“The Art of Building a Financial Future” Securing Our Future Through Smart Money ManagementA Consumer Education Program byLULAC and MasterCard International
What is “The Art of Building a Financial Future”? • A program designed by MasterCard and LULAC to help U.S. Latinos educate themselves about smart financial management. • Includes community workshops and bilingual materials that will be distributed through LULAC councils to Latinos. • Addresses areas of particular interest to Latinos.
What is “The Art of Building a Financial Future”? • It is NOT a sales pitch. • “The Art of Building a Financial Future” is a consumer education program. • It provides useful money management tips to help Latinos build their financial futures. • At no time will anyone be asked or encouraged to sign up for a credit card.
A Shared Vision • Both LULAC and MasterCard are committed to advancing financial management messages to increase financial literacy and to help economically empower Latinos.
LULAC’s Vision • LULAC has a rich history of advocacy in civil rights, education, economic development, immigration, and equal opportunity. • LULAC has identified economic empowerment as the critical next step toward improving the quality of life for Latinos in the U.S. • Advancing financial management messages among the LULAC membership and throughout the Latino community will lead to increased financial literacy and economic empowerment. • Economic empowerment will better position Latinos to take advantage of the opportunities that this economy offers.
MasterCard’s Vision • MasterCard believes it has a special responsibility to provide consumers with information that will help them use payment products responsibly and effectively. • MasterCard is committed to consumer education that will enable consumers to make responsible money management decisions. • MasterCard has a well-developed expertise in financial management and consumer education and has created dozens of consumer education programs on a wide range of topics.
Why Build a Financial Future? • Because one of the most important steps toward building a strong financial future for yourself and your family is learning how to manage your money.
The Art of Building a Financial Future... • Five Basic Actions • Create and manage a budget. • Understand the basics of credit and debit. • Use financial tools effectively. • Establish a good credit history. • Avoid fraud.
Why Create a Budget? • Creating and following a budget is an essential first step to sound financial management. • Benefits of budgeting: • To understand how you are spending money so you can take advantage of opportunities to save. • To set and meet long-term financial goals, such as buying a car, a house or saving for college tuition.
Creating a Budget • It’s a three step process: • List and add up all your monthly income; • List and add up all your monthly expenses; and • Subtract your expenses from your income to find out how much you have left over. • * Make budgeting a family project to help everyone learn good money management.
Add Monthly Income • Total Monthly Income = • Primary Job + • Secondary Job(s) + • Spouse’s Income + • Income from Others in Household + • Any Additional Income
Subtract Monthly Expenses • Total Monthly Expenses= • Mortgage/Rent + • Utilities + • Electricity/Gas • Water • Telephone • Home Maintenance/Other Expenses + • Groceries + • Clothes + • Transportation (fares, tolls) + • Car Loan Payments/Repair/Gas/Parking + • Entertainment + • Movies • Eating Out • Vacation • Medical Expenses/Health Insurance + • Personal Care (e.g. haircuts) + • Savings + • Emergencies + • Miscellaneous
Budgeting Tips • If your expenses exceed your income, determine ways that you can cut back. • Always set aside some money for savings and emergencies. • Even a little each month will add up.
Budgeting Tips • When adding up your expenses, remember to always keep track of the following: • All checks written, ATM withdrawals, fees and deposits; • Debit card purchases; • Monthly checking account statements; and • Monthly credit card statements.
Budgeting Tips • If you find that your financial life is too complicated, it may help to get organized and simplify. • Think about reducing the number of checking accounts or credit cards that you have.
Banks: A Helpful Resource • Banks can help you improve your financial management skills and grow your money.
Banks: A Helpful Resource • Many banks provide information in Spanish. • Any money deposited in an accredited bank account is insured by the U.S. Government, up to certain limits. Look for the “FDIC” or similar signs. • Banks generally will not share your information with government organizations, such as the Internal Revenue Service or the Immigration and Naturalization Service.
Banks: A Helpful Resource • Banking products and services include: • Savings account: Your money will earn interest. • Checking account: Allows you to pay bills using checks instead of cash, which can be a cheaper and more convenient alternative to money orders and certified checks. • Payment cards: Credit and debit cards are secure and convenient alternatives to cash and are accepted by merchants all over the world.
Banks: A Helpful Resource • Reasons to Use a Bank: • Federal law requires the government to issue many payments, including welfare and social security benefits, electronically. This process requires a bank account. • Banks provide an alternative to check cashing outlets. • Check cashing outlets force consumers to carry large amounts of money. • Check cashing outlets often charge large fees for their services.
Four Types of Payment Cards • Credit – Allows you to pay for purchases and carry over or “revolve” a balance from month to month. • Secured – A credit card with a credit line or limit that is equal to an amount deposited with the bank.
Four Types of Payment Cards • Charge – Must be paid in full each month. • Debit – Withdraws money directly from a bank account (like a check).
Understanding Credit Cards • Credit card charges are loans from a bank to help you make purchases --and debts that you must repay. • A credit card allows you to carry part of the balance over to the next month, but you will be charged interest.
Understanding Credit Cards • Before applying for, accepting or using the card, understand all the rules, terms and conditions of use. • Credit cards should only be used for purchases you can afford to pay back in a short period of time.
Credit Card Tips • If you decide to apply for a card, choose carefully. • Ask questions about anything that sounds too good to be true or that you don’t understand. • When applying for a credit card, you may be asked to provide certain information, such as proof of residency or job history.
