CBCF Financial Literacy Workshop I: Building Wealth, Eliminating … · 2019. 9. 6. · Nando's...
Transcript of CBCF Financial Literacy Workshop I: Building Wealth, Eliminating … · 2019. 9. 6. · Nando's...
CBCF Financial Literacy Workshop I:
Building Wealth, Eliminating Debt, and Reducing Costs of Living Friday, June 28, 2019
AGENDA
Ø Welcoming Remarks
Ø Introduction of Speakers
Ø Evaluation of Needs vs. Wants
Ø Evaluating Monthly/Annual Expenses and Calculating Net Income
Ø Building a Budget and Calculating Disposable Income and Savings Surplus
Ø Creating Savings Plans to Achieve Specific Long-Term and Short-Term Financial Goals
Ø Audience Questions
THANK YOU TO OUR GENEROUS SPONSORS
Triangle Financial Independence
Britepaths
Financial Empowerment Center at South County
Domino's Pizza (2029 K Street NW)
Pepsi Cola
Nando's Peri Peri Chicken (2631 Connecticut Ave NW)
University of California-Washington DC Center
Bank of America
CBCF Financial Literacy Workshop I: Building Wealth, Eliminating Debt, and Reducing Costs of Living
Friday, June 28, 2019
SPEAKERS
Mr. Aaron Goldfarb is the co-founder and owner of the Triangle Financial Independence Group, which is a financial consulting firm based out of Raleigh, NC. Through his work with Triangle Financial Independence, Aaron has developed and taught several educational workshops such as these, which focus on building wealth, eliminating debt, cutting the costs of living expenses, and increasing quality of life. As a financial consultant, Aaron primarily focuses on sustainable business development. However, driven by his passion for traveling and the deep belief in the power of traveling to broaden one’s worldview and appreciation for diverse cultures, Aaron is also the founder and owner of the Triangle Travel Lovers Group. Between his work with Triangle Financial Independence and Triangle Travel Lovers, Aaron has traveled all over the world, circling the globe and building a network of international relationships, while also teaching others how to take advantage of financial systems in order to achieve financial independence and attain their financial goals. For more information, visit: https://trifigroup.com/ Mr. Terrance Carty is a volunteer Financial Coach with Britepaths Inc. at the Fairfax County Financial Empowerment Center. He conducts sessions addressing key personal finance topics such as understanding credit, debt repayment, budgeting, and strategies for saving. Mr. Carty also facilitates workshops with high school student groups and community assistance organizations in Northern Virginia. Before becoming a volunteer, Mr. Carty served 20 years in the United States Navy. He rose to the rank of Chief Petty Officer, where he was responsible for the training and development of enlisted sailors and junior officers. As a Chief, Mr. Carty became aware of the financial challenges experienced by the junior enlisted service members. He frequently mentored sailors on taking control of their finances and identified available resources to help reach their financial goals. Although he retired in 2010, Mr. Carty continues to serve his country as a Senior Geospatial-Intelligence Analyst. He provides his expertise to a software and algorithm development company that designs software for government agencies. While on active duty, Mr. Carty obtained a Bachelor of Business Administration from Strayer University and a Masters of Science in Strategic Intelligence from the National Defense Intelligence University. He holds a certification as a Program Management Professional (PMP) from the Project Management Institute and is currently working on his Financial Fitness Coach (FFC) certification from the Association for Financial Counseling and Planning Education (AFCPE). Mr. Carty enjoys running in his spare time and has completed five Marine Corps marathons. Additionally, he gives of his time to his local church and is involved with the Military Care and United Voices Choir ministries. For more information, visit: https://britepaths.org/
CBCF & Financial Literacy Cost of Living Workshop
Please answer these questions before the start of our workshop. You will not be asked to show your answers to anyone, we merely want you to be able to answer these questions for yourself.
● How long can you sustain yourself if you lose your job tomorrow?
● Do you believe social security will exist by the time you’re ready to retire?
● What long term dreams do you have and how much money do you think they will cost?
● What does financial independence mean to you?
● What do you consider a need versus a want?
