CRM LESSON PLAN REPORT€¦ · Instructor Material: Each primary facilitator should possess a lesson plan, slide deck, lesson handout, pre/post test, appicable regulations, and student

CRM LESSON PLAN REPORT

PERFORM PERSONAL FINANCIAL MANAGEMENT

805A-AAF6B101 / 4.2 ©

Approved 10 Aug 2015

Effective Date: 10 Aug 2015

SCOPE: None ____________________________ Distribution Restriction: Approved for public release; distribution is unlimited. Destruction Notice: None Foreign Disclosure: FD1 - This training product has been reviewed by the training developers in coordination with the Fort Jackson, SC foreign disclosure officer. This training product can be

used to instruct international military students from all approved countries without restrictions.

1

SECTION I. ADMINISTRATIVE DATA

All CourseMasters/POIsIncluding ThisLesson

Courses

CourseNumber

Version Title Phase Status

542-36B10 4.2 Financial ManagementTechnician AIT

N/A Analysis

POIs

POI Number Version Title Phase Status

542-36B10 4.2 © Financial ManagementTechnician

0 Analysis

Task(s)Taught(*) orSupported

Task Number Task Title Status

ReinforcedTask(s) Task Number Task Title Status

Knowledge Knowledge Id Title Taught Required

K23507 Identify a Personal Financial ManagementPlan

Yes No

Skill Skill Id Title Taught Required

S3021 Create a Personal Financial ManagementPlan

Yes No

Administrative/AcademicHours

The administrative/academic (50 min) hours required to teach this lesson are as follows:

Academic Resident Hours / Methods

Yes 0 hrs 15 mins Practical Exercise (Hands-On/Written)Yes 7 hrs 35 mins Discussion (Small or Large Group)

________________________________________________________________________Total Hours(50 min): 8 hrs 0 mins

InstructorActionHours

The instructor action (60 min) hours required to teach this lesson are as follows:

Hours/Actions

0 hrs 15 mins Classroom Setup________________________________________________________________________

Total Hours (60 min): 0 hrs 15 mins

Test Lesson(s) Hours Lesson Number Version Lesson Title

None

PrerequisiteLesson(s) Hours Lesson Number Version Lesson Title

None

2

TrainingMaterialClassification

Security Level: This course/lesson will present information that has a Security Classification of:U - Unclassified.

ForeignDisclosureRestrictions

FD1. This training product has been reviewed by the training developers in coordination withthe Fort Jackson, SC foreign disclosure officer. This training product can be used to instructinternational military students from all approved countries without restrictions.

ReferencesNumber Title Date

ATP 5-19 (Change 00109/08/2014 78 Pages)

RISK MANAGEMENThttp://armypubs.army.mil/doctrine/DR_pubs/dr_a/pdf/atp5_19.pdf

14 Apr 2014

TRADOC PAM 600-4 The Soldiers Blue Book 09 Jun 2010TRADOC REG 350-6 (C1) Enlisted Initial Entry Training Policies and

Administration07 Nov 2013

Student StudyAssignment TRADOC PAM 600-4, The Soldier's Blue Book, Appendix A - Army Resources.

InstructorRequirements One (1) primary instructor. Instructor must review lesson plan material and associated multi-media one day prior to the

actual date of instruction. Instructors should be prepared to add relevant experience to assist in learning.

SupportPersonnelRequirements

None

AdditionalSupportPersonnelRequirements

NameStudent

Ratio QtyMan

Hours

None

3

EquipmentRequiredfor Instruction

ID - Name StudentRatio

InstructorRatio Spt Qty Exp

5965-01-C11-8844 - MicrophoneDynamic, w/Connector andCable: Desktop GooseneckShure

0:0 0:0 Yes 1 No

5965-01-C12-2937 - MicrophoneWireless, W/Dynamic High:EW112E Sennheiser

0:0 0:0 Yes 1 No

5965-01-T00-0117 - IndoorSpeakers: DI5 Tannoy

0:0 0:0 Yes 6 No

6150-01-398-2605 - POWERSTRIP,ELECTRICAL OUTLET

0:0 0:0 Yes 4 No

6720-01-C15-4950 - ImagingCamera: Wolf Vision VZ8LTG

0:0 0:0 Yes 2 No

6730-00-402-6437 - Screen,Projection, Ceiling and Stand andWall

0:0 0:0 Yes 2 No

702102982124/70209N -Computer, Personal System

0:0 0:0 Yes 26 No

7025-01-328-5540 - Printer,Automatic Data Processing,Laser Printer

0:0 0:0 Yes 1 No

7025-01-586-0523 - Monitor,Desktop

0:0 0:0 Yes 27 No

7025-01-C09-1799 - Touchpanel,Color: TPS-3100l Crestron

0:0 0:0 Yes 2 No

7025-01-C12-4825 - ComputerDell Precsion T3500 2 Each

0:0 0:0 Yes 2 No

7050-01-C14-4309 - InteractivePen Display: ID422W Smart

0:0 0:0 Yes 1 No

7110-01-334-7082 - Board,Marker

0:0 0:0 Yes 1 No

7195-01-C05-1326 - Mr PodiumMP42-T Lectern

0:0 0:0 Yes 1 No

(Note: Asterisk before ID indicates a TADSS.)

MaterialsRequired Instructor Materials:

Instructor Material: Each primary facilitator should possess a lesson plan, slide deck, lesson handout, pre/post test,

appicable regulations, and student critique.

Student Materials:

PFMT Handout.

NOTE: Students should bring a copy of their own LES if available.

Classroom,Training Area,and RangeRequirements

ID - Name Quantity StudentRatio

SetupMins

CleanupMins

17120-M-1200-30Classroom, Multipurpose, 1200 Square Feet,30 Students

1:25 5 5

4

AmmunitionRequirements DODIC - Name Exp

StudentRatio

InstructRatio

SptQty

None

Instructional Guidance/Conduct of Lesson NOTE: Before presenting this lesson, instructors must thoroughly prepare by studying this

lesson and identified reference material.

Throughout this lesson, solicit from students the challenges they experienced in the current

operational environment (OE) and what they did to resolve them. Encourage students to apply

at least 1 of the 8 critical variables: physical environment, political stability of the state,

sociological demographics, infrastructure, military capabilities, information, time, and

economics.

Proponent LessonPlan Approvals Name Rank Position Date

Reid Bonig Not available Approver 10 Aug 2015

5

SECTION II. INTRODUCTION

Method of Instruction: Discussion (Small or Large Group)Mode of Delivery: Resident Instruction

Instr Type (I:S Ratio): Contractor, (1:25)Time of Instruction: 15 mins

MotivatorWhatever your reason for joining the Army there is one unavoidable fact: it is your Duty as a Soldier to fulfill your

financial obligations and to provide for the needs of your family if you have one. The purpose of this training is

to provide information that will help you prepare for your financial readiness.

NOTE: At this time, pass out Pre-Assessment to students and give them 10 minutes to complete. Go over the

Pre-Assessment (no more than 5 minutes) and have them pass the test back to you. Explain to the students

that this just gives them an idea of where they are knowledge wise. Tell them to not worry about how well they

did because you will cover all of the material during the training.

TerminalLearningObjective

NOTE. Inform the students of the following Terminal Learning Objective requirements.

At the completion of this lesson, you [the student] will:

Action: Perform Personal Financial ManagementConditions:

In a classroom environment using facilitated group discussions, shared

personal experiences, applicable Army administrative publications and

forms, and access to internet resources.

Standards:Demonstrate basic knowledge and comprehension of the following

learning activities:

1. Financial Ethics

2. Leave and Earning Statement / myPay

3. Spending Plan

4. Managing A Checking Account

5. The Essentials of Credit

6. Consumer Awareness

7. Car Buying

8. Meeting Your Insurance Needs

9. Investments / Savings

LearningDomain - Level:

Cognitive - Applying

No JPMELearning AreasSupported:

None

SafetyRequirements In a training environment, leaders must perform a risk assessment in accordance with FM 5-

19, Composite Risk Management. Leaders will complete a DA Form 7566 COMPOSITE RISK

MANAGEMENT WORKSHEET during the planning and completion of each task and sub-task

by assessing mission, enemy, terrain and weather, troops and support available-time available

and civil considerations, (METT-TC). Note: During MOPP training, leaders must ensure

6

personnel are monitored for potential heat injury. Local policies and procedures must be

followed during times of increased heat category in order to avoid heat related injury. Consider

the MOPP work/rest cycles and water replacement guidelines IAW FM 3-11.4, NBC Protection,

FM 3-11.5, CBRN Decontamination.

No food or drink is allowed near or around electrical equipment (computers, printers,

projectors, etc.) due to possible electrical shock or damage to equipment. Exercise care in

personal movement in and through such areas. Avoid all electrical cords and associated

wiring. In the event of an electrical storm, you will be instructed to power down equipment.

Everyone is responsible for safety. A thorough risk assessment must be completed prior to

every mission or operation.

Risk AssessmentLevel

Low - Electrical shock, fire, slippery floors, physical injure/strain, and tripping tight;

spaces in classroom.

Assessment: Low

Controls: Primary Instructor (PI) will ensure: All electrical cords are properly stored under

desks, liquid containers have lids on them and all spills are immediately cleaned and mopped

and allowed to completely dry before allowing students/personnel to walk on them. All chairs

are ergonomically designed, adjust to individual preference and that all students are awake and

paying attention in class. All cables/cords are properly plugged in, sheathed, and secured

along tables, walls, and ceilings. No damaged or frayed cords/cables will be used. PI will brief

proper hand washing techniques, the use of hand sanitizer, and evacuation procedures. All

trash will be removed daily.

Leader Actions: Detailed in-brief covering all aspects of safety to include daily classroom

inspections, spills cleaned immediately, emergency exit plans, leader checks, hygiene

procedures, and weekly safety briefings.

EnvironmentalConsiderations NOTE: Instructor should conduct a Risk Assessment to include Environmental Considerations

IAW FM 3-34.5, Environmental Considerations {MCRP 4-11B}, and ensure students are briefed

on hazards and control measures.

Environmental protection is not just the law but the right thing to do. It is a continual process

and starts with deliberate planning. Always be alert to ways to protect our environment during

training and missions. In doing so, you will contribute to the sustainment of our training

resources while protecting people and the environment from harmful effects. Refer to FM 3-34.5

Environmental Considerations and GTA 05-08-002 ENVIRONMENTAL-RELATED RISK

ASSESSMENT.

InstructionalLead-in The proper management of your personal finances can have a long-lasting and far-reaching impact on you as a Soldier

or a civilian. The last thing you want to be thinking about while patrolling the mountains of Afghanistan is if you are

being paid properly or if your Family is financially stable back at home.

7

SECTION III. PRESENTATION

TLO - LSA 1. Learning Step / Activity TLO - LSA 1. Financial Ethics



Media Type: Handout / PowerPoint PresentationOther Media: Unassigned

Security Classification: This course/lesson will present information that has aSecurity Classification of: U - Unclassified.

SHOW SLIDE 1-1: Personal Financial Management

INTRODUCTION: The proper management of your personal finances can have a long-

lasting and far-reaching impact on you as a Soldier or a civilian. The last thing you

want to be thinking about while patrolling the mountains of Afghanistan is if you are

being paid properly or if your Family is financially stable back at home.

MOTIVATOR: Whatever your reason for joining the Army there is one unavoidable

fact: it is your duty as a Soldier to fulfill your financial obligations and to provide for

your family. The purpose of this training is to provide information that will help you

prepare for your financial readiness.

SHOW SLIDE 1-2: TERMINAL LEARNING OBJECTIVE

Go over the Action, Conditions and Standard with students.

SHOW SLIDE 1-3: Financial Ethics

SHOW SLIDE 1-4 : WHY ARE WE HERE?

Ask students the question. “WHY ARE YOU HERE?” (Wait for students to answer.)

Answer: Several recent analyses have shown that many junior Army personnel have

problems managing their money. These problems adversely affect both individual

members and the Army as a whole.

SHOW SLIDE 1-5: WHY SHOULD I CARE?

In a 2012 Military Survey of the National Financial Capability Study by FINRA Investor

Education Foundation, 41% of active duty service members reported at least some

difficulty making ends meet. This is a 5% increase in 3 years.

SHOW SLIDE 1-6: WHY SHOULD I CARE? CONT’D.

More than one out of every three junior service members have taken non-bank loan

products (pay day loans) which tend to be more expensive than bank loans and which

can be indicative of a poor financial situation.

SHOW SLIDE 1-7: WHY SHOULD I CARE? CONT’D. EFFECTS ON THE ARMY

8

(1) Administrative costs for processing Letters of Indebtedness, garnishments, and bad

checks

(2) Roughly 6 out of every 10 security clearances were revoked because the member

had financial problems--problems that could make them more vulnerable to

approaches by enemy agents.

(3) Millions of dollars in bad checks are written at Army Exchanges worldwide each

month.

SHOW SLIDE 1-8: ARMY CORE VALUES

NOTE TO INSTRUCTOR: Ask class how Core Values apply to their personal

finances.

Focus for just a moment on what you think the relationship of the Army Core Values is

to your personal financial management.

1. Loyalty – Bear true faith and allegiance to the U.S. Constitution, the Army, your unit

and other Soldiers.

2. Duty - Duty means fulfilling your obligations. It often takes courage to meet your

financial responsibilities. Resisting personal desires and peer pressure to spend

beyond your means, particularly at this state of your lives, often requires great inner

strength.

3. Respect - Treat people as they should be treated.

4. Selfless-Service - Put the welfare of the Nation, the Army, and your subordinates

before your own.

5. Honor - Live up to all the Army values. Applied to this subject, honor means being

completely honest about your financial obligations. It means facing the reality of what

constitutes a reasonable lifestyle in concert with your financial resources.

6. Integrity - Do what’s right, legally and morally.

7. Personal Courage - Face fear, danger, or adversity. This value includes being

committed to positive change and constant improvement. You must be committed to

yourself to maintain sound finances.

SHOW SLIDE 1-9: COMMON PROBLEM AREAS

There are five areas where Army lawyers and financial counselors see many

problems. During these discussions, remember that I am not a lawyer. However, you

do have legal advice readily available to you, and I strongly encourage you to seek that

advice any time you are not sure of your legal rights or responsibilities.

SHOW SLIDE 1-10: DOMESTIC RELATIONS

The first problem area for Soldiers is in domestic relations. We will address your

responsibilities regarding separation, divorce, and children.

SHOW SLIDE 1-11: SEPARATION OR DIVORCE

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If you find yourself in a separation or divorce situation, organize all your personal

documents and marital property, and close all joint credit accounts. Create a new

financial plan according to your changed status. BE SURE to have any agreements

reviewed by an attorney. Check your credit report to avoid surprises. After a divorce,

re-title property and change legal documents and insurance papers.

NOTE: Discuss that “marital property” generally means items acquired by the parties

during the marriage. Note that your retired pay is usually considered marital property.

The Uniformed Services Former Spouse Protection Act governs division of retired pay

during a divorce.

SHOW SLIDE 1-12: SPOUSE AND CHILD SUPPORT

The Army provides counseling services to family members and also requires

commands to counsel service members when a nonsupport complaint is received.

The Army does not have the direct authority to force a service member to provide

support. However, the DOD Financial Management Regulation states that when

members receive BAH at the “with dependents” rate, that money is to be used for the

support of dependents. Failure to do so could result in recoupment of the difference

between the “with dependents” and “without dependents” rates and disciplinary action

up to court martial.

SHOW SLIDE 1-13: CHILD SUPPORT

Failure to meet court-ordered support payments usually results in a judgment against

the member, which is enforced by garnishment or involuntary allotment. Be aware that

an involuntary allotment for child support will take priority over all other debts, except

those owed to the Government.

A few additional words about child support. If you are responsible for child support, pay

it! Keep records of what you pay and when. If paternity is in doubt, get a paternity test,

and refrain from doing anything that could be construed as support until the results of

the test are in. If you are due child support and are not receiving it, visit the local child

support enforcement office and seek help from the Army Legal Service Office and/or

the Army Community Service (ACS) Center.

SHOW SLIDE 1-14: LANDLORD/TENANT TRANSACTIONS

Another place Army lawyers see many problems is in the area of Landlord/Tenant

transactions. There are a few items you should consider before becoming a tenant.

(1) You should begin your search for suitable housing by visiting the Housing Office.

You can find information on where and where not to rent.

(2) If you should rent an apartment or house, make sure your lease specifies the exact

rental period as well as the lease termination procedures.

10

(3) There is no Federal law requiring a "military clause"; however, several states

require one. You should always insist on one since it will allow you to terminate your

lease if you are transferred, ordered to move into base housing, or discharged.

(4) You should always carry a separate renter's insurance policy to cover your

personal belongings. The landlord is only liable for your property if it is damaged due to

his negligence.

(5) Inspect the premises thoroughly before moving in and note any discrepancies IN

WRITING. State laws on the landlord's ability to keep a security deposit vary widely.

Normally, your deposit may not be retained unless you damage the property in some

way.

SHOW SLIDE 1-15: CREDIT CONTRACTS

Credit contracts are another place a lot of Soldiers get into trouble. Contracts are

legally binding and difficult to cancel. Always read the fine print! Be sure the whole

contract is filled in--leave no blanks! Above all, don't sign anything under pressure.

Step away and return the next day if necessary.

SHOW SLIDE 1-16: SERVICE MEMBERS CIVIL RELIEF ACT

Another problem area deals with the Service members Civil Relief Act. Army Legal

Service Offices also receive many inquiries about protection under this act, often

because Soldiers mistakenly believe this act offers them more protection than is

actually the case. There is much more in the Act that we can cover here, so we

encourage you to read the act yourself.

The Act covers Reservists and National Guardsmen while on Active Duty. It applies to

Reservists from the point of receipt of orders to the point that Active Duty is terminated.

For National Guardsmen, they are also included if they have more than 30 consecutive

days of service when called to respond to National Emergency.

The provisions of the Service members Civil Relief Act:

This act does allow you to request a stay of default judgments if military duties

preclude your appearance in court; It protects you from having to pay state income

taxes and personal property taxes in states other than your legal residence; It places a

6% interest cap on any pre-service debts. The creditors cannot bill you for the excess

or add to the loan after the military service is over.

Interest cap includes credit card debt accrued prior to service entry-but not if debt was

added after entry to service.

SHOW SLIDE 1-17: SERVICEMEMBERS CIVIL RELIEF ACT Cont.

WHAT IT DOES NOT PROVIDE: help you rescind a rental or purchase agreement

entered into after you entered the service; exempt you from local real estate taxes; or

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assist you in avoiding court on a criminal charge.

SHOW SLIDE 1-18: MILITARY SPOUSE RESIDENCY RELIEF ACT

A military spouse is exempt from income taxes in a state where income was earned

when all four qualifications are met:

(1) The spouse currently resides in a state different than the state of his or her domicile

(2) The spouse resides in the state solely to live with the service member

(3) The service member is present in the state in compliance with military orders

(4) The spouse and service member are both able to claim the same domicile.

Notes: Spouse pays income taxes for state domiciled, if state taxes income.

Some states may still tax spouse on income that is not earned income or income from

services provided– such as rental income, some business income, and capital gains.

If service member gets a second job – it is taxed in the state he or she has the job.

Some states provide that ONLY military pay earned while living outside of a particular

state such as Ohio, Pennsylvania, Oklahoma, etc. is exempt in the domiciled state. No

state provisions for spouse pay earned outside of state. This simply means that a

spouse CANNOT get out of paying tax unless their domicile is in a state that does not

have state withholding from pay. Most states require proof that the Military Spouse

Residency Relief Act applies.

SHOW SLIDE 1-19: Federal Student Loans

To defer payments current law requires service during war time, national emergency,

or certain contingency operations. You may be able to stop the accrual of interest as

well, but certain requirements must be met.

For the Public Service Loan Forgiveness payments must be made for 10 years (120

payments) and then the balance of student loans can be forgiven.

Some private student loan providers offer some relief, modifications, and some other

options to make repayment easier. At least one allows military members to defer for 3

years. But you need to ask and research. Often it takes more effort than just talking to

the first representative you get on the phone. Make sure you understand any

repercussions that any action may have.

SHOW SLIDE 1-20: SOURCES OF ASSISTANCE

Throughout this course we will emphasize that you, as members of the military, have a

12

wide range of assistance available to you absolutely free of charge. Among these are

the Army Community Service Center and Army Emergency Relief. Rely on these

sources for help.

The Consumer Financial Protection Bureau is a relatively new Federal agency to

provide some protection for Consumers. You can file complaints regarding many of the

financial products and practices we are talking about today. They have a department

that specializes in assisting military members and their families. You can file

complaints at consumerfinance.gov.

Check on Learning: Show slide 1-21: Check on Learning

NOTE: Conduct a check on learning and summarize the

learning activity.

Show slide 1-22: Check on Learning

Q: About six times out of ten, when a security clearance is

revoked, it is because the member has financial problems.

A: True

Show slide 1-23: Check on Learning

Q : You should always insist on including a Military Clause

in a housing lease.

A: True

Review Summary: Show slide 1-24: SUMMARY

We discussed why this course is important to you and how

the Army Core Values apply to your responsibility for sound

financial management. We also discussed the most

common problem areas of Soldiers as seen by Army

lawyers and financial counselors.

Summary Questions

1. What is your personal obligation toward good financial

management?

2. Where can I go to get a contract reviewed prior to

signing it?

3. Why should I get a contract reviewed prior to signing it?

4. Where can I go for help with my finances?

TLO - LSA 2. Learning Step / Activity TLO - LSA 2. Understanding the Leave & EarningsStatement (LES)/myPay



13



SHOW SLIDE 2-1: Understanding the Leave & Earnings Statement (LES)/myPay

INTRODUCTION: During this learning activity, we will discuss the importance of

monitoring your pay and entitlements as reflected on your Leave and Earnings

Statement, or LES. We will examine the components of the LES and talk about how to

identify any errors in your net pay.

SHOW SLIDE 2-2: myPay Login

(1) During in-processing, all of you signed up for a bank account so you could receive

your pay from the Army. Once your pay account is established and you start receiving

pay, you can sign up for a myPay account.

(2) Sign on to the myPay website at https://myPay.dfas.mil You will have two options:

a. If you have already established an account, enter your Login ID and password

(you have the potion of typing in your password or, if you prefer more security, you can

click on the On-Screen Keyboard link) and then select the “Go” button, or

b. If you have not established an account, enter your Social Security Number

(SSN), select the “Go” button, and follow the instructions to establish your account.

(3) You will be directed to a System Message screen. Read the information, then

Click the box in front of the “I agree to the terms of the User Agreement” statement,

and then click on the “OK” button.

(4) You are now at the “Main Menu” screen where you have access to you pay

account.

(5) You may also use you Department of Defense Common Access Card (DoD CAC)

or Health and Human Services Employees ID badge (HHS PIV) ID badge to sign into

myPay, just click on the SmartCard Login box.

SHOW SLIDE 2-3: myPay Main Menu

You have several options at the myPay Main Menu that you can take advantage of to

affect your pay without even having to fill out any paperwork at the S-1 or finance

office.

(1) Leave and Earnings Statement (LES). You can view, and if you want, print your

last 12 LESs if you are active duty and 3 if you are a reservist.

(2) Personal Statement of Military Compensation (PSMC). You can view, and if you

14

https://mypay.dfas.mil/

want, print your PSMC. This statement is intended to outline the total value of your

military pay, allowances and benefits. By making your compensation more “visible,”

this statement could be useful when applying for credit or loans (including home loans)

from businesses or lending institutions.

(3) Savings Deposit Program (SDP) Statement/Withdrawal Request. You can view

and print a copy of your SDP statement. Members of the Armed Forces serving in

specified combat zones or in support of a contingency operation are authorized to

make deposits or request to withdraw money from their SDP account.

(4) Pay Changes. You can start, change or stop allotments, and start or change

Savings Bonds (you cannot stop bonds through myPay). Combined Federal Campaign

(CFC) option allows military personnel to establish a CFC allotment within the CFC

open season. You can also turn on or off hard copy delivery of your LES.

