of the before mentioned quotes.
  • Speaker Notes: This slide is meant to provide an opportunity for thought about the role money plays in our lives. One possible analogy is that of slave and master and that money should be the slave and we us the master not the other way around.
  • Speaker Notes: Transitional Thoughts from Previous Slides on Mindset say, “Because we all have a money mindset, here are a few subjects I (we) would like you to think about today.” “The learning objectives for the workshop today are as follows….” Speaker Notes: When introducing the subject matter to the audience also see if they have any questions or topics that they would like to be covered. Additionally, you may want to explain that the presentation is somewhat weighted towards credit and debt as these are the two areas of high concern. Be ready for likely topics such as what is the current credit crisis and how it affects them? Investing tips/techniques, etc…
  • Savings: Stress the importance of saving no matter what you make (10% of paycheck at least each pay period) to start. Credit & Debt: Always manage the income to debt ratio, be aware of what it is. Ways to improve your credit score Know how to find your score and read your credit report Check at least once a year for accuracy Caution in this economy of depending heavily on credit cards Watch out for “Pre Approved” credit offerings – credit cards, quick cash loans etc Budgeting: Create a budget…..and stick to it! Visual confirmation each month of your budget as a constant reminder of what your limits are A budget is fluid, but updating regularly keeps you aware of pitfalls you might make otherwise Investing: Today….the word is “Caution” – “Research” utilize a professional to look at market trends that are upcoming down the road.
  • Speaker Notes: This topic should be stressed. Having an emergency fund is important, especially during a recession as unemployment rises. Use current events to stress this topic.
  • It is important to know exactly what is appearing on your credit report . Most states now provide individuals one free credit report annually. You may also receive free copies of your credit report if you have been declined credit within the last 30 days. Obtain credit reports and review carefully. Be sure what appears on the report is attributed to your credit history. You can request erroneous information be removed. Always check your credit report prior to applying for credit to avoid surprises. Avoid applying for credit too often in a short period of time, as, multiple credit inquires may reflect negatively on your credit worthiness or credit score. Your credit report should include: Name of Creditor Type of Account Terms Amount of the original debt or credit limit Balance outstanding Whether payments were made late during the reporting period
  • Speaker Notes: Ask your audience to ponder these questions. You are building them up for the analogy that you will draw between credit and trustworthiness?
  • If the bank checking account one does not register with the audience right away, this will open up an opportunity to discuss the fact that some Americans are “un-banked,” meaning that they do not have a bank account or they are not eligible to have a bank account. This often results from unpaid NSF fees assessed by the bank, as a result of writing “bad checks,” i.e. not enough money in the
  • Speaker notes: For this slide it might be good to explain to the audience the different types of debt and what stages in life they will experience this debt. Also, this may be a good time to explain that debt is not something that should be avoided but instead should be understood and handled responsibly. It is through debt that many of us pay for education and home ownership.
  • Speaker Notes: You can ask the audience about these terms to see how familiar they are with them. Then you can offer the answers. APR – Finance Charge – Grace Period – Fees –
  • Speaker Notes: A credit report is a record of an individual’s personal credit history. When a person applies for a loan, the lender will order a credit report to see how well the applicant has managed credit in the past. A credit report will tell, in detail, how much the person has borrowed, from whom, and whether the bills have been paid on time. Credit bureaus get information from a variety of sources, including stores, credit card companies, banks, mortgage companies, and medical providers. It is important to know exactly what is appearing on your credit report . Most states now provide individuals one free credit report annually. You may also receive free copies of your credit report if you have been declined credit within the last 30 days. Obtain credit reports and review carefully. Be sure what appears on the report is attributed to your credit history. You can request erroneous information be removed. Always check your credit report prior to applying for credit to avoid surprises. Avoid applying for credit too often in a short period of time, as, multiple credit inquires may reflect negatively on your credit worthiness or credit score. Your credit report should include: Name of Creditor Type of Account Terms Amount of the original debt or credit limit Balance outstanding Whether payments were made late during the reporting period
  • Speaker Notes: You may want to mention that each year a person is allowed one free credit report from each of the reporting agencies. Additionally, if you are ever rejected because of your credit you are allowed a report from the agency that was used to deny your credit for free.