Presented by Aaron Goldfarb of the Triangle Financial Independence Group For further information please contact Aaron at: [email protected] or visit his site at: www.TriFIGroup.com
Triangle Financial Independence Group - Goal Timeline
Below you will find a goal timeline template to help you break down the steps toward
your goals into more manageable sections. Take a moment to think about each aspect of your life such as housing, travel, family, transportation, health, romance, career, hobbies, etc. Set long term objectives and research what steps you’ll need to progress. List each incremental step to reach your goal over the next 15 years, 10 years, 5 years, 3 years, 1 year, 6 months, 3 months, 1 month, and each week. Then think about what the largest barriers you will face in achieving each goal. These challenges may be more than just financial, they could be physical or psychological, or anything really. For example if you want to climb Mount Everest you don’t just need to save up the money for the flight and the gear, you also have to ready your body and mind to conquer the mountain, literally and metaphorically. Goal: Start date:
● 15 Years -
● 10 Years -
● 5 Years -
● 3 Years -
● 1 Year -
● 6 Months -
● 3 Months -
● 1 Month -
● Weekly - What are your biggest challenges slowing your progress toward this goal?
Presented by Aaron Goldfarb of the Triangle Financial Independence Group For further information please contact Aaron at: [email protected] or visit his site at: www.TriFIGroup.com
FinancialFitnessChecklist
Reviewevery6months,whenalifeeventorchangeinincomeoccurs.
ü Doyouhave3-6months'oflivingexpensessavedinanemergencyfund?ü Areyousavingforre/rement?Worktosave10-15%ofyourincome.ü Conductareviewofyourbudget
o Makenecessarybudgetadjustmentsü LookatcurrentexpensesanddetermineNeedsvs.Wants
o Reviewmonthlyspending(useaweeklymoneytracker)o PayessentialNeedsfirst,putsomemoneyintosavings,beforepaying
forWantsü Listoutalldebt,bytotalamountandinterestrateforeachdebtorcredit
cardo Createdebtrepaymentplan
ü Reviewfinancialandsavingsgoals,thinkshort,mid,andlong-termo Createsavingsplantomeetfinancialgoals
ü Pullyourfreecreditreportandreviewforaccuracyatwww.annualcreditreport.com
ü Reviewyourinsurancepoliciesü Reviewincometaxes
o Areyouwithholdingtoomuchortoolittleü Reviewyourestateplanningdocumentseveryyearandwhenyouhavea
majorlifeevent.
8350 Richmond Highway, Suite 125
Alexandria, VA 22309
703-704-6101
A budget is one of the most important tools you can use to manage your money and save for retirement. Limiting your spending and living within your means can have a huge impact on your financial security throughout your life, since you generally have more control over your spending than on your income from work or investments. As seen below, even small changes can add up in the long run. Cutting spending can be a great way to contribute extra money to a retirement account, build up an emergency fund, or reduce your debt.
Budgeting Worksheet
» Weekly Savings » 1 Year » 5 Years » 10 years » 20 years » $10 » $ 520 » $ 2,600 » $ 5,200 » $10,400 » $20 » $1,040 » $ 5,200 » $10,400 » $20,800 » $50 » $2,600 » $13,000 » $26,000 » $52,000
Use this worksheet to examine how much income comes into your household on a monthly basis. Be sure to include all sources of income you receive, as well as your spouse or partner’s income if applicable. You should use your take home pay, not your income before taxes, for the best results.
Income Source Your Income Your Spouse/Partner’s Income Total
Salary/Wages from Employment
Income from Self-Employment
Rental Property Income
Alimony
Monthly Investment Income
Social Security
Pension Benefit
IRA Income (Distribution)
401(k) Income
Veteran’s Pension
Annuity Income
Inheritance/Trust
Gifts
Other
Total
Your Income
Your Expenses
Expense Category Expense Item Column A
Fixed ExpensesColumn B
Flexible Expenses
Housing Rent/Mortgage/Taxes
Maintenance/Condo fee
Lawn/Garden
House Cleaning
Utilities Electric
Gas/Oil
Water/Sewer
Garbage
Phone
Internet
Food Groceries (average)
Restaurants
Snacks (coffee, etc.)