(5) Direct Deposit. You can change your direct deposit information in myPay under

the Direct Deposit option. Net Pay EFT: You can view or change your Direct Deposit

for your paycheck. Travel EFT: You can setup or change your travel pay to be directly

deposited to a bank. Miscellaneous EFT: You can view or setup/change your Direct

Deposit for miscellaneous reimbursements.

(6) Taxes. You can change your Federal or State marital status and exemptions. You

can view and print your W-2. If you are in the Student Loan Repayment Program

(SLRP), you can view and print your SLRP W-2. You can turn on or off hard copy

delivery of your W-2. You can also view and print a SDP tax statement (1099-INT), if

you are in the program and you can turn on or off hard copy delivery of your IRS Form

1095 (you’ll need this form to report Affordable Care Act health insurance information

starting with your 2015 federal income tax return).

(7) Traditional Thrift Savings Plan (TSP) and Roth TSP. You can start enrollment of

TSP at any time, unless you make a financial hardship withdrawal. You may not make

contributions for six months following the withdrawal. You can start or change

percentages at any time, and cancel (stop) contributions at any time. We will discuss

the TSP in more detail later.

(8) TSP Catch-Up – Traditional and Roth. If you are age 50 or over or will become 50

this calendar year, you may be eligible to make additional contributions to TSP, called

“catch-up contributions". For the initial start of your catch-up contributions, if you have

a current regular traditional or Roth election, you may use myPay to submit your

elections.

(9) View Court Orders. Allows Soldiers to view documents issued by U.S. civil courts

or military service related to any garnishment on their pay.

15

(10) Travel Voucher Advice of Payment (AOP). You may be called on to perform

Temporary Duty (TDY) travel. You will file a travel voucher when you complete your

TDY. When DFAS pays your travel, you will receive an Advice of Payment statement.

If DFAS-Cleveland, DFAS-Indianapolis, or DFAS-Columbus pays your travel vouchers,

you can view and print your Travel Advice of Payment (AOP) on-line.

(11) Email Address. You can add, change or delete a personal email address. To

change a pre-registered/work email (AKO - us.army.mil), contact your local site’s email

administrator or go to https://www.us.army.mil. myPay receives and updates these

email addresses weekly.

(12) Security Questions for Password Resets. You have the option to change the

security questions for resetting your password.

(13) Personal Settings Page. Click on the “Click here for details” area to receive

information on what you can do.

SHOW SLIDE 2-4: SAMPLE LES

Note: Refer to handout for explanation of LES terms.

This statement is called the Leave and Earning Statement, or LES for short. The LES

is your detailed pay statement, which is issued at the end of each month. It shows

your entitlements, deductions, and allotments, and it provides a summary of all pay

transactions. It also shows your end-of-month pay and where your pay is being

deposited. It is your duty to review the LES and ensure the information is correct. If

you find an error, report it to your chain of command immediately. By honestly

reporting any pay discrepancies, you uphold the Army values of honor and integrity.

SHOW SLIDE 2-5: PERSONAL INFORMATION

The top portion of the LES contains information about the member to whom it was

issued, the office that issued it, and the pay period covered by the statement.

(1) The first block contains your name in Last, First, Middle Initial format.

(2) The next block is your Social Security number. Make sure it is correct!

(3) Your pay grade is next - a good thing to check the next payday after you get

promoted.

SHOW SLIDE 2-6: PAYDATE

(4) Pay Date. The next box is a very important one. It is your Pay Date. Note that this

is NOT the day on which you are paid, but rather the date you entered active duty for

pay purposes. Like your Social Security number, it should NEVER change, unless it is

16

https://www.us.army.mil/

inaccurate and you take steps to correct it.

(5) The next box reflects a two-digit number showing the number of whole years of

creditable service you have completed. Check to see that this number changes every

time you complete a full year of service. It is very important because some of your

entitlements increase with years of service.

(6) The ETS box shows the expiration of your current term of service. It is a six-digit

figure with the first two digits indicating the year, the second two the month, and the

last two the day.

(7) Your branch of service is shown next.

(8) The ADSN/DSSN is the code that identifies the finance office that maintains your

pay records.

SHOW SLIDE 2-7: PAY PERIOD

(9) The last block on the top line shows the pay period covered by the LES. Note that

it is NOT the same as your Pay Date.

SHOW SLIDE 2-8: ENTITLEMENTS, DEDUCTIONS, ALLOTMENTS, & SUMMARY

The next area down on the LES will probably be the first place you look. Your net pay

and the items used to calculate it are shown here.

SHOW SLIDE 2-9: ENTITLEMENTS

The Entitlements block shows the amount of entitlements and allowances for the pay

period, including any retroactive monies. If you have more than 15 allowances or

entitlements, this block may be continued in the Remarks Section.

SHOW SLIDE 2-10: DEDUCTIONS

Deductions including taxes, SGLI, mid-month pay, and the dependent dental plan,

including any retroactive deductions will be shown in this block. If there are more than

15 deductions, this block may also overflow into the Remarks Section.

SHOW SLIDE 2-11: ALLOTMENTS

This block lists all of your allotments. If you have more than one allotment of the same

type, for instance two savings allotments, the only differentiation may be the dollar

amount. Like the other two categories we just discussed, allotments over 15 will show

in the Remarks Section.

Some allotments are prohibited: new allotments to purchase, lease, or rent personal

property.

Examples of prohibited allotments are: Vehicles (e.g., automobiles, motorcycles,

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boats);Appliances or household goods (e.g., washer, dryer, furniture);Electronics (e.g.,

laptop, iPad, cell phone, television)

SHOW SLIDE 2-12: SUMMARY

The next section provides a math summary that leads to the "bottom line" or your

"EOM" - end of month pay for the period covered by the LES.

(1) The Amount Forwarded, shows the amount of all unpaid pay and allowances, if

any, due you from the prior LES. The totals found in the Entitlements, Deductions, and

Allotments blocks will appear in this summary. Make sure they are correct!

(2) Total Entitlements, Total Deductions, and Total Allotments totals should match the

amount found at the bottom of each section.

(3) Net Amount, will be the amount of your entitlements less your deductions and any

allotments.

(4) Carried Forward, is any amount that is to be carried forward to the next LES.

(5) The final block is probably where your eyes will go first on your Leave and

Earnings Statement as it shows the end-of-month, or EOM, pay that should have been

deposited in your account.

SHOW SLIDE 2-13: DIEMS

DIEMS. This box contains the date you initially entered the military service (delayed

entry). This date may be different from your Pay Date if you came in on the delayed

entry program.

SHOW SLIDE 2-14: RETIREMENT PLAN

Retirement Plan. In this box you will find your choice of a Retirement plan. If you have

less than 15 years, no choice will be shown.

NOTE: The High 36 calculator is also known as the High-3. Inform students if they

hear “High 36” or “High-3”, it is referring to the same calculator.

SHOW SLIDE 2-15: LEAVE

Now we get to the Leave portion of the LES. You earn 2.5 days per month or 30 days

per year. You may accrue (bank) up to 60 days of leave as of 1 October each year.

Some special cases can accrue more.

SHOW SLIDE 2-16: LEAVE INFO

The BF BAL block shows your brought forward leave balance.

(1) The BF BAL block shows your brought forward leave balance.

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(2) ERND shows the cumulative amount of leave earned in the current fiscal year, or

current term of service if you have re-enlisted or extended since the start of the fiscal

year. Increases by 2.5 days each month.

(3) In the USED block you can find the cumulative amount of leave used during the

current fiscal year, or term of enlistment.

(4) CR FWD, is your current leave balance as of the end of the period covered by the

LES. It should be the balance forward, plus leave earned, minus leave used. If your

days off are as important to you as mine are to me, you might want to check the

computer's math from time to time.

(5) The ETS BAL, shows the projected leave available through your current Expiration

Term of Service. This figure could help you make appropriate plans if you do not plan

to re-enlist.

(6) The next block shows any leave that you may have lost, usually because of having

too high a balance at the end of the fiscal year.

(7) Block 29 shows the number of days of leave for which you have been paid

(8) Here is another high interest block on your LES. This block shows the number of

days of leave that you must "use or lose" before the end of the fiscal year - and that

happens every year on 30 September, unless Congress decides to make a change. If

you have a significant number of days in this block, it's time to talk to your supervisor

about when you may be able to take some leave without adversely affecting

operational readiness.

SHOW SLIDE 2-17: FEDERAL TAXES

Just to the right of your leave information, you will find information about your Federal

Income Tax Withholding, or FITW.

(1) The first block shows the amount of your wages that are subject to Federal Income

Tax Withholding during this LES period. Remember that some of your entitlements are

NOT taxable.

(2) The next block shows the money you have earned this calendar year-to-date

(YTD) that is subject to Federal Income Tax.

(3) This important block indicates the marital status used to calculate your Federal

Income Tax Withholding. Be sure this is accurate. An incorrect status could result in

too much money being withheld from each paycheck, or, worse, not enough, leaving

you with a large tax bill for the year.

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(4) The next block indicates the number of exemptions used to calculate tax withheld.

Again, ensure this number is accurate, particularly immediately after any dependent

changes.

(5) The Add Tax block will show any additional dollar amount you have requested to

be withheld in addition to the normal amount for your marital status and number of

exemptions.

(6) The last block in the Federal Income Tax area shows the cumulative amount of tax

withheld for the calendar year to date. The amount in this block on your December

LES could prove useful if you desire to get an idea of your possible tax refund, or tax

liability, prior to receiving your W-2 forms.

SHOW SLIDE 2-18: SOCIAL SECURITY & MEDICARE

The section of the LES immediately below your leave information deals with Social

Security and Medicare taxes. These fall under the Federal Insurance Contributions

Act, hence the acronym FICA.

(1) The first block on this line shows the amount of your wages that were subject to

FICA during the LES period. This will probably not be the same figure as the WAGE

PERIOD figure for Federal Income Taxes depending on your entitlements.

(2) The next two blocks show the wages subject to Social Security taxes and the

amount of such taxes withheld to date during the calendar year. A side note here: the

amount of Social Security you will draw when you become retirement eligible will be

based on the contributions you made throughout your working life. Therefore, it's a

good idea to keep all your end-of-December LES’s in a secure spot to document your

Social Security contributions -- at least until you start to receive letters of eligibility from

the Social Security Administration.

(3) The year-to-date wages and withholdings eligible for Medicare Taxes can be found

in the last two blocks.

SHOW SLIDE 2-19: STATE TAX

The area to the right of the FICA information contains information about state income

taxes. It contains much of the same information as the section relative to Federal taxes

with one key addition.

(1) The ST block contains the two-letter postal identifier of the state where you claim

domicile. As I mentioned earlier, several states do not have a state income tax and

there are legal and ethical ways to establish your domicile in one of them.

(2) One other word on state income taxes. The Service Members Civil Relief Act

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prohibits states from collecting state income tax on military pay of members who are

stationed in that state, but domiciled elsewhere. However, the state may collect these

taxes on monies you or your spouse earns from civilian employment.

SHOW SLIDE 2-20: ADDITIONAL INFO

The last line of your LES titled Pay Data contains information that is used to determine

the rate and type of your dependent entitlements, as well as information about your

charitable deductions.

(1) The BAQ, or Basic Allowance for Quarters, (also referred to as BAH-Basic

Allowance for Housing) and BAQ dependents blocks are used to determine the

amount of money you will be paid for housing. It is your responsibility to ensure that it

is correct.

(2) The next block over, VHA ZIP, shows the ZIP code used to determine your

housing allowance. Because your housing allowance is designed to defray actual

expenses, it will not be as great in, for example, El Paso as it will be if you are

stationed in or around Washington, D.C.

(3) The JFTR block that appears stands for Joint Federal Travel Regulation. Many of

the allowances you may receive during your career will be based on comparative cost

figures contained in this manual. On the LES, the JFTR code is used to determine your

eligibility for, and amount of any Cost of Living Allowance, or COLA, you may be draw

due to assignment, or location of dependents, in a high-cost area.

(4) Glance at the TPC block when you get your LES. This Block is not used, if there is

an entry in this block it is reason to check the accuracy of your LES with your local

finance office.

SHOW SLIDE 2-21: THRIFT SAVINGS PLAN (TSP) INFO

The TSP blocks on your LES show the percentages and amounts that have been

withheld from your various pays. They also give your year to date balances. We will

discuss the Thrift Savings Plan in more detail in another lesson.

SHOW SLIDE 2-22: REMARKS

The bottom portion of the LES is a Remarks Section. This will show starts, stops, or

changes in any of your pay items. It will always contain year-to-date entitlements and

may contain general notices from various levels of command.

Check on Learning: SHOW SLIDE 2-23: Check on Learning


learning activity.

SHOW SLIDE 2-24: Check on Learning

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How often will you receive an LES?

a. Every six months

b. Once a year

c. Every two weeks

d. Once a month

Answer: d. Once a month


In what column on your LES would you find your End of

Month Pay?

a. Deductions

b. Allotments

c. Entitlements

d. Summary

Answer: d. Summary


Which of the following is true concerning the “Pay Date”

shown on your LES?

a. It is the day on which you are paid

b. It is the date you entered the Army for pay purposes

c. It is the last day of your current enlistment

d. It will always be the first day of the current month

Answer: b. It is the date you entered the Army for pay

purposes

Review Summary: SHOW SLIDE 2-27: SOURCES OF HELP

The Leave and Earnings Statement is certainly a "busy"

document, but the information is presented in a logical

format that will allow you to determine the accuracy of your

pay and entitlements each month. Remember that it is your

personal responsibility to do so. If you ever believe that

information shown on your LES is not accurate, visit your

local finance office as soon as possible to discuss your

concerns.

Summary

During this class, we stressed the importance of monitoring

22

your Leave and Earning Statement to detect any errors in

your pay and allowances. We discussed all of the

information provided in the various sections of the LES, and

we identified where you should go for help if you believe

your pay and allowances are not accurate. I hope you will

use this information to keep your pay and allowances

accurate throughout your military career. We also

discussed myPay to include how to sign up and what

options you have.

TLO - LSA 3. Learning Step / Activity TLO - LSA 3. Develop a Spending Plan





SHOW SLIDE 3-1: DEVELOP A SPENDING PLAN

Introduction: During this learning activity, we will discuss the importance of developing

and following sound financial planning. We will examine the elements of a successful

financial plan and determine the components of a spending plan, including how to

identify discretionary and non-discretionary spending.

SHOW SLIDE 3-2: WHY HAVE A GAME PLAN?

Why Have a Game Plan? A good game plan is the key to success in any endeavor. I

am not here to tell you what to do with your money. I'm here to challenge you to think

before you spend. The most effective way to get your dollar's worth is to ensure that

you have a written plan.

SHOW SLIDE 3-3: WHY HAVE A SPENDING PLAN?

You may have already heard about a personal spending plan--it is also commonly

referred to as a budget. But why would anyone need it? A good spending plan can

improve your life in several ways.

(1) It’s most immediate contribution will be helping you live within your income.

(2) It can reduce stress that is often associated with financial problems. Remember we

talked about this as a problem area for young Soldiers.

(3) It will help you establish and maintain a good credit history.

(4) All of this will help you on the road to financial confidence and achievement of

personal goals.

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SHOW SLIDE 3-4: ELEMENTS OF PERSONAL FINANCIAL SUCCESS

3 Elements of Financial Success. A spending plan is only one component of Personal

Financial Planning. There are two additional parts that must be completed as well.

They are: Current Net Worth and Goal Setting. Let's begin by investigating these

parts first.

SHOW SLIDE 3-5: DETERMINING YOUR NET WORTH

Determining your Net Worth. It's difficult to chart a course to a destination if you don't

know where you are. That's the primary reason for determining your net worth -- which

is nothing more than your total assets minus all your liabilities. An asset is anything

you own that has value. A car is a good example. A liability is something for which

you owe. Recognize that the fact that decreasing, or making a conscious decision not

to increase your liabilities, directly and positively affects your net worth.

NOTE: Direct students to their handout on page 2: Statement of Net Worth. Have

students fill out this page to determine their individual net worth. Not all students will

have the information handy to fill the statement out. Tell them if they don’t know the

information, then they can fill the statement out at a later time.

SHOW SLIDE 3-6: THE FINANCIAL PYRAMID

Financial Pyramid.

SHOW SLIDE 3-7: SETTING GOALS

Categories. There are two categories of goals: short-term goals: those that can be

accomplished in a year or less; and long-term goals which may take years and require

a higher degree of commitment to your spending plan. The most important thing about

setting goals is getting started. If you have a financial dream, doing nothing will get

you nowhere.

SHOW SLIDE 3-8: GOAL SETTING STEPS

Steps for Goal Setting. Goal setting is accomplished in the steps shown here. When

setting your goals write them down! There may be times when unexpected obstacles

will challenge you. Keep your goals flexible and re-evaluate them periodically.

Keeping a written financial outline will keep you going in the right direction.

SHOW SLIDE 3-9: SPENDING PLAN

Definition. After you have determined your net worth and set some goals, it will be

time to develop your personal spending plan. A personal spending plan is similar to a

budget. By determining what income you have coming in each month and where it is

going you can identify your spending habits and keep your spending in check. It is

flexible so that it keeps with the ups and downs of your changing finances. Think of

your spending plan as a roadmap--you wouldn't want to take a trip without it.

NOTE: Direct students to page 3 in their handout: Preparing a Monthly Spending Plan

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SHOW SLIDE 3-10: DISCRETIONARY vs. NON-DISCRETIONARY SPENDING

Discretionary vs. Non-Discretionary Spending. The biggest obstacle most people,

particularly young people, face in even starting to save for the future is that savings

must be "paid" with discretionary funds. Discretionary funds are used for WANTS;

they are the dollars left over after paying for your monthly needs. These are the dollars

used for savings. Non-discretionary funds are used for living expenses and debts.

This is the money used for your NEEDS. There are three things you can do if you

want to increase the amount of discretionary funds available for savings.

SHOW SLIDE 3-11: WHERE DOES YOUR DISCRETIONARY MONEY GO?

Increasing your discretionary funds.

The first way to increase your discretionary funds is to control your spending. Take a

closer look at what you are spending your money on each day. Where can you reduce

spending?

To give you an idea of how much discretionary income you use in a year, look at this

slide. Imagine if you cut down on eating fast food for a year. You could save up to

$1800 or more in a year! Reducing your discretionary spending will increase your

ability to save.

SHOW SLIDE 3-12: THREE WAYS TO INCREASE DISCRETIONARY FUNDS

The first way to increase discretionary funds is to control spending.

The second way to increase discretionary funds is to GET PROMOTED!

The third and final way for you to increase your discretionary funds is to reduce your

debt.

SHOW SLIDE 3-13: CHARACTERISTICS OF A SPENDING PLAN

Characteristics of a spending plan. A good spending plan is a guide. Here are some

characteristics of a sound plan.

(1) A spending plan is a general guide. Everything does NOT have to be figured down

to the penny.

(2) It is UNIQUE to you and therefore reflects YOUR needs, wants, values, and goals.

(3) To be practical and realistic, your plan should be based on your current income and

expenses, yet still allow for future possibilities.

(4) Times and circumstances change, so your plan should be FLEXIBLE enough to

adapt.

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(5) A reasonable plan should allow for LEISURE as well as necessities.

SHOW SLIDE 3-14: PREPARING A MONTHLY SPENDING PLAN

We will now spend some time reviewing the personal spending plan of Pvt Smith.

Remember that this plan is a living document, and I strongly encourage each of you to

create your own personal spending plan.

NOTE: Again direct students to page 3 of their handout where they will find a blank

Monthly Spending Plan they can use to create their own spending plan.

SHOW SLIDE 3-15: DEBT-TO-INCOME RATIO

Debt-to-Income Ratio Definition. The debt-to-income ratio is a percentage assigned

the amount of your debt in relationship to your income. Simply speaking this is the

amount of your monthly debt payments divided by your monthly income, times one

hundred. Mortgage payments, if you have them, are not included as debt because real

estate is considered an investment.

SHOW SLIDE 3-16: DEBT-TO-INCOME RATIO EXERCISE

NOTE: Demonstrate determining Debt-to-Income Ratio.

NOTE: Direct the students to page 4 of their handout to complete the Debt-to-Income

Ratio exercise. Not all students will have the information handy to fill the statement

out. Tell them if they don’t know the information, then they can fill the statement out at

a later time.

SHOW SLIDE 3-17: DEBT-TO-INCOME RATIO

SHOW SLIDE 3-18: ONLINE BUDGETS AND COMPUTER SOFTWARE

NOTE: Discuss the advantages of financial planning online.

SHOW SLIDE 3-19: ONLINE BUDGETS AND COMPUTER SOFTWARE CONT.

NOTE: Discuss the disadvantages of financial planning online.

SHOW SLIDE 3-20: ONLINE BUDGETS AND COMPUTER SOFTWARE CONT.

NOTE: Mint.com was described as “the best overall site” for budgeting by Kiplinger’s

Success With Your Money quarterly magazine (Winter 2012). However, each website

or software option works differently and if you choose to use one of these options you

should explore several and pick the one that is best for you. Powerpay.org is very

useful in developing a spending plan and also to develop a debt elimination plan.

26


Sources of Assistance. If you think you are already in debt trouble, or if you need help

in the future with any of the things we discuss in this course, don't be timid about

seeking assistance from any of the sources shown here.

*Contact information for each installation’s ACS is located on the PFMC website as an

easily accessible resource for the Soldiers.

Check on Learning: SHOW SLIDE 3-23: CHECK ON LEARNING

NOTE: Conduct a check on learning. Slides 24-28 contain

a question and answer.

SHOW SLIDE 3-24: CHECK ON LEARNING

NOTE: Click enter for the answer to appear on slide.

Question: How can you increase your discretionary funds?

Answer: b. get promoted



Question: True of False. A spending plan is unique to you

and reflects your needs, wants, and goals.

Answer: True



Question: Which of the following is true concerning your

personal spending plan?

Answer: b. It will help you live within your means.



27

Question: Which of the following statements best describes

the purpose of a spending plan?

Answer: a. Spending plans help you live within your

income.



Question: What are Discretionary Funds used for?

Answer: b. wants

Review Summary: SHOW SLIDE 3-29: SUMMARY (CAN YOU AFFORD

THIS?)

Summary. During this lesson we've talked about the

advantages of a sound spending plan and steps for

preparing your plan. We discussed some key economic

concepts such as debt-to-income ratio and the discretionary

funds that are necessary to establish a savings program.

We also identified ways to increase discretionary funds and

sources of help for any of your financial concerns.

TLO - LSA 4. Learning Step / Activity TLO - LSA 4. Managing a Checking Account





SHOW SLIDE 4-1: Managing a Checking Account

SHOW SLIDE 4-2: Dishonored Checks (1 of 2)

Before we start our discussion of personal checks, deposit slips, and withdrawal slips,

let us talk about dishonored checks (bad checks) and what can happen to you if you

write a dishonored check. By knowing what can happen, you may take this training

more seriously. If you should write a dishonored check, one or more of the following

consequences occur:

(1) Your bank and the institution to which the check was written or debit card used may

each assess a service charge, as much as $25.00 or higher.

28

(2) Your reputation and credit rating may be damaged. If your credit rating is

damaged, it will cost you more to get credit, if you can get it at all.

(3) You will be counseled by your chain of command, regardless of the circumstances.

(4) You may be added to the dishonored (bad check) list on post.

(5) Your check cashing/debit card privileges may be suspended on post for six months,

a year, or indefinitely. This means you will not be able to write checks or use your

debit card on post.

(6) You may be reprimanded by your supervisor or commander.

SHOW SLIDE 4-3: Dishonored Checks (2 of 2)

(7) You may be given a bad efficiency report.

(8) You may be reduced in rank.

(9) You may receive an Article 15 or court-martial.

(10)You may be barred from reenlistment.

(11)You may be separated from the Army.

The punishment you receive depends on how many times you have written dishonored

checks. As you can see, the Army takes writing dishonored checks seriously. This

crime is punishable under the Uniform Code of Military Justice (UCMJ), Article 123a –

Making, drawing, or uttering check, draft, or order without sufficient funds. Your loyalty

to the Army, your unit, your family, and yourself requires you to manage your finances

efficiently. Any indebtedness may require administrative action, which means the

involvement of your supervisor, commander, and other Army personnel.

