fmly 2400

identify and discuss the courses of action that are available to a person who has more debt than he or she can handle

-Negotiating new terms with creditors -Obtaining a consolidation loan: Bank loan, Line of credit -Rewrite mortgage "Powerpay" or "fold down" plans -Working with a financial (credit) counseling service -Declaring insolvency - consumer proposal or bankruptcy

discuss the barriers to tax filing that people with low incomes can face

-Unfiled/incorrectly filed tax returns -Complex systems -Primary Identification Issues -Language barriers -Cultural differences -Multi-step process -Multi-faceted -Limited supports

rising levels of debt are a concern in Canada. what are the warning signs that indicate a debtor may have a debt problem?

-Using money to satisfy emotional needs -Using money to punish -Keeping up with the Joneses -Overindulgence of children -Lack of communication among family members -The amount of finance charges is too high -Continually going over the credit limit -Using credit cards as a necessity rather than a convenience -Borrowing money to make it from one paycheck to the next -Wages have been garnished to pay outstanding debts -Paying only interest or service charges monthly and not reducing total debt -Pressure or threats by creditors -Utility services are cut off for unpaid bills

what is financial empowerment? how is filing a tax return related to financial empowerment?

-an integrated set of interventions proven to measurably improve financial outcomes for people living in poverty

explain why financial planning is important for families

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identify and explain the nine economic conditions that can affect financial planning

Consumer prices Inflation - a rise in the general level of prices Mainly caused by increase in demand without increase in supply Harmful to people on fixed incomes Can adversely affect people who lend money Consumer spending The demand for goods and services by individuals and households influences employment opportunities Reduced spending causes unemployment Interest rates Represents the cost of money The cost of credit when borrowing Borrowing increases demand and interest rates rise The return on money when saved or invested Saving and investing increase the supply of money and interest rates decreased Money supply Dollars available for spending in our economy Unemployment rate The number of people without employment who are willing and able to work Housing starts The number of new homes being built GDP The value of goods and services produced within a country's borders including items produced with foreign resources Trade balance The difference between a country's exports and its imports S&P/TSX composite index and other stock market indexes The relative value of stocks represented by the index

an insolvent can file for bankruptcy or file a consumer proposal. compare and contrast these two procedures.

Consumer proposal -a maximum 5-year plan for paying creditors all or a portion of a debt owed -Must be insolvent and less than $250,000 in debt (excluding home mortgage) -Both court and creditors must approve the proposal -May save the individual from bankruptcy Bankruptcy -Legal process to "permit an honest, but unfortunate, debtor to obtain a discharge from his or her debts, subject to reasonable conditions" -Filed through a trustee in bankruptcy -Assets are given to the trustee for sale and the proceeds are distributed to the creditors -Joint assignment is possible -First step is the assignment of the individual's assets to a licensed trustee in bankruptcy -Until the debtor is released from his or her debts by a court, the debtor will be considered an undischarged bankrupt -Secured creditors are paid first -Remaining assets distributed with cost of bankruptcy administration taking precedence -Once completed, court will grant a discharge

explain the difference between financial plan and a spending plan (budget)

Long-term vs. short-term: With a financial plan, you typically track your progress on a quarterly or semi-annual basis. With a budget, you record your income and expenses on a weekly or monthly basis. Generally, the closer you stick to your budget, the more progress you will make on your financial plan.

compare and contrast non-refundable and refundable tax credits. give an example of each.

Non-refundable -Reduce the amount of taxes payable (if any is owed) -Once non‐refundable credits equal or exceed taxes payable then no more non‐refundable credits are needed as tax filer is already at $0 taxes owed -Tax filers with no or very low income see limited financial value from having high non‐refundable credit claims since they do not create a refund - this can be frustrating and hard to understand for many tax file Refundable -may result in a tax refund even if tax filer has no income -Both federal and provincial refundable tax credits available -Each credit requires calculations on a separate schedule or worksheet -Eligible amounts are reported on page 8 of the Income Tax and Benefit Return on lines 43700 to 47900 -Eligible amounts are subtracted from taxes payable to reduce any balances owing or paid out as part of the net refund

Given the relevant information on two different savings options, you should be able to calculate the effective annual rate (EAR) for each and state which option is the better deal. Given an inflation rate, you should be able to calculate the real rate of return.

come back to

define two basic types of credit and give examples of each type

consumer loan-mortgage revolving credit-store card

describe the four budgeting strategies for dual-income households suggested in the textbook. which strategy requires the most discussion and agreement?

pg 71 1. pooled income 2. sharing the bills 3. 50/50 4. proportionate contributions

Be prepared to compare and contrast the money habitudes. That is, if you are given two habitudes and told they belong to two people in a couple, be prepared to identify the advantages and disadvantages of each habitude and to offer your thoughts on what might be the opportunities and challenges for the couple in managing their money.

see tab

identify both the advantages and disadvantages for each of the six "money habitudes."

see tab

achieve financial goals

the major function of a financial plan is to assist the individual or family making the plan to

inflation

the possibility that rising prices will cause a loss in buying power

what is marginal tax rate?

the tax rate paid on an additional dollar of income

what does the term "fringe financial institutions" refer to? what are the disadvantages of using fringe financial institutions compared to "mainstream" institutions like banks? why do some people prefer the fringe financial institutions?

these are institutions that offer services like cashing of checks and payday loans. Some also sell money orders and collect bill payments. Many who patronize such financial services are usually those without bank or credit union accounts. Part of the attraction of these institutions is their fast service, convenient locations, and extended hours of operation. They are generally unregulated as they are not deposit-taking institutions. What you need to know: Many view transacting with fringe institutions as a last resort. They usually charge high transaction fees and interests compared to banks. But if you must avail of their services, be very aware of the exact charges and/or interest rates for loans. Check if there are hidden charges and ask questions if there is something in the transaction that is not clear to you.

