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Bad Credit Home Equity Loans Ga

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					Steps to Financial Success
            Presented by:



     By Celia Hayhoe, Ph.D., CFP®
 Family Resource Management Specialist
              Virginia Tech




               http://www.ext.vt.edu
Let’s Dream. What do you want your life
to look like in ten years?

   Will you live in a house,      Will you be employed
    townhouse, apartment,           by someone else,
    mobile home?                    owning your own
                                    business, staying home
   Will you live in a big          with the children, or
    city, town, or in the           retired?
    country? On a working          How is you health?
    farm?                          What will you be
   Will you be married?            driving?
   Have Children?                 Where will you go on
    Grandchildren? Great-           vacation?
    grandchildren?
How to plan for financial
success
                                    Evaluate
                              Control
                     Implement
                     Decide                Monitor,
                                           review,
                                           revise
              Organize
         Set goals
  Clarify Values
Values
   Values are what is important to you

   Those things you were willing to work
    hardest for are based on you values

   What are some your values?
Need VS. Want

       Need

       Want
How to plan for financial
success

                                   Evaluate
                             Control
                    Implement
                    Decide                Monitor,
                                          review,
                                          revise
             Organize
        Set goals
 Clarify Values
What are you willing to work for?
   Look at your perfect life, what are you
    willing to work for to make sure it
    happens?
   What are the most important things on
    your list?
   Which things do you need someone
    else to share your dream to make it
    come true? Who?
S.M.A.R.T. Goals
   Specific
   Measurable
   Attainable
   Realistic
   Timetable
Types Of Goals

   Long Term      Purchase a used car

   Intermediate   Save for a down
                     payment

   Short Term     Review Credit report
    Money Problems Involve

 Value Conflict
 Unrealistic Goals

 Emotional Uses of Money

 Lack of Planning
      Openly Communicate
      Communication Guidelines



   Clearly identify
    issue(s)
   Let everyone speak
   Listen carefully
   Negotiate
Discussion For Couples
   Child rearing       Recreation
   Employment          Vacations
    Spending           Gifts and
   Housing              contributions
   Transportation      Future security
In Summary
   Picture your perfect life
   Clarify your values
   Need VS. Want
   Set Goals
   Communicate and negotiate
How to plan for financial
success
                                   Evaluate
                             Control
                    Implement
                    Decide                Monitor,
                                          review,
                                          revise
             Organize
        Set goals
 Clarify Values
   Formula for Financial Success
        L+S+D=Income
Living expenses + savings + debts= Income

                           Debts
                           15%
Savings
 10%
                                   Living
                                    Exp.
                                    75%
Starting a Spending Plan
 Identify your financial goals
 Estimate monthly income

  & expenses
 Track your expenses for

  a few months
 Compare and make

adjustments as necessary!
Determine your monthly
income
   Gross Income
       income before deductions
   Disposable (Net) Income
       income after tax and other employer withholdings
   If you are paid:
       Monthly - 1 x gross or disposable income
       Bi-monthly - 2 x gross or disposable income
       Weekly -      4.33 x gross or disposable income
       Every other week - 2.17 x gross or disposal
                             income
How to plan for financial
success
                                    Evaluate
                              Control
                     Implement
                     Decide                Monitor,
                                           review,
                                           revise
              Organize
         Set goals
  Clarify Values
TYPES OF EXPENSES


   FIXED


   FLEXIBLE


   PERIODIC
    Fixed Expenses
   Housing
   Pension contributions
   Dependent Care
   Installment loan payment
   Savings and investment
   Automobile Payment
   Taxes
Flexible Expenses
     Food
     Utilities
     Transportation
     Medical              Alcohol/Cigarettes/
     Clothing              Lottery Tickets
     Education            Home furnishings
     Personal Care        Entertainment
     Contributions        Telecommunication
     Credit payments
Periodic Expenses
   Personal Property Taxes
   Insurance
   Gifts
   Repairs
   Auto license/inspections
   Tuition/School expenses
   Miscellaneous (postage, books,
    professional fees, etc.)
      Reserve Fund is Crucial!

