Budget Seminar

Cari Bray, Branch Manager

Southeast Branch

December 6, 2017

Introduction

• Cari Bray, Southeast Branch Manager

Agenda

• What is a Budget?

• Key Terms

• Short Term and Long Term Effects, Consequences

• Where to Start

• Making Your Budget a Reality

Write Down…

• One (1) bill that worries you the most

• One (1) dream you can’t afford

• One (1) goal you can attain in 12 months

• What you would do with extra 100/month

What is a Budget?

Definition: A comparison of your income and expenses over a period of time.

Income – Expenses = Budget

Source: Merriam-webster.com

What is my income? What are my expenses?

• Payroll

• Social Security

• Annuities

• Child Support

• Alimony

• Rental Property

• Investments

• Windfalls

• Housing• Transportation • Insurance• Food• Utilities (electricity, water, phone,

internet, TV)• Auto/Life/Home Insurance• Education• Child care• Student Loans

What is a Budget?

Can you name more?

Most Commonly Overlooked Budget Items

• Emergencies

• Taxes

• Health Care

• Retirement Planning

• Auto Maintenance (oil change, new tires, etc.)

• Home Maintenance (HVAC, roof, windows, lawn care, etc.)

• Extracurricular activities

• Organization dues, subscriptions and memberships

• Birthdays, holidays or celebrations

• Mandatory continuing education for employment

• Pet Care

• Discretionary spending such as restaurants, clothing, school lunch or kid’s allowance

Where are the savings?

Measurements of a Healthy Budget

• Net Worth

• DTI

What is Net Worth?

Definition: A key measure of how much an entity or individual is worth. A

consistent increase in net worth indicates good financial health.

Assets – Liabilities = Net Worth

Source: Investopedia.com

What are my assets? What are my liabilities?

• Real Estate

• Automobiles

• RVs, other vehicles

• Jewelry and household items

• Retirement accounts, stocks, bonds,

investments, life insurance (cash

value)

• Cash

• Mortgage

• Auto loans

• Student Loans

• Credit card debt

• Personal loans

• 401k loans*

What is Net Worth?

What about depreciation?

What is Debt to Income Ratio (DTI)?

Recurring Monthly Debt

= Debt-to-Income RatioGross Monthly Income

Definition: A personal finance measure that compares an individual’s debt

payment to his or her overall income. DTI is one way lenders measure an

individual’s ability to manage monthly payment and repay debt.

Source: Investopedia.com

Did You Notice?DTI did not include your entire budget! Never rely on a lender

to ensure that you can afford that loan payment!

DTI Example A

Income

Gross Monthly Income: $4,000

Total Income: $4,000

Debts

Mortgage Payment: $1,000

Car Payment: $200

Credit Card 1: $25

Credit Card 2: $100

Total Debt: $1,325

DTI Example B

Income

Gross Monthly Income A: $2,000

Gross Monthly Income B: $1,000Total Income: $3,000

DebtsRent Payment: $675

Car Payment: $200

Credit Card 1: $125Credit Card 2: $100

Care Credit: $150

Payday Loan: $75/week $300Total Debt: $1,550

Let’s look at a Credit Report

What Happens if I Don’t Budget?

Short Term & Long Term Consequences

• Impacts to your Credit Score

• Hidden costs

• Not prepared for emergencies

• Not able to borrow because of

collections, poor score

• Garnishments

• Judgements and Liens

Hidden Costs - Payday Loan Trap

Income Earned! Woohoo!…

Bills Paid! Woohoo! …

Spending! Woohoo!

…

Nothing Saved. Whoops.…

Emergency! Uh oh.…

Credit Card Swiped. Whew!…

Minimum Payment Made. Meh.…

Debt Grows. Ugh….

Income Earned

Expenses Paid

Minimum Debt

Payments

Spending

Nothing Saved

Perpetual

Debt Cycle

Emergency Loans - Paydays

Emergency Loans - Paydays

Hidden Costs – Consumer Loans

Hidden Costs – Mortgage Loans

Hidden Costs – Credit Cards

Credit Card Debt & Minimum Payments

Payment History35%

Amounts Owed30%

Length of History15%

New Credit10%

Types of Credit Used10%

Factors That

Affect Credit

Score

Your Budgeting History Impacts Your Ability to Borrow!• Repayment history – Did your budget allow you to pay on time?

