Dollars and Sense Managing Your Finances

Presented by:

Carlos Ayestas, Account Manager

Citibank-The Student Loan Corporation

February - 2008

Debt Management: Minding Your Dollars and Sense

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“Spending Plan“

• Keep it Simple

• Make a List

• Prioritize

• Plan Ahead

• Prepare for Emergencies

• Track Spending

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Parts of a Spending Plan

» Basic components of a budget:

• Income – money you get.

• Expenses – what you spend your money on.

» Subcomponents of a budget:

• Regular expenses, Savings, Entertainment, Emergencies.

» Ask yourself:

• Who is the budget for? Are you single, married or have kids?

• What are your expense and savings goals?

• Are they short term or long term?

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$AVING$

• “Savings” are funds placed in a safe place that allow you to access your money at any time

• Savings provide funds for emergency situations

• Rule of Thumb: 3 months of your income should be in savings (monthly income X 3)

Example: monthly income = $1,875, after taxes, X 3 = $5,625 in savings for emergencies

• Basic Types of Savings

» Checking account

» Savings account

– Certificates of Deposit

» Investments

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How to $ave

• Pay yourself first

• Save all unexpected income

• Have a “nothing week”, Don’t open

your wallet

• Collect your pocket change

• Break an expensive habit

• Bring your lunch to school - avoid

restaurants

• Use coupons

• Shop at outlets

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Make It A Priority To Save Every Month

For example, if you save $35 a week (just $5 a day), you’ll have:

• $1,825 after 1 year

• $9,215 after 5 years

• $18,250 after 10 years

With interest, you’ll have well over $20,000 in just 10 years!!!

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Monitoring Your Debt

• In the U.S., we have the largest consumer debt of any country in the world. For every $100 earned, the typical American spends $140. Mostly with credit cards.

• Typically you should be concerned if you are spending more than 10 percent of your gross income on unsecured debt payments.

• Being in debt is stressful for a lot of reasons. The main one is loss of control over your financial life.

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Developing Good Financial Habits

• Plan for Future Purchases and Expenses

• Spend Less Money than You Make

• Develop a Realistic Spending Plan

• Pay Your Bills on Time

• Save, Save, SAVE!

• Use Credit Wisely

• Don't Overspend

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Debt to Income ratio

• What is Debt to Income Ratio –

– Percentage of your income committed to paying Debt (fixed & revolving)

– Most lenders calculate your debt-to-income ratio to help determine whether you can afford a loan you apply for.

• What is your Debt to Income ratio?

– 36% or less: This is a healthy debt load to carry for most people.

– 37%-42%: Not bad, but start paring debt now before you get in real trouble.

– 43%-49%: Financial difficulties are probably imminent unless you take immediate action.

– 50% or more: Get professional help to aggressively reduce debt.

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Debt to Income Example

DEBT TO INCOME RATIO

GROSS INCOME (Before Taxes and deductions)

Fixed payments:

House, Car, Credit

Cards, etc.

RATIO (Percentage of your

income dedicated to paying

Debt)

Monthly $ 2,500.00 $ 900.00 36%

Annually $ 30,000.00 $ 10,800.00 36%

How to Reduce Debt

• Always make more than the minimum payment.

• Avoid late fees, make your payment on time.

• Ask your creditors to reduce your interest rate.

• Add up the total amount of monthly debt payments you presently make. As you pay off each debt continue that same high payment. You will get out of debt much more quickly.

• Make goals for paying off debt and stick with them.

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POWER OF PAYING MORE THAN MININUM PAYMENT

Balance at Repayment 7,000 YRS

Annual Percentage Rate (APR) 18

Number of Months to Repay 60 5.0

Monthly Payment 177.75

Total Payment 10,665.24

Total Interest 3,665.24

Enter your extra payment here => 50

New Monthly Payment 227.75

New Number of Months to Repay 41.5 3.5

Interest you saved with your extra PMT 1,210.29 17%

Consequences of Not Paying Your Debt

• Loss of control over your financial future.

• Added fees to debt balances, Balances grow with added interest.

• Wage garnishment.

• Loss of employment.

• Inability to obtain additional credit.

• Bankruptcy

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What’s In Your Credit Report

• Names and account information for all your past and current

creditors

• Payment history

• Employers name, employment history and current income

• Homeownership status and previous addresses

• Public record information (such as foreclosures, bankruptcies

and tax liens)

• Referrals of overdue accounts to collection agencies

• All inquires made within the last 6 months

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Establishing Good Credit

• The most important part of a credit history is on-time payments.

Pay all your bills on time

• Pay at least the minimum amount required (more if you can)

• Keep credit card balances low. Don’t “Max Out” your credit cards

• Establish credit if you have none

• Don’t open several new accounts just to get more credit

• While trying to establish credit, don’t open too many accounts at

once

• Close any extra unused credit cards

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Need Help?

• Consumer Counseling Centers of America

Helps individuals and families save and manage money through a Bill Consolidation and Debt Management Program which offers:

– Lowering existing monthly debt payments;

– Combining (consolidating) all debt payments into one monthly bank deposit amount;

– Reducing or eliminating the interest creditors charge;

– Bringing delinquent accounts current;

– Eliminating late fees and over-the-limit fees;

– Stopping harassing phone calls; and

– Improving personal credit ratings

• www.consumercounseling.org or 503-253-5115

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800-685-1111www.equifax.com

610-690-4909www.transunion.com

888-397-3742www.experian.com

Credit Bureau Reporting Agencies

https://www.econsumer.equifax.com/consumer/forward.ehtml?forward=home

Questions? Comments?

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