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Money talk session #1

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  • 1. Money Talk: Women’s Financial Education Series Session 1 Financial Basics Jennifer Abel Virginia Cooperative Extension jabel@vt.edu 703-228-641
  • 2. Why a Special Financial Course For Women? • Women live longer, on average • Women earn less, on average • Women are more likely to have “gaps” in employment • Women are impacted more severely by divorce & widowhood • Many women lack financial experience
  • 3. Course Series Objectives • Increased knowledge of financial topics • Increased desire to learn more about money • Increased confidence in financial decisions • Improved financial record-keeping • Improved family communication about financial issues • “No question is a dumb question” philosophy
  • 4. Let’s Get To Know One Another Money Coat of Arms
  • 5. What to write in the quadrants • One thing you do well with money • One thing you don’t do well with money • A money motto • One way you enjoy spending money • A way you have a hard time spending money
  • 6. Session 1 Lessons • Understanding Your Relationship to Money • Money Values and Goals • Testing Your Financial Fitness • Managing Household Cash Flow • Calculating Your Net Worth • Tips For Smarter Borrowing • Financial Record-Keeping
  • 7. Money Values • Personal beliefs about what is important • Guide how people spend time • Guide how people spend money • Examples: – family togetherness – religion/faith – job success – education What are 10 things that you like to do?
  • 8. Financial Goals Reflect Values • Goals should be SMART – Specific – Measurable – Attainable – Realistic – Time-related • Short-term (less than 3 years) • Intermediate-term (3-10 years) • Long-term (more than 10 years)
  • 9. SMART Goal Example • SPECIFIC: 2011 Honda Accord • MEASURABLE: Save $3,500 down payment • ATTAINABLE: Have $2,000, save $250/mo. • REALISTIC: Yes • TIME-RELATED: Dec. 2014
  • 10. What Are Your Financial Goals?
  • 11. Testing Your Financial Fitness • As important as an annual physical • Monitors progress • Identifies weaknesses • Identifies needed action Take the Financial Fitness Quiz Exercise I-5
  • 12. Managing Household Cash Flow • Relationship between income and expenses – Positive cash flow – Negative cash flow • Three ways to improve cash flow – Increase household income – Decrease household expenses – Do both
  • 13. Ways to Increase Income • Adjust tax withholding/tax benefits (EITC) • Add a second job or work overtime • Start a small business • Increase/collect child support/alimony • Access public benefits • Sell assets • Upgrade job skills • Charge adult children room & board • Bartering • Other?
  • 14. Ways to Reduce Expenses • Housing • Food • Transportation • Clothing • Utilities • Other expenses
  • 15. How to Develop a Spending Plan • Add up take-home income • Total fixed expenses (e.g., rent or mortgage) • Total flexible expenses (e.g., food) • Pro-rate (1/12 per mo.) occasional expenses • Include money for emergencies • Include money for financial goals • Balance the bottom line: income = expenses • Take Action!
  • 16. Calculating Your Net Worth All Assets (everything you own) • Cash/liquid assets • Investments • Use assets/personal property All Debts (everything you owe) •Current debts •Mortgages •Loans Assets - Debts = Net Worth
  • 17. Why Calculate Net Worth? • Measure financial progress • Identify problems and gaps – High household debt – Lack of diversification – Inadequate emergency savings • Identify financial strengths • Calculate home equity • Information required for loans & divorces
  • 18. Tips For Calculating Net Worth • Try to do around the same time each year • Use “fair market value” for property • Use account statements or newspaper listings for savings and investments • You may need others for assistance: – Real estate agent for house value analysis – Human resources department for pension data – Insurance agent for cash value life insurance
  • 19. Tips For Smarter Borrowing • Always try to pay more than the minimum payment • Pay bills promptly to reduce average daily balance • Limit cash advances • Request a copy of your credit report: www. annualcreditreport.com
  • 20. YES!
  • 21. Says Who?
  • 22. Methods of checking your report • On-line: www.annualcreditreport.com • By phone: 1-877-322-8228 • By mail: – Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281
  • 23. Credit Score: FICO • A number between 350 and 850 that reflects your creditworthiness • Not provided with your free report; must pay fee of $7.95 per report to obtain score • Mortgage and auto lenders now required to divulge your score when evaluating your credit
  • 24. Credit Scoring Factors
  • 25. More Credit Tips • Make a list of credit card accounts • Have a credit card in your name • Select credit cards that match debt repayment style – Revolver- low interest rate – Convenience user- no annual fee & grace period
  • 26. Calculate Your Debt-to-Income Ratio • Total monthly debt payments • Divide into net household income – Example: 350/2,500 = .14 (14%) • Ratio should not exceed 15% - 20% • Even less (10%) is high for some families • Consumer credit + mortgage ratio should not exceed 40% - 50% of net pay – Example: 1,150/2,500 = .46 (46%)
  • 27. Beware of Credit Card Traps • Late fees • Over-the-limit fees • Penalty APRs • Balance transfer fees • Skip-a-month offers
  • 28. Financial Records • Prove that bills are paid • Save time and reduce stress • Show legal proof of events • Document tax deductions • Help dispute errors • Document benefit claims • Expedite payments • Simplify your financial affairs
  • 29. Three Places to Store Household Records • Safe deposit box at bank – Papers difficult to replace (e.g., car title) – Papers of “historical” value (e.g., deed) • Active Home Storage – Papers that are referred to frequently – Recent bills, statements, tax returns, etc. • Inactive Home Storage – Older records – Copies of documents in safe deposit box
  • 30. Take Your Time and Don’t Be Overwhelmed! Each small step is progress which moves you closer to your goals. “If it is to be, it is up to me.”
  • 31. Class Wrap-Up • Questions? • Comments? • Experiences? • Next week’s class topic: insurance