I’ll Do it If…5 habits for financial health

I’ll Do it If…5 habits for financial health OHCE State Lesson

Icebreaker • Break into small groups of 3-4 • Discuss a habit you have tried to develop (or break) to reduce spending and increase savings • As a group decide the best tips and report back to the group

Objectives • Five strategies to help provide more control over finances • Tracking • Budgeting • Setting Money Aside • Checking your Credit Report • Knowing what’s in your report

Tracking • A method for keeping up with actual spending • Useful when you find there might be some spending “holes” • Notepad, check register, phone app • Whatever works

Tracking continued • Use categories that match those on the budget sheet • Always consider periodic payments • Usually requires a month or two to get accurate tracking

budgeting • A written plan for how we spend money • There is a sample budget sheet in your packet of information

Budget components • Fixed expenses – those that are set • Mortgage • Car payment • Variable expenses – those that can be controlled • Groceries, eating out, utilities • Periodic expenses – those that come up at various times throughout the year • Gifts, vacation, school expenses

Periodic Expenses • Because these are not due every month, they are often ignored or overlooked • Can lead to overuse of credit if no money is set aside • Can use calendar or worksheet to determine amount that needs to be set aside monthly • Set aside into a separate account • Use this account to pay those expenses when they come due

Setting money aside • We just discussed one reason to set money aside • Other reasons include a major purchase, down payment or other goal • Decide on exact amount and time frame • Begin setting aside amounts

example • Financial Planners recommend an emergency fund of 3 - 6 months of living expenses • Nancy is widowed but still working • With only one salary, she needs 6 months • Living expenses $1,235 per month • times 6 months = $7,410 • Over one year she needs to set aside $617.50 into savings each month

Ordering a credit report • All consumers have the right to 3 free per year • From 3 major Credit Reporting Agencies (CRA) • Equifax • Experian • TransUnion • www.annualcreditreport.com • Order online, by mail, on the phone

Know what’s in your report • The report is a compilation of information • Your creditors send the info to the Credit Reporting Agencies • The report is divided into sections

Personal Information • Name • Aliases • Current address • Previous addresses

Public records • Civil claims • Bankruptcy • Collections • Liens • Some of this information can remain on your report for a long time. Bankruptcy (7 – 10 years), liens can be renewed and stay on indefinitely

Credit Items (history) • List of credit accounts • Account numbers, type of account, payment history, months reviewed, total amount of debts… • This information stays on your report for seven years from date of last activity • Payment history has the largest affect upon your credit score (a measure of credit risk that affects how much you pay for loans, interest, and even insurance.

inquiries • List of requests for you credit information • Creditor that you do business with • Someone who wants to offer you credit (promotional) • Your personal request for your report • A creditor where you have filled out an application • This is the only one that affects your score • These inquiries stay on your report for two years

resources • www.ftc.gov • Excellent information on ordering, reviewing and correcting mistakes on your credit history • www.myfico.com • Information on how your report affects your score

I’ll Do it If…5 habits for financial health