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					                                          DRAFT
Your Financial Foundation




                Your Financial
                 Foundation
                            •   Managing cash flows
                            •   Saving and investing
                            •   Credit and debt
                            •   Being prepared
                                         DRAFT
Your Financial Foundation


        Before we begin…

        • This content is provided as educational material only and is not
          intended to solicit you for any product or service.
        • These materials are not a recommendation by HSBC for any product,
          service or financial strategy.
        • The suggestions and recommendations contained within are general in
          nature, and may or may not apply to your particular circumstances.
        • Securities, annuity and insurance products are: not FDIC insured or
          insured by any federal government agency of the United States; subject
          to investment risk, including possible loss of principal invested.
        • All decisions regarding the tax implications of your investments should
          be made in connection with your independent tax advisor.
        • Should you need further assistance, HSBC strongly recommends
          contacting an independent attorney, tax professional or financial
          consultant.

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                                         DRAFT
Your Financial Foundation


        Goals for Today

        Today, we will discuss the pillars that help build a strong,
        financial foundation




                 Managing       Saving           Credit     Being
                  Income           &               &       Prepared
                     &         Investing         Debt
                 Expenses




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                                        DRAFT
Your Financial Foundation


         Planning for a strong financial foundation

         • Set short, medium and long –term goals
            – When is the money needed?
            – How much will be needed?
            – How much is currently saved toward each goal?

         • Detail the steps necessary to meet your goals
            – How much money needs to be saved or invested each month?
            – How should the money be saved or invested?

         • Monitor performance
            – Regularly (annually) compare progress toward your goals and the time
              remaining before you need the money
            – Make adjustments when necessary


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                                     DRAFT
Your Financial Foundation
                                                              Managing Saving Credit     Being
                                                               Income     &       &     Prepared
                                                                  &    Investing Debt
        Managing Income & Expenses                            Expenses




        Cash flow = money earned vs. money spent

        • An indicator of how well you are managing your expenses vs.
          your income
        • Add together all sources of income
        • Subtract all expenses


           Is INCOME > expenses?             Is income < EXPENSES?
           If so, cash flow is positive.     If so, cash flow is negative.



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                                                                 DRAFT
Your Financial Foundation
                                                                                                        Managing Saving Credit     Being
                                                                                                         Income     &       &     Prepared
                                                                                                            &    Investing Debt
        Managing Income & Expenses                                                                      Expenses




        Know the importance of being banked

        •    25.6% of all U.S.                            60%                                                           54%
             households are
             unbanked or                                  50%                        43.3%          44.5%
             underbanked
                                                          40%
        •    66% of this group used
             one or more: non-bank                        30%          25.6%

             money orders, check
                                                          20%
             cashing locations,
             payday loans, pawn                           10%
             shops, rent-to-own
             agreements and refund                          0%
                                                                     Overall        Hispanic      American          African
             anticipation loans                                                                Indian/Alaskan      American

        Source: 2009 FDIC National Survey of Unbanked and Underbanked Households.

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                                                                     DRAFT
Your Financial Foundation
                                                                                                                        Managing Saving Credit     Being
                                                                                                                         Income     &       &     Prepared
                                                                                                                            &    Investing Debt
        Managing Income & Expenses                                                                                      Expenses




        Know the importance of being banked

        • There are high costs associated with being unbanked—
                – Direct costs range from $30 a year to 318 a year 1
                – Being unbanked also hurts the ability to build a credit history
        • Benefits of having a relationship with a mainstream financial
          institution
                – Save money in fees (explore low-cost accounts)
                – Begin to establish a credit history
                – Can allow you to put some aspects of managing your income and
                  expenses on ‗auto-pilot‘ and help you better manage your finances



        Source: 1Various studies as cited in a 2007 Federal Reserve Bank of Boston study, ―Estimating the Cost of Being Unbank ed‖.