Consequences could also include an adverse effect on the unit’s mission as well as

the Army’s reputation.

SHOW SLIDE 4-4: Personal Check

Inform students that checks must always be filled out in ink and must be legible. *Refer

students to page #7 of their handout to view examples of blank checks.

Most transactions you perform with your checking account can be accomplished with a

debit or ATM card. However, some transactions, such as paying rent or utility bills

may require you to write a check. This portion of the instruction covers the proper

procedures for writing a check.

(1) Determine the amount for the check, verify that your current account balance is

enough to cover the amount of the check and any check fees, and obtain the next

29

available blank check.

(2) Write the current date on the check (#1).

(3) Write the full name of the payee (the person or company to whom you are writing

the check) (#2).

(4) Write the money amount on the check, using figures (#3).

(5) Write the same money amount in longhand, this time using words; include both

dollars and cents. Cents are written as “XX/100” (#4). Make sure to begin writing as

far to the left as possible on this line and then draw a line after the written money

amount extending to the preprinted word “Dollars.”

NOTE: Explain that this action is necessary for security to prevent someone else from

altering the amount.

(6) Although not required, it is good practice to write a short description or key word

representing the transaction in the MEMO space (#5).

(7) Sign your payroll signature on the line in the lower right-hand corner. This should

exactly match the signature you used when you opened your checking account (#6).

(8) If you make a mistake, you must start over; you cannot erase or cross out errors.

Write “VOID” in large letters on the incorrect check. Make a note in your checkbook

register, indicating that check number XXXX was voided and destroyed. This will help

you maintain an accurate account.

(9) On occasion you may need to deposit a check or cash to your account. Many

banking institutions offer ATM machines that you can make deposits. Therefore, you

need not physically make a deposit slip for the transaction. If you do need to make a

deposit with a teller, however, follow the requirements of your banking institution for

making a deposit in person.

(10)You may also have to make a withdrawal from your banking institution. If you have

an ATM or Debit Card, you don’t have to fill in a withdrawal slip. If you do need to

make a withdrawal with a teller, however, follow the requirements of your banking

institution for making a withdrawal in person.

SHOW SLIDE 4-5: Check Register

There are five basic types of transactions that must be posted to a checkbook register:

(1) Debit card transactions.

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(2) Personal checks written by you. Also include voided check(s).

(3) All deposits to the checking account (in person, ATM, SURE PAY, etc.).

(4) Withdrawals (not by check) from the checking account (in person, through an ATM,

preauthorized transfer (PAT), etc.).

NOTE: Define PAT as recurring withdrawals automatically taken from the account.

Examples: insurance premiums, car payment, savings transfer, etc.

(5) Monthly adjustments (fees, interest, etc.).

ATM/PAT withdrawals are often the culprits in accounts that are overdrawn or cannot

be balanced. Remember, your personal honor and integrity are at risk when you fail to

properly manage your finances.

(1) It is very important that you indicate the ATM or PAT transaction correctly in your

checkbook register before or immediately after the transaction has been made.

(2) If you have a PAT in place, make sure you add deposits to your balance and

subtract withdrawals.

(3) “In person” deposits or withdrawals affect your account just as ATM and PAT

deposits or withdrawals do. Many banks charge for withdrawals at ATMs and at tellers

in excess of established withdrawal transaction limitations. These withdrawal charges

must also be entered in your register.

NOTE: Demonstrate. Have the students go to page 8 of their handout. Click the

mouse on Slide 4-11 each time you describe the following steps and have the students

follow along by writing each step in their check register in the handout:

(1) Write check number 2047 in the number column (#1).

NOTE: Click mouse once.

(2) Write the date of the transaction in the date column (#2) (4/01).


(3) Write a description in the “description of” transaction column (#3) (AAFES DPP

Payment).

(4) Write the money amount ($200.00) in the appropriate column (record withdrawals

and/or checks in the payment/debit column or record deposits in the deposit/credit

column)(#4) .

31

(5) Subtract or add the money amount to the balance figure (numbers in the

payment/debit column are subtracted or numbers in the deposit/credit column are

added) (#5).


(6) Write the new calculated balance in the checkbook register (#6).


Instruction Note: Refer students to pages 6 thru 8 in their handout to practice writing

checks and recording transactions in a checkbook register. Inform them that during the

next few slides, they will be required to post the shown transactions to the checkbook

register, and practice writing checks.


**Refer students again to page #7 of their handout to practice writing checks that

coincide with this check register ( Check #’s 2048, 2049, 2050).

NOTE: Inform students they will be required to complete the check register. Allow time

for students to complete each transaction. The check register is located in the handout

on page #8.

NOTE: Ask students if they have any questions. Have students enter a Debit Card

ATM deposit for $25.00 on April 2nd and a Debit Card ATM withdrawal for $50.00 on

April 4th to the checkbook register. Have students post the following transaction in

their checkbook register:

(1) Post mid-month pay from LES ($584.82) dated 15 April 20XX.

(2) Write check #2048 for $20.00, dated 20 April 20XX, payable to the Commissary

and post it to the checkbook register.

(3) Void check #2048 and post it to the checkbook register.

(4) Write check #2049 for $25.00, dated 20 April 20XX, payable to the Commissary

and post it to the checkbook register.


(5) Bring the Balance forward from the previous page.

(6) Enter deposit mailed to bank of $50.00 on 22 April 20XX.

(7) Write check #2050 for $26.49, dated 30 April 20XX, payable to Wal-Mart and post it

32

in the checkbook register.

(8) Post end-of-month pay from LES ($584.83) dated 30 April 20XX.

The ending balance should be $1900.80. Each transaction must be properly posted.

SHOW SLIDE 4-9: Using Debit Cards

What is a debit card? Debit cards are a way to pay for things. You get a debit card

from your bank or credit union when you open a checking account. Sometimes a debit

card is free to use. Sometimes you will pay a fee to use the card.

Debit cards look like credit cards. But they do not work the same way. Credit cards use

money that you borrow. Debit cards use money that is already in your checking

account.

Why would I use a debit card?

(1) Debit cards let you buy things without carrying cash. You can use your debit card in

most stores to pay for something. You just swipe the card and enter your PIN number

on a key pad.

(2) Debit cards take money out of your checking account immediately. Therefore, you

should always keep a receipt when using your card so you can post it to your

checkbook register. This enables you to keep track of your debit card use and your

current account balance.

(3) Debit cards let you get cash quickly. You can use your debit card at an automated

teller machine, or ATM, to get money from your checking account. You also can get

cash back when you use a debit card to buy something at a store.

What is a PIN? A “PIN” is a security code that belongs to you. PIN stands for personal

identification number. A bank or credit union gives you a PIN when you get a debit

card. You can change your PIN to a number you will remember.

When you use your debit card, you need to enter your PIN on a keypad. This is one

way the bank tries to stop dishonest people from using your debit card to get your

money.

Never share your PIN with anyone. Remember it. Do not keep it in your wallet or on

your card.

How do debit cards work? When you open a checking account at a bank or credit

union, you usually get a debit card.

A debit card lets you spend money from your checking account without writing a check.

33

(1) You can use your debit card to buy things in a store

(2) You can use it at an ATM to get cash

When you pay with a debit card, the money comes out of your checking account

immediately. There is no bill to pay later.

How do I know where I used my debit card? Every time you use your debit card, you

should receive a receipt, which you should keep to post to your checkbook register.

Your bank or credit union gives you a “statement” every month. Your statement shows:

(1) where you paid with your debit card and how much you spent

(2) where you used the ATM, how much you withdrew, and what fees you paid

(3) who you wrote a check to and for how much

Your statement can help you track your spending and create a budget.

SHOW SLIDE 4-10: Using Debit Cards (Continued)

How is a debit card different from a credit card? When you buy something with a credit

card, you are borrowing money from the credit card company. The credit card

company will send you a bill every month for the money you borrowed to buy things.

When you use a debit card, you are using money in your checking account to buy

things. For example, with debit cards:

(1) You can get a debit card from the bank when you open a checking account

(2) Money comes out of your checking account when you pay with a debit card

(3) You don’t pay extra money in interest when you pay with a debit card

(4) You can use a debit card at an ATM to get money from your checking account

(5) You do not build a credit history using a debit card

With credit cards:

(1) You apply for a credit card at a bank or store

(2) You get a bill once a month for everything you buy with a credit card

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(3) You might pay extra money in interest if you don’t pay all of your credit card bill

every month

(4) You can use a credit card as a safer way to pay for things online

(5) You can build a credit history using a credit card if you pay the whole bill every

month when it is due

Can I use my debit card to buy things online? Your debit card will work online. But

debit cards are not a good way to pay when you shop online.

Credit cards are safer to use when you buy things online:

(1) You might have a problem with something you buy online. It is easier to get your

money back if you use a credit card.

(2) Someone might steal your credit card number online. The law says you can lose

only $50 if you report it right away.

(3) Someone might steal your debit card number online. The thief can take all your

money out of your bank account.

What if I use all the money in my checking account? You might not have enough

money in your checking account. That means your debit card will be “declined.” You

will not be able to buy things.

Some banks and credit unions might let you sign up for “overdraft protection.” That

means you can use your debit card even when you do not have enough money to pay

for the things you are buying. But you might have to pay a fee to the bank. Some

banks might charge this fee for every purchase until you put enough money in your

account to pay for the things you are buying.

For Example:

I did not know my checking account balance was $1.78.

I used my debit card three times. I paid for groceries, coffee, and my cable bill.

My bank charged a $25 overdraft fee every time I used my card.

The good part: My debit card was never declined. I could buy what I wanted.

The bad part: Now I owe the bank $75, plus the money I spent.

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Debit cards are a way to pay for things. They use money from your checking account

at the bank. They can be convenient. But to avoid spending more money than you

have, keep track of how much you spend.

SHOW SLIDE 4-11: Using Debit Cards (Continued)

How do I choose a debit card? A bank or credit union usually gives you a debit card

when you open a checking account.

Compare the services and fees at a few banks and credit unions. Go to the website or

visit in person. Find out what the fee is if you:

(1) have a checking account

(2) use a debit card

(3) get cash from ATMs at other banks

(4) have less money in your account than the bank requires

(5) spend more money than you have in your account

Compare the answers. Find the bank or credit union that meets your needs.

How can I protect my debit card?

(1) keep your debit card number and PIN private

(2) do not use your debit card to buy things online

(3) if you lose your debit card, report it to your bank or credit union right away. Ask

your bank to cancel the card and send you another card

(4) ask for account alerts by email or text message. This can let you know if your

account has less money in it than you think

How can I keep track of my money? To keep track of your money:

(1) write down how much money you spend with your debit card (keep receipts and

post all transactions to your checkbook register)

(2) write down how much money you take out of the ATM. Remember to add the fees

(keep receipts and post all transactions to your checkbook register)

(3) use your monthly budget to schedule payments for regular bills

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(4) look at your bank statement whenever it comes. Make sure it is what you expected

(balance your checkbook register to your bank statement)

(5) ask your bank or credit union to send you email or text alerts. Some banks contact

you if your balance goes below an amount you set

SHOW SLIDE 4-12: Bank Statement

NOTE: Refer students to page #9 of their handout to follow along with the “Bank

Statement” slide.

(1) Use the statement received from the bank to determine which debit card

transactions, checks, deposits, or withdrawals have been processed by the bank. Only

those items appearing on the statement can be counted as processed.

(2) Place a mark beside each item in your checkbook register only if it appears on the

bank statement. You may want to mark items on the bank statement as well.

(3) Find the last balance in your checkbook register (where you have entered your

most recent debit card transaction, check, withdrawal, or deposit that made up a

portion of the bank statement’s balance).

(4) Draw a line in the checkbook register under the last item shown processed in your

bank statement. This is the balance you will reconcile.

NOTE: Explain that there may be checks, withdrawals, and/or deposits “unmarked” in

the register. These will be taken care of later in the reconciliation process.

(5) On the back of your bank statement, write your underlined balance and subtract

any service fees or other charges shown in your bank statement that you have not

already entered and marked off in your checkbook register. Calculate a subtotal.

Make sure you also post these charges and service fees in your checkbook register on

the next available line. After you post them, do not forget to place a mark in your

“check off” column.

(6) Add to the subtotal calculated above any interest that you earned during the month

on your account balance, if your account is an interest bearing account. Calculate a

new total. This is your adjusted checkbook register balance. Make sure to enter the

amount of earned interest in your checkbook register and check it off by placing a mark

beside it.

(7) Using the bank statement you received, find the ending checking account balance,

and write it down next to the adjusted checkbook register balance.

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(8) Look at your checkbook register to find the balance you underlined:

(a) Are there any deposits above the line that have not been marked off yet? If

there are, the bank has not processed them yet. Add the deposit amounts to the

ending checking account balance shown on your bank statement. Subtotal.

(b) Are there any checks which are not checked off yet that make up your underlined

checkbook register balance? If there are, subtract them from the subtotal and

calculate a new adjusted statement balance.

NOTE: Emphasize that deposits and checks made after the underlined balance in

your checkbook register should not be used for reconciliation, whether they are

marked off or not.

(9) Compare your adjusted checkbook register balance with your adjusted statement

balance. If they match exactly, your account is reconciled.

(10)If the two balances don’t match, check your calculations to make sure that you

added and subtracted correctly.

(11)If your calculations are correct and the two balances do not match:

(a) Make sure you wrote all debit card, ATM, or PAT transactions in your checkbook

register.

(b) Make sure you added or subtracted any charges that the bank processed

against your account:

(aa) Interest you earned on your account (add)

(bb) Monthly service charge (subtract)

(cc) ATM charges (subtract)

(dd) Flat fee for each check written (subtract)

(c) Make sure that you did not count checks or deposits made after the underlined

balance in your checkbook.

(d) Verify that the withdrawals, canceled checks, and/or deposit amounts listed on

your bank statement exactly match what you wrote in your checkbook register.

(e) Check the bank statement from last month for a check that was not cleared from

last month. Some people may hold a check for several months before they cash it.

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(12)If you cannot find your error, have your spouse or a friend help you look for the

mistake. If you still cannot find your error, take your statement and all receipts to your

immediate supervisor for help in reconciling your account. If your chain of command

cannot find and resolve the error, the bank must be contacted for help in the

reconciliation of your account. Again, remember that your honor and integrity are to a

great degree measured by your financial trustworthiness. Make sure you accurately

balance your accounts to avoid financial difficulty.

NOTE: Emphasize that this should be the last resort, since most banks charge a fee to

perform the reconciliation service. Many banks do not provide this service at all.



(1) Now take the items that are have not been checked off from the Bank Statement

and enter in the check register.

(2) Be sure to put a check mark now in both the bank statement and check register.

(3) Find the last balance in your checkbook register (where you have entered your

most recent debit card transaction, check, withdrawal, or deposit that made up a

portion of the bank statement’s balance).

(4) Draw a line in the checkbook register under the last item shown processed.

SHOW SLIDE 4-15: Monthly Bank Reconciliation

Using the Reconciliation Sheet, go to your check register and enter any deposits,

checks and any other entries that do not have a check mark next to them. You should

end up with a zero “Difference” on the last line. If not, check for math errors. If you still

have a different figure, enter this amount back to your check register and this will be

your new balance.

The difference is: interest $5.25, an ATM withdrawal not recorded in the check register

($25), and the ATM fee ($1.50).

**Refer the students to their Monthly Bank Reconciliation page 5 in their handout.

SHOW SLIDE 4-16: Online Banking

Can make managing finances easier and is very common now.

Some services offered:

(1) Access to accounts and transaction history

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(2) Paying bills online

(3) Transferring money between accounts

(4) Deposit checks by scanning checks

(5) Automatic payments

(6) Paperless statements

SHOW SLIDE 4-17: Online Banking

Many people use online banking to effectively monitor their financial transactions and

even link their accounts with financial software that helps them with budgeting.

NOTE: Always safeguard your username and password. It can be devastating if it gets

in the wrong hands.



learning activity.


Q: What must you do before you write checks or use your

debit card on a new account?

A: Verify your pay was deposited in your new account by

first reviewing your LES or checking your account online.


Q: Name three consequences that could happen to you if

you write a bad check.

A: Separation, Barred from re-enlisting, UCMJ action,

Reduced in rank, Bad efficiency report, Reprimand, Check

cashing privileges suspended, Counseling, Bank service

charges, Damaged reputation, Damaged credit report


Q: What must you always verify before you write a check?

A: Verify you have enough money in your account to cover

the amount of the check.


40

Q: Why do you start the words of the amount of the check

as far to the left as possible and draw a line after the cents

all the way to the word “Dollars”?

A: For security so no one can alter the amount of the

check.


Q: What are the five types of transactions you must post to

your check register?

A: Debit card transactions, personal checks written by you,

deposits, withdrawals (not by check), and adjustments such

as interest, ATM charges, etc.


Q: What is a PAT and give an example?

A: Preauthorized transactions are reoccurring withdrawals

you arrange to be automatically deducted from your account

such as car payments, insurance payments, utility bill

payments, etc.


Q: Why must you keep up with posting all transactions to

your checking account?

A: So you don’t over draw your account.


Q: What is the bank form you use to reconcile your

checkbook register to?

A: The checking account bank statement.


Q: What do you do with entries that are listed on your

checkbook bank statement but are not in your checkbook

register?

A: Verify the transaction and then post it to your checkbook

register.


41

Q: What are some common errors associated with

balancing a checkbook register?

A: Math errors, not posting entries to the register, and

posting erroneous entries to the register.

Review Summary: SHOW SLIDE 4-29: SUMMARY

During this lesson, we discussed how to write checks, and

how to balance your checkbook. We also talked about debit

cards, reconciling your checkbook, and online banking.

Keeping your finances in order is your duty as well as your

responsibility. Remember, bouncing checks is a crime in

the Army and is punishable under the UCMJ.

TLO - LSA 5. Learning Step / Activity TLO - LSA 5. Identify the Essentials of Credit



Media Type: PowerPoint PresentationOther Media: Unassigned


SHOW SLIDE 5-1: IDENTIFY THE ESSENTIALS OF CREDIT

SHOW SLIDE 5-2: THE ESSENTIALS OF CREDIT

The word credit defines a number of possibilities. You can take out a loan or use a

credit card. Your ability to do this is dependent on the essentials of credit. These

include your credit history, interest rates, fees, payment schedules, etc. Do you make

your payments on time? Do you use your credit card without considering the

purchase? Do you carry your credit card with you at all times?

SHOW SLIDE 5-3: TYPES OF CREDIT

There are three types of credit:

Credit cards

Short-term loans

Long-term loans

SHOW SLIDE 5-4: CREDIT CARD FACTS

Credit Card Facts. VISA International has determined that just placing a credit card in

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someone’s hand will cause an increase in spending of 32%; there is over $886 million

of debt on credit cards held by U.S. consumers. Over 26% of Americans have 4 or

more credit cards (2014 FINRA Financial Capability Study). The Federal Reserve

Survey of Consumer finances for 2013 estimates indicate that the average household

credit card balance is $5,700; and Experian, based on a June 2014 sample of credit

reports looking at 24 months of payment history, estimates the average indebted credit

card balance is $7,743. These averages are still skewed by deeply indebted

households, but overall, credit card debt per household is down. Unfortunately, falling

indebtedness is largely due to defaults rather than repayments.

CreditCards.com reported that the average annual percentage rate (APR) on credit

card balance is 15.00 percent (as of July 2015) and the Federal Reserve reported that

the total U.S. consumer debt was $3.3 trillion (as of December 2014).

SHOW SLIDE 5.5: CREDIT EXAMPLE

Look at this credit example. If you charge $5,000 at 18% and make only a minimum

2% monthly payment, it will take 46 years to pay off this debt! You will have paid

$18,931!!

SHOW SLIDE 5-6: SHORT-TERM LOANS

SHORT-TERM VERSUS LONG-TERM LOANS To use credit to your advantage, you

should understand the differences between short-term and long-term loans, so let’s

examine the advantages and disadvantages of each. Incidentally, the terms “short-

term” and “long-term” are relative, not associated with any particular time period.

Short-term Loans. Short-term loans usually offer a better interest rate than longer-term

loans. In addition, even if rates are the same, the short-term loan will save you money

in interest over a longer loan. Their down side is higher monthly payments.

SHOW SLIDE 5-7: LONG-TERM LOANS

Long-term Loans. The primary advantage of a long-term loan is that it lowers your

monthly payments. Disadvantages are an increase in the amount of interest paid, and

the fact that some items purchased with long-term loans may wear out before the debt

is paid in full.

SHOW SLIDE 5-8: HOW CREDIT WORTHY ARE YOU?

Are you a good credit risk? Before deciding whether or not to grant you a loan, or

other types of credit, and at what interest rate, a financial institution or company will

evaluate the probability that you will make required payments on time. The three

factors that weigh heavily in those decisions are: character, capacity, and collateral.

SHOW SLIDE 5-9: CHARACTER

Character. Do you have a history of repaying loans on time? Stability (length of time

on the job and in a location), age of accounts, and checking and savings account

records are also taken into consideration. If you've bounced checks or have been late

43

on your bills, it may prevent you from obtaining credit.

SHOW SLIDE 5-10: CAPACITY

Capacity. What is the likelihood you can repay the loan on time? Factors include your

income, how much potential credit you hold (number of cards, number of inquiries),

and total debt are considered.

SHOW SLIDE 5-11: COLLATERAL

Collateral. What, if any, additional security is there to ensure the loan will be repaid?

Collateral is normally required for any large loan, such as for a home or car.

SHOW SLIDE 5-12: THE ABC’s OF APPROPRIATE CREDIT USE

Appropriate uses for credit. The best use of credit is to purchase assets - things that

will grow or increase in value over time, like your own business or buying a home or a

rental property. Credit is also useful for convenience - avoiding having to carry large

sums of cash or as a management tool. Wise use of credit virtually always falls into

one of these two categories - Assets or Convenience. Sometimes use of credit for

major consumer goods (so-called "Big Ticket" items) cannot be avoided; few of us can

purchase our first car without a loan. This, too, is an acceptable use of credit.

SHOW SLIDE 5-13: INAPPROPRIATE USES OF CREDIT

Inappropriate uses of credit. Credit becomes more dangerous when used to purchase

consumables. Furniture, clothing, sporting equipment, meals out, and vacations lose

much or all of their value immediately after purchase. Such unwise use of credit is

often motivated by one of four factors.

SHOW SLIDE 5-14: MOTIVATIONS TO ABUSE CREDIT

Motivations to abuse credit:

Availability of credit can lead to a "buy now, pay later" mentality. Impulse buying on

credit can result in your purchasing an item you would never have bought if you had to

pay cash. Distinguish between needs and wants.

Spending on credit to impress others is another common trap. An example would be

advertisements portraying people using a credit card to treat their friends. This can be

a huge temptation. Living within your means can prevent unwise decisions.

More common in marriages is the lack of, or failure to adhere to, an agreed-upon

family spending plan. It can be another cause for an unwise use of credit. Your partner

deviates from the plan and therefore you feel you can do the same. These behaviors

are preventable. Communication is the key.

Believe it or not, spending to feel good can become an addictive behavior. Avoid this

trap by asking yourself if you really need, and can afford to pay for, an item before you

44

charge it.

SHOW SLIDE 5-15: DEBT WARNING SIGNS

Warning signs of too much debt. There are several warning signs, in addition to your

debt-to-income ratio, that you are on the wrong road. They are:

Not paying off most of your cards every month could be a sign of trouble--especially if

higher and higher percentages of each month's pay go to service your debt. When

you start to fall behind on payments, and/or need loans or cash advances for daily

living expenses, it's time to seek help! Limit the number of credit cards to only one or

two.

Additional clues may include not having at least one month's pay in savings, being at

or near the limit on all your credit cards, or relying on a second job or spouse's income

to make ends meet. Remember that outside income and your spouse's employment

can be impacted by an extended deployment or Permanent Change of Station.

SHOW SLIDE 5-16: CONSEQUENCES OF DELINQUENT ACOUNTS

Delinquency commonly refers to a situation where borrowers are late or overdue on a

payment, such as student loans, income taxes, mortgage loans or automobile loans.

