Budget Seminar - Microsoftpfcu.blob.core.windows.net/media/1312/budget-seminar-presentatio… ·...
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Budget Seminar
Cari Bray, Branch Manager
Southeast Branch
December 6, 2017
Introduction
• Cari Bray, Southeast Branch Manager
Agenda
• What is a Budget?
• Key Terms
• Short Term and Long Term Effects, Consequences
• Where to Start
• Making Your Budget a Reality
Write Down…
• One (1) bill that worries you the most
• One (1) dream you can’t afford
• One (1) goal you can attain in 12 months
• What you would do with extra 100/month
What is a Budget?
Definition: A comparison of your income and expenses over a period of time.
Income – Expenses = Budget
Source: Merriam-webster.com
What is my income? What are my expenses?
• Payroll
• Social Security
• Annuities
• Child Support
• Alimony
• Rental Property
• Investments
• Windfalls
• Housing• Transportation • Insurance• Food• Utilities (electricity, water, phone,
internet, TV)• Auto/Life/Home Insurance• Education• Child care• Student Loans
What is a Budget?
Can you name more?
Most Commonly Overlooked Budget Items
• Emergencies
• Taxes
• Health Care
• Retirement Planning
• Auto Maintenance (oil change, new tires, etc.)
• Home Maintenance (HVAC, roof, windows, lawn care, etc.)
• Extracurricular activities
• Organization dues, subscriptions and memberships
• Birthdays, holidays or celebrations
• Mandatory continuing education for employment
• Pet Care
• Discretionary spending such as restaurants, clothing, school lunch or kid’s allowance
Where are the savings?
Measurements of a Healthy Budget
• Net Worth
• DTI
What is Net Worth?
Definition: A key measure of how much an entity or individual is worth. A
consistent increase in net worth indicates good financial health.
Assets – Liabilities = Net Worth
Source: Investopedia.com
What are my assets? What are my liabilities?
• Real Estate
• Automobiles
• RVs, other vehicles
• Jewelry and household items
• Retirement accounts, stocks, bonds,
investments, life insurance (cash
value)
• Cash
• Mortgage
• Auto loans
• Student Loans
• Credit card debt
• Personal loans
• 401k loans*
What is Net Worth?
What about depreciation?
What is Debt to Income Ratio (DTI)?
Recurring Monthly Debt
= Debt-to-Income RatioGross Monthly Income
Definition: A personal finance measure that compares an individual’s debt
payment to his or her overall income. DTI is one way lenders measure an
individual’s ability to manage monthly payment and repay debt.
Source: Investopedia.com
Did You Notice?DTI did not include your entire budget! Never rely on a lender
to ensure that you can afford that loan payment!
DTI Example A
Income
Gross Monthly Income: $4,000
Total Income: $4,000
Debts
Mortgage Payment: $1,000
Car Payment: $200
Credit Card 1: $25
Credit Card 2: $100
Total Debt: $1,325
DTI Example B
Income
Gross Monthly Income A: $2,000
Gross Monthly Income B: $1,000Total Income: $3,000
DebtsRent Payment: $675
Car Payment: $200
Credit Card 1: $125Credit Card 2: $100
Care Credit: $150
Payday Loan: $75/week $300Total Debt: $1,550
Let’s look at a Credit Report
What Happens if I Don’t Budget?
Short Term & Long Term Consequences
• Impacts to your Credit Score
• Hidden costs
• Not prepared for emergencies
• Not able to borrow because of
collections, poor score
• Garnishments
• Judgements and Liens
Hidden Costs - Payday Loan Trap
Income Earned! Woohoo!…
Bills Paid! Woohoo! …
Spending! Woohoo!
…
Nothing Saved. Whoops.…
Emergency! Uh oh.…
Credit Card Swiped. Whew!…
Minimum Payment Made. Meh.…
Debt Grows. Ugh….
Income Earned
Expenses Paid
Minimum Debt
Payments
Spending
Nothing Saved
Perpetual
Debt Cycle
Emergency Loans - Paydays
Emergency Loans - Paydays
Hidden Costs – Consumer Loans
Hidden Costs – Mortgage Loans
Hidden Costs – Credit Cards
Credit Card Debt & Minimum Payments
Payment History35%
Amounts Owed30%
Length of History15%
New Credit10%
Types of Credit Used10%
Factors That
Affect Credit
Score
Your Budgeting History Impacts Your Ability to Borrow!• Repayment history – Did your budget allow you to pay on time?