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                                         DRAFT
Your Financial Foundation
                                                             Managing Saving Credit     Being
                                                              Income     &       &     Prepared
                                                                 &    Investing Debt
         Activity 1: Cash Flow Analysis                      Expenses




         • Review Activity handout
         • Identify—
            – Total income
            – Total expenses
            – Whether cash flow is positive or negative
         • List ways improvements can be made to cash flow




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                                          DRAFT
Your Financial Foundation
                                                                      Managing Saving Credit     Being
                                                                       Income     &       &     Prepared
                                                                          &    Investing Debt
        Budgeting                                                     Expenses




        • Identify patterns of spending
            – Use past receipts, bank and credit card statements for details
            – For 30 or 60 days, track where money is being spent

        • Place expenses into categories
            – Fixed vs. variable
            – Essential vs. discretionary (or needs vs. wants)
            – Include irregular expenses— insurance premiums, doctor visits, etc.

        • Look for spending ratios that are inconsistent with your goals




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                                                                   DRAFT
Your Financial Foundation
                                                                                                     Managing Saving Credit     Being
                                                                                                      Income     &       &     Prepared
                                                                                                         &    Investing Debt
         Average household expenditures                                                              Expenses



         (as a % of income)

          • Housing                                      26.9%
          • Transportation                               13.8%
                                                                                                 All other items,
          • Food                                         10.0%
                                                                                                   e.g., taxes,
          • Healthcare                                      4.6%                      = 63.5%     savings, etc.,
                                                                                                 come from the
          • Entertainment                                   4.2%
                                                                                                remaining 36.5%
          • Apparel and services                            3.0%                                    of income.
          • Personal care                                   1.0%


         Source: Bureau of Labor Statistics, Consumer Expenditure Survey, 2006-2008

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                                           DRAFT
Your Financial Foundation


          Bonus! Save money by going green
          Ways to go green and save money in the process

          •   Becoming more environmentally-friendly also can free up money
              for savings or investments

          •   Examples of ways to find more money to save and help the
              environment in the process –
              – Ensure tires on autos are properly inflated
              – Drinking tap water vs. bottled water
              – Buy a programmable thermostat

          •   See worksheet for additional ways to save money



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                                               DRAFT
Your Financial Foundation
                                                                            Managing Saving Credit     Being
                                                                             Income      &      &     Prepared
                                                                                &    Investing Debt
         Saving & Investing                                                 Expenses




         Components of successful saving and investing

         • Set clear and realistic short, medium, and long –term goals
         • Start saving as soon as possible
             – When paying bills, be sure to ―pay yourself first‖
             – Use automatic transfers or payroll deductions
         • Save as much as you can
             – Try to save at least 10% of gross income
             – Save15% or 20% if your goals are more aggressive
             – Contribute at least enough to any employer-sponsored savings plan to capture
               any company matching dollars
         • When debt is paid off, redirect what you had been paying into a
           savings account

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                                            DRAFT
Your Financial Foundation
                                                                       Managing Saving Credit     Being
                                                                        Income      &      &     Prepared
                                                                           &    Investing Debt
         Investing                                                     Expenses




         • Inflation negatively impacts the purchasing power of money
         • Investing may provide greater returns than federally-insured
           savings accounts
         • Investing generally involves more risk compared to saving
             – Returns are not guaranteed
             – You may lose some or all of your money

         • Many different asset classes exist in which to invest
             –   Stocks (or ―equities‖)
             –   Bonds
             –   Cash
             –   Mutual funds that invest in some or all asset types


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                                        DRAFT
Your Financial Foundation
                                                                 Managing Saving Credit     Being
                                                                  Income      &      &     Prepared
                                                                     &    Investing Debt
          Investing (cont.)                                      Expenses




          When investing for longer-term goals, consider—

          • How much money you currently have saved for this goal
          • How many years until you will need this money
          • How long you will need the money to last
          • How inflation may impact your investments
          • How much risk you are willing to take compared to anticipated
            rates of return
          • If other sources of funding for your goal will be available




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                                         DRAFT
Your Financial Foundation
                                                                      Managing Saving Credit     Being
                                                                       Income      &      &     Prepared
                                                                          &    Investing Debt
         Investing (cont.)                                            Expenses




