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Securing Your Financial Future
Cash Management
Presented by Teresa Muench
NEA Member Benefits
April 4, 2015
Cash Management
• Understanding Cash Management
• Where oh where does our money go?
• Making a budget
• Living within that budget
• IT DOESN’T ALWAYS TAKE MORE $$$, Sometimes it takes smarter choices!!
Cash Management
Benefits of Developing A Budget• It allows you to choose how you will spend your
money.
• It gives you control over where your money goes.
• It provides against financial emergencies.
• It helps prevent impulse buying.
• It helps financial goals become a reality.
Cash Management
• Budgeting Rules– Set realistic financial goals– Distinguish between wants and needs– Record monthly expenses– Limit monthly debt payments to 20% of
net income (excluding mortgages)– Establish an emergency fund (3 to 6
months of after tax income)
Cash Management
• Budgeting Rules– Track income and expenditures
– No lazy money
– Establish credit
– Shop wisely
Cash Management
• Steps in Developing Your Budget– Determine your income
• Include only your net income• Do not include over-time or bonuses
– Determine your fixed expenses• Includes rent or mortgage, savings utilities,
car payment, etc.• Pay yourself first!!!!
Cash ManagementSteps in Developing Your Budget
– Determine your flexible expenses• Easier to control or reduce• Includes clothing, food, entertainment
– Determine your variable expenses• Can be a problem if not properly budgeted for• Include things like insurance, taxes, annual
fees, etcIf the payment is due every year, divide by 12 and put aside
every month
Cash Management
• Steps in Developing Your Budget– Record monthly expenses
• Keep organized records– Re-evaluate your budget periodically
• Budget should reflect you and changes in your life
Credit…A Key Element of Cash Management
Understanding Credit– Why is it important?
– How to build credit reputation?
– How are lending decisions made?
Cash Management
Why is it important to establish credit?– Allows you to enjoy major purchases
– Offers advantages of convenience and safety
– Enables you to take advantage of sales and investments
Cash Management
• Understanding credit– The cost of credit
– Getting your credit report
– Some tips
Cash Management
• Understanding Credit– Finance Charges
• Average daily balance- gives you credit from the day the creditor receives payment
• Two-Cycle Billing – if balance is not paid in full, interest can become retroactive back to date of purchase – essentially wiping out your grace period
Cash Management
• Understanding Credit– Balance Transfers
• Promotional rates (usually 0% - 3.9%) offered by credit card issuers to balance transfer balances from a competitors credit card
• Typically lasts from four to nine months
Cash Management
• Understanding Credit– Balance Transfers
• “We may allocate your monthly payments to your promotional APR balance(s) before your non-promotional APR balances.”
Cash Management
• Understanding Credit– Other Charges & Fees
• Annual Fee – for the privilege of using the card
• Cash Advance Fee – transaction fee for cash advances
• Over Credit Limit Fee – fee assessed for exceeding the stated credit limit
• Transaction Fee – fees charged for using an ATM, debit card, purchase of money orders, wire transfers, etc.
Cash Management• Understanding Credit
– Other Charges & Fees• Insufficient Funds Fee – charged
assessed for checks returned or insufficient funds
• Late Payment Fee – fee for late payment• Minimum Finance Charge – minimum
finance charge of $0.50 if your purchase or finance charge is less than $0.50
• Low Activity Fee – fees charged if a transaction is not recorded regularly or if no balance is carried
Cash Management
• Identifying Financial Stress– Do you routinely spend more than you earn?– Are you forced to make day-to-day
purchases on credit?– Are able to make only the minimum
payments on monthly credit card bills?– Are you having difficulty stretching your
paycheck to meet monthly bills?
Cash Management
• Identifying Financial Stress– Are bill collectors calling?
– Would you have difficulty paying next month’s bills if you lost your job?
Cash Management
• Reducing Expenses– Cut Spending – Eliminate unnecessary
spending such as eating out and purchasing expensive entertainment. Clip coupons, shop sales, and avoid impulse buying
– Consolidate Debt – Check into mortgage refinancing, home equity loans, and personal loans.
Cash Management
Get a Handle on Credit Cards
By paying $100 towards a $3,000 balance (and not charging any more to the account), it would take 41 months to pay off the balance (18% interest rate) and you would incur $1,042 in interest charges.
Cash Management
Building a Good Credit Reputation– Use credit before you need it
– Keep within obligation of your agreement
– Live up to the terms of the contract
Questions?