Getting Your Financial House in Order Hello, my name is _______. I’m a _______ , as well as a Member of The Society for Financial Awareness, commonly referred to as SOFA. We’re here as a 501(c)(3), with a Mission of ending Financial Illiteracy across America, one community at a time! Today we will be talking about Getting Your Financial House in Order.

WE WOULD LIKE TO WELCOME YOU TO TODAY’S WORKSHOP Thank You for joining us! Our hope today is to provide you with some valuable information, have some fun, and enjoy this next hour. Most importantly, I’d like to welcome you to today’s workshop. In this next hour, it is our sincere desire to provide you with some really interesting and informative information that should provide you with a lot of answers in your journey of your Financial Plan. Feel free to use the back of your Program Evaluation for notes. As to any questions that might pop up, please feel free to ask at any time during the presentation, so you don’t forget. 2016 | The Society for Financial Awareness

EVALUATION FORM Please review this form. I will be picking these up at the end of the workshop. Do note – the backside is to be used for your specific questions and issues. Pass out the Evaluation Form now and explain the Complimentary Consultation. * Do note – this slide follows the welcome slide. 2016 | The Society for Financial Awareness

Using Sound Financial Principles Make decisions with a firm commitment to: • Eliminate debt • Put your money to work for you • Accumulate wealth Using Sound Financial Principles 2016 | The Society for Financial Awareness

Taking advantage of temporary rate disparities, interest arbitrage is buying interest bearing notes on different exchanges simultaneously. • Transactions typically involve trading currencies from two different countries  • The trader assumes any of the risk associated with exchanging foreign currency Interest Arbitrage 2016 | The Society for Financial Awareness

Buying Your First Home Types of Mortgages Fixed Rate Mortgage Adjustable Rate mortgage Full Amortized Adjustable Rate Mortgage (ARM) Buying your first home is probably the most important investment you'll ever make, and selecting the right type of mortgage is an important part of getting your financial house in order. Buying Your First Home 2016 | The Society for Financial Awareness

Fixed Rate Mortgages Fixed rate mortgages have a constant interest rate and monthly payment amount, over the term of the loan.  Payments are calculated to payoff your balance by the end of the term  30 year fixed rate mortgages are the most common type of mortgage * Shorter-term, fixed rate mortgages often have lower interest rates. 2016 | The Society for Financial Awareness

Adjustable Rate Mortgages Unlike fixed rate mortgages that have the same interest rate over the time, adjustable rate mortgages offer an initial period with a fixed interest rate, that's often lower than a conventional mortgage. Initial monthly payments are lower, and following the initial period, the interest rate is calculated annually. While an adjustable rate mortgage is not for everyone, it may be an option for financing your home under certain circumstances. Adjustable Rate Mortgages 2016 | The Society for Financial Awareness

Fully Amortized Adjustable Rate Mortgage (ARM) The most common type of adjustable rate mortgage Monthly payment are calculated to payoff the balance at the end of the term, typically 30 years When the initial fixed interest rate period expires, your interest rate and payment adjusts according to specific rules A Fully Amortizing ARM typically has an interest rate cap 2016 | The Society for Financial Awareness

Fixed Rate Mortgages: Advantages • Payments remain the same, making it easy to stick to a monthly budget • No risk of interest rate increases over the term of your loan • Provides a sizable deduction on your federal tax return Fixed Rate Mortgages: Advantages 2016 | The Society for Financial Awareness

Adjustable Rate Mortgage: Advantages Initial monthly payments are lower More affordable with a principal reduction Can save you money if you plan to sell the home before your initial interest rate period ends You may be able to qualify for a higher loan amount and buy a larger, more expensive home If interest rates remain low, the overall cost of your mortgage is less than a traditional, fixed rate mortgage 2016 | The Society for Financial Awareness

Adjustable Rate Mortgage: Advantages Type of ARM Number of Months w/Fixed Interest Rate 10/1 120 month fixed; adjusts annually for the remained of the term 7/1 84 months fixed; adjusts annually for the remainder of the term 5/1 60 months fixed; adjusts annually for the remainder of the term 3/1 36 months fixed; adjusts annually for the remainder of the term 2016 | The Society for Financial Awareness

Adjustable Rate Mortgages: Important Things to Consider If interest rates increase after your initial fixed rate period, your monthly payments increase Your increases in income may not keep pace with interest rate increases Since you pay less interest, your federal income tax deduction is typically lower than with a fixed rate mortgage Prepayment penalties are often assessed for paying off your loan early A prepayment penalty may be assessed if you sell or refinance the home before paying off your mortgage 2016 | The Society for Financial Awareness

30 Year Fixed Rate Mortgages: Example Loan Interest Total Payment • A Closed-end loan (homebuyer cannot change number or amount of payments) • Money Goes In & CANNOT Come Out Principal loan amount $200,000 Interest rate 6% Monthly payment $1,199 30 years x 12 months                                           x360 Total repayment $431,640 Principle Loan Amount        -$200,000 Total Interest Paid $231,640 30 Year Fixed Rate Mortgages: Example 2016 | The Society for Financial Awareness

