This class has two parts to it. The first part is what we are doing today: presenting information on a specific financial topic that you are interested in knowing more about. The second part of the program involves our providing you with 30 days of free financial coaching from a seasoned financial expert who works with employees like you all over the country. The Coach’s total focus for the next 30 days is helping you implement into your life what you'll be learning here today, Like other professional Coaches, they will not try and sell you a product.
This is a quote form Scott Blanchard, founder of Coaching.com, an executive coaching program. He is also the son of Ken Blanchard, author of “The One Minute Manager”. A cornerstone of our financial classes is the coaching piece. Coaching helps sustain learning and facilitates the application of what you learn today to your every day life. Now, let’s talk about how important it is to develop a spending plan!
To be debt free – Stop paying a large part of your income to high interest debt. To pay your bills on time – Stop paying late, overage and reinstatement fees. T o establish savings – Be prepared in the event of an emergency or unforeseen expense, such as a sudden car repair or a short-term loss of income. To have good credit – By being current with monthly bills and paying on time. To keep what you have worked hard to gain - Avoid repossession or foreclosure. Staying Motivated Most people do not like to track their spending Set your sights on a positive financial future Set specific goals to stay on track Allocate money to items that achieve family goals. Shared family goals provide incentive
Complete the Spending Plan worksheet, as outlined below (participants will have a sample spending plan in their handout). 1.Your worksheet is set up to track income and expenses. Change or add categories as needed; cross out categories that do not apply to your situation. Your expense categories should reflect the way you and your family spend money. 2.Go through your checkbook and your bills for the last two to three months. Add and delete categories from the worksheet to fit your expenditures. Enter average monthly expenditures from your checkbook from the last few months. 3.Go through pay stubs and calculate your average monthly gross and net pay; include any interest income, dividends, bonuses, or other miscellaneous income. 6.For quarterly, semi-annual or annual expenses, convert the payment to a monthly amount when calculating the monthly budget. 7. Track cash expenditures and record total cash expenditures at the end of the month. 8. Subtotal the income and expense categories. 9. Subtract the total expenses from the total income to arrive at your monthly net income.
Deferment is a period of time when the borrower is not required to make payments on the loan. You must apply annually for a deferment with your loan servicer. Subsidized loans will not accrue interest during a deferment period. Unsubsidized loans will accrue interest during deferments. Forbearance means a period of time when the borrower is not required to make payments on the loan, or the regular payment amount is reduced. You must request forbearance from your loan servicer, and it may be granted for up to 12 months at a time. Interest accrues on all loans during a forbearance. Loan consolidation is a way to refinance, or pay off, multiple loans with one brand new loan (sometimes at a lower interest rate). Consolidating makes payment more convenient, can improve cash flow, and may allow the borrower to access additional deferments. Loan repayment and forgiveness programs are a way of expediting repayment of student loans in exchange for work or military service.
A balance transfer may cost you even more in interest and fees. A.Will you be charged a fee for a balance transfer? The fee could either be a flat sum or percentage of the debt you plan to consolidate. B.Shop around - you may be able to find a credit card that offers free balance transfers. C.Is there a “universal default” clause? If so, your interest rate could increase dramatically if you are late paying any bill and the late payment is reported on your credit report. Pay your cell phone bill late and your credit card interest rate could skyrocket! D.If you make all your required payments on time you don’t have to worry about the penalties for a late or missed payment. Any additional balance or purchases you make with the credit card will be paid for after your low balance transfer is paid off. Too many additional purchases and you won’t be saving as much money in interest as you had hoped. Low introductory rates can skyrocket after the initial period, or sooner, with a late payment : A.Some credit cards offer the same low interest rate on the transferred balance for the life of the balance. B.Other cards will offer a low rate for a set period of time and then revert to the credit card’s regular interest rate if the transferred balance is not paid off in full before the interest rate change. C.If you’ve transferred a large balance and don’t pay it off in time, you could wind up paying even larger interest payments than before you transferred the balance. Read the fine print in any transfer agreement before you sign.
A home is the best collateral to use to secure a loan at lower interest rates compared to rates typically charged by credit card companies and other high-interest lenders. Keep in mind, however, a home equity loan is a loan against your home, and a series of missed payments could result in foreclosure and loss of your home. The most important part of a debt consolidation is maintaining the new debt-free status. Many people who consolidate feel the burden of debt has been removed and within a year or two fall into old habits and pile up new debt on fresh credit cards. This advantage is erased if old habits continue, and a new cycle of debt occurs.
People can get deep in debt when they take out a loan against their paycheck. They write a postdated check in exchange for money. When they get paid again, they repay the loan, thus the name “payday loan”. These loans generally come with very high, double-digit, or even triple digit interest rates! It pays to read the fine print before you sign! Borrowers who can't repay the money are charged additional fees for an extension, which puts them even deeper in debt. Borrowers can continue to pay fees to extend the loan's due date indefinitely, only to find they are getting deeper in debt because of the steep interest payments and fees.
