1. 2 Personal Financial Management

2. SECURITY
INDEPENDENCE
CHOICES

3. After studying these topics, you will benefit by:
Recognizing the significance of money management and budgeting on personal and professional success
Distinguishing the wise use of credit and identifying debt management resources
Evaluating alternatives for financing your education through student loans, financial aid, and other resources
Discovering the impact your credit report has on your financial future
Identifying methods to protect yourself from identify theft
Assessing money wasters, emotional spending, and the impact money has on relationships

4. FINANCIAL MANAGEMENT
Personal Financial Management: the process of controlling your income and your expenses

5. FINANCIAL MANAGEMENT Income: incoming money
Parents
Grants
Student loans
Job
After college and starting your new career, your income most likely will increase

6. FINANCIAL MANAGEMENT Expense: outgoing money
Tuition, textbooks, supplies
Housing
Transportation
Food, shelter, clothing
Hobbies and entertainment
Health care
Loans

7. PERSONAL FINANCIAL MANAGEMENT AFFECTS WORK PERFORMANCE
Personal finances impact all areas of your life
Create a personal financial plan now
Finances assist you in reaching life goals
Monitor your money
Keep debt under control
Protect yourself from identity theft
Don’t allow it to negatively affect your work or add stress

8. PERSONAL FINANCIAL MANAGEMENT AFFECTS WORK PERFORMANCE
Maintain a positive credit report
Employer may require a credit check
Use credit wisely
Pay your bills

9. TOPIC SITUATION Oscar TOPIC RESPONSE:
Where are you unnecessarily spending money?

10. MONEY MANAGEMENT Budgeting
Create financial goals
Budget: a detailed financial plan used to allocate money for a specific time period
Reflects your goals
Identifies, controls, and prioritizes spending
Be honest and precise when creating a budget

11. MONEY MANAGEMENT Steps to Creating a Budget
Identify goals
Attach financial goals to personal goals
Determine monthly income (money in)
Determine monthly expenses (money out)
Budget on a monthly basis
Keep track of all spending
Reduce money wasters

12. BUDGETING Determine Income
Gross income: the amount of money in a paycheck before paying taxes or other deductions
Net income: the amount of money you have after all taxes and deductions are taken out of your gross pay

13. BUDGETING Determine Expenses
Fixed expenses: expenses that do not change from month to month
Flexible expenses: expenses that change from month to month

14. BUDGETING
Money wasters: small expenditures that you do not realize are actually using up a portion of your income
Cash management is the key to good budgeting
Carry a small amount of cash
Minimize using your ATM card
Reduce trips to the ATM
Record all transactions

15. THINK ABOUT IT
How will a personal budget assist you with your finances?

16. DEBT MANAGEMENT Debt management involves: Debt Loan Interest Net worth
Assets
Liabilities

17. DEBT MANAGEMENT Debt: money you owe for borrowed funds
Debt vs. expenses
Debt includes a loan with interest
Expenses include bills that come regularly
Loan: a large debt that is paid in smaller amounts over a period of time and has interest added to the payment
Interest: the cost of borrowing money
This is extra money paid to the lender

18. DEBT MANAGEMENT Total Net Worth
Total Assets – Total Liabilities
= Total Net Worth
Net worth: the amount of money that is yours after paying off debt
Assets: what you own
Car, home, furniture
Liabilities: an obligation to pay what you owe
Car loan, home loan

19. DEBT MANAGEMENT Steps to Get Out of Debt
Seek advice
Parents
Counselors
Nonprofit credit-counseling services
Credit-repair organizations
Do not create additional debt
Canceling or destroying a credit card does not eliminate the debt

20. DEBT MANAGEMENT Steps to Get Out of Debt
Take action now
Prioritize your debt
Pay off the smallest amount or the amount with the largest interest first
Take the extra cash from a paid-off debt and apply it to the next debt on your priority list

21. TALK IT OUT
What are warning signs that you may be getting into excessive debt?

22. STUDENT LOANS Student loans are like all other loans
Borrower must pay back the loan with interest
Use only for school expenses
Refer to your goals
Exhaust all other funding sources
Grants
Scholarships
Work-study

23. STUDENT LOANS Two types of student loans Federal Private
Funded by the government
Paid back after graduation
Fixed rates
No credit checks
Private
Private lenders such as a bank
Paid back while in school
Fixed or variable rates
Need a credit check or co-signer

24. WISE USE OF CREDIT Manage Your Credit
Managing credit and establishing savings is the best way to stay out of debt
Do not abuse the privilege of loans and credit cards
Consider interest rates
Hidden costs
Purpose of the loan
Amount of payments
How long to pay off loan

25. WISE USE OF CREDIT Manage Your Credit
Do not accept all credit card offers
Use credit only for items you can afford
Spend wisely and pay off the balance each month
Avoid cash advances

26. TOPIC SITUATION Simone
TOPIC RESPONSE:
What are the risks if Simone does not pay the credit card balance in full each month?

27. TALK IT OUT
Identify potential terms and conditions that you should consider before getting credit from a lender.

28. CREDIT REPORTS
Credit report: a detailed credit history on an individual
Fair Isaac Corporation (FICO) score is the most common credit score rating system
Scores
The higher the score, the better the rating
Higher ratings allow you to secure loans at a lower rate

29. CREDIT REPORTS Credit report information:
Includes all personal identification information
Previous names, addresses, and employers
Details credit cards and loans
Shows balances and payments
Shows liens, foreclosures, or bankruptcies

30. CREDIT REPORTS
Three credit reporting agencies are Equifax, Experian, and TransUnion
Under federal law, you are entitled to a free copy of your credit report from these agencies once every 12 months
Use the annual credit report authorized by Federal law
Take advantage of this free review
Report any errors immediately

31. SAVINGS AND INVESTMENTS
Begins saving now
Put away funds for short-term goals or emergencies
Rule of thumb: Have at least five-eight months’ income saved for emergencies
Have savings in a financial institution
If available, use an automatic deduction plan
Funds are automatically deducted from your paycheck into your savings

32. SAVINGS AND INVESTMENTS
Begin saving and investing now
Saving: determine if you should use a regular savings account or a Certificate of Deposit
Decide if you may need money readily available
Investing: typically long term
Stocks, mutual funds, real estate
Involves risk
Establish investments after you have a savings account

33. IDENTITY THEFT
Identity theft: when another individual uses your personal information to obtain credit in your name
Prevent by:
Do not share Social Security number to anyone
Disposing of any communication that contains your personal information by shredding
Keep copies of important information in a safe place

34. IDENTITY THEFT Tips to Remember
Do not give out your SSN over the telephone or Internet without verifying the authenticity of the company or individual requesting the information
If using the Internet, check for a secure website
Document all important numbers and keep them in a safe place
Practice good personal financial management

35. IDENTITY THEFT Tips to Remember
Remove your name from credit card and marketing lists
Monitor your credit and bank accounts regularly
If you receive a call from a collection agency and do not have poor credit, do not ignore the call

36. IDENTITY THEFT If You Become a Victim of Identity Theft
File a police report
Contact your bank, credit card companies, and cell phone provider
Do not change your social security number; contact the Social Security Administration Fraud Department
Contact the credit reporting agency fraud lines
Document everything you do

37. ADDITIONAL FINANCIAL MATTERS
Consider the long-term impact of your financial choices
Be cautious when lending money to others or co-signing a loan
Keep your financial information secure

38. CREDIT AND FRAUD RESOURCES
Counseling services:
The National Foundation for Credit Counseling
Myvesta Foundation
Credible credit reporting agencies and resources:
Equifax
Experian
TransUnion