There are long-term consequences for delinquency, depending on the type of loan and

the duration and cause of the delinquency.

For example, assume a Soldier takes out a loan from a bank and is delinquent on his

loan for 90 days. His credit score would decrease for a considerable period, affecting

his credit rating for multiple years (seven to ten years depending if he files for

bankruptcy or not). Long-term delinquency could cause the loan to default, which

would cause the bank to foreclose on his home. This would further affect his credit

rating and make it difficult for him to obtain credit card accounts, mortgages or

automobile loans.

Similarly, assume a recent college graduate obtained student loans throughout his stay

at college. Suppose too he fails to make his first loan payment. Consequently, his loan

becomes delinquent until he repays the owed amount. If his loan remains delinquent

for 270 days, it goes into defauLt and he must pay the entire balance and fees

immediately. The long-term effects of his delinquent account include damage his credit

rating, making it harder for him to obtain other loans, and garnishment of his wages

and withholding of his tax refunds.

SHOW SLIDE 5-17: INDICATIONS OF SERIOUS CREDIT PROBLEMS

Indications of Serious Credit Problems. You should acknowledge that things are

critical when you start skipping some bill payments, using credit to pay credit, using or

even considering a debt consolidation loan, being denied additional credit, or hiding

bills and lying to members of your family.

45

SHOW SLIDE 5-18: CREDIT BUREAUS

Credit Reports. A credit report is information about you and your credit experiences,

such as your bill-paying history, the number and type of accounts you have, late

payments, collection actions, outstanding debt, and the age of your accounts. A good

report can open many doors for you, and a bad report will be a major obstacle in

realizing future goals and aspirations. We'll discuss who keeps these reports, what

they contain, how they are used, and what you should do to ensure your report is

accurate.

Credit Bureaus. Most credit reports are compiled by three major companies: Equifax;

Experian; and TransUnion. A list of these companies and contact information can be

found on the PFMC website. In some states, these companies may charge you for

your credit report or, if you were denied credit, you can request a copy of your credit

report FREE of charge within the time limit set by law. These companies are

competitors, so they do not share their information, and therefore, the information in

your report with each of them may be different.

SHOW SLIDE 5-19: REPORT COMPONENTS

Components of a credit report. Your credit report has four major components:

Personal Information. Your name, address, former address/es, SSN, and estimated

date of birth. You may not want a great deal of personal information to go on file,

however, if you refuse to provide it the creditor can deny you credit.

Credit History. This section contains the history of all your accounts of which they

have information. It shows all of your credit information: the type of account, the date it

was open, your payment history, and the current status of the account. This

information is used in evaluation of your creditworthiness. This section will contain your

history of late or missed payments - definite adverse entries. You should ensure all

closed accounts are reflected as such because potential credit, as well as actual debts,

may be used by the lender to compute your debt-to-income ratio. Be sure the report

shows that such accounts were closed at your request; otherwise it is left open to

question that it might have been closed for cause, more potential adverse information.

Public Records. This section will contain any judgments that have been entered

against you. Any bankruptcy information will remain on your report for 10 years from

the date of filing. Unpaid tax liens may be reported depending on your state of

residence. Paid tax liens may be reported for 7 years from date of payment. Other

judgments such as foreclosure, criminal convictions, and even some driving infractions

may be found on your credit report. You may be required to explain public record items

to potential creditors.

Inquiries. This section contains a record of all who have requested and been provided

46

with copies of your report. It is especially useful if correcting erroneous information -

the credit bureau is required by law to provide corrections to all who received your

report within the past six months.

SHOW SLIDE 5-20: CREDIT SCORING SYSTEM

Credit Scoring System. Creditors use the credit scoring system to determine whether

or not you are a good credit risk. Points are awarded for each factor that predicts

reliability for debt repayment. Each of the 3 major credit bureaus (Equifax, Experian &

Trans Union) uses a different variation of the Classic FICO (Fair, Isaacs, and

Company) formula. It should be noted that the differences between each of the credit

bureaus' credit scores and the Classic FICO formula are minute, and basically they

share the same formula/algorithm. One difference between FICO and Beacon scores

is the scale; while Classic FICO runs from 300–850, Beacon Credit Score runs from

350–850. For this reason, your Equifax Beacon score will not be the same as your

score from Experian or Trans Union.

Credit Scores. The three credit bureaus charge for your credit score. However there

are three places where you can get your scores for free.

The first place is through the FINRA Investor Education Foundation by way of your

local Army Community Service Center. This not-for-profit foundation has a website

(SaveAndInvest.org) that provides financial tools and information for military families.

One of these tools is a free credit score and analysis tool that enables you and your

spouse to get your FREE FICO score. To use the tool, your first step is to contact a

military financial educator (sometimes called a “PFM”) at your nearest Army

Community Service or their equivalent). Your Financial Educator or PFM can assist

you in obtaining your free credit score. See more at:

http://www.saveandinvest.org/ControlDebt/CreditScore/P124370#sthash.EpdvSNkr.dp

uf

The second place is Credit Karma at creditkarma.com. Most “free credit score”

companies, when you sign up for their service, ask for your credit card and then, a

month later, you’ll unsuspectingly get charged. After going back to read the fine print,

you’ll notice that free was really only free for the first month, and if you didn’t cancel

your subscription, you’ll get a monthly charge. That’s why they asked for your credit

card. Credit Karma does not ask for your credit card. You do have to give them your

social security number. This is how all credit is tracked, after all. You have to supply

your SS# with all the credit bureaus, all other credit score sites out there, and any time

you apply for credit. Once you provide specific information, Credit Karma will provide

you with a completely free look at collections, credit card utilization, and pulls your

scores from both TransUnion and Equifax.

The third place is Credit.com. Like, Credit Karma, Credit.com does not ask for a credit

card. They ask basically the same questions as Credit Karma and you receive your

47

http://www.saveandinvest.org/ControlDebt/CreditScore/P124370#sthash.EpdvSNkr.dpuf

http://www.saveandinvest.org/ControlDebt/CreditScore/P124370#sthash.EpdvSNkr.dpuf

basic data in a snapshot providing information on all of your accounts, as well as,

credit scores from Experian and a VantageScore 3.0. They also show you on a scale

where your score falls compared to the state you are in and also the national average.

Credit.com gives you a letter grade of each of the categories that make up your score

(Payment History 35%, Debt Usage 30%, Credit Age 15%, Account Mix 10%, and

Credit Inquiries 10%) and offers an action plan on how you can improve your score.

They also provide expert advice in the way of articles just for you based on your credit

profile and action plan.

SHOW SLIDE 5-21: WHAT IS A GOOD CREDIT SCORE?

While there are many credit scoring systems, it is generally accepted that any score

above 720 is considered a GOOD credit score. To help you visualize this, here’s a

rating scale (there are no official brackets and this is just an approximation of a

continuous range:

Credit Score Description

750+ Excellent credit score. You should qualify for the best interest rate and loan

terms.

700 – 750 Good credit score. There won’t be any problem in getting a loan at a good

interest rate.

640 – 700 Average credit score. You may qualify for the loan but not at a good interest

rate.

580 – 640 Poor credit score. You will have a tough time getting a loan or a credit card.

below 580 Bad credit score. It’s doubtful that you will qualify for a loan or a credit card.

Read more: http://www.moolanomy.com/1805/credit-score-rating-and-

scale/#ixzz2TxELz5uZ

SHOW SLIDE 5-22: HOW CREDIT REPORTS ARE USED

Uses for credit reports. Potential employers may access your credit report as a

character check. But by far the most common use is by potential landlords, mortgage

companies, banks and other lending institutions, and merchants offering charge

accounts and credit cards to determine how creditworthy you are. Insurance agents

have also begun using credit reports to determine whether or not you are a good risk

for their insurance policies.

SHOW SLIDE 5-23: ENSURING ACCURATE REPORTS

Ensuring Accurate Reports. Approximately 20% of all credit reports contain inaccurate

information. It's up to you to ensure erroneous information is corrected or your version

is included in your file.

Get Copies. The first step you must take is to get copies of all your credit reports. If

you were denied credit, your copy will be free. Names, addresses, and phone

numbers of the major bureaus are in your handout. The Fair Credit Reporting Act

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http://www.moolanomy.com/1805/credit-score-rating-and-scale/#ixzz2TxELz5uZ

http://www.moolanomy.com/1805/credit-score-rating-and-scale/#ixzz2TxELz5uZ

(FCRA) requires each of the nationwide credit reporting companies — Equifax,

Experian, and TransUnion — to provide you with a free copy of your credit report, at

your request, once every 12 months. The three nationwide credit reporting companies

have a central website, a toll-free telephone number, and a mailing address through

which you can order your free annual report. To order, visit annualcreditreport.com,

call 1-877-322-8228, or go to http://www.consumer.ftc.gov/articles/0155-free-credit-

reports and download the free Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Do

not contact the three nationwide credit reporting companies individually. They are

providing free annual credit reports only through annualcreditreport.com, 1-877-322-

8228 or mailing to Annual Credit Report Request Service. You may order your reports

from each of the three nationwide credit reporting companies at the same time, or you

can order your report from each of the companies one at a time. The law allows you to

order one free copy of your report from each of the nationwide credit reporting

companies every 12 months.

Disputed Items. If you dispute an item on your report, by law the credit bureau must

investigate it, and if it is found to be incorrect, they must correct it. If they do not

complete the investigation within 30 days, they must drop the disputed item from your

report.

Your version. If the information in your report is accurate, you have the right to have a

statement of your version of what happened included in your report. The credit bureau

must send a copy of it to anyone who received a copy of your report in the past 6

months. If the information is confirmed, however, it becomes very difficult to remove;

there are no quick "fixes" available for a bad credit record.

SHOW SLIDE 5-24: CONSUMER CREDIT PROTECTION LAWS

Truth In Lending Act. The Truth In Lending Act of 1968 and amendments ensure

customers are given information about the cost of the credit for which they are

applying. Lenders must disclose the cost of any loan expressed both as the annual

percentage rate of interest and as the total finance charge in dollars. It applies to

single purchases made on credit as well as purchases by credit cards. Additionally,

the Act provides three business days in which you may cancel a transaction that used

your home as security or that took place at your residence (door-to-door sales). You

must do this in writing. This does not apply to all purchases, for example, there is no

cooling off period on car purchases. This law also limits your liability for lost or stolen

credit cards to $50 per account, if you notify the issuing company. Contact them

immediately and follow up in writing.

Fair Credit Billing Act. This act protects you from billing errors and allows you to

dispute charges in writing within 60 days. You may also withhold payment for items

purchased on your credit card which do not meet the quality standards the seller

promised if your good faith try to remedy with the seller fails. You should review your

49

http://www.consumer.ftc.gov/articles/0155-free-credit-reports


statement each month to be sure you recognize all charges.

Fair Credit Reporting Act. This act provides for your right to know what is on your credit

record and provides for the dispute and deletion of inaccurate information. The credit

bureau must first request confirmation from the business that originally made the

disputed entry; if unable to get confirmation, the information is supposed to be

removed, since the consumer has the benefit of doubt. This act allows you a free

credit report if denied credit and limits the time information stays on your credit file. It

also requires each of the nationwide credit reporting companies — Equifax, Experian,

and TransUnion — to provide you with a free copy of your credit report, at your

request, once every 12 months.

Fair Debt Collection Practices Act. This act determines the means by which debt

collectors can contact you. Debt collectors can not contact you before 0800 or after

2100 your local time. You are protected from unfair practices from third party debt

collectors. They cannot be abusive, harass you, tell anyone else about your debt, or

threaten you. You can write to debt collectors and tell them to stop contacting you.

You can also sue them for breaking this law.

SHOW SLIDE 5-25: CONSUMER CREDIT PROTECTION LAWS (Cont.)

Equal Credit Opportunity Act. This act provides for granting of credit regardless of

race, gender, marital status, age, religion, color, national origin or RECEIPT OF

PUBLIC ASSISTANCE.

Fair Credit and Charge Card Disclosure Act. This act requires that credit cards

solicitations inform you of their total cost. This includes APR, grace period, annual fee,

finance charge, other fees, and the method for calculating the balance.

Credit Card Act. The Credit Card Act (2009) provides many consumer credit

protections. For example, your credit card company generally cannot increase the rate

on your existing balance and must tell you forty-five days before increasing the rate for

new transactions. The Act also places new limits on fees and rate increases and

requires consistency in payment dates and times.

State Protection. Federal laws do not regulate interest lenders may charge you! Some

states may provide additional protection in credit matters; however, many have few

credit or consumer protection laws. In particular, in some states there is no effective

cap on interest rates. Arm yourself with information!

SHOW SLIDE 5-26: DEALING WITH CREDITORS

Even though you may have legal protections as just discussed, there are right ways

and wrong ways to deal with creditors if you find yourself in financial difficulty. Here

are some positive actions you should take:

50

Stay in contact with your creditors; let them know if there is a problem. If a friend owed

you money and was avoiding you or not returning phone calls, you would think he or

she was trying to “stiff ” you. Businesses are the same way. Just talk to them.

Be honest.

Approach them with a plan, but be careful of promising more than you can deliver.

SHOW SLIDE 5-27: SITUATIONS TO AVOID

Conversely, there are some things you should not consider:

Credit clinics. Many of these charge up-front fees promising to “clean up your credit

report” fast and get you out of debt. They cannot do anything for you that you cannot

do for yourself. Charging up front fees for debt counseling is illegal in a number of

states.

Debt consolidation loans. Debt consolidation loans are not always bad, but they are at

best a temporary fix. They will not work without a change in your behavior. A study by

American Express indicated 78% of all consumers who take out bill consolidation loans

have a higher debt-to-income ratio 18 months later than when they first took out the

loan.

Bankruptcy. Declaring bankruptcy does not allow you to walk away from all past

problems. This is a last resort option that may have lasting consequences. It may

severely impact on your ability to get credit in the future, in addition to the potentially

negative career implications.

SHOW SLIDE 5-28: HOW TO ESTABLISH CREDIT

No. 1: Check your credit. If you haven't established credit, this advice may seem odd.

However, children are sometimes the prime target of identity theft and some young

adults who apply for credit for the first time discover their information has already been

used by someone else to get credit, oftentimes a close relative!

No. 2: Get your first credit reference. Your first credit reference will establish your

credit history but it can "take credit to get credit." That's why a secured credit card is

often a popular way to get started. With a secured card, you'll place a security deposit

with the financial institution and, in turn, get a card with a credit limit that is usually

equal to the deposit. Besides a secured card, typically a gas card or a department

store card are easiest to get. Be wary of interest rates, they can be high, and shop

around.

No. 3: Use it but don't abuse it. Use your new secured card to purchase things but

don't charge it up to the limit. Ideally, you want to use about 10% to 20% of your

available credit in order to maintain a positive "debt-to-available-credit ratio." That

51

means that if you have a card with a $300 credit limit, you'll want to charge only about

$30 to $50 a month on the card.

No. 4: Pay your bills on time each month. Your payment history counts for about a third

of your credit history, so make sure you pay your bills on time. One late payment can

mean a big drop in your credit scores. Set up online alerts or mark your calendar so

you don't let a due date slip by.

No. 5: Get another card and round out your references. The best credit scores go

people with a well-rounded credit history that includes different types of loans.

No. 6: Monitor Credit report – Maintain your credit and make sure it doesn’t get

messed up. You can get your free credit reports each year at AnnualCreditReport.com.

You can also get a free credit score or approximation of your credit score at credit.com

or creditkharma.com.

SHOW SLIDE 5-29: HOW TO IMPROVE YOUR CREDIT

Get copies of your credit reports. The Fair Credit Reporting Act (FCRA) requires each

of the nationwide credit reporting companies — Equifax, Experian, and TransUnion —

to provide you with a free copy of your credit report, at your request, once every 12

months. The three nationwide credit reporting companies have a central website, a toll-

free telephone number, and a mailing address through which you can order your free

annual report. To order, visit annualcreditreport.com, call 1-877-322-8228, or go to

http://www.consumer.ftc.gov/articles/0155-free-credit-reports and download the free

Annual Credit Report Request Form and mail it to: Annual Credit Report Request

Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Pay your bills on time. Your payment history counts for 35% of your credit history, so

make sure you pay your bills on time. One late payment can mean a big drop in your

credit scores. Set up online alerts or mark your calendar so you don't let a due date

slip by. You can set up automatic payments from your bank account to help you pay

on time, but be sure you have enough money in your account to avoid overdraft fees.

Understand how your credit score is determined. Your credit score is usually based on

the answers to these questions:

Do you pay your bills on time? The answer to this question is very important. If you

have paid bills late, have had an account referred to a collection agency, or have ever

declared bankruptcy, this history will show up in your credit report. Negative credit

history stays on your report for seven years, bankruptcies for ten years.

What is your outstanding debt? Many scoring models compare the amount of debt you

have and your credit limits. If the amount you owe is close to your credit limit, it is likely

to have a negative effect on your score. Your goal should be to keep the ratio of what

52


you owe (credit balance) to your total debt limits to under 10%. For example if you

owe $500 and your credit limit is $10,000 then your ratio is 5% (500/10000).

How long is your credit history? A short credit history may have a negative effect on

your score, but a short history can be offset by other factors, such as timely payments

and low balances.

Have you applied for new credit recently? If you have applied for too many new

accounts recently, that may negatively affect your score. However, if you request a

copy of your own credit report, or if creditors are monitoring your account or looking at

credit reports to make prescreened credit offers, these inquiries about your credit

history are not counted as applications for credit.

How many and what types of credit accounts do you have? Many credit-scoring

models consider the number and type of credit accounts you have. A mix of installment

loans and credit cards may improve your score. However, too many finance company

accounts or credit cards might hurt your score.

Improving your score significantly is likely to take some time, but it can be done. To

improve your credit score under most systems, focus on paying your bills in a timely

way, paying down any outstanding balances, and staying away from new debt. To

learn more about credit scoring, go to the Federal Trade Commission's website and

click on the Tips & Advice (for consumers) tab at the top of the page.

Learn the legal steps to take to improve your credit report. The Federal Trade

Commission has information on disputing errors on credit reports, tips on dealing with

debt, and more. Credit.com also has information on how to dispute errors.

Beware of credit-repair scams. Sometimes doing it yourself is the best way to repair

your credit. The Federal Trade Commission's “Credit Repair: How to Help Yourself”

explains how you can improve your creditworthiness and lists legitimate resources for

low-cost or no-cost help.

Maintain your credit and make sure it doesn’t get messed up. You can get your free

credit reports each year at AnnualCreditReport.com. You can also get free credit

score or approximation of your credit score at credit.com or creditkarma.com.


As a member of the military, there are several sources you can turn to for assistance to

assist you in properly managing credit. They are:

Chain of Command

53

Your PAC is always a good place to start.

Army Community Service Centers. Your local ACS center may have a Financial

Educator on staff to provide personal financial information and counseling. They

normally work closely with the PAC’s at the local commands.

Legal Services can provide assistance in a dispute over a bill or contract. They

strongly encourage service members to come in with a copy of the contract before

signing it when making any major purchase.

Financial Institutions often have financial counselors available who can provide a

range of services to members, up to and including full-scale debt management

programs.

Army Emergency Relief provides no-cost financial counseling and emergency financial

assistance.

SHOW SLIDE 5-31: Questions

NOTE: Ask students if they have any questions.


NOTE: Conduct a check on learning. Slides 5-33 through

5-38 contain a question and answer.



Question: True of False. A credit repair company can

erase a poor credit history.

Answer: False



Question: Name Five Warning Signs of Financial Trouble.

Answer: Debt Consolidation Loans, Using Credit for Basic

Needs, Falling Behind on Payments, At or Near Credit

Limits, Lack of Savings



Question: True of False. You will have lower monthly

54

payments with a long term loan.

Answer: True



Question: True of False. If someone uses your lost or

stolen credit card, you are liable for no more than $50.

Answer: True



Question: True of False. If you pay a bill late, your creditor

can report this information to a credit bureau.

Answer: True



Question: Under the Truth in Lending Act, what is one

thing a lender MUST disclose to you when you apply for a

loan?

Answer: a. Annual Percentage Rate


Credit is something you will use throughout your lifetime. It

can be a valuable tool; however, it can also be a source of

long lasting difficulty. The availability and over extension of

credit has contributed significantly to the rise in personal

bankruptcy rates in the past 20 years. Wise use of credit

can be a key element in achieving financial independence;

misuse can be a ticket to financial ruin. To help you make

wise credit decisions, we have discussed factors that affect

the cost of credit, appropriate and inappropriate uses of

credit, and warning signs of too much debt. We also

discussed what credit reports are and steps you should take

to ensure yours is accurate and reflects favorably on your

ability to manage your finances. Lastly we identified

55

sources of help should you encounter problems properly

using credit.

TLO - LSA 6. Learning Step / Activity TLO - LSA 6. Consumer Awareness





SHOW SLIDE 6-1: CONSUMER AWARENESS

INTRODUCTION: Unfortunately, a large percentage of our population doesn't see

anything wrong with "exaggerated product claims," or high-pressure sales tactics.

Young military members and their spouses are common targets of many who conduct

frauds and cons. It is impossible to cover all of the frauds, cons, and rip-offs currently

in existence. New scams pop up everyday. Gathering accurate statistics about the

number of frauds committed is difficult because some people are embarrassed to

admit that they've been cheated. During this lesson we will cover some of the most

common types of fraud, cons, and rip-offs, how marketing and advertising play a part,

and where you can go to find assistance with complaints. We will also explore what

identity theft is and how you can protect yourself from becoming a target.

SHOW SLIDE 6-2: THE PSYCHOLOGY OF ADVERTISING

To better understand how a person becomes susceptible to being scammed it is

important to recognize the psychology that might be used--especially through

advertising. Let's look at a few ways that advertising and marketing can influence the

decisions you make.

Types of Advertising - The goal of advertising is to get you to buy a product or service,

to buy more than you planned to buy, to spend more than you intended to spend, and,

if possible, to get you to buy something that you did not want or need in the first place.

There are several common types of advertising.

(1) Personalized - Designed to make the individual think that the salesman or

advertiser wants him or her, personally for a customer. May include 'personalized' junk

mail or phone calls. Preys on the idea that we all want to have friends, and here is one

- as long as you buy the product.

(2) Association - Uses familiar people from the entertainment and sports industry to

sell the product. The idea is that you can associate with that person on a personal level

if you buy the product they endorse.

(3) Buzz Words - Words and phrases created to catch your attention, to make you

56

think the product is somehow special or better than the former version or the

competition's version. The idea is to make you want to get rid of the other stuff and buy

this one in order to have the newest, latest, best. This is often called "baiting a sale".

Examples include "Clearance," "Sale," "Closeout," and "Liquidation.“

(4) Fear - Part of the emotional appeal approach. Plays on your fear of rejection or loss

if you don't use the favored product. This often includes the idea of personal ruin if this

product is not used or purchased.

(5) Berating (Put Down) - The goal is to convince you that something is wrong with you

if you don't buy their products.

SHOW SLIDE 6-3: DEFINING DECEPTION

You now have a little knowledge about how people influence you let's look at some of

the techniques they use. You've seen them everywhere -- people trying to convince

you that you must have or do something. There are a number of ways that they can

convince you of those needs. Here are the most common types of misrepresentations.

(1) Fraud - Fraud is a deliberate deception. It is intentional and usually relies on a

twisting of the facts. People who convince people of a fake identity, are frauds.

(2) Con - A con is similar to fraud except that the con artist first wins the CONfidence of

the person being defrauded. They convince the unwitting person that they are a friend,

and as such, they have their best interests in mind.

(3) Rip-Off - Rip-offs are unfair acts of exploitation, they are not necessarily illegal. Rip-

offs take advantage of areas where there are no consumer laws to provide protection.

Remember, the bottom line for all of these scams is to separate you from your money.

SHOW SLIDE 6-4: SCOOP ON SCAMS

There are a number of ways unwitting people become targets of dishonest dealings.

Here are a number of common scams you should be aware of.

