Financial Education - The Service Collaborative of Western New York

Financial
Education
A Guide to Basic Finances for Everyone
Introduction
WHAT ARE YOUR GOALS?
Odds are you will need money to get there.
Sometimes, a new financial future may feel hopeless. This book will
guide you to achieving your goals by helping you fight back against an
unfair financial system and money habits that don’t get you closer to
where you want to be.
HOW WILL WE DO THIS?
Together, we will:
1.) Recognize our spending patterns and see if they work for us
(budgeting/savings)
2.) Know what place is a good fit for us to put our money
(banking)
3.) Understand our financial system and how to make it work for us
(credit)
1
2
Introduction
Money Memories
1.) What was your first memory related to money?
2.) Think about the family that raised you - what did you
notice about money issues/finances?
3.) What did you learn about money from your church?
from school? or any other place?
4.) What would the person closest to you say about your
financial habits/money situation?
3
Saving&
Budgeting
Recognize your spending patterns and see if they work for you
4
Saving & Budgeting
Pay Yourself First!
Treat your savings plan like another bill...
but it’s for you to enjoy!
Paying yourself first means that when you get money
(like a a paycheck, tax refund, cash gift), put some of that money in a
savings account before you pay your bills.
You are the most important person in your financial life. Paying
yourself first can help you with your own needs, goals, and feel safe
in in emergencies.
Set S.M.A.R.T. Goals:
Specific, Measureable, Achievable, Realistic, Timely
Example: I will save $15 each week toward holiday gifts for my
family by October 31st.
Write down your own S.M.A.R.T. goal!
Write down (2) things you will do this month to get closer
to that goal:
1.)
2.)
Saving & Budgeting
Savings Options
Pick the savings option that is right for you
STATEMENT SAVINGS ACCOUNT
Get paid for saving money! Banks and Credit Unions pay you money
(interest) to save your money with them in this basic savings
account form.You should not withdraw money from this account
more than four times each month to stick with your savings goals
and avoid fees.
CERTIFICATE OF DEPOSIT (CD)
This account pays higher interest than a regular savings account
because you agree not to take out any money for a period of time
that you choose.
Example: You agree to place $500 in your CD for a year and it
will earn much more interest than a statement savings account.
INDIVIDUAL DEVELOPMENT ACCOUNT (IDA)
IDAs are called matched savings accounts. When an account is
matched, it means another organization adds money to your
account as you save in it.
If you become part of a First Time Homebuyer’s Club, the
federal government will put $4 in your account for every $1 that
you save for a house! It’s the best savings deal around!
CLUB ACCOUNT
A Club Account lets you save for a specific purchase over time (like
holiday gifts or a beach vacation). The account is open for 1 year and
expires at a set date when you can remove your savings. This way,
you are able to put small amounts of money into this account over
the year and enjoy a large purchase without going into debt!
MONEY MARKET DEPOSIT ACCOUNT
An account that earns interest at a rate set by the bank and usually
limits the customer to a certain number of transactions within a
stated time period. Similar to a Certificate of Deposit.
5
6
Saving & Budgeting
What Do These Famous People
Have in Common?
1.
2.
3.
4.
Michael Jackson
Nicholas Cage
Mike Tyson
Nas
5.
6.
7.
8.
Kim Basinger
DMX
MC Hammer
Burt Reynolds
If you guessed that they are all millionaires you’re way off!
...They all went BROKE!
No matter how much money you make, it is still easy to spend
more than you have! A budget is the best way to control your
money so it doesn’t control you!
Use any of these ways to start budgeting today!
1. Keep a log of what you buy for a month
• Write it down in a notebook
• Use an app on your phone like “MoneyLover”
• Use free personal finance software from www.mint.com
2. Make a Budget
• Create a sheet to show how much you make each month and how
much you spend
3. Stick to It!
• Keep envelopes for your bills and put the money in them as soon as
you get paid!
