BBuuiillddiinngg YYoouurr F ii nn aancciall FF oouunddattion F · following some simple steps. Some of the most important aspects that will help you on the road to financial wellness

Fun, engaging

and effective.

Aligned with

national financial

education and

core curriculum

requirements.

Lessons on:

Credit and Debt

Insurance

Long-Term Planning

Income and Savings

Budgeting

Social Enterprise

Business Relations

Risk Management

Investments

BBuuiillddiinngg YYoouurr

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Student Guidebook

Building Your Financial

Foundation

Published by the National Financial Educators Council

Copyright 2012 by the National Financial Educators Council

All Rights reserved. No part of this book may be reproduced.

Library of Congress Cataloging-in-Publication Data

ISBN: 978-0-9797853-2-0

Printed in the United States of America

Design and composition by Rick Soldin

Requests for permission to make copies of any part of this book can be made to the National Financial Educators Council at [email protected]

10 9 8 7 6 5 4 3 2 1

No Earnings Projections, Promises, or Representations You recognize and agree that we have made no implications, warranties, promises, suggestions, projections, representations or guarantees whatsoever to you about future pros-pects or earnings, or that you will earn any money, with respect to your purchase of this financial education cur-riculum, and that we have not authorized any such projection, promise, or representation by others.

Any earnings or income statements, or any earnings or income examples, are only examples for educational purposes. There is no assurance you will do as well as stated in any examples. If you rely upon any figures provided, you must accept the entire risk of not doing as well as the information provided. This applies whether the earnings or income examples are monetary in nature or pertain to advertising credits that may be earned (whether such credits are convertible to cash or not).

Due Diligence You are advised to do your own due diligence when it comes to making business decisions and should use caution and seek the advice of qualified professionals. You should check with your accountant, lawyer, invest-ment advisor, or other appropriate professional before acting on any investment information. You may not consider any examples, documents, or other content on the course or otherwise provided by us to be the equivalent of legal, accounting, or investment advice. Nothing contained in the course or in materials available for sale or download on the website provides legal, investment, or accounting advice in any way. You should consult with your own attorney, financial investment advisor, and accountant with any questions you may have. We assume no responsibility for any losses or damages resulting from your use of any information or opportunity contained within the course, on the related website, or within any information disclosed by the owner of the course and the website in any form whatso-ever. Visit www.FinancialEducatorsCouncil.org to review the complete earnings disclaimer and terms & conditions.

3

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Course Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Financial Psychology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Saving and Budgeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Credit and Credit History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Qualifying for Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Skills and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Insurance & Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Investing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

5

Introduction

Good news! No matter what your current financial situation is, you can achieve a state of financial wellness within five years—no matter where you start from!”

“Financial wellness” doesn’t mean that you are necessarily a multimillionaire. But it does mean a place where you feel comfortable, you feel secure, you know your needs will be met, and you don’t have those fears and worries.

If you are reading this now, you can achieve financial wellness! It just takes some simple steps, continuing to learn on a regular basis, and continuing to take action on a regular basis.

Not only can you achieve financial wellness, but you can also choose the life-style that you want to live. So how do you want to live your life?

There’s no right or wrong answer. Just relax and let your mind daydream. Who do you want to share your time with? How would you like to feel? Is having enough money for a secure retirement important to you? What are those fun things that you would like to have? Would you like to travel the world, start a business, spend your days at the spa, get a college degree, have three day weekends every week, free time to work on your hobby, or would you prefer just to spend time with your family all day? Do you see yourself living in your mansion or would you prefer to relax at a BBQ with some long-time friends? Whatever lifestyle you want to live is the right choice for you.

Close your eyes for a second. Think about how you really felt on the first day of a long vacation. If you’re like many people, you felt an overwhelming sense of free-dom. How would you like to experience that feeling of freedom on a regular basis?

When you were daydreaming, some of the things you imagined probably required money. Maybe you need enough money to quit your job, so you can spend your days doing what you want to do. Is there somebody special you’d like to help out financially? And you’ll need money to buy that car, house, clothes, or trip that you desire—right?

6 Building Your Financial Foundation

On the other hand, you probably imagined some things that don’t cost money that would make you just as happy. Maybe you pictured hanging out at the beach on a sunny day, sharing stories with family, or joking around with friends.

So how would you like to live your day-to-day life? You don’t have to know exactly; but you probably already have a decent idea.

If everything you imagined comes true, what would your life look like? Most people agree that being able to afford your dream life is an incredible feeling. You would have plenty of free time to live life on your terms. You would be able to help the people who are important to you. Wouldn’t you like to “do what you want, when you want”?

7

Course Overview

This course will cover five main areas of money management.

❖ Assets are things of value that you own, like cash, stocks, real estate, mutual funds, bonds, gold, and silver.

❖ Income is money we earn from work; it’s money coming in from invest-ments or from businesses, and any other money we have coming in from any source.

❖ Credit basically refers to your ability to borrow and access money. ❖ Insurance protects our things—like our assets, our income, and our credit.

Insurance is really important, and we’ll talk more about it later. ❖ Debt is money we owe—in loans and other obligations. Being in debt isn’t

always bad; debt can be used to buy assets that will benefit us in other ways.

No matter what financial situation you’re in personally, you definitely are not alone. Here is what many Americans are faced with now:

❯ Regardless of their income, 70% of Americans are living paycheck to paycheck.

❯ 1 in every 45 households are in foreclosure (2012). ❯ Most people do not feel financially secure.

Although every financial situation is unique, the most common reasons people get into financial problems include:

❖ No clear goals that define how much money they need to live the lifestyle they desire.

❖ Lack a clear financial plan. ❖ Do not have a trusted financial mentor, advisor, or coach. ❖ Poor financial choices due to the lack of financial knowledge. ❖ Lack the confidence they need to make necessary financial moves. ❖ Poor financial choices due to emotions. ❖ Choices motivated by fear and greed.


❖ Taking advice from the wrong people. ❖ Most advice comes from unqualified salespeople and friends. ❖ Had a few problems that snowballed. ❖ Unrealistic expectations of investment returns. ❖ Poor financial habits that are developed at an early age.

Attaining financial wellness does take effort; however, there is good news. The basic principles of personal finance are easier than the majority of classes you took in high school or college. You don’t have to be great at math or reading. It just takes following some simple steps. Some of the most important aspects that will help you on the road to financial wellness include:

❖ Clear Goals. Goals give us direction, hope, and a purpose. ❖ Reasons. Having strong reasons ‘why’ you want to understand the subject

of money keep you motivated and working toward your goals. ❖ Knowledge. Having good skills and understanding about personal finance

topics gives us the confidence to take action. ❖ Mentor / Teacher / Coach. Find that trusted person to guide you. Although

a live person is best, you can study a knowledgeable person (by reading books, for example) and pick up their skills.

❖ Detailed Plan. If you had a step-by-step plan to accomplish your financial goals, would you follow it?

❖ System. Systemize and let your system work for you! ❖ Ongoing Education. You are a life-long learner. You soak up information.

The full course will cover key areas all designed to help you achieve your per-sonal financial goals. Here’s an overview of what you’ll learn in each topic area of this course:

❖ Financial Psychology. You will have a clear picture of your goal setting, relationship with money, spending and savings habits.

❖ Accounts and Budgeting. You will know how to automate and systemize your finances so you’re able to save more and stay organized.

❖ Credit and Debt. You will know how to repair, build or maintain an excel-lent credit history and confidently act on your debt elimination plan.

❖ Skill Growth. You will identify the skills that get you paid and develop a plan to improve them.

❖ Insurance. You will have an insurance plan that protects your assets, credit, and income and manages your risk.

❖ Investment Basics. You will be introduced to investment principles and be excited to learn more about getting your money growing for you.

9

Financial Psychology

What’s standing between you and your dreams, your future success? Nothing, if you can set goals and make an actionable plan for achieving them!

If you’ve ever aspired to be comfortably, secure or financially independent—even to be a millionaire!—reaching those aspirations requires goal-setting. Just like in sports, you can’t score without a goal, right?!

Successful people have written goals. It is a scientific fact that you will achieve a higher percentage of your goals by imagining the successful achievement of those goals. When you write your goals and use mental imagery to focus your thinking, you can actually rewire your brain so the neurons form new connections and make new pathways. This helps you achieve a higher percentage of your goals.

Setting goals for financial planning and life success has many benefits, for example:

❖ Motivation. Goals motivate you. Your life is moving toward something instead of steering you off course.

❖ Saving vs. Spending. How much of your monthly paycheck should you save? How much should you spend on coffee and eating out? Good questions—and without a set goal, you might see your used coffee cups stack up while your finances suffer.

❖ Freedom. Once you’ve set a goal—believe it or not—you become liberated from constantly worrying and wondering what you’re going to do with your life. Plan and set goals when you’re young, or else wake up when you’re 95 years old and say, “Hey! What happened to my life, my money, and my dreams?”

❖ Scoring. You achieve success by scoring. How can you score if you don’t even know where the goal is? Set goals, achieve them, and feel rewarded. Planning ahead makes scoring so much easier.


Goal-setting can improve every area of your life. For a well-balanced life, set goals in each of the following areas:

❖ Family/Relationships ❖ Physical Health and Well-being ❖ Giving Back ❖ Fun & Toys ❖ Spiritual Self ❖ Money/Career ❖ Personal Growth

The S.M.A.R.T. GuidelinesTurning your dreams into reachable objectives takes some thought, but there’s a proven technique. Use the S.M.A.R.T guidelines:

S—Specific, SignificantBe specific. Describe what you want to accomplish in clear and specific terms. If you can really visualize your goal, it’s easier to achieve.Example: If you’re saving money to buy a car, it’s much easier to keep to that savings plan when you have the model, color, and features picked out.Significant. Make sure your goals are for what you want. Goals should match your personal interests and values.

M—Measurable, MotivationalYou must be able to measure your goals. That is, you will know when you get there.Example: “I will have a net worth of $20,000 and be debt free by my 40th birthday.”Motivational. Your goals should motivate you to take it to the next level—and beyond!

A—AttainableGoals must be attainable.Example: Wanting to be President is a tough goal, but possible. Wanting to be Spi-derman is a fantasy; you’ll never get there.

R—Results-oriented, ReasonsResults-oriented. Phrase your goals in the positive: “I accomplished, I have, I am enjoying.” Positive phrases direct your mind to focus on outcomes. When your mind is on board, the rest comes naturally.Example: “I will earn enough money by January to afford the $1,000 vacation I always wanted.”

Financial Psychology 11

Reasons. Why do you want to accomplish the goal? Deciding on the reasons behind your goal provides inspiration.

For instance, if your goal is to be financially free, some reasons behind that goal might be:

❯ Spend more time with family or friends ❯ Feel more secure about your future ❯ Free time to do favorite activities—travel, sports, etc. ❯ Stand out among friends and associates ❯ Be able to afford things you want ❯ Ability to help family members and take care of loved ones

The reasons behind a goal are the fuel that keeps you motivated to accomplish all your hopes, and more!

T—Time-driven

Good goals are time-driven. In other words, give yourself a deadline

For your plans to operate smoothly, you need to write down specific dates. You need a sensible time frame in order to work toward a goal and track your progress along the way.

Example: “I have paid off my $2,300 credit card by Memorial Day weekend and will be enjoying a 3 day weekend.”

Remember that your goals must fit together. Goals should be headed in the same direction, not contradictory. For instance, having two goals of “saving up enough money by the end of summer to buy a Sony Plasma TV” and “taking the summer off to travel” contradict each other—you would only be able to accomplish one or the other. You must decide which is more important to you: TV or travel?

Poorly-written goal Well-written goal

I want to have more money for vacations .

I will save $5,000 by New Year’s Day and will take a trip to Hawaii with my family .

I’ll try to lose some weight . I will lose 10 pounds of fat and drop 2 pants sizes by the end of 4 months .

I’ll pay my credit cards and hospital bills .

I will have paid in full my $4,200 credit card and cleared my hospital bills from my credit by the end of this year by focusing keeping my expenses low and contacting the credit bureaus .


Make It HappenOnce you’ve written your goals down using the S.M.A.R.T. guidelines, follow these steps:

❖ Plan of Attack. Write down each step you need to take toward accomplish-ing the goal. These step-by-step plans may sound corny, but they work. Reaching goals is like climbing stairs: without steps, how can we ever move up? Build steps in your staircase of life. Suddenly the next level will seem that much closer!

❖ Review your goals often. Write your goals on the back of an index card and tape it to the mirror where you brush your teeth. Put an identical card by your bedside table and another on the dash of your car. Look at your goals daily. Keep them in the forefront of your mind.

❖ See it, believe it: Visualize your goals coming true. The body goes only where the mind has already been. That means you must see, hear, smell, touch, and feel what it will be like to accomplish your goals. Visualization is like daydreaming with a purpose. By imagining yourself already accomplishing your goal, you are well on the road to success.

❖ What you think about, you become. You have the ability to get whatever you want in life. All you need to do is change your thoughts. The law of attraction says you will get whatever you think about, whether wanted or unwanted.

You Have a HUGE AdvantageThe fact that you’re reviewing this course gives you a huge advantage! Most people do not receive this information so you no matter your current financial situation, you know more than most by taking this course. Right now, everything is on your side to help you live the lifestyle of your dreams.

The investment, business, personal growth, and money management skills you will learn during this course will help you both financially and in everyday life. Learning these skills gives you an advantage that will stay with you forever. Most importantly, you’ll be ready for opportunities when they come your way.

By following the tips in this course, you will develop simple but powerful skills and traits that will put you in an advantageous financial position – no matter your current financial situation, the knowledge you pick up here will save you time, money and energy.


Throughout the book we’ll discuss many benefits to learning these skills. One of the biggest benefits of learning to invest is the ability to make money from money you did not earn. Once you begin to let your money work for you, it has a snowball effect. Your money grows automatically.

Having enough money to live the lifestyle you want is easier than most people think. You can live your own personal American Dream. It all starts with getting your mind right!

If that’s caught your attention, let’s go a little deeper.


Motivation

GoAl

Money impacts all areas of my life, so I‘m going to figure out the true importance of money and how it can help me live the way I want.

Warm–Up Take a moment to reflect on the following quote: “Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.” Groucho Marx

Belief Statement When my money situation is handled I will feel:

I believe the most important thing money can do for me is:

Questions What motivates you to earn money?


How does your motivation affect your desire to earn money?

What motivates you to pick up money skills?

Dreams

GoAl

I will live my dreams! Even if I’m not 100% sure on what they are, I do have an idea on things I like to do. By thinking about my dreams, I will figure them out over time.

Warm-Up What is a goal and what is the difference between goals and dreams?

Write down at least one dream that you want to complete in the next five years. Tell us what it is and why it is a dream. Do you desire to retire early, travel the world, build a business or write a book? Tell us here.


Lifestyle choices that affect my dream(s):

What are two ways that money can affect your dreams?

What can you do to ensure that you achieve your dreams regardless of money?

Goals

GoAl

In order to live the way I want; I know the first step is to write down my goals and create a plan.


I Want It! The best way to get what you want is to set a plan to achieve it. In the lesson we learned about how to save to buy a car in two years.

❖ What is it that you really want to accomplish in the next 5 years? ❖ What are you going to do to get there? ❖ Make your plan today to get started!