SHOW SLIDE 6-5: AUTO REPAIR RIP-OFFS

Auto repair rip-offs consistently rank as the number one consumer complaint

throughout the nation. One shady practice is misdiagnosing -- telling you a major repair

is needed when only a minor one will do. You also need to be alert for installation of

lesser quality parts than what you are charged for. Request to see your old part. A

"rebuilt" part should look new. A dirty or rusty part may have been "salvaged" from a

junkyard for about 10% of the cost of a rebuilt or refurbished part. Be aware that most

states have laws that require auto repair facilities to give you a written estimate of what

their work will cost. If they exceed the written estimate by more than 10% without your

permission, you are not required to pay.

57

SHOW SLIDE 6-6: BAIT AND SWITCH

In this ruse, stores advertise fabulous bargains just to get you in the door, then try to

sell you something more expensive. More often than not, the advertised item is not

available for any number of reasons: there aren't any left. . . you can't get delivery for

six months, etc. If you encounter a "bait and switch", leave immediately. IF IT SEEMS

TOO GOOD TO BE TRUE, IT PROBABLY IS.

SHOW SLIDE 6-7: INVESTMENT SCHEMES

Investment schemes promise high rates of return with minimal risk. You may have

heard these commonly referred to as Ponzi or Pyramid schemes. Promoters of

investment schemes often operate a particular scam for a short time, quickly spend the

money they take in, then close down before they can be detected. In their sales pitch,

they'll say that they have high-level financial connections; that they're privy to inside

information; that they'll guarantee the investment; or that they'll buy back the

investment after a certain time. To close the deal, they often serve up phony statistics,

misrepresent the significance of a current event, or stress the unique quality of their

offering. These schemes are a good investment for the promoters, but not for the

participants.

SHOW SLIDE 6-8: PRIZE PROMOTIONS

Have you ever surfed the net and found that while you were visiting various sites

blinking boxes arrive congratulating you on winning a fabulous prize? Most times you

can buy them for an attractive price and you are always "specially selected" for this

opportunity. Sound fishy? You bet. The scam is that most unsolicited commercial e-

mail goes to thousands or millions of recipients at a time. If you've won a cruise, it

may be on a tug boat or the hotel accommodations you've won are in a shabby motel.

If you want something better, you may be required to pay an additional fee.

Remember, if you buy into this scheme, you'll get what you pay for.

SHOW SLIDE 6-9: TITLE LOANS

In a title loan transaction, you keep your vehicle and drive it. The lender keeps the title

as security and, usually, a copy of your keys. Say for instance you need $1000. If you

take your vehicle title to a title loan officer he'll give you a loan for $1000 at an

enormous interest rate--using your car as collateral. Forget to make one payment and

your car will be immediately repossessed--even it it's the last payment you owe. The

lender will sell it, and pocket whatever money they get. They can do it--you gave the

title, and your keys, away when you took out your loan. Stay away from these loans!!

SHOW SLIDE 6-10: TITLE LOAN EXAMPLE

SHOW SLIDE 6-11: PAYDAY LOANS

SHOW SLIDE 6-12: WHAT IS A PAYDAY LOAN?

What Are Payday Loans? Payday loans (also called post-dated check loans) are small

58

loans that you can take out several days before payday and then repay as soon as you

get paid. Most of these places have you write a post-dated check for collateral. The

typical interest for a payday loan can be as much as 700%.

SHOW SLIDE 6-13: FACTS ABOUT PAYDAY LOANS

Here are some interesting statistics on Payday Loans:

(1) The typical two-week payday loan has an annual interest rate ranging from 391 to

521 percent

(2) Since its inception in the 1990s, the payday lending industry has established over

22,000 locations which originate an estimated $27 billion in annual loan volume

(3) The typical payday borrower remains in payday loan debt for 212 days of the year

(4) Studies have shown that payday borrowers are more likely to have credit card

delinquency, unpaid medical bills, overdraft fees leading to closed bank accounts, and

even bankruptcy

As you can see it is easy to get trapped with these loans.

- See more at: http://www.responsiblelending.org/payday-lending/tools-resources/fast-

facts.html#sthash.k08xwDl3.dpuf

SHOW SLIDE 6-14: QUESTIONABLE CHARITIES

At some point in time, you will receive countless solicitations asking for donations to

what may seem like worthy causes. The problem is how to distinguish between the

legitimate and the scam. Solicitors requesting donations for law enforcement or

emergency services groups cannot claim that you may receive reduced services if you

fail to donate. Donating to a law enforcement "association" will NOT save you a

possible ticket. Copycat organizations may use a name similar to a well-known charity

to confuse you into giving. Beware! If you are sincerely interested in donating to the

cause, request the information be mailed to you. That way you'll have it in writing and

can keep a personal record of your donation.

SHOW SLIDE 6-15: CREDIT REPAIR SCAMS

Credit Repair clinics make many offers to miraculously erase negative information from

your credit files. Not true. Only time, a deliberate effort, and a personal debt

repayment plan will improve your credit.

SHOW SLIDE 6-16: CREDIT REPAIR CRIME

Some credit repair schemes promise you that they can "hide" bad credit by helping you

to establish a new credit identity. If you pay a fee for such a service, the company may

direct you to apply for an Employer Identification Number (EIN) from the Internal

59

http://www.responsiblelending.org/payday-lending/tools-resources/fast-facts.html#sthash.k08xwDl3.dpuf

http://www.responsiblelending.org/payday-lending/tools-resources/fast-facts.html#sthash.k08xwDl3.dpuf

Revenue Service, and to use the EIN in place of your social security number when you

apply for credit. You may also be instructed to use a new mailing address. This

practice, known as file segregation, is a federal crime.

SHOW SLIDE 6-17: TIPS ON INTERNET SHOPPING

The Internet provides consumers with a wide range of information, and sellers with a

new way to promote their products or services. "Cyber shopping," "banking online,"

and other conveniences will spur an increasing number of consumers to do business

by computer. But crooks also recognize the potential of cyberspace. The same scams

that have been conducted by mail or phone can now be found on the Internet, and new

technologies are resulting in new ways to commit crimes against consumers. Let's

look at a few ways to protect yourself.

(1) Do business with companies you know and trust. Be sure you know who the

company is and where it is physically located. Businesses operating in cyberspace

may be in another part of the country or in another part of the world. Resolving

problems can be more complicated in long-distance or cross-border transactions. You

can also ask consumer agencies and the Better Business Bureau about the company's

complaint record. But keep in mind that fraudulent companies can appear and

disappear quickly, especially in cyberspace.

(2) Understand the offer. Look carefully at the information about the products or

services the company is offering, and ask for more information, if needed. A legitimate

company will be glad to provide it; a fraudulent marketer won't. Be sure you know what

is being sold, the total price, the delivery date, the return and cancellation policy, and

the terms of any guaranty. Print out the information so that you have documentation if

you need it.

(3) Be careful with financial or other personal information. Don't provide bank account

numbers, credit card numbers, social security number or other personal information

unless you know the company is legitimate, the site is secure, and the information is

necessary for the transaction. Even with partial information, con artists can make

unauthorized charges, deduct money from your account, and impersonate you to get

credit in your name.

(4) Take your time to decide. While there may be time limits for special offers, high-

pressure sales tactics are often danger signs of fraud.

(5) Be aware that there are differences between private sales and sales by a business.

All sorts of goods and services are sold or traded by individuals through unsolicited e-

mails, newsgroup postings, chat room discussions, web auctions and online classified

advertisements. While most people are honest, your legal rights against the seller may

not be the same as with a business, and you could have difficulty pursuing your

complaint if merchandise is misrepresented, defective or never delivered.

60

(6) You may be better off paying by credit card than with a check, cash or money

order. When you use your credit card for a purchase and there is a problem, you have

the right to notify your card issuer that you are disputing the charge, and you don't

have to pay it while your dispute is being investigated.

(7) Don't judge reliability by how nice or flashy a website may seem. Anyone can

create a website; it's relatively easy and inexpensive. Know that people in cyberspace

may not always be what they seem. Someone sharing a "friendly" tip about a money-

making scheme or great bargain may actually have a piece of the action. "Friendly"

people can turn out to be crooks!

SHOW SLIDE 6-18: IDENTITY THEFT

Whenever you use a credit card, write a check, or give your name and address, you

share personal information –information that can be used by identity thieves. In this

part of the lesson we will show you how to protect yourself from identity theft.

SHOW SLIDE 6-19: IDENTITY THEFT FACTS

(1) A Billion records leaked. According to IBM, more than one billion records containing

personally identifiable information were leaked in 2014 alone. An identity thief only

needs a few data points like the kind found in many data breaches to tap into your

financial life.

(2) There Is No Anonymity. You can do everything right and still get “got.” The

fraudsters out there mining the veins of personal data for financial gain are good at

what they do. However, if you assume you are going to get got and take some

proactive steps – including monitoring your bank and credit accounts regularly for

signs of fraud – in many cases you can have a head start when it actually happens.

(Keeping a tight rein on your social media posts and making them private can also help

give fraudsters less access to you.)

(3) Your Medical History Can Be Compromised. With more than 2.32 million victims

thus far — 500,000 last year alone — medical identity theft is a crime on the rise. It can

cause medical histories to get changed, and benefits fraudulently used by others can

bar a victim from getting medical treatments – making it a dangerous crime. Unlike

credit card fraud where liability is often zero, a recent study by the Medical Identity

Theft Alliance found that more than 60% of medical fraud victims had to pay an

average of $13,500 to resolve the crime. Your best bet is to check every statement

that comes in, and make sure the treatments listed on your Explanation of Benefits

summaries sent out by your insurer match the care you’ve received.

(4) Your Tax Refund Is Under Attack. Tax-related identity theft is a big-money crime,

and the statistics prove it. The IRS stopped 19 million suspicious tax returns last year,

and stopped more than $63 billion in fraudulent refunds. A whopping $5.8 billion in tax

61

refunds were paid out to fraudsters. In 2012, the Treasury Inspector General for Tax

Administration projected that fraudsters would net $26 billion into 2017.

(5) It’s Becoming More Common For The Ones Stealing Your Identity To Be Those

Closest To You. Studies have shown that it’s becoming more common for the ones

stealing your identity to be those closest to you. One study found 32% of identity theft

victims discovered a family member or relative was responsible for stealing their

identity. That same study found 18% were victimized by a friend, neighbor or in-home

employee.

SHOW SLIDE 6-20: IDENTITY THEFT - HOW?

No one can steal your identity without some amount of personal information. They may

get this from a stolen wallet or purse, they may buy it from "inside sources," they may

go "dumpster diving" and obtain it from bills and receipts carelessly deposited in your

garbage, or they could steal or re-direct your mail.

SHOW SLIDE 6-21: IDENTITY THEFT - WHAT?

Armed with enough information, a crook can open a bank account in your name and

write bad checks on it. They can use your credit card, or apply for a new card in your

name. If they have diverted your statements, you may not be aware of what is

happening to you until well after the fact. They could even obtain a drivers license in

your name.

SHOW SLIDE 6-22: PREVENTING IDENTITY THEFT

(1) One way to protect yourself from identity theft is to minimize personal information,

credit cards carried.

(2) Use a cross-cut shredder to dispose of receipts, copies of credit applications,

insurance forms, checks, bank statements, expired charge cards, and any credit offers

you get in the mail prior to discarding.

(3) Use strong passwords for all of your online accounts. Use at least 8 characters,

alpha numeric, symbols, and upper/lower case.

(4) Read credit reports annually by going to Annualcreditreport.com for a free credit

report.

SHOW SLIDE 6-23: WHAT TO DO IF YOUR IDENTITY IS STOLEN

(1) First, contact the fraud department of one of the three major credit bureaus. The

company you call must tell the other companies about your fraud alert. An initial fraud

alert can make it harder for an identity thief to open more accounts in your name.

When you have an alert on your report, a business must verify your identity before it

issues credit in your name, so it may try to contact you. Be sure the credit reporting

companies have your current contact information so they can get in touch with you.

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The initial alert stays on your report for 90 days. It allows you to order 1 free copy of

your credit report from each of the 3 credit reporting companies. Remember that a

credit report details all of your financial transactions for approximately seven years and

it can give you some indication of how much damage to your credit has been done.

(2) Second, contact your creditors, even those that have not been opened by you.

Follow up with a letter.

(3) File a report with your local police department. Keep a copy in case your creditors

need proof of the crime.

(4) As an identity theft victim, you have protections under federal law for ATM or debit

card transactions. Federal law also limits your liability for the unauthorized electronic

transfer of funds that result from identity theft. It’s best to act as soon as you discover

a withdrawal or purchase you didn’t make or authorize. Many card issuers have

voluntarily agreed that an account holder will not owe more than $50 for transactions

made with a lost or stolen ATM or debit card. However, under the law, the amount you

can lose depends on how quickly you report the loss. If you don’t report within 60 days

of the day your institution sent you the account statement showing the unauthorized

withdrawals, you could lose all the money an identity thief took from your account.

(5) An identity thief may steal your paper checks, misuse the account number from the

bottom of your checks, or open a new account in your name. If this happens, contact

your bank or financial institution and ask them to close the account as soon as

possible. Federal law doesn’t limit your loss if a thief forges your signature on your

checks or uses your account number to buy something by phone, but most states hold

banks responsible for losses from those fraudulent transactions. However, banks

expect their customers to take reasonable care of their accounts. That means you

might be responsible for a loss if you know about a problem but don’t report it to your

bank quickly.

(6) Your liability for credit card charges that you didn’t authorize is limited to $50 per

card. To dispute fraudulent charges, contact the credit card issuer within 60 days of the

day the credit card issuer sends you the bill showing the fraudulent charges. What if an

identity thief changed the address on your account and you don’t get your statement?

You are responsible for keeping track of your statements. If your statement doesn’t

arrive on time, contact your credit card company.

(7) If you believe someone filed for bankruptcy in your name, contact the U.S. Trustee

in the region where the bankruptcy was filed. The U.S. Trustee Program refers cases

of suspected bankruptcy fraud to the United States Attorneys for possible investigation

and prosecution. The U.S. Trustee can’t provide you with legal help, so you may need

to hire an attorney.

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SHOW SLIDE 6-24: HOW TO PROTECT YOURSELF

There are several things you can do to protect yourself from Identity Theft.

(1) Be a Skeptic. No one is going to give something for nothing. If somebody has a

business proposition to make thousands of dollars in your spare time, they aren't going

to be selling it in a newspaper ad for $50.

(2) Do Research. Find out how long the company has been in business and research

its past successes and failures. Check out the person or business your dealing with.

Call the Better Business Bureau or a research the company at the local library or on

the Internet.

(3) Get it in writing. There's an old quote that says, "A verbal promise isn't worth the

paper it's written on." If you don't have it in writing, it is your word against the

salespersons.

(4) Use caution. Be leery when dealing with unknown businesses that are located out

of state, use P.O. Box addresses, and when buying over the Internet. It can be very

difficult and expensive to recover your money if the business is hard to locate and

fraudulent companies know this. If you need to speak with a person directly you may

be out of luck.

(5) Think before you buy. Analyze your needs and wants before you buy. Nothing is a

bargain if you didn't need it in the first place.

(6) Save your receipts. Keep your receipts and take prompt action if the product isn't

what you want or doesn't live up to advertising or the salesperson's claims.

(7) Remember that nothing is really free. Companies can't stay in business if they give

away their merchandise. There will ALWAYS be a hidden cost or ulterior motive.



learning activity.



Question: When should you consider getting a payday loan?

Answer: d. You should never consider a payday loan.



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Question: True or False. A company that creates a

connection between a celebrity and a product uses

‘association’ in their advertising.

Answer: True



Question: What type of advertising presents “just the facts?”

Answer: b. Informative



Question: What is the first step you should take when your

identity has been stolen?

Answer: c. place a fraud alert with the credit bureaus



Question: What does a criminal need to steal your identity?

Answer: b. Your social security number



Question: What is the best way to successfully wipe out

excessive debt?

Answer: b. Time

Review Summary: SHOW SLIDE 6-32: SOURCES OF ASSISTANCE

SUMMARY

In the area of consumer awareness, as is the case in most

other topics we've covered, you are not alone. Several of

the sources of assistance shown on this slide are available

only to you, the military member. More specific information

on how to contact each of these sources is included in your

handouts. Remember both spouses are legally and

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financially liable for debt.

TLO - LSA 7. Learning Step / Activity TLO - LSA 7. Car Buying





SHOW SLIDE 7-1: CAR BUYING

SHOW SLIDE 7-2: DO YOUR RESEARCH

Many people begin the car-buying process by visiting a dealership - which should be

one of the last things they do. Unfortunately, for the average consumer, the process

often ends right there with the purchase of a vehicle at too high a price. Dealers will

ask about financing and trade-ins before offering a bottom-line price. They will then

use this information to calculate their profits to your disadvantage. You can save

yourself hundreds, if not thousands, of dollars on your next purchase by doing some

homework BEFORE you step on the lot. This puts you in control of the buying process.

Let's look at some areas that warrant attention before you set out on your journey.

SHOW SLIDE 7-3: STEPS TO SUCCESSFUL PURCHASES

Steps to successful purchases. The following steps can help ensure that you are

satisfied with your purchase.

(1) Determine how much you can afford. Refer to your spending plan.

(2) Determine the type of vehicle you want to buy that fits into your budget.

(3) Determine where you will buy the vehicle.

SHOW SLIDE 7-4: HOW MUCH CAN YOU AFFORD?

Determine what you can reasonably pay and then select a car and options in that

range. Four factors should be considered:

(1) Total Cost. Shopping for a vehicle based on what you want to spend each month is

one of the most common errors consumers make. You risk paying too much for the

vehicle when using this logic.

(2) Down Payment The more you put down, the less you have to finance. This will

lower both your monthly payments and total cost.

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(3) Monthly Costs. Face Reality! You won’t enjoy your car very much if you don’t have

enough money to put gas in it. What will your monthly expenses be? We’ll talk about

how much you should plan on spending for monthly costs in a moment.

(4) Insurance Costs. This cost is considerable for soldiers at your age. Shortly, I’ll

show a slide with an example of what your insurance costs could be. Be sure to

include an estimate when determining how much you can pay for a car payment.

SHOW SLIDE 7-5: MONTHLY COSTS

Monthly Costs. Financial advisors suggest keeping total car expenses to no more than

25% of your net (after tax) income. This includes car payments plus expenses, such

as insurance, maintenance and operating costs (fuel, oil, etc.). As a general guide you

can use 15% of your net income for the car payment and 10% for associated costs.

You should always compute what your debt-to-income ratio would be with any loan

you are contemplating. Most financial institutions won't grant you a loan that has a high

potential to get you in trouble. BEWARE some dealers might. Borrowing from a

relative can only worsen your plight. It is always better to live within your means.

SHOW SLIDE 7-6: AUTOMOBILE INSURANCE COSTS

As you can see by this slide, auto insurance can be a huge cost when purchasing a

car. It is imperative that you add these costs to your monthly payments. Otherwise,

you might find yourself overextended.

SHOW SLIDE 7-7: SELECTING A CAR

What type of car should you consider? The vehicle you purchase must strike the right

balance between what you want, what you need, and what you can afford. Everyone

has different preferences. Factors to consider include:

Size – (Compact, Sedan, Coupe, etc.); Manual or Automatic Transmission; 2-, 4-, or

all-wheel drive; Use (family, recreation, commuting); Style; Safety; Ownership and

Operating Costs; Performance vs. Practicality?

SHOW SLIDE 7-8: NEW or USED

Once you have made some choices about type and style, you have another choice

that will significantly affect the cost of ownership - new or used? Each has positive and

negative aspects. There are no absolute answers to the question of new vs. used. You

might consider "splitting the difference" with a "Program Car" that was a lease or rental

unit and still has a good part of the new car warranty remaining.

SHOW SLIDE 7-9: NEW CAR CONSIDERATIONS

(1) Cost - more than a used car of same make and model.

(2) Mechanical problems - likely fewer than a used car.

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(3) Depreciation - The value of a new car diminishes rapidly following the purchase,

anywhere from 10% to 40% in the first year. To get the full value of a new car, many

consumers plan on owning it for several years (four, five, or more).

(4) Warranties - Usually 3 yrs/36,000 miles is provided, and can be extended at

significant extra cost.

SHOW SLIDE 7-10: USED CAR CONSIDERATIONS

(1) Cost - Often less than a new car.

(2) Mechanical Problems - Likely to have more than a new car. Repair costs can

significantly increase the cost of owning and operating a car.

(3) Depreciation - Usually less than with a new car because much of it may have

already occurred.

(4) Warranties - May or may not have any remaining. Service contracts will add

significantly to the cost of the car.

SHOW SLIDE 7-11: EVALUATING DEALERS

Where should you buy? Car buyers should research a minimum of three potential

sellers. There are no absolute guidelines to follow when selecting a dealer, a

salesperson, or an individual from whom to buy a car. Do your homework, and you

should get a fair deal no matter where you buy. If you're looking for a new car, you'll

have to go to a dealer eventually. Here are some things to consider when evaluating

dealerships:

SHOW SLIDE 7-12: EVALUATING DEALERS Cont.

(1) Years in business: Although being in business for a long time does not

necessarily mean the dealer is straightforward, the worst dealers (in terms of how

buyers are treated) seem to go out of business fairly quickly.

(2) Complaints: Check with the Office of Consumer Affairs of the (state) Attorney

General, the Better Business Bureau, and any professional associations to which the

dealer belongs for any complaints filed against them.

(3) Salesperson and mechanics: How long have they been with the company? Are

the mechanics certified by an accredited agency, such as ASE (Automotive Service

Excellence). Don't be reluctant to ask questions.

(4) References - Senior enlisted and some of your contemporaries assigned to your

duty station for a while may have recommendations. You can probably trust such

references, but be leery of references volunteered by a dealer.

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(5) Professional memberships - Membership in the Better Business Bureau, National

Automobile Dealers Association, or National Independent Automobile Dealers

Association doesn't guarantee you a fair deal. It does, however, give you some

reassurance that there are avenues for you to address problems that cannot be

resolved with the dealership.

SHOW SLIDE 7-13: FAIR PRICE

Auto dealers have a right to make a reasonable profit on the sale of a car. What

constitutes a reasonable profit? To know this you must know what fair price is.

SHOW SLIDE 7-14: INFORMATION SOURCES

All pricing components, including base and option costs at invoice and Manufacturer's

Suggested Retail Price (MSRP), as well as things like destination charges, are

available from a variety of resources.

Price your vehicle at invoice, subtract any dealer holdback or incentives, add a 3-5%

profit, and you will have a good price goal for your vehicle. When working with a dealer

who provides you with pricing information, make sure you know the source - it could be

biased. Your best bet will be to do price research on your own from sources you know

are reliable. Additional resources include:

(1) Public Libraries - One of the very best sources of information on car pricing is the

public library. Most Army bases have libraries as well.

(2) Kelley Blue Book - Lists suggested retail and loan values for specific makes and

models of used cars. This is a guideline, not a law. Factors such as mileage, options,

and physical condition of the car will affect its value. This will give a good ballpark

figure. It can be found on the internet at www.kbb.com.

(3) IntelliChoice Car Cost Guides - Besides the dealer cost and sticker prices, this lists

items such as resale value, economic value, maintenance, costs, etc. The site

www.cars.com uses IntelliChoice pricing.

(4) Consumer Reports/Consumer Union Price Service - Each April issue is devoted to

cars and pricing, and they offer a low cost service to provide the dealer cost for

particular makes, models, and options.

(5) Edmund's Car Prices Buyer's Guide - Available in hard copy as well as at their

internet site. Similar to IntelliChoice guide.

(6) Car-Buying Services. Many organizations offer their members buying services, in

which the consumer indicates the make, model, year and exact options they want and

the organization does the shopping for them.

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http://www.kbb.com/

http://www.cars.com/

SHOW SLIDE 7-15: PURCHASE NEGOTIATIONS

Salespeople are trained in the art of selling. In the majority of instances, their pay

includes a commission based on the sale price of the vehicle, so they have a vested

interested in getting as high a price as possible for the car. Your goal is to get as much

car as you can for as little as you can. Determining a price, trade-in value, and

financing options are three separate events. Don’t offer what you know about your car

before finding out what the price will be for the car. It could affect how much you’ll pay.