• Make a payment calendar
• Sign-up for e-mail alerts from mint.com
Saving & Budgeting
Increasing Income & Resources
Your Money: how income supports could help you
JOB TRAINING
Buffalo Employment and Training Center | 716-856-5627
77 Goodell Street, Buffalo, NY 14203
Educational Opportunity Center | 716-851-2515
465 Washington Street, Buffalo, NY 14202
BENEFITS SCREENING
BFNC
716-856-0363
97 Lemon Street
Buffalo, NY 14204
Salvation Army
716-883-9800
960 Main Street
Buffalo, NY 14203
Catholic Charities
716-856-4494
525 Washington Street
Buffalo, NY 14203
Jericho Road
716-348-3000
184 Barton St.
Buffalo, NY 14213
International Institute
716-883-1900
864 Delaware Avenue
Buffalo, NY 14209
Matt Urban Institute
716-893-7222 x 310
385 Paderewski Dr.
Buffalo, NY 14202
UTILITY HELP
HEAP | 716-858-7644 | 78 Main Street, Buffalo, NY 14202
Catholic Charities | Neighbor for Neighbor Heat Fund | 716-856-4494
PUSH Green Buffalo | 716-886-1780
7
Monthly Expenses
8
MONTHLY BUDGET
Rent/Mortgage
Real Estate/School Taxes
Heat: Gas, oil, wood
Electricity
Other Utilities (cable/satellite TV, water, garbage)
Groceries
Insurance (auto, fire, renter’s/homeowner’s, life)
Medial Insurance
Medical Co-pays, prescriptions, braces, etc.
Telephone
Cell Phone
Transportation: gas, parking, bus fare, tolls
Auto Repairs
Clothing
Daycare/Babysitter
Tuition/Afterschool activities
Child Support/Alimony
Personal Care (haircuts, beauty salon, nails)
Entertainment: movies, dining
Dry Cleaning/Laundry
Newspapers/Magazines
Pets
Gifts
Tobacco/Alcohol
Church/Charities
Car Payment
Household Repairs
Rent to Own
Banking/Money Order Fees
Other
Total
Expenses
Amount
Monthly Income
Take Home Pay (Self)
Take Home Pay (Family)
Part time job (Who):
Support/Alimony
Pension
Social Security (how long)
Other Income
TANF (Cash assistance)
Food Stamps
Child Care Subsidy
Total
Income
Amount
Total Income
Total Expenses
Creditor Payment
Net Worth
9
10 Saving & Budgeting
Interest Matters
Getting rich slowly
Interest rates are low!
Why should I put my money in a savings account?
1.) INFLATION
Inflation is prices getting larger over time (around 3% each year)
This is why a car in 1969 cost $3,500 and cars now cost $25,000!
This means...
If you have $100 and you put it in a bank that gets 3.2% interest
(money being added to your money), after a year that $100 would
equal $103.2 just for sitting there (combats inflation)!
2.) EASIER TO KEEP FINANCIAL GOALS
If you saved $10 per week for your newborn child’s education, by
the time they turn 18, you will have saved $9,360. If you were to
save that same $10 each week for 18 years with an insured
savings account with 2% interest, you would have $11,371.37!
3.) SOME SAVINGS OPTIONS EARN MORE MONEY
THAN OTHERS!
When you are looking at savings options, look at the
Annual Percentage Yield (APY).
This number tells you what you will earn in a year after the
compounding. Compounding is the interest being added to
your money. If you have $100 in a savings account earning
3% interest, that interest may be added every 3 months (which
is quarterly), annually, or daily and lets you earn more in the future
because your extra money from interest starts to earn interest!
Saving & Budgeting 11
12 Saving & Budgeting
Home Ownership
FIrst Home Clubs are worth it!
FIRST HOME CLUBS
The Federal Home Loan Bank of New York started the FIRST
HOME CLUB (FHC) to help low-income first-time homebuyers
to save for a new home. FHC offers help with down payment and
closing cost for first-time homebuyers who qualify. They also help
people follow a savings plan and join an approved homeownership
counseling program.
HOUSEHOLD REQUIREMENTS
• They are a first-time homebuyer
• Live and buy their home in a HLB district area
(New Jersey, New York, Puerto Rico and the US Virgin Islands)
• Income is 80% or less of the area median income
• Open a savings account with a bank/credit union member and
agree to save monthly for 10-24 months
• Do an approved homebuyer counseling program
• Finish the FHC Enrollment Terms and Conditions Agreement
• Get mortgage financing from the member
• At closing, complete a subordinate mortgage for subsidy funds
for 5 years
ELIGIBLE PROPERTIES
One-to-four family homes, co-ops, condos, and mobile homes
attached to a permanent foundation on buyer owned land within
the HLB’s district area (New Jersey, New York, Puerto Rico, and the
U.S.Virgin Islands).