I really want

I will buy what I want by using the following plan

This month I will:

Next month I will:

Within 6 months I will:

This year I will

Next year I will:

Two years from now I will:

How to Achieve Your Dreams: ❯ Daydream about how you want to live your life and the lifestyle that you picture for yourself.

❯ Get these daydreams down in writing—just write do not judge.

❯ Organize your goals by completing the goal setting worksheet on this page.

❯ Create a rough plan to accomplish your goals.

❯ Review your goals often—Every day would be excellent!

❯ See it, believe it and think about achieving your goals.

You have the ability to overcome any challenge and experience whatever you want in life. Set-ting goals may sound simple but it makes a big impact on all areas of your lifestyle.


Three years from now I will:

Four years from now I will:

Five years from now I will celebrate the accomplishment of this goal by:

Write down at least one financial goal that you want to complete in each of the following time frames: 1, 5, 10 and 25 years.

Within 1 year I will feel great knowing that I:

Within 5 years I will feel great knowing that I:



How are dreams and goals related?


What do goals have to do with finances?

What is the importance of setting goals to reach your dreams?

Questions

1. What are two ways that money can affect your dreams? a. b.

2. What are two things you can do to ensure that you achieve your dreams, regard-less of money? a. b.

3. What is the difference between a dream and a goal?


4. Why is it important to set and write down goals? a. Goal-setting provides me with a plan to turn my dreams into reality. b. Having written goals is motivating and provides direction. c. Goal-setting gives me an opportunity to show off to others. d. Both “a” and “b.”

5. The goal-setting acronym S.M.A.R.T. stands for which of the following? a. Secure, Marketable, Assertive, Reliable, Talented. b. Specific, Measurable, Attainable, Results-oriented, Time-driven. c. Sophisticated, Mutable, Airtight, Relative, Thought-based.

6. Which of the following are important strategies to help you achieve your goals? a. Creating a plan of attack that describes each step along the way. b. Visualizing my goals. c. Telling other people about my goals whenever I have a chance. d. Reviewing my goals often. e. “a,” “b,” and “d.”

21

Saving and Budgeting

Knowing how to manage money is one of the most important life skills you will ever master. Essentially, proper money management gives you a well-managed, effective life plan.

What is the key to great money-managing? Just like learning to drive a car, you can learn basic financial strategies that build proficiency. Spending and sav-ing are two of the most important lessons in good money management. Adopting good spending habits and sound saving strategies will guide you toward a bal-anced, complete life. One of the most important fundamentals to master is creating a personal budget.

A budget is simply a plan for how to handle your money, a roadmap to give you the money you need to live the lifestyle you want. Budgeting has many benefits, including:

❖ Control. Knowing exactly how much money you have at any given point puts you in the financial driver’s seat.

❖ Organization. Keeping your finances in order is vital, and having a financial plan keeps you organized.

❖ More money. Working within a budget will leave you with more money every month.

❖ Opportunities. Sticking with your budget will open up many financial windows of opportunity.

Needs vs. WantsBefore we jump into budget-building, we need to understand how our money is spent. The first step is to understand the difference between a “need” and a “want.”


A need is something you must have for survival—something you can’t live without. Food, shelter, and clothing are examples of needs.

A want is something you would like to have—something not absolutely neces-sary for your survival, but that you would enjoy having. Examples of wants include iPods, designer clothes, vacations, new cars, or Rolex watches.

Good money management involves having enough money to cover all your “needs,” while purchasing “wants” only when you have extra money to do so.

Track your SpendingEach of us has a limited amount of money available to spend. The ability to man-age spending is critical to achieving financial success. More importantly, when you spend wisely you have more money available to save and invest. That means a brighter and richer future for you, your family, and your friends.

Tracking Fixed Expenses. The first step to developing a budget is to account for all your fixed expenses. Fixed expenses are the bills on which you pay the same amount each month, like rent, car payment, and insurance. Write down your fixed monthly bills. Better yet, create an Excel spreadsheet and enter them there.

Next, account for the fixed expenses you pay annually: car registration, gym membership dues, anything you pay each year. Enter these into your budget by taking the annual payment and dividing it by 12. For example, if your gym dues are $240 each year, your monthly payment is $20.

Tracking Variable Expenses. Most of us have cash that vanishes each month into unknown voids, like stops for coffee or a burger. To really get a handle on spending, write down every dollar you spend—every latté, every burger, every bus or taxi fare—everything. Keeping a “money diary” helps you understand where your money really goes.

There are several ways to track spending: save receipts, carry a small note-book, or tap into the variety of cell phone apps available. Another easy way to track day-to-day spending is by only using cash: take out a fixed amount of cash each week, and limit yourself to that amount for your daily purchases. After a month, you’ll have a good idea how much money you’re spending.

If you’re like most people, over time you’ll identify areas where you tend to overspend, and possibly other areas where you want to spend more. You may be able to pinpoint those times when you have no idea where your money went.

Once you become aware how you spend your money, you can start building a workable budget.

Saving and Budgeting 23

Creating Your BudgetBudgeting is simple.

From your income:

❖ Set money aside into savings accounts first. ❖ Pay your necessary expenses (“needs”). ❖ Leftover money is yours to spend as you wish (“wants”).

Following is a summary of steps to follow in developing your budget:

1. Input your fixed expenses in a spreadsheet.2. List your variable expenses, which you’ve been tracking using receipts, a

notebook, or a cell phone app.3. List your net monthly take-home pay (after taxes, insurance, etc. are taken out,

how much money is left?).4. List how much you want to save each month for fun.5. List how much you want to save each month for long-term planning.6. Implement your plan and make regular adjustments as needed.

SavingThe goal of creating a budget is to save money for the things you want now, while making sure you have enough for later. Saving money is the cornerstone of living a financially secure lifestyle. Setting aside money each month builds a foundation for establishing future wealth while still leaving you able to enjoy time with your family and friends now. Putting away your hard-earned dollars will free you from the emotional stresses of everyday bills.

Maybe you want a computer or new clothes. Well, saving money allows you to purchase the luxuries you want. The best part is that you can afford it!

Life is about experiences. By saving money for the things you like to do, you’ll be able to partake in more activities and holidays, and invest in those things you dream of having.

Separate Your SavingsHaving real goals in mind makes the choice to save—rather than spending—much easier. Try saving money according to what you want to do with it. Divide and allocate your savings into three specific categories: emergency fund, fun fund, and long-term savings.


Emergency Fund. Your emergency fund is your first priority. Emergency funds should equal six months of your living expenses. That is, if your bills are $500 per month, you need to save $3,000 for emergency purposes. Unexpected problems may arise, and your emergency savings helps reduce your worry. For example, say your car breaks down and needs expensive repairs. If you have no money saved, how will you get to work? Take the bus? Walk? Bum rides from friends? If you have an emergency savings fund, you’ll get back in the driver’s seat with little or no stress or panic.

If saving six months of living expenses sounds too hard, here are two ways to save more:

❖ Earn more money ❖ Cut down expenses

Short-term Savings. Your short-term savings is important because life is about experiences. Short-term savings are the funds you use for fun things you like to do. How you define “fun” is up to you, but setting aside money for fun is important. You only live once! Determine how much you must save each month to pay for the things you love to do.

Long-term Savings. The long-term savings account is where you hold the money for future investments. This account is the backbone of your financial future. Deposit money into this account every month. Get in the habit of paying yourself first. In other words, before you pay your bills, buy new shoes, or purchase music downloads, first make sure to set aside money in long-term savings. This is the money secret that will give you financial security at a young age.

How Much Should You Save?Set a goal to save 15% of your income for long-term savings and 15% for your fun savings. That means if you make $1,000 per month, you save $150 for long-term and $150 for fun. This goal may sound challenging, but it gets easier over time.

You may find it hard to save $20 a month right now. But if you begin control-ling your expenses and learning ways to earn more money, your savings plan can easily become a reality. Plus even just saving $20 adds up overtime so be happy with what you are able to save and try to save more.

Savings is the key to calling your own shots. By setting up and following your budget, you’ll see your savings grow over time. Start your savings plan now and reap the benefits every day of your life.


Learning to Save

GoAl

Most people don’t have budgets and most people are broke. I will have a budget because I know it will help me afford the things I want.

Warm-Up Why is it important to bud-get? How does a budget help you?

Questions

List 3 Needs:

1.

2.

3.

Budget Tips

❯ Get your budget down on paper. Use the sample budget worksheets provided in this section or access a budget tool online.

❯ Write down your specific savings goals and create a step-by-step plan to reach them. Your plan may involve: earning more money, cutting your expenses, saving more money or a variety of other options.

❯ Save up and set aside emergency money that is equal to 6 months of your bills.

❯ Save money and work your plan.


List 3 Wants:

1.

2.

3.

What do I want to learn how to budget?

Why are budgets important?

How do you keep a budget?


Characters – Lifestyle Choices

Directions Use this guide and budget worksheet to help your characters accomplish their goals.

Housing (includes: rent, water & gas)

$400 – You get a small bedroom and share a bathroom with 2 other roommates. Your apartment is in a bad location and you don’t feel safe when you get home late at night.$650 – You have a few roommates and get the small bedroom but are able to enjoy your own bathroom. This is in a pretty good location and a short drive from a lot of the places you want to hang out.$1200 – You share a nice furnished loft at the center of town with a roommate. You have the master bedroom and when people come over they are impressed.

Car (Includes: payment, insurance, gas)

$300 – Your cars looks like a piece of junk but its paid for and gets you to where you want to go.$500 – You have a nicer looking used car that gets good gas mileage.$900 – You’re turning heads with your ride and all your friends want to you to drive all the time.

Needs

$400 – This covers electric, internet connection, cell phone and really cheap food. A typical day’s meal would include Mac & Cheese, Top Ramen, tuna, peanut butter & jelly sandwiches & tap water. You would not have money to eat out.$800 – This would cover your electric, internet connection, cell phone, basic cable channels and healthier food. You can eat out a few times a week and better food at home.$1,400 – This covers your electric, internet connection, cell phone, deluxe cable channels, home phone line and good food. You can eat out most meals and enjoy nicer meals from time to time.

Clothes

$50 – You pick up a new piece of clothing every other month and have decent clothes for most occasions.$175 – You get one new complete outfit every month or two.$450 – You get a new complete outfit with accessories every month.


Entertainment

$300 – You like to meet your friends after work for dinner. A typical weekend includes eating out with friends, a movie, and whatever activity is going on in your city (concert, festival etc.). You are rarely home.$200 – You usually go out with friends and eat at least once a week. A typical weekend includes one activity with friends and a night at home playing games or watching videos.$100 – You go out with friends a couple times a month. You and your friends try to find inexpensive things to do around town to have fun.

Toys

$300 – You have to have all the latest gadgets.$200 – You like your toys, but try to limit your purchases to a few a month.$100 – You don’t buy a lot of new toys, but you like to buy new apps, music and games for those you have.

Credit Card Minimum Payments

$250 – If you want it you get it.$100 – You don’t buy anything with your credit card, but you used it for a vacation last year.$50 – You only use your credit card for emergencies you can’t cover with savings.

Travel

$300 – You and your friends try to do at least one mini-vacation every long week-end. You also save up for a big vacation every year.$200 – You take one big vacation a year and save up for it.$100 – You do some traveling but usually stay with friends or family.

Savings

$50 – You save a little here and there.$150 – You save regularly each month.$250 – You keep your emergency fund high and also save for big purchases.

Giving Back

$200 – You have become very successful and believe it is very important to pay it forward. You have a few charities you give to regularly.$100 – You give a little each month to charity.$50 – You give when it’s the opportunity presents itself. Like when you run into girl scouts selling cookies.


Expenses Money Coming In

Living Expense Current Goal Income Current Goal

Rent / Mortgage Employment

Taxes / Insurance Other

Utilities Other

Electric Other

Gas Total

Water / Garbage

Cable/Satellite Investment Income

Internet Rental Properties

Phone Stock Market

Renters Insurance Business

Other Other

Other Total

Total

Total Income

Travel Expenses

Car Payment Money for Savings

Insurance Long Term Savings

Registration Short Term ‘Fun’ Savings

Gas Charities

Maintenance Total

Other

Total

Variable Expenses Total Income

Groceries Total All Expenses

Clothes Total Savings

Personal Items Money Left Over

Personal Loans

Credit Card Payments

Entertainment

Eating Out

Other

Total

Total All Expenses


Character: Carl Jobs: Office Mail Room & Security Guard. Monthly Take-home Pay: $2,147

Carl likes to live large. He has a brand-new car, the latest clothes, and rents an expensive apartment. Although he appears wealthy, he has no money in the bank. He has $12,650 in credit card debt and has to work two jobs just to pay his bills. This month he is late on his car payment, so the credit card company has increased his minimum credit card payment.

People in Carl’s life are starting to become upset with him. He never has enough money to take his girlfriend out. When he goes out with friends, he never pays his fair share and they’re getting tired of subsidizing him. He’s taking a big risk because he has no medical or car insurance. If he gets sick or has an accident, he risks being sued and having money automatically deducted from his paycheck until the judgment is paid.

Carl asked both his employers for a raise, but was denied. He messed up a few times at work because he was worried about his bills, so he cannot be promoted within his company. He works 65 hours a week: at an office mail room during the day and as a security guard at night. His gross pay is $3,520 per month but after taxes he only brings home $2,147 (rounded).

Carl’s goal: To pay off all his debt in one year and take a trip with his friends that will cost $1,000. Can you help?

Income

$3,520 Gross PayFederal Tax (varies by income level) 25%State Tax (varies by state & income level) 6.35%FICA (Federal Insurance Contributions Act) 7.65%39 % goes to taxesTake-home Pay –$2,147

Carl’s Current Expenses

Housing $1,200Car (includes gas & insurance) $750Needs (electricity, phone, basic food) $700Clothes $400Entertainment $100Medical Insurance $0Toys $0


Credit Card Debt $12,650; minimum payment $360 ($12,650 at 22%–would need to make payments of $1,286 per month to pay it off in one year)

Student Loan Debt $0Travel $0Friends & Family $0Savings $0Giving Back $0Total Expenses $3,150Take Home Income –$2,147minus Total Expenses of –$3,150= Carl is adding debt of –$1,002 (rounded) per month

Discussions How does Carl live?

Is he able to do everything he wants to?

Why does he miss out on fun with family & friends?

Does he have enough free time to experience life?


How would you describe his spending habits: Frugal Average Over spenderNotes:

Character: Tonya Job: Sales Monthly Take-home Pay: $3,050

Tonya has a well-paying job in sales. She doesn’t like her job much, but it pays the bills. She has always loved design and working with animals. She wishes she could be designing marketing material and advertisements for a nonprofit that helps abused animals.

Tonya graduated from college with a Bachelor’s Degree in Communications. Since high school, she has been volunteering once per month for a nonprofit that helps abused animals. Her resume for her dream job is not the strongest, but it would be good enough to get her an interview. To strengthen her chances of getting the job, she’s practicing her interviewing skills with friends and creating marketing material to show potential employers.

She recently interviewed for a position at a job she would love to have, but the pay is too low for her to pay her current bills. Her take home pay at the potential job would be only $2,750. Right now her gross income is $5,000 a month and she brings home $3,050 after taxes.

Tonya’s Goal: To find a way to accept her dream job at the lower take-home rate and still meet her expenses. Can you help?