Here are some negotiating tips to help you hone your skills:

SHOW SLIDE 7-16: NEGOTIATING TIPS

(1) Information - The salesperson's goal is to get as much personal information about

you as possible. With your name, military status, and particularly your social security

number, a car dealer can determine what you might pay for a car and institute a credit

history check (without your knowledge or permission!). You need only give them your

first name.

(2) Trade-Ins - The dealer will try to combine purchase price, financing, and your

trade-in. You need to keep them apart. Practice saying "That's not important right

now." You will probably get more for your vehicle if you are willing to sell it yourself.

This may be difficult if you owe more on the vehicle than it is worth, but in that case,

you shouldn't be buying a new car.

(3) Driver's License - Some car dealers tell you they must make a copy of your driver's

license prior to taking a test drive. After making a copy they will run a credit check on

you while you’re out for a test drive. Don't fall for this trap!

(4) Deposit - Don't advertise how you will pay for the car. Again, use the phrase

"That's not important right now." If they ask for a deposit, do not pay it. (Unless you are

absolutely certain you will buy the car). Research clearly shows that people who put

down a deposit are much more likely to buy even if they prefer something else! You’ll

have to return even if you change your mind and may have trouble getting your money

back. If the car you were looking at actually is sold, they will find another for you to

purchase, so don't feel pressured.

(5) Don’t like the car. One of the salesperson's goals is to get you to say you "like" the

car. The sooner they establish an emotional connection between you and the car, the

more likely you are to buy it. Stay detached.

SHOW SLIDE 7-17: MORE NEGOTIATING TIPS

(6) Discounts - If the salesperson offers a discount, ask if it will apply a week from now

(in many cases, it will). If they don't bring up the subject, ask for one. Even the "one

price/no haggle" dealers might discount options, etc. You never know unless you ask.

(7) Shop Twins - Some models have identical twins on the other car lots with different

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nameplates on them (for example, the Chevrolet Blazer and GMC Jimmy). If a car you

are interested in is one of them, be sure to consider its twin and choose the one that

gets you the best deal.

(8) Financing - Stating up front that you intend to pay cash could work against you.

The dealership and the salesman make money when they find financing for you. If you

tell the salesman that you will use 100% financing, they may give you a better deal on

the sale because they can make up the profit on the back end. This gives them an

incentive to offer a discount. The best route, however, is to refuse to address financing

at all until you have negotiated a fair price.

(9) Options - Dealer-installed options are frequently available at other sources and

much cheaper than buying through the dealer. Often, they are unnecessary (like rust

proofing), cheaper if done yourself (like fabric and paint protection) and sometimes

even void your warranty (like undercoating). If there are options already on a car that

you don't need, tell them to remove the options. Many times they will just leave them

on and not charge you.

(10) Road Test - This is one of the most overlooked steps in buying a car (particularly

a used car). When you road test a car, ROAD TEST THE CAR! Drive it as closely as

you can to your actual driving conditions: stop and go traffic, long trips, highway

acceleration, rough roads, etc. Turn the radio off and listen carefully. Try every knob

and switch. Leave the salesperson behind if possible; if not ask him or her to be quiet

and even sit in the back seat. If you are considering buying a used car, be sure to have

a trusted independent mechanic check it out before you make the purchase.

SHOW SLIDE 7-18: MORE NEGOTIATING TIPS

(11) Extended Warranty - They are meant to take over when the manufacturer's

warranty runs out. New cars have excellent reliability, often making an extended

warranty completely unnecessary. If you do decide to purchase an extended warranty,

shop around. This is something you can always do later.

(12) Best Time to Buy - There is absolutely no consensus among experts as to when

is the best time to buy. Therefore, buy only when you need a new vehicle and have

done all of your homework.

(13) Walk Away - If you don't like what you hear, don't be shy about turning around

and leaving. Remember: It's your money and your decision!

(14) Don't Rush - Never buy the first thing you see. Sleep on such a major decision

overnight. There will always be others to choose from if "your car" is sold.

SHOW SLIDE 7-19: TRICKS OF THE TRADE

Most salespeople are reasonable, honest individuals. Some, however, are not above

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techniques designed to pressure you into making a commitment. Be aware of these

tactics. Should you encounter them, ask to see a different salesperson, or simply

leave.

(1) Bait and Switch. The dealer advertises a certain car or model at an unbelievable

low price. Problem is that car has just been sold, but the salesman will show you more

expensive models.

(2) Mutt and Jeff. This is like "good cop, bad cop" where the salesman is the good guy

and the sales manager is the bad guy. They may even stage fake arguments in front of

you. Once you believe the salesman is on your side, you become an easy mark.

(3) Low-Balling. Here the salesperson quotes you a price well below the going market.

This will get you to return before you buy elsewhere, at which time the "bad old sales

manager" just won't let the car go for the low ball price given you (verbally, of course)

by the salesperson.

(4) High-Balling. In this twist, the salesperson quotes you a price for your trade-in that

is significantly above fair market value. Of course when you return to actually do the

deal, that trade-in value won't be approved by the "nasty old manager."

(5) Put-to-Ride. Here the salesperson convinces you to take the car home for the night

or even the weekend. You'll have to leave your potential trade-in with the dealer (so

you can't show it to other dealers). They want you and your family to become attached

to the car. Also, you may feel pressure to buy, less your friends think you couldn't

afford the "new" car you were driving.

(6) Padding. This involves adding charges for things such as undercoating, rust

proofing, protection packages, etc. to the contract before you sign it. Negotiate these

out of the contract before you sign.

(7) Name-Dropping. Be leery if the salesperson uses the name of someone you know,

or may know of, as a third-party endorsement of the dealership.

(8) Ownership. Be aware of any comments the salesperson makes about "your" car.

The idea is to get you to believe that the car actually is, or at least should be "yours,"

and you join the salesman to overcome any obstacles to "rightful" ownership.

(9) Fixed-Price. If a dealership claims to offer only one firm fixed-price, you can bet the

invoice has been marked up considerably and/or there are a lot of unnecessary add-

ons (padding). Turn to leave and see if the price becomes "un-fixed" before you get to

the door.

SHOW SLIDE 7-20: FINANCING

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There are a number of places to finance your new car. Be choosy. Rates could differ

greatly depending on where you go.

(1) Credit Unions - A good place to look because of their nonprofit status and

competitive terms. By law, federal credit unions can only calculate interest using the

"simple" method. Also, your credit union may have an in-house buying service

available. You must be a member and have fairly good credit.

(2) Banks - Usually the next best thing after a credit union, but still requires good

credit.

(3) Auto Dealerships - Usually don't have the amount of cash on hand needed to

finance a purchase, so they commonly have a relationship with a finance company for

this purpose.

(4) Finance Companies - These vary widely in interest rates, and often cater to credit

risks by charging very high rates. Some are affiliated with a particular manufacturer

and can have special rates as incentives.

SHOW SLIDE 7-21: FINANCE CHARGES

Finance Charges. You'll need to know some financing terms in order to understand

your financing. First, let's talk about different types of interest. Interest is expressed as

an Annual Percentage Rate (APR) but is computed in several different ways.

SHOW SLIDE 7-22: Add-On or Simple Interest?

Add-on interest . Interest for the total amount of the loan is computed for the length of

the loan and added to the principal. This is an expensive option, since you pay interest

on the entire loaned amount for the entire year, even though you are reducing the

balance you owe each month. For example, financing $1000 for one year at 12% add-

on interest would result in a finance charge of $120.00.

Simple interest - This is paid on the outstanding balance only, which is by far the most

reasonable to the consumer. Credit unions are required by federal law to charge

simple interest only. For example, financing $1000 for one year at 12% simple interest

would result in a finance charge of $66.19.

SHOW SLIDE 7-23: USURY LAWS

In some states there are no usury laws; laws that limit the amount of interest that can

be charged on a loan. Know what the limits are in your state and read your contract

thoroughly before signing. As we discussed earlier, the Federal Truth-in-Lending law

requires that the Annual Percentage Rate (APR) be disclosed in the financing

documents. Read the fine print and have legal review your contract for free.

SHOW SLIDE 7-24: CONTRACTS

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Dealers make a profit from the sale of the car, as well as from extra fees, options, and

services they add to the contract. Carefully considering which options or services you

need ahead of time will help avoid unnecessary expense. If you are not prepared, the

first you will hear of some of the extra profit-makers will be when negotiating the

contract. Let's look at some practices regarding your contract to purchase a car.

(1) Read the Fine Print. Be sure you understand every word on the contract. Take it

to your Legal Services Office for an explanation before you sign. If the dealer refuses

to let you take it with you before signing, WALK AWAY; this is a sure sign something is

not quite right.

(2) Federal Truth-in-Lending Disclosures. Federal law requires these boxes to have

certain appearance and to include the annual percentage rate, total finance charge,

total amount financed, total of payments, and the sales price. Look for, read, and

understand all of them.

(3) Physical Damage Insurance. This is required, but can almost always be obtained

elsewhere more cheaply. The property liability insurance offered by some dealers is

only for their protection, not yours; in the event the car is totaled, it will compensate

them for their loss and do nothing for you.

(4) Credit Life/Disability Insurance. Credit life or disability insurance is seldom

necessary for members of the military. Often it is very high-priced for the amount of

coverage involved and protects the only the dealer or finance company.

(5) Options - Examine these carefully and ensure you really need it, and it cannot be

obtained more cheaply elsewhere (they usually can).

SHOW SLIDE 7-25: OTHER CONTRACT TIPS

(1) Taxes, License, Registration, Title, And Processing Fees. Try to pay as many of

these up front as possible, to avoid having to pay interest on them if they are included

in the financing. Be sure they are itemized so that you know which fees are truly the

government fees and which are processing fees (pure profit for the dealer).

(2) Power of the Pen. If you don't understand or approve of something in the contract,

line it out and initial it. This legally removes the item. Better yet, demand a new

contract with the offending items removed.

(3) Don't Leave Any Blanks. Everything should be filled in, and items left off should

read "$0.00", "N/A," be lined out, or otherwise denoted. Something simply left blank

could be filled in later to your detriment.

(4) Take it to Legal Before Signing It. If you aren't 100% sure of every word in the

contract, take it to legal for an explanation BEFORE YOU SIGN IT! Again, if the dealer

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refuses to let you take it with you before signing, walk away - this is a sure sign

something is wrong.

SHOW SLIDE 7-26: LEASING CONSIDERATIONS

We've discussed the purchasing aspect of vehicles, now let's look at another possible

option. Leasing. Again, you need to do your homework before making any decisions.

There are numerous options and plans to choose from. Before deciding to lease there

many things to consider.

To Lease or Not to Lease. That's the choice you face when mulling over makes and

models and which car deal best meets your needs. Leasing a car is not the same as

buying one. When you buy, you own the car. Customizing is not allowed on leased

vehicles. When you lease, you pay to drive someone else's. Although leasing can

involve lower monthly payments than a loan, at lease end you will have no ownership

or equity in the car.

Ask whether extra charges will be assessed for excessive mileage, wear and tear,

disposition and early termination. Find out the amount of these charges. In most

cases leases restrict taking the vehicle out of state or out of the country. Auto

insurance costs may be higher. Make sure you ask the question.

SHOW SLIDE 7-27: NEGOTIATING A LEASE

Negotiate all the lease terms, including the price of the vehicle. Lowering the lease

price will help reduce your monthly payments. Get all the terms in writing.

(1) Bargain on Price and Mileage. Just like a purchase, lease costs are negotiable.

Bargain for the best cost and mileage prices.

(2) Pay fees up front. It will be to your long-term financial advantage to pay any fees

up front if possible, including security deposits, taxes, destination charges, etc., to

avoid paying finance charges on them.

(3) Understand your lease. Before you sign the deal, take a copy of the contract to

Legal Services for review. This step is crucial to ensuring you understand the terms

completely.

SHOW SLIDE 7-28: CONSUMER PROTECTION

Consumers have some rights under federal laws, but additional rights vary from state

to state. Once again, the best legal preparation is to research the car purchase and

know what you are agreeing to before signing any contracts.

(1) State Lemon Laws. Most states have a Lemon Law, which enables consumers to

get either a new vehicle or get their money back when the vehicle cannot be repaired

to conform to the standards of the warranty. Some states also have Lemon Laws for

75

used cars.

(2) Odometer Reading. It is illegal to ever turn back or reset an odometer, even if a

new engine is installed on the car. A statement of the odometer miles is required with

every purchase. Average mileage per year in America is 15,000 miles, and the

Attorney General estimates that one-third of all vehicles have had their odometers

spun. The DMV can provide you with the number of owners your vehicle has had, and

this information, plus the age and condition of the car, can help you estimate whether

the mileage is suspiciously low.

(3) "As Is" vs. Implied/Expressed Warranty. This sticker is required by Federal law to

be placed in the window of all used cars sold by dealers. For your own protection, any

used car should be inspected by an outside mechanic before you buy and any

promises made by a dealer should be put in writing. Very few assurances are provided

by "implied" warranties and you want everything to be "expressed."

(4) Magnuson-Moss Warranty Act. This is a federal law that protects the buyer of any

product that costs more than $25.00 and comes with an express written warranty. This

law applies to any product that you buy that does not perform as it should, including

cars. A consumer may pursue legal action in any court of general jurisdiction in the

United States to enforce rights under this law.

SHOW SLIDE 7-29: COMPLAINT RESOLUTION

Complaint Resolution. If you experience a problem, you should follow these

guidelines:

(1) Speak to the dealer first. In many cases, dealers have a reputation to protect and

may be willing to quickly resolve problems at this level.

(2) If the dealer is part of a chain, speak next to the regional representative of the

company since he or she also has an interest in preserving the company's good name.

(3) If you don't get resolution from the regional rep, you should contact the

manufacturer directly and address your complaints.



learning activity.



Question: What should you consider when evaluating a car

76

dealer?

Answer: c. Years in business



Question: The Manufacturer’s Suggested Retail Price

(MSRP) can be found in what publication?

Answer: b. Kelly Blue Book



Question: When should you walk away from a car deal?

Answer: d. All of the above



Question: True or False. You should always finance your

car through the auto dealership.

Answer: False



Question: True or False. You should always compute your

Debt-to-Income Ratio before you take out any loan.

Answer: True



Question: Which of the following is the best way to

determine how much you can afford when buying a car?

Answer: c. Refer to your spending plan


77


Question: A warranty that does not allow for future auto

repairs once you purchase a car is called?

Answer: c. An “As Is” Warranty



Question: True or False. The terms of an auto lease

cannot be negotiated.

Answer: False


During this lesson we discussed how to be a more informed

consumer when purchasing a vehicle. We covered the

steps you should take as part of the car-buying process,

including determining what you can afford, researching the

right car for you, selecting a dealer, negotiating a contract,

and your legal rights as a consumer. Various sources of

assistance you may rely on were also discussed at several

points in the lesson.

TLO - LSA 8. Learning Step / Activity TLO - LSA 8. Meeting Your Insurance Needs





SHOW SLIDE 8-1: MEETING YOUR INSURANCE NEEDS

Managing risk is a serious business and a big part of managing your financial future.

Insurance should be a major part of your risk-management strategy. What is

insurance, and how does it work? Insurance is the transfer of risk for a loss you

cannot afford to a third party (the insurance company) in exchange for your payment of

premiums to the company. In this lesson, we will discuss the different types of

insurance and how to define your individual insurance needs. We will briefly review

some of your insurance requirements and identify scams, frauds, and high-pressure

tactics often associated with the insurance industry. And, as in all our lessons, we will

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tell you where to go for assistance when you need it.

SHOW SLIDE 8-2: TYPES OF INSURANCE

The Four Types of Insurance. There are four types of insurance:

Renter’s/Homeowners; Automobile; Life; and Health.

SHOW SLIDE 8-3: RENTER’S INSURANCE

Renter’s Insurance. Renter's insurance covers the loss of your possessions due to fire,

theft, or storm and provides you personal liability protection. Many of you will need this

type of insurance when you rent an apartment, house, store your possessions in a

storage unit, or if you live in government quarters. You should always have your

personal property insured. This type of insurance does not cover the structure, since

you don’t own the property.

SHOW SLIDE 8-4: HOMEOWNER’S INSURANCE

Homeowner’s Insurance. Homeowner's insurance is a combined policy that provides

coverage for fire, windstorms, or theft as well as some level of liability protection. The

premiums are relatively low and the policy covers a particular structure and its

contents. If your dog bites a neighbor, a homeowner's policy will cover the medical

expenses and damages awarded as a result of a lawsuit. It is mandatory coverage if

you own a home with a mortgage. If you don't want to lose all of your savings in a fire,

tornado, or lawsuit you want to have this coverage. Certain risks like earthquake,

flood, war, or nuclear accident are usually not covered. These coverages are available,

often for an additional premium.

SHOW SLIDE 8-5: AUTOMOBILE INSURANCE

Automobile Insurance. Automobile insurance provides five basic protections;

Collision, Comprehensive; Liability; Medical; and Uninsured/Underinsured Motorists.

To make informed decisions about your particular needs, you must understand what

each of these does for you.

Collision. Collision coverage pays for damage done to your car by YOU. It has a

separate deductible and premium. Collision coverage is expensive as the probability of

damage from collision is the highest risk of car ownership. If you finance your car, the

lender will require this insurance, most likely with a very low deductible. Most

deductibles are $250 to $1000. The higher the deductible, the lower the premium. If

you have the cash, raise the deductible. Put the money you save into a savings

account.

Comprehensive. Comprehensive covers damage done by OTHERS, or damage while

you are not in the car, such as vandalism, broken glass, and so forth. Like Collision

coverage, Comprehensive has a separate premium and deductible.

Liability. This is the most important part of your coverage. It insures the damage you

79

do to the "other guy". Physical damage to his/her car, and any lawsuit you may

encounter. Liability coverage is mandatory for all cars in every state. Liability is less

expensive than collision (unless you are under 25 or have some traffic tickets) yet it is

the most important coverage you can carry. Buy all that you can afford. A judgment

against you can follow you for the rest of your life - make sure you have enough liability

coverage.

Medical. This portion of your policy covers you and your passengers for immediate

medical treatment regardless of who caused the accident. Typical coverage here

ranges from $1,000 to as high as $10,000. It is very inexpensive and provides

immediate help.

Uninsured/Underinsured Motorist. You will need this coverage in the event that the

person who hits you has little or no insurance. If this happens, your insurance

company will pay you. They will then sue the uninsured/underinsured driver and try to

get any assets he may have, but the important point is you don't have to do that. If you

carry this coverage, your insurance company does it for you.

SHOW SLIDE 8-6: AUTO INSURANCE TIPS

Automobile Insurance Tips. Lastly, there are a few tips on auto insurance. If you get

traffic tickets or have several accidents, you will have to pay a much higher rate. In

fact, if your driving record is so bad that your carrier cancels your insurance, you may

have to pay a very high rate for what is called the "assigned risk pool" of bad drivers.

Shop for insurance. There are a lot of different rates. If you have had drivers training,

get the certificate and provide it. Most companies will reduce your premium. Anti-theft

systems can reduce your premium as well. Carry as high a deductible as your cash

situation, or your lender will allow. Carry as much liability as you can afford.

SHOW SLIDE 8-7: LIFE INSURANCE

Life Insurance. Life Insurance pays someone else if you die. Simply put, it insures

your future income. If you don't have anyone depending on you for their financial well

being, then you don't need life insurance. If you do, then you need to understand it and

know how to calculate how much and what type you need.

Determining your life insurance needs. Over the next 2-3 years, many of you will

marry, and many of you will start families. So listen up. You can take care of your

family and it is a profound responsibility to do so. Widows or widowers and children of

men and women who did not prepare suffer greatly.

NOTE: Refer students to page 10 of their student handout to complete the

“Determining the Life Insurance Need’s” exercise.

SHOW SLIDE 8-8: TYPES OF LIFE INSURANCE

Types of life Insurance. If you decide you need additional life insurance over and

80

above the maximum you already get in your Army SGLI coverage, you will need to

understand the various types available to you. There are two basic types, Term

insurance and Permanent insurance.

SHOW SLIDE 8-9: TERM LIFE INSURANCE

Term Life Insurance. The advantages of term policies include:

(1) Term premiums are lower than those for permanent insurance so you get more

insurance coverage for less money. This allows you to buy more coverage when you

need it the most, such as when you have young children.

(2) Because term provides insurance for a specific period of time, it is ideal for

covering specific financial needs such as covering your life until your children are

through college, until they are self-supporting, or covering your life until you pay off

your mortgage.

The disadvantages of term policies include:

(1) Premiums increase every time a policy is renewed, so the cost of term insurance

can become prohibitive as you near your late 50s and 60s.

(2) Term life doesn't provide a savings feature known as cash value. Term policies

only pay benefits if you die while the policy is in force.

(3) If your insurance company wants you to take a medical exam when you want to

renew your policy, you may be turned down if your health condition has deteriorated.

(4) You could outlive your coverage, because term insurance is generally not

renewable after age 70 or 75, depending on your state’s insurance regulations.

SHOW SLIDE 8-10: Serviceman’s Group Life Insurance (SGLI)

Serviceman’s Group Life Insurance (SGLI). A term policy you should be aware of is

your Serviceman's Group Life Insurance (SGLI). It is provided to each member of the

Army for the ridiculously low price of 65 cents per ten thousand per month. It can

provide up to $400,000 in life insurance and includes a mandatory rider for Traumatic

Injury Protection Under Servicemembers' Group Life Insurance (TSGLI) and should be

your first life insurance consideration. TSGLI payments are designed to help

traumatically injured Servicemembers and their families with financial burdens

associated with recovering from a severe injury. TSGLI payments range from $25,000

to $100,000 based on the qualifying loss suffered. SGLI has also expanded to include

Family Coverage. Reservist and National Guardsmen qualify for full SGLI if they drill

12 times a year.

SHOW SLIDE 8-11: SGLI-FAMILY COVERAGE

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SGLI-Family Coverage. Spouses and children of active duty members, who are listed

on the service member's personnel file, are eligible for low cost insurance coverage.

Family coverage is available only to members insured under the SGLI program. It is

not available to those insured under the VGLI program. If you are covered under full-

time SGLI, you are eligible to insure your spouse, regardless of whether your spouse is

on active duty, retired, or is a civilian. Coverage starts at $10,000 and is available in

increments of $10,000 up to $100,000 at a cost of $0.50 per $10,000 of coverage for

spouses under the age of 35. Children are automatically covered for $10,000 at no

cost to the service member. SGLI family coverage is AUTOMATIC unless it is

declined, in writing. To do so, you must obtain a waiver statement from your personnel

office.

SHOW SLIDE 8-12: SGLI and other Life Insurance

If you decline SGLI (not recommended) or decide to add to it, ensure that any other

policies:

(1) Specifically cover loss of life due to war and combat.

(2) Cover loss of life due to suicide.

SHOW SLIDE 8-13: SURVIVOR BENEFITS (While on Active Duty)

In addition to SGLI, the Army and the American taxpayer provide these benefits:

(1) The death gratuity is $100,000, (100% tax free) and is paid to the next of kin for the

following armed service members: A member of an armed force under his jurisdiction

who dies while on active duty or while performing authorized travel to or from active

duty; A Reserve of an armed force who dies while on inactive duty training (with

exceptions); Any Reserve of an armed force who assumed an obligation to perform

active duty for training, or inactive duty training (with exceptions) and who dies while

traveling directly to or from that active duty for training or inactive duty training; Any

member of a reserve officers' training corps who dies while performing annual training

duty under orders for a period of more than 13 days, or while performing authorized

travel to or from that annual training duty; or any applicant for membership in a reserve

officers' training corps who dies while attending field training or a practice cruise or

while performing authorized travel to or from the place where the training or cruise is

conducted; or A person who dies while traveling to or from or while at a place for final

acceptance, or for entry upon active duty (other than for training), in an armed force,

who has been ordered or directed to go to that place, and who Has been provisionally

accepted for that duty; or Has been selected for service in that armed force.

(2) Burial Benefits. DoD will process, transport, and inter remains. It provides a casket,

vault and headstone for interment in a government cemetery or may reimburse costs

of up to $7,700, if the family elects to make private arrangements. Transportation to

the burial for the immediate family is provided by the government at no charge, or may

82

be reimbursed up to the government rate. It is recommended that family members

make no travel arrangements until they have spoken with their casualty assistance

officer. The casualty assistance officer will guide the family through the specific

requirements and paperwork for the particular branch of service involved. Specific

information about burial benefits and military honors is available at:

www.militaryfuneralhonors.osd.mil.

