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  1. 1. Money Matters NxLeveL Guide to Money Management
  2. 2. Getting Started
  3. 3. Discussion Topics <ul><li>Household Budgeting </li></ul><ul><li>Setting Financial Goals </li></ul><ul><li>Personal Financial Statement </li></ul><ul><li>Understanding Credit </li></ul><ul><li>Debt ~ is it for you? </li></ul><ul><li>Linking Personal & Business Finances </li></ul><ul><li>Borrowing for your Business </li></ul><ul><li>The Lender Relationship </li></ul><ul><li>Take the First Step </li></ul>
  4. 4. Household Budgeting
  5. 5. Sample of Household Budget Categories <ul><li>Income </li></ul><ul><li>Salary </li></ul><ul><li>Partner’s Salary </li></ul><ul><li>Public Assistance </li></ul><ul><li>Child Support/Alimony </li></ul><ul><li>Other </li></ul><ul><li>Expenses </li></ul><ul><li>Living/Housing </li></ul><ul><li>Regular Payments </li></ul><ul><li>Food </li></ul><ul><li>Personal </li></ul><ul><li>Transportation </li></ul><ul><li>Charity, Donations </li></ul><ul><li>Savings </li></ul><ul><li>Other </li></ul>
  6. 6. Setting Financial Goals
  7. 7. The Planning Cycle Set Goals Create the Plan Work the Plan Make Changes Analyze the Situation
  8. 8. What are Your Goals? <ul><li>Immediate </li></ul><ul><ul><li>Within 1year </li></ul></ul><ul><li>Short Term </li></ul><ul><ul><li>2-5 years </li></ul></ul><ul><li>Long Term </li></ul><ul><ul><li>5+ years </li></ul></ul>
  9. 9. U.S. Personal Savings Rate (1960-2008)
  10. 10. Personal Financial Statement <ul><li>Assets = Liabilities + Net Worth </li></ul>
  11. 11. Understanding Credit
  12. 12. Credit Report Basics <ul><li>Four Types of Information </li></ul><ul><li>Identification </li></ul><ul><ul><li>Name, address(es), Social Security number, birth date, employers, etc. </li></ul></ul><ul><li>Credit History </li></ul><ul><ul><li>Account information, credit/loan limits, payment history, balances due </li></ul></ul><ul><li>Public Records </li></ul><ul><ul><li>Bankruptcies, tax liens, criminal records, other </li></ul></ul><ul><li>Inquiries </li></ul><ul><ul><li>Requests for your credit history </li></ul></ul>
  13. 13. Elements of Credit Score
  14. 14. Rebuilding & Protecting Your Credit <ul><li>Reduce existing debt … Stop spending! </li></ul><ul><li>Stick to a budget </li></ul><ul><li>Pay bills on time </li></ul><ul><li>Make more than the minimum monthly payment </li></ul><ul><li>Don’t carry too many credit cards </li></ul><ul><li>Get copy of Credit Report annually </li></ul><ul><li>Fix discrepancies ~ in writing </li></ul><ul><li>Carefully guard your Social Security Number and other personal information </li></ul><ul><li>Beware of Identity Theft schemes </li></ul>
  15. 15. Debt ~ Is it for You?
  16. 16. Types of Debt <ul><li>Short term </li></ul><ul><ul><li>Less than one year </li></ul></ul><ul><ul><li>Personal: Consumables (restaurants, clothing, vacations, etc) </li></ul></ul><ul><ul><li>Business: Working capital, supplies, seasonal inventory, lines of credit, etc. </li></ul></ul><ul><li>Intermediate term </li></ul><ul><ul><li>2-10 years </li></ul></ul><ul><ul><li>Personal: Auto or student loans </li></ul></ul><ul><ul><li>Business: Furniture & fixtures, leasehold improvements, equipment </li></ul></ul><ul><li>Long term </li></ul><ul><ul><li>10+ years </li></ul></ul><ul><ul><li>Personal: Home mortgage, property </li></ul></ul><ul><ul><li>Business: Real estate, large equipment, initial business purchase </li></ul></ul>
  17. 17. Caution: Not all debt is created equal <ul><li>Pay Check Loans </li></ul><ul><ul><li>Easy to arrange </li></ul></ul><ul><ul><li>Extremely high interest rates, restrictive terms </li></ul></ul><ul><ul><li>Committing future pay as a guarantee to repay the debt </li></ul></ul><ul><li>Rent to Own </li></ul><ul><ul><li>Easy; down payment is usually not required </li></ul></ul><ul><ul><li>Rent an item for a short period before returning </li></ul></ul><ul><ul><li>If all payments are made, you own it; if not, it will be repossessed for as little as one missed payment </li></ul></ul><ul><ul><li>Extremely high interest rates; may pay more than double or triple the original purchase price by the end </li></ul></ul><ul><li>Layaway </li></ul><ul><ul><li>Making a resurgence as our economy struggles </li></ul></ul><ul><ul><li>Retailer holds an item for you; no credit history is required </li></ul></ul><ul><ul><li>Store keeps the money as you make payments; fee is charged </li></ul></ul><ul><ul><li>Retailer may go out of business and/or you may incur extra expenses if you later change your mind </li></ul></ul>
  18. 18. Caution: Not all debt is created equal <ul><li>Car Title Loans </li></ul><ul><ul><li>Similar to rent to own; easy to access </li></ul></ul><ul><ul><li>Lender holds the title of vehicle until all payments are received </li></ul></ul><ul><ul><li>High interest rates; vehicle repossessed if payments are missed </li></ul></ul><ul><li>Pawn Shops </li></ul><ul><ul><li>Quick money using your valuables as collateral </li></ul></ul><ul><ul><li>No questions are asked </li></ul></ul><ul><ul><li>Extremely high interest rates; shop can sell your property if you do not pay </li></ul></ul><ul><ul><li>Loan is for only a small portion of the true value of your items </li></ul></ul><ul><li>Quick Tax Refund </li></ul><ul><ul><li>Loan against your expected tax refund </li></ul></ul><ul><ul><li>Quick access to money; high interest rates; refund may be delayed </li></ul></ul><ul><ul><li>An alternative is electronic filing or using a VITA (Volunteers Income Tax Assistance) Center to assist you </li></ul></ul>
  19. 19. Spending Choices 5-10% Savings & Investments 10-20% Debt & Obligations 10-15% Transportation 25-40% Living 20-35 % own 15-20% rent Housing
  20. 20. Linking Personal & Business Why do we care?