  • Used responsibly, credit cards can be helpful in an emergency and for establishing a credit history. Credit card companies will compete for your business by handing out T-shirts, coffee mugs, CDs and other enticements. Don’t fall for their gimmicks. Here are some tips on using credit wisely. Be aware of teaser rates. A lot of times those low interest rates are simply introductory rates that last for a few months and then jump to 20%. It’s important that you compare offers from several different issuers before selecting a card.
  • Speaker Notes: Discuss the difference between good and bad debt and that the difference is understanding the terms of the debt, your ability to repay, and how the debt fits into larger goals.
  • Know where your money is going or it’s going to go places without you Strive to become an excellent money manager Building a budget Keep it simple Income – Fixed Expenses (rent, electric) – Variable Expenses (clothing, groceries) = Net Income or (Net Loss) Track all expenses including cash Update as often as possible: weekly or daily if possible Be flexible Build in rewards to your budget Budget Pitfalls…. Trying to live up to an unrealistic budget Not being flexible Not updating your budget on a regular basis Ignoring budget items Fun, Money Lost (cash moves quickly)
  • 3 positions to find yourself Ahead – You have more money than you spend. Money at end of month can be saved or invested Break-even – You spent everything you had –no more, no less Behind – You spent more than you had using borrowed funds
  • Explain that this is a elementary budget and that a budget should be tailored towards your individual needs and goals. Most important aspect of a budget is that it is followed on a regular basis.
  • Speaker Notes: With this slide try to press the group to see where their money goes. For young adults, a lot of money will go towards entertainment and clothing- a good question is to ask the group to see if they know how much they spent on “nights-out” with the friends last month. Emphasis should be placed on gaining an understanding of where money is going not that spending money is bad. Speaker Notes: With this slide try to press the group to see where their money goes. For young adults, a lot of money will go towards entertainment and clothing- a good question is to ask the group to see if they know how much they spent on “nights-out” with the friends last month. Emphasis should be placed on gaining an understanding of where money is going not that spending money is bad.
  • Indicate that this slide is for illustrative purposes only. That in today’s environment, it is virtually impossible to find savings accounts that pay at 5%. Most are at 1-2% with some longer term CDs yielding a bit more. However, we all anticipate interest rates increasing as the economy strengthens. Depending on your audience and their risk position/tolerance, you may also want to point out that this might be a good time to enter/re-enter the stock market, (with caution of course, and the assistance of a financial advisor) to “buy low, hold and sell high”, when the market bounces back.
  • Speaker Notes: Habits are the actions that will make or break a person financially. Emphasize discussion regarding current habits versus habits that would create financial success. Speaker Notes: This is an opportunity to recap the main points from the presentation and provide a launching bad for further action. Any key points that were expressed during the presentation should be brought up again. For instance, save 10% of income, understand debt, and develop a working budget would be several that could be used.
  • Transcript

    • 1. National Association of Black Accountants, Inc. M ney $ ense NABA - Money $ense
    • 2. Money Mindsets
      • “ The only way to not think about money is to have a great deal of it.”
      • Edith Wharton
    • 3. Money Mindsets (cont’d)
      • “ The safest way to double your money is to fold it over and put it in your pocket.”
      • Kin Hubbard
    • 4. Money Mindsets (concluded)
      • “ We have become ninety-nine percent money mad. The method of living at home modestly and within our income, laying a little by systematically for the proverbial rainy day which is due to come, can almost be listed among the lost arts."
      • George Washington Carver
    • 5. How does money play into your life?
      • Have you thought about your relationship with money?
      • Money should not influence your self-esteem
      • Your value as a person does not come from money
      NABA - Money $ense
    • 6. Financial Education
      • Workshop Learning Objectives:
      • Four Pillars of Personal Finance
      • Keys to saving
      • Understand credit
      • Recognize good debt vs. bad debt
      • Learn to win the money game using a budget
      NABA - Money $ense
    • 7. Four Pillars of Personal Finance
      • Savings
          • You are worth every penny of your money
              • Pay Yourself First and Pay Yourself Often
      • Handling Credit and Debt
          • Knowledge is Power
              • Know your credit score and how to raise it
              • Know the power and pitfalls of credit/debt
      NABA - Money $ense
    • 8. Four Pillars of Personal Finance
      • 3. Budgeting
          • Know where your money is going or it’s going to go places without you
              • Know your budget, update your budget, be flexible with your budget
      • Investing
          • Know what you want and use patience to get there
              • Invest based on your goals, risk tolerance, and time
    • 9. Pillar One: Savings
    • 10. Pay Yourself – Savings is Key
      • Make a habit of paying yourself first
        • Rule of thumb is 10% but the more the better
      • Save for 3 – 6 months living expenses
        • Set-up high interest savings account
      • Nest egg savings
        • Save for vacation, new car, expected expenditure
      NABA - Money $ense
    • 11. Pillar Two: Managing Debt and Credit
    • 12. Credit in a Nutshell Are You Trustworthy?
