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The Fraternity Man

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					Understanding Finances and
          Credit

Ed Levesque
Bridgewater State
Grand Third Councilor
           What we’ll cover
• The Rule of 72
• Cash flow
• Your personal budget
• Your obligation to your organization
• Tips for your organization’s finances
• Your Credit
             The Rule of 72
• Divide 72 by the interest rate (“APR”) you
  are getting/paying
  – The result equals how long it takes to double
    your money in savings, or double how much
    you owe
  – Minimum payments on credit cards,
    mortgages are geared to extend the money
    you owe
       What is your “Cash Flow”?
    Fold a piece of paper four ways, and fill it in for a typical month as follows:



          Income                                    Expenses
          (e.g. paycheck)                           (e.g. monthly bills)




            Assets                                   Liabilities
        (what makes you $;
                                               (still owe payments, e.g., car)
         e.g., DJ equipment)

• To keep it simple, just total your Income and Expenses only
• Your net result is + or – cash flow
                              Budgeting
• Understand your cash flow
     – Improve it: increase income, reduce expenses
     – 12 monthly cycles
• Considerations
     – Future needs (repairs, savings)
     – Current liabilities

•   For some folks….rent / mortgage / lodging
     – 32% to 45% of total dues;
         • similar to owning a home
     – Usually monthly or at start of semester
        Some budgeting tips
• Pay yourself first!
• Plan your income one month ahead of
  expenses
• If you can store it in bulk, compare the
  bulk price, then buy bulk
• Comparison shop
• ‘Auto payment’ and ‘normalization’ plans
           The Credit Dilemma
Before you use a credit, consider:

• Why do you need ‘it’ vs. paying with cash?
• How soon will you pay the credit back?
• Can you pay more than the monthly
  minimum?
• Do you understand the interest rate?
• Don’t be fooled by ‘low APR’ deals.
         Your Credit Report
• What type of information is on your credit
  report?
  – Identifying Information
  – Credit Information
  – Public Records
  – Recent Inquiries
• Where does this information come from
          Your Credit Report
•   Why should you police your credit?
•   How do errors in reports happen?
•   How are errors corrected?
•   How long are items on the report?
    How to get a free copy of your
            credit report
Equifax
PO Box 105873
                          Trans Union LLC
Atlanta, GA 30348
                          Consumer Disclosure Center
http://www.equifax.com
                          PO Box 390
(800) 685-1111            Springfield, PA 19064-0390
                          http://www.transunion.com
Experian (formerly TRW)   (800) 916-8800 or (800)
PO Box 2104                  888-4213
Allen, TX 75013-2104
http://www.experian.com
(888) 397-3742
Establishing and Using Credit
• Savings and Checking Accounts
• Loans
  – Personal
  – Secured (non-real estate)
  – Real Estate
• Credit Accounts
• Utilities
Establishing and Using Credit
• Loans
  – How interest is paid
  – Loans vs. Lines
  – Credit Implications
Establishing and Using Credit
• Credit Cards/Revolving Credit Lines
  – General Credit Cards
  – Charge Cards
  – Consumer Finance
  – Home Equity Lines of Credit
  – Overdraft Lines of Credit
Establishing and Using Credit
• Credit Cards/ Revolving Credit
  – How interest is paid
  – Loans vs. Lines
  – Credit Implications
Establishing and Using Credit
• Which credit card is right for me?
  – How will you use the card?
     • Pay in full monthly, carry a balance, cash
       advances, earn points for travel
     • What is the APR structure?
     • Multiple APRs, Fixed, Variable
  – What is the grace period and fees?
• Truth in Credit
             Credit Problems
• Over credit limit
• Delinquency
• Balance to Limit
  Ratios
• Foreclosure
                  Credit Problems
• Credit Repair: Self Help May Be Best
You see the advertisements in newspapers, on TV, and on the
Internet. You hear them on the radio. You get fliers in the mail.
You may even get calls from telemarketers offering credit repair
services. They all make the same claims:

•   “Credit problems? No problem!”
•   “We can erase your bad credit — 100% guaranteed.”
•   “Create a new credit identity — legally.”
•   “We can remove bankruptcies, judgments, liens, and bad
•   loans from your credit file forever!”
                      Credit Problems
• Do-It-Yourself Check-Up
Even if you don’t have a poor credit history, some financial advisors and
   consumer advocates suggest you review your credit report periodically

•   because the information it contains affects whether you can get a loan or
    insurance — and how much you will have to pay for it.

