Financial Basics 101

Welcome to

Budgets and Credit

Introduction

Budgeting

Credit Report

Credit Score

Agenda

1

2

3

4

IntroductionBanks vs Credit Unions

Banks Credit Unions

Customers –Banks are owned by investors. Members – Credit unions are member owned. Each person who deposits money becomes a member.

Profits – Investors get share of profits. Not-For-Profit – Profits are given back to members in the form of lower loan rates, higher dividends and free or low cost services.

FDIC – Federal Deposit Insurance Corporation NCUA – National Credit Union Association.

Budget

Learning to Manage Your Money also known as

Setting up a Budget

BudgetBenefits of Managing (Budgeting) Your Money

• Free up time → do things you enjoy

• Less Stress → better health

• Achieve goals → satisfaction

•Greater Control → peace of mind

Budget

Ask Yourself: Do you….• Spend more than you make?

• Live beyond your means?

• Pay yourself first?

• Charge items instead of saving for them?

• Think about an emergency fund, but fail to have one?

• Spend uncontrollably?

Budget

Establishing anEmergency Fund

Emergency Fund

$1,000

3 – 6 months living expenses

Retirement

401KIRA

Savings Account Savings AccountMoney Market

CD IRA

Remember to PAY YOURSELF FIRST!

BudgetSet SMART Financial Goals

Specific

Measurable

Adjustable

Realistic

Time-Oriented

BudgetSet Three Types of Goals

Short Term Goal within next six months

Mid Term GoalWithin next one to five years

Long Term GoalMore than five years away

BUDGET

SAVE

INVEST

BudgetFinancial Goal Chart

Targe

t Date

Total Neede

d

Pay Periods

Until Target Date

Savings Needed Per Pay Period

Savings Per Week

Savings Per Day

Short Goal

Intermediate Goal – pay off $1,200 debt

One year

$1,200 12 $100 $25 $3.57

Long Range Goal

BudgetFive Steps to a

Successful Spending Plan

1. Identify all income sources2. Determine monthly expenses

fixed and variable expenses

3. Balance income and expenses

4. Review and Revise

5. Manage

Budget

BudgetingBasics

http://hffo.cuna.org/budget_blueprint.html

BudgetSTEP 1: List All Income Sources

Paycheck BonusDividends GiftsInterest Child Support/AlimonyPension Tax RefundSocial Security OtherRental Income

BudgetSTEP 2: Determine Monthly Expenses

• Fixed - mortgage, car payment

• Flexible - food, clothes, utilities, gifts

• Periodic - insurance, taxes

BudgetExpenses

Necessary – shelter, food, utilities, insurance, taxes.

Discretionary – vacations, entertainment, lattes.

Personal – don’t have to account for every penny.

Miscellaneous – unplanned expenses.

BudgetWhere Does Your Money Go??Track your daily expenses

Fast FoodSodaCoffeeVideo Rental Tobacco products

BudgetSTEP 3: Balance Income and Expenses

How does your CA$H flow?

If Income > Expenses – save more!If Expenses > Income – make changes

BudgetSTEP 4: Review and Revise

• Continue to track expenses• Find places to save (eliminating leaks)• Does your plan fit with your goal?

BudgetSTEP 5: Manage Your System

• Track expenses regularly• Pay bills regularly• Balance checkbook monthly• Review goals annually or after major life change.•Does plan still fit with your goals?

Credit Report

Credit Report

www.experian.com/credit_report_basics/pdf/samplecreditreport.pdf

Credit Report

How long does information stay on your credit report?

• Positive information can remain forever.• Negative information can remain up to seven years – from time you take care of it.• Bankruptcies can remain seven to 10 years.

Credit ReportIf your credit report has errors….

• Write a letter to credit bureau explaining why you think information is inaccurate.

• Credit bureau has 30 days to investigate, notify you of results and delete inaccurate or unverifiable information.

• If you disagree with investigation results, write a dispute statement to appear in your file.

Credit Score

•How your credit score can affect your life•Employment•Landlord•Insurance underwriting•Extending future credit

Credit Score

FICO Credit ScoreRange from 300-850, higher is betterMost lenders base approval on themHigher scores mean lower interest ratesScores are based on your rating in five general categoriesThe median FICO® score in the U.S. is 723

How Credit is Calculated

Payment History

•Timely payments=positive points•Late/delinquent=negative points

Length of Credit

Type of Credit• Unsecure vs secure debt• High risk vs low risk

Amount Owed• % of credit used• # of accounts• Aggregate credit limits

New Credit• # of new accounts• # of inquiries

Vehicle Loan Example

Credit Score $25,000 5 year note*

Monthly Payment

700 – 850 4.50% $466

660 – 699 6.25% $486

600 – 659 9.25% $522

599 – below 17.50% $628

*for illustration purposes only

$162.00/month difference = $9,720 over a five year loan.

Credit ScoreWays to Improve your credit score

• Pay down debt• Pay on time• Cancel cards you don’t need - with caution

Financial Traps

•Check Cashing Services•Pay Day Lenders•Car Title Loan Companies•Rent-to-Own Retailers•Zero Interest Deals•Rapid Refund Loans

Do You Ever Feel Like This?

Debt Collectors

http://ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm

http://www.credability.org/en/homepage.aspx

Debt Collection FAQs: A Guide for Consumers

CredAbility

Brought to you by:

Budget Worksheet emoryacu.com → About Emory ACU → Resources → Home & Family Finance Magazine → Search for Budget.

Free Copy of Your Credit Report - freecreditreport.com

Credit Bureaus - experian.com • transunion.com • equifax.com

Debt Collection FAQs - http://ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm

CredAbility –

Don’t forget - the credit union is here to assist youwith all your financial needs. 404.329.6415 • emoryacu.com

Resources

http://www.credability.org/en/homepage.aspx