    • 13. Are You Trustworthy?
      • If I lend you money, will you pay me back?
      • Will you pay me on schedule according to our agreement?
      • What happens when you don’t pay on time?
      • At what point do you violate my trust?
      • What will it cost you to regain my trust?
      • What should I tell others when they ask about your trustworthiness?
    • 14. Types of Credit Accounts and Relationships
      • Mortgage loan (Countrywide, Quicken Loans, Bank of America)
      • Car loan (GMAC, Chrysler Financial, Ford Motor Credit)
      • Major credit card (Bank of America, Capital One, US Bank)
      • Dept. store credit (Macy’s, The Limited, Nordstrom)
      • Cell phone (AT&T, Sprint, Verizon)
      • Bank checking*
    • 15. NABA - Money $ense Type of Credit Lender Advantages Disadvantages HOME MORTGAGE • Commercial bank • Savings and loan • Credit union • Homes often increase in value. • Interest rates for mortgages are relatively low • The interest paid is tax-deductible. • Mortgages are long-term commitments. • Obtaining a home loan involves extensive credit checks. CAR LOANS • Commercial bank • Savings and loan • Credit union • Consumer finance company • Cars can make it easier to work and earn an income. • Cars lose their value relatively quickly. The car you purchase may have little value when the last payment is made. COLLEGE LOANS
      • • Commercial bank
      • • Savings and loan
      • • Credit union
      • Federal government
      • A college education is a good borrow investment. necessary. • Interest rates can be relatively low. • Students sometimes borrow more than necessary. • New graduates can face difficulty in repaying large loans. PERSONAL LOANS • Commercial bank • Savings and loan • Credit union • Consumer finance company • Personal loans allow individuals to purchase today that boat or vacation they want. • Personal loans have relatively high interest rates. • Some young people may borrow more than their income allows. CREDIT CARDS • Commercial bank • Savings and loan • Department store • Oil companies • Other financial institutions, e.g., American Express • Credit cards are convenient to use and useful in an emergency. • Credit cards provide a record of charges. • Credit cards have relatively high interest rates. • Some young people may borrow more than their income allows.
    • 16. Credit Cards, Credit Bureaus and Credit Reports
      • How They Work Together
      + + = Your Credit Score
    • 17. Credit Cards
      • Terminology you must know:
        • APR – Annual Percentage Rate
        • Finance Charge
        • Grace Period
        • Fees (annual, transaction, cash advance, late)
    • 18. Credit Bureaus
      • Three credit bureaus (Equifax, Experian, TransUnion)
      • Role they play:
        • Receive and report credit information from and to various entities who have established or look to establish a credit relationship with you.
        • Maintain credit report
    • 19. Credit Reports
      • What is reported?
        • Name of creditor
        • Length of credit history
        • Amount of credit outstanding and borrowing capacity
        • Status of payment on account: current or late
        • Inquiries on account
        • Other information
        • Credit score*
      • How do you obtain a copy of report?
        • FREE at www.annualcreditreport.com
    • 20. Credit Score
      • Why is it important?
        • Measurement of creditworthiness
        • Basis for creditor’s lending decision
        • Determines cost of borrowing (i.e. interest rate)
        • Employers may pull it when evaluating potential candidates for hire
      • How is it calculated?
        • Payment history – (35%)
        • Debt to credit limit – (30%)
        • Length of credit history – (15%)
        • New accounts and recent applications for credit – (10%)
        • Mix of credit cards and loans – (10%)
    • 21. Credit Cards – Terms to Know
      • APR : the amount it costs annually when you decide to carry a balance (not pay off your credit
      • card in full) each month.
      • Can range from 0 to as high as 25% annually
      • Finance Charge : Actual dollar cost of using credit
      • Grace Period : the number of days you have to pay your bill in full before incurring finance charges (typically 25 days).