•   to make sure the information is accurate, complete, and up-to-date before
    you apply for a loan for a major purchase like a house or car, buy insurance,
    or apply for a job.

•   to help guard against identity theft. That’s when someone uses your
    personal information — like your name, your Social Security number, or
    your credit card number — to commit fraud. Identity thieves may use your
    information to open a new credit card account in your name. Then, when
    they don’t pay the bills, the delinquent account is reported on your credit
    report. Inaccurate information like that could affect your ability to get credit,
    insurance, or even a job.
     Fraud and Identity Theft
• Credit Card
  – Phishing, Skimming, Truncation of Receipts,
    Mail Fraud
• Mortgage Fraud
  – Foreclosure Bailout, Straw Buyers, Broker-
    Lender Fraud
• Personal Loans
  – Payday Loans, Advance Fee Scam
          For More Information
Federal Trade Commission
• http://www.ftc.gov/bcp/conline/pubs/credit/repair.shtm

Federal Reserve Bank of San Francisco- Public
  Information/Publications
• http://www.frbsf.org

Consumer Reports
• http://www.consumerreports.org/cro/personal-
  finance/credit-cardoffers-8-06/overview/0608_credit-
  cards-offers_ov.htm
             Standards
– Scholarship
– Accountability
– Knowing the ritual and local and
  international history
    Your Organization’s Finances

• Don’t hide behind the word ‘brother’
  – Pay your dues in full, on time (probably worded in
    many ways in many organizations’ manuals, bylaws)
• Officers need to set an example
• Unless you set up a welfare system, don’t
  practice one
• Follow through on procedures
WHY MUST your chapter budget?
• Chapter must plan ahead for activities and
  lodging
• Grand Chapter obligations
• Members can plan ahead for their share
 What MUST your chapter budget?
For the Grand Chapter…
• Insurance / Programming ($500/chapter;
  $155/member)
   – Payable November 1
• Chapter (Convocation) Assessment ($350)
   – Payable Dec 1, Apr 1
• Pledge fee ($150) / Initiate fee ($350*)
   – Payable upon pinning/initiation
• Colony fees (if applicable, $2000 one time)
• Fines and late fees (just in case….)
         * $325 if person was a properly registered pledge prior to 7/1/08
What MUST your chapter budget?
For your chapter…
• Rent / mortgage / lodging
  – Usually monthly or at start of semester
• Chapter Activities
  – Prioritize against chapter goals
  – Philanthropy, Fundraising, Alumni,
    Brotherhood, Socials
What MUST your chapter budget?
For your chapter…
• Chapter Activities
  – Prioritize against chapter goals
  – Philanthropy, Fundraising, Alumni,
    Brotherhood, Socials
• Rent / mortgage / lodging
  – Usually monthly or at start of semester
 What MUST your chapter budget?
              Tips for planning your budget
• Define fall’s budget in spring
   – Approve budget before you leave for break
   – Start collecting in summer when members are working
• Consider your chapter’s goals and “ROI”
   – Rush is easy to overspend vs. results
   – Fundraising and Alumni
   – Focus on philanthropy and brotherhood
• Other considerations
   – Competition in other houses
   – Cosponsoring events
   HOW MUCH must your chapter
          budget?
• Chapter Activities   ~ % of remaining dues
  –   Philanthropy     20%
  –   Rush              8%
  –   Fundraising      10%
  –   Brotherhood      20%
  –   Alumni           17%
  –   Socials          20%
                               This example assumes
  –   Other             5%        an emphasis on
                                    philanthropy.
                               Semesters and overall
                                   goals may vary
  .
HOW should your chapter budget?
            Incentives instead of Fines
• Individual dues + 10%
  – Pay on time = ‘discount’ 10%; Pay late = no change
  – 10% used to cover shortfalls, build ‘rainy day’ fund,
    special events
• Social privileges based on a good payment
  record
• Normalize payments over 9 months- always
  have $, easier to manage (more pay ahead)
• Committees get more funding for their member’s
  good payment behavior
       Third party collectors
• Omega Financial, Tom Harner (Sigma Pi
  alumnus), Automated Payment Highway
  (APH)

• Charge fees and/or % of gross A/R

• Handle delinquencies, etc.

• Contact Exec Office for more information
                   Summary
• Assess your personal situation
• Understand how credit works
• Obligation to your organization
• Plan your budget well in advance
• Set an example
• Be creative with dues, fines, and
  incentives
   Questions?

   Thank you!



  Acknowledgements:
Frederick Rheaume, HH

				
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