(3) Round Trip Travel and BAH. P.L.109-163 made permanent the extended time that

surviving families may occupy government quarters or be paid housing allowances

from 180 to 365 days. Those eligible for Basic Allowance for Housing (BAH) will be

paid in one lump sum. Survivors are also authorized one relocation move at

government expense which must be completed within one year following the death of

the service member. Spouses are eligible for Commissary, Exchange, and Morale,

Welfare and Recreation activities privileges indefinitely unless they remarry. Children

maintain eligibility until age 18 or 23, if still enrolled full-time in college. Military

exchanges forgive Military Star credit card debt owed by families when their service

member is killed in combat. Survivors are also eligible for legal assistance advice on

benefits and entitlements, insurance or taxation.

(4) Arrears in Pay and Leave. Arrears of Pay is a one-time payment made to a

beneficiary after your death. The arrears of pay payment to your beneficiary will

include: The pro-rated amount of your final month’s pay, and Any other money owed to

you at the time of your death to include accumulated leave.

(5) Social Security. A one-time payment of $255 can be paid to the surviving spouse if

he or she was living with the deceased. If there is no surviving spouse, the payment is

made to a child who is eligible for benefits on the deceased’s record in the month of

death. Certain family members may be eligible to receive monthly benefits, as well.

For more information go to www.socialsecurity.gov or call toll-free, 1-800-772-1213.

(6) Dependent’s Indemnity Compensation (DIC). DIC is a monthly benefit paid to

eligible survivors of the following: Military service member who died while on active

duty, OR Veteran whose death resulted from a service-related injury or disease, OR

Veteran whose death resulted from a non service-related injury or disease, and who

was receiving, or was entitled to receive, VA Compensation for service-connected

disability that was rated as totally disabling for at least 10 years immediately before

death, OR since the veteran's release from active duty and for at least five years

immediately preceding death, OR for at least one year before death if the veteran was

a former prisoner of war who died after September 30, 1999.

(7) DIC Eligibility. The surviving spouse is eligible if he or she was married to a service

member who died on active duty. Dependency and indemnity compensation is paid to

a surviving spouse at the monthly rate of $1,254.19. Add $310.71 per child for each

dependent child under age 18.

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http://www.militaryfuneralhonors.osd.mil/

http://www.socialsecurity.gov/

SHOW SLIDE 8-14: PERMANENT LIFE INSURANCE

Permanent Life Insurance. The other type of life insurance, other than term, is

permanent insurance. Permanent insurance provides lifelong protection. As long as

you pay the premiums, the death benefit will be paid. They are designed for you to

keep over a long period of time. If you don't intend to keep the policy for the life, this

may be the wrong type of insurance for you. There are a variety of permanent policies;

whole, adjustable, universal, and variable.

SHOW SLIDE 8-15: PERMANENT LIFE INSURANCE

Permanent Life Insurance. The advantages of permanent insurance are:

(1) You lock in a premium rate at whatever age you start the policy and the benefits

are guaranteed for as long as you live.

(2) Your policy accumulates cash value that grows tax-deferred. Your premiums are

invested by the insurance company in stocks, bonds, real estate, venture capital and

other funds, and you receive a return on your money in the form of annual dividends,

which increase your cash value.

(3) You can tap that cash value while you are alive with low-cost loans. Any

outstanding loans will reduce your policy’s cash value by the amount of the loan. Or

you can withdraw the cash value, though you will have to pay income taxes on those

withdrawals. You can also convert your cash value into an annuity that will provide

fixed-income throughout your retirement years.

(4) If you surrender your policy by discontinuing to pay premiums, you will receive any

accumulated cash value.

(5) Dividends can be used to pay your premium in whole or in part.

(6) Once you have passed the medical tests and have been issued a policy, your

policy cannot be cancelled for medical or any other reasons if you continue to pay the

premium.

The disadvantages of permanent insurance are:

(1) It is far more expensive than term insurance. This means that you can usually

afford far less permanent coverage than you can afford term. If you start a permanent

policy and then must drop it because you cannot afford the premiums, you will have

lost a great deal of money.

(2) Insurance companies invest your cash value quite conservatively so it is possible

that you could earn higher returns on your own if you are a skillful and knowledgeable

84

investor.

(3) The return you earn on your cash value is determined by current interest rates in

money markets. So if interest rates are high, your cash value will grow much more

quickly than if interest rates are low. Periodically, the insurance company deducts its

expenses and a mortality charge from your cash balance. The mortality charge is the

amount of money, based on a premium rate per thousands of dollars of death benefits,

required to provide you with life insurance. The company will guarantee a minimum

interest rate and a maximum mortality charge. Some will also guarantee a maximum

expense charge.

SHOW SLIDE 8-16: ARMY HEALTH COVERAGE

Army Health Coverage. The Army health umbrella covers all of your Medical and

Dental needs, while also affording low-cost options to your dependents.

(1) Medical Coverage. Health insurance covers several things, including doctors

visits, diagnostic tests, surgery, hospital stays, and prescription drugs. It also includes

disability insurance and policies that provide "no-strings" payments for such dreaded

diseases as cancer. It is probably the least of your insurance concerns.

While you are on active duty, the U.S. Army is going to take care of the health care

needs of you and your family. Army medical coverage is furnished by TRICARE

providers. They might be located in a TRICARE facility or a local Military Hospital. If

there are no care facilities local to you or your dependents, you could be responsible

for a small percentage of medical costs if care must be obtained in the civilian

environment. If you have large medical considerations a TRICARE supplement is

available. Such policies usually have a very low monthly cost.

(2) Dental Coverage. The TRICARE Dental Program (TDP) is a voluntary, high-quality,

cost-effective dental care benefit for eligible Family members of all active duty Soldiers

as well as Reserve Component Service members and/or their Families. TDP is offered

by the Department of Defense (DoD) through the TRICARE Management Activity

(TMA). The Metropolitan Life Insurance Company (MetLife) administers and

underwrites TDP for the TMA.

(3) TRICARE Reserve Select (TRS) is available worldwide to most Selected Reserve

(National Guard and Reserve) members and their Families when the military member

is NOT on active duty orders. It is less expensive than many healthcare plans and it

has co-pays and deductibles. As with other insurance you should shop around to find

out what has the best coverage and cost for you. For 2015, Member Only-$50.75 per

month; Member and Family-$205.62. per month.

SHOW SLIDE 8-17: FRIVOLOUS INSURANCE

Frivolous Insurance. There are several types of insurance policies that you should

85

probably be quite leery of:

(1) Hospital Indemnity. This guarantees you continue to be paid while hospitalized. As

an active duty member of the military, you have little need to worry about this

coverage.

(2) Dreaded Disease(s). These policies, written for specific diseases such as cancer,

usually only pay for inpatient care. If you ever need a hospitalization policy, it should

cover required care regardless of cause.

(3) Student Accident Insurance. These policies normally have very low limits on what

they will pay. As a student you are medically covered by the Army. Your dependents

are covered also.

(4) Credit Life Insurance. These policies offer to pay off specific debts should you die

or, in some cases, become disabled. They are profit generators for the companies

selling them and seldom are a good value.

(5) Credit Card Loss. These policies are often quite expensive, and you should know

that your liability is generally limited to $50 per card.

SHOW SLIDE 8-18: MORE FRIVOLOUS INSURANCE

(6) Rental Car Collision (CDW). If you own a car, chances are your policy will cover

you when you are driving a rental. It also likely that your credit card provides some

degree of coverage. Be sure you really need this expensive addition to the cost of

renting a car before you agree to it at the counter.

(7) Accidental Death or Dismemberment. This feature, for an additional premium,

doubles your life insurance payoff if you die from an accident. Your insurance amount

should be based on your survivor's requirements, regardless of how you die. Also keep

in mind that most people, even those who die young, do so of natural causes.

(8) Flight Insurance. For example, you pay $14 per flight for a million dollar payoff if

you die on the flight. Better to buy 14 lottery tickets. You don't have to die to collect if

you hit the jackpot.

(9) Pet Insurance. Policies cost from $40 to $100 per year. They often don't cover

leukemia or other major illnesses.

(10)Extended Warranties. Most major purchases come with sufficient warranties to

protect you in the event you purchase a "lemon". Companies wouldn't offer these

extended warranties if they didn't think they would make money off them. Guess where

they make their money?

86

SHOW SLIDE 8-19: INSURANCE SCAMS

Most individuals who work in the insurance industry are honest and ethical. However,

young Soldiers are often targeted by those who are not. A recent investigation by the

DOD Inspector General documented several instances of improper insurance sales

practices including misleading presentations, presentations by unauthorized personnel,

and agents trying to sell during duty hours or in the barracks.

Two tactics known to have been used by unethical salespersons are convincing the

young Soldier to drop SGLI because it does not build cash value, and claiming non-

existent dependents to decrease income tax withholding in order to "invest" the

"additional" take-home pay in high-cost cash value life insurance. In this latter case,

the Soldier gets a rude shock on April 15th when he or she discovers they must write a

sizable check for income taxes.

SHOW SLIDE 8-20: SOUND ADVICE

Here are some tips to help you through the insurance jungle. As with any major

purchase, don't be rushed in to making a decision. Any "good deal" available today will

likely be there tomorrow. Sleep on it, and be sure to have any contract reviewed by

Army Legal Services PRIOR to signing. Be sure to consider your military benefits

when determining your insurance requirements and don't get pressured into a

decision, like buying auto insurance at a car dealership. Shop hard using several

agents and the internet. A few hours spent now can mean thousands of dollars over

your lifetime.


As a member of the military, you have several sources of help in determining your

insurance needs and meeting your requirements. Army Legal Services is always

ready to review any contract your are considering. In addition, there are several

internet sites, not aligned with any insurance company that will assist you in finding the

lowest cost insurance policies to meet your needs.



learning activity.


Q: What does Renter’s Insurance cover?

a. Your possessions and your house

b. Your possessions only

c. Your House only

d. Your vehicle

87

A: b. Your possessions only


Q: What is the most important, mandatory coverage in your

auto insurance policy?

a. Collision

b. Liability

c. Medical

d. Uninsured/Underinsured

A: b. Liability


Q: What is one way to reduce your auto insurance

premium?

a. Attend a driver’s training class

b. Possess more than two tickets

c. Lower your deductible

d. Double your liability limits

A: a. Attend a driver’s training class


Q: Permanent life insurance which is designed to provide

life long protection is called?

a. Whole Life

b. Adjustable Life

c. Universal Life

d. All of the Above

A: d. All of the Above


Q: What is the maximum amount of Serviceman’s Group

Life Insurance (SGLI) coverage available to Soldiers?

a. $100,000

b. $150,000

c. $200,000

d. $400,000

88

A: d. $400,000


Q: True or False. You should never buy any insurance

under pressure.

A: True


Q: True or False. SGLI family coverage is automatic

unless waived in writing.

A: True


In this lesson, we discussed a subject of vital interest to you

for the rest of your lives - insurance. We covered four

primary types of insurance with particular emphasis on the

different automobile policy provisions and types of life

insurance available. We reviewed the military benefits that

you should consider when determining your personal

insurance requirements and we talked about some frivolous

insurance you might be tempted to purchase. We

concluded this lesson by telling you where you can find

assistance with your insurance needs.

TLO - LSA 9. Learning Step / Activity TLO - LSA 9. Investing / Thrift Savings Plan (TSP)


Instr Type (I:S Ratio): Contractor, (1:25)Time of Instruction: 1 hr 25 mins



SHOW SLIDE 9-1: INVESTING/THRIFT SAVINGS PLAN (TSP)

SHOW SLIDE 9-2: TODAY’S RETIREMENT CONCEPT

Retirement has changed significantly from the past. Many people are spending 20, 30,

or even more years retired. They retire younger, live longer, and are usually quite

healthy. Retirees not only live independently, but also enjoy more of the fruits of their

labors. Retirement income may need to equal or, depending on activities, even

exceed pre-retirement income.

SHOW SLIDE 9-3: REGARDING INVESTMENT INFORMATION

89

Keep in mind as we start discussing investments that we will be providing you with

very basic investment information. We are not financial-planners, nor are we qualified

to recommend investing in any particular stocks, bonds, or mutual funds. You will

need to make these decisions for yourself as you mature and become more

knowledgeable about investment strategies.

SHOW SLIDE 9-4: SOURCES OF RETIREMENT INCOME

Retirement income is often described as a three-legged stool. The three legs are:

Social Security benefits; Retirement and/or pension payments; and Investment

income.

SHOW SLIDE 9-5: SOCIAL SECURITY

Social Security/FICA. The FICA withholding you see on your Leave and Earnings

Statement (LES) is your Social Security contribution. Persons your age will be eligible

to draw full Social Security benefits beginning at age 67. It will probably be about

$1,300 a month or less in terms of today's dollars. After you have been working for a

year or two, you should ensure the Social Security Administration is tracking your

employment by requesting an Earnings and Benefits Estimate. Go to

www.socialsecurity.gov to get a copy of your Social Security Statement online.

SHOW SLIDE 9-6: TYPES OF RETIREMENT PLANS

Types of Retirement Plans. The second leg of the retirement income stool is

Retirement Benefits and Pensions. Some of you may retire from the military, begin a

second career, and retire again. Others may leave the service prior to retirement and

become employed in the civilian world. In either case, I strongly suggest you examine

an employer's retirement plans and pension benefits when deciding to take, or remain

in, any specific job. At this time in your life you are in the military and we will

concentrate on military retirement benefits. There are two types of retirement plans,

Defined Benefit and Defined Contribution. Today's Army has both.

SHOW SLIDE 9-7: DEFINED BENEFIT PLANS

Defined Benefit Plans. Defined Benefit Plans are the more traditional type. The

employer funds them, and one must usually work a relatively long time to become

eligible for a pension check. The amount of monthly pension is normally based on

salary and the number of years worked, and is guaranteed for life. These plans may or

may not include cost of living increases (Military retirement does).

SHOW SLIDE 9-8: DEFINED CONTRIBUTION PLANS

Defined Contribution Plans. Defined Contribution Plans have become increasingly

popular over the last 20 years or so. These plans allow employees to contribute up to a

certain amount of their salary each month, before taxes, to a fund that they have a

significant amount of control over. Sometimes, frequently in the civilian world,

employers will match a portion of each month's contributions. The most common are

401(k) plans, named after the regulating paragraph in the Federal Income Tax Code.

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http://www.socialsecurity.gov/

There is no guarantee with this type of plan. Many workers have options on how they

want to receive their funds at retirement. The options are a lump sum payout, which

they can then invest for future income; deferment of the distribution for a later date;

converting their funds to an annuity and then receiving periodic payments from the

annuity; or installment payments from their plan. These sums can be quite large,

however, the amount depends on how much the worker has invested, and the earning

of the specific investment plan.

SHOW SLIDE 9-9: TWO TYPES OF DEFINED CONTRIBUTION PLANS

Generally, when money is withdrawn in retirement from a traditional plan, it is taxed. It

is paid with tax deferred dollars and continues to grow tax deferred until withdrawn

when you are taxed on the money you withdraw.

For a Roth plan, when the money is withdrawn in retirement it is not taxed. A Roth

account is paid with after tax dollars and grows tax free, even when withdrawn (some

restrictions apply).

SHOW SLIDE 9-10: MILITARY RETIREMENT PLANS

Military Retirement Plans. Let's briefly summarize the two retirement options, the

"High 36" (High-3) or "CBS/REDUX," that you will have if you retire from the Army.

Members who entered service after 31 July 1986 must choose between the "High-3" or

the "CBS/REDUX" at the 15th year of service. If you decline to make a choice you will

automatically receive the High-3 retirement plan.

Under the High-3 and CSB/REDUX systems a member's pension is based on the

average of the highest 36 month's base pay. So if you retire at twenty years under

these systems you would get a percentage of the average of 36 months (3 years) of

your highest basic pay.

The Multiplier. The multiplier is the percentage of your base pay you receive for each

year of service. For the High-3 systems you earn 2.5% per year of service. That means

you get 50% for 20 years of service up to a maximum of 100% for 40 years.

The multiplier for the CSB/REDUX system is 2% per year for the first 20 years, but you

get an increase to 3.5% for each additional year past 20. That means you get 40% for

20 years, but up to 100% for 40 years. That is a significant difference.

Cost of Living Adjustment (COLA). All three retirement systems have an annual cost

of living adjustment. This is a subtle, yet very important detail. Over the lifetime of your

retirement the cost of living adjustment could more than double your retirement check.

The COLA for the final pay and high-3 systems is determined each year by the

national Consumer Price Index. But the COLA for the CSB/REDUX retirement system

is the Consumer Price Index minus 1%.

For Example: A retiree under the High-3 may see a COLA increase in their retirement

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check of 3.5% in 20XX, while a retiree under the CSB/REDUX plan would get a COLA

increase of only 2.5%. Note: There is one more twist to the COLA and multiplier for the

CSB/REDUX retiree. At age 62 the COLAs and multiplier are readjusted so that the

High-3 and CSB retirees get the same monthly pay. But, CSB/REDUX COLAs for later

years will again be set at CPI minus 1%.

The Bonus. When you reach your 15th year of service, you must choose between

taking the "CSB/REDUX" with a $30K cash bonus (approximately $21K after taxes)

and a 40% pension check, or the High-3 retirement system with no bonus and a 50%

pension check. This is a huge decision and cannot be made without some serious

consideration and a clear understanding of the details. If you select the CSB/REDUX

and you don’t complete the obligation of the twenty-year career, you must repay a pro-

rated share of the bonus.

Check My Benefits on the AKO website to learn more on your retirement options and

calculators.

SHOW SLIDE 9-11: USAR / NG RETIREMENT

Retirement is based on Rank, Points, and “Good” Years (based on your Retirement

Year Ending (RYE) date).

Need 50 points to have a “Qualifying Year” to count for retirement. A qualifying year,

under this system, is a year in which the Soldier earns at least 50 retirement points

during their retirement year. Inactive point credit is earned for inactive duty training,

Reserve membership, equivalent instruction, and correspondence courses. Points are

credited on the following basis:

- One point for each day of active service (active duty or active duty for training).

- 15 points for each year of membership in a Reserve Component (Guard and

Reserve).

- One point for each unit training assembly.

- One point for each day in which a member is in a funeral honors duty status.

- Satisfactory completion of accredited correspondence courses at one point for each

three credit hours earned.

Need 20 Good Years to receive a 20 year letter from HRC and receive retirement

benefit at age 60. National Guard and Reserve Soldiers who complete a minimum of

20 "qualifying" years of service (creditable retirement years) become eligible for retired

pay at age 60. Note: A law passed in early 2008 allows Reserve and Guard members

with 20 or more years to begin drawing retirement benefits before age 60 if they deploy

for war or national emergency. For every 90 consecutive days spent mobilized,

members of the Guard and reserve will see their start date for annuities reduced by

three months. But this law only applies for deployment time served after Jan. 28, 2008.

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Your RYE is based on when you entered service. The retirement year ending (RYE)

date is the annual date that a Soldier's retirement point record is closed out. It is used

when referring to retirement points accounting. The RYE is much like a Reserve

Soldier's "Anniversary" date and is a primary date captured in the Retirement Points

Accounting System (RPAS). The anniversary year periods listed on the AHRC Form

249-E are calculated from an anniversary date. The date to determine the anniversary

year is established by the date the member entered into active service or into active

status in a reserve component per DoDI 1215.07. For Example: entered service on 28

Jan. RYE is 27 Jan. You must earn at least 50 points between 28 Jan-27 Jan each

year.

SHOW SLIDE 9-12: USAR / NG RETIREMENT EARNING POINTS

Earning Points:

- You earn 4 retirement points during drill (IDT). Each drill weekend equals 4 unit

training assemblies and 4 retirement points. That’s 48 points.

- You earn 12-14 retirement points during Annual Training. One point per day. That’s

12-14 points

- You get 15 membership points.

- 48+12+15= 75 (77 if you do 14 days AT)

- 77 points makes a Good Year (minimum of 50).

SHOW SLIDE 9-13: USAR / NG RETIREMENT EARNING MORE POINTS

Earning More Points:

- Additional Duty Special Work (ADSW), Active Duty for Training (ADT, schools),

deployment, mobilization: one per day.

- Correspondence Courses: 1 point for every 3 credit hours.

- Submitting 1380 for non-paid IDT (weekend phases of WLC, ALC, SLC, ILE): one

point per day

- Special categories of paid IDT duty: ATA, RMA, ET

SHOW SLIDE 9-14: USAR / NG RETIREMENT ACTIONS

Actions at 20 Good Years:

HRC sends your 20 year letter/eligibility for retirement. The Secretary of the military

department concerned (Secretary of Homeland Security for the Coast Guard) notifies,

in writing, members of the Reserve Forces who have completed the eligibility

requirements for retirement and receipt of retired pay at age 60. Notice is sent to the

member within one year of reaching eligibility. Reserve Component members generally

have three options upon receiving notice of eligibility:

- Remain in Ready Reserve. Remain in the Ready Reserve and continue to perform

inactive duty training, annual training and active duty for training depending on their

training and pay category, or remain on the active status list of the Standby Reserve

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and continue to perform unpaid training for the purpose of accumulating retirement

points.

- Retire into Retired Reserves-GREY AREA Reservist. A member in this category may

participate in inactive duty training provided:

(1) Such training is at no expense to the Government.

(2) Members are not entitled to pay or retirement points.

(3) No official record of such participation is maintained.

- Resign or ETS. Request discharge from the Reserve Components. A member who

elects to resign or ETS is considered a former member. A former member is defined as

an individual who elected discharge rather than transfer to the Retired Reserve

anytime after receiving notification of eligibility to receive Reserve retired pay at age

60. In the case of a former member, regardless of the system under which the

individual will receive Reserve retired pay, longevity credit ceases on the date the

former member was discharged.

Note: Regardless of the option chosen, the member is entitled to receive retired pay at

age 60, but must apply for it.

SHOW SLIDE 9-15: CALCULATING MULTIPLIER FOR RETIREMENT

Here is an example.

You joined on 01 Jul 1990, and had 2 “bad” years. You would be able to retire on 30

Jun 2012.

Assuming that you earned 77 points every good year and 35 points in the bad years,

you would have a total of 1610 points (77 x 20 plus 35 x 2 which equals 1610). This

would equate to 4.47 years (1610 divided by 360 equals 4.47) for retirement

purposes. Your multiplier would equal 2.5 times 4.47 yielding 11 percent. Your

average monthly base pay for the last 36 months is calculated by adding the base pay

for the last 36 months, then dividing by 36. So, in this example, your monthly

retirement pay would be 11 percent times the average of your last 36 months base

pay.

SHOW SLIDE 9-16: RETIRED PAY EXAMPLE

To calculate your base pay for the last 36 months, take your LES and look at your

base pay for the last 36 months. In this example we will use an E8 pay grade. You’ll

notice that each year, you received a pay raise on 01 January. In this example, the

total base pay received in the last 36 months was $173,685.60. Divide this number by

36 and this will be your average base pay in the last 36 months.

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The multiplier that you use will be based on the number of years served and the plan

that you’re under (High-3 or Redux).

SHOW SLIDE 9-17: EFFECTS OF COMPOUND INTEREST

SHOW SLIDE 9-18: THRIFT SAVINGS PLAN (TSP)

In addition to your Defined Benefit Plan (High-3, CSB/REDUX), you and all other

service members will have access to a Defined Contributions Plan—the Thrift Savings

Plan. We will discuss the basics of TSP. You can go to the TSP website to learn more

about the program and the various investment funds. We’ll look at how it works and

what it can do for you.

Benefits of TSP.

(1) It's easy to enroll and maintain your investment plan.

(2) Costs for management of the program by the TSP Management Board was .029%

per $1,000 invested annually (for 2014).

(3) Money contributed to a Traditional TSP account is Pre-Tax Dollars. It is NOT

counted as taxable income. You will eventually have to pay taxes upon withdrawal.

