Starting Over: Making the Most of Your Money

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Starting OverMaking the Most of Your Money
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Class Topics

• Developing a Spending Plan
• Money Management
• Wise Use of Credit
• Consumer Information
• What are your questions?

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Money is a Tool to

• Achieve dreams
• Fulfill your values
• Better quality of life
• Reach goals

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First Things First

• NEED must haves
• WANTS can live without or postpone

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Financial Goals

• Short term Up to 3 years
• Mid term- 3 to 10 years
• Long term Over 10 years

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Set SMART Goals

• Measurable
• Achievable
• Realistic
• Specific
• Time-Related

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Develop a Spending Plan

• Income
• Expenses
• Savings

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Know Your Income

• Sources of Income
• Salary, wages
• Alimony, child support
• Public benefits
• Other?
• Gross- What you earn
• Net- What you keep

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Know Your Expenses

• Fixed
• Controllable (Flexible)
• Periodic (Irregular)

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Pay Yourself First

• Put set amount into savings
• Do regularly
• View savings as an expense

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Adjust Your Plan

• Track your income and expenses
• Pay yourself first
• Cut expenses
• Increase income
• Add a fudge factor

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Cut Expenses

• Focus on needs
• Cut back on wants
• Wait for sales
• Shop around
• Look for alternatives
• Change habits
• Other ideas?

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Follow The Rule of Three
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Increase Income

• Work overtime
• Get part-time job
• Barter or swap
• Develop and use skills
• Other ideas?

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Save For Emergencies

• Financial experts advise saving 3 to 6 months
  expenses
  
• Keep in liquid assets (e.g., money market fund,
  bank savings account)
  
• Get started ASAP and save as much as possible

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Why Keep Records?

• Necessary in case of death, fire or theft.
• Show proof of payments ownership of property.
• Protection in case official records are lost or
  destroyed.
  
• Assists in tax preparation
• Makes locating information easier.

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Getting Started

• Do what works for you. Everyone is different.
• K.I.S.S. Principle
• Find a specific place for storage.
• Show and tell everyone in the family about the
  new system.
  

• Collect supplies
• file box or cabinet
• accordion folder
• file folders
• notebook
• calculator
• box or basket for incoming mail bills
• Use a shredder

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Where to Keep Records

• Wallet (e.g., health insurance card, credit
  cards, drivers license)
  
• Safe Deposit Box (e.g., car title, certificates,
  deeds, military records)
  
• At Home (e.g., financial records, wallet and safe
  deposit box inventory)

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Know Your Personal Property

• Need for insurance claims in case of fire or
  theft
  
• May be a list, photographs or videotape or
  combination
  
• The more detail, the better

• List - date of purchase, cost (receipts are
  good), make and model, serial number.
  
• Photographs - take of everything in rooms
  drawers closets. Get close.
  
• Videotape, as above

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Financial Records

• List of accounts - location and numbers
• Income tax returns
• Bank information - pass books, statements, and
  canceled checks
  
• Credit card information and list
• Education, employment and Social Security
  records
  
• Names and addresses of financial advisors

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Financial Records

• Safe deposit box information
• List of assets (e.g., stocks and bonds)
• List of real estate ownership information
• Receipts for major purchases
• Monthly or annual spending plan (budget)
• Net worth statements (assets minus debts)

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What is Insurance?

• Risk protection
• Paying for someone else to share the risk with you

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Common Types of Insurance

• Life
• Health
• Liability
• Auto
• Property (a.k.a., homeowners, renters)
• Property Casualty or PC

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Basic Insurance 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

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What Impacts Costs?

• Amount of risk you want to accept
• Lifestyle and behavior
• Past insurance experience
• Price of items covered
• Statistics

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Shopping For Insurance

• Decide coverage you need
• Decide risk you want to take
• Get three quotes
• Check out insurance company ratings

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Control Insurance Costs

• Buy home and auto insurance from same company
• Add security devices
• Seek discounts
• Raise your deductibles
• Consider term life insurance

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Generally Unnecessary Insurance

• Credit insurance (life, disability,
  unemployment)
  
• Life insurance for children
• Cancer insurance
• Double Indemnity insurance riders
• Hospital indemnity policies
• Flight insurance
• Car rental collision-damage waivers

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What is Credit?

• Using someone elses money today and paying it
  back in the future
  
• Obligation to pay back
• Pay a fee to use the money -- interest
• Responsibility not a right!

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Forms of Credit

• Short-term (Service) Utility bills
• Revolving Visa, MasterCard
• Installment Car loan, mortgage
• Secured -Backed by property or cash
• Unsecured Based on ability to repay

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Costs of Credit

• Annual percentage rate (APR)
• Annual fees
• Late fees
• Over-the-limit fees
• Transaction fees
• Penalty APRs

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How Long Will it Take to Pay?

• How long will it take to repay 3,000 on your
  credit card with minimum monthly payments of 2
  of the outstanding balance and an 18 APR
  (assuming no additional charges are made)?
• 10 years?
• 20 years?
• 30 years?

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Pay Down Your Debt

• Figure your TOTAL credit debt
• Determine interest and fees
• Pay off the highest interest rate first
• Pay off small balances
• STOP charging
• Find a lower interest rate

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Your Credit Report

• Basic identifying information
• Credit history
• Collection agencies
• Courthouse records
• Employers
• Inquiries by potential credit grantors

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Getting Your Report

• Free, if denied credit (within 60 days)
• Free once per year nationwide
• See www.annualcreditreport.com
• Call credit reporting agency
• Send a written request
• Stagger requests (every 4 months)
• Equifax
• Experian
• Trans Union

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Danger Signs

• Paying bills late
• Fees and penalties on bills
• Creditors calling
• Checks bouncing
• Juggling payments
• High debt-to-income ratio

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Alternatives to Credit

• Rethink your goals
• Pay cash
• Save for emergencies and goals
• Use a debit card
• Postpone or do without

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Resources For Consumers

• Rutgers Cooperative Research and Extension
• www.rce.rutgers.edu/money2000
• www.investing.rutgers.edu
• Consumer credit counseling agencies
• NJ Department of Consumer Affairs
• County and non-profit human service agencies
• NJ Housing Mortgage Finance Agency
• Federal Citizen Information Center
• www.pueblo.gsa.gov

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Key Consumer Protection Laws

• Fair Credit Billing Act
• Fair Credit Reporting Act
• Fair Debt Collection Practices Act
• Fair and Accurate Credit Transactions Act
• State consumer fraud laws
• Home improvements
• Car sales
• Mail fraud
• Telemarketing

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Closing Thoughts

• Live below your means
• Every small step makes a difference
• Pay yourself first for goals and emergencies
• Pay off credit cards as quickly as possible
• Follow The Rule of Three
• Know the difference between needs and wants
• Buy insurance for large financial risks
• Develop a workable spending plan
• Start Today! Take charge of your financial life