Entertaining (food/beverages, etc.)
Transportation Car payment/Lease
Gas
Car Insurance
Subway/Bus/Parking
Medical Health Insurance
Regular Prescriptions
Out-of-Pocket
Fitness Programs
Appearance Clothing
Dry Cleaning
Hair Care
Miscellaneous
Other
Next, look at how this money is spent on both fixed expenses, like rent and groceries, and flexible expenses, like entertainment. While filling out the next worksheet, think of some ways you can cut costs and work towards a secure financial future.
Expense Category Expense Item Column A
Fixed ExpensesColumn B
Flexible Expenses
Childcare
Entertainment Movies
Newspapers/Books
Cable TV
Sports (Golf, etc.)
Theatre, Concerts
Travel
Savings Retirement Contributions
Other Savings
Reserve Fund Contributions
Creditors Credit Cards
Other
Other Business Expenses
Alimony
Other
TOTAL
Putting It all Together
Total Income
Subtract Total From Column A
Subtract Total From Column B
Savings or shortfall
Your Expenses, continued
Now that you have recorded your income and expenses, it’s time to combine them to find your monthly savings or shortfall. Subtract both your fixed and flexible expenses from your total income. If you get a negative number, it means you are not living within your means. You should find ways to cut your expenses to avoid going further into debt. If you get a positive number, you can use that extra cash to boost your savings or reduce debt.
Financial Security601 E Street NWWashington, DC 20049
www.aarp.org
D20037 (0714)
©AARP 2014.
Your To-Do List Q Work to find ways to decrease your
spending, from buying generic brand groceries and going out less to reducing your debt and the monthly interest you pay on it.
Q Check out our tipsheet Managing Debt for more advice on paying down your debts. It can be found at www.aarp.org/orderfinancialpubs.
Q Visit www.aarp.org/jeffyeager for cost-cutting advice from the Ultimate Cheapskate Jeff Yeager.
Q For an interactive budgeting experience, you can use our Home Budget Calculator. It can be found in the tools section of our website at www.aarp.org/money.
Q Visit www.aarp.org/retirementcalculator to estimate how much income you will have in retirement.
Employerhealthcareplanoptions HSA FSA
EligibilityMusthaveaqualifiedhigh
deductiblehealthplan(HDHP).Self-employedcancontribute.
Allemployeesareeligibleregardlessofwhethertheyhaveinsuranceor
not.Self-employedcannotcontribute.
2019ContributionLimit $3,500IndividualCoverage$7000FamilyCoverage $2,700
ContributionSource Employerand/oremployee Employerand/oremployee
AccountOwner Employee Employer
Rollover Unusedcontributioncanberolledovertothenextyear.
Unusedcontributionislostatendofyear.
Withdrawals Allowed,butincludestaxwithholdingplus10%penalty. Notallowed.
InterestEarned Interestearnedintheaccountistax-free. Accountdoesnotearninterest.
Portability Employeekeepsaccountevenifs/hechangesjobs.
Accountisforfeitedafterajobchange.
Accessibility Canonlyaccesswhathasbeencontributedintotheaccount.
Completeaccesstotheannualelection,regardlessofwhethertheaccounthasbeenfundedornot.
ContributionAmendment Employeecanchangecontributionamountduringtheyear.
Employeeisstuckwiththecontributionamountchosenatthe
beginningoftheyear.
Source:https://www.investopedia.com/insurance/hsa-vs-fsa/ 1
Presenter:TerranceCartyJune28,2019
WhycreateaSpendingPlan(budget)?
• Reduce anxiety about bills
• Have a sense of control over your money
• Save and build assets that will improve your life
• Identify spending leaks
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A spending plan is a step-by-step plan for meeting expenses in a given time period.