explain how the balance sheet and cash flow statement can be used to analyze a household's current financial situation

use the balance sheet to: -Measure progress toward financial goals (Save and invest on a regular basis) -Identify how assets are distributed among the different categories (Each asset has a purpose) -Calculate the current asset allocation (Allocation of financial assets between cash, fixed income, and equity investments) -Identify whether investments are tax efficient (Provide the highest after-tax return) -Identify assets that may be lost, stolen, damaged or destroyed (May required insurance coverage) -Summarize the types and extent of indebtedness (Borrowed to finance depreciating or appreciating assets, Many credit cards may inflate the debt ratio) Use the cash flow statement to -Highlight sources of income -Reveal whether the individual or family is overspending -Help assess spending and saving patterns

compare and contrast tax credits and tax deductions. give and example of each.

Refundable tax credits •May result in a tax refund even if tax filer has no income •Both federal and provincial refundable tax credits available •Each credit requires calculations on a separate schedule or worksheet •Eligible amounts are reported on page 8 of the Income Tax and Benefit Return on lines 43700 to 47900 •Eligible amounts are subtracted from taxes payable to reduce any balances owing or paid out as part of the net refund Examples of federal refundable credits paid as part of refund -Over payments of taxes, CPP & EI premiums withheld at source -Working Income Tax Benefit (WITB) Examples of provincial refundable credits paid as part of a refund: -Manitoba Personal Amount -Manitoba Education and Property Tax Credit -Primary Caregiver Amount deductions: Examples of common deductions: •Registered Pension Plan (RPP) contributions (line 20700) -shown in box 20 of T4 slips •Registered Retirement Savings Plan (RRSP) contributions -shown on receipts •Union or professional dues (line 21200) ‐usually shown in box 44 of a T4 slip

identify and explain the steps in the budgeting process

Step 1: setting financial goals Plans for future activities that require families or individuals to plan their spending and investing Should be Realistic Stated in specific, measurable terms Have a definite time frame Imply type of action to be taken Step 2: estimating income Estimate available money for given period of time - usually one month Based on number of times income received each month -spending should be planned accordingly Can be difficult if earnings vary by season or income is irregular Step 3: budgeting emergency fund and savings Recommend 3-6 months of living expenses be established for unexpected expenses and future security Step 4: budgeting fixed expense will depend on current needs and plans for the future Housing or loan payments Step 5: budgeting variable expenses Will fluctuate by household situation, time of year, health, et Phone Step 6: recording spending amounts Record actual income and expenses Budget variance - difference between amount budgeted and actual amount received or spent Deficit - actual spending exceeds planned spending Surplus - actual spending less than planned spending Step 7: reviewing spending and savings patterns Review financial progress Revise goals and budget allocations as needed based on review

identify and explain the steps in the financial planning process

The financial planning process Step 1 - developing financial goals Analyze financial values and attitudes towards money What is your financial decision-making process? Step 2: determine current financial situation Prepare a list of current asset and debt balances and amounts spent for various items Step 3: identify alternative courses of action Continue as is, expand or change the current situation, or take a new course of action Step 4: evaluate alternatives Take into consideration life situation, personal values and current economic situation Opportunity cost is what is given up by making a choice Consider lost opportunities that will result from decisions Evaluate the risks faced Types of risks Economic or product Interest rate risk Inflation risk Liquidity risk Product risk Personal risk Risk of death Risk of lost income Health risk Asset and liability risk Step 5: create and implement a financial action and plan choose ways to achieve goals May require assistance from others Financial planning information sources Printed materials Financial institutions School courses and educational seminars Computer software, internet, and on-line information sources Financial specialists Step 6: re-evaluate and revise the plan The plan should be reviewed regularly based on life circumstances

provide a definition of financial literacy, identify where it from, and explain what the definition means.

There are many competing definitions and models for financial literacy. This paper draws on the framework developed by the Personal Finance Research Centre in the UK (Atkinson, et al, 2006). This model divides financial literacy (referred to as financial capability) into five distinct domains, each of which is characterized by related knowledge, attitudes and behaviours (se

identify and explain the eight types of risk

Types of risks Economic or product Interest rate risk Inflation risk Liquidity risk Product risk Personal risk Risk of death Risk of lost income Health risk Asset and liability risk

explain who is required to file a tax return. should someone who is not required to file a return? explain your answer.

Who must file? All residents of Canada must file a federal income tax return for any year in which they have a balance of taxes owing A resident is considered to be anyone living in Canada, but also includes non-Canadians who are present 183 days (one-half of a year) or more Canadian residents are taxed on their worldwide income Income tax basics - why file? tax filing is an obligation or responsibility for those who earn income in Canada But, even those who don't earn income SHOULD file since tax filing is the only way to: Access income through tax benefits and credits Establish eligibility for income‐tested benefits through federal or provincial governments

subtracting assets from current liabilities

a person's net worth is computed by

what are the advantages and disadvantages of credit?

advantages -Current use of goods and services -Permit purchase even when funds are low -Use for financial emergencies -Convenient when shopping -Safer than cash -Can take advantage of float time -May get rebates, airline miles or other bonuses -Demonstrates financial stability disadvantages -Purchases are more expensive -Temptation to overspend -Ties up future income -Possible financial difficulties -Possible damage to family relationships -Slows progress to future goals

describe the relationship between financial literacy and financial exclusion

b.s

compare and contrast the different types of credit

ch 5 LO2 -consumer loans -revolving credit -credit cards

credit bureaus

collect and provide credit info