Prepared by: Sissy R. Osteen, Ph.D., CFP® (Resource Management Specialist), Oklahoma State University, Stillwater, OK 74078-6122, (405) 744-8029

Lesson presented: March 2014

Time needed to teach lesson: 30 minutes to 1 hour

Introduction

Everyday is a good day to focus on maximizing the family's financial habits. Especially when it improves the bottom line. This lesson will highlight five strategies that could be adopted for attaining better financial health and lessening stress related to finances. The lesson is set up as follows:

·  Ice breaker activity to start the meeting

·  Information on 5 new habits

·  Tips on how to be successful with change

·  Resources for more information

·  Evaluation

Group leaders can cover all issues or just focus on certain issues given time constraints and the wishes of the group.

Ice breaker

Have members break into small groups of 3-4 and briefly discuss a habit they have tried to develop to reduce expenses or increase savings. As a group decide on the best tip and report it back to the whole group.

Slides

1.  Today we will focus on five management strategies that can improve financial health and provide you with more control. Tracking, budgeting, setting money aside, checking your credit report, and knowing what is in you report are practical ways for you to be more involved in starting new habits related to money.

2.  Tracking is a method for documenting expenses with direct deposit of paychecks, debit card, online access, and ATM withdrawals it is very easy for consumers to lose touch with finances. When money stays in the background we lose sight of what we are actually spending. Tracking can provide insight and help us plug the hole on money leaks (those small amounts that seem to go nowhere). No tracking system will be effective if we don’t use it. What will work depends upon the individual. Some may want to record expenses on a tablet or even in a check register. Others may work better with a computer program like Excel or Quicken, or a phone app like mint.com or MYBUDGET-ONLINE.COM. The more you like the method, the more likely you are to continue using it.

3.  The information that is recorded by tracking should be broken down into categories like: housing, transportation, insurance, clothing, food, or entertainment. These categories should match ones found in a budget worksheet like the one in the fact sheet. It usually takes a month or two to get an accurate picture of your expenditures and spending habits.

4.  Budgeting is a written plan for how we spend and save money. Once you spend some time tracking expenses, you will be aware of current spending and able to set goals and construct a plan for future spending.

5.  The budget is composed of fixed expenses (mortgage, car payment, cable) and variable expenses (groceries, eating out, utilities), and periodic expenses (gifts, vacation, school expenses). The more fixed expenses you have, the harder it is to make changes. Variable expenses can be reduced through careful planning and control.

6.  Periodic expenses are the expenses that are most often ignored (until they come due) or they are charged to a credit card. You can use a calendar, or the worksheet found in the fact sheet to determine an actual amount to set aside each month into a separate account. Once the account balance reaches an adequate level, it can be used to pay the periodic expenses as they come along.

7.  Setting money aside: We just discussed one reason for setting money aside. Other reasons could include a major purchase, down payment, or goal that requires money. One way to handle this is to be clear on the total amount needed and the time available. Once this is determined, frequency of deposits and amounts can be set up.

8.  For example: Financial planners recommend setting aside 3-6 months’ worth of living expenses in an emergency fund. Nancy is widowed so since there is only 1 salary coming into the household she needs to set aside 6 months of living expenses. Her monthly living expenses are $1,235 per month for a total of $7,410. She is willing to take a year to build up this account so she will deposit $617.50 into her savings account each month.

9.  Ordering your credit report: All consumers have the right to 3 free copies of their credit report each year. There are three major credit reporting agencies: Experian, Equifax, and Transunion. Each must issue a free copy of your credit report annually. You don’t need to go to freecreditreport.com to get it. As a matter of fact, that is a credit monitoring service that will eventually cost money. Go to www.annualcreditreport.com to order your reports. You can order online and download, call, or order through the mail. If you order 1 free report every four months, you have the added bonus of monitoring your credit history.

10. Know what’s in your report. A credit report is a compilation of information that your creditors send to a credit reporting agency like Equifax. The report is divided into sections:

11. Personal information – name, aliases, current address, and previous address

12. Public records – civil claims, leins, bankruptcy, collections. Bankruptcy information can stay on your report 7-10 years.

13. Credit items (history) – a list of credit accounts, types of accounts, and payment history. This section will have account numbers, account names, account history, number of months reviewed, total amount of accounts, and total amounts of debt. This information stays on your report for seven years from the date of last activity. This section has a large affect upon your credit score, which is a formula used by the credit reporting agency to determine whether you are a credit risk. This score affects how much you pay for loans, credit cards, and even insurance.

14. Inquiries – This is a list of requests for your credit information. These requests can come from 1) a creditor you currently do business with 2) someone who wants to offer you credit (promotional) 3) your personal request for a free report 4) a creditor where you have applied for credit. The only ones that usually affect your credit score are those where you are shopping for credit.

15. Share resources for more information.

a.  The Federal Trade Commission provides excellent information about ordering, reviewing, and correcting mistakes in credit reports. www.ftc.gov

b.  www.MyFico.com provides information on how your credit report information can affect your credit score.

16. Give out the evaluation, collect them, and give them to your county educator.

17. Allow time for questions and comments

Oklahoma State University, U.S. Department of Agriculture, State and Local Governments Cooperating. The Oklahoma Cooperative Extension Service offers its programs to all eligible persons regardless of race, color, national origin, religion, sex, age, disability, or status as a veteran, and is an equal opportunity employer.