Your Spending, Your Savings, Your Future: A Beginner’s Guide to Financial Readiness

Target Audience: 21- to 55-Year-Olds, Middle-Income, Pre-Retirement Audience Profile
The workshop is intended for middle-income, pre-retirement audiences between the ages of 21 and 55. Money management skills are important for everyone, no matter what their current financial condition or what financial mistakes they’ve made in the past. To understand how best to assist those who are seeking to take control of their personal finances, it’s helpful to know that many people feel powerless or ashamed when it comes to their spending habits. However, with the right tools, anyone can gain control of their financial future. By learning to use money wisely, people will be able to build a bright future for themselves and their families. You will help initiate their healthy financial future by teaching them steps to take control of their finances so they can bring about positive change and realize financial stability.

Program Overview
Topics addressed in the Your Spending, Your Savings, Your Future: A Beginner’s Guide to Financial Readiness workshop include: • spending awareness and managing debt; • saving and investing; and • setting financial goals. Learning to manage personal finances is an important step toward achieving financial stability and the capability to pursue our dreams. Yet, many people don’t know the basics of money management. This workshop walks participants through the basics of managing personal finances in an easy-to-understand introduction to the principles of financial health.

Resources
Additional resources are provided to help workshop participants learn more about the topics presented in this workshop. Below you will find links to publications, websites and articles that will provide more information and tools to help implement new financial strategies. o National Endowment for Financial Education (NEFE)

o www.nefe.org o www.financialworkshopkits.org o www.smartaboutmoney.org
o o o www.myretirementpaycheck.org www.americasaves.org www.managingmymoney.com
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o www.spendster.org

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National Foundation for Credit Counseling (NFCC), 1-800-3882227 or www.nfcc.org o To stop most credit card offers from arriving in the mail, 1-8885OPTOUT or www.optoutprescreen.com o Annual Credit Report, 1-877-322-8228 or www.annualcreditreport.com o Consumer Federation of America, www.consumerfed.org (choose Finance, then Credit and Debt, thenCredit Scores and Reporting) o Federal Reserve System, www.federalreserve.gov (click Consumer Information, then Consumer Credit) o Alliance for Investor Education, www.investoreducation.org o American Association of Individual Investors, www.aaii.com o Bloomberg, www.bloomberg.com o CNN Money, www.money.cnn.com o Investing for Your Future, a basic at-home study course, www.investing.rutgers.edu o Investment Company Institute, www.ici.org o Investorguide.com, www.investorguide.com (Click University) o Kiplinger.com, www.kiplinger.com o Morningstar, www.morningstar.com o National Association of Investors Corporation, www.betterinvesting.org o Quicken, www.quicken.com o Smart Money Magazine, www.smartmoney.com o Certified Financial Planner Board of Standards, Inc., www.cfp.net o Financial Planning Association, www.fpanet.org o The American Institute of Certified Public Accountants, www.aicpa.org o The National Association of Personal Financial Advisors, www.napfa.org o Society of Financial Service Professionals, www.financialpro.org o AARP, www.aarp.org o American Savings Education Council, www.choosetosave.org o Social Security Administration, www.ssa.gov o U.S. Department of Agriculture’s Cooperative Extension Initiative on Financial Security in Late Life, www.nifa.usda.gov (search “Online Tools for Later Life”)

Facilitator’s Preparation:


Review this guide and complete your own set of the accompanying worksheets. Review the suggested length for each topic noted as (10) or (15) and so on. This session is designed to be 60 minutes (1 hour) from Welcome to Review. Consider your current financial situation. Do you have a spending plan? Do you have an emergency fund in place to pay cover unexpected expenses? Are you considering options for investing?
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Your Spending, Your Savings, Your Future

Reflect on your views about what it takes to obtain financial stability. Is it more difficult to stick to a spending plan? What are some common everyday expenses that can be drain on finances? Are there some lessons learned from your own experiences that may be helpful to share with others? Consider that when it comes to talking about money, sharing your own successes and challenges may be more engaging and effective than appearing to be lecturing in a workshop setting.

