Financial Literacy

Learn How to Manage Your Money

Create a Budget and Stick To It

• Step 1: Record your total monthly income• Step 2: Record all of your expenses• Step 3: Categorize your spending– “Non-discretionary” spending—things you can’t live

without (housing, food, utilities, etc.)– “Discretionary” spending– things that aren’t true

necessities (eating out, concert tickets, beer $$$)• Step 4: Target Discretionary Spending• Step 5: Balance your budget—do this monthly and make

sure you’re not spending more money than you earn

Not Just for Writing Checks Anymore

• Checking Account Basics– Convenient and fast way to manage your money and

access it to pay your bills• Online & Mobile Banking—keep track of deposits &

withdrawals, pay your bills online• Get fast cash at an ATM—watch out for those fees• Debit Card—comes directly out of your account, so make sure

you have money in there• Checks—make sure you keep track of checks that haven’t

cleared so they don’t bounce

• Saves you $$$ b/c you don’t have to pay bills by money orders or cashier’s checks anymore

To Save or Not to Save?

• It’s never too early to start saving!• Choose a savings account with a good interest rate

& few penalties to help grow your savings • Watch for fees that may apply to minimum balance

requirements or withdrawal limits• A good rule of thumb is to pay your bills first and

put the rest into savings. Consider saving at least 10% of your income.

• Keep track of deposits, withdrawals and transfers to avoid unexpected service charges

Watch Out For Those Pesky Bank Fees!

• Overdraft & Insufficient Funds Fees• Monthly Service Fees• Overdraft Protection Transfer Fees• ATM Fees• Excess Withdrawal Fees• Late Payment & Overlimit Fees

Your bank should provide a list of fees when you first open an account there.

Credit Cards—Friend or Foe?

• If used responsibly, credit cards can offer these benefits:– Help you build credit– Don’t have to carry cash or write checks– Can be used for unexpected emergencies– If you don’t have cash available for necessities, you can

still purchase them– You can keep track of purchases with monthly

statements– Consolidate your spending into a single monthly

payment

Credit Cards—A Cautionary Tale• Young college students are heavily targeted by credit card

companies because they:– Need to built credit– Are notorious for being broke, image conscious, & impulse buyers– Sometimes forgo making payments because other things are more

pressing…late fees & higher interest rates are just $$$ in the CC company’s pocket

– Will pay high interest rates because most don’t know any better• Beware of impulse buying most…it adds up way faster than you

think• Mismanagement of credit cards can lead to late fees, overlimit

fees, higher interest rates and averse affects on your credit score that can last for years

Staying out of Credit Card Hell

• ALWAYS pay at least the minimum amount due. If you can pay the entire balance, that’s even better

• Make your payments on time, every time• NEVER spend more than you can afford to pay back• Make sure the total of all your transactions doesn’t

exceed your Total Credit Limit (don’t forget to factor in that interest)

• Don’t fill out every credit card application you receive…your credit takes a hit every time

What’s in a Credit Report?• Credit Report is a complete file of your financial history that

shows:– Whether you’ve paid credit card & loan bills on time– How you’ve handled necessary expenses, like rent & utilities– How much credit is available to you, on cards you already have– The total amount of debt you have outstanding

• Who can check your credit report?– Banks– Landlords– Employers– Auto Insurance Providers– Cell Phone Companies– Auto Dealerships

Credit Score—More Than Just a Number

• Based off of your Credit Report– Credit history is a good indicator of whether you will be a

high or low risk borrower in the future– Based on a scale of 850-350…the higher, the better

• Higher end of scale (700-850)—Moderate to low risk; more likely to receive a competitive interest rate on loans

• Middle of scale (600-700)—Fair to good risk; interest rates on loans will be higher, but you should still qualify

• Lower end of scale (350-600)—High risk; lenders will be wary about extending loans or credit to you; improving score should be a priority to you

– The higher your score, the more likely you are to obtain the financial tools you need

Identify Theft—Not a Victimless Crime

• Identify Theft is fast becoming one of the most common types of crime all over the world

• Protect yourself– Check your credit reports regularly—you are entitled to one free credit report every

12 months from the three credit bureaus…TransUnion, Equifax, and Experian. Just go to www.annualcreditreport.com

– Watch statements for fraudulent charges– Keep identity information private & in a secure location– Make sure websites are secure before you enter any personal information– Limit the amount of personal information you provide on social networking sites– Be cautious about messages you receive on social networking sites that contain

links– Install Firewall/Antivirus/Anti-spyware software on computer– Sign the back of your card– Make a list of your credit card numbers– NEVER give out personal information over the phone

Identify Theft Victim—What Now?

• If you believe you are a victim of identify theft or fraud, there are steps that can be taken:– Step 1: Contact one or more of the consumer credit

reporting companies– Step 2: Close the accounts you know or believe have been

tampered with or opened fraudulently– Step 3: File a report with your local police– Step 4: File a complaint with the Federal Trade Commission

• Call the Identity Theft Hotline 1-877-IDTHEFT• Mail the Identify Theft Clearinghouse, Federal Trade Commission,

600 Pennsylvania Ave. NW, Washington, DC 20580• Online at www.ftc.gov

How In the World Do I Pay for College?

• Understand the total cost of your education– Tuition, fees, books, supplies– Living & transportation costs

• Complete the FAFSA (Free Application for Federal Student Aid) every academic year…the earlier the better!

• Fill out scholarship applications! Most schools have a general scholarship application on their websites

• Review your financial aid package• Set up a budget• Determine if additional resources are needed

– Federal Loans and Private Alternative Loans are available, but always considered a last resort. Explore all of your options before putting yourself too far in debt!

Student Loans—Don’t Get in a Bind

• If you do take out school loans, don’t over-borrow. Only take out what you need

• If at all possible, make small payments on your loans while in school• Don’t forget to complete online Exit Counseling at

www.studentloans.gov if you withdraw or graduate/transfer• Figure out how much you owe and who your servicer is at

www.nslds.ed.gov • When you graduate, remember you only have six months before you

start paying your federal loans back, so prepare accordingly• Talk to your servicer about what repayment plan will work best for you• If you get in a bind and can’t make your monthly payments, talk with

your servicer about deferment or forbearance options…they are there to help!

And the Consequences Are…

• Consequences of Delinquent Payments and Default (Loans are considered defaulted after 270 consecutive days of non-payment)– The entire amount of your loan can become immediately due and

payable– Delinquency & default will be reported to all national credit

bureaus– Legal action can be taken against you– A collection agency can be hired to collect the loan balance– Your wages can be garnished and your federal tax return withheld

to pay the loan balance– You will not be eligible for any other federal financial aid until your

loan is in acceptable payment status

Some Keys to Financial Freedom

• Create a budget and stick to it!• Utilize checking and savings accounts• Use credit cards responsibly—don’t impulse buy!• Always pay your bills on time to maintain a good

credit report…a low credit score can haunt you for years!

• Take steps to ensure you are not a victim of ID Theft• Use free money first to pay for college• If you take out student loans, only ask for what you

need and never be afraid to talk to your servicers!