Income

$5,000 Gross PayFederal Tax (varies by income level) 25%State Tax (varies by state & income level) 6.35%


FICA (Federal Insurance Contributions Act) 7.65%39 % goes to taxesTake-home Pay –$3,050

Tonya’s Current Expenses

Housing $800Car (includes gas & insurance) $550Needs (electricity, phone, basic food) $700Clothes $400Entertainment $500Medical Insurance $75Toys $200Credit Card Debt $3,650; minimum payment $65 ($3,650 at 22%–$371 payments

per month to pay it off in 1 year) Student Loan Debt $150Travel $150Friends & Family $200Savings $0Giving Back $50Total Expenses $3,840Take-home Income –$3,050minus Total Expenses–Payments $3,840= Tonya is adding debt of –$790 per month.

Discussions How does Tonya live?

Is she able to do everything she wants to?


Why does she miss out on fun with family & friends?

Does she have enough free time to experience life?

How would you describe her spending habits: Frugal Average Over spenderNotes:

Character: Melanie Job: Brand Representative Take-home Pay: $1,625

Melanie is a single mom who can’t count on money from her ex-husband. She just took a job as a brand representative for a linen company and works 50 hours per week. She makes $2,700 gross and takes home $1,625 after taxes. When she is working outside the office, the company also pays for her food, covering about 10 days out of each month.


Melanie has built a reputation as a good worker and has developed a good network among people in the industry. She has always enjoyed sewing and picks up side jobs from time to time. Her sewing machine is old and she misses out on jobs because it takes her three times longer to complete the projects.

Melanie’s Goal: To have 6 months of rent, car, needs, medical, and student loan debt in her savings account within one year. These expenses total $1,225 per month, so Melanie needs a total of $7,350 saved. Currently she already has $5,900 and the latest sewing machine will cost her $2,000. If she invests in the sewing machine she could earn an extra $400 per month. She has met with many people and has asked a successful businessperson from her network to be her mentor. She thinks that after 1 year her sewing business can be earning $1,000 to $2,000 each month within a year. Can you help her meet her goal?

Income

$2,700 Gross PayFederal Tax (varies by income level) 25%State Tax (varies by state & income level) 6.35%FICA (Federal Insurance Contributions Act) 7.65%39 % goes to taxesTake-home Pay $1,625

Melanie Current Expenses

Housing $400Car (includes gas & insurance) $350Needs (electricity, phone, basic food) $250Clothes $0Entertainment $100Medical Insurance $75Toys $50Credit Card Debt $0Student Loan Debt $150Travel $0Friends & Family $100Savings $122Giving Back $50Total Expenses $1,625

= Melanie has $0 money left over but is saving $122 each month and has the potential to earn another $175.


Discussions How does Melanie live?






Character: Natasha Job: Manager Take-home Pay: $3,660

Natasha spent a year and a half working a low-paying entry-level job to build up the skills to get the job she always wanted. Next week she is starting her dream job. She will be managing a team of buyers for an import/export business. This new job pays her $6,000 per month gross and she will take home $3,660. Her medical insurance is paid, she has a company car, and she gets a company credit card so she can take clients out to eat many times a week. She will be able to travel the world all expenses paid.

Although Natasha is a few years away from launching her own company, she has started to prepare now and is investing $200 per month in her future business. This early investment in her business has included expenses like seminars, books, and networking with like-minded people on social networking sites.

Natasha’s Goal: To save $5,000 in 10 months without touching her current savings and without taking any money away from starting a business. She plans to spend $1,000 to rent out a nightclub and have a party for her and her 2 best friends who all have birthdays in the same month.

Income

$6,000 Gross PayFederal Tax (varies by income level) 25%State Tax (varies by state & income level) 6.35%FICA (Federal Insurance Contributions Act) 7.65%39 % goes to taxesTake Home Pay $3,660

Natasha’s Current Expenses

Housing $1,400Car (includes gas & insurance) $0Needs (electricity, phone, basic food) $800Clothes $0Entertainment $300Medical Insurance $0Toys $200Credit Card Debt $0Student Loan Debt $220Travel $0


Friends & Family $200Savings $190Giving Back $150Starting a Business $200Total Expense $3,260Take Home Income $3,660minus Total Expenses $3,260= Natasha has $400 left over each month and is investing in her business & sav-

ing $190 per month.

Discussions How does Natasha live?






Character: Ronnie Job: Sales Total Income: $1,500

Ronnie got into some trouble and has just been released from prison. Fortu-nately, his brother owns a company and pays Ronnie $1,500 a month cash under the table so no taxes are taken out. Business has been slowing down and Ronnie’s concerned about what might happen if it drops further.

Ronnie lives with his brother and tries to contribute what he can toward the groceries but is moving out at the end of the month. He is also doing a lot of vol-unteer work at nonprofits to build his resume for the future. Although he doesn’t have much free time he feels good that things are finally starting to fall into place for him.

Ronnie’s Goal: Ronnie’s trying to save $1,000 to pay a lawyer to get his record expunged and still owes the court $1,500 in reparations and court fees. He also wants to purchase a cheap car so he needs $2,500 to pay cash for it. He also wants to build up his emergency savings to $2,500 in case his brother’s work slows down. Ronnie wants to move out next month. Help him decide on the best choices (rent, car, needs, clothes, etc) he should make to be able to afford these other goals.

Income

$1,500 Gross PayTake-home Pay $1,500


Ronnie’s Current Expenses

Housing $0Car (includes gas & insurance) $0Needs (electricity, phone, basic food) $400Clothes $50Entertainment $0Medical Insurance $0Toys $0Credit Card Debt $0Student Loan Debt $200Travel $0Friends & Family $100Savings $0Giving Back $0Continuing education $0Total Expenses $750Take Home Income $1,500– minus total expense $750= Ronnie is able to save $750 per month this month but this will change once

he moves out.

Discussions How does Ronnie live?

Is he able to do everything he wants to?


Why does he miss out on fun with family & friends?

Does he have enough free time to experience life?

How would you describe his spending habits: Frugal Average Over spenderNotes:

Character: Maria Job: Business Owner Take-home Pay: $17,040

Maria started a catering company in high school and now she is making $24,000 per month. Because she is a business owner and has a good accountant, she legally pays less in taxes (only 29%) and brings home $17,040 each month.


She likes the finer things in life and her closet is filled with clothes she’s never worn. She is impulsive and does not plan for her purchases. If she likes it, she buys it—she never looks for sales or discounts. She often travels last-minute and pays a lot more because she doesn’t book tickets in advance.

Maria’s Goal: To get out of debt this year, have $10,000 saved for emergencies, and another $5,000 to invest in new equipment for her business. The new equipment will generate additional revenue of $2,400 per month.

Income

$24,000 Gross PayFederal Tax (varies by income level) 15%State Tax (varies by state & income level) 6.35 &FICA (Federal Insurance Contributions Act) 7.65%29 % goes to taxesTake Home Pay $17,040

Maria’s Current Expenses

Housing $3,600Car (includes gas & insurance) $1,250Needs (electricity, phone, basic food) $2,100Clothes $1,700Entertainment $2,700Medical Insurance $400Toys $2,800Credit Card Debt $35,600; minimum payments $712 ($35,600 at 22% = $3,471

payments per month to pay it off in 1 year) Student Loan Debt $700Travel $2,500Friends & Family $600Savings $0Giving Back $150Total Expenses $16,512Take-home Income $17,400– minus total expense $16,512= Maria has an extra $888 per month but she doesn’t know where that money

goes.


Discussions How does Maria live?






Expenses Money Coming In

Living Expense Current Goal Income Current Goal

Rent / Mortgage Employment

Taxes / Insurance Other

Utilities Other

Electric Other

Gas Total

Water / Garbage

Cable/Satellite Investment Income

Internet Rental Properties

Phone Stock Market

Renters Insurance Business

Other Other

Other Total

Total

Total Income

Travel Expenses

Car Payment Money for Savings

Insurance Long Term Savings

Registration Short Term ‘Fun’ Savings

Gas Charities

Maintenance Total

Other

Total

Variable Expenses Total Income

Groceries Total All Expenses

Clothes Total Savings

Personal Items Money Left Over

Personal Loans

Credit Card Payments

Entertainment

Eating Out

Other

Total

Total All Expenses


Can I Afford That (Part 1)

GoAl

I will buy a car in my lifetime, and knowing the right way to plan out a car purchase can save me a few grand plus help me avoid the embarrassment of getting my car repossessed.

Warm-Up Define “hidden costs” in your own words:

Remember – BBB. Budget Before Buying

Lesson Activity

My Income:

My Desired Car Payment:

Possible Hidden Costs:

The Car of My Dreams:

The Car I can afford:


New BMW Active Hybrid 750$106,000 and $10,600 down.

Monthly payment $2,380

Registration fee–$980 per yearTax–$8200 one time

Initial here to choose this car.

New Toyota Prius $21,000 and $2,100 down

Monthly payment $450

Registration fee–$325 per yearTax–$1,800 one time


Used 1984 Ford F250 XLT $150,000 miles in fair shape

$1,400 and must pay full amountPayment $0 Add $50 per month –

maintenance

Registration fee–$80 per yearTax–$120 one time.


New Infiniti FX 35 $42,000 and $4,200 down.

Monthly payment $920

Registration fee–$570 per yearTax–$3,700 one time


Used 2005 Chevrolet Tahoe 100,000 miles in good shape

$19,500 and $3,900 down Monthly payment $440

Registration fees $310 per yearTax–$1,700 one time


Used 1999 Honda Accord 150,000 miles in fair shape $7,900 and $2,400 down Monthly payment $150

Add $30 per month–maintenance

Registration fee $160 per yearTax–$690 one time


Questions What are all the costs associated with purchasing and owning a car?


Can I Afford That (Part 2)

GoAl

I will understand how to rent a place to save money and make things much easier.

Warm-Up What are five possible hid-den costs that you will incur from renting?

What are the potential hidden costs asso-ciated with renting a place?

Finding a Place to Rent

Budget first! Before you go out looking be sure you know what you can afford. Fill out the rental budget worksheet on this page to make sure you’re covered. Remember most places require a security deposit, first and last month’s rent.

❯ Understand if you’re ‘rent ready’. Is your credit good, do you have enough cash and do you have a good rental history? If not improve these areas before you move.

❯ Research and understand the area you want to move and visit it several different times before committing yourself. It is suggested that you drive by the area at night as well.

❯ Determine the features you need—carport, laundry room, bedroom and bathroom count are some of the things to consider.

❯ Locate. Talk with friends, search online, look in the newspaper, use Craig’s list, drive the areas and look for signs are all common ways to find a property.

❯ Contact etiquette. First impressions do count so be profes-sional, friendly and courteous. Fill out the application completely and make it easy to read.

❯ Inspect the property closely and take pictures of items that may need repair. This will help protect you if they try to charge you for the damages later.

❯ Understand what you are signing. Sometimes legal documents can be difficult to understand so take the time to read the lease carefully and highlight the important areas—understanding contracts is a skill you need , so get some practice now.

❯ If you are a qualified candidate, have acted professionally throughout and there are a lot of vacancies in the area–negotiate. Just saving $50 a month is $600 a year!


What steps can you take to ensure you locate a rental property that best meets your needs?

Questions

1. What is the definition of hidden costs?

2. Name five possible hidden costs you might incur when renting a house or apartment.

1.

2.

3.

4.

5.

3. Name three hidden costs associated with purchasing and owning a car.

1.

2.

3.

4. Which of the following is the first step you should take before renting an apart-ment or buying a car? a. Pick out the car or apartment of your dreams. b. Enter the purchase price or rent into your personal budget to calculate

whether you can afford it. c. Check into the cost of insurance.


5. Renter’s insurance is: a. Insurance that covers theft or damage of your personal belongings in a rental

property. b. Insurance that pays your rent if you lose your job. c. Insurance that covers you while you’re driving a rented car.

6. Which of the following is the best reason to buy a used car? a. Used cars are cheaper than new cars. b. You can buy a used car from a private party instead of from a dealer. c. New cars depreciate in value by 20-30% immediately after purchase.

Notes:

51

Accounts

Banks and Credit UnionsHow you manage your money today determines whether you achieve financial freedom tomorrow. Opening and maintaining the right bank accounts is a very important aspect of good money management.

The accounts you open with a bank or credit union are the backbone of your financial planning. Everyone needs checking and savings accounts. These accounts form the center of your financial structure, and all your money will transfer from these accounts to pay your bills and to fund your investments.

How Banks and Credit Unions WorkAs a business model, the banking concept is pretty simple. In short, banks use your money to make loans to other accountholders.

❖ Savers deposit money and earn interest. ❖ Borrowers borrow money and pay a higher interest rate to the bank, so the

bank makes money.

Banks make money by lending money to people at higher rates than they pay the people who deposit money. For example, you deposit money in a savings account and earn 2.25% interest. The bank can then lend money to other custom-ers at an interest return of 8%. The bank earns the difference.

The difference between a bank and a credit union is that a bank is for-profit. The income a bank makes is given to its stockholders and investors. A credit union, on the other hand, is not-for-profit. The members of a credit union are its owners, and any income the credit union makes is given back to the members.


Do You Need Checking and Savings Accounts?Yes. Here are several compelling reasons to open checking and savings accounts:

❖ Safety. Storing your money in a bank is safer than holding cash. Please note, you should still keep several months of cash safely hidden at your house as well.

❖ Interest. The bank pays you interest every month just for depositing your money there.

❖ Direct deposit. You can have your employer deposit your paycheck elec-tronically into your checking account.

❖ Organization. Bank accounts help you track spending, manage savings, and stay on target with your budget.

❖ Future. Building a relationship with a bank will pay off in the future as your banking needs increase.

How to Choose the Right Bank or Credit UnionIn order to decide which bank or credit union is right for you, consider your expec-tations and purposes for opening the accounts. Will your accounts be used for business, pleasure, savings, wage-depositing, or eventual loans?

First, choose a credit union that offers online banking. In today’s economy, you cannot do without this feature. Online banking allows you to check balances from the comfort of your home or office. You can pay all your monthly utilities, cell phone, and credit card bills electronically without ever writing a check.

Next, look at the costs. Financial institutions are competitive, so ask about and compare fees for opening and running an account. Many institutions charge fees for both checking and savings accounts. They also may charge separate fees for such things as:

❖ Receiving statements in the mail ❖ Online banking ❖ Multiple checkbooks

Finally, choose a bank or credit union that’s convenient to where you work or live. Since you can now access your accounts online or by phone, you can make many bank transactions without ever visiting the bank. However, you will want to check out the locations of your bank’s ATMs (Automatic Teller Machines).

Over time, build a long-term relationship with your chosen financial institu-tion. The longer you remain a good customer, the more benefits you’ll receive. As

Accounts 53

you build a banking relationship, the next time you need a car loan, investment account, student loan, or home loan you may find that the terms of those services improve along with the relationship.

If you had past problems with a bank or credit union, you may have trouble opening an account. Visit http://chexsys.tripod.com/goodbanks.html to see if there is a problem being reported. If so, use the form letter provided below to clear up your Chex Systems report.

Mail to: Chex Systems, Inc. 7805 Hudson Road, Suite 100 Woodbury, MN 55125

Your Full Name | Social Security Number | ID number (listed on ChexSys-tems Report) | Address Contact Number | Name of the bank you are disput-ing | Address | Account Number

This letter is about the issue with (account number, bank) which I dispute and I would like your help in clearing. I am disputing both the validity of the alleged debt and the validity of your report.