Materials Needed:
  Flip chart and easel or marker board; markers Pencils for participants Copies of 3-Step Spending Plan worksheet (two pages or double-sided) Copies of Spending Leaks worksheet Copies of How Much Consumer Debt Can I Manage? worksheet Copies of My Goals worksheet Copies of My Action Plan worksheet

    

How to Facilitate This Session
Welcome (Slide 1 and 2) (5) Introduce yourself and express your pleasure in sharing money management tools that can be used to help them take control of their financial future.  Have each participant introduce him/herself and share one current financial issue. List the issues on the flip chart or marker board.

Objectives (Slide 3) (5) Share the program objectives and tie them back to the list of issues. o Tracking your money flow o Managing debt effectively o Thinking about tomorrow ?Ask participants: “Before we begin, let’s take some time to think about our dreams and goals.”  Direct them to think of at least three dreams and goals. Allow participants just a couple of minutes to complete this activity.  When time is up, direct participants to put their goals aside for now, and inform them that you will be talking more about goals later in the workshop.

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Tracking Your Money Flow (Slide 4 and 5) (20) Acknowledge that participants have worked hard to get to this point. Managing your money is a skill that takes practice and ongoing learning. ?Ask participants: “How many of you have established a spending plan?”

Distribute 3-Step Spending Plan worksheets.  Review Step 1: Identify Income Sources. Explain that it’s important to know exactly how much money you can count on every month. This is not the time to guess or estimate!  Review Step 2: List Expenses. Explain that a good way to establish a solid savings habit is “pay yourself first”. Most people do not plan for their contributions to their savings. Consequently, they do not make a monthly deposit into their savings. In addition, most people do not establish separate bank accounts for emergencies or long-term goals. Instead, they have only one account and often use it to withdraw money for small purchases they may not actually need in their day-to-day living. When a financial emergency occurs, they often discover they have very little saved up in their accounts!  Have participants look at the Utilities Worksheet (second page or reverse side of their 3-Step Spending Pan). Review the items listed and answer any questions.  Review Step 3a: Compare Expected Income and Expenses. Explain that this critical step allows you to regroup and make adjustments before it’s too late.

 Review Step 3b: Compare Actual Income and Expenses. Emphasize
the importance of using the 3-Step Spending Plan worksheets to track actual income and expenses to get a true picture of your financial situation. ?Ask participants: “How many of you feel confident that you do not have any spending leaks?  Remind participants that managing money means making choices. There is never enough money for all of the things we want in life. In order to take control of your financial future, you have to know where your money is going!  Explain that when you track your expenses, you may find areas where money is leaking in your day-to-day living. For example, if you’re stopping off to buy a coffee drink on the way to work every day, you could be leaking $3.50 a day; $17.50 a week; (5 days x $3.50); $70.00 a month (20 days x $3.50); and $910.00 a year (52 weeks x $17.50)!
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Explain that if you don’t discover your spending leaks and plug them, you’ll have less money available for savings—less money available to maintain your new home. Distribute the Spending Leaks worksheet. Review the directions and go through the calculations of one item so participants can see how to complete the worksheet. Assure participants that plugging spending leaks does not necessarily mean going without. You may need to make better buying choices. For instance, instead of buying a soft drink from a vending machine every day at a cost of $1.75, you could buy a case of soft drinks for around $8 and save of $1.42 a day! Encourage participants to complete their Spending Leaks worksheets. Suggest that one way to track spending is to keep a small spiral notebook with you at all times. Each day, list everything you buy and how much you pay for it. Include all your purchases, whether you paid for them with cash, money orders, checks, debit cards, or credit cards. Don’t forget to include small purchases like a coffee drink or a cookie. As you’ve seen, in time these small items really add up.

?Ask participants: “How many of you have a credit card, an auto loan, a mortgage, or a student loan?” Managing Debt Effectively (Slide 6) (10) For most participants, growing debt is something they worry about frequently. Remind participants that not all debt is created equal.  Share with participants the differences between “good” debt and “bad” debt, noting that the least-favorable type of debt is called consumer debt, which is debt for items that do not increase in value over time. Consumer debt includes such items as balances on credit cards and car loans. Distribute the How Much Consumer Debt Can I Manage? worksheet. Review the directions and go through the calculations so participants can see how to complete the worksheet.

