MoneyCounts: A Financial Literacy Series AAUW – PSU Students Financial Literacy: What’s in it for Women? Dr. Daad Adel Rizk Director, Penn State Financial Literacy Center 128A Outreach Building University Park PA 16802 https://financialliteracy.psu.edu/ dar39@psu.edu 814-863-0214

Financial Literacy: A life $kill To boldly go where no one has gone before Topic is personal Topic is emotional Mission: To provide financial knowledge and skills to make informed decisions and take effective actions regarding money management

Four Elements of Financial Well Being In summary, financial well-being can be defined as a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life. The four elements of financial well being (cfpb) Present Future   Security Control over day-to-day Capacity to absorb financial shock Month to month finances Freedom of Choice Financial freedom to make On track to meet financial goals Choices to enjoy life Consumer Financial Protection Bureau (Jan 2015)

Why Financial Literacy? Credit card debt = 1.0 trillion Student loan debt = 1.42 trillion Mortgage debt = 14.4 trillion Bankruptcies = 512,743 Foreclosures = 869,533 Median Income = $30,112 Total Personal Debt = $18 trillion Debt per Citizen = $56,146 Citizen = man, woman, child http://www.usdebtclock.org/

Life on the Edge

Financial Literacy for Women Financial literacy is a serious issue facing women in the United States (and globally) Women earn less over a lifetime Women spend between 11–13 years out of work Women save and invest little, if any Women acquire same or higher debts Women end up divorced (50%) Women live longer (5–7 years)

Student Loans Total U.S. student loans: $1.4 (T) Average loan for college graduate = $35,000 Women college graduates are carrying 60% of student debts Average loan monthly payment is between 8–20% of women’s net income www.usdebtclock.org/#

Credit Card Debt Total U.S. credit card debt = $867,784, (B) Average credit card debt = $5,600 FINRA (Financial Industry Regulatory Authority, Inc.) 2009 study of 28,000 people: Carrying a credit card balance: 55% of men, 60% of women Making only minimum payment: 38% of men, 42% of women Paying a late fee: 23% of men, 29% of women Over-the-limit fee: 15% of men, 16% of women

Financial Literacy: Young Professionals Map your financial future Budget your money Your credit past is your credit future Manage your debt Stay insured

Map your Financial Future Set Goals – Plan Dream of your 20,30,40,50,60,70,80,90 What do you see? Save & Invest – Act Realize goals

Budget your Money Gross Income/Net Income Tax and other Deductions Saving & Investing Expenses Fixed Variable/discretionary

Budgeting guide Earning 100% Saving 10% Housing 30% Meals 20% Loans 10% Car 10% All other 20%

Save before you Spend Saving Pay Yourself First Make Saving automatic Establish an emergency fund (curveball account) Expect the unexpected – EXIT Strategy 3 – 6 months

Spend less than you Earn Spending Wants Versus Needs Live within your means Financial Freedom! Financial Security! Living Beautifully!

How Time Changes Values

Credit Cards Credit past is credit future www.annualcreditreport.com Copies of your credit reports www.annualcreditreport.com Equifax Experian TransUnion Clean & protect credit reputation Watch out for student loans Understand the cost of borrowing

Manage your Debt Pass the Debt Test? 20/10 Rule All Debt (outside mortgage) should not exceed 20% of net annual income Monthly payment should not exceed 10% of monthly take home income Pay by due date and in full (if possible) Watch debt to limit ratio - Keep your credit card charges at no more than 30% of your credit limit to protect your FICO Score

Strategies to reduce debts Debt Management Strategies Pay debt with highest interest rate first Pay debt with small amounts first and free funds Save for Big Purchases Calculate cost of items before you charge on credit cards

Size your Mortgage Mortgage Monthly payment should not exceed 28% -30% of net monthly income Send ½ a payment every 2 weeks instead of one payment a month $800 a month = $9,600 a year (800 X 12) $400 every 2 weeks = $10,400 a year (400 X 26)

Stay Insured Manage Risk Review Insurance coverage periodically Assess current and future need Health/medical Life and Term insurance Disability Home insurance Car insurance Protect Identity from theft

Managing Retirement Manage Retirement Start saving early – compound interest Do not rely solely on Social Security Funds Delay SSF to get full benefits Save money in your assets - Home

Things do not change, WE CHANGE Share the Knowledge Share a TIP! Things do not change, WE CHANGE Henry David Thoreau

MoneyCounts: A Financial Literacy Series Thank You! Comments and Questions Dr. Daad Adel Rizk Director, Penn State Financial Literacy Center 128A Outreach Building University Park PA 16802 https://financialliteracy.psu.edu/ dar39@psu.edu 814-863-0214