Following a spending plan helps you:
StepstoCreateaSpending&SavingsPlan
1. Determine financial goals 2. Track spending for at least two weeks 3. Know your net income 4. Determine Needs versus Wants 5. Determine monthly bills/expenses 6. Prepare budget 7. Use budget to create a savings plan 8. Review and revise
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SettingFinancialGoals
Make your goals specific to what you want within a certain
time period
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1. Identify and write down your financial goals
2. Organize your financial goals
3. Educate yourself
4. Evaluate your progress
SettingFinancialGoals
• Identify and write down your financial goals • Make them specific and state time
period • Incorporate savings plan to reach
goals into budget
• Organize them into time period • Short-Term (under 3 years) • Mid-Term (3 – 10 years) • Long-Term (more then 10 years)
• Once goal list is complete, prioritize your goals
• Achieving Foundational goals are the first priority • Obtain proper insurance • Building an emergency fund
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ExamplesofFinancialGoals
• Short-term (< 3 years) • Establish a budget • Build a emergency fund • Purchase insurance coverage • Build credit
• Mid-term (3 – 10 years) • Purchase or rent a home • Plan for additional educational expenses or payoff student loans • Begin building savings for life events
• Long-term (> 10 years) • Retirement savings • Start a business
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FoundationalGoals
Obtain proper insurance coverage Types of Insurance
• Property • Rental or homeowners
• Automobile • Health • Life
• Disability
Remember to include monthly premiums into your budget! Create a savings account for deductibles and co-pays
OR Create a health savings account (HSA) or flexible spending
account (FSA) with your employer 7
Employerhealthcareplanoptions HSA FSA
EligibilityMusthaveaqualifiedhigh
deductiblehealthplan(HDHP).Self-employedcancontribute.
Allemployeesareeligibleregardlessofwhethertheyhave
insuranceornot.Self-employedcannotcontribute.
2019ContributionLimit $3,500IndividualCoverage$7000FamilyCoverage $2,700
ContributionSource Employerand/oremployee Employerand/oremployee
AccountOwner Employee Employer
Rollover Unusedcontributioncanberolledovertothenextyear.
Unusedcontributionislostatendofyear.
Withdrawals Allowed,butincludestaxwithholdingplus10%penalty. Notallowed.
InterestEarned Interestearnedintheaccountistax-free. Accountdoesnotearninterest.
Portability Employeekeepsaccountevenifs/hechangesjobs.
Accountisforfeitedafterajobchange.
Accessibility Canonlyaccesswhathasbeencontributedintotheaccount.
Completeaccesstotheannualelection,regardlessofwhethertheaccounthasbeenfundedornot.
ContributionAmendment Employeecanchangecontributionamountduringtheyear.
Employeeisstuckwiththecontributionamountchosenatthe
beginningoftheyear.
Source:https://www.investopedia.com/insurance/hsa-vs-fsa/ 8
FoundationalGoals
Build an emergency fund • An emergency fund is a separate savings or bank account used to cover unexpected expenses such as, an unexpected illness, accident, job-loss, car or home repair
• Serves as a safety net, to be tapped into when a financial crises occur
• It shouldn’t be considered a nest egg or calculated as part of your mid or long-term savings plan
• The goal is to tap your emergency savings only for expenses directly related to an unexpected emergency.
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BuildinganEmergencyFund
How much money should be in an emergency fund?
• This will depend on your lifestyle, household size, monthly costs, and income • Rule of thumb is to have 3 – 6
months of basic living expenses in an emergency fund • If homeowner, account for
unexpected home repairs as well
Steps to building & maintaining an emergency
fund: • Determine a specific dollar
amount that should be in that account
• This amount can seem daunting • Look at your budget to
determine how much you can put away each paycheck even if it is a small amount every month
• Use your tax refund or unexpected source of money
• When/if you draw from the emergency savings it’s important to immediately start rebuilding it back to the desired amount
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TrackDailySpending
• Understand where your money goes by tracking your spending
• Using a budgeting app, a planner or spending diary to track your spending
• Track your spending for at least 2 weeks • Include all cash, debit and credit card purchases
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Do you know where your money goes each month?
