Financial Fitness for Life Training Conference Becoming a Smart Money Manager

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Financial Fitness for LifeTraining
ConferenceBecoming a Smart Money Manager
University of Illinois at Urbana-Champaign
College of Agricultural, Consumer and
Environmental Sciences United States Department
of Agriculture Local Extension Councils
Cooperating University of Illinois Extension
provides equal opportunities in programs and
employment.
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Funding for this workshop is provided by
National Council on Economic Education US Dept
of Education University of Illinois Extension
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Instructors

• Dr. Angela Lyons, Assistant Professor, University
  of Illinois Urbana-Champaign [phone]
  anglyons_at_uiuc.edu
• Debra Bartman, Extension Educator, Quad
  Cities Center
  [phone] (x217) dbartman_at_uiuc.edu
• Patricia Hildebrand, Extension Educator,
  Effingham Extension Center
  [phone] phildebr_at_uiuc.edu

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Anecdotal Storiesfrom Real Students
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Objectives

• Introduce
• (1) Financial Fitness for Life
• (2) Saving and Investing
• (3) Budgeting
• (4) Credit Reports and Credit Scores
• (5) NEFE HSFPP
• Experience activities to use in the classroom
• Answer questions about curriculum and other
  resources

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You will receive

• Curricula with lessons and activities to use in
  the classroom
• 6 CPDUs
• Network of colleagues to share experiences
• Resources available at U of I Extension

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Financial Fitness for Life

• Overview
• Teacher Guide
• Student Workouts
• Parents Guide
• CD-Rom and web links

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http//fffl.ncee.net
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• 5 Themes and 22 Lessons
• The Economic Way of Thinking
• Earning Income
• Saving
• Spending and Using Credit
• Money Management

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• Each lesson includes
• Fitness Focus (lesson description and objectives)
• Workout (warm-up, exercise, cool down)
• Visuals
• Student Exercises
• Family Activities

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• Meets national and most state content standards
  in 4 critical areas
• Economics
• Language Arts
• Mathematics
• Personal Finance

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FFFL Part 1(Lessons 1, 3, 8, 10, and 14)
How to Really Be a Millionaire

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The Millionaire Game

• The Rules
• For each statement, answer TRUE or FALSE.
• For each correct answer, give yourself 5 points.
• For each incorrect answer, take away 5 points.
• For any 5 statements, you may use your
  Millionaire card. If you answer correctly, you
  receive 10 points. If not, you lose 10 points.

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Lets Get Started.

• Question 1
• Most millionaires are college graduates.

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• Answer 1
• TRUE

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• Question 2
• Most millionaires work fewer than 40 hours a
  week.

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• Answer 2
• FALSE

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• Question 3
• More than half of all millionaires never
  received money from a trust fund or estate.

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• Answer 3
• TRUE

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• Question 4
• More millionaires have American Express Gold
  Cards than Sears cards.

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• Answer 4
• FALSE

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• Question 5
• More millionaires drive Fords than Cadillacs.

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• Answer 5
• TRUE

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• Question 6
• Most millionaires work in glamorous jobs, such
  as sports, entertainment, or high tech.

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• Answer 6
• FALSE

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• Question 7
• Most millionaires work for big Fortune 500
  companies.

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• Answer 7
• FALSE

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• Question 8
• Many poor people become millionaires by winning
  the lottery.

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• Answer 8
• FALSE

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• Question 9
• College graduates earn about 65 more than high
  school graduates earn.

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• Answer 9
• TRUE

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• Question 10
• If an average 18-year-old high school graduate
  spends as much as an average high school dropout
  until both are 67 years old, but the high school
  graduate invests the difference in his or her
  earnings at 8 annual interest, the high school
  graduate would have 5,500,000.

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• Answer 10
• TRUE

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• Question 11
• Day traders usually beat the stock market and
  many of them become millionaires.

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• Answer 11
• FALSE

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• Question 12
• If you want to be a millionaire, avoid the risky
  stock market.

