Best Ways to Invest

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					National Association of Black
      Accountants, Inc.

  M ney $ense
          Financial Education
Workshop Learning Objectives:
 Understand credit
 Recognize good debt vs. bad debt
 Learn the principles of setting SMART financial
  goals
 Learn to win the money game using a budget




                    NABA - Money $ense
Credit in a Nutshell



 Are You Trustworthy?
       Are You Trustworthy?
 IfI lend you money, will you pay me back?
 Will you pay me on schedule according to
  our agreement?
 What happens when you don’t pay on
  time?
 At what point do you violate my trust?
 What will it cost you to regain my trust?
 What should I tell others when they ask
  about your trustworthiness?
            Types of Credit
       Accounts and Relationships
 Mortgage      loan (Countrywide, Quicken Loans, Bank of
  America)

 Carloan (GMAC, Chrysler Financial, Ford Motor Credit)
 Major credit card (Bank of America, Capital One, US
  Bank)

 Dept. store credit (Macy’s, The Limited, Nordstrom)
 Cell phone (AT&T, Sprint, Verizon)
 Bank checking*
  Type of Credit             Lender                       Advantages                       Disadvantages

HOME MORTGAGE      • Commercial bank                 • Homes often increase in          • Mortgages are long-term
                   • Savings and loan                value.                             commitments.
                   • Credit union                    • Interest rates for mortgages     • Obtaining a home loan
                                                     are relatively low                 involves extensive credit
                                                     • The interest paid is tax-        checks.
                                                     deductible.
CAR LOANS          • Commercial bank                 • Cars can make it easier to       • Cars lose their value
                   • Savings and loan                work and earn an income.           relatively quickly. The car you
                   • Credit union                                                       purchase may have little value
                                                                                        when the last payment is
                   • Consumer finance company                                           made.
COLLEGE LOANS      • Commercial bank                 • A college education is a good    • Students sometimes borrow
                   • Savings and loan                borrow investment. necessary.      more than necessary.
                   • Credit union                    • Interest rates can be            • New graduates can face
                    Federal government
                                                     relatively low.                    difficulty in repaying large
                                                                                        loans.


PERSONAL LOANS     • Commercial bank                 • Personal loans allow             • Personal loans have relatively
                   • Savings and loan                individuals to purchase today      high interest rates.
                   • Credit union                    that boat or vacation they want.   • Some young people may
                   • Consumer finance company                                           borrow more than their income
                                                                                        allows.


CREDIT CARDS       • Commercial bank                 • Credit cards are convenient      • Credit cards have relatively
                   • Savings and loan                to use and useful in an            high interest rates.
                   • Department store                emergency.                         • Some young people may
                   • Oil companies                   • Credit cards provide a record    borrow more than their income
                                                     of charges.                        allows.
                   • Other financial institutions,
                   e.g., American Express



                                         NABA - Money $ense
Credit Cards, Credit Bureaus
    and Credit Reports
                             Your
                         =   Credit
      +        +             Score



    How They Work Together
                    Credit Cards
 Terminology         you must know:
     APR – Annual Percentage Rate
     Finance Charge
     Grace Period
     Fees (annual, transaction, cash advance, late)
                Credit Bureaus
 Three credit bureaus (Equifax, Experian, TransUnion)
 Role they play:
      Receive and report credit information from
       and to various entities who have established
       or look to establish a credit relationship with
       you.
      Maintain credit report
                  Credit Reports
   What is reported?
       Name of creditor
       Length of credit history
       Amount of credit outstanding and borrowing capacity
       Status of payment on account: current or late
       Inquiries on account
       Other information
       Credit score*
   How do you obtain a copy of report?
       FREE at www.annualcreditreport.com
                         Credit Score
   Why is it important?
       Measurement of creditworthiness
       Basis for creditor’s lending decision
       Determines cost of borrowing (i.e. interest rate)
       Employers may pull it when evaluating potential candidates for hire
   How is it calculated?
       Payment history – (35%)
       Debt to credit limit – (30%)
       Length of credit history – (15%)
       New accounts and recent applications for credit – (10%)
       Mix of credit cards and loans – (10%)
         Debt
Friend          Foe?
          Or
Debt is rising...




    NABA - Money $ense
           S.M.A.R.T. Goals Model
   Specific:
        State exactly what you want to achieve.

   Measurable:
        In order to know when you’ve achieved your goal, you must be able to
         track them.

   Attainable:
        Make sure the goal is within reach.

   Relevant:
        Is the goal something that’s important to you, i.e., saving for a much-
         needed vacation, college tuition, etc.

   Timely:
        Determine timeframe appropriate for attaining the goal.

                                 NABA - Money $ense
The Money Game




 How Do You Play?
             Three Ways to Play
1.   Getting Ahead – You make more money than you
     spend. Therefore, you have money at end of month that can be
     saved or invested.

2.   Breaking Even – You spent everything you had –no
     more, no less

3.   Falling Behind – You spent more than you had using
     borrowed funds.
           BUDGET SCORECARD

                      Getting   Breaking    Falling
Category              Ahead       Even      Behind
Monthly INCOME:
Wages/Income            $1600      $1600      $1600
Interest Income           $10        $10        $10
INCOME
SUBTOTAL              $1,610      $1,610     $1610

Monthly
EXPENSES:
Taxes                    $250       $250       $250
Rent/Mortgage            $500       $600       $750
Utilities                $100       $100       $100
Groceries/Food           $250       $300       $350
Clothing                 $100       $100       $200
Shopping                  $75        $75       $100
Entertainment            $100       $160       $200

Miscellaneous/Other       $25         $25        $50
EXPENSES
SUBTOTAL              $1,400      $1610      $2000

NET INCOME
(Income -
Expenses)               $210          $0       $(390)

                 NABA - Money $ense
              Benefits of Budgeting
   Evaluate source (s) of                Cash Flow Equation:
    income – explore ways to               (+) Revenue or Source
    increase this amount
                                           of Income
   Evaluate
                                           (-) Less: Expense or
    expenditures and
                                           Use of Income
    where money goes –
    identify opportunities to reduce       _______________
    this amount
                                           (=) Net Cash Flow
   Save, invest, pay
    down debt faster
                  Budgeting Basics

1. Save at least 10% of income through automatic
   payroll deduction (when available)
2. Create a contingency fund for unexpected
   expenditures (minimum 6 months of salary)
3. Track your spending
        Itemize necessities first and foremost
        Update your budget monthly
        Add new information timely
        Print it out and post it as a daily visual reminder
4.   Pay down expensive / excessive debt.

                           NABA - Money $ense
      Make Your Money Grow
What if you saved $1 per day for 30 years?
                  NO INTEREST                5% DAILY
    TIME                                   COMPOUNDING

    Year 1           $ 365                    $ 374

    Year 5          $ 1,825                   $ 2,073

   Year 10          $ 3,650                   $ 4,735

   Year 30          $10,950                  $25,415


           Money that is invested will grow!
                      NABA - Money $ense
                       Action Items…
Step 1 – Credit: MANAGE your credit. Honor your commitments. Pay
       your bills on time, review your credit report, watch out for “too good to be
       true” offers.

Step 2 - Goal Setting: Set SMART financial goals.

Step 3 – Budgeting: Pay Yourself First. Begin saving a set amount
       each pay period, monthly; no matter how small, just start.

Step 4: Track the money. Know where your money is going and stop budget
pitfalls.

Step 5: Start investing. Your financial health and independence is within
your control.




                                 NABA - Money $ense
            Thank You!
National Association of Black Accountants, Inc.


             M ney $ense

   For more information visit www.nabainc.org
                 NABA - Money $ense