  21. 21. Keeping the Books Balance Sheet Personal Financial Statement Cash Flow Statement Profit & Loss Statement Balancing your Checking Account Business Budget Household Budget Business Personal
  22. 22. Borrowing for Your Business
  23. 23. Sources of Capital <ul><li>Personal Savings, Boot-strapping </li></ul><ul><li>Friends & Family </li></ul><ul><li>Angel Investors </li></ul><ul><li>Home Equity Loans </li></ul><ul><li>Credit Cards </li></ul><ul><li>Franchising </li></ul><ul><li>Banks & Credit Unions </li></ul><ul><li>Loan Guarantees </li></ul><ul><li>Suppliers/Vendors </li></ul><ul><li>Alternative Lenders, Microlenders </li></ul><ul><li>Other Sources ….. </li></ul>
  24. 24. Business Financing <ul><li>Debt Financing </li></ul><ul><li>Money borrowed for a business </li></ul><ul><li>A promise to pay back at a later time, with interest </li></ul><ul><li>Payment varies on terms (amount, length of loan, interest rate) </li></ul><ul><li>Receive money upfront in one lump sum </li></ul><ul><li>Repaid via a standard repayment schedule; amount typically does not vary </li></ul><ul><li>Common sources: Banks, Credit Unions, Alternative Lenders </li></ul>
  25. 25. Business Financing <ul><li>Equity Financing </li></ul><ul><li>Money invested by the owner(s) </li></ul><ul><li>Sell partial ownership of business in exchange for financial investment </li></ul><ul><li>Receive money upfront in one lump sum </li></ul><ul><li>Terms vary greatly based upon owner & investor negotiations; share risks and profits (or losses) </li></ul><ul><li>No monthly payments, but high rate of return expected in future </li></ul>
  26. 26. C’s of Credit <ul><li>Character </li></ul><ul><li>Credit </li></ul><ul><li>Concept </li></ul><ul><li>Collateral </li></ul><ul><li>Conditions </li></ul>
  27. 27. What to Look for in a Lender <ul><li>Listens </li></ul><ul><li>Answers all questions </li></ul><ul><li>Interested in working with you </li></ul><ul><li>Familiar with your type of business </li></ul><ul><li>Works with your size of $ request </li></ul><ul><li>Explains terms & options clearly </li></ul><ul><li>Does not talk down to you </li></ul><ul><li>Returns all phone calls & emails </li></ul><ul><li>Provides references, if asked </li></ul><ul><li>Trustworthy, honest, flexible, timely </li></ul><ul><li>Interested in a long-term relationship </li></ul>
  28. 28. Preparing for the Loan Process <ul><li>Investigate multiple lenders </li></ul><ul><ul><li>Find lenders that regularly lend to small business </li></ul></ul><ul><ul><li>Learn their preferences and requirements </li></ul></ul><ul><li>Get your personal records in order </li></ul><ul><ul><li>Check your credit history, know your credit score </li></ul></ul><ul><ul><li>Update your Personal Financial Statement </li></ul></ul><ul><li>Get your business records in order </li></ul><ul><ul><li>Write/update your business plan </li></ul></ul><ul><ul><li>Prepare financial projections for your business </li></ul></ul><ul><ul><li>Know what records will be requested </li></ul></ul><ul><li>Understand your commitments </li></ul><ul><ul><li>What is your financial investment </li></ul></ul><ul><ul><li>What will you pledge as collateral </li></ul></ul><ul><ul><li>Understand personal guarantee requirements </li></ul></ul><ul><li>Set expectations </li></ul><ul><ul><li>Be prepared for “personal” questions </li></ul></ul><ul><ul><li>Have patience </li></ul></ul>
  29. 29. Next Steps
  30. 30. Next Steps <ul><li>Know Your Baseline </li></ul><ul><ul><li>Household Budget </li></ul></ul><ul><ul><li>Personal Financial Statement </li></ul></ul><ul><ul><li>Credit Report, Credit Score </li></ul></ul><ul><li>Set Financial Goals </li></ul><ul><li>Address Credit Challenges </li></ul><ul><ul><li>Rebuild & Protect your Credit </li></ul></ul><ul><ul><li>Spending Plan </li></ul></ul><ul><li>Prepare for Your Business </li></ul><ul><ul><li>Write/update a Business Plan </li></ul></ul><ul><li>Take Action Today! </li></ul><ul><li>Have fun ~ enjoy the ride! </li></ul>
  31. 31. If you don’t write it down, it doesn’t happen! <ul><li>My Action Items: </li></ul><ul><li>1. </li></ul><ul><li>2. </li></ul><ul><li>3. </li></ul>

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