1. Consumer Economics Copyright©2009 Taylor & Francis Group, an informa business Chapter 13 Banking, Debt, and Credit Issues

2. Learning Objectives Identify the three steps in the financial management processExplain budgets, net worth statements, and the role of taxesDescribe banking and savings strategies and scamsDiscuss financial planner credentials and feesExplain credit, common pitfalls, and consumer rightsExplain bankruptcy and how to avoid it

3. Introduction Importance of financial knowledge to financial health Steps in achieving financial successCommon pitfalls and frauds

4. Financial Management Process Step 1: Awareness and setting financial goals Setting goals Making decisions Step 3: Evaluating and revising plans Step 2: Creating and activating plans

5. Budgets and Net Worth Statements Savings Taxes How banks are changing Bank products and issues Deregulation of banking Money laundering and terrorist financing

6. Financial Services Providers 1.Accountants 2.Attorneys 3.Banks, credit unions, savings & loans (S&Ls) 4.Brokerage firms 5.Credit counselors 6.Financial planners 7.Insurance companies 8.Real estate companies 9.Tax preparation services

7. Financial Planner Credentials and Scams A Financial Planner helps people plan to achieve their financial goals Regulations and credentials Divorce Planners – a type of financial planner

8. Types of Financial Scams Free financial seminars and “Get Rich” books* If it sounds to good to be true, its not true Legitimate sources of good financial advice might be available from employers Beware of infomercials and TV shows Beware of people selling financial products *The secret: they get rich selling books!

9. Credit, Loans, and Debt Warning Signs Debt adds stress to life Use credit wisely; investment oriented is better than consumption oriented Interest is the cost of borrowing money The main benefit is convenience; the danger is overextension

10. Credit and Consumer Rights Consumers have rights Consumer reporting agencies provide credit scores that are used to evaluate borrowers’ credit worthiness Loans are money lent at interest

11. College Students, Banks, and Credit Cards College students may be financially inexperienced Lenders target them as vulnerable customers The best weapon to avoid exploitation is knowledge and awareness

12. Credit and Consumer Rights Solutions to credit problems Credit counseling services Debt collectors and creditor rights

13. Final Credit and Debt Issues Debt and relationships/self-worth Bankruptcy – a legal recourse open to insolvent debtors Bankruptcy options – Chapter 7 & Chapter 13 To declare bankruptcy, you file petitions and schedules with federal bankruptcy court

14. Government’s Role Information is available on several web sites, especially the FTC State agencies and legislatures also provide assistance to consumers The federal government defends consumer rights, regulates processes, and mediates between parties

15. Chapter Summary Self-worth, financial beliefs, behavior, and satisfaction are linked Many sources of credit and debt are availableConsumers must learn to use credit wisely Resources are available to help those who become overextended