Financial Empowerment Final
The C's of Credit
Character (payment history); Capacity (income)
CFE Fund
Cities for Financial Empowerment Fund; nonprofit focused on local government giving them support to launch good strategies; let BankOn 2.0
CFPB
Consumer Financial Protection Bureau; made by Dodd Frank Act; federal enforcer of consumer financial laws & supervise companies
Why people do not have bank account
not enough money for min balance, distrust banks, high fees, credit issues or Chex systems
high interest rates
pay on the debt with the highest interest rate first; will save money by paying less interest but it may feel slower
Underbanked
prefer to manage finances through cash transactions instead of financial services & use alternative services like cash checking twice a month
credit bureau
private businesses that maintain credit reports and create credit scores (Experian, Equifax, Transunion)
asset-building
process of accumulating, developing, and preserving financial human and social resources to increase the economic stability of individuals, families and community
bounded rationality
people have limited time and capacity to think deeply before acting; stress decreases intelligence short term to people take risks and aren't as rational
Unbanked
person does not have a checking/savings account
Cliff Effect
person gets a wage increase but this can trigger the loss of benefits that are worth more than the raise; don't even want to risk getting close to losing benefits so sometimes people will not work
Financial Literacy
person's knowledge about his/her personal finance
PIN
personal identification number
annualcreditreport.com
no such thing; have to request score from FICO
Label Debit card
!!!
national debt
- $31 trillion; held by US government and debt held by public
What Debt Collectors can and can't do
- Cannot harass, or abuse; can only contact the person who owes the debt - Only contact between 8am and 9pm; cannot call you at work - Cannot tell lies to collect a debt; cannot have you arrested
northeast core
- DC, NY, Boston, Philadelphia; financial heart of the nation
Student Loan Forgiveness
- Have to make payments for 10 years - Done public service like the government or military - Teacher that services low income students - If you school ceases to exist - Total and permanent disability discharge - Death discharge - Student loan forgiveness from Biden; people can get more assets but not fair
Wheat Belt
- Midwest; growing wheat, soy barley
energy belt
- Texas, Oklahoma etc. oil production & leads the world
Minimum Wage
- min wage that is mandated by the government
Tech Belt
- west coast; Silicon Valley, Portland, Seattle
Living wage
- what is needed to provide a decent standard of living above the poverty level - Minimum wage is not a living wage anywhere
non-roth
401k is through your own money but company may match it; gets taxed when you take the money out
Kentucky Payday Lending Interest Rate
469%
50/30/30 budget
50% income to necessities, 30% to wats, 20% to savings
Bad credit vs no credit
?
Credit under the age of 18
?
Hard vs Soft Credit Check
A hard credit inquiry may impact your credit scores and stay on your credit reports for about two years, while a soft credit inquiry won't affect your scores
BOL
Bank on Louisville
Research Triangle
Duke, UNC, NC State
EITC
Earned Income Tax Credit
FICO
Fair Isaac Corporation
FDIC
Federal Deposit Insurance Corporation; state chartered banks; ensure money in account up to 250,000 after great depression
GDP
Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
J.C. Penney
JC is just cash; no credit cards allowed in stores
LADDER
Louisville Alliance for Development through Diversity, Empowerment, and Resources
LABC
Louisville Asset Building Coalition
Bank On 2.0
Louisville is testing ground for new products/curriculums; want to implement similar style account standards for participating banks
OFE
Office of Financial Empowerment
Why Payday lenders thrive
Payday lenders thrive: people use it ot fill gap between income and expenses, emergencies, not many financial institutions in low income areas
biggest action to build credit
Paying bills on time and paying down balances on your credit cards
Benefits
SNAP (food) Section 8 (housing) LIHEAP (heating and electric) welfare (cash to lowincome families working toward self sufficiency) Social Security (source of income for you/legal dependents, retirement) unemployment (pay money if you lose job through no fault of your own)
Diversification
Spreading out investments to reduce risk
Sun Belt
The South and Southwest regions of the United States - took over rust belt.
