KEYS FOR FINANCIAL SUCCESS

A COURSE FOR PERSONAL FINANCIAL MANAGEMENT RICHARD K. MAUK, President

CONSUMER FINANCIAL EDUCATION FOUNDATION OF AMERICA, 2007

Member of AICCCA

INSTRUCTORS

RICHARD K. MAUK, PRESIDENT OF CFEFA JAN SPRUILL, CERTIFIED FINANCIAL HEALTH CARE COUNSELLOR ERA SELLERS, CERTIFICED FINANCIAL HEALTH CARE COUNSELLOR GAYLE LINVILLE, SUPERVISING CERTIFIED FINANCIAL HEALTH CARE COUNSELLOR SCOTT A. WHYRICK, VICE-PRESIDENT OF CFEFA AND CERTIFIED FINANCIAL HEALTH CARE COUNSELLOR

TABLE OF CONTENTS INTRODUCTION 4

SESSION 1 Understanding Debt-Being in Debt.5 SESSION 2 Creating an Effective Home Budget8 SESSION 3 Understanding How Credit Works.19 SESSION 4 Credit Reports..21 SESSION 5 -- Credit Scoring23 SESSION 6 - Planning for the Future.25 CONCLUSION..29 CODE CERTIFICATE.31 EVALUATION32

INTRODUCTION This workbook has been developed to accompany the classroom or DVD presentation of the course entitled Keys to Financial

Success. The workbook is intended to be a supplement to

content provided by the instructor, in person or on video. The following elements contained in the workbook will improve your understanding of the material and concepts presented by the instructor. Preview Objectives for each chapter. Guide for note taking in the form of Keys for Success. As you follow along with the instructors presentation, fill in the blank spaces to emphasize key concepts. Supplemental Information Worksheets Please take advantage of the information contained in the workbook. We welcome your evaluation of this and other materials at the conclusion of the course.

SESSION 1 UNDERSTANDING DEBT- BEING IN DEBT Instructors: Richard K. Mauk and Jan Spruill OBJECTIVES At the conclusion of this session, the student will be able to: Identify types of consumer debt Identify factors that contribute to consumer debt in the United States. Describe psychological patterns identified in the practice of overspending. List examples of predatory practices used by some lenders to exploit borrowers. Discuss the financial, lifestyle, and emotional changes that may occur as a result of being in debt. Understand debt collection and how to deal with it.

SESSION 1 UNDERSTANDING DEBT- BEING IN DEBT KEYS TO FINANCIAL SUCCESS 1. are Four of the sources of consumer debt in the United States

2.

A person who (over)spends in order to cope with feelings of spending.

emptiness or depression has exhibited a pattern of

3. clothing, jewelry, etc.). 4.

spenders try to overcome feelings

of inferiority by spending excessively on appearance items (hair,

Punishment of another person through destructive spending spending.

is an example of

5. debt problem.

lenders use a variety of unethical

practices to exploit borrowers, expanding the national consumer

LIST THE CODE GIVEN IN THE VIDEO For The First Session

1.__________________

SESSION 2 CREATING AN EFFECTIVE HOME BUDGET Instructors: Richard K. Mauk and Era Sellers OBJECTIVES At the conclusion of this session, the student will be able to: Identify methods used to establish a picture of monthly income and expenses. Describe process to identify patterns in spending. List strategies to modify spending in an effort to reduce monthly expenses. Establish an achievable goal that can be met in a month through budgeting. Three months? One year?

SESSION 2 CREATING AN EFFECTIVE HOME BUDGET KEYS TO FINANCIAL SUCCESS 1. A is a financial statement of

estimated income and expenses for an individual or family of a specific period of time. 2. An will help

cut expenses by identifying less costly ways of buying essentials. 3. % of current monthly spending can be

reduced with no noticeable change in lifestyle.

HOME BUDGETING What is a budget? A budget is a savings and spending plan. It is a step-by-step plan for meeting expenses in a given period of time. Why Budget? Knowing what your income and expenses are every month will help you take control of your financial situation. How will budgeting help you take control of your financial situation? o A budget will reduce anxiety. o A budget will give you a sense of control over your money. To complete a budget, you must first know what you spend your money on daily. The best way to track your spending is to keep a Daily Spending Diary. Write down everything that you spend your money on for one month. See example of a Daily Spending Diary on next page.

