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Financial Head Start. Why care? It’s Your MONEY. What would YOU like to start saving for?. It’s never too early to plan ahead…. Where to begin. Create a Budget and Goal with an Expense Worksheet An Expense Worksheet will keep track of: Expenses Actual Amount Spent Savings and Losses.
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Financial Head Start
What would YOU like to start saving for? It’s never too early to plan ahead…
Where to begin Create a Budget and Goal with an Expense Worksheet An Expense Worksheet will keep track of: • Expenses • Actual Amount Spent • Savings and Losses
What is a Budget? • An important step to Financial Security • About choices – choosing how to make and spend money
Steps to Preparing a Budget Step 1: Review your income and expenses Step 2: Keep track of daily spending Step 3: Find ways to decrease spending
Step 1: Income… Income comes in the form of: • Allowances • Wages from a job • Miscellaneous work • Interest and dividends from investments
Step 1: ...and Expenses Expenses: items you pay for each month: • Housing and car payments • Insurance • Food and clothing • Utility bills • Personal, child or pet care • Eating out or other entertainment • Educational costs, etc.
Classifying Expenses • Fixed Expenses: • Do not change from month to month • Flexible Expenses: • Often change from month to month • You may have control over how much you pay • You may shop around for the best value before committingto any expense
Step 2: Keep Track of Daily Spending Do you know where your money goes each month? Have you ever had any money and then spent it? Do you remember exactly what you bought? Control Your Money! • Know where your money goes • Keep a personal spending diary • Cut expenses to save for goals
Step 3: Find Ways to Decrease Spending You can decrease spending by: • Not shopping “for fun” • Remembering your savings goals • Buying only what you need • Paying your bills on time to avoid extra fees and charges
It all adds up! • 1 Starbucks® drink @ $3.50 • $3.50 x 7 days = $24.50 • $3.50 x 365 days = $1,227.50 • 1 Sonic® burger @ $4.25 • $4.25 x 7 days = $29.75 • $4.25 x 365 days = $1,551.25 • 1 carton of cigarettes @ $32.00 • $32.00 x 12 months = $384.00 • $32.00 x 26 weeks = $832.00
Needs vs. Wants • Write down needs and wants, look carefully at what is written down. • Think about what’s really important to you and what has lasting value. • Do you really need or want everything on your list? • Are some needs really wants?
Now what? How do I pay bills? What do I do with the money I save?
Types of Bank Accounts • Checking accounts are used to pay bills and buy goods. • Saving accounts are used for saving money and earning interest.
Advantages of Maintaining a Bank Account • Money in a bank account is safe, secure, and convenient • Pay bills online • Earn interest – build your savings • Build credit (credit score) Make sure your banking institution is FDIC insured ! ((F (FDIC) Federal Deposit Insurance Corp
Banking Services Banks offer their customers many different ways to access their services: • A branch is a retail location where a bank offers face-to-face service to its customers. • ATM (automated teller machine) • Online banking allows you to conduct nearly all of your banking transactions. • Mobile banking allows you to use your cell phone to conduct simple banking transactions.
Checking Account A checking account can help you manage your daily finances and make sure you’re staying on track. Benefits of a checking account: • Writing checks or using a debit card is generally safer than carrying cash. • Making payments through a checking account is much less expensive than paying for money orders and cashier’s checks. • Direct deposit from your employer into your checking account is the easiest way to manage your paycheck. • Paper and/or online account statements help you track your income and expenses. • You can make purchases easily and access cash when you need it. • Most checking accounts come with ATM cards that allow you to get cash from ATMs.
Checking AND Saving Accounts Types of accounts • Basic checking • Interest-Bearing accounts • Money Market Accounts • Student and Senior Checking • Savings • Make sure to pay yourself first – don’t wait to save what is left over at the end of the month. You can do this easily by setting up an automatic transfer so that every month or with every paycheck, a certain amount of money goes directly to your savings account.
Important Terms • Deposit – To put money in the bank • Withdrawal – To take money out of the bank • Balance - How much money you have in the bank • Overdraft - Withdrawing more money than you have in your account • Fees - Money charged for services
Be Smart! • Establish financial goals • Develop a realistic budget • Prepare for the unexpected • Balancing your checkbook • Save, save, save. • Pay on time • Be smart about credit
What is Credit? Credit is your… • Reputation as a borrower • Tells others how likely you are to repay your loans based on information about your borrowing history • Information comes from your credit reports
What is FICO? FICO is the best-known and most widely used credit score model in the U.S. Fair Isaac Corporation – Risk Score FICO Score is made up of:
Establishing and Building Credit Credit Cards - Revolving credit “borrowed” to make purchases at most merchants/businesses. Monthly payment including interest must be paid back to creditor. Get a co-signer - Lenders will consider the co-signer’s existing credit when approving. Apply for a department store credit card - These types of cards are sometimes approved for people with no credit history. ALWAYS PAY ON TIME!
