karen aspinwall fcs extension educator cecil county your financial check up
TRANSCRIPT
Karen AspinwallFCS Extension Educator
Cecil County
Your FinancialCheck Up
Emergency FundFinancial Plan Credit Record
•Health
•Life
•Property
•Disability
•Liability
Insurance
Financial Foundation
•Goals
•Spending Plan
•Financial Statements
•Financial Records
•Using it wisely
•Monitoring
•ID Theft Protection
Smart Money Tip #1Make a Plan
• SSpecific
• MMeasurable
• AAgreeable
• RRealistic
• TTime-bound
Turn financial dreams into S.M.A.R.T. Financial Goals!
“I wish I wasn’t drowning in debt!” I will only play BINGO once a month and I’ll put the extra $40 toward debt payments so that my credit cards are paid off by March 2011.
“I wish I could drive a car that’s paid for.”By packing (not buying) lunch 2 days/wk,I will pay an extra $50/month on my carpayment so my car will be paid off by June 2011.
Changing dreams to SMART goals
Smart Money Tip #2:Get Organized!
In the case of identity theft, an ounce of
prevention is worth a pound of cure . . . .
Clearing your good name from identity theft may take two to three years!
Assets - Liabilities = Net Worth
Smart Money Tip #3:Know How You Are Doing
Calculate your Net Worth
Online tools: www.mdsaves.org
Data from Employees Benefits Research Institute (EBRI) indicates that only 2 out of 5 people have done net or future worth calculations, but 44% of those who do make a positive change in savings behavior.
Track your expenses. . .
Smart Money Tip #4:4a. Be a Money Detective
Discover how money slips through your
fingers
A spending plan is a roadmap for your money
•Income : All sources
•Expenses: Fixed, Flexible, Periodic
•Plans for spending/saving
4b. Develop a Spending Plan
Use 70% of take-home pay for living expenses.
Use 20% to repay debt.
Save 10% for you and your future.
A Guideline To Remember:
Smart Money Tip #6:Become Credit Smart
•Understand credit•Use it wisely
Smart Money Tip #6:Become Credit Smart
Collect data:Personal informationEmployment historyCredit use and
repayment history
Provide information to:CreditorsEmployers Insurers Landlords
What do Credit Bureaus do?
Start Here
www.AnnualCreditReport.com
• Contact company that reported the error
• Ask company to correct error,in writing, with each credit bureau
• Photocopy pertinent documents
• Write credit bureau, explain error and enclose documentation
• Send certified mail with return receipt
Correcting a Credit Report
10%
10%
15%
30%
35%
Requests for newcredit
Types of credit inuse
Length of credithistory
Current total debt
Payment History
What is a Credit Score?
Credit Score Ranges
780-850 : Low Risk740-780 : Medium Low Risk690-740 : Medium Risk620-690 : Medium High Risk620 and Below : High Risk or Sub-Prime
www.myfico.com
Signs of Credit Trouble• Exceeding the “20% Rule”• Second salary is used to pay debts• Dishonest about credit use• Credit not thought of as debt• Using credit impulsively• Using cash advances to pay bills
Smart Money Tip #7:Pay Off Debt
• Bills paid late• Paying only the minimum
due each month• Defaulting on payments• Anticipated income increase is
committed to debt repayment• Don’t know total amount of debt
(More) Signs of Credit Trouble
The Minimum Payment TrapCredit card: Balance of $3000. Card has 19.0% interest.
Minimum per Month: 4% of balance (starts at $120/mo.)
If you pay the Minimum each
month:4% of balance
If you pay the Minimum plus $15
each month:4% of balance
plus $15
If you “Power Pay”each month:
fixed payment of $120/mo
No. of months to pay off debt 134
(11.2 years!)53
(4.4 years)33
(2.75 years)
Amount of Interest paid $1,872.49 $1,358.74 $849.27
Total amount paid $4,872.49 $4,358.74 $3,849.27
•Communicate with your creditors
•Stop credit use
•Create a realistic spending plan
•Develop a debt repayment plan•Know when (and where) to ask for help!
Regain Control
EveryLittle BitCounts!
Smart Money Tip #8:Develop a
Savings Habit
Pay Yourself First!at 5% interest. . .
Save this each week: In 10 years, you will have:
$ 7.00 $ 4,720 $ 14.00 $ 9,440
$ 21.00 $ 14,160 $ 28.00 $ 18,880
$ 35.00 $ 23,600
$ Continue to make loan/debt payments into savings after debt has been paid
$ Try a temporary crash savings diet by purchasing only bare necessities
$ Adjust your tax withholdings and save the difference
$ Save windfall money from lottery, inheritance and gifts
$ Save money from pay raise, bonus or working overtime
Painless Ways to Save
• Health--Life--Property--Liability Disability--Long term care • Buy insurance - don’t let someone
SELL it to you. Follow the “Rule of Three”
• Buy adequate coverage
Smart Money Tip #9Cover Your Bottom Line: 9a.Insurance
Insurance Guidelines
1. Review periodically and update as needed through life cycle, including beneficiary designation
2. Keep essential coverage in force until a new policy starts
3. Keep up with changes in Medicare as you approach retirement
• Powers of Attorney (general, financial, healthcare)
• Healthcare Advance Directives• Will and/or trust(s)• Guardianships for minor children
or other dependents• Personal property inventory with
named recipients
Smart Money Tip #9:Cover Your Bottom Line:9b.Create an Estate Plan
3-6 months8 months(current average length of time of unemployment)
Smart Money Tip #9:Cover Your Bottom Line:9c. Establish an Emergency Fund
Saving:Preserve principal while getting a small return.
Smart Money Tip #10Invest Wisely
Investing:Increase principal in hopes of
getting a greater rate of return.
Prepare financial statements Set financial goals Establish a spending plan Organize financial records Establish a positive credit
history Maintain adequate insurance
coverage
Prerequisites to Investments
Insured Savings, Savings Bonds, Money Market Funds, Certificates of Deposits
Life Insurance Investments Government Securities
High Quality Corporate Stocks, Bonds and Mutual Funds
Real Estate
Aggressive Growth, Junk Bonds, Stocks and Mutual Funds
Futures Contracts
Collectibles
Pyramid of Investment Risk
Increase
d Risk
Financial Plan Credit RecordHealth, Life, Property,
Disability, Liability
Insurance
Financial Foundation
Goals, Spending Plan, Financial Statements and Records
Using it wisely, Monitoring, ID Theft Protection
Emergency Fund
The Time Value of Moneyand CompoundingInterest
Start saving today!
TAX DEFERRAL MAGIC
•403b•457
•IRA•401k
Smart Money Tip #11Take advantage of Tax Deferment
http://www.choosetosave.org/ballparkhttp://www.choosetosave.org/ballpark//
Smart Money Tip #12Plan for Retirement
Do your own “Ball Park Estimate”for Retirement planning
Your input is very valuable to us!
Please take a moment to complete the evaluation
form.
Your Financial Check UpKaren Aspinwall
FCS Extension Educator Cecil County