   Total your periodic
    expenses for the year.

   Take 1/12 of total amount
    $2400/12 = $200 monthly set aside

   Keep a running balance
Reserve Fund Worksheet
Sample                 Balance
 Expense Cost            Deduct Deposit* $250
 Jan. auto     $200      $200        $191         $241
 insurance
 Feb           $75          75       $191         $357
 Dental work

 Mar. -        $250      $250        $191         $298
 weekend
 vacation


*Total annual irregular expenses $2292 / 12 months = $191
    Set Spending Plan
    Amounts (%)

   Use past records
   Check other sources
   Track expenses for
    2 to 3 months
      Balancing Your
      Spending Plan

What if you spend more than you make?

Three things you can do:
   Increase Income
   Reduce Expenses

   Combination of Both
Guidelines to Save
Money
   Control buying on impulse
   Pay cash
   Buy at the right time
   Don’t pay extra for a “Name”
   Recognize the high price of convenience
    shopping
   Use lifecycle planning for major purchases
        Before You See a
          Salesperson
   Distinguish between wants and needs

   Do the necessary pre-shopping research

   Fit the purchase into your spending
    plan
Comparison Shop
   Use the “Rule of Three”
   Best Buy
   Service Contracts
   Buyer Protection Plans
Negotiating & Decision Making
   Negotiating
       Have accurate information
       Be prepared to walk out
   Decision Making
       Make your final decision at home
       Beware of “lowballing”
    Tips for a Better
    Spending Plan
   Include savings in plan
   Include some discretionary
    spending
   Carry less cash and plastic
   Stay away from ATM machines
   Use spending plans
   Withhold taxes correctly
   Check your math
How to plan for financial
success
                                    Evaluate
                              Control
                     Implement
                     Decide                Monitor,
                                           review,
                                           revise
              Organize
         Set goals
  Clarify Values
Practical Ways to Track Expenses

           Receipts
           Pocket Tracker/Wallet
           Checking Account
           Calendar
           Financial notebook
           Computer program
What format do I use?
   Weekly
   Monthly
   Yearly
   Whatever you like the best!!
       Whatever makes sense to you
       Whatever is easiest for you
       Whatever you are willing to do!
      Envelope Method:
   Create an envelop for each category
   On the envelopes, write the amount from each
    paycheck that goes into the envelope
   Each payday place the amount listed in the
    envelope
   Take money out of the envelope to pay for things
    from that category
   When there is no money in the envelope you can
    make no more spending in that category
   Do not take money from another category or you
    may not have the money for periodic expenses
    when you need it
  Running Balance Method:

          Example:     “Food Account”
Balance 3/31:                 $250
April 1:           -100
                               $150
 April 8:          -100
                                     $50
April 13:        + 250 (targeted amount from
                                   paycheck)
                              $300
April 15:        - 100
                              $200
Spreadsheet Method:
                  Target    Actual
Income            Amount:   Amount:
  Salary #1       $ 900      $ 1,000
  Salary #2         1,200      1,200
                  $ 2,100    $ 2,200
Expenses
  Savings -       $ 250     $  250
  Mortgage -         755        755
  Utilities -        235        295
  Loan/credit -      245        260
  Insurance -        130        130
  Food -             300        265
  Reserve Account - 100         280
                 $ 2,015    $ 2,235
Surplus/Deficit      $85        <$35>
        Summary of
        Spending Plan Tools
   Develop worksheets
     Spending plan
     Reserve fund



   Track expenditures
       Control Sheet
How to plan for financial
success
                                   Evaluate
                             Control
                    Implement
                    Decide                Monitor,
                                          review,
                                          revise
             Organize
        Set goals
 Clarify Values
Tips for a Better
Spending Plan

 Review and Revise
 Keep it simple

 Avoid “quick fixes”

 Add a “fudge factor”

