Money talk session #1

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Money talk session #1

  1. 1. Money Talk: Women’s Financial Education Series Session 1 Financial Basics Jennifer Abel Virginia Cooperative Extension jabel@vt.edu 703-228-641
  2. 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. 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. 4. Let’s Get To Know One Another Money Coat of Arms
  5. 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. 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. 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. 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. 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. 10. What Are Your Financial Goals?
  11. 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. 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. 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. 14. Ways to Reduce Expenses • Housing • Food • Transportation • Clothing • Utilities • Other expenses
  15. 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. 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. 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. 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. 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. 20. YES!
  21. 21. Says Who?
  22. 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. 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. 24. Credit Scoring Factors
  25. 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. 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. 27. Beware of Credit Card Traps • Late fees • Over-the-limit fees • Penalty APRs • Balance transfer fees • Skip-a-month offers
  28. 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. 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. 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. 31. Class Wrap-Up • Questions? • Comments? • Experiences? • Next week’s class topic: insurance

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