(4) Money contributed to a ROTH TSP account is taxed when earned. When

withdrawn in retirement, ROTH TSP withdrawals may be tax free.

How to Enroll in TSP. Enroll at the myPay website or by completing and submitting a

paper form.

NOTE: Unit should provide TSP-U-1 forms for the students. At this time, make sure

each student has the form to fill out if they would like.

Your local Finance Office or PAC will have the forms. Forms are also available at

www.tsp.gov. Follow the prompts to download and/or print.


TSP Contribution Sources.

(1) You can begin making regular employee contributions at any time. These are

payroll deductions that are made from your basic pay. Each pay period, your agency or

service will deduct your contribution to the TSP from your pay in the amount or

percentage that you indicated when you submitted your contribution election

information.

(2) You can elect to contribute from incentive pay, special pay, or bonus pay, even if

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you are not currently receiving them. These contributions will be deducted when you

do receive any of these types of pay.

(3) You cannot contribute from sources such as housing or subsistence allowances.

(4) If you are receiving tax-exempt pay (i.e., pay that is subject to the combat zone tax

exclusion), your contributions from that pay will also be tax-exempt. You may also

contribute more of your pay to the TSP during the year.

(5) Be aware that if you do contribute tax-exempt pay, your total contributions from all

types of pay must not exceed the Internal Revenue Code (I.R.C.) section 415(c)

annual addition limit for the year. This limit does not include catch-up contributions you

may make during the year.

(6) You cannot make catch-up contributions from incentive pay, special pay, or bonus

pay. You are allowed to use tax-exempt pay to make Roth catch-up contributions but

not to make traditional catch-up contributions.

Select all the contribution sources boxes on the TSP Enrollment Form even if you are

not receiving special, incentive, or bonus pays. If you do not select the special,

incentive, or bonus blocks and then start receiving them you cannot contribute those

moneys into TSP until you resubmit the form.

Especially important is the bonus selection. If you do not select the contributing from

bonus block and you eventually receive one, you cannot put any of the money into

TSP. Once you receive the bonus money you cannot put it into your TSP account.

If you stop contributing from base pay all other sources of contributions stop.


TSP Contribution Amounts. You can contribute up to 100% of your base pay and up to

100% of any special pays, incentive pays, or bonuses up to the IRS maximum,

currently at $18,000 per year (2015). If you are age 50 or older, you can make an

additional $6,000 in catch-up contributions. In a combat zone the limit is higher, up to

$53,000 per year (2015). However, contributions to the Roth TSP are still limited to

$18,000. These limits change periodically.

If you are a member of the Ready Reserve and you are contributing to both a

uniformed services and a civilian TSP account as a FERS employee, the elective

deferral and catch-up contribution limits apply to the total amount of employee

contributions you make in a calendar year to both accounts. If you are called to active

duty and make tax-exempt contributions to the TSP while deployed in a designated

combat zone, the sum of the employee and agency contributions to your civilian

account as well as the tax-exempt contributions made to your uniformed services

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account cannot exceed the annual addition limit ($53,000).

Currently there is no employer matching dollars from the Government.


Control of your TSP Funds. Your contributions belong to you and you have control

over them. This control is exercised by directing which of six funds your money is

invested in. These funds are known as the G, F, C, S, I and L funds.

SHOW SLIDE 9-22: TSP “G” FUND

The G Fund will invest in Government securities and is guaranteed against loss.

Invested in non-marketable U.S. Treasury Securities with 1 to 4 day maturities.

No risk of loss (negative returns) in "G" Fund.

The "G" fund has never lost money although the rate of return on your investment is

usually between 1.5 and 7%. It has averaged 5.43% since its inception date of

04/01/87.

SHOW SLIDE 9-23: TSP “F” FUND

The F Fund will invest in corporate and Government bonds.

Invested in a bond index fund.

U.S. Government: U.S. Treasury and Agencies.

Mortgage-backed securities.

Rate Of Return - Between (-1.68%) and 18%. It has averaged 6.66% since its

inception date of 01/29/88.

SHOW SLIDE 9-24: TSP “C” FUND

The C Fund will basically track performance of the stock market.

Invested in a Standard & Poor's (S&P) 500 stock index fund.

S&P 500 index contains common stocks of 500 companies that represent the U.S.

stock markets.

Historical Returns Between (-37%) and 37%. It has averaged 10.43% since its

inception date of 01/29/88.

SHOW SLIDE 9-25: TSP “S” FUND

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The S Fund invests in small to medium sized U.S. companies.

Invested in a Wilshire 4500 stock index fund.

Wilshire 4500 index contains all common stocks (except those in the S&P 500 index)

actively traded in the U.S. stock markets on a daily basis.

Historical Returns Between (-38%) and 43%. It has averaged 9.19% since its inception

date of 05/01/01.

SHOW SLIDE 9-26: TSP “I” FUND

The I Fund invests entirely in non-U.S. companies.

Will be invested in a Europe, Australasia, and Far East (EAFE) stock index fund.

EAFE contains stocks that cover approximately 60% of the stock markets of the 20

countries included in the index.

Historical Returns Between (-42%) and 38%. It has averaged 4.51% since its inception

date of 05/01/01.

SHOW SLIDE 9-27: TSP “L” FUND

The L Funds, or "Lifecycle" funds, use professionally determined investment mixes that

are tailored to meet investment objectives based on various time horizons. The

objective is to strike an optimal balance between the expected risk and return

associated with each fund.

The strategy assumes that:

The greater the number of years you have until retirement, the more willing and able

you are to tolerate risk (fluctuation) in your TSP account value to pursue higher rates of

return.

For a given risk level and time horizon, there is an optimal mix of the G, F, C, S, and I

Funds that provides the highest expected return.

Use the L Funds if you are looking for a simple, low maintenance way of investing

money in your TSP account. The L Funds make the investing process easy for you

because you do not have to figure out how to diversify your account or how and when

to rebalance.

The L Funds are designed so that 100% of your TSP account can be invested in the

single L Fund that most closely matches your time horizon (or in the two L Funds

closest to your time horizon). Any other use of the L Funds may result in a greater

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amount of risk in your portfolio than is necessary in order to achieve the same

expected rate of return.

Choose If your target date is:

L 2050 2045 or later

L 2040 2035 through 2044

L 2030 2025 through 2034

L 2020 Now through 2024

L Income If you are already withdrawing your account in monthly payments.

Historical Returns Between (-32%) and 26%. It has averaged 4.42% (L), 5.98 (L2020),

6.56% (L2030), 6.93% (L2040), and 10.83% (L2050) since their inception date of

08/01/05 (L – L2040) and 01/31/11 (L2050).

SHOW SLIDE 9-28: TSP CONTRIBUTION ALLOCATION

After your initial enrollment and election request has been processed, TSP will deposit

your first contribution in to the G Fund.

Once the first contribution is received you will then receive a TSP PIN. You can then

begin making contribution allocations among the various funds using the TSP

Thriftline, Website, or via mail.

Allocations must be made between the funds in increments of 1%. E.g. If you elect to

contribute 3%, you may want to put 1% in the "G" Fund and 2% in the "C" Fund.

SHOW SLIDE 9-29: ADDITIONAL TSP BENEFITS

Loans. Two types of loans can be made from your TSP account, a general purpose

loan, or a loan for a primary residence. All loan payments, plus interest, is paid back

directly into your TSP account. Remember, TSP is an investment for your retirement.

It is not recommended to take a loan from your account as it has a negative impact on

the compound interest feature of the TSP plan.

Rollovers. On separation or retirement you can roll the funds in TSP to a qualified 401k

plan. While on active duty you can rollover a qualified Individual Retirement Account

(IRA) into TSP.

Interfund Transfers. You can move your invested money between the various funds,

once a month, 12 times a year.

Financial hardship withdrawals. Verifiable financial hardship. e.g. Medical bills. All

contributions to TSP will be terminated for six months after a hardship withdrawal.

Contribution allocations. You can increase or decrease the percentage you allocate to

each fund as often as you are paid, or twice a month.

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SHOW SLIDE 9-30: TSP OPTIONS UPON RETIREMENT OR SEPARATION

(1) Leave your money in the TSP. You cannot make further contributions but your

money continues to accrue.

(2) Take a Single payout. The payment is made directly to you after a deduction for

Federal Income Tax as required. Rollover into an IRA or 401k.

(3) Receive Monthly payments starting at age 59 ½. There are substantial penalties

for withdrawing the money prior to 59 ½.

(a) You may decide that you want income from your TSP account every month. You

have a couple of options:

- If you have a specific monthly dollar amount in mind, you can indicate it when

you complete your withdrawal request form. You will receive payments in the amount

that you request until your entire account balance has been paid to you. Note: The

amount of each monthly payment must be at least $25.

- If you want the TSP to compute a monthly amount for you based on your life

expectancy, you can choose that option when you complete your request form. Your

initial payment will be based on your age and your account balance at the time of the

first payment. Each year thereafter, the TSP will recalculate the amount of your

monthly payments based on your age and your account balance at the end of the

preceding year.

(b) You may have certain expenses in retirement that you know will continue

throughout your lifetime. If you need a guaranteed stream of payments to cover some

of those expenses, you could consider purchasing a life annuity. A life annuity is a

monthly benefit that is paid to you every month for the rest of your life. The cost of an

annuity depends on the type you choose and the options and features you select. You

don't have to use your entire TSP account balance to purchase the TSP annuity, but

the minimum purchase amount is $3,500.

SHOW SLIDE 9-31: YOUR RESPONSIBILITIES

Your responsibilities with TSP. Once enrolled in TSP you have additional

responsibilities:

(1) Make contribution elections.

(2) Make investment and allocation decisions.

(3) Keep accurate up-to-date personal information.

(4) Designate a beneficiary.

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TSP Website. For more in-depth information on the TSP program go to www.tsp.gov.

Then look under Uniformed Services. Frequently Asked Questions is an excellent

source.

SHOW SLIDE 9-32: SAVINGS VS. INVESTMENT

Saving vs. Investing. Recall that the third leg of our retirement planning stool is

investment income. There are several differences between investing money and

merely saving it. Recognize that the ultimate purpose of saving money is to

eventually spend it. Savings accounts are virtually 100% safe, as most are insured by

the Federal Government.

Conversely, the purpose of investing money is to allow it to grow. Investing is generally

thought of in terms of a significant time span, five years or more. Even optimum

savings instruments have limited ability to overcome the effects of inflation and taxes,

both of which decrease the value of our money. Wise investments will mitigate these

effects.

Investing involves some degree of risk. However, the greatest risk is not making

prudent investments, and therefore not growing your money to meet your retirement

needs. Because saving and investing have different purposes, different instruments

are used for each.

Instruments of Savings. Savings instruments that are highly safe, and liquid, but

provide relatively low yields include:

(1) Regular or share savings accounts.

(2) Certificates of deposit (CD).

(3) Money market accounts.

(4) U.S. savings bonds. Series I bond is tied to rate of inflation.

Investment Assets. Investment instruments fall into one of two categories:

(1) Equity assets, you invest as an owner.

(a) Growing assets are designed to grow your investment. They include

investments such as shares, alternative investments and property.

(b) Hard assets are investments with intrinsic value such as oil, natural gas, gold,

silver, farmland, natural colored diamonds and commercial real estate.

(2) Debt assets, you invest as a lender. Bonds (some can be used by companies and

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varying levels of government).

SHOW SLIDE 9-33: INVESTMENT INSTRUMENTS

Instruments of Investment. As you become more financially capable and

knowledgeable about investing you may want to consider other investment instruments

in addition to TSP, such as:

(1) Individual Retirement Account (IRA). Similar to TSP funds, but purchase through

financial institutions like banks, credit unions, or investment firms. Note: Unlike TSP

there will be fees, paid to the financial institution, associated with opening an IRA.

(2) Direct purchase of bonds or stocks through a brokerage house. Note: Unlike TSP

there will be fees, paid to the brokerage house, associated with purchasing bonds or

stocks.

(3) Mutual Funds. Purchase of stocks and bonds with a pool of investors who have

similar goals. Note: Unlike TSP there will be fees associated with purchasing mutual

funds.

NOTE: Historically, since 1926, large stocks returned an average of 9.8%, while long-

term government bond returns averaged 5% to 6%. However, you should recognize

that there are years, and periods of several years, where bonds significantly out-

performed stocks.

SHOW SLIDE 9-34: RULE OF 72

One quick and way to determine the effect of any particular return on an investment is

to use the Rule of 72. To apply the Rule, divide 72 by the expected annual percent of

return on your investment. The answer will be the number of years it will take for your

investment to double at the expected rate of return.

For example, if you earn 3% on your investment, it will take 24 years to double your

money. If you earn 7.2% on your investment, it will take 10 years to double your

money. If you earn 10%, you will double your money in 7.2 years. If you can earn a

15% annual return, your money will double every 4.8 years.

SHOW SLIDE 9-35: 7 STEPS TO ACCUMULATE WEALTH

No matter how you choose to invest your money, there are seven proven techniques

that will assist you in accumulating the funds necessary for savings and investment.

(1) The first rule is "Pay yourself first." Develop a spending plan that reduces debt and

provides a positive cash flow, Set aside a certain amount for savings and investment at

the top of your plan. Savings allotments and contributions to the TSP are two excellent

ways to "pay yourself first." You never miss the money because you never see it.

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(2) The second rule is to establish a realistic spending plan to systematically put

money aside.

(3) The third rule is to maximize tax-deferred investment opportunities. The TSP and

civilian 401(k) plans are excellent vehicles for this purpose. Individual Retirement

Accounts, or IRAs, are another. Make sure you increase your knowledge about

investing before looking at the many instruments available to you.

(4) The fourth rule is to don’t lose money. Greed causes people to invest in scams that

promise unrealistic returns – Taking prudent risks are OK but speculation is at best a

50/50 deal.

(5) The fifth rule is to persevere. If you see your account has grown, resist the urge to

spend it. After all, if it’s spent, its gone for good.

(6) The sixth rule is to compound your money. The royal road to riches is

compounding. It’s the safe road, the sure road, and fortunately anybody can do it. But

it takes perseverance.

(7) The seventh rule is dollar cost averaging. Invest a set amount every month

regardless of market performance. No one can predict the market. Over time, dollar

cost averaging will compensate for the market ups and downs.

SHOW SLIDE 9-36: CREATIVE SAVINGS STRATEGIES

Some of you may be saying this is all well and good, but where do you get the money

to save and invest? Let's look at a few things you can do:

(1) One way to quickly pad a savings account is to shift debt payments to savings

when the debt is paid off. Just start banking this amount when the loan is paid.

(2) If you unexpectedly receive a sum of money, put it directly into your savings

account and watch it grow.

(3) Select one month during the year and really be a miser. Only doing it for a month

may help to develop some excellent habits that will carry over into the future.

(4) Be very aware of just how much you spend on fast food and snacks. Keep a list of

what you spend for fast food and snacks for one month. That could be $50 a month

going into your savings and investment accounts.

When living off-post, see how much you can cut back on utilities for one month. Be

energy conscious. You could easily save 10% - 20% on your utility bill. Put the

difference in savings!

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SHOW SLIDE 9-37: SAVINGS DEPOSIT PROGRAM

Eligible if serving in an SDP-eligible combat zone , once you are deployed for a

minimum of 30 consecutive days or at least one day in each of three consecutive

months.

A total of $10,000 may be deposited for each deployment

Earns 10% interest annually, compounding quarterly. Interest is taxable. This is

guaranteed, so it compares favorably to the stock market.

Cannot close account while deployed. Money will continue to draw interest for 90 days

after you have returned.

120 days after returning, your money will be direct deposited, but you may request it

before the 120 days, via myPay.

You can withdraw money for an emergency withdrawal. This must be approved by

CO.


There is an art to choosing ways to invest your savings. Good investments will make

money; bad investments will cost money. Do your homework. Gather as much

information as you can. Seek advice from personnel at your bank or other trained

financial experts. Read newspapers, magazines and other publications. Identify

credible information sources on the Internet. Join an investment club.



learning activity.


Q: What is the difference between savings and investing?

a. Savings is for short term buys and emergencies

b. Savings is for your retirement

c. Investing is for short term buys and emergencies

d. Investing is for impulse buying

A: a. Savings is for short term buys and emergencies


Q: Which of the following is an example of an investment

instrument?

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a. Passbook Savings Account

b. Term Life Insurance

c. Certificate of Deposit

d. TSP/IRA

A: d. TSP/IRA


Q: True or False? ROTH TSP contributions are tax free.

A: False (unless contributions are made in a combat zone)


Q: How many investment funds are available in the Thrift

Savings Plan?

a. 3

b. 4

c. 5

d. 6

A: d. 6


Q: In the Thrift Savings Plan, you must contribute first from

what pay source in order to contribute from future bonus

pays?

a. Incentive Pay

b. Base Pay

c. Combat Pay

d. Hazardous Duty Pay

A: b. Base Pay


Retirement may look a long, long way off to most of you

right now, and may not be high on your priority list.

Unfortunately, there are many people who reach an age

where they would like to retire, but fail to have the resources

necessary to do so; people didn't plan to fail, they simply

failed to plan!

We’ve covered a lot of very important information during this

learning activity. We started by looking at how the concept

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of retirement has changed in just a few short years. We then

examined the three-legged stool of retirement income. We

talked about Army retirement systems, with particular

emphasis on those that will affect you. We discussed the

Thrift Savings Plan, a new benefit that can significantly

assist you in saving for your retirement years. We examined

the differences between saving and investing and talked

about why each is important. We examined various vehicles

you may use to invest for your future and discussed proven

techniques that will assist you in forming sound financial

habits.

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SECTION IV. SUMMARY

Method ofInstruction:

Discussion (Small or Large Group)

Mode of Delivery: Resident InstructionInstr Type(I:SRatio):

Contractor, (1:25)

Time ofInstruction:

5 mins

Check onLearning Show Slide #9-46: TLO Check on Learning

Facilitator Note: Each LSA will include a Check on Learning.

Review/Summary Summary: During this lesson we discussed the following areas:

1.Financial Ethics

2.Leave and Earning Statement / myPay

3.Spending Plan

4.Managing A Checking Account

5.The Essentials of Credit

6.Consumer Awareness

7.Car Buying

8.Meeting Your Insurance Needs

9.Investing / Thrift Savings Plan

The proper management of your personal finances can have a long-lasting and far-reaching

impact on you as a Soldier or a civilian. The last thing you want to be thinking about while

patrolling mountains of Afghanistan is if you are being paid properly or if your Family is

financially stable back at home. Whatever your reason for joining the Army there is one

unavoidable fact: it is your duty as a Soldier to fulfill your financial obligations and to provide for

your family. Hopefully, this training provided you with the ammunition you need to prepare you

for your financial readiness.

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SECTION V. STUDENT EVALUATION

TestingRequirements One Pre/Post Assessment

FeedbackRequirements

An AAR will be conducted after all presentations have been given. A student end of course

critique will be conducted at the end of the lesson.

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Appendix A - Viewgraph Masters

Perform Personal Financial Management805A-AAF6B101 / Version 4.2 ©

Sequence Media Name Media Type

1 01_Financial Ethics PPTX2 02_LES-myPay PPTX3 03_Spending Plan PPTX4 04_Managing a Checking Account PPTX5 05_Essentials of Credit PPTX6 06_Consumer Awareness PPTX7 07_Car Buying PPTX8 08_Meeting Your Insurance Needs PPTX

A-1

Appendix B - Assessment Statement and Assessment Plan

Assessment Statement: Conduct a pre-assessment after the introduction. Conduct a post-assessment after thesummary and any questions from the students.

Assessment Plan: None.

B-1

Appendix C - Practical Exercises and Solutions

PRACTICAL EXERCISE SHEET 805A-AAF6B101 PE1

Time: 0 hours 15 minutes

PRACTICAL EXERCISE(S)/SOLUTION(S) FOR LESSON 805A-AAF6B101 Version 4.2 ©

Title Post Assessment

LessonNumber/Title

805A-AAF6B101 Version 4.2 © / Perform Personal Financial Management

Security Classification Unclassified

IntroductionINTRODUCTION: The proper management of your personal finances can have a long-lasting

and far-reaching impact on you as a Soldier or a civilian. The last thing you want to be thinking

about while patrolling the mountains of Afghanistan is if you are being paid properly or if your

Family is financially stable back at home.

MotivatorMOTIVATOR: Whatever your reason for joining the Army there is one unavoidable fact: it is

your duty as a Soldier to fulfill your financial obligations and to provide for your family. The

purpose of this training is to provide information that will help you prepare for your financial

readiness.

TerminalLearningObjective

NOTE. Inform the students of the following Terminal Learning Objective requirements.

At the completion of this lesson, you [the student] will:

Action: Perform Personal Financial ManagementConditions:

In a classroom environment using facilitated group discussions, shared

personal experiences, applicable Army administrative publications and

forms, and access to internet resources.

Standards:Demonstrate basic knowledge and comprehension of the following

learning activities:

1. Financial Ethics

2. Leave and Earning Statement / myPay

3. Spending Plan

4. Managing A Checking Account

5. The Essentials of Credit

6. Consumer Awareness

7. Car Buying

8. Meeting Your Insurance Needs

9. Investments / Savings

SafetyRequirements No food or drink is allowed near or around electrical equipment (computers, printers, projectors,

etc.) due to possible electrical shock or damage to equipment. Exercise care in personal

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movement in and through such areas. Avoid all electrical cords and associated wiring. In the

event of an electrical storm, you will be instructed to power down equipment. Everyone is

responsible for safety. A thorough risk assessment must be completed prior to every mission or

operation.

Risk AssessmentLevel

Low

EnvironmentalConsiderations NOTE: Instructor should conduct a Risk Assessment to include Environmental Considerations

IAW FM 3-34.5, Environmental Considerations {MCRP 4-11B}, and ensure students are briefed

on hazards and control measures.

Environmental Statement: Environmental protection is not just the law but the right thing to do.

It is a continual process and starts with deliberate planning. Always be alert to ways to protect

our environment during training and missions. In doing so, you will contribute to the sustainment

of our training resources while protecting people and the environment from harmful effects.

Refer to FM 3-34.5 Environmental Considerations and GTA 05-08-002 ENVIRONMENTAL-

RELATED RISK ASSESSMENT.

NOTE: It is the responsibility of all Soldiers and DA civilians to protect the environment from

damage. Recycle all appropriate courseware material. Environmental protection is not just the

law but the right thing to do. It is a continual process and starts with deliberate planning.

Always be alert to ways to protect our environment during training and missions. In doing so

you will contribute to the sustainment of our training resources while protecting people and the

environment from harmful effects.

EvaluationStudents will be evaluated on how well they absorbed the material presented.

InstructionalLead-in Before presenting this lesson, instructors must thoroughly prepare by studying this lesson and

identified reference material. Throughout this lesson, solicit from students the challenges they

experienced in the current operational environment (OE) and what they did to resolve them.

Encourage students to apply at least 1 of the 11 critical variables: physical environment, nature

and stability of the state, sociological demographics, regional and global relationships, military

capabilities, technology, information, external organizations, national will, time, and economics.

ResourceRequirements Instructor Materials:

Enough copies of the pre and post assessment for each student. Answer key.

Student Materials:

Pencil or pen

SpecialInstructions Conduct a post-assessment after the summary and any questions from the students.

ProceduresConduct a post-assessment after the summary and any questions from the students. Hand out

the assessment and give the students ten minutes to complete the assessment. Go over the

assessment after they complete it.

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FeedbackRequirements Ask students if they have any questions or concerns. Answer all questions or concernes.

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SOLUTION FORPRACTICAL EXERCISE 805A-AAF6B101 PE1

Instructors will have a copy of the solution (answer key).

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Appendix D - Student Handouts

Perform Personal Financial Management805A-AAF6B101 / Version 4.2 ©

Sequence Media Name Media Type

1 PFMT Student Handout PDF9 09_Investing-Thrift Savings Plan PPTX10 Post-Test PDF11 Critique PDF

D-1

CRM LESSON PLAN REPORT€¦ · Instructor Material: Each primary facilitator should possess a lesson plan, slide deck, lesson handout, pre/post test, appicable regulations, and student

Documents