1. 1 Financial $uccess Presented by: Name Family Financial Education Specialist University of Missouri Extension Website: http://extension.missouri.edu/hes/http://extension.missouri.edu/hes/ Phone: E-mail:

2. 2 1.Goals and Decisions 2.Managing Financial Resources 3.Managing Credit 4.Managing Risk 5.Consumer Information Financial $uccess

3. 3 What Matters Most? Family Well-being (Primary Objective) Use of Limited Resources Trade Offs VALUES Needs Vs. Wants GOALS

4. 4 Decision Making Process Why must I decide? Making WISE decisions What is the decision? Inform yourself Select the “best” alternative Evaluate the outcome

5. 5 Activity How Do I Decide?

6. 6 Short-Term Goals=Within next 6 months Mid-Term Goals=Within next 2 years Long-Term Goals=More than 2 years from now T ime Limited R elevant S pecific M easurable A ttainable Setting SMART Financial Goals

7. 7 Activity What My Family Wants to Accomplish Setting Financial Goals –Short-term –Mid-term –Long-term

8. 8 1.Goals and Decisions 2.Managing Financial Resources 3.Managing Credit 4.Managing Risk 5.Consumer Information Financial $uccess

9. 9 Identifying Financial Resources Income - money from earnings or other sources Savings - money from past income Credit - money from future anticipated income borrowed from future income at a price (interest rate)

10. 10 Net Worth: Your Financial Snapshot Net Worth = Assets – Liabilities 1.Add up value of what you own (assets) 2.Add up value of what you owe (liabilities) 3.Subtract liabilities from assets Aim – positive net worth Review net worth regularly

11. 11 How to Make a Spending Plan 1.Determine Income 2.Estimate Expenses Fixed, flexible, occasional Saving, include saving for your goals and emergencies! 3.Balance the plan Income-Expenses=0 4.Follow plan and keep track of progress 5.Make adjustments as necessary Reduce expenses Increase income

12. 12 Determine Income Money for use today comes from several sources  Paycheck  Public assistance  Social security  Relatives  Sale of goods  Alimony or child support  Investments or savings  Credit

13. 13 Estimate Expenses Fixed expenses are the same each month. Flexible expenses change each month. Occasional expenses occur 1-3 times a year.

14. 14 Activity Developing a Spending Plan Financial $uccess depends on: –knowing where you are now, –knowing where you want to be, and –having a specific plan for getting there.

15. 15 Record Keeping What records to keep Where to keep records How long to keep records

16. 16 1.Goals and Decisions 2.Managing Financial Resources 3.Managing Credit 4.Managing Risk 5.Consumer Information Financial $uccess

17. 17 What is Credit? Using your future income in the present. Types of Credit –Installment Credit –Service Credit –Revolving Credit Credit cards

18. 18 Sources of Credit Banks, S&L, credit unions Credit cards, department stores Mortgage companies Utilities Rent-to-own stores Refund anticipation loan (RAL) Title loans, payday loan companies Pawn shops

19. 19 Costs of Credit Annual percentage rate (APR) Annual fees Late fees Over-the-limit fees Transaction fees Penalty APRs

20. 20 Costs of Credit Based on minimum payment of 4% of the original balance, with no new debt added Example: Credit Card

21. 21 Activity Shop for Credit

22. 22 Danger Signs Paying bills late Fees and penalties on bills Creditors calling Checks bouncing Juggling payments High debt-to-income ratio

23. 23 Appropriate Use of Credit It may be appropriate to use credit: when you pay balances in full and make payments on time when you have a financial emergency for convenience or safety of a credit card for additional security for a purchase when cash is not appropriate (such as with on-line purchases)

24. 24 Alternatives to Credit Rethink your goals Pay cash Save for emergencies and goals Use a debit card Postpone or do without

25. 25 Activity When to Use Credit

26. 26 What is a Credit Report? Your financial management report card: Financial information Personal information Bankruptcy filings

27. 27 Who Uses my Credit Report? Potential employers Rental landlords Lenders Insurance agencies Credit card companies Retailers

28. 28 Who Provides Credit Reports? 3 major credit reporting bureaus are: –Equifax –Trans Union –Experian Can I see a copy of my credit report? One free annual report per person from each credit reporting bureau

29. 29 What if There is a Mistake on my Credit Report? Contact the credit bureau Contact the creditor directly Write a 100 word statement Beware of “credit repair” scams

30. 30 Your Credit Score (FICO)