Saving & Budgeting 13
WNY First Home Clubs
Steps to Participating in a WNY First Home Club:
1.) Get Preapproved for a Mortgage Loan by a participating bank
2.) Join a First Home Club
3.) Attend First Home Club counseling sessions at a participating
community based organization
PARTICIPATING BANKS
SEFCU
First Niagara
Buffalo branch:
598 Main Street
Buffalo, NY 14202
Member Solution Center:
1-800-727-3328
Various Buffalo locations
Customer Contact line:
1-800-421-0004
www.sefcu.com
M & T Bank
www.mtb.com
Various Buffalo locations
Mortgage line:
1-800-724-2224
www.fnfg.com
Summit Federal
Credit Union
www.summitfcu.org
Buffalo branch:
2290 Delaware Ave
Delaware Commons Plaza
Buffalo, NY 14216
Mortgage Hotline:
1-800-836-7328
extension 7017
PARTICIPATING COMMUNITY ORGANIZATIONS
Belmont Housing Resources of WNY
www.belmonthousingwny.org
Central Office:
1195 Main Street, Buffalo, NY 14209-2196
716-884-7791
14 Saving & Budgeting
First Time Home
PROGRAM
ERIE COUNTY
TOWN OF AMHERST
FUNDING
AVAILABILITY
PROG
DETA
Available thro
Up to $14,000 available for
County excep
down payment and closing
Amherst, Ch
costs depending on income;
Hamburg and
forgivable after 5 years
$5,000 deferred loan for
closing costs
Only availabl
costs/escrow;
own down
Up to $5,000 for down
payment and closing costs
Minimum
Contribution
case-by-case
$5,000 deferred loan for
down payment and closing
costs
Only availabl
costs/escrow;
own down
$10,000 purchase
reduction; forgivable after
5 years
Purchase r
subsidy; buyer
for closing c
TOWN OF
TONAWANDA
$7,500 deferred loan for
down payment and closing
costs
Closing cost p
down p
RURAL
DEVELOPMENT
Farmers Home
Administration mortgages
low as 1% for 38 years
Available in r
trac
CITY OF BUFFALO
TOWN OF
CHEEKTOWAGA
TOWN OF HAMBURG
Saving & Budgeting 15
ebuyer Programs
GRAM
AILS
GUIDLINES
CONTACT
oughout Erie
pt for Buffalo,
heektowaga,
d Tonawanda
Under 80% of the Area
Median Income Limits;
1st Time Homebuyer
Erie County Department of
Environment and Planning
858-2733
le for closing
; buyer needs
n payment
Under 80% of the Area
Median Income Limits;
1st Time Homebuyer
Amherst Community Development
631-7082
m Buyer
n determined
e, at least 1%
Under 80% of the Area
Median Income Limits;
1st Time Homebuyer
Office of Strategic Planning
851-4769
le for closing
; buyer needs
n payment
Under 80% of the Area
Median Income Limits;
1st Time Homebuyer
Tonawanda Community
Development
897-7200
reduction
r responsible
cost/escrow
Under 80% of the Area
Median Income Limits;
1st Time Homebuyer
Hamburg Community
Development
648-6216
paid first; then
payment
Under 80% of the Area
Median Income Limits;
1st Time Homebuyer
Tonawanda Community
Development
871-8847 ext. 2
rural census
cks
Under 80% of the Area
Median Income Limits;
1st Time Homebuyer
(585) 343-9167 ext. 2200
16 Saving & Budgeting
NOTES:
Goal Amount:_______
Goal Date to Finish: _______
Date:________ Amount Saved: __________
Date:________ Amount Saved: __________
Date:________ Amount Saved: __________
Date:________ Amount Saved: __________
17
Banking
Know what place is a good fit for us to put your money
18 Banking
Do You Prefer to Keep Your
Money Under Your Mattress?
Now that you have an idea of how much you want to save,
how do you plan on saving it?
Why use a Bank or Credit Union:
SAFETY
If you keep your money in a bank, no matter what it is safe (up to
$250,000). This means your money is safe from robbery, loss, and
natural disasters because the government will pay you back.
CONVENIENCE
Check your account online, have your paycheck put in directly
(direct deposit), or buy things with a debit card or check
INFLATION
You can make money just for letting your savings sit in a bank or
credit union! This way your money will grow and fight rising prices
each year (inflation).
COST!
Cashing a check costs you money! Keep the money that belongs to
you by using a bank or credit union.
Banking 19
It’s Your Money,
Keep More of It!