The Fair Debt Collection Practices Act requires evidence that has my signature and shows I have a contractual obligation to pay. As you are aware, any negative mark on my ChexSystems report for a debt I don’t owe is in violation of the Fair Credit Reporting Act (FCRA). Therefore please delete the entry in question.

My permission is required before you take any action that could negatively affect my rating with credit reporting agencies.

Full Name | Signature

Evaluating Account optionsA checking account is where most of your transactions will take place. This is the brain of your bank account and will handle most of your money’s “ins and outs.” For this reason, checking accounts pay little or no interest.

Savings accounts pay interest for each day you leave your money on deposit. These are the accounts where you deposit money for short-term and long-term savings. As the money in your accounts grows, the effect of compound interest begins working in your favor.


Once you have chosen the credit union or bank that best suits your needs, immediately open both a checking and a savings account. This is the first step toward getting your finances in professional order.

Your savings account is where you will keep your emergency fund—enough cash set aside to cover six months’ worth of expenses. Your long-term savings also will rest in your savings account before it’s moved into an investment.

You also want to have money set aside for fun. It helps to keep your fun fund separate from your long-term account (as long as the fees for having a separate savings account are minimal). Separating your savings by purpose lets you know exactly how much you have left over to spend on vacations, toys, and clothes for you and gifts for others.

Savings and checking accounts can be linked to allow easy money transfers between accounts. Ideally, set up your accounts to automatically transfer a set por-tion of your money each month from checking to savings. That way saving money becomes easy and automatic.

Keep on top of your account balances, so you know how much money you have available to spend at any time. In the past you may have seen someone balanc-ing a checkbook by hand; that’s what people had to do 40 years ago. In today’s age, online banking balances your accounts for you.

Use online banking features to write checks, pay bills, and transfer money. The system will do the math for you, but be sure never to spend more money than you have in the account. When you spend more money than you have, your account becomes overdrawn. Banks charge hefty fees for being overdrawn, so make sure you have enough money to cover your bills.

Bills

Employer Checking Savings Direct Deposit Paychecks

Auto Bill Pay

Auto Transfer Emergency – 6 months bills

Fun Money – life experiences Long-Term - retirement

Brokerage Account or Financial Planner

Auto Transfer Auto

Invested

Invested

Accounts 55

There’s no time like the present to get in the habit of keeping your finances organized and paying your bills on time. Using automatic online bill pay makes banking a breeze. The bank automatically sends a check for you, each month, for a given amount and on the date you choose.

Online bill pay has many advantages:

❖ Professionalism. The checks are typed out by the bank, instead of hand-written. ❖ Timeliness. Payments are sent like clockwork. ❖ Accuracy. The bank keeps accurate records and up-to-the-minute reporting. ❖ Time-saving. Your accounts are balanced automatically, which saves you time.

Check your bank statement every month. Just one mistake—by the bank, by you, or by a third party—might cost you hundreds of dollars or more! The sooner you catch mistakes, the easier they are to fix. In cases of fraud, identifying the fraudulent charges early saves you money too.

Developing a long-term bank relationship and using the latest online technol-ogy lets you handle your banking in a businesslike manner. Your bills will be paid on time with little effort. Your accounts will be automatically balanced and your outgoing checks will look professional.

Debit CardsA debit card works like a plastic check. Just like when a check clears, using your debit card deducts money automatically from your checking account. The money is automatically withdrawn at the time of the transaction—unlike a credit card, where the charge is placed on a bill that you’re asked to pay later.

Your bank or credit union can issue you a debit card. Debit cards from a bank have one drawback: you can be charged over-limit fees if your purchases exceed the amount in your checking account.

Private organizations also issue debit cards, which can be a great way to start out. Private debit cards require cash deposits that are applied to the card, so the card would be denied if you tried to make purchases beyond the amount of your deposit. Private debit cards let you learn how to use your “plastic” without worry-ing about incurring over-limit fees.

In summary, opening and automating your accounts is the first step toward building a financial foundation. Find a credit union or bank with which you can grow over time. Look for one that offers the services you need now, as well as those you may need in the future. Be a good customer and grow with your bank. As that relationship grows, so will the benefits you receive.


Banking Essentials

GoAl

I don’t want to spend hours a month opening bills, writing checks, balancing a checkbook, addressing envelopes, licking envelopes and bringing them down to the mail box. That’s why I automated my finances so I just check my online bank once a month and I’m done.

How do banks and credit unions make money?

Why do you want to open an account with a bank or credit union?

What is the difference between a checking and savings account?

What are the benefits you can experience by setting up the AutoX system?

Accounts 57

Write down the steps you need to take to set up the AutoX system for the given examples:

Step 1:

Step 2:

Step 3:

Step 4:

Step 5:

Questions

1. What is the difference between a bank and a credit union?

2. Name three reasons why opening checking and savings accounts is a good idea.

1.

2.

3.

3. What is the first, most important feature to look for in choosing a bank or credit union in today’s age? a. Someone you know works there. b. Online banking feature. c. Lots of ATMs around town. d. There’s a branch close to where you work.


4. How often should you use online banking to check your accounts? a. Daily b. At least once a month c. Every other week d. Twice a year

5. Building a positive long-term relationship with a bank or credit union can save you money on future loans and investments.

True

False

6. What happens if you use your debit card to spend more money than you have in your checking account? a. You may be charged an over-limit fee. b. Nothing. Debits are covered by the bank. c. A bank representative will call you.

59

Credit and Credit History

No discussion about money management is complete without addressing credit cards, loans and debt. If you take a few lessons away from this chapter, they should be to avoid or eliminate credit card debt and plan ahead before applying for loans.

Using a credit card is basically the same as a loan. The credit card company lends you money and charges you fees (interest) to borrow their money. The inter-est rate is determined from your credit history (your past record of paying bills and handling credit). For instance, let’s say you borrow $1,000 and your interest rate is 25%. If you don’t pay the loan off until a year later, you would owe $1,250.

It’s all about convenienceCredit cards are convenient; most businesses accept them and they’re easier to carry than cash. Credit cards can be a handy tool for purchasing clothes and groceries as long as you pay the bills in full each month. Avoid carrying the costs and paying sizable interest fees. When faced with an emotional or impulse purchase, pulling out the plastic can be far too easy to do. If money is tight, it’s easy to talk yourself into thinking “charging it” is no big deal. But if you don’t take spending seriously, receiving that credit card bill can be a painful experience.

A new pair of shoes that were on sale at a great price = $68

A friend came in town for the weekend and you had no cash = $75

A dinner out with the family = $48

While those expenses might not seem large individually, together they total $191. If you don’t have the money this month, how can you expect to have enough to pay off the bill when it arrives next month? And if you don’t pay it off in full, the credit card company will start adding finance charges. The longer you carry a bal-ance, the farther down you get toward spiraling out of control. Use an online ‘debt payoff calculator’ to illustrate how fast credit card debt can multiply.


Be a bad customerThe best way to manage a credit card is to be the company’s worst customer. Credit card companies make their money when customers carry a balance from month to month. Plan and budget for your purchases properly so you can pay your credit card bills in full each month.

Carrying a small debt for two, maybe three months is not ideal, but is not the end of the world. If you start carrying balances longer than three months, that can be a good indicator that you’re developing a debt management problem.

“Cut it out”If you can’t handle credit card debt, you need to literally “cut it out”—snip your plastic cards into pieces before you get into real trouble!

Whether your balance is $300 or $3,000, at 24% interest, the interest is work-ing against you—undercutting your financial freedom. Trouble typically begins when people make common mistakes with credit cards:

❖ Disorganized bill-paying (common late fees are $35 or more) ❖ Paying only the minimum payment. ❖ Not having a budget in place. ❖ Lacking financial and savings goals. ❖ Overspending. ❖ Not understanding how to most effectively pay off debt.

Credit cards do have advantagesIf you understand the dangers of using credit cards, you can learn how to use them to your advantage. For instance, traveling with a credit card is much safer than carrying a pocketful of cash. Credit cards allow you to rent cars easily and, in an emergency, a credit card can be a lifesaver.

However, it is suggested that you decide not to apply for a credit card until you have your emergency fund in place. Before you put credit cards to work for you, you must prove to yourself that you can live successfully within a budget.

When you have no credit history, a good option is to get a secured credit card. Secured cards often have high interest rates, but they do offer you the convenience of a credit card while you work on building a credit history.

How do secured cards work? You secure the card by depositing cash in the credit card company’s bank. This balance you cannot touch unless you chose to

Credit and Credit History 61

close your credit card. Your cash deposit serves much like collateral for a loan. For example, deposit $300 with the credit card company and you’ll be approved for a $300 limit on the credit card. If you decide to close the card, you receive your initial $300 back. And after you have established a proven track record of managing the card, you can apply for an unsecured card (one that does not require a cash deposit as collateral).

Your first step should be to use a credit card each month and pay off the bal-ance in full. After as little as six months, you will have begun building a solid credit history. Note that you do not need to carry a balance to build a credit history. Use the card, pay off the balance each month, and pay on time: that’s how you build a positive credit history.

Of course, as you build your credit status, credit card offers will begin flooding your mailbox. Credit card offers vary wildly, so read them carefully. Just because they send you a “pre-approved” application with a huge credit limit doesn’t mean you should apply.

Credit or debit card, can you spot the difference?A debit card attached to your bank account looks a lot like a credit card, but debit cards withdraw existing money from a checking and/or savings account .

In effect, using a debit card is like writing a paperless check . When you use a debit card at an ATM or in a store to make a purchase, money is immediately withdrawn from your account (unlike a credit card, where that money is lent to you on “credit”) .

You cannot use a debit card to withdraw more money than you have in the account . So debit cards offer the convenience of not carrying cash, but only allow you to spend money you actually have .

With the convenience of debit comes a word of caution: If you don’t carefully track your account balance and purchases, it can be easy to overdraw your account .

Debit cards do not offer the same protection as credit cards . Some credit card companies offer debit cards with some protection; but most debit cards are just the same as writing a check . If you fail to report any fraudulent charges within 60 days of receiving your bank statement, your losses could be astronomical .

Be sure to understand the details when you sign up for a debit card . Debit card use fees and fees incurred when withdrawing money from an ATM not owned by your bank represent the hidden costs of a checking account . Ask plenty of questions when you sit down with your bank representative . Understand all the potential fees so you’re in the know .


Minimum paymentsYou may think it’s OK to pay just the minimum payment the credit card company calculates for you. That’s a common misunderstanding. In fact, the minimum pay-ment just represents the minimum amount that will keep your account active. It’s not enough to actually retire the debt in a reasonable time. Here’s an example:

Let’s say you sign up for a credit card with a low limit. You handled your credit card responsibly so the company quickly raises your credit limit to $1,500. You decide it would make your life easier if you purchased a more reliable car; you find a used car for $1,800 with body damage but it runs great. To avoid emptying your savings account, you decide to pay $500 in cash and put the $1,300 balance on the credit card. Although your credit limit will now be maxed, you really want the car.

You receive the first credit card bill and see that your minimum payment is $33; your interest rate is 24%. Take a look at what happens if you pay only the minimum.

It will take you six years and eight months to pay off the debt, and it will cost you:

$1,300 for the original debt +$1,340 in interest $2,640 Total

See how much that great, unbeatable deal cost you? The car probably won’t be around in six years—but the debt will.

So what happens if you commit to $100 a month instead of just making the minimum payment? It will take 16 months to retire your debt and it will cost:

$1,300 for the original debt +$300 in interest $1,600 Total

So what happens if you make the purchase with cash?

Purchases $1,800Amount needed to save monthly $150Months to save up $1,000 12 monthsInterest earned on money in savings $30Actual Cost $1,770

This scenario looks a whole lot better, but you still paid an extra $300 for the car. And if you continue using the card before the balance is paid off, it’ll take even longer.


Already in debtIf you’re already in credit card debt, it’s not the end of the world; you’ll just need some added dedication to get yourself out of the hole. The key to getting out of credit card debt is to prioritize payments.

Call each credit card company to which you owe money. Find out the interest rates they’re charging you and ask about any promotional rates for which you may be approved. Once you have the rates you’re paying to each credit card company, organize a payment structure.

Pay just the minimum payment on all credit cards except the one with the highest interest rate. Put all your payment money toward paying the highest-rate credit card down first. Once the high-rate card is paid off, begin paying down the one with the next-highest rate. Keep up the plan until all your cards are paid off. Following this payment structure will save you a lot in interest.

For those of you who are in a substantial amount of debt—that is, your debt exceeds several years of future income—talk to a credit counselor and/or a lawyer. In cases of extreme debt, it may be a good idea to negotiate with your creditors or look into bankruptcy. While either option will destroy your credit for 10 years, these extreme measures may offer the best solutions if you honestly have no way to pay the debt.

Most people today use credit cards for the wrong reason, and major trouble is the result. Credit cards should be viewed only as a great tool to build credit. If you use credit cards only for that purpose, you’ll avoid a lot of stress and worry.


What is Credit?

GoAl

I want to know about credit because I need credit to buy a car, to qualify for loans and to buy a home.

Warm- Up Why is building a good credit history important to you?

What is your credit report?

List an example of a good credit score:

List an example of a bad credit score:

List ways your credit history impacts your finances:

Tips to Getting or Keeping Great Credit:

❯ Pay your bills on time. Setting up automatic bill pay through your bank will make this easy.

❯ Keep your debt low. You’ll have better credit and avoid extra interest payments.

❯ Build and maintain a good credit rating. You must prove to the credit bureaus that you have the ability to pay back money you borrow.

❯ Protect against identity theft. Review your credit one a year for free at annualcreditreport.com.

❯ Have health and auto insurance! One of the biggest causes of bankruptcy is medical bills; so avoid that situation by making sure you have enough coverage.


What factors to credit bureaus consider when giving you a credit score?

Credit History

GoAl

I will have good credit because I realize it can save me over $100,000 (equal to about 4 years of work, if you’re making $20 an hour) in my lifetime.

Do you think that people are more likely to buy something they do not need when they use a credit card?

What doors does having good credit his-tory open?

What doors does having bad credit history close?


What will I do to build and/or improve my credit score?

What safety measures should you have in place prior to getting a credit card?

How to get out of credit card debt1. Contact all your creditors and ask them for your:

❖ Current interest rate ❖ How much you owe ❖ Minimum payment ❖ If they can reduce your interest rate or any specials they may have.

2. List your debt on a spreadsheet with the highest interest rate credit card listed first.

3. Pay the maximum amount on your highest rate credit card and make the mini-mum payment on the credit cards with the lower interest rate.

4. Once the highest rate credit card is paid off then start work on the next card with the highest interest rate and continue to make minimum payments on lower rate cards.

5. Just this tip can save you 3 to12 years of extra payments.

Creditor Name Interest Rate Amount OwedMinimum Payment

Visa 27% $567 $20

Mastercard 24% $2,245 $32

Discover 22% 8,967 $149

Diner Club 19% $324 $20

In the example shown above, if you had $400 dollars to spend on your credit card payments you would pay $20 to Diners Club, $149 to Discover and $32 to MasterCard. This would cover the minimum payment amount.


On the Visa you would pay the maximum possible, which in this example is $199 after all the other minimum payments are made. You could pay off this credit card in 3 months then start paying your MasterCard.

Steps to getting an ‘A’ credit rating . ❯ Get a complimentary copy of your credit report. ❯ Identify the areas you need to work on and create a credit plan to address those areas.

