Securing Your Financial Future Cash Management Presented by Teresa Muench NEA Member Benefits April 4, 2015

Cash Management Understanding Cash Management Where oh where does our money go? Making a budget Living within that budget IT DOESN’T ALWAYS TAKE MORE $$$, Sometimes it takes smarter choices!!

Cash Management Benefits of Developing A Budget It allows you to choose how you will spend your money. It gives you control over where your money goes. It provides against financial emergencies. It helps prevent impulse buying. It helps financial goals become a reality.

Cash Management Budgeting Rules –Set realistic financial goals –Distinguish between wants and needs –Record monthly expenses –Limit monthly debt payments to 20% of net income (excluding mortgages) –Establish an emergency fund (3 to 6 months of after tax income)

Cash Management Budgeting Rules –Track income and expenditures –No lazy money –Establish credit –Shop wisely

Cash Management Steps in Developing Your Budget –Determine your income Include only your net income Do not include over-time or bonuses –Determine your fixed expenses Includes rent or mortgage, savings utilities, car payment, etc. Pay yourself first!!!!

Cash Management Steps in Developing Your Budget –Determine your flexible expenses Easier to control or reduce Includes clothing, food, entertainment –Determine your variable expenses Can be a problem if not properly budgeted for Include things like insurance, taxes, annual fees, etc If the payment is due every year, divide by 12 and put aside every month

Cash Management Steps in Developing Your Budget –Record monthly expenses Keep organized records –Re-evaluate your budget periodically Budget should reflect you and changes in your life

Credit…A Key Element of Cash Management Understanding Credit –Why is it important? –How to build credit reputation? –How are lending decisions made?

Cash Management Why is it important to establish credit? –Allows you to enjoy major purchases –Offers advantages of convenience and safety –Enables you to take advantage of sales and investments

Cash Management Understanding credit –The cost of credit –Getting your credit report –Some tips

Cash Management Understanding Credit –Finance Charges Average daily balance- gives you credit from the day the creditor receives payment Two-Cycle Billing – if balance is not paid in full, interest can become retroactive back to date of purchase – essentially wiping out your grace period

Cash Management Understanding Credit –Balance Transfers Promotional rates (usually 0% - 3.9%) offered by credit card issuers to balance transfer balances from a competitors credit card Typically lasts from four to nine months

Cash Management Understanding Credit –Balance Transfers “ We may allocate your monthly payments to your promotional APR balance(s) before your non-promotional APR balances.”

Cash Management Understanding Credit –Other Charges & Fees Annual Fee – for the privilege of using the card Cash Advance Fee – transaction fee for cash advances Over Credit Limit Fee – fee assessed for exceeding the stated credit limit Transaction Fee – fees charged for using an ATM, debit card, purchase of money orders, wire transfers, etc.

Cash Management Understanding Credit –Other Charges & Fees Insufficient Funds Fee – charged assessed for checks returned or insufficient funds Late Payment Fee – fee for late payment Minimum Finance Charge – minimum finance charge of $0.50 if your purchase or finance charge is less than $0.50 Low Activity Fee – fees charged if a transaction is not recorded regularly or if no balance is carried

Cash Management Identifying Financial Stress –Do you routinely spend more than you earn? –Are you forced to make day-to-day purchases on credit? –Are able to make only the minimum payments on monthly credit card bills? –Are you having difficulty stretching your paycheck to meet monthly bills?

Cash Management Identifying Financial Stress –Are bill collectors calling? –Would you have difficulty paying next month’s bills if you lost your job?

Cash Management Reducing Expenses –Cut Spending – Eliminate unnecessary spending such as eating out and purchasing expensive entertainment. Clip coupons, shop sales, and avoid impulse buying –Consolidate Debt – Check into mortgage refinancing, home equity loans, and personal loans.

Cash Management Get a Handle on Credit Cards By paying $100 towards a $3,000 balance (and not charging any more to the account), it would take 41 months to pay off the balance (18% interest rate) and you would incur $1,042 in interest charges.

Cash Management Building a Good Credit Reputation –Use credit before you need it –Keep within obligation of your agreement –Live up to the terms of the contract

Questions?