Paying off a credit card balance is comparable to investing with a rate of return – equal to the credit card interest. The question then becomes, if you have an outstanding balance on your credit card and are being charged 21% interest, can you invest the money and get a 21% rate of return? Sometimes, a better investment is paying off the credit card to avoid the interest on a loan. However, that advice will change if your employer’s retirement plan has a company match. You may want to put at least the minimum you need to invest in a 401(k) to get your company's match, with any leftover dollars going towards debt pay off. Many companies match at least some of your investment, and your money grows, tax-deferred, over time. If your company matches, say, 50% on the first 6% of pay you invest in a 401(k), you've got a 50% return right off the bat.
Make credit card payments on time. With some creditors, a payment one day late can result in a late fee of up to $35. A late payment can also trigger a “default” interest rate thereafter on the balance. A 12% interest rate, could be increased to a “default” rate of 21% or higher, once a late payment occurs! A payment received more than 30 days late is considered a delinquent payment for credit reporting purposes. A 30-day late (or more) notation on your credit report has an immediate affect of lowering your credit score.
Statistics show that 70 percent of credit reports contain serious errors that might cause consumers to be denied credit cards, car loans and even mortgages. The Fair Credit Reporting Act requires credit-reporting agencies to fix these mistakes. But it takes your diligence to make sure it happens. The first step is locating any discrepancies in your report. Even the smallest error could seriously dent your credit chances. If you find a mistake, immediately bring it to the credit agency's attention. Remember, there are three credit reporting services -- TransUnion, Experian and Equifax -- so you need to check, and correct, the record held by each.
Successful training happens when you combine the classroom experience and resources with the personal attention and focus of a financial coach. Coaching reinforces classroom learning and gives participants a chance to practice new skills.
MSA provides a team of seasoned, highly credentialed financial coaches. My Secure Advantage has extended the benefits of coaching beyond the everyday experience, providing flexible collaborative services.
We are delighted to introduce you to the growing number of individuals and families who are benefiting from setting goals and working with a financial coach. My Secure Advantage™ is here to help you through events that affect your life. This is a complete financial wellness approach that combines the classroom experience with a confidential one-on-one relationship with a professional who can help you put your plans into action. Through working personally with your very own Financial Coach, you will make a significant change in the future for you and your family. Our coaching services focus on the major areas of your finances: budget, debt and savings. We are here to work for you to help you maximize your cash flow and ability to improve your creditworthiness.
Making your money work for you
Making Your Money Work for You Financial Classes Personal Coaching
Making Your Money Work for You Today we’ll talk about… <ul><li>Using a spending plan to set goals. </li></ul><ul><li>Loan repayment strategies. </li></ul><ul><li>Managing your credit report. </li></ul>
“ Coaching to support learning has been proven to be an effective and dynamic process that drives the sustainability of training…” Source: Scott Blanchard, founder, Coaching.com
A spending plan is the foundation of a solid financial future
A spending plan helps you <ul><li>Cover necessary expenses, while saving for the future. </li></ul><ul><li>Pay bills on time. </li></ul><ul><li>Be debt free. </li></ul><ul><li>Establish and maintain good credit. </li></ul><ul><li>Reach short and long term goals. </li></ul>
Develop strategies to increase discretionary income <ul><li>For effective cash flow management </li></ul><ul><li>Compare actual versus estimated monthly cash; make necessary adjustments. </li></ul><ul><li>Identify variable expenses to trim or budget monthly. </li></ul><ul><li>Be realistic about expenses. </li></ul><ul><li>Identify needs vs.wants. </li></ul>
Watch out for “cash flow traps” <ul><li>Steadily increasing credit card debt. </li></ul><ul><li>Trade-up syndrome – spending more as income rises. </li></ul><ul><li>Maintenance expenses (failing to budget for home maintenance, car repairs, etc.) </li></ul><ul><li>Failing to track cash expenditures. </li></ul>
Whenever possible, make your finances “automatic” <ul><li>Direct deposit of paycheck. </li></ul><ul><li>Bill pay service through checking account. </li></ul><ul><li>Payroll deduction/auto-transfer to build savings. </li></ul><ul><li>Automatic deduction of insurance premiums, etc. </li></ul><ul><li>Automatic “sweep” account for investable cash. </li></ul><ul><li>Dividend reinvestment for stock and mutual funds. </li></ul>
Take control of your debt <ul><li>Student loans may be your most significant debt. </li></ul><ul><li>Other life goals are often contingent upon reducing student loan debt. </li></ul><ul><li>Debt repayment strategies should reflect your personal goals. </li></ul>
Consumer debt options <ul><li>Negotiate a lower rate </li></ul><ul><li>Balance transfer </li></ul><ul><li>Debt consolidation </li></ul><ul><li>Credit Counseling services </li></ul><ul><li>Debt settlement </li></ul><ul><li>Bankruptcy </li></ul>
<ul><li>Pros </li></ul><ul><li>Cons </li></ul><ul><li>Is there a time limit on the low interest rate? </li></ul><ul><li>Is there a balance transfer fee? </li></ul><ul><li>Some companies will raise rates to 20% or more and charge a late fee if payment is late. </li></ul><ul><li>Consolidate debt from accounts or loans with higher interest rates to reduce the interest paid. </li></ul>Consumer Debt Strategy Balance transfer to a lower rate card
Consumer Debt Strategy Debt consolidation to an equity loan <ul><li>Pros </li></ul><ul><li>Transfer to a secured loan with lower interest rate. </li></ul><ul><li>Interest may be tax deductible (check with a tax advisor). </li></ul><ul><li>Cons </li></ul><ul><li>Many people feel the burden of debt has been removed and soon can pile up new debt on fresh credit cards. </li></ul><ul><li>Missed payments could result in foreclosure and loss of your home. </li></ul>
Should I use extra cash to pay off student loans and credit cards, or contribute to my employer’s retirement plan?