Credit Card Tips • Know your credit card interest rate, due date and credit limit as well as any, fees charged. • Always pay your credit card bill on time. • Interest charges are always added when the bill is not paid in full. • You may be charged a fee for late payment. • Your credit record is damaged when you pay late.
Credit Card Tips • Always pay more than the minimum amount due on your credit card statement. • If you only pay the minimum amount due, you will not reduce your balance.
Did You Know??? • Question: How long does it take to pay off: • A $1,000 credit card balance • With a 19.8% interest rate • If you pay only the minimum balance due each month?
Did You Know??? • Answer: • Eight years!! • It would cost $843 in finance charges, almost doubling the amount of the original purchases.
Credit Card Tips • Keep track of how much credit you have available and limit your spending to how much you can afford to pay in a short period of time. • Fees are usually charged, and your credit record is likely to be damaged if your credit limit is exceeded.
Your Credit Card Statement • You can track your spending with the monthly statement issued by the bank. • Each month, you will receive a statement that will list all of the purchases you made during the last billing cycle. • If you do not pay the balance in full, the bank will also charge you interest on the remaining amount. • The statement will also include a minimum amount due. • Review your statement with your family members. This is a good opportunity to explain how to manage a credit card.
Understanding Secured Cards • Secured Cards • The credit line or credit limit is equal to the amount deposited with the bank. • They help those with damaged, little, or no credit history to build a good credit record. • Secured cards look like “regular” cards and are accepted by merchants in the same way. • There is often an annual fee assessed. • Some offers are better than others; read the “fine print.” to check for fees that will be assessed.
Understanding Debit • Debit cards can be used like a credit card to make purchases anywhere the logos on these cards are accepted. • Debit cards can also be used to withdraw cash from an ATM.
Understanding Debit • In some cases, your debit card will require the use of a Personal Identification Number (PIN) and sometimes a signature. • The amount of the purchase or withdrawal is deducted directly from your checking account.
Use Debit Wisely • Always record your debit transactions. • Always know how much money you have in your bank account.
Use Debit Wisely • Never overdraw your account. • You will be charged fees by the bank and possibly the merchant. • You may damage your credit record. • Some debit card transactions take several days to be deducted from your account, so tracking your balance through only an ATM is not the most effective way to manage your account.
Protect Your Debit Card • Check your wallet often and report lost or stolen cards immediately. • Sign your card as soon as you receive it. • Read the security precautions that come with your debit card and follow them.
Protect Your Debit Card • Memorize your Personal Identification Number (PIN) • Never write it down, especially on the card. • Never share it with anyone. • Don’t carry it with your card.
Facts About Your Credit Report • A credit report, also known as your credit history, is a collection of information that indicates how well you’ve managed your finances.
Facts About Your Credit Report • Negative credit information such as: late payments, non-payment, or exceeding your credit limit can stay on your credit report for seven years. • Bankruptcy can stay on your credit report for seven to 10 years.
Facts About Your Credit Report • A poor credit record can: • Hurt your chances of renting an apartment or buying a house; • Prevent you from being approved for a car or new business loan; • In some cases, affect your chances of getting a new job.
Establish a Good Credit History • Your credit record is critical to establishing a strong financial future. • Review your credit report annually and correct any mistakes. • Credit records can be obtained (for a small fee) from three national bureaus.
Credit Bureaus • Equifax Information Service Center 1-800-997-2493 or 1-800-865-1111P.O. Box 740241, Atlanta, GA 30374-0241 www.equifax.com • Experian Information Solutions, Inc. 1-800-682-7654 or 1-800-397-3742PO Box 740241, Chatsworth, CA 91313 www.experian.com • Trans Union Corp. 1-800-888-4213 or 1-800-916-8800Consumer Disclosure CenterBox 390, Springfield, PA 19064-0390 www.transunion.com
What If Credit Is Refused? • Sometimes a bank will determine that your application for credit is too great a risk for them to loan you money. • If you are refused credit, you have the right to receive a free copy of you credit report.
How to Repair Your Credit • There are steps you can take to rebuild your credit record so that you can qualify for a credit card or a loan.
How to Repair Your Credit • Create and maintain a budget. • Pay your bills on time over time. • Review and correct your credit report (if there are errors). • Consider getting a secured credit card. • Be sure to always pay at least the minimum amount due on time each month. • The strongest credit reference is a bank card, paid on time, over time.
How to Repair Your Credit • Beware of credit repair companies offering to “erase” negative information from your credit report. • This cannot be accomplished by an any outside agency. • Repairing your credit takes time and discipline. There is no quick fix.
Avoiding Fraud • Credit and debit fraud are easy to prevent if you follow a few simple rules.
Avoiding Fraud • Do not give your card number to any unknown caller or anyone who refuses to put an offer in writing. • Do not allow a merchant to record your card number on a check, receipt or other document.
Avoiding Fraud • Do not write your PIN on your credit or debit card. • Dispose of copies of receipts and other documents that display your card numbers.
Avoiding Fraud • When online: • Never provide your credit card number to an Internet merchant who does not run a secure server. (Look for an unbroken key or closed lock at the bottom of the browser window.) • Never send your credit card number through e-mail. • Never give your credit card number to an Internet merchant without first learning about the merchant.