Workshop Resources • Allstate Foundation • REAP • NeighborWorks® Training Institute • Kentucky Housing Corporation • Juli Clark, OASIS • Hadley Meserve, OASIS • Andrea Miller, KDVA
Lesson 1 What is Financial Education? Identifying and Overcoming Economic Abuse
Goals and Objectives Goals for today’s lesson: • Learn the importance of financial education/build foundation for remaining lessons • Identify different forms of economic abuse Objectives: • Identify financial fears and visions for success • Ease financial fears through discussion • Learn appropriate record-keeping/organization • Identify /discuss different forms of economic abuse • Learn about the abuse of power where it revolves around money
What is Financial Education? Following strategies to make the most of your financial resources or income: • Budgeting • Saving • Understanding and using credit wisely • Responsible choices • Needs vs. wants
Financial Fears Complete activity worksheet
Financial Fears: When I think of my finances, I am afraid of: • Being poor and living in poverty • Losing Money • Making a mistake that will cost me a lot of $ • Never having $ for emergencies • Being sued by a creditor • Having to file for bankruptcy • Not being able to afford living on my own • Someone stealing my identity • Outliving my retirement savings • Not being able to work due to an injury • Having medical expenses I can’t afford to pay • Having bad credit • Not being able to get a better paying job • Not being able to buy food • Never being able to pay off my debts • Not being able to establish good credit • Having my wages garnished by a creditor • Making financial decisions on my own • Trusting a stranger to manage my finances • Investing my money and losing it all
What are your financial values? • Identify 3 important reasons to save money. • Identify 3 important ways to spend money. • Identify 3 ways that you think money is wasted or used carelessly.
What is your vision of financial success? Complete the activity
Check all that apply; Rank importance • Not living paycheck to paycheck • Having 3-6 months of living expenses saved • Being free of credit card debt • Having a fully funded retirement fund and retiring comfortably • Owning my own home • Being able to pay all of my bills when they are due • Not relying on credit to purchase things I want or need • Having a plan for how I will save and use my money • Having a good credit score • No longer struggling to make ends meet • Owning my own vehicle • Having life insurance and an estate plan • Sending myself and/or my children to college • Having the money to buy anything I could ever want or need
Why keep records? • Provides proof of ownership, that a bill/debt has been paid, evidence if official records are lost • Captures legal events (birth, divorce, etc) • Able to dispute errors in banking/billing statements • Enter claims (insurance, social security, etc) • Tax deductions • Pay fees/premiums on time
Why keep records? (cont’d) • Make good decisions, save time, and reduce stress!!!
What to keep? Social Security Cards Any legal document (marriage, divorce, custody, wills, etc) Insurance (health, auto, property) Banking/credit card/loan statements Investment records Tax records
Organization of Documents:3 Categories • Active Files • Inactive Files • Safe Deposit/Lock box
Active Files: Keep for 12 months • Unpaid and paid bills • Bank (checking/saving statements) • Active insurance policies • Warranties/Instructions for appliances • Current papers for tax returns • Last 3 years of tax returns • Employment records • List of items in lock box/safety deposit box
Inactive Files: Keep for 3-7 years • Bank statements for the last three years • Tax returns for past seven years • Educational records, diplomas, transcripts, etc. • Statements for home/property improvement expenses
Safe Deposit/Lock Box • Birth, death, marriage, divorce, etc, certificates or decrees • Mortgage papers, property deeds, rental agreements • Credit card numbers/phone & address of credit card company in case of theft/loss • All banking account numbers • Home inventory with photos • Medical records • Copy of will • Car title
Economic Abuse • Occurs when one person/group uses money to control another person/group • Examples?
Examples of Economic Abuse • Controlling the financial resources (check book, paying bills, etc) or Access to resources • Taking partner’s money • Destroying partner’s credit • Forcing partner to ask for money or giving an “Allowance” • Gambling/spending savings • Purpose getting partner fired from work • Demanding receipts/details of how money was spent • Not letting partner talk to others about money • Not allowing partner’s name to be on accounts • Devaluing partner’s contributions • Preventing partner from working • Destroying homework for school
Case Study #1 • Beth was only given $5 at a time for gas. Beth wants to leave but won’t because she doesn’t think she can make it on her own. She is disabled and receives $700 per month. She has 3 children and the Section 8 waiting list is closed. When asked about a shelter, she states “I have done that and I don’t want to go back.” • Abuse/Not abuse? • What would you do?
Case Study #2 • Lisa saved up and re-built her credit history so she could buy a new car. She had it for 5 days when her ex-boyfriend stole it. Lisa paid $4500 and has a loan for $10,000 at 7% for 5 years. A week later, Lisa found her car abandoned on the side of the road with slit seats, a broken front windshield, and profanity written on the seats with black marker. Lisa’s insurance will not cover the repairs. Lisa cannot get to work and was fired for missing too much work. She is now homeless and living with friends. • Abuse/Not abuse? • What would you do?