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• Answer 12
• FALSE

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• Question 13
• At age 18, you decide not to smoke and save
  1.50 a day. You invest this 1.50 a day at 8
  annual interest until you are 67. At age 67,
  your savings from not smoking are almost
  300,000.

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• Answer 13
• TRUE

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• Question 14
• If you save 2,000 a year from age 22 to age 65
  at 8 annual interest, your savings will be over
  700,000 at age 65.

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• Answer 14
• TRUE

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• Question 15
• Single people are more often millionaires than
  married people.

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• Answer 15
• FALSE

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Lesson 8 Spending vs. Saving

The road to wealth.
begins with saving,then investing.
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Managing money well means taking things one
step at a time.
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The factors that affect how much savings grow
are

• Time
• The earlier or longer you save,
  the more savings you will have.
• Investment Size
• The more you save each year from your
• income, the more savings you will have.
• Rate of Return
• The higher the interest rate or rate of
• return, the more savings you will have.

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Exercise 8.2A Tale of Two Savers
Time Value of Money
The earlier you save, the more s you will have.
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Cool Million calculator www.myfico.com/CreditEd
ucation/Calculators/Millionaire.aspx
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Other Calculators Mortgage Auto Loan Debit and
Credit Cards Saving Personal Finance Investment Re
tirement
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Exercise 8.3Why It Pays to Save Early and Often
Rule of 72
Or, how long it takes for savings to grow to
double your money
Divide 72 by the interest rate. Example72 ? 6
? 12 years
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Activity (Exercise 10.1)

• Investment Bingo

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FFFL Lessons

• Grades 9-12
• Lesson 1, How to Really Be a Millionaire
• Lesson 3, Decision Making
• Lesson 8, Whats the Cost of Spending and Saving?
• Lesson 10, Investment Bingo
• Lesson 14, All About Interest
• Grades 6-8
• Lesson 7, p. 61-64, Types of Savings
• Lesson 8, p. 65-81, Simple and Compound Interest

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FFFL Part 2(Lesson 20)
Budgets are Beautiful!

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Creating a Spending Plan (Your Financial Plan)

• Identify your financial goals.
• Determine the time frame for your budget annual,
  by academic term, monthly.
• Take stock of where youre currently at.
• Estimate your available financial resources.
• Calculate your expenses.
• Do the math.

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• Subtract expenses from resources.
• Decide how much to borrow.
• Borrow only what you can afford to pay back.
• Note that your loans will be repaid with your
  FUTURE income.

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Set Your Financial Goals

• Types of goals
• Short-term (1 year or less)
• Medium term (1-5 years)
• Long-term (5 years or more)
• Identify goals and write them down.
• Prioritize your goals.
• Develop strategies to achieve your goals.
• Reassess your goals periodically.
• ACTIVITY Financial Goal
  Worksheets

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Identify and Prioritize Your Goals

• What do you want to buy after you graduate?
• How soon do you hope to pay off any student loan
  or other education-related debt you have
  incurred?
• What kind of lifestyle do you want?
• Where do you want to live?
• What are your hopes for a family?
• Where do you want to work?
• Where do you want to retire?
• What kind of lifestyle do you want in retirement?

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When creating a spending plan.

• Set limits and prioritize.
• Know your limits.
• Learn by doing!
• Get some practical experience.

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When estimating your resources.

• REMEMBER
• Borrowed funds are NOT your resources!!!

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When calculating expenses.

• Be honest and realistic.
• Distinguish between needs and wants.
• Consider fixed and variable (flexible) expenses.
• Pay yourself first (PYF)

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Can you cut expenses?

• Find one or more roommates to share living
  expenses.
• Eat at cheaper places when dining out cook at
  home.
• Have only one phone.
• Dress for less.
• Clip and use coupons.
• Dont buy a new car.
• Beware of buying for convenience.
• Avoid credit card debt.

