1 formal endorsement of any company, its products, or services by the Department of Defense. Specifically, the appearance of external hyperlinks does not constitute endorsement by the U.S. Department of Defense of the linked web sites, or the information, products or services contained therein. The U.S. Department of Defense does not exercise any editorial control over the information you may find at these locations. This information is being provided as informational resource material to assist military personnel and their families and should be used to assist in identifying or exploring resources and options. Competencies: Completion of a working/realistic spending plan for transition that will contain current spending, transitional spending, and future requirements.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
1Disclaimer:The information provided herein does not constitute a formal endorsement of any company, its products, or services by the
Department of Defense. Specifically, the appearance of external hyperlinks does not constitute endorsement by the U.S. Department of Defense of the linked web sites, or the
information, products or services contained therein. The U.S. Department of Defense does not exercise any editorial control
over the information you may find at these locations. This information is being provided as informational resource material to assist military personnel and their families and should be used
to assist in identifying or exploring resources and options.
Competencies:Completion of a working/realistic spending plan for transition that will contain current spending, transitional spending, and
future requirements.
2
Agenda
• How to plan and prepare financially• Develop a solid Individual Transition Plan• Familiarity with the tools to help manage your
finances• Awareness of available benefits• How to use your resources before transition
The DoD has developed six core financial readiness areas that will aid in the successful transition from the military. At the conclusion of today’s briefing you will have a better understanding of the following financial readiness competencies.
3
Core PFRP for Transition
Module 1Credit
Reports
4
Why Is It Important To Look At Your Credit Report?
There are several reasons why it is important to review your credit reports on a regular basis. 1. Check for accuracy-55% of all military members have errors on their reports2. Ensure you are not the victim of identity theft-Identity theft is the fastest growing crime in the world.3. To see how lenders and merchants view you as a liability or risk.4. ETC.
5
Analyzing Your Credit Report & Score
513.3
6
Credit Reports
6
A credit report is a record of an individual’s credit history. It contains: Credit Employment Residences Judgments Tax Liens Bankruptcies Inquiries
7
Credit Report Components
7
Personal IdentificationNameAddressDate of BirthSocial Security Number
Employment Information
Payment History (Trade Lines) – Credit Accounts
Inquiries - List of everyone who accessed your credit report within the last two years
Public Record InformationPublic records Wage attachmentsLiens BankruptciesJudgment Foreclosures
13.4
8
Credit Reporting Agencies
8
9
FACT Act Provisions
• One free copy of your report from each CRA each year
• Right to a copy of your credit score for a reasonable fee
• You’ll need to provide and validate:• Name• Address• SSN• Date of birth• Current & previous address (if moved in last 2 years)• Other information listed on your file
• An additional free report can be obtained if:• Denied credit, insurance, employment, rental housing• Adverse action was taken against you based on your
credit file• Unemployed• Receiving public welfare assistance• Your state offers a free or reduced-price credit report• You’ve been a victim of identity theft
12
What Is A Credit Score?
12
13
What Is A Credit Score?
13
Vantage
14
The Score Matters
Higher scores =
lower interest rates
& more credit
14
15
Where To Get A Score
1513.5
16
Credit Score Components
16
Vs
17
Improving A Score
17
Ensure credit report is accurate
Make all payments promptly
Stay within credit limits
Take advantage of auto payment plans/options
Set up a bill-payment calendar
Match credit to appropriate purchase
Don’t exceed 10% of the limit on a credit card
Pay down installment loans
Don’t add new accounts to lower balances on older ones
Establish new credit only if you have little existing history
Keep your older accounts in good standing
Limit inquiries
18
Correcting A Report
18
Request positive missing
information be added
Request errors/errone
ous information be removed
Request outdated
information be removed
Place a consumer
statement on the report
Avoid credit repair
agencies!
19
Fixing A Report
19
20
Fair Credit Report Act• Consumers have the right
to:– know the contents of their
report– an accurate and complete file– have mistakes fixed– tell their side of the story– a fresh start– understand their report– know who has seen their
report– confidentiality– know if their report has been
Determine salary range based on current military pay, allowances, benefits and future
careerConsider a salary comparison calculator Realistically assess the worth of your skills
and experienceConsult Bureau of Labor Statistics (BLS)
website for national wage data
Research your job skill, career field, and job projectionsConsider implications on financesTrack salary info (use handout)O*Net Online can translate your
Check with your HR Department, or the IRS website (www.irs.gov)
for the more information
37
Continued Health Care Benefit Program (CHCBP)
• For Service-members separating from active duty (& families) – Must be under other than adverse conditions – Eligibility is for up to 18 months of CHCBP health
benefits after enrollment• Enrollment & Fees
– Must enroll w/in 60 days of loss of military health care benefits
– Coverage must be effective as of the date eligibility for military health care is terminated
– Quarterly premiums • $1,138 (FY13) member only / $1,193 (FY14) member
only • $2,555 (FY13) mbr and fmly / $2,682 (FY14) mbr and
fmly – Enrollees responsible for paying cost shares and
deductibles
38
Consider These Comps
Significant vacation/persona
l/sick leave
Promotion opportunities
Money for education and certifications
Relocation services
Paid job relocation
Company investment plan
Transportation reimbursement
Discounted/free gym membership
Co-share insurance costs
Life insurance Strong retirement package
Short term/long term disability
39
Module 3Retirement Pensions
40
Retirement Pensions
Questions to ask a potential employer
“When do company contributions start?”
