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Financial Literacy Michael Bernard, CFP, ChFC, EA
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Page 1: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Financial Literacy

Michael Bernard, CFP, ChFC, EA

Page 2: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Budgets

Page 3: Financial Literacy Michael Bernard, CFP, ChFC, EA.

BudgetO What is a budget?

O A list of all planned revenues and all planned expenses

O A budget organizes your income and expenses so that you can track, monitor, and control your financial life

A budget helps you spend only the money that you have.

Page 4: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Budget - usesO Monitor your current income / expenses

O Determine where you are going to spend your money each week, month, or year.

O Categorize your expenses to help you know how much you’re spending in certain areas.

O Forecast the future or upcoming income / expensesO Project how you expect to spend and save your money in

the future.O Compare your actual expenses to what you forecasted to

see how well you did

Page 5: Financial Literacy Michael Bernard, CFP, ChFC, EA.

What are the components of a budget?

Income

The amount of money you’ve earned in a given month, and you have control over

how it’s used.

Income is a positive number in your budget

Page 6: Financial Literacy Michael Bernard, CFP, ChFC, EA.

What are the components of a budget?

Expense

When your money is used or spent.

Expenses are negative numbers in your budget, meaning they are

subtracted from your income reducing the money you have.

Page 7: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Sample Categories of Expenses

O Medical

O Transportation

O Lifestyle

O House

O Food

Page 8: Financial Literacy Michael Bernard, CFP, ChFC, EA.

What are the components of a budget?

Discretionary Money

The excess money left over after each month that you can use anyway you want.

Discretionary Money should be a positive number, showing that you aren’t spending

more money than you have.

Page 9: Financial Literacy Michael Bernard, CFP, ChFC, EA.

What are the components of a budget?

Income

Expense

Discretionary Money

Page 10: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Case Study

Page 11: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Meet Antonio

Page 12: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Credit and Credit Cards

Page 13: Financial Literacy Michael Bernard, CFP, ChFC, EA.

CreditDefinition:

The amount of money available to be borrowed by an individual is referred to as credit. It must be paid back to the lender at some point in the future.Example:

When you make a purchase at the mall with your VISA card it is considered credit because you are buying goods with the understanding that you’ll need to pay for them later.

In other words, your credit is your “trustworthiness” of being able to pay back

money that you borrow.

Page 14: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Credit Score

What Is A Credit Score? - Investopedia Videos

Your credit is often represented by a numerical number between 300 and 800 called a Credit Score

or FICO Score.

The Higher your score = the more trustworthy you areThe Lower your score = the less trustworthy you are

Page 15: Financial Literacy Michael Bernard, CFP, ChFC, EA.

What Impacts Credit Score

Your financial behavior impacts your credit score

The decisions you make with money will prove whether you are trustworthy and responsible with more of it or not. This will impact your credit score

and your creditworthiness.

Page 16: Financial Literacy Michael Bernard, CFP, ChFC, EA.

What Impacts Credit Score

O Opening a Checking Account

O When you have a cell phone bill

O When you open a credit cardO Whether you use it, how much you use it,

when you pay it back…

O When you get Student Loans or Car Loans, etc.

Page 17: Financial Literacy Michael Bernard, CFP, ChFC, EA.

What Impacts Credit Score

O Your payment history

O The amount you owe on a loan

O How long you’ve used credit

O How often you apply for credit

O The types of credit you use

Page 18: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Let’s examine Antonio’s credit

Page 19: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Credit CardsO A way to build credit…O A way to destroy credit

Page 20: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Credit CardsO Definition:

O A card issued by a financial company giving the holder an option to borrow money, usually at the point of sale.

O Credit cards charge interest on the money borrowed on the card, and your must make a monthly payment to the credit card company to pay back the money you borrowed.

Page 21: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Credit Cards: InterestO Each credit card has an interest rate

O Also known as APR or “Annual Percentage Rate”

O This is the amount of money you will be charged by the credit card company to borrow that money, calculated over a years time.

O Credit Card Basics

Page 22: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Credit CardsO Interest on credit cards is typically between 10%

and 29.99%

O What’s it mean to be charged interest?O Assume you have a 20% interest credit cardO If you charge something that cost $100…

O The interest the credit company would charge you over a year would be $20

O That means you’re paying more than what it’s worth!

Page 23: Financial Literacy Michael Bernard, CFP, ChFC, EA.

Credit Cards PrinciplesO Pay off your balance every monthO Always pay your bill on timeO Never have more than 3 credit cardsO Never charge something on a credit card that

you know you cannot affordO Never use more than half of your credit limitO Check your credit report regularly to ensure

there are no errors