❯ If you’re already in debt, create a debt reduction/debt payoff plan. ❯ If you don’t have a credit history yet, first save 6 months’ worth of your bills, have a working budget, and have

the ability to control your spending. Then get a credit card, use it each month and pay it back in full each and every month.

❯ Set up the Auto X system so your bills are automatically paid on time. ❯ Review your medical and auto insurance to ensure that you have adequate protection in place in case something

happens. ❯ Review your credit report annually and three months prior to any major purchase.

❯ Consider signing up for credit protection plans. ❯ Build up your available credit over time and keep your debt load to a minimum. ❯ Limit inquiries—don’t have your credit report run too often—and be aware and conscientious about things that

might impact your credit rating.

Questions

1. What are three ways that having a good credit score can help you achieve your financial goals?

1.

2.

3.

2. How is a credit score similar to a school report card?

3. How much money can a good credit history save you over the course of your lifetime?


4. A credit score of 550 is better than a credit score of 720.

True

False

5. Which of the following are likely to be affected by your credit rating? a. Interest rates you pay on car loans. b. Your ability to get a job. c. Your qualification for a home loan. d. Approval of your application to rent an apartment. e. All of the above.

6. Identity theft has an impact on your credit rating.

True

False

7. Which of the following are the two most important ways to get and keep good credit? a. Check your credit scores annually and shred all your important papers. b. Have lots of credit cards and use them to pay your rent. c. Apply for loans often and report fraudulent charges to your bank. d. Pay your bills on time and keep your debt low.

8. Name three other steps you can take to maintain a good credit score.

1.

2.

3.

69

Qualifying for Loans

How to Qualify for loansThe key to qualifying for any type of loan is preparation. This brief article describes the four areas on which you need to focus in order to qualify for a loan. This infor-mation applies to qualifying for home and car loans.

Lenders look at four areas to determine whether you qualify for a home loan:

1. Credit – Credit is the first thing a potential lender will look at to qualify a loan applicant. Maintain an excellent credit status, and qualifying for any type of loan becomes much easier.

2. Collateral– At the time of a home purchase, equity is equal to the amount of money you offer as a down payment on the property. So if you put 10% down, you have 10% equity. The more you put down, the easier it is to qualify for a loan.

3. Assets–Lenders want to see that you have money in your savings, checking or investment account so you are able to cover payments in case of an unexpected event occurs (job loss, medical bills, etc). It is suggested that you have at least six months of payments set aside, in addition to the down payment, before you upgrade your car or invest in real estate.

4. 4. Debt to income ratio – To further determine their risk of lending to you, lenders will assess your amount of debt relative to your income. A low debt-to-income ratio shows that you have the ability to afford monthly loan payments. If you earn $2,000 per month and your want to purchase a car that has a $1,000 monthly payment, that doesn’t look good. The lender will be thinking,


“How can this person afford to pay me?” That’s why you make a sensible budget plan: to avoid getting into indebted situations beyond your means.

Having a low debt-to-income ratio lowers your personal risk on a property investment. Carefully consider your comfort level with the mortgage payments prior to making any investment decision.

For highly-qualified home loan applicants, the loan process becomes much easier. Good credit and low debt make it easy to save hundreds of thousands of dollars off your home, because you’ll qualify for the best interest rates. The better you perform in the four areas outlined above, the lower your payments are likely to be. Be prepared and save money!

Understanding the basics of loans, debt and money management can save you a lot of money overtime. Be sure to keep focused on your goals and overcome any short-term setback while keeping the stress levels as low as possible.

Lending Money to FriendsMoney shouldn’t—but often does—come between friends and family . As a general rule, you should only lend money to loved ones if you do not expect it back . Money is not worth losing friends over; protect your friendships by outlining the details of the loan in writing . Avoid any misunderstandings later on .

Many times when friends need money it is due to poor money management . Of course, emergencies do occur and you may want to treat emergency situations differ-ently . But if your friends already are unable to pay their bills, there’s a good chance they won’t be able to pay you either .

If you want to help out a friend but can’t afford to lose the money, take some form of security as collateral . Hold your friend’s car, watch, or something else of value . That will help motivate your friend or relative to pay you back .

Qualifying for Loans 71

Car Loans

GoAl

I probably will buy a few cars in my lifetime and getting a bad car loan can cost me $10,000 extra dollars in loan payments. I would rather do something else with $10k so it s good for me to figure out how to qualify for the best car loan.

Warm-Up What are potential benefits and drawbacks of getting a car loan?

How can having a good credit score benefit you when purchasing a car?

How can having a bad credit score impact you when you try to purchase a car?


Loan Manager

GoAl

I will develop an understanding of how lenders qualify an applicant for a loan because the more I know the more money I can keep in my pocket.

Warm-Up What are some things you think that a loan manger may look at to approve you for a loan?

Lesson Activity

You received a thousand dollar check and…. ❖ Your friend Tom had his car break down and he needs to buy a car quickly to get to

work. He needs to borrow $900 for the full down payment. Do you lend it to him? ❯ Collateral – Minimal, he only has $200 for a down payment. ❯ Credit – He doesn’t have any credit history. ❯ Income – Tom is making $1,000 per month. ❯ Debt – His total debt is $1,400 on credit cards. ❯ His total monthly payments between debt, rent and insurance comes to $800 per month

❯ Assets – $200 in a savings account. ❯ Overall – Tom has a spotty job history and he has jumped fields several times—cashier, salesperson, stylist and pet groomer.


Would you let Tim borrow money? Why?

❖ Samantha is trying to move to college but her student loan has been delayed. She needs $900

❯ Collateral – No collateral ❯ Credit – Good but a short history. She has a few credit cards for the last year and has always paid them back in full and on time.

❯ Income – Samantha makes $1,200 a month ❯ Debt – $0 now but she is requesting $5000 loan for this year in college. ❯ Her other expenses: rent, insurance and cell phone total $450 per month. ❯ Assets – She has saved $2000 from holiday and birthday money and put it in a CD to earn higher interest rather than her savings account. The only problem is that she cannot remove the money for another 6 months due to account restrictions.

❯ Overall – She has been working for a marketing company for the last 2 years and is studying event promotion in college.

Would you let Samantha borrow money? Why?

If you decided not to loan Tom or Samantha money, what would you need to get from him and/or her to lend them money?


Financing Real Estate

GoAl

I want to buy a home one day and the earlier I know how to qualify for a real estate loan the sooner I can start to prepare.

Warm-Up What are three things that you know about purchasing a home?

How Lenders Qualify You for a Loan .

❯ Credit is the first thing most lenders look at. You can qualify for loans with poor credit however you’ll be paying a higher interest rate which means higher payments.

❯ Debt to Income ratio. Lenders look at how much money you make compared to the bills you have. They want to make sure you make enough money to make all your monthly payments and have money left over.

❯ Liquid Assets are defined as money that is readily available – like money in your savings or checking account. To qualify for some loans, like an auto or home loan, many lenders want to make sure you have liquid assets available to cover a few months of payments.

❯ Equity (aka Collateral) is loosely defined as how much of your own money you have invested. For example the more money you put down on a car loan the easier it will be to qualify.


Preparing to Buy a Home:

Steps What I can todayWhat I need to do

in the futureTo buy a home I should have at least 10% of the purchase price as a down payment .

I need to have a good credit score .

I need to know about the different types of loans there are .

I need to have at least 6 months expenses in the bank for emergencies .

Essential Questions

What should you consider before buying a home?

What are 4 areas lenders look at when qualifying you for a loan?


Questions

1. How does understanding the loan qualification process save you money?

2. Which of the following loans is a good debt? a. A loan from a family member. b. A loan for something that’s likely to go up (appreciate) in value. c. A loan for something that’s likely to go down (depreciate) in value.

3. Which of the following loans is a bad debt? a. A loan from a family member. b. A loan for something that’s likely to go up (appreciate) in value. c. A loan for something that’s likely to go down (depreciate) in value.

4. The best first step to take when preparing to buy real estate is: a. Apply for a home loan. b. Shop around for a good real estate agent. c. Plug some figures into your personal budget to determine how much house

payment you can afford.

5. Name the five financial areas a loan manager will examine to decide whether you qualify for a home loan.

1.

2.

3.

4.

5.

6. Your debt-to-income ratio is one way to measure your: a. Equity b. Payment c. Risk


7. What is the minimum most lenders want you to have in liquid assets before they approve your home loan? a. Three months of payments b. Eight months of payments c. $5,000

8. Name two ways choosing a good car loan can save you money.

1.

2.

9. What is the definition of an upside-down car loan? a. A loan that finances only the car’s chassis, not the engine. b. A loan where the interest rate is higher than the payment. c. A loan where you owe more than the value of the car.

10. Why is an upside-down loan the worst kind of car loan? a. You end up paying more for the car. b. You’ll have to pay the amount you’re short when you go to buy a new car. c. Your car will have less trade value when you go to buy a new car. d. All of the above.

11. What are the three financial areas a car lender looks at to determine whether you qualify for a loan?

1.

2.

3.

12. When buying your first car, the best loan term to choose would be: a. Three years b. Five years c. Seven years

13. Having a car repossessed is no big deal; you can just get another car loan right away to buy a new car.

True

False


14. If you get an auto loan to finance a car purchase, how much insurance coverage do you need? a. Liability coverage only b. Liability plus collision coverage c. Full coverage

79

Skills and Income

You are in the business of YOU. The new way to handle money shows us that your job will determine your interests, expand your social network, and give you life experi-ence. Most importantly, jobs help us build skills so we can continue to increase our earnings.

We all need income. Without work, many of us would be broke and homeless! Yet still the terms “work” and “job” are associated with being bossed around for a wage. In reality—while these things can be true—work also can be rewarding, fun, and a great way to meet people. If you follow the lessons taught in this chapter, you’ll have all the tools you need to get the job you really want.

Starting out in the world of work is the time to pay some dues, build an employment history, learn to work with a supervisor, and develop good work hab-its. Remember, too, that you’re gaining experience and making contacts that will be useful in the future.

If you want to find a job that fits your goals, you can make a good start by answering these questions:

❖ What are your interests? ❖ What do you think you want to do in the future? ❖ How much money do you need to earn?

What if I have interests, but have no idea what I want in a career? Focus on the job interests you have now. Those interests probably will change and evolve over time. But it’s fine just to think about a potential line of employment that’ll give you enough money to pay your bills while setting aside money for investing and for financial emergencies. Your goal is to get a job that pays you enough to live now and that matches your current and future interests.


Search and Employ Start your job search by talking to everyone you know—parents, relatives, teachers, friends—and asking if they have any contacts. Give each of them a copy of your resume. This is basic networking, and networking is always the best way to get a job.

In addition to networking:

❖ Read the paper. Check out the classified ads for listings. ❖ Get online. The Internet is quickly becoming the best source for job postings. ❖ Hit the pavement. Get out in your community and visit places where you’d

like to work.

What Employers Want No matter the job—waiter, retail clerk, or administrative assistant—employers gen-erally look for the same traits in each person they hire:

❖ Motivation! The energy and desire to get things done. ❖ Punctuality. Proven ability to arrive on time and work your full shift. ❖ Positive attitude. Employers like to see positivity even when the going is tough. ❖ Sociability. The ability to get along with your co-workers and customers. ❖ Strengths. We all have areas where we excel and areas where we’re a little

weaker. Your strengths get you paid, so know and build on them. ❖ A good investment. Your employer might be paying you, but at the end

of the day, job skills you learn are part of the company investing time and money in YOU. Be a good investment!

The Application Filling out a job application can be tedious, but it’s important. Employers use these forms to gather enough basic information to determine whom to interview. This is especially true for entry-level positions.

Often you’ll be asked to fill out the application at the employer’s office. Be sure to have everything with you that you need:

❖ Resume ❖ Social security card ❖ Driver’s license or state ID ❖ Contact information for at least three references ❖ A completed sample application to help you fill out all the questions fully

Skills and Income 81

Read the entire application first so you understand how it’s organized. Fol-low the directions carefully. Today many employers use online applications, which make it easier to correct mistakes. Even so, try to read the questions twice and answer once, correctly.

Remember:

❖ Fill in every question, or risk your application being considered incomplete and discarded.

❖ Be consistent with the information on your resume. ❖ Don’t leave anything blank. If a question doesn’t apply to you; for example:

How many kids do you have? Respond “not applicable” or “n/a.” ❖ Do not write “see resume,” but certainly attach a copy. ❖ Proofread the application before you submit it. Look for misspellings,

errors, and illegibility. Being neat counts! ❖ Above all else, be truthful. Embellishing on the facts or making up lies

about interning for Donald Trump will mean a short-lived job, one way or another. Every liar eventually gets caught. Misrepresentation could send out red flags for the rest of your career.

❖ If you do have something questionable in your past, be ready to explain. If you were fired from your last job as a burger flipper, you could write “job ended.” Focus on your strengths instead of your shortcomings.

ReferencesMake sure you ask permission before you list anyone as a reference. Give your references a heads-up that potential employers may call them, and brief them on what you’d like them to say about you.

Your contact information–voicemail and email. I can’t say it too often: first impressions count. Get that rap song off your cell phone voicemail message. Change it to a professional-sounding message. Speak clearly and be upbeat. And if your email address is an inappropriate name, change it. Change [email protected] to something more professional like [email protected].

A Great Resume One invaluable tool will help you seal the deal on your first employment gig—a killer resume. Remember, a resume is a marketing piece. Here are some tips for maximizing your resume’s impact:


❖ List accomplishments at your past jobs, rather than responsibilities. ❖ Don’t list hobbies unless they’re relevant to the job objective. ❖ Don’t include religious or ethnic affiliations unless they’re relevant to the

job. Including them can invite pre-interview discrimination. ❖ Keep it short and simple. Unless you’re trying to get a job as a graphic

artist, don’t use any weird paper or pretentious brochures. ❖ If you have little or no job experience, list volunteer work. If you have gaps

in your work history, include unpaid volunteer work and self-employment. ❖ If a prior job title doesn’t convey all your responsibilities, list the employer’s

job title and then add your description. For example: Store Clerk (Cus-tomer Service Representative).

InterviewingThe interview process makes many people a bit nervous however by knowing some basic tips you will be confident and prepared to get the job you want. Most impor-tantly by making a good impression at the interview you are more likely to receive higher pay.

Getting ready for the interview:

❖ Do your homework. Gather information about the company. If it’s a com-pany you really want to work for, go the extra mile to learn as much as you can. Here are some things you might look for:

❖ Mission statement – defines the core purpose of the organization. Look for it in the “About Us” section.

❖ Area of expertise – do they have a special product or unique service method?

❖ Recent positive news about the company – if the company just expanded into a new state, you might ask; “What effect will the expansion of XYZ Corp into Arizona have on my potential for working up to a higher position?”

Write down what you think you can bring to this employer, not the other way around. Take your research and boil it down to three key attributes that you want to get across to the employer.

Presentation tips:

Grooming! Yes, that means brushing your hair and teeth, and even ironing your shirt! If you don’t take time to dress right, you send the message that the job is not that important to you. If you’re unsure what to wear, call the Human Resources department before your interview. Most companies have rules or guidelines for


their staff. And when you stop in to pick up an application, take note of what the receptionist and other employees are wearing.

Before your interview:

Before you enter the interview, build up your confidence and get into a positive state of mind. Most people are nervous before interviews, but follow these sugges-tions and you will be confident, have fun, and land that job!