VITA
Volunteer Income Tax Assistance
America Saves
encourages individuals to save money, only online resources; America saves week, America Saves for Young Workers, Split to save, military save
Bank
a for profit business, anyone can join o More products, more accessible, more fees
debt clock
about 80,000 per person to pay off the national debt
financial education
activities that lead to an increased understanding of financial and personal tools, resources, and services
Reasons people don't budget
afraid of what they will find; don't want to be restricted, intimidating, don't know how, past failures, time and effort, volatile financials
Why are checks being phased out
age demographic, cost to consumer, time it takes to clear, security issues, direct deposit
APR
annual percentage rate; percentage of yearly cost of a loan or line of credit
revolving
approved for a credit limit and can use any amount up to that limit (credit card)
installment
approved for a specific loan amount taken out for a period of time and pay it back over a period of time (loans)
Figuring up your Net Worth
assets - liabilities
Taxes that come out of your paycheck
federal income tax, state income tax, city income tax, medicare, social security
Community Reinvestment Act
banks have to administer products to people of all income levels, not just the wealthy; people can get CRA credit if they do good things - Regulators are FDIC, Federal Reserve, OCC
Financial capability
being able to take effective action to pursue financial stability and weather downturns
Emergency Fund
car, home, medical, job loss, family; should be 1,000 as beginning & aim for 10,000 & keep it liquid
Liquidity
cash or savings
Social Security issues
cost of social security is expected to exceed its income in 2034 - Money paid into social security system is invested - Was created during great depression, didn't know that there would be baby boomer generation - Longer life expectancy, lower birthrate/workers
Four walls
cover food, shelter, clothing, transportation first in budgeting
Dodd-Frank Act
created CFPB; signed after recession to regoanize the financial regulatory sustem
Frank McNamara
created the 'diners club card' that people could use at restaurants; the beginning of the credit card
Prosperity Now
expand economic opportunity for low income families; known for yearly scorecard to be a resource on data, states ability to provide opportunity; use IDAs; manage assets and opportunity network
ChexSystems
database that has names of people who has had an account closed on them by a financial institution; intended to catch people committing fraud but now it is affecting people who fell behing on payments and now can't get a new account
Rust Belt
deindustrialization and industry leaving; Indiana
what is a financial plan
document containing a person's current money situation and long term monetary goals and strategies to achieve those goals; determine net worth, determine cashflow and spending habits, clearly define goals and priorities
bad debt
drain welth, not affordable and offer not real prospect of being paid off in the future
pension
employer does all the saving and the money is just there for the employee at retirement
Michael Sherraden
father of financial empowerment and asset building; creater of individual development accounts (IDAs)
Richard Cordray
first director of CFPB
FDR Second Bill of Rights
focused on economic rights; right to good job, adequate food/clothing/recreations, farmers decent rate of return, no business monopolies, right to decent home, adequate medical care, protection from old age/accident, right to education
Financial Coaching
form of financial empowerment support that offers a relationship based approach to encourage goal setting and self-accountability
FDIC Money Smart
free to help basic tools about financial topics; different age groups
clusters
geographic concentrations of interconnected companies that are in the same industry - Shar infrastructure, suppliers, workforces etc.
Brain Drain
good smart people in the area but if they aren't getting goof opportunities then they are going to leave to go somewhere else
financial stability
having enough resources to pay for food, healthcare, housing and other basic needs, navigate short term crises, and begin to build personal assets
Financial coach
help people organize and prioritize their needs and hold them accountable; foundational knowledge
7 areas of insurance
homewowners, auto, health, disability, long term care, identity theft, life
Who is checking credit
housing, transportation (car), employment, cell phones, utility companies
Nudge
if you don't want people to do things make it difficult to do so; opt out programs for retirement
roth
income is taxed and then put into Roth so that when you take it out it has already been taxed
IRA
individual retirement arrangement
good debt
investment in financial future that should leave you in a better off in the long term
snowball
list all debts smallest to largest; pay off the smallest debt first then work up to the larger ones; will show more progress but could pay more money through interest
Start Fresh
modern banking safety, safe accounts, saving
interest
money financial institutions pay you for keeping money deposited with them, normally only in savings accounts; compounding
Is a car an asset?
no
Dave Ramsey
no credit cards ?
Panic of 1907
public distrust of the banking system & everyone went and withdrew their money; saved by JP Morgan & other putting their money back into banks
Dave Ramsey baby steps
put 1,000 in emergency fund, pay of all debt using snowball, 3-6 months of expenses into savings for full emergency fund, invest 15% of income into pretax retirement plans, begin college funding for kids, pay off home early, build wealth
asset
real money or an investment you can convert into currency that you can use to buy things; liquid (car stocks, savings account) or non liquid (home, real estate)
CFPB Your Money, Your Goals
set of financial empowerment materials that help people meet their financial goals by increasing their knowledge, skills and resources - Modules with lots of tools
Elizabeth Warren
set up the CFPB
Offshoring
shifting production to another location that has lower labor costs
Outsourcing
shifting production to another party that does it cheaper
progressive tax
tax that is higher for taxpayers with more money (US income tax)
Credit Union
technically a nonprofit; when you purchase a product or service you become a partner o Fewer fees, better rates, less accessible
What is credit
the ability to borrow money or access goods/services with the understanding that you will pay later
regressive tax
the tax or its burden decreases as income increases (tax is flat); sales tax and property tax
Secured Credit Card
there is another asset (house) pledged against the loan that can be taken if you do not pay back
deductible
what you will have to pay out of pocket before the insurance company will contribute any money
San Francisco
where BankOn program was started; $50 matched savings bank account for kindergartners enrolled in public school and more likely to go to college if have a savings account
Reading a Credit Report
who you owed, how much, how much you paid, and whether or not the payment was on time - Identity, existing credit information, public records, recent inquiries
Credit As an Asset
workbook for people to build/rebuild a good credit history
Dan Ariely
wrote predictably irrational, founder of behavioral economics; people are less rational in decision making than standard economic theory suggests
Start Smart
youth financial education curriculum