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1 Zach Teutsch, Director Investor Education Project National Labor College Financial Empowerment.

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Presentation on theme: "1 Zach Teutsch, Director Investor Education Project National Labor College Financial Empowerment."— Presentation transcript:

1 1 Zach Teutsch, Director Investor Education Project National Labor College Financial Empowerment

2 Responding to the Foreclosure Crisis 2

3 Origins of the Foreclosure Crisis: Productivity Grew—Wages Didn’t 3

4 The Housing Market Bubble 4

5 Homeowners are not to blame!  The foreclosure crisis was caused by:  Wall Street Greed  Regulatory Failures  Unstable Economy 5

6 Advice for Homeowners: Tip #1: Start Early  The sooner you take action, the more likely you will be able to save your home.  Homeowners should take action when they first have trouble paying their mortgage  Do not wait for a foreclosure filing before seeking help 6

7 Advice for Homeowners: Tip #2: Seek Help  Seek help - you wouldn’t try to negotiate a grievance with the boss alone  Work with a non-profit housing counselor who is familiar with loan modifications  Free help is available from government-qualified housing counselors  Be wary of scams offering help for a fee 7

8 Advice for Homeowners: Tip#3: Stick With It  The mortgage modification process can take a long time to complete  Keep copies - the bank may ask for the same document multiple times  Continue to seek a modification even if you also receive a foreclosure notice  Stay in contact with your bank and HUD approved housing counselor 8

9 Finding a housing counselor  Be wary of scams asking for money  Free home counseling is available to homeowners facing foreclosure  Housing and Urban Development maintains a list of free, government-approved counselors   Hotline Number: (888) 995-HOPE 9

10 Neighborhood Assistance Corporation of America  Founded with assistance of the Boston Hotel and Restaurant Employees Union Local 26  Save the Dream mortgage modification events  Organizes campaigns to challenge predatory lending and encourage banks to modify mortgages  Visit or call (888) 10

11 Affordable Housing Centers of America  Formerly the ACORN Housing Corporation  Home Equity Loss Prevention (HELP) program  Offices in 19 cities, 14 states, and DC  Help homeowners in person, via phone or via internet  Visit or call (888) 11

12 Union Plus--Save My Home Hotline  Housing counselors are available 24/7  Run by Money Management International (MMI) with 46 years of credit counseling experience  If you have a Union Plus Mortgage, you may also be eligible for additional assistance  Visit or call (866) 12

13 13 Questions?

14 Do you save money every paycheck? 14 1. Yes 2. No

15 Is an increasing percentage of your income going towards paying down debts? 15 1. Yes 2. No

16 Is your savings cushion adequate? 16 1. Yes 2. No

17 Can you only make the minimum payments on your credit cards? 17 1. Yes 2. No

18 Are you often late paying bills? 18 1. Yes 2. No

19 Are you using credit to pay for things you used to buy with cash? 19 1. Yes 2. No

20 If you lost your job, would you be under immediate financial strain? 20 1. Yes 2. No

21 Do you know how much you owe? 21 1. Yes 2. No

22 Are you being threatened by collectors with possible legal action? 22 1. Yes 2. No

23 Financial Security: The Basics 23

24 Becoming Financially Secure  There are no secret shortcuts to financially security.  The keys are patience, time and discipline. 24

25 Four Steps to Financial Security  Spend Less Than You Earn  Eliminate Debt  Emergency Fund  Invest 25

26 Spend Less Than You Earn  Every month we get richer or poorer.  If we take in more money than we spend, we get richer.  If we take in less than we get poorer.  We can build a surplus at any salary. 26

27 Saving $1,000 Per Year  Ditch the latte  Nix the lottery tickets  Bring a brown bag lunch sometimes  Reduce smoking  Get the right cell phone plan 27 What are some ways to Save $3 per day?