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Saving Dollars When You Dont Have a Dime to
Spare
Break a habit! Do without! Dont buy!
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Budgeting Really Does Work

• A successful budget should
• Help increase savings
• Inhibit impulsive spending
• Determine what you can afford
• Identify expenses that can be reduced
• Repay debt
• EVIDENCE BYU Financial Path to Graduation

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Its not all about finances.

• Emotions and decision making
• Family communication
• Purpose and value of money
• Financial habits and financial socialization

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Methods for Tracking Spending

• Personal financial software programs
  (Quicken or Microsoft Money have built-in
  budget-making tools that can create your budget
  for you.)
• PowerPay (Utah State University)
• Worksheets / spreadsheets
• Online budget planning calculators
• Envelope method

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www.powerpay.org
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PowerPay Spending Plan PowerSave Calculators Educ
ation Center
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Basic Spending Plan Extended Spending Plan
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PowerSave
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Calculators
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Education Center
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Access Group, Inc. http//www.accessgroup.org/Stud
ent-Loans/learn-about-loans/wise-borrower-tutorial
.htm
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(No Transcript)
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Calculators Interest Rate Comparison
Calculator In-School Budget Calculator Loan
Repayment Calculator Out-of-School Budget
Calculator
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Money 101 Making a Budget http//cgi.money.cnn.c
om/tools/instantbudget/instantbudget_101.jsp
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www.finaid.org/calculators College Cost
Projector Savings Plan Designer Expected Family
Contribution and Financial Aid Calculator Loan
Calculators Budgeting Calculators
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FFFL Lessons

• Grades 9-12
• Lesson 20, p. 98-101, Managing Your Money
• Grades 6-8
• Lesson 15, p. 128-134, Managing Cash

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An Activity

• The Bean Game!
• A simulation game where
• you learn how to prioritize
• and make spending choices
• based on whats important
• to you.

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Iowa State University Extension http//www.extensi
on.iastate.edu/finances/personal/childrenmoney/You
th.htm Spending Game Allowance Game
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http//www.extension.iastate.edu/Publications/PM1
103.pdf
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http//www.extension.iastate.edu/Publications/PM1
776.pdf
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Credit Reports and Credit Scores
FFFL Part 3(Lessons 11, 12, 13)
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How credit can affect your everyday life

• Getting a job
• Renting an apartment
• Getting a loan
• Buying a car
• Paying insurance
• Getting married!!!

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Take the Credit Challenge!Myths and Realities of
Credit

• The Rules
• For each statement, answer TRUE or FALSE.
• For each correct answer, give yourself 5 points.
• For each incorrect answer, take away 5 points.
• For any 5 statements, you may use your CREDIT
  card. If you answer correctly, you receive 10
  points. If not, you lose 10 points.

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Lets Get Started.

• Question 1
• Credit card companies only approve credit limits
  that an individual is able to afford.

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• Answer 1
• FALSE

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• Question 2
• After you take out a loan, a lender is not
  required to provide information to credit
  reporting agencies about the loan and your
  history of paying it back.

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• Answer 2
• TRUE

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• Question 3
• Approximately 10 of an individuals credit
  score is determined by their payment history.

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• Answer 3
• FALSE

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• Question 4
• Individuals are eligible to receive a free
  credit report once a year from each of the three
  credit reporting agencies.

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• Answer 4
• TRUE

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• Question 5
• Credit reports contain information on where an
  individual has lived, past employers, and annual
  income.

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• Answer 5
• FALSE

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• Question 6
• A potential employer is permitted to see an
  individuals credit report without his/her
  consent.

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• Answer 6
• FALSE

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• Question 7
• Requesting a copy of your own credit report can
  negatively affect your credit score.

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• Answer 7
• FALSE

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• Question 8
• Negative information, such as filing for
  bankruptcy, can remain on a credit report for up
  to 10 years.