         Learn about these investing concepts

         • Risk-reward relationship
            – Investors generally seek greater returns for more risky investments
            – Know your tolerance for risk and the risk level of your investments
         • Asset allocation
            – Money invested in different types of assets (stocks, bonds and cash)
         • Diversification
            – Money diversified across asset categories
            – Money diversified within asset categories
         • Dollar-cost averaging
            – Typically involves committing to a regular schedule of investing
            – Not a safeguard against losses, but can smooth out price movements
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                                             DRAFT
Your Financial Foundation
                                                                           Managing Saving Credit     Being
                                                                            Income      &      &     Prepared
                                                                               &    Investing Debt
          Investing (cont.)                                                Expenses




          • Resources for help
             –   Your local bank or credit union
             –   Online resources
             –   Local libraries, bookstores
             –   Mutual fund companies
             –   Certified financial planners
             –   Your retirement plan administrator (e.g., 401(k), 403(b), etc.)

          • Remember—
             – Work with a financial planner if necessary
             – Learn all you can – taking advantage of free resources
             – Read the ―fine print‖




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                                              DRAFT
Your Financial Foundation
                                                                             Managing Saving Credit   Being
                                                                              Income     &       &   Prepared
                                                                                 &    Investing Debt
         Credit & Debt                                                       Expenses




         • Not all debt is bad debt
             – Buying a home
             – Paying for college, advanced degree or specialized training

         • Using credit knowledgeably can—
             – Help build a strong credit history
             – Can provide access to additional loans
             – Can provide access to the best terms available (rate, fees)

         • Responsible use of credit and debt involves—
             – Keeping debt to manageable levels, consistent with income
             – Keeping costs of using credit low, e.g., lowest interest rates and
               fees, and avoiding punitive charges such as late payment fees



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                                              DRAFT
Your Financial Foundation
                                                                      Managing Saving Credit   Being
                                                                       Income     &       &   Prepared
                                                                          &    Investing Debt
         Using credit cards                                           Expenses




         • Many types of cards available
             –   Credit cards
             –   Charge cards
             –   Affinity and private label cards
             –   Secured credit cards
             –   Debit cards
         • Know and understand all terms related to the use of credit
           before accepting and using
             – Fees – annual, over-limit, late, balance transfer
             – All APRs – purchases, introductory, balance transfer, cash advance




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                                          DRAFT
Your Financial Foundation
                                                                     Managing Saving Credit   Being
                                                                      Income     &       &   Prepared
                                                                         &    Investing Debt
         Credit history                                              Expenses




         • Credit history is a record
             – Includes elements of your credit report
             – An objective summary of your credit history is a credit score
                 • Three-digit number assigned based on a formula from details of
                   your credit report

         • A record of your creditworthiness
             – Used by lenders, insurance companies, landlords, employers
             – A measure of how you have handled your finances




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                                          DRAFT
Your Financial Foundation
                                                                       Managing Saving Credit   Being
                                                                        Income     &       &   Prepared
                                                                           &    Investing Debt
         Credit reports                                                Expenses




         • Creditors report aspects of how you use credit to credit reporting
           agencies (CRAs)
             – Big three are Equifax, Experian and TransUnion
             – They record the data that is provided to them, and compile into your
               credit report

         • The FACT Act provides consumers the ability to receive one free
           credit report from each of the three CRAs every 12 months
             – Visit www.annualcreditreport.com
             – Credit score can be purchased for a nominal fee
             – Check every 6 months to look for errors, especially before large
               purchases



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                                          DRAFT
Your Financial Foundation
                                                                      Managing Saving Credit   Being
                                                                       Income     &       &   Prepared
                                                                          &    Investing Debt
         Credit scores                                                Expenses




         • A three-digit number calculated from information in your credit
           report
         • Credit scores make loan processing faster and more objective
             – Earliest uses were for mortgage approvals
             – Used now by many types of organizations – employers, insurance
               companies, colleges/universities