Deep breaths: Reeelaaaax. Start by thanking the interviewer for taking time to meet you. It’s natural to be a bit anxious about an interview. Relax yourself and remember to listen carefully.

Be yourself. Of course you want to be on your best behavior; but there’s no point in hiring a fictional person. Act the same way you would act if you were in the position.

Calm your nerves. Remember, this is just an interview. The worst that can happen is that you don’t get hired.

Review the job posting and your company research. Know what the company is looking for and some basic information about the company.

Practice out loud. Go over your stories and the points you want to get across to the employer.

Pump yourself up! You are the right candidate for the job. They can’t do any better than you.

Keep your eye on the prize. Look the interviewer in the eye, which is hard to do when you’re feeling nervous. One trick is to slowly look from the person’s right eye to left eye, then to the mouth, in a triangle pattern.

Body language speaks volumes. Did you realize that over 50% of the impres-sion you give comes from your body language? Your words and tone account for the other 50%. Smile and shake hands firmly, even if you’re nervous. Keep your back and shoulders straight and don’t slouch in your seat. This helps keep your nerves and breathing steady.

Conversation counts. The interviewer is looking for someone whom he or she believes can fulfill the job requirements and fit in with the company. Have fun, enjoy the conversation, and try to find things you can both talk about in a relaxed way. Is there anything on the interviewer’s desk that interests you? That could be a perfect conversation starter.


Be truthful. Interviewers often will ask questions about how any previous jobs ended; be prepared to answer carefully and truthfully. For instance, if you were fired from a fast food job, you might say, “My boss and I decided that I would be better suited to a different career, since I am very interested in work-ing in an office environment.”

Follow-up:

Everything you’ve learned up to this point will give you the edge when applying for a job. Follow-up is the last part of the edge equation. After your interview, drop off a thank-you card.

Be well-prepared for interviews and present yourself appropriately before, during, and after. With some practice you will find that you get offered most of the jobs that you apply for, and can pick the job that you like the most.

How to Evaluate Job opportunitiesOnce you receive a few job offers, it’s time to compare your employment opportu-nities. Consider the following criteria to help make a decision:

❖ Passion – is this a job you feel passionate about? If not, will it help you build the skills and connections to get you the job you really want?

❖ Environment – before deciding on a specific job, go in and check out the work environment. Do you like the people? The boss?

❖ Pay – Is the pay enough to keep you on budget? ❖ Schedule – Can this job accommodate your schedule? ❖ Insurance – Medical and dental insurance are benefits you definitely need. ❖ Distance to travel to work – Choose a job within an acceptable distance to

you. ❖ Vacation time – Work hard; play harder. How much vacation time does the

employer give you?

Evaluating these key areas helps you select the best job for you and your life-style, one you hope may lead to a longer-term career opportunity.

Build Respectful RelationshipsYou will learn something at every job you hold—new skills or self-discoveries.

Be on time, be positive, and go the extra mile. Learn all you can; over-deliver. Build a good reputation by showing initiative. People will feel comfortable recommending you to another employer, or you might even receive a promotion and a pay raise!


Sometimes, though, you may encounter problems that make you want to quit. Some problems have nothing to do with the job itself—rude or inappropriate bosses, for example. Taking direction with respect is a key to successfully navigat-ing the world of work, but this can be difficult if your boss is a nightmare to work with. It can happen.

If you have a problem with your boss, ask for a private meeting to discuss your grievance. Set the meeting at a future date so you have time to remove your emotions from the conversation. Take a hard look at yourself: “Could I have done something, even unintentionally, to provoke the situation?” There are always two sides to a work relationship. You may learn something about your behavior or work habits that needs to change. Or your boss might be having personal issues that are interfering with work.

Or maybe your boss is just a jerk. Depending on the problem, you may be able to talk about your situation with Human Resources. Use this resource if you need it.

If you treat your boss with respect and handle your duties responsibly, you will be well-respected at work. Mutual respect creates the foundation for promotions and pay raises. You know what you’re worth to the company, and you’re compen-sated fairly.

You’re Worth It! So you’ve been employed for a while; you feel you’re pulling your weight, increasing sales or improving services. Do you think you should be making a bit more money? If so, do some research about pay rates in your industry. If you excel at your job and know your employer likes your performance, use it to your advantage.

Always know your worth. Are there other, similar jobs with employers that have a better, more productive environment? How do their pay and benefits com-pare to your current job?

If you find another job that pays more or offers better benefits, you may con-sider changing jobs. You may also consider asking your boss for a raise. Be sure to plan ahead of time and be prepared.

Most people are afraid to ask for a raise; they might not get the raise and could ruin the relationship. But if you don’t ask, you don’t get. Plus asking for a well-deserved raise often lets you call the shots. If you’re a good worker your boss may fear losing you. Even if they can’t afford to give you a raise, they may find other ways to increase your compensation.

Know when to ask. If the company is experiencing cutbacks or slow sales, that’s not the time. Plan strategically when to ask your boss for a raise. Good times


include during your review, when your employer is short staffed or when you are recognized for excellent performance.

Ask for a private meeting and sell yourself. Share how you exceed your job expectations, how you’re an asset to the company, and how your current salary and benefits package compares to other jobs you evaluated. If your boss turns down your request, find out what you need to improve in order to get a raise.

Remember to always be true to yourself, family, community, and friends first. A job is a job. Show your loyalty by working hard, but never stay with an employer who isn’t holding up their end of the agreement by offering fair compensation, a good work environment, and opportunity for personal growth.

Understanding Your PaycheckYou scored a job you like, and at last you’ve received your first paycheck. When you first enter the job world, understanding how your net pay is calculated can be confusing. Most young adults can expect to keep about 60-70% of their paychecks. Deductions include:

Statutory DeductionsSocial Security, income tax withholding, and other deductions required by law

are automatically deducted from your gross pay. Other deductions are voluntary.

BenefitsEmployers offer a compensation package of which salary is a part. In addition

to pay for work, your employer incurs other costs in hiring you. Many employers list these expenses as benefits.

Vacation PaySome companies let you negotiate more vacation days in lieu of additional

salary. Paying you for time away from the job and shifting schedules to cover your absence has a cost, but more progressive employers will consider this as an option.

Health InsuranceMost people obtain health insurance through their employers. Dental, life, and

disability insurance often are included in a group plan. Having health insurance is vital. One of the leading causes of bankruptcy occurs when people with no health insurance need medical attention. Medical bills can add up quickly; something as simple as a broken arm can cost up to $10,000 without medical coverage. Make sure you’re protected.


Dental insuranceDental is not always included in group policies, but if it is offered, the premi-

ums can be small if you go to a dentist in the plan.

Life and Disability InsurancePremiums for term life insurance and disability are fairly inexpensive, and

many employers cover these lesser premiums.

Disability income insuranceMany people overlook disability insurance. Death may seem unlikely (fingers

crossed!), but the chance of becoming disabled—that is, unable to work for an extended time—is greater than most people realize.

Getting More EducationOn average, people who graduate from college earn more than those who do not. A college degree can make you hundreds of thousands of dollars over your lifetime.

A college degree increases your knowledge, and you can’t put a price tag on knowledge. Continue to learn and grow throughout your lifetime. In our age, things are changing faster than ever before in history. You must continue gaining the skills you need to achieve your dreams.

Statistics show that you can earn $9,000+ more per year (on average) by get-ting a Master’s degree. Let’s say it will cost you $70,000 to get your Master’s degree and you can complete it in three years. You would give up a total of $208,900 if you attain your Master’s instead of working for those three years:

Three years of work at $46,300 = $138,900Cost of graduate program = + 70,000

Total cost = $208,900

Many companies help their employees pay for higher education. If you want to pursue your Master’s or Ph.D., working for a company that helps offset the costs may benefit you. Explore all financial aid options before you make your decision; a lot of aid and scholarships are available to people who understand the system.

Before you decide to work toward a higher degree, take into account the time and cost to pay off the extended education. Then go out and get the necessary education to excel at the career of your choice.

You are in the business of you and a job may be part of your overall business. Follow your passions, take jobs that build your skills, get paid what you’re worth, and always keep your eyes open for better opportunities.


Your Dream JobThe overall goal of working at a job is to generate income to live the lifestyle you want now, while planning for a comfortable retirement in the future.

We all need income; without work, we’re likely to be homeless and broke. Yet it seems like the words work and job just mean being bossed around for a wage. In reality, work can be rewarding, fun, and a great way to meet people.

Of course, finding a job that suits you takes determination, but if you’re armed with some basic skills and a positive attitude, it’s not as hard as you might think. By following the tips here and in the next chapter, you’ll have the tools necessary to get the job you want and get paid what you’re worth.

Volunteer PossibilitiesWhen you’ve formed an idea about your passions and talents, one way to move toward working at your dream job is to do volunteer work in your area of interest. Volunteering helps you learn job skills, practice teamwork, and give back to the community; it helps you learn more about the field so you can decide whether that’s really where you want to work. Volunteer work looks good on your resume and demonstrates a positive, responsible attitude. A good place to start looking for volunteer possibilities is to visit the website volunteermatch.org. There you can search for volunteer options by field of interest and zip code.


Identifying Passions

GoAl

I will identify my passions and talents so I spend my days doing what I enjoy.

Warm-Up “Spend your days doing what you love. Start by figuring out what you like to do then find a way to get paid doing it.” ~Vince Shorb

What does this mean to you and why?

Lesson Activity

Potential jobs in sports:

Potential jobs in entertainment:

Potential jobs in media:


Finding your passion activity

What am I passionate about?

What do I enjoy doing in my spare time?

What am I good at?

What industries am I interested in and what attracts me to them:


What is a dream job or business I would love?

List ten jobs or businesses I can start in the industry(s) that I’m interested in:

List volunteer work that will allow you to explore career options:


Prepare for your dream job today!

GoAl

Understand the skills needed to get the job you want, and create a plan to attain your dream career.

Warm Up “Success is the sum of small efforts, repeated day in and day out.” Robert Collie

Lesson Notes

Sample Job Description #1:

Telephonic Transplant Nurse Case Manager, RN–Chicago, IL 60601

UnitedHealth Group is an innovative leader in the health and well-being indus-try, serving more than 55 million Americans. Through our family of companies, we contribute outstanding clinical insight with consumer-friendly services and advanced technology to help people achieve optimal health.

We have an excellent opportunity available to join our company as our newest Telephonic Transplant Case Manager, to be located in our Lisle, IL or Cypress, CA office. In this telephonic position you would counsel prospective organ transplant patients and conduct clinical reviews of members. In addition to the opportunity to help people through a crucial life event, you would receive great benefits, the chance to work with an excellent team as well as the potential to succeed and grow with the company. Apply today and discover a truly healthy career!

Primary responsibilities include: ❯ Receiving clinical information and making determinations on eligibility to receive an organ transplant


❯ Communicating with staff at the transplant facility plan members to work through the transplant process

❯ Verifying eligibility information and conducting research in order to educate members on their benefits

❯ Conducting clinical reviews of members ❯ Reaching out to members to help them navigate information and to explain benefits that are available to them as well as medication, lifetime adherence, cost, and compliance to treatment

❯ Following up with the member and facility throughout the whole process ❯ Maintain the confidentiality of sensitive and protected health information

The requirements for this role are as follows: ❯ An RN with a current, unrestricted license in IL or CA ❯ Minimum 2 years of clinical experience within a hospital setting ❯ Computer proficiency, must be able to type and navigate around a Windows environment

❯ Strong organizational skills ❯ Must be detailed ❯ Excellent communication skills, written and verbal

Additional preferred qualifications include: ❯ Organ and/or stem cell transplant experience is strongly preferred ❯ ICU and/or Critical Care experience ❯ Exposure to a health plan and/or managed care ❯ Previous experience in a telephonic role ❯ CCM certification

OptumHealth is part of the family of companies that make UnitedHealth Group one of the leaders across most major segments of the US health care system. If you want more meaning in your career–as a clinician or a business professional–think of OptumHealth as your calling.

By providing 58 million Americans with information, tools and solutions, we are helping to guide them through the health care system, financing their health care needs, and enabling them to achieve their personal health and well-being goals.

At OptumHealth, you will perform within an innovative culture that’s focused on transformational change in the health care system. You will leverage your skills across a diverse and multi-faceted business. And you will make contributions that will have an impact that’s greater than you’ve ever imagined.

Diversity creates a healthier atmosphere: equal opportunity employer M/F/D/V


UnitedHealth Group is a drug-free workplace. Candidates are required to pass a drug test before beginning employment. In addition, employees in certain posi-tions are subject to random drug testing.

Sample Job #2:

In-house Public Relations Representative

A San Antonio-based international franchisor is seeking a superstar publicist. Suc-cessful candidates are smart, aggressive, and creative and will thrive in a fast-paced environment.

Details / Duties: ❯ Candidates will provide PR support for corporate and individual franchisee locations

❯ Monday-Friday, 9 AM–6 PM, corporate offices, San Antonio, Texas ❯ Salary $35K with excellent benefits

Successful candidates will have: ❯ A minimum of 2 years experience in a PR firm ❯ An undergraduate degree in Communications or a related field ❯ Proven experience using social networking platforms in a business setting (e.g., Facebook, Twitter, blogging, etc.)

❯ Experience developing and distributing press materials ❯ Superior writing and communications skills ❯ Ability to identify market trends and develop creative PR solutions ❯ Skills to make media contacts and successfully pitch story ideas


Dress Designer

Qualifications Include: ❯ Minimum of 5 years pattern-making experience in dress market ❯ Experience with knits, wovens, and chiffons ❯ Computer aided patternmaking ability ❯ Tailoring experience, excellent draping ability, and construction knowledge ❯ Ability to work in fast-paced environment ❯ Ability to work as a team player



In-house Public Relations Representative

Successful candidates will have: ❯ A minimum of 2 years experience in a PR firm. ❯ An undergraduate degree in Communications or a related field. ❯ Proven experience using social networking platforms in a business setting (e.g., Facebook, Twitter, blogging, etc.).

❯ Experience developing and distributing press materials. ❯ Superior writing and communications skills. ❯ Ability to identify market trends and develop creative PR solutions. ❯ Skills to make media contacts and successfully pitch story ideas.


International Style Representative

Qualifications: ❯ Bachelor’s degree in Business, International Business or a related field ❯ 2+ years experience in Sourcing within the apparel industry ❯ Previous experience working with overseas vendors. ❯ Knowledge of technical requirements related to testing of fabric, trims, and garments

❯ Excellent communication skills, both written and verbal. ❯ Strong computer skills to include Microsoft Word, Outlook and Excel, email, and production tracking software, i.e. Gerber or PDS.

❯ Ability to travel if needed (up to 20% of the time) ❯ Ability to speak and understand Spanish, Mandarin, or Cantonese preferred

From the job descriptions above, list three of the top qualities two of the organizations are looking for:


Picking one of the top qualities, write a brief story that shows you possess the skill. For instance, using ‘strong organizational skills’ you could say “In my last job I excelled at organizing the schedules of the entire sales team. They were so pleased with my work they gave me the team-player award three times.

lesson Activity

My Dream Job Timeline

My dream job is:____________________________________________________.

Steps I will take: Start Date:Potential End Date

Example:Research the colleges that offer majors in my futures dream job .

January 2011 June 2011


Resumes and Job Applications

GoAl

I will have a good resume so I don’t have to spend months looking for a job and not getting paid. With a good resume, I stand out and will be hired.

