Money Management Getting a strong start 2 Achieving financial goals 3 Planning a secure future A project of Consumer Action | Funded by Consumer Action’s Money Management Project © 2010 Rev. 2/16

Money Management 1: Getting a strong start Money Management Getting a Strong Start

Pay stub Net vs. gross Withholding Voluntary deductions Earning income Money Management Getting a Strong Start

Tax rates Money Management Getting a Strong Start

Tax tips Stay organized and don’t wait until April Be aware of credits and deductions Plan for health insurance Money Management Getting a Strong Start

Checking and savings accounts Money Management Getting a Strong Start Bank vs. credit union Compare options Account opening requirements

Money Management Getting a Strong Start

Budgeting Money Management Getting a Strong Start

Budgeting tips Identify wants and needs Write it down (paper or electronic budget forms) Convert income/expenses to monthly amounts Track your spending Adjust as needed Money Management Getting a Strong Start

Building your savings Money Management Getting a Strong Start

Employment, insurance, home rental, utilities, wireless service Achieve goals Pay over time Emergencies Importance of good credit Money Management Getting a Strong Start

Financial cost of bad credit 48-month car loan of $20,000 Credit score: Interest rate:9.364%3.26% Monthly payment:$501 $445 Total interest paid:$4,056$1,359 Cost of a low credit score: $2,697 (almost $700 per year additional interest!) Source: Scoring is on a scale of 350 to Money Management Getting a Strong Start

FICO score calculation

Establishing and building good credit Money Management Getting a Strong Start

Installment vs. revolving Interest rate (APR) and type (fixed/variable) Repayment term (length of credit) Fees Money Management Getting a Strong Start

Credit, debit and prepaid cards Money Management Getting a Strong Start

Financing a vehicle

Congratulations! You’ve completed Part 1 of the Money Management training. Money Management Getting a Strong Start

Money Management Two: Achieving financial goals Money Management Achieving Financial Goals

Updating your budget Money Management Achieving Financial Goals

Saving for a purpose Goal Total needed Current savings Need to save Target date Savings/ month Savings/pa y period Buy a computer $800$240$56010 months$56$28 Pay off credit card $3,000$0$3, months (2½ yrs) $100$50 Home down- payment $30,000$0$30, months (5 yrs) $500$250 Money Management Achieving Financial Goals

Savings vehicles Passbook or statement savings account Money market account (MMA) Certificate of deposit (CD) Individual development account (IDA) U.S. savings bond Money Management Achieving Financial Goals

The power of starting early Investor:DwayneDan Monthly deposit:$50$100 Starting age:3050 Ending age:7070 Years of deposits:4020 Annual return*:8%8% Total invested:$24,000$24,000 Final balance:$174,575$58,907 Dan would have to save $300/month to achieve the same balance as Dwayne. *Compounded monthly Money Management Achieving Financial Goals

Saving vs. investing Annual returnBalance in 10 yearsTypes of investments 1%*$11,051Savings accounts 3%$13,493Longer-term CDs 5%$16,470Certain bonds 7%$20,096Stocks 9%$24,513Stocks Value of $10,000 in 10 years at hypothetical rates of return * All rates are hypothetical; for example, interest rates on standard savings accounts and MMAs at the time of publication ranged from around.01% to around 1% Money Management Achieving Financial Goals

Life stage investing Asset30s50s70s Cash5%10%20% Bonds10%20%45% Stocks85%70%35% Hypothetical asset allocation through life stages Money Management Achieving Financial Goals

Individual retirement account (IRA) TraditionalRoth No income limits on contributionsIncome limits on contributions Tax-deductible contributions*After-tax contributions Tax-deferred growthTax-free growth Min. required distributions at 70½No required distributions Taxable withdrawalsTax-free withdrawals Money Management Achieving Financial Goals *For those who meet requirements

Retirement plan advantages Targeted monthly savings:$125 Years until income needed:30 Hypothetical rate of return:8.00% Your current tax rate:15% After-tax value in 30 years:$125,327 Tax-deferred value in 30 years:$187,536 Assumes a 15 percent federal tax rate. Taxes must be paid on the earnings when you withdraw the money from the tax-deferred account. Source: Tax deferred investment calculator, Money Management Achieving Financial Goals

Key considerations for investors Objective Time frame Expected return Risk tolerance Tax consequences Money Management Achieving Financial Goals

Lenders Loan types Loan terms Loan approval Mortgages Money Management Achieving Financial Goals

Successful homeownership Money Management Achieving Financial Goals

Protecting your assets

Money Management Achieving Financial Goals Be covered

Money Management Achieving Financial Goals

Congratulations! You’ve completed Part 2 of the Money Management training. Money Management Achieving Financial Goals

Money Management Three: Planning a secure future Money Management Planning a Secure Future

Retirement challenges

Funding your retirement Money Management Planning a Secure Future

My Social Security

Tapping home equity Home equity loan typeProsCons Home equity loan Lower interest rate Tax deductible Fixed payments Secured by home Interest on entire balance Home equity line of credit (HELOC) Lower interest rate Tax deductible Pay interest only on what you use Secured by home Fluctuating payments Money Management Planning a Secure Future

Right for you? Money Management Planning a Secure Future

Managing medical expenses Money Management Planning a Secure Future

Long-term care insurance Money Management Planning a Secure Future

Stay adequately insured Audit insurance coverage regularly Don’t be underinsured Consider “umbrella” policy Money Management Planning a Secure Future

Raising grandchildren Money Management Planning a Secure Future

Congratulations! You’ve completed Part 3 of the Money Management training. Money Management Planning a Secure Future