         • Many types of credit scores
             –   Most popular is FICO® score (from Fair Isaac Corporation)
             –   VantageScore® credit score – newer, but not in widespread use
             –   FICO® ranges from 300-850; the higher the better
             –   Know which score you are reviewing




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                                           DRAFT
Your Financial Foundation
                                                                 Managing Saving Credit   Being
                                                                  Income     &       &   Prepared
                                                                     &    Investing Debt
         Managing your credit score                              Expenses




         Learn about these investing concepts

         1. Make all payments on time, every time

         2. Keep balances to less than 30% of available credit

         3. Only apply for new loans or credit when needed

         4. Be cautious when closing older accounts, as it could shorten the
            amount of time it appears you have been using credit

         5. Aim for a good mix of credit




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                                           DRAFT
Your Financial Foundation
                                                                         Managing Saving Credit   Being
                                                                          Income     &       &   Prepared
                                                                             &    Investing Debt
          The Three Cs                                                   Expenses




          • Credit
             – Also known as ‗character‘
             – Your credit history, credit score
             – How you have handled previous debts and loans
          • Capacity
             – Your ability to make payments for the new loan
             – Takes into consideration your income, and current debt
             – Your DTI ratios discussed earlier will influence lender‘s decision
          • Collateral
             – Anything of value that will help secure the loan if you cannot make
               payments
             – Home, auto, etc.


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                                       DRAFT
Your Financial Foundation
                                                                Managing Saving Credit   Being
                                                                 Income     &       &   Prepared
                                                                    &    Investing Debt
          Activity 2: Preparing to Borrow                       Expenses




          • You are hoping to buy a new car in the near future
          • You feel you have been managing your finances adequately and
            have saved for a down payment
          • You have been late with a few credit card payments recently
          • You have never checked your credit report, and recently had a
            concern you were possibly a victim of identity theft

          • Outline what steps you should take, and when you should take
            them, in order to help improve your chances of being approved
            for the auto loan and at the best rates and terms available.




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                                            DRAFT
Your Financial Foundation
                                                                              Managing Saving Credit   Being
                                                                               Income     &       &   Prepared
                                                                                  &    Investing Debt
         Loans and debt                                                       Expenses




         • Make sure any new debt fits comfortably within your budget
         • Use the ―28/36‖ debt-to-income (DTI) ratios as guidelines—
            – No more than 28% of your gross income for mortgage or rent (including
              property taxes, insurance, association dues, etc.)
            – No more than 36% of your gross income for all debt payments

         • Example—
             Monthly, pre-tax salary    $3,000      Monthly, pre-tax salary                    $3,000
             Total debt ratio           x   .36     Housing debt ratio                         x    .28
                                       = $1,080                                            = $ 840

         • No more than $840 for housing related expenses (mortgage, rent,
           taxes, insurance)
         • No more than $240 for other monthly, recurring debt ($1,080 - $840)

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                                          DRAFT
Your Financial Foundation
                                                                      Managing Saving Credit Being
                                                                       Income     &       &   Prepared
                                                                          &    Investing Debt
         Being Prepared                                               Expenses




         Saving for emergencies

         • Obstacles – some smaller, some larger – may sometimes get in
           the way of even the best financial plans
         • Build your cash reserves to help during times of crisis
             – Rainy day funds of $1,000 to $1,500 can help with smaller expenses
             – Emergency funds, containing at least 3 to 6 months (or more,
               depending on your personal situation) can help through larger, more
               financially-pressing issues

         • Build these reserves gradually, but make a priority
         • Keep in safe, liquid and easily-accessible accounts (savings or
           money market accounts, CDs)

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                                         DRAFT
Your Financial Foundation
                                                                   Managing Saving Credit Being
                                                                    Income     &       &   Prepared
                                                                       &    Investing Debt
          Activity 3: Emergency Funds                              Expenses




          Building cash reserves

          • After a recent promotion and paying off some debt, you find that
            you can now save 10% of your income

          • You have only $1,000 in a savings account

          • You wish to start being more proactive in your financial planning
            and heard recently about the need to have an emergency fund