“When will my account be credited with 100% of company’s contributions as my own?”
“Does your company do a graduated or cliff vesting schedule?”
41
Retirement Pensions
Defined-Benefit PlanTraditional company pension plan; ultimate retirement
benefit is definite and determinable as a dollar amount
Example is a military retirement pension
① Funded mostly by the employer
② Responsibility for payment of the benefit & risk on funds invested rests with the employer
③ Like separation pay & unemployment pay, it is considered a type of compensation
42
Retirement Pensions
Defined-Contribution PlanA qualified retirement plan in which the contribution is defined
yet the ultimate benefit to be paid is not
① Contributions are from the employee② A portion may/may not be matched by
employer③ Each participant has an individual
account④ The benefit at retirement depends on
amounts contributed + investment performance of account
⑤ Investment risk may rest solely with the employee due to opportunity to choose from a number of investment options
Examples are 401(k) and 403(b) plans, Roth 401(k), Thrift Savings Plan (TSP), SIMPLE IRA, SEP, Employee Stock
Ownership (ESOP), and profit sharing
43
Thrift Savings Plan (TSP) Options
• Leave funds in TSP account (if balance is more than $200)
• Roll your TSP into another eligible account i.e., IRA, annuity, civilian 401(k)
ExampleMember @ 42 withdrawals $10,000 balance from TSP
A premature withdrawal penalty costs $1,000
Penalty
Factor in a minimum 20% tax rate
that will cost $2,000
Not waiting will cost a minimum of
$3,000!
Before 59 1/2 Taxes
45
Cutting Taxes While Investing
• Tax-deferred accounts allow the investor to delay paying taxes on earnings.
• Immediate benefit is that the contribution is deducted from paychecks before income taxes are calculated, so taxable pay is reduced today.
46
Module 4 Housing:
To Rent Or Buy
47
To Rent or Buy?
Buying makes sense if you…• Have money for the larger initial investment
• Are ready for stability• Desire a sense of community
• Can financially support two homes• Like to remodel/fix/personalize
• Can financially manage fluctuating expenses
Renting makes sense if you…• Move frequently or suddenly• Need to determine long-term desirability• Are low on cash• Don’t have time/desire/funds for maintenance/improvements• Don’t want to risk loss of equity• Don’t need/want tax advantages• Don’t want to be a landlord
Advantages of owning vs renting are different for everyone!
Consider these important personal situations along with your long-term goals before you decide..
48
To Rent or Buy?
49
To Rent or Buy?
50
50
Relocation Assistance
The Relocation Assistance Program (RAP), Transportation Management
Office (TMO) and Personal Financial Management Specialist (PFMs) can
assist with information regarding:• Entitlements• Allowances• Needs• Costs
51
51
Beyond Renting vs Buying
A Personal Financial Management Specialist (PFMs) can assist with:
• Selling Your Home• Buying a Home• Short Sales• Foreclosure• Negative Equity
TOTAL EXPENSES $3,032.50 TOTAL EXPENSES $4,589.9373% OF INCOME 87% OF INCOME
73
Debt Management
Creditor
Balance Due
Minimum
PaymentInterest
Rate Tot
al
74
Summary
• Total pay equals all compensation
• Total compensation minus all deductions equals take home pay
• Take home pay is what you live on for the month
75
70-20-10 Ratio
75
Ex-penses 70%
Debt
20%
Savings10%
4.18
Percentages will vary based on lifestyle, but guidelines prove effective in helping to develop a sound financial plan and keeping
debt at a reasonable level.