Income • Total amount of your salary before taxes and other deductions are taken out
• Typical Payroll Deductions • State and Federal Income Tax • FICA • Health Insurance • Retirement contributions
Gross Income
• the amount of money you receive per pay period after payroll deductions
• Also known as disposable income
Net Pay (Take–Home Income)
• The amount of money leftover after all necessities have been paid
Discretionary Income
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DetermineNeedsvs.Wants
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Wants – Not a necessity but
strongly desired
• Expensive clothes • New car • Going out to dinner
or buying take-out • Expensive cell
phone plans
Needs – Essentials items necessary to
live
• Affordable clothing • Transportation
(public or used car) • Making meals at
home, bringing lunch to work
• Basic cell phone or pay as you go
DetermineMonthlyBills&Expenses
Fixed Expenses • An expense that does not change from time period to time
period
Variable Expenses • Variable expenses are monthly expenses or bills that the amount
owed varies from month to month. • Typically, the higher the usage rate the higher the monthly
amount owed. • Look at the past three months of amounts owed to determine a
monthly average • Adjust when necessary; i.e. increase monthly average of gas bill in
wintertime
Discretionary Expenses • Discretionary expenses are optional expenses or purchases that
a person or family chooses to pay or buy per month. • i.e. gym membership, Hulu membership, eating out
• They are typically not necessities (needs) but instead are wants.
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TypicalBudgetingGuidelinesforAllocationofNetIncome
• Savings for Retirement and Financial Goals = 5-10% • includes employer matching
• Housing = 25-35% • mortgage/rent, internet,
phone, utilities, insurance, repairs, taxes
• Food = 5-15% • groceries, dining out
• Healthcare = 5% • Transportation = 5-15%
• insurance, loan payments,
gas, repairs, registration, public transit
• Insurance Premiums = 5% • medical, homeowners,
rental, life
• Debt Repayment = 0-5% • Includes student loan
repayment • Does not including
mortgage and auto loans • Goal to be as close to 0%
as possible
• Personal Care = 5% • Miscellaneous = 10-15%
• cash, gifts, pets, dues, child care, allowances
• Entertainment = 5% 15
PrepareaBudget• Fill in fixed expenses and average
amount for variable expenses • Include due dates for each expense
• Determine monthly spending of the discretionary expenses:
• Use the money tracking list you created as a base for establishing your new budget
• Critically review ALL expenses and spending
• Strive to find areas where you can realistically reduce expenses to SAVE money
• Eliminate or reduce WANTS to find money for saving towards financial goals
• Determine how much additional money you can allocate per month for savings, debt reduction or towards financial goals
• Track your progress each month and redefine budget as necessary
16
UsingtheBudget
When getting paid monthly When you are paid once a month, it is easy to go through your money quickly, leaving you falling short at the end of each month. • Pay all your bills when you get
paid to include paying yourself by putting money into your savings/investments for future financial goals
• If you cannot pay all bills at time of pay set money aside in a savings account for the budgeted upcoming bills, draw from savings when bill comes due
• Create a weekly spending limit for your discretionary expenses to ensure you have enough to get through month
When getting paid bi-monthly Typically, a person will be paid on the 30th or 1st then on the 15th of every month. • Pay all bills due between the 1st and
15th with first of month paycheck • Treat the paycheck on the 30th as the first
paycheck for the following month.
• Pay all bills due between the 16th and 30th with mid-month paycheck
• If need to use part of a paycheck to pay for a larger expense due later in month set a portion of the amount aside into a savings account to draw at later date
• Remember to pay yourself! • Create weekly spending limits for
discretionary expenses to ensure you have money for the in-between paychecks
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HowtoBudgetwithBi-WeeklyPay
• Complete budget using two paychecks per month • Ten months out of year you
will only get two paychecks • Two months of the year you
will earn three paychecks
• When you get paid, look at budget and pay bills due between the two pay periods
• Consider the 3rd paychecks as bonus pay • Use for debt repayment • Savings towards financial
goals • Put into an emergency fund
• Save a portion of your paycheck for big expenses due later in month such as, rent
• Create weekly spending limits for discretionary expenses to ensure you have money for the two weeks between paychecks
• This allows you to put aside money ahead of time for larger bills and goals as opposed to using one paycheck to pay a big expense and trying to make the remaining amount stretch throughout the entire month.