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• Answer 8
• TRUE

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• Question 9
• By law, if an individual is unable to resolve a
  disputed item with a credit reporting agency,
  they have the right to delete the information
  from their credit report.

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• Answer 9
• FALSE

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• Question 10
• If an individual resolves an error on their
  credit report with one credit reporting agency,
  the same error will automatically be corrected by
  the other credit reporting agencies.

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• Answer 10
• FALSE

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What is a credit report?

• An evaluation of your credit experience.
• Similar to a report card.
• Your credit record includes
• Personal information
• Open lines of credit
• Payment history
• Inquiries
• Public record and collection items (bankruptcies,
  foreclosures, financial judgements)

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What info is not in your credit report?

• Race
• Religion
• Medical history
• Political affiliation
• Criminal records
• Annual income
• Checking or savings accounts

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Who has access to your credit report?

• Creditors
• Employers
• Insurance companies
• Certain professional organizations
• Courts
• IRS
• Collection agencies (i.e., CCCS)

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What is a credit score?

• A number that summarizes your level of
  creditworthiness.
• Your score depends on the credit scoring model
  used.
• FICO scores are the most common.
• Scores range from 300-850.
• Averages are between 690 and 740.
• Visit www.myfico.com for more information.

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FICO Score Ranges

• 20 are above 780
• 20 are between 740-780
• 20 are between 690-740
• 20 are between 620-690
• 20 are below 619

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FICO Credit Score Estimator www.myfico.com/fico
creditscoreestimator
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• Your credit score is used to set the price of
  your loan.
• Based on

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FICO Score Simulator Pay Bills on Time Pay
Down Balances on Credit Cards Pay Down Delinquent
Balances First Seek New Credit Transfer Credit
Card Balances Miss Payments Max Out Credit Cards
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Other Calculators Mortgage Auto Loan Debit and
Credit Cards Saving Personal Finance Investment Re
tirement
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• Understanding Your Credit Score
• www.myfico.com

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Checking Your Credit Report

• 3 major credit bureaus
• Equifax (Beacon score)
• (www.equifax.com, 1-800-685-1111)
• Experian (PLUS score)
• (www.experian.com, 1-888-397-3742)
• TransUnion (Empirica score)
• (www.transunion.com, 1-800-888-4213)

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Obtaining a FREE Credit Report www.annualcredi
treport.com
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Annual Credit Report Frequently Asked
Questions Contact Us About Us Fraud Alert
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An Activity

• Reading a Credit Report

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Sample Credit Report http//experian.com/credit
_report_basics/pdf/samplecreditreport1.pdf
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FFFL Evaluating Credit Reports

• Grades 9-12
• Ex. 13.1, p. 76
• Ex. 13.2, p. 79
• Illustration 13.1, p. 80-83
• Grades 6-8
• Lesson 13, p. 115-118
• Ex. 13.1A - 13.1E, p. 123-131

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FFFL Evaluating Credit Applications

• Grades 9-12
• Ex. 13.3, p. 84-85
• Ex. 12.1, p. 74-75
• Grades 6-8
• Lesson 13, p. 115-118
• Ex. 13.1A - 13.1E, p. 123-131

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Helpful Resources

• University of Illinois Extension
• Consumer and Family Economics
• www.ace.uiuc.edu/cfe
• National Council on Economic Education
• www.ncee.net
• Illinois Council on Economic Education
• www.econed-il.org

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University of Illinois Extension Consumer and
Family Economics www.ace.uiuc.edu/cfe
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NCEE www.ncee.net
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Contact Information

• Dr. Angela Lyons, Assistant Professor, University
  of Illinois Urbana-Champaign [phone]
  anglyons_at_uiuc.edu
• Debra Bartman, Extension Educator, Quad
  Cities Center
  [phone] (x217) dbartman_at_uiuc.edu
• Patricia Hildebrand, Extension Educator,
  Effingham Extension Center
  [phone] phildebr_at_uiuc.edu

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Questions