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                                         DRAFT
Your Financial Foundation
                                                                    Managing Saving Credit Being
                                                                     Income     &       &   Prepared
                                                                        &    Investing Debt
         Insurance                                                  Expenses




         Being prepared is also about having proper insurance coverage

         • Life insurance
            – Can protect finances by paying beneficiary lump sum of cash (―death
              benefit‖) when insured dies
            – Money can be used for paying off mortgage, college expenses, etc.
            – Two types—
               • Term – coverage is set for a specific number of years
               • Permanent – coverage is designed for lifetime protection




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                                          DRAFT
Your Financial Foundation
                                                                       Managing Saving Credit Being
                                                                        Income     &       &   Prepared
                                                                           &    Investing Debt
         Insurance (cont.)                                             Expenses




         • Disability insurance
            – Replaces some or all income in the event of a temporary or permanent
              disability

         • Health insurance
            – Provides medical or health care coverage, including doctors‘ visits,
              medicine, etc.

         • Other types of insurance
            – Home/renter‘s insurance
            – Auto insurance
            – Long-term care insurance

         • Be sure insurance premiums fit budget

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                                          DRAFT
Your Financial Foundation
                                                                     Managing Saving Credit Being
                                                                      Income     &       &   Prepared
                                                                         &    Investing Debt
         Keeping safe records                                        Expenses




         • Keep your files organized and in a safe place
         • Document and have handy a list of all pertinent financial
           information
             – Credit card account numbers, customer service 800#s
             – List of other creditors
             – List of where your assets are located, along with phone numbers
         • Keep your files clean, throwing away unnecessary statements
             – Most are available online
             – Others keep for up to 7 years
         • Buy and use a shredder
             – Cross-cut shredders can be purchased for $25-$50




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                                         DRAFT
Your Financial Foundation
                                                                     Managing Saving Credit Being
                                                                      Income     &       &   Prepared
                                                                         &    Investing Debt
         Identity theft                                              Expenses




         • Account fraud
         • Data breaches
         • Protect your identity and personal information
             – At home — buy a shredder for old statements, and keep other sensitive
               information under lock and key.
             – Online — be sure to verify you are entering any personal information
               over both a secure connection and on a secure website.
                 • Look for the ―s‖ in the URL – www.https://
                 • Look for the padlock icon in the lower corner of secured sites
         • Never provide sensitive data to email (or phone) requests where
           you did not initiate the contact.




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                                        DRAFT
Your Financial Foundation
                                                                 Managing Saving Credit Being
                                                                  Income     &       &   Prepared
                                                                     &    Investing Debt
         Identity theft       (cont.)                            Expenses




         If identity theft happens
         1. Contact one of the three major credit reporting agencies and
            place a fraud alert on your report.

         2. File a police report.

         3. Contact your creditors and close any accounts that have been
            misused or opened without your authorization.
         4. File a complaint with the FTC.

         •   Other resources
             – www.idtheftcenter.org
             – http://www.ftc.gov/bcp/edu/microsites/idtheft/

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                                             DRAFT
Your Financial Foundation


          Fine-Tuning Your Finances

          Ways to get back on the right financial track
          • Save more
              – Generate extra income
              – Downsize autos, sell unneeded items
          • Spend less
              – Scale-back discretionary spending
          • Reassess financial goals
              – May be necessary to scale-back or eliminate completely
              – Delay a vacation or home purchase by one year
              – College education = start at public or junior college then transfer if goal
                was to attend more expensive private university
              – Delay retirement = save more and spend less those extra years in the
                workforce

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                                         DRAFT
Your Financial Foundation


         Wrap up

         • Over the next few weeks:
            – Take time to think about then write down your short, medium and
              long –term financial goals, including projected costs of each and
              how much you‘ll need to save to achieve them
            – Set up a budget (or refine an existing one), being sure to include
              ―saving money‖
            – Calculate how much you‘ll need to save each month so that in one
              year, you‘ll have established—
                • A rainy day fund ($1,000 or $1,500)
                • An emergency fund, containing at least 3-6 months‘ worth of
                  living expenses
         • Visit www.YourMoneyCounts.com


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