Bank vs. Cash Checking Services:
Check Cashing*
Banking
Check-cashing fees
($5 per check):
4 x $5 = $20 per month
12 x $20 = $240 per year
Monthly Fee:
$5 per month
12 x $5 = $60 per year
Money Order fees ($1):
5 x $1 = $5 per month
12 x $5 = $60 per year
Box of Checks:
$18 per year
Total:
$300
Total:
$78
Savings: $222!
*This example is of a small check cashing fee.The fees can be much higher,
sometimes as high as $30 or even 20 percent of the check’s value! If you still
want to use this service try to go to a chain grocery store; they have low fees.
20 Banking
Are You Mad at Banks??
Try a CREDIT UNION!
Credit Unions
are not-for-profit places where you can keep your money.
This means any money they make has to be given back to the
community. Here is a list of credit unions anyone can join who
lives, works, plays or worships in Buffalo.
Buffalo Community
Federal Credit Unions
Buffalo Community FCU | 716 854.2458
Riverside FCU | 716-875-1747
SEFCU | 518-452-8183
Summit FCU | 585-453-7000
Banking 21
Using an Account
It’s as Easy as 1-2-3!
1.) Choose the best financial institution for you.
• www.findabetterbank.com
• See our list of local credit unions
• See Account Selection Guide to learn more about what they offer and how much it costs.
2. Open the Account
Bring your Social Security card and a picture ID with you to the
bank. Let the teller know you are there to open an account.
3. Make Deposits/Withdrawals!
Be sure to keep track of how much money you have in your
account — this is your balance. Then you won’t take out more
money than you have in the bank —this is called overdrafting.
The average fee for overdrafting an account is $35 per item.
22 Banking
23
Credit
Understand our financial system and how make it work for you
24 Credit
Credit Cards
Your best friend or your worst enemy...
1.) What’s the difference between a debit card and credit card?
A debit card takes your money from your account, you are not
borrowing money.
A credit card allows you to borrow as little or as much as you
want up to a certain limit. If you don’t pay everything you owe at the
end of the month you get hit with fees and interest charges.
2.) Is having a credit card a bad idea?
Not at all! But paying your bill late is. There are secured credit cards
which can help you build credit without the fear of going into debt.
Bankrate.com has a great list of secured credit cards. But watch out
for high fees!
3.) Why is having good credit important?
Credit can affect you getting employment, housing, and insurance.
It also allows you to pay for things over time and can be helpful in
emergencies.
Credit 25
Credit Scores
Figuring out the FICO
What is a Credit Score?
A credit score is a number that shows what is on your credit report.
It is made up of your Capacity (can you make payments now and in the
future), Capital (what you have and what you are worth), Collateral
(property or things you own that can get you a loan), and Character (making payments on time in the past).The FICO Score is the most common
type and it can be from 400-850.A higher score means your credit is
good. If you have good credit you will be more likely to borrow money
and get it for a lower interest rate.
What if I’ve never had a credit card or loan?
You will have a very low credit score. Having no credit is the same as
having bad credit because nobody will know if you are a responsible
with the money you borrow if you have never borrowed money.
How is the FICO Score made?
This graph shows what is used to find out your score.
26 Credit
Your Credit Report
What is a credit report?
Businesses look at your credit report to see if they want to lend you
money, lease you an apartment, or give you a job.
Your credit report shows: Who you are, how much debt you have, if
you make payments on time, whether you have bad information about
you in public records (like bankruptcy)
I don’t have a credit card or loans, do I still need to order my
credit report?
Answer: Yes! 15-45% of credit reports have errors on them so you
may have someone else’s car payment attached to your name!
What is a Credit Reporting Agency?
There are 3 major agencies: Experian, Equifax and TransUnion.
They receive information from creditors and send it back to you as a
credit report.
Credit 27
How Do I See My
Credit Report?
Go online or call
www.annualcreditreport.com
1-877-322-8228
Mail a Credit Request Form
(from a secure mailbox)
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348
Be sure to fill in a bubble next to one of the three credit reporting agencies
(Experian, Equifax, or TransUnion).You can receive one free report from each
of the agencies per year!
28 Credit
Checklist to Fix Mistakes on
Your Credit Report
Order a free copy of your credit report from each of the three
reporting agencies in one of three ways:
1) www.annualcreditreport.com
OR
2) Call toll-free 877-322-8228
OR
3) Complete and mail a Request Form to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348
If there is an error, tell the credit reporting agency about it:
• You can start fixing an error online on the websites for all three agencies
(Experian, Equifax, TransUnion)
• If you want to do it online on the credit-reporting agency website, send a letter
after and request a receipt for proof.