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My Daily Spending Diary

Items Purchased Sunday Daily Total

Monday

Tuesday

Wednesday

Thursday

Friday

Saturday

Total Amount Spent This Week $______________________

Once you know what you spend your money on monthly, it is time to prepare a budget. Lets review the items listed on this budget.

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Housing o Mortgage/rent should not exceed 32.7% of your gross monthly income. Gross income is the amount shown on your check stub prior to taxes and other deductions. See national budget guidelines provided. For example, you monthly gross income is $3,000. You would multiply $3,000 X .327 = $981.00. o 2nd Mortgage o Association Fees o Land or lot Payment o Property Tax (if not escrowed) If not included with mortgage divide total amount mount by 12 to get the yearly average.) o Electric I suggest that you get on the budget plan if it is available in your area. o o o o o o o o o o Gas Water/Sewer Telephone/Cell/Pager Cable Home Maintenance/Security System Computer/Online Garbage Service (due every three months) Fire Dues Homeowners Ins. (if not escrowed) Pest Control

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Food o Groceries o School Lunches o Food at Work o Eating Out/Entertainment o Other Automobile o Car payment # 1 o Car payment #2 o Gasoline o Car Repairs/Maintenance o Car Tag (s) yearly amount o Bus/Taxi/Parking o Auto Insurance (monthly amount) Personal o o o o o o o o o Personal Items/Toiletries Barber/Beauty Shop Allowance for Children Child care Child support (if not payroll deducted) Alimony Tobacco/Alcohol Clothing Dry Cleanings/Laundry

Medical o Doctors Visits (yearly Avg.) To get the yearly average, total cost of visit for the year and divide by 12 months. o Medication (monthly) o Dentist (yearly average)
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Insurance o Life Insurance (if not payroll deducted) o Health (if not payroll deducted) Education o Tuition/School Fees o School Books/Supplies o Professional Dues Gifts & Donations o o o o Birthday (yearly average) Christmas Other Gifts (Anniversaries, mothers/fathers day, etc..) Church Donations/Charities

Entertainment o Movies/video rental/play station o Books/magazines/CDs Other o o o o o Savings/Emergency Funds Postage/P.O. Box Rentals/Safety Deposit Box Pet Supplies/Vet bills (yearly average/12 months) Fee on checking account Other/credit card debts/payday loans.

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Summary Monthly Gross Income _____________________ Monthly Net Income _______________________ Total Expenses ___________________________ (subtract from Net income)

Questions 1. Do you have a negative cash-flow? If the answer is yes, then consider the following options to help balance the budget. o Take a lunch from home. o Cut off cable or down grade cable. o Car pool o Get a part-time job if possible. 2. Do you have a positive cash-flow? If the answer is yes, then consider the following options. o Place the extra income in your savings/emergency funds. o Place more money in retirement plan.

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BUDGET WORK SHEET (MONTHLY EXPENSES) Housing

Mortgage/Rent ___________________________ 2nd Mortgage _____________________________ Association fees __________________________ Land or lot payment _______________________ Property Tax (if not escrowed) _______________ Electric _________________________________ Gas ____________________________________ Water/Sewer _____________________________ Telephone/Cell/Pager ______________________ Cable ___________________________________ Home Maintenance/Security System __________ Computer/Online __________________________ Garbage service ___________________________ Fire Dues ________________________________ Homeowners Insurance (if not escrowed) _______ Pest Control/Termite Bond __________________