76
4.13
Calculate the indebtedness & summary section of the Financial
Planning Worksheet
77
77
Debt-to-Income RatioTotal Monthly Debt Payments / Net Income x 100
78
70-20-10 Ratio
784.18
Use caution <15%Fully extended 15-20%
Overextended 21-30% Seek assistance >30%
Ex-penses 70%
Debt
20%
Savings10%
79
The Action Plan
80
Improving a Spending Plan
80
Increase Income
Decrease
Indebtedness
Decrease Living
Expenses
81
Sources of Help
82
Spending Plan
4.17
MONTHLY EXPENSESMEMBER AND SPOUSE'S NAME TAKE HOME PAY 0 0 SAVINGS ACTUAL PROJECTED REMARKSGOAL: 10% OF NET INCOME For comparison purposes onlyEMERGENCY FUND (1-3 MONTHS) 0 RESERVE FUND "GOAL-GETTER" FUND 0 INVESTMENTS/IRAS/TSP/ETC 0 PAY PERIOD SAVINGS AND INVESTMENTS (10%) 0 0 LIVING EXPENSES ACTUAL PROJECTED REMARKSHOUSING
MORTGAGE/RENT MAINTENANCE/REPAIRS
FURNISHINGS TAXES/FEES
UTILITIES CABLE/SATELLITE TV/INTERNET
CELLULAR/PAGES/PHONE CARDS/TELEPHONE ELECTRICITY
NATURAL GAS/PROPANE WATER/GARBAGE/SEWAGE
OTHER FOOD
DINING OUT GROCERIES
LUNCHES VENDING MACHINES
MEAL DEDUCTIONS TRANSPORTATION
GASOLINE MAINTENANCE/REPAIRS (INCL. SAVINGS FOR FUTURE) OTHER TRANSPORTATION (TAXI/BUS FARE, PARKING)
OTHER (TAXES/REGISTRATION/LICENSING) INSURANCE
AUTOMOBILE HOMEOWNERS/RENTERS
HEALTH/LIFE/LTD/DENTAL WARRANTIES/OTHERS
HEALTHCARE DENTAL
EYE CARE HOSPITAL/PHYSICIAN
PRESCRIPTIONS SUBTOTAL (PAGE 1) OF MONTHLY LIVING EXPENSES 0 0
MONTHLY EXPENSES (PAGE 2)MEMBER AND SPOUSE'S NAME LIVING EXPENSES ACTUAL PROJECTED REMARKSCLOTHING
LAUNDRY/DRY CLEANING PURCHASES ($50 MONTHLY PER PERSON)
ATM FEES/STAMPS/ETC OTHER (TOILETRIES, SUPPLEMENTS, ETC)
SUBTOTAL (PAGE 2) OF MONTHLY LIVING EXPENSES 0 0 GRAND TOTAL OF MONTHLY EXPENSES (70%) 0 0
83
Summary
• Preparation is key• Develop a solid Individual Transition Plan• Use tools to manage your finances• Take advantage of available benefits• Use your resources before transition
84
Preparation for Wednesday
• Review slides and print handouts on CD if you do not have a computer– Day 3, 4 & 5
• You will be using all the handouts each day
84
85
TAP GPS Program Assessment
• We apologize for requesting you to take two assessments….however we do not receive the results of the OSD Assessment
• Please complete Financial Portion of OSD Assessment – https://www.dmdc.osd.mil/tgpsp
85
86
Post Assessment
• Please complete the Post Assessment and pass to facilitator
86
87
Assessment Review 1. To reduce stress while transitioning
a. Continue exercise programb. Talk with MFLC/Counselorc. Keep communications open with family d. Don’t bottle things upe. All of the above
2. When choosing a mentor, it should be:a. Someone you are friends withb. Someone who identified their own goalsc. Someone who acts as a role modeld. All of the above
3. Individual Transition Assistance Plans (ITP):a. Assist those wanting to start a business in their homeb. Help those that haven’t made a career decisionc. Assist those that are seeking employmentd. Assist those seeking additional educatione. All of the above
4. Which of the following are skills translators:a. Hero2Hired, Career One Stop, VA for Vets, USA Jobsb. VETSUCCESS, Hero2Hired, Career One Stop, O*NETc. USAJOBS, VETSUCCESS, Hero2Hired, Career One Stop, O*NETd. VETSUCCESS, Hero2Hired, Career One Stop, O*NET, VA For Vets
5. Where can you find labor market information (LMI):a. O*Netb. Career One Stopc. VETSUCCESSd. Chamber of Commerce
6. What is the recommended distribution of your net income?Expense Debt Savingsa. 70% 20% 10%b. 65% 25% 10%c. 50% 30% 20%d. 80% 15% 5%
7. What is the most effective way to raise your credit score?a. Open a credit cardb. Timec. Pay bills on timed. Open a line of credite. Close a card you don’t use
8. Which of the following is the most heavily weighted in determination of a credit score? a. Payment Historyb. Length of Credit Historyc. Available Creditd. Types of credit
87
88
Assessment Review (cont’d)
9. This is the total value of an employee’s salary, benefits, & other employment-related perks:a. Competitive Bidb. Offer with Optionsc. Taxable Incomed. Compensation Packagee. Wage Bundle
10. Which statement about TSP is true?a. TSP is a defined benefit planb. You can contribute to your Uniformed TSP after separating/retiringc. TSP follows the provisions of a 401(k) pland. You can withdraw your money from TSP at any time
11. It might be preferable to rent a home instead of buying if…a. You prefer more fixed expensesb. You are ready for stabilityc. You like to fix or renovated. You can financially manage fluctuation
12. Which tax will not be affected after transition?a. Federal Income Taxb. State Income Taxc. Certain Vehicle/Personal Property Taxesd. State & Local Sales Tax
89
Video to play during breakhttp://www.youtube.com/watch?v=_u33kFTYT8w