New borrowing <ul><li>In the next several years, you may need to secure additional credit: </li></ul><ul><ul><ul><li>Car loan </li></ul></ul></ul><ul><ul><ul><li>Home mortgage </li></ul></ul></ul><ul><ul><ul><li>Education expenses </li></ul></ul></ul>
Good credit is important in achieving these spending goals <ul><li>Five categories of data determine credit score. </li></ul><ul><li>35% Payment history </li></ul><ul><li>15% Length of credit history </li></ul><ul><li>10% New credit </li></ul><ul><li>30% Amounts owed </li></ul><ul><li>10% Types of credit used </li></ul><ul><li>Percentages show relative importance in determining credit score </li></ul>
Your credit score affects the interest rate you pay <ul><li>How your credit score could affect the cost of a 30-year mortgage for $250,000 </li></ul>Source: Fair Isaac $ 492,952 $2,063 9.289% 500-559 $444,000 $1,928 8.531% 560-619 $391,540 $1,782 7.698% 620-674 $321,705 $1,588 6.548% 675-699 $290,232 $1,500 6.011% 700-719 $283,132 $1,481 5.888% 720-850 Total interest paid Monthly payment Annual % rate FICO score
Ways to improve and maintain credit score <ul><li>Pay bills on time </li></ul><ul><li>Minimize credit inquiries </li></ul><ul><li>Keep debt to available credit ratio (utilization) at 30% or less. </li></ul><ul><li>Pay off debt instead of moving it around </li></ul><ul><li>Avoid closing unused accounts as a short-term strategy to improve your credit score </li></ul>
79% of credit reports surveyed contained either serious errors or other mistakes… Source: www.uspirg.org (Federation of State Public Interest Research Groups)
You are entitled to a free credit report (one from each of the 3 national bureaus) every 12 months <ul><li>Check for errors that can lower your score </li></ul><ul><li>Order your reports through the website, www.annualcreditreport.com , by phone, </li></ul><ul><li>877-322-8228, or by writing: </li></ul><ul><li>Annual Credit Report Request Service </li></ul><ul><li>P. O. Box 105281 </li></ul><ul><li>Atlanta, GA 30348-5281 </li></ul>
What is the best way to develop an effective spending and debt repayment plan?
It’s Important to Set Specific, Measurable Financial Goals
What is the best way to achieve financial goals that you set?
Financial Coaching <ul><li>Create clear goals and accomplish them </li></ul><ul><li>Increase self-confidence and make financial decisions more easily </li></ul><ul><li>Explore financial road blocks/challenges and learn how to get through them </li></ul><ul><li>You and your partner are more likely to work together regarding finances! </li></ul>
Did you know? Source: Scott Blanchard, founder, Coaching.com “ Successful training takes more than putting people in a classroom and hoping that they will learn, absorb, and retain the material that’s presented…”
“ According to industry research, coaching helps people organize their increasingly complex lives, providing focus, a clear direction for setting goals, and the ability to develop meaningful action plans.” Source: “ E-Coaching” by Merry Lee Olson
My Secure Advantage ™ ( MSA ™ ) Financial Coaching <ul><li>Our program helps you focus on the major areas of your finances: </li></ul><ul><li>Improve your budget </li></ul><ul><li>Improve your credit </li></ul><ul><li>Maximize savings </li></ul><ul><li>Retirement planning </li></ul>
My Secure Advantage ™ Financial Coaching <ul><li>MSA ™ is a financial wellness program </li></ul><ul><li>MSA ™ provides a confidential relationship with a professional to help you set and achieve financial goals. </li></ul>
By attending today’s class… <ul><li>You have 30-days free access to the MSA ™ financial coaching program. </li></ul><ul><li>Let’s get started! </li></ul>
<ul><li>This presentation, and any handouts, were created and/or distributed by CLC Incorporated (CLC) and its Employee Assistance Plan (EAP) client. The presenter hereof is an independent provider of financial and/or insurance services. The presenter, and his/her broker-dealer or insurance agency, are neither employees nor agents of CLC or the EAP. This presenter has been retained as an independent contractor for the sole and exclusive purpose of making this CLC and EAP approved presentation. </li></ul>
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