      • Beware of cards with no grace period! Interest accrues from the moment you charge an item.
      • You don’t get a grace period when you carry a balance.
      • Annual Fee : the amount you pay annually as a credit cardholder for the privilege of using credit
      • If you pay your balance each month, you should avoid cards with an annual fee.
      • Some annual fee cards have lower interest rates, so if you carry a balance each month you may actually save money with an annual fee card.
      • Transaction Fees : You may be charged additional fees for ATM cash advances, balance transfers,
      • late charges and exceeding your credit limit.
      • Some cards also charge a monthly fee for not using the card!
      • Late Fee : If your payment is not processed by the due date, you may be assessed a late fee of up to $35.
      • Avoid this expense by mailing timely payments.
      • Remember, creditors must receive a payment at least every 30 days.
      NABA - Money $ense
    • 22. Debt: Friend or Foe?
      • Good Debt vs. Bad Debt
        • Buying a home vs. buying an expensive vacation
      • How much debt can you handle
        • A conservative rule of thumb: the “20-10 Rule”
          • Total household debt including your housing payments shouldn’t exceed 20% of your net household income
      • How to handle debt
        • Have a plan
          • Know how much you owe, know the interest and repayment terms, set a plan, and stick to it
      NABA - Money $ense
    • 23. Pillar Three: Budgeting Get in the Money Game!
    • 24. The Money Game How Do You Play?
    • 25. Three Ways to Play
      • Getting Ahead – You make more money than you spend. Therefore, you have money at end of month that can be saved or invested.
      • Breaking Even – You spent everything you had –no more, no less
      • Falling Behind – You spent more than you had using borrowed funds.
    • 26. BUDGET SCORECARD NABA - Money $ense Category Getting Ahead Breaking Even Falling Behind Monthly INCOME:         Wages/Income  $1600  $1600  $1600  Interest Income  $10  $10  $10  INCOME SUBTOTAL   $1,610   $1,610   $1610           Monthly EXPENSES:         Taxes  $250  $250  $250  Rent/Mortgage  $500  $600  $750  Utilities  $100  $100  $100  Groceries/Food  $250  $300  $350  Clothing  $100  $100  $200  Shopping  $75  $75  $100  Entertainment  $100  $160  $200  Miscellaneous/Other  $25  $25  $50  EXPENSES SUBTOTAL   $1,400   $1610   $2000           NET INCOME (Income - Expenses)   $210   $0     $(390)
    • 27. Benefits of Budgeting
      • Evaluate source (s) of income – explore ways to increase this amount
      • Evaluate expenditures and where money goes – identify opportunities to reduce this amount
      • Save, invest, pay down debt faster
      • Cash Flow Equation:
        • (+) Revenue or Source
      • of Income
        • (-) Less: Expense or
      • Use of Income _______________
        • (=) Net Cash Flow
    • 28. Budgeting Basics
      • Save at least 10% of income through automatic payroll deduction (when available)
      • Create a contingency fund for unexpected expenditures (minimum 6 months of salary)
      • Track your spending
        • Itemize necessities first and foremost
        • Update your budget monthly
        • Add new information timely
        • Print it out and post it as a daily visual reminder
      • Pay down expensive / excessive debt.
      NABA - Money $ense
    • 29. Pillar Four: Investing
    • 30. Make Your Money Grow Money that is invested will grow! NABA - Money $ense What if you saved $1 per day for 30 years? TIME NO INTEREST 5% DAILY COMPOUNDING Year 1 $ 365 $ 374 Year 5 $ 1,825 $ 2,073 Year 10 $ 3,650 $ 4,735 Year 30 $10,950 $25,415
    • 31. What Did You Learn?
    • 32. New Mindset, New Habits
      • Take the First Step:
        • Step 1
          • I have taken control of my financial future
          • I am committed to achieving financial freedom
        • Step 2
          • I have a budget and I review my budget regularly
          • I save 10% or more of my income
          • I have 6-9 months of living expenses saved as an emergency fund
          • I know how much debt I have and the related interest rates
          • I know my credit score
        • Step 3
          • I have a 401(k) or similar retirement account that I contribute to regularly
          • I have an investment plan that considers my goals and risk tolerance
      NABA - Money $ense
    • 33. Thank You! National Association of Black Accountants, Inc. M ney $ense For more information visit www.nabainc.org NABA - Money $ense