 Suggest that, in general, no more than 15 to 20 percent of your net (after-tax) income should be paid to consumer debt.
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Emphasize limited amount of debt isn’t necessarily bad, however, excessive debt, especially consumer debt can carry a heavy burden. At the very least, excessive debt delays you from reaching your goals. At its worst, excessive debt could rob you of your dreams.  Suggest to participants that there are ways to use credit cards wisely and briefly review each of the tips listed on Slide 7. ?Ask participants: “Do you feel you have a good set of tools to help you understand your spending and manage your debt effectively?”

Thinking About Tomorrow (Slide 7) (15) For most participants, it’s been a while since they sat down and thought about their long-term goals. For some, they may have never gone through this exercise.  Pair up participants. Direct pairs to draw up a list of reasons why they may need an emergency fund. Allow 3-5 minutes for participants to develop their lists.

When time is up, randomly call on groups to share one item from their list. Write responses on the flip chart or marker board. Repeat until all lists have been exhausted from the participants. 


   

Compare participants’ responses against the following list: Broken water heater or furnace Loss of job Car breaks down Medical bills Death in the family

Suggest that establishing an emergency fund is one way to be ready for unexpected expenses that can occur at any time or any moment. The rule of thumb is to set aside enough to cover your basic living expenses for at least three months. (Saving even $500, however, can help you better cope with unexpected expenses.)

Emphasize that it is better to keep the money in your emergency fund than to take out a loan or cash in your investments to pay for an emergency. If you take out a loan, you will have to pay interest. If you cash in an investment, you will lose interest and possibly some of the original investment. ?Ask participants: “Has anyone heard of the ‘two-for-one savings plan?’”

Write on the flip chart the words “Roth IRA,” then explain to participants how the Roth IRA (individual retirement account) works
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differently from most retirement plans. You pay into the account with “after-tax” dollars. Overtime, the account accumulates earnings. After you retire, you can take out the money you put in, plus the earnings, without paying taxes. You also can use the money for a “rainy day” by taking out any money you’ve contributed at any time, penalty-free.

Distribute the My Goals worksheets. Review the directions and the items listed. Remind participants to think about the goals they wrote down at the start of the workshop.

 

Suggest that one way to set financial goals is to use the SMART system (Specific, Measurable, Achievable, Realistic, and Time-bound). Review the suggestions listed at the top of the My Goals worksheet. Answer any questions. ?Ask participants: “Do you feel that you have a good set of tools to help you manage your money and prepare for a better tomorrow?” (5) Review (Slide 8) Review the list of issues and note which ones were addressed and which ones will need to be addressed at a later time.  Review the topics covered in the session:  Tracking your money flow  Plugging the spending leaks  Using credit cards wisely  Planning for tomorrow Remind participants to use their 3-Step Spending Plan.  Encourage participants to make the commitment and follow through with tracking every day purchases to identify their spending leaks.

Distribute My Action Plan worksheets. Encourage participants to take a few minutes to complete their worksheets to ensure that they get started managing their money and planning for the future immediately.  Thank participants for their attendance and let them know how much you enjoyed spending an hour with them. Provide them with any additional information as agreed upon with your agency contact.

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3-Step Spending Plan
Step 1: Identify Income Sources
Source
After-tax wages After-tax wages from spouse’s income Tips, bonuses, cash from hobbies Unemployment compensation Social Security or Supplemental Security Income Public Assistance Child support Food Stamps Other Other

Expected per month

Actual per month

Total Monthly Income Step 2: List Expenses
Source
Rent/mortgage payment Utilities (see Utilities Worksheet) Savings (pay yourself first) Cell phone (all features) Home maintenance Groceries (could be offset by WIC benefits) Car payment, gasoline, parking Bus fare Insurance (car, homeowner’s, life) Tuition or school-related fees Child care Child support, alimony, spousal maintenance Union dues Pets Credit cards Clothes/uniforms Snacks/meals eaten out Personal (toiletries, hair, nails, etc.) Entertainment Charitable donations Savings for emergencies Savings for long-term goals Other

Expected per month

Actual per month

Total Monthly Expenses
Step 3a: Compare Expected Income and Expenses Expected monthly income $ _______________________________ (minus) expected monthly expenses - $ _______________________________ $ _______________________________

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Do you have money left over? If so, go back and increase your monthly savings expenses to build financial security. Not enough income to cover expenses? Where are your spending leaks?

