1. Money Management Unit B

2. 1. Determine Your Current Situation – analyze how to use your money now based on your values 2. Set and prioritize your goals – short (5 yrs), medium (5-10 yrs), long term (10+). Be specific, realistic and measureable 3. Develop a long term plan – create a feasible working plan 4. Organize your records – bills, bank records, etc. 5. Set up a budget – realistic, responsible, restraint. Monitor and modify as needed. 6. Keep it simple – easy to track, make progress and follow through. Your Financial Plan

3. Specific – do not plan to save for a new car Measureable – save $50 per week for a new car Realistic – I make $150 per week and need $20/week for my cell, spend $50 per week on myself, and save $30 per week. Implement plan and be firm with yourself!! Adjust as you change the big ticket items you are saving for Adjust as you reach your goals Adjust as your income changes Your Financial Goals

4. Cash flow – how much money you bring in and spend during a time period Income – money coming in. What you earn; net income WorkingWeekly AllowanceBi-weekly Gifts**Monthly Selling your things**Irregular Expenses – money going out. What you are spending. Class survey 1. Did my spending reflect what is important to me? 2. Two years from now, which of these purchases will still mean something to me? 3. Would I be embarrassed if my family and friends saw my list? 4. What percentage of my spending is for necessities? Determine Your Cash Flow

5. Estimate – educated guess based on information you have. Approx. how much do you expect to earn and spend during this time period. Cash flow statement – summary of your receipts, payments and income. Fixed expenses – expenses that stay the same month to month Variable expenses – expenses that change month to month Periodic expenses – expenses that are paid at different points during the year Emergency fund – planning for unexpected expenses Savings – separate account for personal item and future Expenses

6. Needs – things you must have. Simple forms. Wants – things you would like to have. Organizing Expenses

7. Net cash flow – the difference between your expenses and income Surplus – when your income > expenses Deficit – when your expenses > income Discretionary income – money left over after paying for your essential expenses Budget variance – the difference between the budgeted amount to spend and the actual amount you spend Net Cash Flow

9. Using Your Budget Personal Financial Statement – document with information about a persons current financial position and summarizes income and spending. Net worth – reflected on your balance sheet, shows the difference between what you own and owe. Assets – items of value that a person possesses; cash, real estate, investments, possessions Liquid assets – cash and items than can be quickly converted to cash Real estate – land and structures a person owns Market value – the price at which your real estate would sell Personal possessions – belongings other than real estate Investments – retirement, stocks, bonds

10. Debt ratio – liabilities dividend/net worth Compares total what you owe by what youre worth Lower the better Liquidity ratio (not a %) – liquid assets/monthly expenses Indicates # of months you can still pay expenses in a financial emergency Higher the better Debt-payments ratio – monthly credit payments/net income How much of your earnings goes towards paying debts < 20% is ideal Savings ratio – Savings each month/gross income What you save compared to what you make At least 10% is ideal Evaluating Your Financial Progress

11. Liabilities – debts you owe Current liabilities –short-term debts to be paid within a year Long term liabilities – debts that do not have to be repaid for at least a year Discretionary income – money left over after paying your expenses/liabilities Insolvency – when your liabilities >assets Using Your Budget

12. http://www.kiplinger.com/tools/cashflow.html http://www.calculatorweb.com/calculators/budgetc alc/ http://www.calculatorweb.com/calculators/budgetc alc/ http://www.saveandinvest.org/web/groups/foundati on/@foundation/documents/foundation/p118408.pd f go to page 11 http://www.saveandinvest.org/web/groups/foundati on/@foundation/documents/foundation/p118408.pd f www.billmonk.com Personal Statement Resources

13. Checks, ATM, prepaid cards Daily Cash Regular savings, MMA Savings Credit Cards Credit Regular, Online, Automatic, Phone, M.O. Checking Financial services for the short-term Financial Services & Institutions

