Financial Crisis Management Tenth Annual Financial Literacy Leadership Conference Society for Financial Education and Professional Development Vonda Bowens, CPA

Sources of Financial Crisis Income Loss Job Business Death of Income Earner Increase in Expenses Illness Injury Major Home Repair Major Car Repair

Before Financial Crisis New money coming in periodically from Job/Business New Bills “eating” the new money

Financial Crisis (Stage 1) Either loss of income or increase in expenses New Bills have to “eat” Assets (Old Money) Level of Assets determine how long the household can be maintained

Financial Crisis (Stage 2) Continued loss of income or increase in expenses New Bills have to “eat” Liabilities (Other People’s Money) Availability of credit determines how long the household can be maintained

Financial Crisis (Stage 3) Continued loss of income or increase in expenses New Bills have nothing to “eat” Insolvency

Building Financial Resilience Address Financial Behavior to Change Financial Reality Strengthen Each Household Financial Pillar (Income, Expenses, Assets, Liabilities)

Address Financial Behavior to Change Financial Reality “The problem with most financial advisors out there today is that they believe that all clients can achieve financial health if they only had the proper education and information. This is based on the assumption that we will all make the right financial decisions and behave in optimal ways to reach our financial goals if we just know what we should do. However, the reality is that just knowing what to do isn’t enough–just like knowing how to eat properly and exercise correctly is all it takes to lose weight and get in shape. The truth is that for most of our clients, their financial beliefs, which drive their financial behaviors, can’t be changed by education or information alone.” Klontz, Brad; Kahler, Rick. Facilitating Financial Health: Tools for Financial Planners, Coaches, and Therapists (Kindle Locations 133-138).

Address Financial Behavior to Change Financial Reality What should we help them with? Identifying unconscious detrimental financial beliefs so they can be changed Identifying how financial history experiences contributed to financial beliefs and behaviors Identifying clear financial and life goals and learning to use money as a tool to achieve them Showing how to take financial actions that are in line with one’s values and purpose

Address Financial Behavior to Change Financial Reality How can we help them? Assessments Individual coaching Group Coaching Etc.

Strengthen Each Pillar: Fortify Income Increase skillset to get promotion/find a higher paying job Get Tax Refunds Early Income Protection Disability Insurance Life Insurance

Strengthen Each Pillar: Manage Expenses Identify where money is going Use spending plan to manage expenses Use spending plan to reach financial goals

Strengthen Each Pillar: Increase/Protect Assets Teach the money mechanics to invest and manage funds properly Build active savings and retirement plans from the surplus Asset protection Homeowners insurance Vehicle insurance

Strengthen Each Pillar: Control Liabilities Pay down debt Pay off smallest debt first, roll that monthly payment to the next smallest debt, and so on Ask creditors to lower interest rates Use portion of surplus to accelerate debt elimination If credit is strong consider balance transfers

Strengthen Each Pillar: Control Liabilities Build/Rebuild Credit Scores Pay bills on time (35%) Revolving account balances should be no higher than 30% of credit limit (30%) Don’t close long standing accounts (15%) Have 3 active revolving accounts (credit cards) and at least one open installment account (mortgage, car loan) (10%) Keep inquiries to a minimum (10%)

Let’s Get This ONE THING: To more effectively help households achieve and maintain financial resilience, it requires addressing financial behavior to change their financial reality

Life More Abundantly, LLC Vonda Bowens, CPA Life More Abundantly, LLC Ph: 301.577.5027 vbowens@lifemoreabundantlyllc.com http://www.lifemoreabundantly-dc.com THANK YOU