 Give it time
     Another Financial Decision -
     Credit
   Credit occurs when goods, services, or
    money are received in exchange for a
    promise to repay that money (usually
    with interest) at a future date.
Disadvantages of Credit Use
    Interest is costly
   Temptation to overspend
   Privacy Issues
   Payment term may exceed life of
    purchase
   Less flexibility in future spending plans
   High priced add-ons
   Liability for lost credit cards
Types of Credit Accounts
   Revolving Accounts
       Unsecured
       Secured Credit Cards
          Collateralized credit card

          Secured by amount of deposit

          Higher interest card

          Build credit record
Types of Credit Accounts
   Charge Cards

   Installment Accounts
        Credit Card Shopping
   What is the Annual Percentage Rate
    (APR) of interest?
   Is a lower interest rate available?
   Is there a grace period?
   What are the annual fees?
   What are the charges for late
    payments, over-the-limit purchases,
    and cash advances?
What Does Credit Cost You?
   Situation
       Principal owed is 5,000
       Minimum payment of 2%
       18% interest rate
       No other purchases are made
   In Time and Money
       37 years, 6 months
       $17,673.70
       Cost of credit $12,673.70
Computing Credit Card
Interest
      Average daily balance
         Excluding new
          purchases
         Including new
          purchases with a
          grace period
         Including new
          purchases without
          a grace period

      Two cycle billing
Average Daily Balance
                  Payments/      Daily Balance
                  Purchase
Day 1-9                          $450 x 9
Day 10            - $150         $300
Day 11-14                        $300 x 4
Day 15            +   $50        $350
Day 16-30                        $350 x 15
                  Total balance $11,150
Average Daily Balance $11,150 30 = $371
When to Use Installment Credit

   For big-ticket purchases
   For education
   Rollover higher interest loans
   Emergencies
        Shopping for Installment
                Loans
   Annual percentage rate (APR)
   Total cost of loan in dollars
       principal, interest, term, down payment
   Amount of payments
   Due date of payments
           Home Equity Loans
   Kinds of home equity loans
      Line of credit (revolving loans)
      Installment (closed-end loans)


   Interest rate
     Adjustable
     Fixed


   Tax deductible
Home Equity Loans

   Disadvantages
       Home is collateral (foreclosure)
       Real interest rate vs. teaser rate
       Extra charges
       Frequency of rate adjustment
       Balloons
       Loan payable on demand
       High credit limits may restrict other options
Signs of Credit Abuse
   Exceeding 15% rule
   Second salary used to pay debts
   Paying only the minimum
   Bills paid late
   Default on payment
   Use credit impulsively
   Debts exceed assets
Equal Credit
 Opportunity Act

   Prohibits certain types of unfair
    discrimination when granting credit
       gender, race, age, national origin,
        religion, receipt of public assistance
   Prohibits creditor from requiring
    women to reapply for credit with
    marital status change
Fair Credit
Billing Act

   Permits a charge-back for goods and
    service disputes.

   Allows withholding of payment
Fair Credit
 Reporting Act

   Requires that reports contain accurate,
    relevant, and recent information

   Establishes procedures for debt
    collection
Fair Credit & Charge
Card Disclosure Act

   Made it easier to comparison shop for
    credit.

   Requires that key information be
    disclosed in direct mailing and on credit
    card applications.
Fair Debt Collection
Practices Act

   Aimed at improving the ethical practices
    of third party debt-collection agencies.