14. OtherInvestment Credit services Savings CDs, Bonds Cash & home loans Tax prep, insurance Mutual funds, advice Financial services for the long term Financial Services & Institutions

15. Savings account – deposit money for safekeeping. Banks use about 90% of your money for loans. Interest – cost of loans Withdrawal limit Checking account – able to withdraw, pay bills, make purchases, use checks daily Checks – written request from your bank to issue it to someone else Payee – person who check is made out to Payer – issuer of the check Debit card – allows electronic transaction from checking account Direct deposit Automatic payment Basic Banking Concepts

16. Commercial Banks – accept deposits, make loans Privately owned For profit Most influential to economy Highly regulated by the Fed & FDIC S&L – originally setup to provide mortgages to those who could not be approved by commercial banks Today, offers similar services to commercial banks Regulated and insured by government Credit Unions – nonprofit, owned/operated by users members are part owner Offer high dividends/lower interest rates Member eligibility – what do the have in common Regulated and insured by government Banks, Savings & Loan Associations, Credit Unions Types of financial institutions

17. 1. Most expensive financial institutions in the U.S. 2. Charges fees 3. Payday lenders – make short term, small loans to people until they receive their paycheck (2 weeks) 4. Target: low income people; welfare, military, little savings, live paycheck to paycheck 5. Typically cannot pay in timeframe renew loan 6. Multiple issue (average 9x/yr)/renewal fees high rates 7. Cycle of debt 8. Pay a fee of up to $30/week = 900% interest/year Payday Lenders and Check Cashing Companies Types of financial institutions

18. Small cash advance – usually $500 >. Borrower gives lender a postdated check in amount of loan Borrow receives cash, less fees (up to 15%) At date of paycheck (next pay; 2 weeks) personal check is cashed or loan is renewed – rolling over Option to write check for new loan in order to pay previous - back to back transaction www.cashnetusa.com What is a payday loan? Types of financial institutions

19. Fees are about $15 for every $100 borrowed Fees charged daily/weekly Borrow $500 for two weeks @ $10 per $100 per week = $50 in one week or $100 in two weeks Cash is not instant; fees are charged to rush transaction Some companies penalize you for paying early; do not want to lose their interest payment On average, Americans often use 12 transactions to pay back a $300 loan, = up to $600 in the end What are costs of payday loans? Types of financial institutions

20. Deposit – addition of funds to your account balance Withdrawal – cash taken out of bank account Debit – any transaction that removes funds from your account; withdrawals, payment with ATM, check writing, fees charged to checking account Credit – any positive addition to your account; deposits, returns Transfer – movement of funds from one account to another Loan – temporary transfer of money from one person or institution to another Financial transactions – exchange of money between 2 or more businesses or individuals. Types of Banking Transactions

21. ACH – electronic system for transferring money between banks; called electronic funds transfer ACH payments include: Payroll direct deposits SS and other government deposits Consumer payments (automatic) Business to business payments E-checks E-commerce payments Fed, state, local taxes Replaces writing paper checks Automated Clearing House – The Fed & NACHA Types of Banking Transactions

22. See account, make transfers, payments, check history, pay bills Register with username, password, pin, security questions Proceed with caution when using public computers Contact bank immediately with problems and/or concerns Online Banking & Account Protection

23. FDIC is an independent government agency FDIC preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks for up to $250,000 They identify, monitor and address risks to the deposit insurance funds They limit the effect on the economy and the financial system when a bank fails The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category FDIC calculator Federal Deposit Insurance Corp.