Warm-Up Why is a resume important?

Lesson Activity

Employment Application Information Sheet

Employment Application Information Sheet

Position Applying For:

First Name: Middle Initial: Last Name:

Current Address:

Street and Apt.#: City: State: Zip Code:

Telephone: E-mail:

Social Security #: _______-____-_______ Driver’s License #: State:

I am an U.S. Citizen or otherwise authorized to work in the ❏ Yes ❏ No United States on an unrestricted basis:

Have you ever been convicted of a felony? ❏ Yes ❏ No

continued


Employment HistoryPresent or Most Recent EmployerEmployer: Address: Your Position: Salary: Duties: Dates of Employment: ______________ to ______________Supervisor: Name Title: May we contact? ❏ Yes ❏ NoReasons for Leaving:

Prior EmployerEmployer: Address: Your Position: Salary: Duties: Dates of Employment: ______________ to ______________Supervisor: Name Title: May we contact? ❏ Yes ❏ No Reasons for Leaving:

EducationHigh SchoolName and Address: Did you graduate? ❏ Yes ❏ No Attended from ______________ to ______________If you did not graduate, did you receive your GED? ❏ Yes ❏ NoSpecial honors or awards:

Technical or Vocational SchoolName and Address: Did you graduate? ❏ Yes ❏ No Attended from ______________ to ______________Degree or Certification: Specialty: Special honors or awards:

References#1 Name: Phone: Address: #2 Name: Phone: Address:

Position InformationPosition Applying For: How did you hear about this job? What hours are you willing to work? ______ Would you be able to work weekends? ❏ Yes ❏ NoWhen would you would you be able to start? Desired salary: ________ per ______

SkillsPlease describe any skills you have in the following areas:Computer:


Y O U R N A M E H E R E123 ANY STREET, ANY CITY, ANY STATE

Phone: (909)222-2222 ~ Email: [email protected]

Professional SummarySummarize your professional/academic experience to give potential employers a glance of why you are best for the job.

Create your own here:

Experience2005-Present Ethika Internal Company TrainingSales Rep – 2008• Your responsibilities in order from greatest too least.• Duties include but are not limited too; anything else you do/summary of your duties

Create your own job here:

Education2005–Present ABC College Riverside, CaB.A. Journalism; Minor Public Relations• Any Other Concentration

Create your own edu-cation here:

Organizations2005–Present ABC College Riverside, CaThe Banner Newspaper – Assistant Editor of Fashion• School student-ran newspaper• DUTIES


Questions What is a resume?

What is a job application?

What is the importance of using a resume to sell yourself?

What is the importance of taking a completed job application with you to all the places you apply at?


Mock Interviews

GoAl

A resume will get me an interview; but interviews get me hired and paid. I will strive to be the best interviewer possible so I can land the job I want.

Warm-Up “An interview is a chance for an applicant to ‘connect-the-dots’ between what they’ve done and what they can do for an employer.”

Lesson Activity What are the strengths that you bring to the table?

Why should we hire you?


How can you benefit our organization?

Why did you quit your last job?

What are your weaknesses?

Why do you want to work here?


What makes you better than the other candidates we are interviewing?

How much are you looking to get paid?

Category 4 3 2 1 Reasons for Hiring

Gave 3 reasons they should be hired . All reasons were relevant to the job applying for .

Gave 3 reasons why they should be hired but they were not all relevant to the job applying for

Did not give all three reasons why they should be hired or their reasons were not all relevant .

Forgot to give any reasons why they should be hired or the reasons they gave were com-pletely irrelevant to the job they were applying for .

Appropriate Answers

Answered ques-tion being asked .

Answered most of the questions being asked .

Didn’t clearly address the ques-tion being asked .

Did not answer questions in complete sen-tences or answers were completely off base .

Relevant Examples

Used relevant examples/stories from their life to illustrate their character traits/qualifications being asked about .

Used relevant examples/stories from their life to illustrate their character traits/ qualifications being asked about most of the time .

Used examples/stories but they did not clearly illustrate the character traits/qualifications being asked about .

Did not give clear examples .


List three interview tips?

Why is it important to ‘connect-the-dots’ between your resume and interview for a potential job?

What are two typical interview questions?

Questions

1. What is the best first step you can take to figure out your dream job? a. Go to college b. Search postings on monster and craigslist c. Identify your particular passions and talents


2. Your job contributes to determining which of the following? a. Your interests b. Your social network c. Employment history d. Work habits e. All of the above

3. Name two ways in which volunteer work can help you obtain your dream job:

1.

2.

4. How will getting your dream job help you achieve your personal goals?

5. Which of the following is an example of basic networking to find your dream job? a. Getting all your friends to sign up with your cell phone carrier. b. Talking to family, relatives, friends, and acquaintances to find out if they have

contacts in your field of interest. c. Searching online job sites like monster.com and careerbuilder.com.

6. Name three things it’s important to remember when you fill out an application in person.

1.

2.

3.

7. Which of the following represents three ways to make a good impression at an interview? a. Dress casually, be sure to talk a lot, and sit up straight. b. Talk about what the company can do for you, point out items on the

interviewer’s desk, and avoid bringing up your past employer. c. Bring up key points about the company, use positive body language, and

maintain eye contact.


8. Name three things to consider when choosing between multiple job offers.

1.

2.

3.

9. Which of the following are good strategies for getting a pay raise? a. Understanding your paycheck b. Knowing when to ask c. Researching salaries offered by other companies for your job d. Both “b” and “c”

107

Insurance & Risk Management

Insurance will help to protect you and your credit from many of life’s problems. Today it is more important than ever to have automobile and health insurance.

Lack of health insurance is one of the biggest reasons behind people’s deci-sions to file bankruptcy. And with all the expensive cars on the road today, even a little fender bender without insurance can have you making payments to the courts for years.

Auto insuranceGet and maintain car insurance—it’s vital. Without insurance, you are taking a huge risk—risk to yourself, to others, and to your future finances.

Let’s say you have no car insurance and you get in accident. If you’re at fault and caused $80,000 in damages and medical costs, the courts will probably deter-mine that you’re responsible to pay. They can garnish your wages (automatically take money from your paycheck) to repay the money you owe. A court-ordered garnishment for $80,000 would severely stifle your income for many years to come.

Shopping for Insurance takes time, but you can use the Internet to obtain lots of quotes fast. However, be sure to read each policy and its special provisions care-fully to make sure the policies you’re evaluating are comparable.

Bottom line: Younger people pay higher insurance rates than older Americans. It’s a fact: teenage drivers cause a lot of accidents. In fact, the number one killer of teens does not have a trigger or a plunger; it has a steering wheel.


To help lower your insurance cost, try the following:

❖ Good driver discounts – Your insurance premiums will increase every time you’re cited for speeding. If you get too many tickets, you may be unable to find insurance at all. But if you maintain a good driving record, you’ll receive insurance discounts for being responsible.

❖ Good grades – For teen drivers who are still in high school, good grades may lower insurance rates with many companies.

❖ Good car – Young adults who purchase sports cars or four-wheel-drive vehicles pay more in insurance costs. Insurance companies figure those customers are likely to drive fast or off-road, posing greater risk. Insuring the driver of a flashy car can cost a bundle.

Ultimately, it’s your responsibility to make sure you’re covered and protected. Driving without insurance puts your future finances and your lifestyle at risk.

Choosing the Right AgentMany people choose insurance based on the cheapest rates. But going for the low-est rate can actually cost you more in the long run if you go with a substandard company that won’t come through when you need it. Pick an established insurance company with competitive rates, one that offers all types of insurance (auto, home, renters, and life).

Find an experienced agent who knows the business inside and out and has a proven track record. A knowledgeable agent can help you pick the best insurance to protect both you and your bank account.

Health InsurancePaying health insurance premiums might seem like a waste of money, especially to healthy people. But health insurance protects you from sky-high medical bills if you become unexpectedly ill or injured.

Young people may be tempted to think, “I’m young; I never get sick,” and to opt out of paying for health insurance. That’s a mistake. While a person may be young, he or she is just as likely as anyone else to break a leg snowboarding.

If you forego insurance, any catastrophic accident or illness could bankrupt you. It happens all the time. Don’t be one of the 47 million Americans who play Russian roulette with their health and finances by remaining uninsured.

Insurance & Risk Management 109

Health Insurance ExplainedHealth insurance is a form of risk management used to protect individuals against an unpredictable health loss. An insurance policy is a contract between an individ-ual and an insurance company that transfers responsibility for such a loss from the individual to the insurance company—for a fee (called a premium). All insurance policies are not alike. Each individual should take time to review and understand his or her insurance policies. Following are the most important aspects to consider:

1. Doctor and medical facility availability: Make sure the doctors, hospitals, and medical groups you want to use are contracted with your insurance company.

2. Premium (monthly cost): The monthly premium should be affordable; you should be able to maintain the premium within your budget over a period of time.

3. Deductible: The amount you must pay out-of-pocket before the health insur-ance plan pays its share.

4. Co-payment: The amount you must pay for each individual service before the health plan pays. The co-payment is a lot like a deductible, but is applied to those individual services that are usually waived from the deductible (except for prescription drugs).

5. Exclusions: Not all services are covered in every plan. For example, many plans currently have no coverage for maternity expenses or brand-name prescription drugs. Exclusions can reduce premiums.

6. Out-of-pocket maximums: This is the amount where, once you have paid this much, your obligation ends under co-insurance and the insurance company pays 100% of any additional costs.

Health insurance policies can be very confusing. Find an insurance agent who specializes in health coverage and meet with him or her to review the details. You’ll pay no more going through an agent than you would by purchasing direct.

Dental Insurance

Dental insurance is not as important as medical coverage, but still can protect you from unplanned costs. If you have healthy teeth, you might be able to live without this coverage for a while, but if you have a history of cavities or periodontal disease, dental coverage will be important.

Renter’s Insurance

Renter’s insurance protects non-homeowners in the event of theft or fire, and renter’s coverage is relatively inexpensive. The insurance company will ask you to take inven-tory of your belongings and indicate what it would cost to replace them. If you just


have an old couch and some clothes, you probably don’t want to add the expense of this insurance. But if you have designer clothes, computers, nice furniture, jewelry, and other expensive items, looking into renter’s insurance is a good idea.

Life Insurance

Premiums for term life insurance and disability are fairly inexpensive; many employers cover these lesser premiums. The life insurance coverage in these poli-cies is temporary—that is, you’re only covered during your tenure of employment at the company.

The amount of the death benefit will be a percentage of your salary or a like factor. Even if dying seems like a remote possibility at your life stage, this inexpen-sive protection is good to have. The benefit would help your family pay for your funeral and cover other costs in the event of your death.

Life insurance takes another role in our financial plan: it can serve as an investment vehicle. Consult with a life insurance provider or agent to learn more about how you and your family may benefit from life insurance.

Disability Income Insurance

Many people overlook disability coverage. Like I said above, death may seem unlikely, but the chances of becoming disabled—unable to work for an extended time—are greater than most people realize. Statistically, 25% of American workers become disabled at some time during their careers!

You could have a car accident or, yes, a bad tumble while jet skiing. Disability coverage in a typical policy is adequate to replace about half your income if you suffer an accident or a health emergency that prevents you from working for an extended time.

While you may not think disability insurance is important, consider what would happen if you were unable to work for six months. You would still have to pay your rent, make your car payments, and deal with a host of other expenses—those bills aren’t just going to go away. Think about it.

Your coverage for medical, dental, life, and disability insurance through your employer will be limited to your time of employment. When you change jobs, you should compare benefits so you understand any changes.

For example, you may have to pay more for your health insurance at the next employer, or the coverage may not be as generous. And if you take time off from work between jobs, you must plan for an inevitable gap in insurance coverage—especially health insurance.

Insurance helps you reduce risk and protect your financial future. Make sure you have the right coverage so you, your family, and your money are safe.


What is Insurance?

GoAl

Understand the basics of insurance and how it can protect you from major financial losses.

What is insurance?

Why is it important to have insurance?

What do you need insurance for?


Lesson Activity

❯ Use the guidelines below to play a game about insurance.

❯ Your instructor will pass out 20 tickets to you and you will take turns rolling a set of dice with a group of students.

❯ The guidelines below explain what happens with each number you roll. ❯ If you role:

� Doubles – nothing, they are extra safe and get 1 extra ticket. � 3 – You fall and hurt your leg. If you have insurance you pay 1 ticket. If you

do not have medical you pay 4 tickets. � 4 – You get into a car accident. If you are insured you pay 1 ticket. If you are

not you pay 6 tickets. � 5 – Your apartment is broken into and need to replace your electronics. If

you are insured you pay 1 ticket. If you are not you pay 5 tickets. � 6 – You get the flu and need to have prescription antibiotics and blood test.

If you are insured you pay 1 ticket. If you are not you pay 4 tickets. � 7 – Someone hits his or her car in a parking lot. If you are insured you pay 1

ticket. If you are not you pay 3 tickets. � 8 – A pipe bursts in your apartment and ruins your couch and TV. If you are

insured you pay 1 ticket. If you are not you pay 6 tickets. � 9 – A rock hits your car and breaks your windshield. If you are insured you

pay 1 ticket. If you are not you pay 5 tickets. � 10 – You trip and fall and sprain your ankle. You need crutches, an x-ray and

pain medications. If you are insured you pay 1 ticket. If you are not you pay 8 tickets.

� 11 – You want to get the flu shot to protect themselves. If you are insured you pay 1 ticket. If you are not you pay 3 tickets.

� 12 – The roof collapses and damages all your belongings. If you are insured you pay 1 ticket. If you are not you pay 10 tickets.


What Insurance Do I Need?

GoAl

Figure out exactly what type of insurance you need.

Warm Up What type of bill is the leading cause of bankruptcy? Also, how can this bill be avoided?

What situations can having auto insurance protect you?

What situations can having renters insurance protect you?

What situations can having health insurance protect you?


Essential Questions

What types of insurance are there?

What types of insurance do I need to obtain?

Estate Planning

GoAl

I create an estate plan with my family because we want to decide where our posses-sions go in case someone passes away.

Warm-Up If you were on vacation in Europe and you needed to have a family mem-ber to watch your house and pay bills unexpectedly, do you have a clear plan that will tell them how to do this?


Lesson Activity

Complete the “My Top 5” activity below.

How will having an estate plan help me?

How can having a will or trust help my loved ones?

What steps can I take immediately to setting up my estate plan?

What are wills? What are trusts?


Questions

1. What is insurance?

2. Complete the following sentence:Insurance is a way to manage one’s .

3. Insurance can protect people from loss or damages to: a. Their property b. Their lives c. Other people d. All of the above

4. Name two reasons why it’s important to have insurance.

1.

2.

5. Why do banks and other lenders want you to insure any property they lend you money to buy? a. Because they don’t trust you. b. To protect their investment in case of loss or damage. c. Because it’s always required by law.

6. Name the two kinds of insurance it’s vitally important to have in today’s age.

1.

2.

7. Name three types of insurance policies.

1.

2.

3.


8. If you are healthy and rarely get sick, why should you have health insurance? a. Because you can borrow against the premium. b. Because your employer pays for it. c. Because health insurance protects you against having to pay for an

unexpected injury.

9. The terms deductible and co-payment both refer to out-of-pocket costs you must pay before your health insurance kicks in.