Utilities Worksheet
Utility
Heating (natural gas, oil, propane, wood) Electricity (cooling and heating, appliances and lighting) Water and sewer Landline phone (include features—caller ID, call waiting, etc.) Internet service Cable TV subscription (include all features) Trash collection Satellite service $ $ $ $ $ $ $ $ Per Month

Total Monthly Utilities Expenses

$

Make certain that you track your actual income and actual expenses for the month. Now, complete Step 3b. Step 3b: Compare Actual Income and Expenses Actual monthly income $ _______________________________ (minus) actual monthly expenses - $ _______________________________ $ _______________________________

How did you do? Are you on track? Do you need to make some adjustments? It’s time to start the process all over again and create next month’s Spending Plan.

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Spending Leaks
Directions: Living within your income can be challenging, but it’s important to identify where your money is going so that you can stop the spending leaks and start saving for retirement and unexpected expenses. Begin today by keeping track of where you are spending your money. Keep track for one week. Then, do the math and find out how much you’re spending in a year!

Item Soda Video or DVD rental Cigarettes Alcohol CDs/DVDs Dry cleaning Magazines Fast food Vending machines Coffee drinks Premium cable TV channels Lottery tickets Hair and nails Gifts Cell phone ring tones Eating out New clothes/shoes Weekend mini vacations Movie tickets Other: Other: TOTAL
$ $

Cost

# of items per week

Cost per week (cost per item x number of items per week)
$ $

Cost per year (cost per week x 52)
$ $

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

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How Much Debt Can I Manage?
In general, no more than 15 to 20 percent of your net (after-tax) income should be paid to consumer debt. When looking at your debt, remember to consider the amount you borrowed along with the interest on the debt. Even while you are paying down the debt, you’re being charged interest on the remaining balance. Rather than trying to figure out the total amount of consumer debt you can afford, it’s easier to calculate how much you can afford on a monthly basis.

Yearly income after taxes and deductions = $_________ Monthly income: $_________ (Yearly income ÷ 12) Amount of consumer debt per month that I should not exceed is: $_________ to $_________ (Monthly income x 0.15; Monthly income x 0.20) Each month, I can afford to pay between $_________and $_________, including interest charges, for my consumer debt.

Now that you have a pretty good idea of the amount of consumer debt you can manage adequately on a monthly basis, you can begin making adjustments to your spending plan. A word of caution: If your current debt level is below what you can afford to pay each month, don’t feel compelled to go on a spending spree. Instead, congratulate yourself on living below your means! Your lower debt level can mean more freedom to change jobs or reach your long-term goals even sooner. Also, the 15 to 20 percent rule of thumb is general and may not apply to you. For example, if you live in an area with high housing costs, you may not be able to afford 15 to 20 percent in consumer debt because you have to use more of your money to pay your rent or mortgage.

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My Goals
Too many people never ask themselves what they’d like to accomplish in life. They’re far too busy trying to keep up with everyday life demands, such as paying the bills and taking care of loved ones. How do you take control of your life and move forward? The answer is planning. The first step in planning is setting goals. Goal setting is a major component of personal development. To achieve your goals, you must focus on them. Achieving your goals will give you a great sense of accomplishment!    Financial goals can generally be divided into three durations: Short-term goals: Three months Medium-term goals: Three months to a year Long-term goals: Within a year or more

Goal

Priority Number

Achievement Date

Short, Medium, or Long Term

Total Cost

Weekly Savings Needed

Remember to use the SMART system (Specific, Measurable, Achievable, Realistic, and Timebound). When you reach your first goal, reevaluate and add new goals to your list. Then begin working toward accomplishing your next goal!

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My Action Plan
Main message for me from this session:

My personal commitment to action:

Obstacles that may get in my way:

What I need to do to succeed:

Use Limitations. These materials are intended for non-commercial educational and instructional use only. These materials may not be used in connection with any sale, advertisement, endorsement or promotion of any service, product, person or business and may not be commercially published, sold or offered for sale.

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