The Power ContinuumWhich of the following, if any, affect your financial power? • Gender • Race/ethnicity • Sexual orientation • Educational level • Age • Occupation • Political views • Religion
Safety Planning Tip If you are planning to leave, try to obtain the following five: • Photo identification • Most recent tax records • Most recent bank statement • Vehicle registration (if you own a car) • Insurance contact (health and vehicle)
Lesson 2 Creating a Monthly Spending Plan (budget)
Goals and Objectives Goals for today’s lesson: • Identify the need for a “monthly spending plan” • Begin to create an individual plan Objectives: • Define a spending plan and its importance • Learn how to create a plan • Learn to total/track monthly income • Create a practice budget
Spending Plan = Plan to pay for monthly expenses based on income Why is this important?
Helps you control your money instead of your money controlling you Helps tell if you are living within your means Helps meet savings goals Helps you to set aside extra money for things you need and/or want Helps you plan for emergencies or unexpected expenses Helps you to see where you are spending money so you can focus your goals Helps to keep you out of debt or get you out of debt Helps give you peace of mind
Creating a Spending Plan • Record all sources of income • Record list of monthly expenses • Divide expenses into “fixed” and “variable” • Fixed expenses stay the same each month • Variable expenses change from month-to-month • Note whether the expense is a “want” or a “need” • Needs are basic to SURVIVAL (food, water, shelter, etc) • Wants are desired but not necessary (dining out, cable, movies, nail care, etc) • Adjust expenses to fit within income • Review/adjust/update monthly
Practice Scenarios • What suggestions or thoughts do you have for Lisa? • For Katarina? • How will this help you with your spending plan?
Lesson 3 Building (or Rebuilding) Your Credit
Goals and Objectives Goals for today’s lesson: • Teach the importance of developing and maintaining positive credit • Learning the basics of a “financial” resume Objectives: • Definition of credit • Why we need good credit • 4 C’s of credit worthiness • Difference between creditors and credit bureaus • Credit report basics • Dispute letters • Credit scores • Tips/Strategies for raising credit scores • Consumer rights regarding credit
What is credit? • The present use of future income
Good credit allows you to: • Purchase item/s you need or want • Get the lowest interest rates • Get a job (in some industries) • Rent an apartment • Open a checking account • Obtain insurance at lower rates • Establish utility service in your name • Purchase a home or other asset
Four C’s of Credit-worthiness • Capacity =ability (income; past, present and future) • Capital = resources (cash in banks, stocks, gifts, etc) • Character = responsible credit patterns (repayment history) • Collateral = security in event of default (solid home, fair market value) Would you lend to you?
Creditors vs. Credit Bureaus A Creditor is the person/entity granting credit A Credit Bureau reports on credit provided to others Examples: Experian Trans Union Equifax Important to note that not all bureaus report the same information Each creditor can choose (and has to pay) the bureau to which it reports information • Examples: • Banks • Finance companies • Stores • Insurance companies • Landlords • Credit Card companies
Free Credit Report • Request online from www.annualcreditreport.com (all three bureaus) • Security questions are asked to verify your identity • Can request (1) free copy per year from each CRA
What’s in the report? • Identification information (full name, last two addresses, SSN, DOB, place of employment) • Detailed information on the accounts listed (name of creditor, date account opened, balance information, late payment history, and current status of account) • Public record information (bankruptcies, tax liens, judgments, other filings) • Credit report inquiries (name of each creditor who has requested a copy) – last two years • Consumer statement (place for a consumer to place a statement challenging or explaining any creditor entry, in < 100 words per trade line)
What is NOT in the report: • Race, religion, gender, marital status, national origin, age • Salary, dates of employment, thorough employment history • Interest charged on particular accounts • Child support/family obligations (unless judgment rendered and in default) • Participation in credit counseling • Any information not predictive of future performance
Review your report! • Verify that ALL personal information is correct including SSN, DOB, addresses, etc. • Review credit information/trade lines to ensure information is accurate • Review public record information (local, state and federal courts) • Review inquiries (people who have obtained a copy of your information) • NOTE: Courts/Homeland Security/Child Support enforcement can request WITHOUT your permission
Disputes • Write letters to dispute incorrect information on your credit report • Include copy of report with highlight of disputed item and reason for dispute • Incorrect information must be removed • Adverse, but correct, information does not have to be removed until terms apply (generally 7 years + 180 days)
What is a credit score? • A number lenders use to determine if you are a good credit risk • Most common = FICO (Fair Isaac Corporation) • Range from 300-850 • Proprietary formula – lenders must pay FICO to obtain and pay for software to calculate • Vantage Score = new model • developed using 7.5 million files from all three credit bureaus • Range from 501-990 • What you usually receive when getting your “free” score from the internet
Profile of high FICO score holders • NO late payments or other payment problems • Use of less than 10% of the amount available on credit cards • Most have credit history > 20 years • Most have opened no more than one new credit account in the past year • Most have between 6-15 credit accounts (all types)
What if you have no score? • Establish a non-traditional credit history with an agency such as (PRBC-Pay Rent, Build Credit) based on: • Rent payments • Utility payments • Child care or child support payments • Other recurring expenses • Microloans • Loans using a co-signer
Strategies to Improve Credit Score • ~3/4 of your score is under your control!!! • Pay your bills ON TIME • Decrease your balances and increase your limit/balance ratio • Keep older accounts open . Don’t swap accounts constantly. • Don’t apply for new credit unless you really NEED it • Have a sensible mixture of credit