   Prohibits them from using abusive,
    deceptive, and unfair practices in
    collecting debts.
Truth in
 Lending Act

   Requires lenders to disclose to credit
    applicants both the interest rate
    expressed as an annual percentage rate
    and the finance charge expressed in
    dollars
       Fair and Accurate
       Credit Transactions Act

    One free credit report per year
   Order free credit reports through the centralized channels
     You can order the report
      On-line at www.annualcreditreport.com

      Call 1-877-322-8228

      Filling out the Annual Credit Report Request Form and
        mailing it to: Annual Credit Report Request Service, P.O.
        Box 105281, Atlanta, GA 30348-5281.
   If you run into trouble getting reports at no charge or have
    other problems, call the FTC's toll-free number -- 1-877-
    FTC-HELP -- for assistance
Credit Bureaus
Experian             Equifax
PO Box 949           PO Box 740241
Allen, TX 75013      Atlanta, GA 30374-0241
800-682-7654         800-685-1111
www.experian.com     www.equifax.com


Trans Union
PO Box 2000
Chester, PA 19022
800-888-4213
www.transunion.com
In summary
   Use credit only when necessary
   Keep your credit payments (other than
    your mortgage) to under 15% of your
    disposable income
   Choose installment or revolving credit
    depending on what you are purchasing
   Pay credit card bills in full each month
   Know your consumer rights
Steps to Financial Success

  Risk Management: When to Use
            Insurance
Protecting What You Have -
Risk Management Process
     1. Identify risks
           What can be              Against what
            insured?                  losses?
                Net worth                Bad health or
                Future income             injury
                Assets: Home,            Premature
                 personal                  death
                 property,                Lawsuit
                 automobile and           Property loss
                 real property
Risk Management Process

2. Select method for handling risk
   Risk avoidance
   Risk retention

   Risk reduction

   Risk transfer
Risk Management Process
 3. Evaluate risk - Risk evaluation
   depends on:
    Frequency of loss
    Severity of loss


 4. Implement and administer
 5. Evaluate and adjust the program
Types of Insurance
   Auto is required by law if you own a car
   Health insurance covers you when you
    are sick
   Homeowner’s covers your home and
    possessions whether you own or rent
   Disability covers loss of income if you
    can’t work due to a disability or illness
   Life covers lost income if you die
   Automobile Liability Insurance
   Limits:

Automobile liability insurance limits may
 be quoted as three figures:
 250/500/100
 $250,000--Per-person bodily injury limit

 $500,000--Per-accident bodily injury limit

 $100,000--Per-accident property damage
 liability limit
Additional Types of Coverages:
        Medical Payments
       Uninsured Motorist
       Underinsured Motorist
       Collision
       Comprehensive
Types of Health Insurance
   Private Care Plans
   Managed Care Plans
       Preferred Provider Organizations
       Provider Sponsored Networks
       Health Maintenance Organization
   Government Health Care Plan
       Medicare
       Medicaid
Health Insurance: Policy Provisions

   Deductible
   Coinsurance and co-payment provisions
   Stop-loss feature
   Policy limits
   Policy exclusions
   Pre-existing condition
     limitations
Health Insurance: Policy Provisions

   Coordination of benefits
   Continuation provisions
   Grace period
   Convertibility and portability
   Homeowner’s Insurance:
     Property Insurance
Property insurance--provides
protection from various types of
property damage losses to:
   1. Dwelling
   2. Other structures on the property
   3. Personal property
   4. Loss of use of the dwelling
 Perils covered

1.   Fire, lightning         7. Damage from smoke
2.   Windstorm               8. Vandalism, malicious
3.   Explosion                  mischief
4.   Riots                   9. Theft
5.   Damage by aircraft      10. Glass breakage
6.   Damage by vehicles      11. Volcanic eruption
     owned operated by
     people not covered by
     the homeowner’s
     policy
 Perils Covered
12. Falling objects (external     16. Bursting, cracking, burning,
   sources)                          or bulging of a steam or hot
13. Weight of ice, snow, sleet       water heating system
14. Collapse of building or any   17. Freezing of plumbing,
   part of building (specified       heating, and air-conditioning
   perils only)                      systems and home
15. Leakage or overflow of           appliances
   water or steam from a          18. Injury to electrical
   plumbing, heating or air-         appliances and devices
   conditioning system               (excluding tubes, transistors,
                                     and similar electronic
                                     components) from short
                                     circuits or other accidentally
                                     generated currents
Types of Homeowner’s
Insurance
Six types of homeowner’s insurance policies:
   HO-1 Basic--Perils 1-11
   HO-2 Broad--Perils 1-18
   HO-3 Special (Comprehensive)--All perils except
   those specially excluded for building; perils 1-18
   on personal property (does not include glass
   breakage)
   HO-4 Renter’s Contents Broad--Perils 1-9, 11-18
   HO-6 Condominium--Perils 1-18
   HO-8 Older Home--Perils 1-11
Homeowner’s Insurance--
Determining the coverage needed on
your dwelling:

 1. Determine the dwelling’s replacement
   value
 2. Home must be insured for 80 (or
   perhaps 100) percent of replacement
   value
 3. Consider a clause to cover inflationary
       increases
Homeowner’s Insurance--
Determining the coverage needed
for your personal property:

1. Make an inventory, with values, of all
  contents of you home
2. Take an inventory of each room,
  basement, garage, shed and yard
  possessions
3. Obtain appraisals for jewelry, guns,
  antiques, and any collections
       Disability Income Insurance
       Likelihood of Disability…

   Eight out of 10 people between the ages of 25 and 65
    will become disabled for 90 days or more sometime
    during their lives.
   Your chance of becoming disabled in one year --1 in 8!
   If you are between ages 35 and 65 the risk of disability
    before retirement is even higher: odds are 1 in 2 --twice
    your chances of dying.
   At age 35, the chance of experiencing total
    disability of three months or more before age 65,
    is about 33%. The average length of the
    disability will exceed five years. Moreover, nearly
    30 % of all disability cases will be permanent.
Options When You Become
Disabled
   Savings.
   Social Security Disability
   Sell you home (farm)
   Borrow
   Live on Spouse’s income
   Or Buy Disability Insurance
Sources of Disability Income
Insurance
   Government
       Social Security disability income insurance
   Employer
       Sick pay benefits
   Other group
   Individual
       Disability Income Insurance
    Disability Income Insurance
   Generally replaces 60-80% of the
    insured’s after-tax earnings
   Be careful of policy definitions: own job,
    any job, residual
   Elimination period
   Benefit period
   Social Security rider
   Cost of living adjustments
        Determining Disability Income
        Insurance Needs

   Months until disability insurance is needed:
       Paid sick leave                3 months
       Expenses savings could cover   3 months

   Waiting period                     6 months
Life Insurance
   Who needs life insurance
       Wage earners with dependents
       Parents, guardians, and caregivers with
        young children
        People who will leave debt if you have a
        spouse or others who would be responsible
        for the debt.
   How much to buy?
        Consider resources to meet the
        insurance needs:

1. Government benefits, i.e., Social Security benefits

2. Employer benefits--death benefits from employment, such as group life
     insurance

3. Personal resources: savings accounts, investments and other liquid assets

4. Proceeds from life insurance policies already owned

5. Business interest, home equity and other non-liquid assets, if available to
     meet post death needs
Basic Types of Life Insurance
   Term                           Universal Life
       For a specific                 Same as whole life
        number of years                 but more flexible
       No cash value                  Flexible premiums
       Premiums increase          Variable
        at renewal                     Whole or Universal
   Whole-Life                          Life
       Usually until age 100          Cash value will vary
       Has a cash value                with investment
       Level premiums                  choices
Insurances To Avoid
   Accidental Death Insurance
   Mail-order Life Insurance
   Life Insurance for the Elderly
   Burial (Funeral) Insurance
   Life Insurance on Children
   Credit Life Insurance
Insurance Summary
   Determine your insurance needs
   Select type of insurance that meets
    your needs
   Shop and compare prices
   Review your policies and make changes
    as your family situation changes
Keys to Financial Success
   Base your goals on your values
   Have a written spending plan that you
    monitor
   Use credit wisely
   Know your rights
   Protect what you have by covering
    potential large losses with insurance
   Please complete the evaluation form.

				
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