• If it’s been more than 90 days since you requested your free report, you may
have to buy one from each agency:
Experian (www.experian.com, 888-397-3742)
Equifax (www.equifax.com, 800-685-1111)
TransUnion (www.transunion.com, 800-916-8800)
• Include in the letter:
• Your name and address
• List the incorrect information, explain why and ask that it be removed
• Include copies of your credit report with the incorrect item highlighted
• If you choose to fix it by phone, keep detailed notes and follow the phone call with a letter
Tell the business about the mistake
• Send a letter to the business (bank, car dealer, or student loan office, etc) telling
them that you want to change the information that they have reported
• Explain what information is wrong and ask them to stop reporting it.
• Include copies of information that proves you’re right.
Keep track of everything! Make copies of all the letters you send!
Credit 29
Fixing Mistakes on
Your Credit Report
Sample dispute letter
30 Credit
Rent to Own
Stand against the abuse!
In an ad for a rent-to-own company, an LCD television is promoted
for $39.99 a week for 104 weeks.
This “limited time offer” totals $4,159, more than twice the
$1,890 price we found for the very same model online.
Rent-to-own companies talk about hot products with “great”
payment plans, but you end up paying TWO-THREE times more
than the item costs elsewhere! This is why less than 1 of every
4 people that use rent-to-own companies end up owning their
item in the end.
Purchase the item by copying the “low monthly payments” offered
and place into savings.You’ll own the item faster and at a MUCH
cheaper price!
There are other options!
Secured Credit Cards
These cards are for those who
have no credit history or bad
credit.
High Yield Savings Account
See our list of local credit unions
Cheap Bank Loans
See our list of local credit unions
Credit 31
Financial Rehab
Take your life back from debt!
Steps to Financial Fixing
1.) Look at Your Situation
Look at how much you make and how much you spend.
Track your spending by using free personal finance software
(www.mint.com), a small notebook, or adding up your receipts
each week.
2.) Make a Financial Fixing Plan
Find out your financial goals and write them down.
Follow a spending plan by using a monthly payment schedule or
calendar, computer spreadsheet, or money envelopes if you pay
your bills in cash.
Contact your credit businesses (be ready to explain your situation
and what you are doing to try and pay them, have a plan for when
you can pay).
Use the “avalanche method” of paying down debt. This means pay
off the debt with the highest interest rate first, then pay the debt
with the 2nd highest rate until that debt is paid off. Keep doing this
until you are debt free!
3.) Start your Plan, Reevaluate Periodically
Remember: There are credit repair scams out there!
NO ONE can remove accurate information from your credit
report, create a new identity for you, and it can take years to repair
bad credit. There are only two ways to get out of debt, make more
or spend less.
Most Importantly: Don’t be upset by setbacks! You can be debt free!
32 Credit
Financia
You don’t have
PROGRAM
Belmont Housing Resources
of WNY
1195 Main Street
Buffalo, NY 14209
716-884-7791
Buffalo Urban League
15 E Genessee St.
Buffalo, NY 14203
716-854-7625
BFNC Hope Coaches
716-887-2627
Belmont has free on
Foreclosure Preve
Reverse Mortgages
and fin
The Buffalo Urban L
They teach: financial
credit, saving and in
Hope Financial Coa
credits, teach mone
m
Child and Family Services
844 Delaware Ave.
Buffalo, NY 14209
716-335-7400
Child and Family
workshops on to
Purchase a Good Us
and Cr
Consumer Credit Counseling
Services
716-712-2060
Consumer Credit C
face financial cou
programs that help
They help with
budgeting, cred
foreclosur
Credit 33
al Rehab
e to do it alone!
DESCRIPTION
COST
ne-on-one counseling on Home Buying,
ention, Budgeting/Credit Management,
s and Affordable Rental Opportunities
nancial education classes.
FREE
League has financial education services.
management, the basics of banking and
nvestment, building wealth and money
management.
FREE
aches offer help in finding benefits and
ey managing, ways to save, offer tips to
making more money.
FREE
Services have free financial literacy
opics like Defensive Driving, How to
sed Car,Youth Employment and Savings,
redit When Credit is Due.
FREE
Counseling services have local, face-tounseling while having knowledge and
p individuals and households in WNY.
h financial education, one-on-one
dit report review, and bankruptcy,
re, and mortgage counseling.
$25 per session
(offers discount in
certain cases)