MoneyCounts: A Financial Literacy Series

1. MoneyCounts: A Financial Literacy Series What is Financial Literacy? Dr. Daad Rizk MoneyCounts: A Financial Literacy Series 301 Outreach Building University Park PA 16802 dar39@psu.edu 814-863-0214

2. Learning Objectives Define Financial Literacy Discuss mission, needs and benefits Discuss Core Competencies Review principles of budgeting, credit and debts management, saving and investing

3. What is Financial Literacy? • To explore strange new worlds • To seek out new life and new civilizations • To boldly go where no one has gone before • Topic is personal • Topic is emotional • Mission: • To provide financial knowledge and skills to make informed decisions and take effective actions regarding money management • Subliminal -Underlined Mission • To alter people’s core attitudes and beliefs as a prelude to changing their behavior

4. Why Financial Literacy? • USA Population = 319 million • Taxpayers = 116 million • Credit card debt = 889 billion • Student loan debt = 1,297 trillion • Mortgage debt = 13,355 trillion • Total Personal Debt = $16,642 trillion • Debt per Citizen = $52,178 • Citizen = man, woman, child U.S. Debt Clock

5. What does that mean? • College student graduates with $27,000 in student loan (average) • 1 out of 2 college graduates go back to live at home • Unemployment rate 10.8% -11% (varies) • Average of 9 months to 1.5 year to find work • 49% of taxpayers do not have saving accounts • Average credit card debt per taxpayer = $7,600 • Total saving per family $8,640 U.S. Debt Clock

6. No College Fund?

7. Life on the Edge

8. MoneyCounts: A Financial Literacy Series • Core Competencies MyMoney.gov • Earning • Saving & Investing • Borrowing • Spending • Protecting

9. Core Concept #1 - Earning • Gross versus net paycheck • Benefits and taxes • Education is important • Understand your paycheck • Verify and adjust your exemptions and deductions on your W4 (withholding) • Learn about potential benefits and taxes • Invest in your future, plan for your career through education – search the market Knowledge Action/Behavior

10. Core Concept #2 – Saving& Investing • Saved money grows • Banking – saving and checking accounts • Long-term financial planning • Eliminate or reduce waste • Start saving early, pay yourself first • Comparison shopping for a financial institution – reconcile your accounts • Plan for retirement, child education, renting versus owning a home • Replace waste with saving Knowledge Action/Behavior

11. Core Concept #3 - Spending • Difference between needs and wants • Develop a quantitative awareness of your spending habits • Get the most/best value for your money • Develop a spending plan • Track spending habits • Live within your means • Understand the social and environment impact of your spending decisions Knowledge Action/Behavior

12. Core Concept #4 - Borrowing • Distinguish net income from loans • Cost of borrowing – Penalty, Interest, late fee, surcharge (PILS) • Amortization schedules • Credit Score - FICO (Fair Isaac &Company) Equifax, Experian, TransUnion • Credit cards • Borrow only what you need not want • Avoid high cost loans, avoid penalties, late fees, and surcharge • Minimize interest payments • Get your free annual credit report, check your financial grade, review and correct if necessary • Shop for low interest cards, use only in emergencies, avoid paying (PILs) Knowledge Action/Behavior

13. Core Concept #5 – Protecting • Risk management and insurance coverage • Identity theft • Fraud and scam • Shop for insurance, review and update insurance, build up an emergency fund • Watch for your social security number and card, your date of birth and your banking information • If it is too good to be true, it most certainly is Knowledge Action/Behavior

14. MoneyCounts: A Financial Literacy Series • Student Specific Topics Plan Your Finances [Penn State Office of Student Aid] • Budgeting • Cost and Student Aid • Borrowing & Repayment of Student Loans

15. Basic Steps • Steps to Financial Literacy–Practical Elements • Commitment to change • Acknowledge the financial challenge • Take the Pledge to make changes • Get the family on board • Financial challenges • 65% of couples argue • 45% of divorce cases Examiner.com

16. Assessment • Assess your financial situation • Examine: • Earning • Saving • Spending • Borrowing • Protecting

17. Organization • Clean out financial clutter • Organize information • Protect against identity theft

18. Expectations • Set yourself up for success • Get the family involved • Create a plan • Designate a task for each member

19. Money In • Earning • Explore ways to increase earning • Turn a hobby into cash • Get more education/specialization • Explore seasonal work • Review paystub for tax withholding and deductions • Take advantage of pre-tax benefits • Take advantage of tuition assistance • Take advantage of military/government programs

20. Money Saved • Saving • Pay Yourself First • Make Saving automatic • Set SMART goals and work toward them • Get the family involved • Establish an emergency fund • Expect the unexpected – EXIT Strategy • 3 – 6 months

21. Money Spent • Spending • Wants Versus Needs • Wants disguised as needs • Examine spending habits • Evaluate one by one • Set a budget • Adopt a cause • Get the family involved • Live within your means

22. How Time Changes Values?

23. Money Borrowed • Borrowing • Get copies of your credit reports • AnnualCreditReport.com • Equifax • Experian • TransUnion • Clean & protect credit reputation • Watch out for student loans • Understand the cost of borrowing

24. Debts • Pass the Debt Test? 20/10 Rule • All Debt (outside mortgage) should not exceed 20% of net annual income • Monthly payment should not exceed 10% of monthly take home income • Pay by due date and in full (if possible) • Watch debt to limit ratio - Keep your credit card charges at no more than 30% of your credit limit to protect your FICO Score

25. Mortgage • Mortgage • Monthly payment should not exceed 28% -30% of net monthly income • Send ½ a payment every 2 weeks instead of one payment a month • $800 a month = $9,600 a year (800 X 12) • $400 every 2 weeks = $10,400 a year (400 X 26)

26. Freedom from Debts • Debt Management Strategies • Pay debt with highest interest rate first • Pay debt with small amounts first to free funds • Save for Big Purchases • Calculate cost of items before you charge on credit cards

27. Understanding Budgeting • Where does all the money go? • Create a BUDGET • Examine spending HABITS • Practice TRACKING • Identify and document your • Fixed monthly expenses • Variable and periodic monthly expenses • Document your spending • Analyze, divide and conquer • Identify ways to reduce/control spending

28. Budget at a glance • Earning 100% • Saving 10% • Housing 30% • Meals 20% • Loans 10% • Car 10% • All other 20%

29. Budget at a glance

30. Waste Reduction • Manage Waste! • Average family throws $1,500 a year of unused food items • Expiration date, sell by date, use by date • No time to cook • Want to try new products • It was on sale

31. Risk and Insurance • Manage Risk • Review Insurance coverage periodically • Assess current and future need • Health/medical • Life and Term insurance • Disability • Home insurance • Car insurance • Protect Identity from theft

32. Retirement • Manage Retirement • Start saving early – compound interest • Do not rely solely on Social Security Funds • Delay SSF to get full benefits • Save money in your assets – Home • Invest and manage risks

33. TIPS • Join a movement/Adopt a cause in life • Environment (3 R’s) • Recycle, reuse, reduce • Health • Food, exercise • Charity • Learn to give, make a difference Things do not change, WE CHANGE Henry David Thoreau

34. Promote the Knowledge • Share a TIP! Things do not change, WE CHANGE Henry David Thoreau

35. MoneyCounts: A Financial Literacy Series Thank You! Comments and Questions Dr. Daad Rizk MoneyCounts: A Financial Literacy Series 301 Outreach Building University Park PA 16802 dar39@psu.edu 814-863-0214