1. UNIT II General Financial Management Saving, Spending, Banks, Credit, and Wealth Savings Credit & Debt Credit & Debt Credit Profile Budgets

2. I Want to Save Money, but Where Do I Begin?

3. Set S.M.A.R.T. Savings Goals Specific Measurable Attainable Realistic Trackable

4. Prioritize Your Saving!!! THE FOUR BUCKETS Emergency Fund Near-Term Goals Fund Retirement Investing

5. How Much Can I Save or Invest?

6. SPENDING & BUDGETS Income (The Money You Make) - Expenses (The Money You Spend) ______________ = THE BOTTOM LINE (Save or Invest)

7. How Do I Adjust My Bottom Line?

8. KNOW THE DIFFERENCE!!! Fixed Costs:  Expenses stay relatively the same each month.  Your essentials or basic living expenses.  They include expenses such as your mortgage or rent, car payments, cable and/or internet service, trash pickup, etc.  Keep your fixed costs as low as you can! Variable Costs:  Expenses are typically easily adjustable and the type that can change from month to month.  They are not set in stone by a contract, agreement, or loan obligation.  These include items such as groceries, gasoline, entertainment, eating out and gifts to name a few. This category will be important when making adjustments.

9. KNOW THE DIFFERENCE!!! NEEDS are necessities for living (e.g. housing costs) WANTS are non-essential things

10. Does Everyone Have a Bank Account?

12. “Unbanked” and “Underbanked?” What Does that Mean? Unbanked An umbrella term used to describe consumers who do not use banks or credit unions for their financial transactions. They have neither a checking nor savings account. Underbanked Term used to describe consumers that do have a bank account, but also rely heavily on alternative financial services.

13. Why are people unbanked?? A poor credit history or outstanding issue from a prior banking relationship A lack of understanding about the U.S. banking system A negative prior experience with a bank Language barriers for immigrant residents A lack of appropriate identification needed to open a bank account Living paycheck to paycheck due to limited and/or unstable income

14. Where are the Unbanked Getting Financial Needs Met? Unbanked households use non-bank money orders or non- bank check-cashing services, payday loan institutions, rent- to-own agreements or pawn shops on a regular basis.

15. Who are the unbanked and underbanked? The FDIC estimates that the under-banked population includes about 43 million adults and 21 million households. Blacks, Hispanics and Native Americans are the most likely Americans to be under-banked. The most common groups of unbanked persons include low-income individuals and families, those who are less educated, households headed by women, young adults and immigrants. The unbanked population includes about 17 million adults, with 21.7 percent Blacks, 19.3 percent Hispanics and 15.5 percent Native Americans. WHY? Brainstorm Ways to Close the Gap and Bring the Unbanked to Your Bank

16. Is it more expensive to remain unbanked? A bank account allows consumers to avoid costly alternative financial services. When you consider the cost for cashing a bi- weekly payroll check and buying about six money orders each month, a household with a net income of $20,000 may pay as much as $1,200 annually for alternative service fees—much more than the cost of a monthly checking account fee. The direct cost of being unbanked will vary based upon the number and type of checks cashed and the number of money orders purchased. Unbanked individuals often lack sufficient credit histories to satisfy the requirements of traditional lenders; a bank account helps build a credit history.

17. How Do I Obtain Credit? Is There Some Sort of Criteria?

18. 18 WHAT IS A CREDIT SCORE? A number that allows a lender to predict if an individual will repay a loan, or make credit payments on time. A number that changes as the elements in a credit report change. A FICO Score: FICO scores range from 400- 850. The higher the score, the better. Lenders feel more confident that people with high credit scores will pay their debts consistently and on time. A determinant of how much you pay for things: Persons with excellent credit versus poor credit can sometimes access credit at interest rates ranging from 0% to 10%. Those with poor credit might get charged as high as 20 or 30%. Given that this is compounding interest, the difference is significant!

19. 19 Source: Fair Isaac and Consumer Federation of America, 2005 WHAT MAKES UP A TYPICAL CREDIT SCORE?

20. 20 IMPROVING YOUR CREDIT SCORE Pay your bills on time Don’t open a lot of new accounts too quickly Correct errors on your report Keep credit card balances low Pay off all debt. Check your credit report regularly.

21. What About Credit Cards?

22. TYPES OF CREDIT CARDS Standard Credit Cards Has a revolving balance up to a certain credit limit. Credit is used up when you make a purchase and made available again once you've made a payment. A finance charge is applied to outstanding balances at the end of each month. Credit cards have a minimum payment that must be paid by a certain due date to avoid late- payment penalties. Premium Credit Cards Offer incentives and benefits beyond that of a regular credit card. Offer cash back, reward points, travel upgrades, and other rewards to cardholders. Premium cards can have higher fees and usually have minimum income and credit score requirements. 22

23. TYPES OF CREDIT CARDS Charge Cards Do not have a preset spending limit Balances must be paid in full at the end of each month. Do not have a finance charge or minimum payment since the balance is to be paid in full. Late payments are subject to a fee, charge restrictions, or card cancellation Secured Credit Cards An option for those without a credit history or those with blemished credit. Require a security deposit to be placed on the card. The credit limit on a secured credit card is equal at least the deposit made on the card, but it could be more in some cases. Customer is still expected to make monthly payments on your secured credit card balance. 23

24. 24 QUESTIONS TO ASK WHEN SHOPPING FOR A CREDIT CARD What is the Annual fee? What is the Annual percentage rate (APR)? What is the Minimum payment? What is the Computation method? What is the Grace period? What are the Finance charges? Are there any Card incentives?

25. 25 How much Can Credit Cost? If you make only the minimum payment for an item, here are some examples of what you might actually pay and how long it will take you to pay it.

26. What Does it mean to Be Wealthy?

27. Wealth is… ASSETS – LIABILITIES = WEALTH

28. Types of Financial Assets

29. Types of Financial Liabilities – Credit Card Debt – Student Loans – Debts to friends and/or family members – Car Loans – Home Mortgage

30. What are the Parts of an Income Statement?

31. Parts of An Income Statement Revenue/Sales (minus) Costs of Goods Sold (COGS) (equals) Gross Profit (minus) Operating Expenses (equals) Operating profit (minus) Taxes (equals) Net Income