How Amortized Loans Work Principal Loan Amount $200,000 Interest Rate 6% Monthly Payment $1,199 Years Principal Interest Balance Equity Payment (1st Month) $199.10 $1,000 (2nd Month) 200.10 999 1 Year 210.33 988.77 197,543 2,457 14,389 5 Years 267.22 931.88 186,108 13,891 71,946 10 Years 360.44 838.66 167,371 32,628 143,891 21 Years 696.23 502.87 100,573 99,436 300,974 Total Repayment at the end of the 30 year term =  $431,677 2016 | The Society for Financial Awareness

Example Cont’d Amortized Loan With Principal Reduction *Savings in Interest: $23,303.93 (based on $5,000 extra principal payment on the 1st payment  of the loan)  Principal loan amount $200,000 With principal reduction $5,000 Interest rate 6% Monthly payment $1,199 Actual Savings $27,579.30 (23 payments of $1,199.10) Example Cont’d 2016 | The Society for Financial Awareness

Save by Making 1 Extra Payment Per Year Making just one extra payment could save you thousands of dollars and a few years worth of mortgage payments.  The question is: Will you make the extra payment? Tracking your progress is good motivation! Save by Making 1 Extra Payment Per Year 2016 | The Society for Financial Awareness

Saving Through Bi-Weekly Mortgage Payments What are bi-weekly mortgage payments? Since there are an average of 4.3 weeks in one month, paying half your monthly mortgage payment every two weeks gets you ahead on your loan. Similar results as the extra payment per year Locks you on track to save money on the overall cost of your mortgage Saving Through Bi-Weekly Mortgage Payments 2016 | The Society for Financial Awareness

Managing the Equity You Build in Your Home As long as your yield, or rate of return is higher than the net rate of your loan, you can be debt free on paper utilizing the following: Mutual Funds Stocks Other cash investments Goal: Mortgage Balance- Investment Balance At 6% your money can double in 12 years At 12% your money can double in 6 years *The Rule of 72 applies to compound interest and doubling time 2016 | The Society for Financial Awareness

Strategic Use of Your Tax Return Through the mortgage interest deduction on your federal tax return, you should get a sizable amount returned. Use it strategically: • Pay down debt • Make investments • Use your tax refund to offset you mortgage payments next year Strategic Use of Your Tax Return 2016 | The Society for Financial Awareness

Use Your Tax Return Wisely • A tax refund of $4,000/12 months = $333.33 toward each monthly mortgage payment  • If your payment = $1,199, use the interest you paid (and got back) to reduce your monthly mortgage payments to $865.67 Offset Monthly Mortgage Payments • Mutual Funds • Other cash investments Make Investments • Pay down one debt at a time • Use the money you save to pay down the next debt Pay Down Debt 2016 | The Society for Financial Awareness

Utilizing the Equity You Build in Your Home • Home Equity Line of Credit • Home Equity Loan • 2nd Mortgage Utilizing the Equity You Build in Your Home 2016 | The Society for Financial Awareness

Utilizing the Equity You Build in Your Home A home equity line of credit is open-ended: Money goes in Money can come out Interest is charged on the average daily balance Home equity loan is not a line of credit– use it to: Buy a second home Build a second home Make improvements to your first home 2nd Mortgage: Fixed Rate Works the same as your original mortgage 2016 | The Society for Financial Awareness

Example Using a Home Equity Line of Credit (HELOC) Total of 1st Mortgage $200,000 Pay from HELOC -5,000 New total on 1st Mortgage $195,000 HELOC Balance $5,000 *Total debt amount is the same Example 2016 | The Society for Financial Awareness

Advantages of Using a HELOC Takes advantage of the bank's money Total debt remains unchanged No savings used Advances your amortization schedule Cancels interest 2016 | The Society for Financial Awareness

Understanding Financial Principles Utilize the financial principles in this presentation to: • Eliminate debt • Put money to work for you • Accumulate wealth Understanding Financial Principles 2016 | The Society for Financial Awareness

Please take a moment to complete. I will be collecting these EVALUATION FORM Please take a moment to complete. I will be collecting these in a moment. If you need a pen, please let me know. Now is the time to promote the Evaluation Form and Complimentary Consultation. * Do note – this page is the 2nd to the last slide of your presentation. 2016 | The Society for Financial Awareness

Thank you for your time! Please complete your Program Evaluation. We will be picking them up shortly. Now would be a good time for me to answer any particular questions you may have. IMPORTANT: This is where you move from the front of the room, to the back by the door. This strategic location is where you will be picking up your Program Evaluations from your Attendees, who will be met by you at the door they’re leaving from. 28