• Total debt load – Does your income support what you’ve already borrowed? What about borrowing more?

• Do you have outstanding collections or judgments that need attention?

Your Budgeting History Impacts Your Cost to Borrow!• Lower score = higher interest rates = higher payments = more cost to you.

Brace for Impact

Where Do I Start?

Where Do I Start?

Step 1: Be honest!

• What are my spending habits?

• Are hobbies or habits creating “vampire debt”?

• Needs vs Wants

How do I know my numbers?

• Know what’s on your credit report▫ Annualcreditreport.com

▫ Vantage Score

• Monitor your spending▫ Online & mobile banking tools

Analyze Spending

Housing35%

Debt15%

Transportation15%

Other Living Expenses

25%

Savings10%

Savings 10%

Housing 35%• Mortgage/Rent

• Repairs

• Taxes

• Utilities

• Insurance

Debt 15%• Student Loans

• Credit Cards

• Personal Loans

Transportation 15%• Car Payments

• Gas

• Insurance

• Repairs

• Parking/Tolls

• Train/Bus Fees

Other Living

Expenses 25%• Dining out

• Vacations

• Entertainment

• Clothing

Source: Jeanchatzky.com

Ne

ed

s

Wa

nts

How do I fix my mistakes?

Step 2: Set a SMART goal.

GOAL: I WANT TO SAVE $1,000 FOR CHRISTMAS SPENDING FOR 2018.

Specific? For Christmas Spending

Measurable? $1,000

Attainable? $1,000/26 pay weeks = $38.50 per paycheck

Relevant? You decide.

Timely? One year, date of December 2018

How do I fix my mistakes?

Step 3: Prioritize.

• PAY YOURSELF FIRST!

• Debt is an emergency.

• Plan for large expenses.

• Reach your goal.

• Live.

How do I fix my mistakes?

Step 4: Write the Budget.

• S.M.A.R.T review

• Tools for budgeting

NEW Widget: Budgets

NEW Widget: Savings Goals

What does a budget actually look like?

Let’s take a look!

How do I fix my mistakes?

Step 5: Stick to the Plan… or Start over at Step 1!

1. Be Honest

2. Set a Goal

3. Prioritize4. Write

the Budget

5. Stick to the Plan

Making Your Budget a Reality

What tools can help me pay myself first?

For Saving:

• Christmas and Savers Clubs are available to help save for big events or

periodic large payments.

• Share Certificates can protect your savings and help it grow!

• Sub Shares can help you separate periodic bills from monthly expenses.

Tip: Use automatic transfers or

payroll deposits to direct funds

straight to your savings share!

What tools can help me save money?

For Consolidation & Refinancing:

• Low-rate Credit Cards can help consolidate your

debts with cash back!

• Low-rate Personal Loans can help cover unexpected

expenses or consolidate other debts.

• PFCU Consumer Loan Originators can help identify

other ways to utilize your assets to catch up.

• PFCU Mortgage Loan Originators can help identify

ways to use your home’s value to create a fresh start.

Tip: Use automatic payments to make loan and credit card payments on or

before the due date.

What tools can help me stay honest?

For Money Management:• Prime Online is convenient to monitor

account balances and spending, and has an option to transfer transactions to QuickBooks or Excel.

• Prime Mobile to quickly review activity, transfer funds or pay loans from your mobile.

• Bill Pay allows you to easily make single or multiple payments at one time, establish recurring payments and funds are withdrawal immediately.

• Widgets – Savings Goals, Budget, Calculator

How do I start today?

Make an appointment!

Northwest – Will Smith

414-486-4672

wsmith@primefcu.org

Downtown – Mai Yang

414-486-4623

myang@primefcu.org

South – Katiria Esquivel

414-486-4628

kesquivel@primefcu.org

Southeast – Amy Braud

414-486-4690

abraud@primefcu.org

Contact our Mortgages Department:

Erick Levandoski – Director of Mortgage Services &

Business Lending

414-486-4633

elevandoski@primefcu.org

Questions?

• Complete the Survey

• Follow Up Session www.surveymonkey.com/r/L7Y85KB