• Total debt load – Does your income support what you’ve already borrowed? What about borrowing more?
• Do you have outstanding collections or judgments that need attention?
Your Budgeting History Impacts Your Cost to Borrow!• Lower score = higher interest rates = higher payments = more cost to you.
Brace for Impact
Where Do I Start?
Where Do I Start?
Step 1: Be honest!
• What are my spending habits?
• Are hobbies or habits creating “vampire debt”?
• Needs vs Wants
How do I know my numbers?
• Know what’s on your credit report▫ Annualcreditreport.com
▫ Vantage Score
• Monitor your spending▫ Online & mobile banking tools
Analyze Spending
Housing35%
Debt15%
Transportation15%
Other Living Expenses
25%
Savings10%
Savings 10%
Housing 35%• Mortgage/Rent
• Repairs
• Taxes
• Utilities
• Insurance
Debt 15%• Student Loans
• Credit Cards
• Personal Loans
Transportation 15%• Car Payments
• Gas
• Insurance
• Repairs
• Parking/Tolls
• Train/Bus Fees
Other Living
Expenses 25%• Dining out
• Vacations
• Entertainment
• Clothing
Source: Jeanchatzky.com
Ne
ed
s
Wa
nts
How do I fix my mistakes?
Step 2: Set a SMART goal.
GOAL: I WANT TO SAVE $1,000 FOR CHRISTMAS SPENDING FOR 2018.
Specific? For Christmas Spending
Measurable? $1,000
Attainable? $1,000/26 pay weeks = $38.50 per paycheck
Relevant? You decide.
Timely? One year, date of December 2018
How do I fix my mistakes?
Step 3: Prioritize.
• PAY YOURSELF FIRST!
• Debt is an emergency.
• Plan for large expenses.
• Reach your goal.
• Live.
How do I fix my mistakes?
Step 4: Write the Budget.
• S.M.A.R.T review
• Tools for budgeting
NEW Widget: Budgets
NEW Widget: Savings Goals
What does a budget actually look like?
Let’s take a look!
How do I fix my mistakes?
Step 5: Stick to the Plan… or Start over at Step 1!
1. Be Honest
2. Set a Goal
3. Prioritize4. Write
the Budget
5. Stick to the Plan
Making Your Budget a Reality
What tools can help me pay myself first?
For Saving:
• Christmas and Savers Clubs are available to help save for big events or
periodic large payments.
• Share Certificates can protect your savings and help it grow!
• Sub Shares can help you separate periodic bills from monthly expenses.
Tip: Use automatic transfers or
payroll deposits to direct funds
straight to your savings share!
What tools can help me save money?
For Consolidation & Refinancing:
• Low-rate Credit Cards can help consolidate your
debts with cash back!
• Low-rate Personal Loans can help cover unexpected
expenses or consolidate other debts.
• PFCU Consumer Loan Originators can help identify
other ways to utilize your assets to catch up.
• PFCU Mortgage Loan Originators can help identify
ways to use your home’s value to create a fresh start.
Tip: Use automatic payments to make loan and credit card payments on or
before the due date.
What tools can help me stay honest?
For Money Management:• Prime Online is convenient to monitor
account balances and spending, and has an option to transfer transactions to QuickBooks or Excel.
• Prime Mobile to quickly review activity, transfer funds or pay loans from your mobile.
• Bill Pay allows you to easily make single or multiple payments at one time, establish recurring payments and funds are withdrawal immediately.
• Widgets – Savings Goals, Budget, Calculator
How do I start today?
Make an appointment!
Northwest – Will Smith
414-486-4672
Downtown – Mai Yang
414-486-4623
South – Katiria Esquivel
414-486-4628
Southeast – Amy Braud
414-486-4690
Contact our Mortgages Department:
Erick Levandoski – Director of Mortgage Services &
Business Lending
414-486-4633
Questions?
• Complete the Survey
• Follow Up Session www.surveymonkey.com/r/L7Y85KB