• Remember to pay yourself first! Look at budget to determine when you set aside money for your financial goals
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StarttheSavingHabitEarly!The earlier you start to save and invest the more wealth you can accumulate
The consistent habit of saving is more important than the amount of money saved
STRIVE to ALWAYS Pay yourself first • Systematic approach to saving
and investing • View the amount you put into
savings a fixed monthly expense • Invest same dollar amount at
regular intervals • Set up a monthly automatic
allotment to go directly into an investment or savings vehicle
• Increase amount saved as net income increases
For short-term goals, use a savings account, CDs, or bonds to save money
For mid to long-term financial goals, put money into inflation-beating investments (such as mutual funds or investment accounts).
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CreateaSavingsPlan
Be proactive in managing money and create a savings plan
Critically look at budget to determine how much you can set aside for regularly monthly savings
Determine the percentage of the amount you are saving you want to apply towards each of your financial goals
• Remember to make sure you have funded or are funding your foundational goals first!
• Such as an emergency fund or savings for insurance co-pays and deductibles
As you receive pay raises, increase the percentage you allocate towards savings
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CreateaSavingsPlanReview your financial goals and establish “savings buckets” for your goals: • Emergency fund savings • Short-term goals savings • Mid-term goals savings • Long-term goals savings • Tax protected retirement saving Use automatic savings methods • Set up an automatic transfers from your checking account or
paycheck to each of the savings buckets each month preferably on same day as your payday.
Save all or part of a infrequent or unexpected income • Designate your tax refund, annual bonus, tip money or proceeds
from garage sales to savings.
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Canyouaffordafinancialgoal?
To see if you can afford to borrow money for a car, student loan, mortgage Research how much money you will need to borrow
Review your credit report
Use online loan calculator to see how much the monthly payment will be
• Determine current interest rate • Use Bankrate or other online banking website • The higher your credit score the better interest
rate you will receive
To see if you can afford to move into a more expensive apartment or home
Research how much more your rent will be (remember to factor in higher utility costs!)
Begin saving the monthly payment or the difference between your current rent and the higher rent into a savings account as if you were making the payments. If you can save the monthly payment/rent for at least 3 months without having to take it from savings and without having to use credit to cover your regular monthly expenses, then you can afford the financial goal.
Use money you saved for a down payment, rental deposit or moving expenses! 22
WaystoSaveMoney
Look at your budget and your spending habits to identify spending leaks!
Some typical spending leaks: • Soda, energy drinks, coffee • Dining out • Fast food • Convenience store shopping • Habits (cigarettes, alcohol, lottery tickets) • Downloads
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WaystoSaveMoney• Pay bills on time to avoid late
fees • Think before you make a
purchase • Do you really need it? • Is there a cheaper option?
• Control credit card spending • Use credit cards only when
necessary • Budget/track credit card
purchases • Strive to pay off credit card
balances every month
• Make your own lunch to bring to work
• Make your own coffee • Buy reusable items instead of
convenient throw-away items
• Meal Plan • Save energy
• Turn off lights and appliances • Invest in energy efficient
appliances • Weather proof windows and
doors • Do full loads of laundry
• Reduce spending on your “Wants”
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ReviewandRevise!
• Continue to track spending and variable expenses • Use money tracking/budgeting apps such as
• Mint • Money Manager
• Review budget and spending after one month • Make adjustments as necessary • Note: life happens so no monthly budget will be exact
• Once you have a good working budget review and revise budget and financial goals • At least once a year • When your money or life situation changes • When you have added or deleted expenses • When the expenses have increased or decreased
• Such as, increase in property taxes, decrease in gas bill due in warmer months
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TheFinancialEmpowermentCenterCanHelpYou!
• Financial literacy classes • Financial mentoring • Financial wellness check-ins • Pull and review credit report • Provide credit scores • Assist in creating a budget • Assist in developing action plans
to achieve financial and savings goals
• Assist in developing action plans and steps to help reduce debt
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FECcsoco.org Email: [email protected]
703-704-6101 8350 Richmond Hwy Ste.125
Alexandria, VA 22309