28 Expensive Ways to Spend Money  More than 20% of Americans use Payday Lenders, Pawnshops, etc.  Over half of households carry a credit card balance from month-to- month.  These are ways that we end up spending much more than the price of items we buy.  If we pay only the minimum on our credit cards we end up paying as much as 5 times our original bill. 28

29 Credit Card Companies  How do credit card companies make profits?  What sort of customers do they love?  Why? 29

30 Eliminate Debt  High-Interest Debt is Crippling  Eliminate Debt as Soon as Possible.  Two Approaches  Highest Interest Rate First  Smallest Balance First  Don’t Let the Credit Card Company Own Your Life. 30

31 Emergency Fund  Before We Talk About Investments…  Emergency Fund  Experts Say That We Should Set Aside 2-6 Months Salary in case there are unexpected expenses. 31

32 Retirement at a Glance 32

33 33 Personal Investments Social Security Pensions The 3-Legged Retirement Stool

34 One-Legged Retirement Approach  No Pension  No Social Security  Just Savings/Investment  Wobbly!  Unstable!  Avoid! 34

35 The 2-Legged Retirement Approach  Most Americans have only two legs to their retirement.  Social Security  Personal Savings  Stable as long as it leans on something:  Generous employer contributions  Strong stock market performance  Be Careful! 35

36 Defined Benefit Pensions Are Important!  Defined Benefit = payments are guaranteed.  Pension benefit is based on salary and years served.  The stock market doesn’t impact your ability to retire.  Employer takes on risk, not employee.  Money managed by investment professionals. 36

37 Financial Security: Investing 37

38 Time To Invest  Once we have gotten rid of our debt and setup our emergency fund, we can set aside money every month for investment.  Automate so we don’t have to remember every month.  Auto-pay ourselves first! 38

39 Money Grows  “The most powerful force in the universe is compounding interest.”  The sooner you start saving and investing, the sooner you will have the resources you need. 39

40 $1,000 Over 30 Years 40

41 $1,000 A Year for 30 Years 41

42 Mutual Funds  Each person owns a share of the basket of investments  Professionally managed Fund types:  Actively managed funds (staff buy and sell stocks or bonds to try to make money)  Index funds (passive, fees are usually lower) 42

43 Index Funds  Lower Fees  Lower Taxes  Diversified 43

44 Asset Allocation  Asset classes are different types of investments - stocks, bonds, real estate, etc  Allocation means the percent of total money available that you invest in each class.  The investment mix should give you the highest return for the lowest level of risk for your particular circumstance. 44 “Do not put all your eggs in one basket”

45 Age and Asset Allocation The younger you are the more risk should be in your portfolio (including Deferred Comp) to increase it’s likely return. The older you are the more conservative you should be so you can minimize risk. 45

46 46 Questions?

47 47 401(k) Plans

48  Two Kinds of Tax Advantages  Help Now  401(k)  403(b)  457  Help Later  Roth IRA  Roth 401(k) 48

49 401(k) Plans  Contain Mutual Funds  Look for Low Fees.  Diversify Yourself or Choose a Pre-Diversified Fund. 49

50 401(k) Plans  Is it a Good Deal?  Match?  Mutual Fund Options?  Fees 50

51 Smart Choices in Difficult Times  Try hard to conserve funds meant for retirement.  Understand the tax bite  Withdrawals before 59½ can carry a 20-30% tax that can be avoided but by waiting until 59½.  20% will be held by plan manager to insure tax payment.  If you rollover, do it directly to avoid taxes. 51

52 52 Wrapping Up

53 Other Resources  Investor Workshops:  Available 24/7  Workshops in chunks of 20 minutes or less.  Objective. User-friendly. 53

54 Putting Learning Into Practice  Write down two things you’d like to accomplish financially in the next three months on the worksheet.  Put your address on the envelope.  Put the worksheet in the envelope, seal it, and return it to me. 54

55 Acknowledgements This program is made possible by a generous grant from the FINRA Investor Education Foundation. The FINRA Investor Education Foundation, supports educational projects that give investors the tools and information they need to better understand the basic principles of saving and investing. For details about grant programs and other new initiatives of the Foundation, visit 55

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