24. Single Accounts (owned by one person with no beneficiaries): $250,000 per owner Joint Accounts (two or more persons with no beneficiaries): $250,000 per co-owner IRAs and other certain retirement accounts: $250,000 per owner Revocable trust accounts: Each owner is insured up to $250,000 for each unique eligible beneficiary named or identified in the revocable trust, subject to specific limitations and requirements Basic Coverage Limits FDIC

25. If you go to a bank to open a checking account, what paperwork will you need? What are some terms and conditions of Free checking accounts? Interest-earning checking accounts? Joint checking accounts What information is listed on a check? What financial services are offered with checking accounts? Please research these topics and create your own notes. Types of Checking Accounts

26. Checks may come free when opening an account Some accounts require you to pay to print checks with your contact info Sometimes there are fees attached to using checks Checks can be personalized and come with carbonless copy sheets – duplicate checks Checks and Debit cards Checking Account Tools

27. Used just as you do a credit card – purchases or withdraw from ATM Money is taken immediately out of account – no postdate Some banks limit the total amount to spend or WD in a day Fees may apply per use or annually Fast and convenient Must record transactions ATMs are commonly found in many practical locations Fees applied for using ATMs outside of your bank Debit Cards Checking Account Tools

28. Since 2004, regulations made it easier for companies to process checks electronically Image of check is scanned and processed immediately Floating check – writing a check without the money in account, but putting it in by the time the check reached your bank Common practice before electronic checks If check is deposited into bank of which it wasnt written, may take a day to process Debits and cash withdrawals are transacted and reflected immediately How checks and debits are processed Checking Account Tools

29. Monthly fees – maintenance of account, keeping funds under minimum required ATM Fees – for using ATMs of other banks, charged by your and the other bank Bank of America Online bill-pay fees – replaces mailed, written checks; flat monthly fee or waived Overdraft/NSF fees – balances below zero; $30-$30 per day. Charges for bounced check; charged twice Stop-payment feed – Change your mind about written check or scheduled payment, stop-pay order is issued. Typical fee is $25; good for lost, incorrectly written checks Only 45% of banks still offer free checking Types of Checking Account Fees What Are All Those Fees?

30. 1. Early account closure fee. 2. Monthly or annual maintenance fee. 3. Minimum balance fee. 4. Returned deposit fee. 5. Foreign transaction fee. 6. Lost debit card fee 7. Paper statement fee 8. Redeeming rewards points fee 9. Returned mail fee 10. Human teller fee http://money.usnews.com/money/personal-finance/articles/2012/08/10/10-annoying- bank-feesand-how-to-avoid-them 10 Annoying Bank Fees – How to Avoid Them

31. Minimum deposit Signature card Starter checks Personalized checks (order/pay) Checkbook register/checkbook cover ATM card What You Need, What You Get

32. Number/Code: If you've written a check, put the check number here. Or use a transaction code: DC for Debit Card, ATM or a cash withdrawal, D for Deposit, and T for a transfer to your savings account, etc. Date: Always record the date of anything you do. Description of transaction: Business name, other info Payment/Debit: Here you record the amounts of money going out of your account. Deposit/Credit: Here you record the amounts of money coming into your account. Balance: Recalculate new balance after transaction has been made Sample Check Register

33. Use ink Write legibly No spaces after writing Sign per signature card Writing Checks

34. Postdate – check written with a date that will occur in the future. Banks do not hold postdated checks. Writing to Cash or a payee Write dollar amount in words with cents as fraction Include number dollar amount Sign Memo line Mistakes = new check Write VOID across all old, unused checks Endorse – authorization of deposit of check Sign back of check per signature card Include account number Do not go below line Writing/Endorsing Checks

35. Endorse here For Deposit only Special Endorsement – Pay to the order of (business), then sign (signature of payee) Special Endorsements

36. To make a deposit you need a deposit slip Printed with your name, acct #. Or find blank at bank Amount of cash, checks, subtotal, less cash, total Submit all cash, endorsed checks with slip Receive receipt of transaction Notify bank with any discrepancies Making a Deposit Checking Account Activity

37. Reconciling – matching your records with bank records Compare entries in your register or spreadsheet with statement or online account Outstanding checks – have yet to appear on statement because they have not been endorsed Outstanding deposits – have yet to be shown due to time lag Compare ending balances Check your math!! Check your inputs!! Check for fees/charges Check type of payment Call bank to confirm Reconciling Checking Account Activity