31. 31 Why FICO Scores Matter Myfico.com scores 300 - 850 How your credit score affects your interest rate / cost of your mortgage loan: 30 year, $85,000 mortgage loan FICO ® Score Int. Rate PaymentInterest Paid 720 - 8506.221%$522$102,833 700 - 719 6.346%$529$105,324 675 - 6996.882%$559$116,163 620*- 6748.029%$625$140,151 560 - 6198.752%$669$155,774 500 - 5599.332%$704$168,559 Source: www.myfico.comwww.myfico.com * Indicates the cut off point between prime/sub-prime loans

32. 32 Rebuilding Your Credit Check your credit report regularly Pay bills on time Set up a financial plan Apply for a secured credit card Have someone co-sign a loan If one lender turns you down, try another

33. 33 Credit and Bankruptcy Following bankruptcy, pay more for a loan Automobile loans may be available –You could face an APR = 20% or 22%, compared to 7%, prior to bankruptcy. Monthly payments for a $25,000 car, for 4 years would be –$760.76, at 20% (Total = $36,516.48) –$598.66, at 7% (Total = $28,735.68)

34. 34 How Can I Protect my Credit? Keep personal information safe Shred or destroy receipts, applications and documents Report stolen cards immediately

35. 35 Truth in Lending Fair Credit Reporting Fair and Accurate Credit Transactions Act Equal Credit Opportunity Fair Debt Collection Practices Fair Credit Billing Consumer Credit Laws

36. 36 1.Goals and Decisions 2.Managing Financial Resources 3.Managing Credit 4.Managing Risk 5.Consumer Information Financial $uccess

37. 37 What is at Risk? What is at risk? –The possibility of financial loss from events we do not anticipate –Risk is everywhere

38. 38 How to Manage Risk Methods of handling risk –Avoid (e.g., do not participate) –Reduce (e.g., use precautions)

39. 39 How to Manage Risk –Transfer (e.g., buy insurance) –Retain (e.g., establish emergency fund)

40. 40 Common Insurance Policy Terms Policy = contract Coverage = what insurance pays for Term = length of contract Premium = cost of contract Deductible = what you pay before insurance company pays Claim = request for payment

41. 41 How Insurance Works: Term Life Insurance Application –Private history –Demographics Underwriting –Company tries to match the probability of paying out with the premium Policy delivery Pay the premiums to continue coverage

42. 42 Term Life Insurance… continued 2 possibilities –The term of the policy ends; no dependents to take care of. –Death, life insurance pays out the face value to take care of the dependents.

43. 43 Activity Life’s Big Gamble

44. 44 Types of Risk & Insurance Loss of Property –Auto Insurance –Homeowners/Renters Insurance Loss of Health –Health Insurance Loss of Income –Life Insurance –Disability Income Insurance Liability –Auto Insurance –Homeowners/Renters Insurance Living too Long –Retirement Savings –Annuities

45. 45 Types of Insurance Other –Flood –Travel/AD&D –Long term care/disability –Burial

46. 46 Generally Unnecessary Insurance Credit insurance (e.g., life, disability, unemployment) Life insurance on the lives of children Dread disease (e.g., cancer insurance) “Double Indemnity” insurance riders Hospital indemnity policies Flight insurance Car rental collision-damage waivers

47. 47 Shopping For Insurance Decide coverage you need Decide risk you want to retain Get three quotes for each type of insurance Try several different marketing channels –Agents –Mail order –Online –Insurance Broker

48. 48 1.Goals and Decisions 2.Managing Financial Resources 3.Managing Credit 4.Managing Risk 5.Consumer Information Financial $uccess

49. 49 Consumer Information Opt out numbers: –Pre-approved credit card offers 1-888-5OPTOUT (1-888-567-8688) –No call list 1-866-662-2551 http://www.ago.state.mo.us/nocalllaw/nocalllaw.htm ID Theft Clearinghouse 1-877-438-4338 www.consumer.gov/idtheft

50. 50 Consumer Information MU Extension –http://extension.missouri.edu/http://extension.missouri.edu/ Federal Citizen Information Center (FCIC) –http://www.pueblo.gsa.gov/http://www.pueblo.gsa.gov/ –888-8 PUEBLO (888-878-3256) Missouri Attorney General’s Office –http://www.ago.state.mo.us/consumers.htmhttp://www.ago.state.mo.us/consumers.htm –Consumer Protection Hotline 800-392-8222 National Fraud Information Center –http://www.fraud.org/http://www.fraud.org/ –800-876-7060

51. 51 Creating Financial $uccess Make SMART goals and WISE decisions Every small step makes a difference Pay yourself first for goals and emergencies Consider future income before seeking credit Follow “The Rule of Three” Recognize your own personal needs and wants Buy insurance for large financial risks Develop a workable spending plan Start now on the road to financial success!