MEDICAL
Doctor Visits (yearly Average) ________________ Medication (monthly) _______________________ Dentist (yearly average) ______________________ INSURANCE Life (if not payroll deducted) __________________ Health (if not payroll deducted) ________________ EDUCATION Tuition/School Fees _________________________ School Books/Supplies ______________________ Profession Dues ____________________________ GIFTS & DONATIONS Birthday (yearly average) ____________________ Christmas _________________________________ Other gifts ________________________________ (Anniversaries, mother/father day, etc..) Church Donation/Charities ___________________ ENTERTAINMENT Movies/Video Rentals/Play Station _____________ Books/Magazines/CDs _______________________ OTHER Savings/Emergency Funds ____________________ Postage/PO Box Rental/Safety Deposit Box ______ Pet Supplies/Vet Bills _______________________ (yearly average/12 months) Fee on Checking Account ____________________ Other/Credit Cards Debts/Payday Loans _________

FOOD Groceries ________________________________ School lunches ____________________________ Food at Work _____________________________ Eating Out/Entertainment ____________________ Other ____________________________________ AUTOMOBILE Car Payment #1 ____________________________ Car Payment #2 ____________________________ Gasoline __________________________________ Car Repairs/Maintenance _____________________ Car Tag(s) yearly amount _____________________ Bus/Taxi/Parking ___________________________ Auto Insurance (monthly amount) ______________ PERSONAL Personal Items/Toiletries ______________________ Barber/Beauty Shop __________________________ Allowance for Children _______________________ Child Care __________________________________ Child Support _______________________________ (if not payroll deducted) Alimony ___________________________________ Tobacco/Alcohol ____________________________ Clothing ___________________________________ Dry Cleaning/Laundry ________________________

SUMMARY Gross Income __________________ Net Monthly Income _____________ Total Expenses _________________

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BUDGETING TOOL

Monthly Payment Schedule

In conclusion, a budget is a road map to give you a snap shot of where you are financially. Always review your budget prior to taking on additional debt. Establish an emergency savings fund as a number one priority because you never know when you will need it. As a rule of thumb, save at least three to six months of your monthly net income.

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Tools For Budgeting

Monthly Payment Schedule Use different colored ink for income and expenses (example: black for income and red for expenses). List ALL bills, even the little ones. Where applicable keep track of remaining balance due. Income Bills/Expenses Due Date Amt. Due Amt. Paid Remaining Bal.

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LIST THE CODE GIVEN IN THE VIDEO FOR SECTION 2 2._______________ SESSION 3 UNDERSTANDING HOW CREDIT WORKS Instructors: Richard K. Mauk and Gayle Linville OBJECTIVES At the conclusion of this session, the student will be able to: Identify the four basic types of credit available to consumers in the United States. Describe common methods used to calculate credit card finance charges. Excluding finance charges, list some of the various fees and expenses that may be associated with consumer credit cards. Discuss strategies for the prevention of credit card debt.

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SESSION 3 UNDERSTANDING HOW CREDIT WORKS KEYS TO FINANCIAL SUCCESS 1. There are four types of credit extended to consumers:

2.

Credit cards may cause debt problems quickly because they .

allow impulse purchasing and may carry

3.

The

is the

percentage of interest that is charged in exchange for the ability to use a credit card. 4. Two features that might make a credit card undesirable are:

LIST THE CODE GIVEN IN THE VIDEO FOR SECTION 3 3._________________

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SESSION 4 CREDIT REPORTS Instructor: Richard K. Mauk OBJECTIVES At the conclusion of this session, the student will be able to: Identify acceptable uses for consumer credit reports. List the contents of a consumer credit report. Know what responsibilities a credit bureau has Names, addresses and web sites of the credit bureaus Know how to correct errors How to prevent identity theft

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SESSION 4 CREDIT REPORTS KEYS TO FINANCIAL SUCCESS 1. A is designed to assist a consumer in developing a reputable credit history. 2. The oversees

how consumer credit information is handled. 3. More than % of consumer reports may contain

some type of error.