True

False

10. You should always choose the insurance policy that offers the lowest premium.

True

False

11. List the types of insurance you think you need to help you meet your personal and financial goals.

Notes:

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Investing

Ask yourself: is it better to bury your money in the ground (where it will lose value due to inflation), or invest your savings to let your dollars grow?

Investing makes sense. It’s all about making your money work for you, instead of the other way around! Best of all, if you take the time to become an invest-ing expert, you can see your money double, triple, and quadruple. The earlier you begin investing, the more you can increase your original investment—at least in theory—so start studying now.

Invest!Imagine being able to earn money while you sleep, vacation, study, shop. You can be making money all day, every day! This is possible when you earn profit and income by investing your savings in the stock market, bonds, real estate, and entre-preneurial endeavors.

Being financially comfortable gives you the freedom to live the lifestyle of your choosing. You can achieve financial comfort in two ways: 1) build up your net worth, and 2) build up your cash flow.

Net worth is the measure of how much money you have.

Cash flow is the amount of money coming in on a regular basis from your investments.

Your net worth and cash flow income should be working for you all the time.When first starting, take “baby steps” and keep your risk as low as possible.

Decide how much you can afford, and don’t get in over your head. By starting slowly, you can learn the ropes without getting burned too badly by your mistakes.


Compound InterestWhat if you knew when you were 18 years old that if you just invested a hundred dollars a month, you had a good chance of becoming a millionaire.

This is a fact; however it is never too late to take advantage of this benefit. It happens due to a principle called compound interest. Compounding interest allows money to grow, and the younger a person starts to invest, the larger that person’s money can grow.

The beauty of compounding interest is that you’re making money off the money you deposit AND you’re making money off the interest the bank pays you. So interest is calculated not only on the initial principal, but also on the accumu-lated interest your money generates over time. That’s the definition of compounding interest: the process by which the value of an investment increases exponentially because it earns interest both on the principal and on the prior interest payments.

There are various investment strategies to help you get better returns on your money. But do you see how just a simple savings plan and compounding interest work in your favor?

ConsistencyThe first step to achieving financial success is following a consistent, long-term investment plan. Adopting a regular savings plan, as taught in the budget section, is the foundation of your investing career. Your savings forms the backbone of a plan that provides you with money to invest on a regular basis.

Building wealth over time is all about taking the long view, and not getting bogged down in short-term gains. Building financial freedom takes time. But that doesn’t mean you shouldn’t get involved now. Success can come faster than you think!

By learning simple investment lessons you can begin making money while you sleep. Because you started investing early and consistently, you’re harnessing the power of compounding interest.

How to Make Your First InvestmentThere are good ways to prepare before you consider making your first invest-

ment. Follow these guidelines:

❖ Before you consider investing be sure to have six months’ worth of expenses put away in your emergency fund.

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❖ Be free of credit card debt and have a working budget in place that allows you to save money each month.

❖ Only use risk capital for your investments. Risk capital refers to money that you can lose without putting you in dangerous financial circumstances.

❖ Have a team of trusted advisors and mentors at your disposal. ❖ Create an overall investment plan and determine how the investment you

are considering fits into your plan. ❖ Gain expert-level knowledge on each specific investment you are consider-

ing by conducting due diligence research. Due diligence means you educate yourself on the investment and do your homework before committing your hard-earned money.

❖ Determine the risk and potential reward. All investments have a certain amount of risk and reward. Ideally, you want to earn the highest return (reward) with the least amount of risk.

❖ Have an exit plan in place in case the investment doesn’t go as planned.

The Big PictureLook at investing from a bird’s-eye view. That is, instead of focusing on the ups and downs of each individual investment, you need to step back and look at the big picture. Here are some tips for doing that:

1. Trends. One of the biggest things to watch is trends. A trend is the direction that a market has a tendency to move toward.

Ultimately, trends allow you to forecast and place your investments ahead of these movements. As your knowledge of trends improves, so will your confidence in the results derived from demographic models, which will provide key information on where to find the next profitable investment.

2. Demographic research allows you to look at long-term trends as well as characteristics of current groups of people in the population. That may sound complicated, but essentially we can draw conclusions based on demographic profiles, which take into account many factors like age, economic cycles, spending patterns, lifestyle preferences, growth rates, generational preferences, migration patterns, historic patterns, income, and employment.

3. General Research. To invest in companies or markets, you need to know if they have any problems. If these problems are being reported on TV or the web, you’ll get a better understanding of why this stock is tumbling, or that housing market is rising, etc.


Check YourselfEmotions make us do things we wouldn’t normally do. The negative emotions most likely to affect people when they invest are greed and fear. Many people just chase the almighty dollar. They want more and more—yet when they start to lose money, they become scared and freeze up.

Another emotional crutch for some people is to fall in love with a stock, or a company, or a piece of real estate. Despite warning signs telling them to sell, they foolishly continue to hold on to it, even as it depreciates in value!

People who carry emotional baggage when they invest are likely to make bad decisions more often than people with a clear, relaxed business focus.

Investing basics – a brief glossaryRule of 72 – divide the interest rate into 72 for calculating how long it will take to double your investment . For example, if you receive a 12% interest rate that means your money will double every six years (72 divided by 12 = 6) . So that $100 you invested is $200 after 72 months .

Three types of income – Active: earned through work . Passive: earned without labor on your part, like the income received from rental properties . Portfolio: returns that come from financial market investments .

The Laws of InvestingSupply and demand – When more people want a product, supply prices go up . And when fewer people want that product, prices go down .

Assets and Liabilities – Easy as ABC . Assets produce income whereas liabilities cost you money (for example, cars) . Try to get assets, not liabilities!

Length of investment –Basically, a dollar in hand today is worth more than a dollar that will be received in some future year .

Rate of Return – Return on investment (ROI) refers to the percentage of profit or revenue generated from a specific activity .

Cash Flow – The income generated through investments .

Leverage – The ability to control large dollar amounts of a commodity with a compara-tively small amount of capital .

Diversification – Whatever you’re investing in, diversification is an investment strategy that reduces market risk by combining a variety of investments such as stocks and real estate, which are unlikely to all move in the same direction (up or down) at the same time .

Investing 123

Think for YourselfGet-rich-quick schemes are a dime a dozen—someone calling you with a “hot stock tip,” or begging you to invest in a sweet deal. These types of salespeople are trying to stir up your emotions by selling you an improbable dream. Gain the knowledge you need to make educated financial decisions for yourself.

Build a Successful Investment TeamAs much as you do need to think for yourself, nobody ever made a million dollars by working exclusively solo. Success takes teamwork. Establishing a winning team lets you invest and be the best. Include the following advisors in your team:

❖ Tax planner ❖ Financial mentor(s) ❖ Personal development coach ❖ A network of friends and contacts all looking to achieve financial

independence

Selecting the right team of experienced professionals will save you time and headaches in the long term. But remember due diligence! There’s no substitute for your own research.

Hire professionals, but always educate yourself enough to be knowledgeable. Although many people are honest and hard-working, it’s great to have at least a basic knowledge of what each member of your team does. Familiarize yourself with the ABCs of each team member’s job to enable you to catch people who are not playing fair.

Here’s a list of basic questions you should ask each potential member of your team:

❖ How many years have you been in your respective field? ❖ Are you knowledgeable in real estate matters? ❖ What are your fees and how do you get paid? ❖ What are your credentials? ❖ What professional boards do you belong to? ❖ Have you ever had any disciplinary action? ❖ What is your past experience? ❖ What other services do you offer?

Besides the questions listed above, ask your tax planner the following: “Are you available year-round for questions?” When you’re first starting out, your taxes


will be pretty easy to manage, but don’t do them yourself. Hire a professional with whom you can grow as your investment income grows.

NetworkingJust like building a solid team, an element of networking is needed to ensure invest-ment success. The more contacts you maintain, the more opportunities you’ll have available, now and in the future. Creating a stable network is vital to a sound invest-ment plan. Building a strong investor network will ensure you a steady supply of viable investment options, both now and for years to come.

Networking is simply gathering together contact information of people you know: friends from school, colleagues, and other associates. Make special notes about contacts who are interested in investing—people who seem goal-oriented toward financial independence.

Communication is a two-way street, so keep their contact information up-to-date and make sure they have yours.

Below are a few simple ways to maintain your investor network:

❖ Send out a monthly email telling your network what you’ve been investing in; reiterate your interests in particular stock market or real estate areas. They’ll associate these areas with you and contact you when something of interest arises.

❖ Contact your network when you see an investment they might be interested in. They will certainly repay the favor.

❖ Be a good friend and colleague. Treat old friends well. Stay in touch on birthdays and anniversaries. It doesn’t have to be all about business; good friendship can often be a network’s best strengthening bond.

Many successful investors credit knowledge, a good team, and an investment plan with their success. Continue to gain knowledge, but get your money working for you as soon as possible. Become an educated investor to reach a level of finan-cial security that you are looking to achieve.

Investing 125

Why People Invest

GoAl

I want my money to work for me instead of me having to work for every dollar. I’ll pick up basic investing skills now and continue to learn more about investing each week.

Warm-Up What does investing mean?

The chart below illustrates the decreased purchasing power of the dollar due to inflation:

Effective Buying Power

1950 1960 1970 1980 1990 2000Avg . Income

New Car

New House

Loaf of Bread

Gallon of Gas

Gallon of Milk

Minimum Wage

$3,216

$1,511

$8,450

$0 .14

$0 .18

$0 .84

$0 .75

$5,199

$2,610

$12,675

$0 .20

$0 .26

$1 .04

$1 .00

$9,357

$3,979

$23,400

$0 .24

$0 .36

$1 .32

$1 .60

$19,173

$7,201

$68,714

$0 .51

$1 .19

$2 .02

$3 .10

$28,906

$16,012

$123,000

$0 .70

$1 .34

$2 .78

$3 .80

$41,343

$24,800

$134,120

$1 .26

$1 .72

$3 .24

$5 .15

Chart provided by: Planner Connect


Lesson Activity

If the Federal Reserve continues to print money what do you think will happen to your purchasing power?

If you are earning 1% in a savings account and inflation is at 3% are you able to purchase more or less next year?

What if you were earning 7% on a stock market investment with 3% inflation would you be able to purchase more or less next year.

What if your bank offered you a CD at 4% but you had to keep your money in for 5 years. What is your risk?

In year 1, if the inflation rate was 3% would that give you greater or less purchasing power? What if inflation jumped up to 8% in the second year, would that investment still makes sense for you?

Investing 127

Questions

What is investing?

Why do people invest?

What is a financial risk?

Good Debt vs. Bad Debt

GoAl

Good debt can earn me money without having to work. Bad debt has me working for every dollar I borrow plus a lot of extra fees. I will understand this section because a few minutes now can save me many days of working.


Warm-Up What is good debt and what is bad debt? Make sure to explain why.

Good Debt or Bad Debt?The best way to learn about the differences about good debt and bad debt is to choose. Complete the chart by yourself or with a friend to figure out what debt is good or bad.

Type or DebtYes, it’s good debt

because . . .No, it’s bad debt

because . . .Shelly wants to go to college but her family has no money for her to use towards the expenses . She doesn’t make enough money to pay for school and doesn’t qualify for grants . She wants to take out a $5,000 loan to pay for school .

Daniel wants to buy his girlfriend an engagement ring . There are some in his price range but a really nice one that he can finance and only pay $20 per month . If he does this he will use the $1000 he saved for the ring towards your wedding .

George is short on cash until payday . His car broke down and needs to pay $750 to fix it . He has been saving for about a year and has $1000 in his savings . He wants to use his credit card to not deplete his savings account .

Investing 129

Questions

What is good debt?

What is bad debt?

What type of debt is a home loan considered and why?

What type of debt is a credit card debt considered and why?


Cash Flow

GoAl

I plan out my financial life so I can spend my days now and in the future doing what I enjoy.

Warm-Up “When you’re making money doing what you love you never want to retire.” “Many describe the new retirement as having the freedom of time to do what you want when you want.”

What did those quotes mean to you?

What is cash flow?

What is net worth?

Investing 131

What does ROI stand for and what does it mean?

What does financial freedom mean to you?

Lesson Activity

Think about what you would like your future financial life to be like. Write down what you would like or where you would like to be in each part of your life below. Look at the samples to help you and listen to the instructions provided by your teacher.

Your first age range, should be the most detailed.

SAMPLE:

Between ages 40–50:Career: I’ll get my AA at age 42 and take a few years to go travel and volun-

teer in countries I want to visit – Costa Rica and Brazil. During that time, I will also explore career opportunities because I’m unsure what I want to do. I will then complete my degree in advertising. Then get a job that gives me a lot of time off to travel or a job that involves travel.

Investments: Main investment will be in my skill sets through school and in other forms of hands on learning. I also plan to save $100 a month to start to grow my nest-egg early and I plan to have no student loan debt when I graduate.

Net worth and Cash Flow: By the time I reach 46 I want to have $30,000 saved and invested. I also will have a small online business that I start where I earn an extra $500 per month.

Lifestyle: I think my lifestyle will be focused on doing what I know I like now—travel meeting new people, experiencing new cultures. I also will take time to find other things that I like. My work schedule is flexible and I live really close to my best friends.


Start this activity in your personal age range.

Age 20–30:

At age 30–40:

At age 40–50:

Investing 133

At age 50–60:

At age 60–70:

At age 70+:


Questions

What is cash flow?

Why do people invest?

What is a financial risk?

Investing 135

Questions

1. Being financially free means:

2. Name five important steps to creating a personal financial plan.

1.

2.

3.

4.

5.

3. Which of the following are important considerations for building financial freedom? a. Cash flow b. Net worth c. Lifestyle d. Location e. All of the above

4. What are three knowledge basics that help form the proper foundation for your financial plan?

1.

2.

3.

5. Part of having a positive investment outlook involves: a. Sticking with your plan even if an investment loses money. b. Realizing that your returns will vary based on market conditions. c. Giving back to serve the greater good. d. All of the above


6. What is investment diversification?

7. Diversification is a type of: a. Loss b. Risk c. Protection

8. How can an investor benefit from having a diversified portfolio?

9. Name three of the basic types of investments.

1.

2.

3.

10. Why should I consider investing?

11. What is compounding interest?

Investing 137

12. What benefits do I get by reinvesting my profits?

13. Becoming a millionaire in the future is completely out of reach for someone my age.

True

False

14. A simple savings plan, along with compounding interest, can help me reach my life goals.

True

False

15. What is investing?

16. Why do people invest?

17. What is a financial risk?

18. What is the number into which you should divide your interest rate to calculate how long it will take to double your investment? a. 72 b. 32 c. 120


19. What are the three types of income?

1.

2.

3.

20. I don’t need to start investing now, because I can expect to have a pension and Social Security income when I’m old enough to retire.

True

False

21. Which of the following are important members to include in your team of invest-ment advisors? a. Knowledgeable friends in your network b. Financial mentor c. Tax planner d. All of the above

22. Networking helps you succeed at investing because: a. It opens up more opportunities for investment options. b. Your network will introduce you to important celebrities. c. You need a lot of friends to help you look good in the community. d. All of the above

23. Your cash flow is: a. The total money in your checking and savings accounts. b. The amount of money your investments bring in regularly. c. Your total annual salary minus your deductions.

24. In investment terms, what is the definition of a trend?

Documents

BBuuiillddiinngg YYoouurr F ii nn aancciall FF oouunddattion F · following some simple steps. Some of the most important aspects that will help you on the road to financial wellness