CREDIT REPORTING AGENCIES

EXPERIAN NATIONAL CONSUMER ASSISTANCE CENTER * www.experian.com TRANSUNION CORPORATION *www.transunion.com EQQUIFAX CREDIT INFORMATION SERVICE *www.equifax.com

FREE CREDIT REPORT

www.annualcreditreport.com LIST THE CODES GIVEN IN THE VIDEO 4._____________________
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SESSION 5 CREDIT SCORING Instructor: Richard K. Mauk OBJECTIVES At the conclusion of this session, the student will be able to: Identify the five most common reasons that credit is not extended by a lender. Describe the factors that establish creditworthiness. List consumer rights regarding credit. Tips on raising a credit score

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SESSION 5 CREDIT SCORING and ESTABLISHING NEW CREDIT KEYS TO FINANCIAL SUCCESS 1. The primary reason that new credit is denied is

2.

Being creditworthy depends on factors such as:

3.

Credit scores are based on the following five categories:

_______________;_______________;__________________; _______________;and _______________. LIST THE CODE GIVEN IN THE VIDEO 5.________________

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SESSION 6 PLANNING FOR THE FUTURE Instructor: Scott A. Whyrick OBJECTIVES At the conclusion of this session, the student will be able to: * * * Understand the four steps to planning Describe the necessity to plan for debt, insurance, investments, and your decedent's estate Understand what the most important financial goals are

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SESSION 6 PLANNING FOR THE FUTURE There are four (4) steps in planning for your future: 1. 2. 3. 4. State Goals in specific terms Create a plan of how to achieve each goal Evaluate your progress towards that goal Decide whether to keep working toward the goal or focus on a new one Three financial goals to consider: 1. Education: With the cost of a college education rising yearly, it is impossible for most people to attend college without some type of financial assistance. Student loans should be considered an investment for higher earning potential. Keep in mind however that most federally insured student loans cannot be discharged in bankruptcy. 2. Buying a home: Homeownership is a hallmark of financial success. It requires saving for a down payment and qualifying for a mortgage that you can afford. The interest

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paid on the mortgage is deductible on your income taxes. Homeownership offers a sense of stability and security that renting cannot. 3. Saving for retirement: Today's living expenses often exceed what we receive in social security income. More than ever, people need to understand that retirement income must be supplemented by savings and investments. Options include 401(k)s, Individual Retirement Accounts (IRAs), and mutual funds. Additional goals to consider: 1. Debt Planning: Debt is a part of life. Mortgages, car loans and lines of credit make it possible for us to attain life's necessities when we don't have tremendous amounts of cash at our disposal. It is important to keep our debt in check and not let it get out of hand. Shopping and qualifying for the best low interest loans and credit cards with consumer-friendly terms is key in debt planning. Using these for essential purchases rather than for non essential items is also important.

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2.

Insurance planning also plays an important role in the lifecycle. When people are young, their ability to work and earn income is a valuable asset. When people are injured, grow old or die, they need insurance to cover these expenses. Disability, life, casualty and health insurance are ways to guard against these losses.

3.

Investment Planning: Saving a percentage of one's income every year is only part of the retirement equation. The money saved should be invested to produce a desired dividend.

4.

Estate Planning:

Even when you die, financial obligations

can devastate your family. Preparing a will and a burial plan should also be considered.

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CONCLUSION FINANCIAL HEALTH CHECKLIST Answer Yes or No to the following: I prioritize payment for the important things I am able to consistently save at least 5% of my income Currently I have adequate health, life, home and auto insurance I balance my checkbook every month or balance my debit purchases once a week I am generous with my money I consult with my spouse/partner before making purchases I am currently satisfied with my level of income For the most part, I enjoy my job Before I go shopping, I plan I understand the terms and conditions of all my lending agreements I establish short and long term financial goals I regularly monitor and adjust my financial goals to measure my level of success and to meet changing needs I have a spending plan and retirement plan

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Monetary Assessment
Think about your current finances: What level of income do you need to live the kind of life you imagine for yourself? Do you currently have that level of income? If not, what could you do to accomplish that goal? In your opinion, what is the number one cause of credit card debt? Describe your family's money history. Were resources abundant or were times tough? Was money spent wisely or frivolously? Has this history affected you in any way? What do you spend most of your money on? Do you have money left over at the end of the month? Are you generous or miserly?

Please complete the code certificate on the following page, complete with the codes and your bankruptcy case number and submit to our website. We also have an evaluation page following the code certificate that we would like for you to complete and submit.

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