Professionalism skill for workplace success 4e by anderson bolt chapter02

2 Personal Financial Management Copyright © 2016, 2013, 2011 Pearson Education, Inc SECURITY INDEPENDENCE CHOICES Copyright © 2016, 2013, 2011 Pearson Education, Inc After studying these topics, you will benefit by: • Recognizing the significance of money management and budgeting on personal and professional success • Distinguishing the wise use of credit and identifying debt management resources • Evaluating alternatives for financing your education through student loans, financial aid, and other resources • Discovering the impact your credit report has on your financial future • Identifying methods to protect yourself from identify theft • Assessing money wasters, emotional spending, and the impact money has on relationships Copyright © 2016, 2013, 2011 Pearson Education, Inc FINANCIAL MANAGEMENT • Personal Financial Management: the process of controlling your income and your expenses Copyright © 2016, 2013, 2011 Pearson Education, Inc FINANCIAL MANAGEMENT • Income: incoming money – – – – Parents Grants Student loans Job After college and starting your new career, your income most likely will increase Copyright © 2016, 2013, 2011 Pearson Education, Inc FINANCIAL MANAGEMENT • Expense: outgoing money – – – – – – – Tuition, textbooks, supplies Housing Transportation Food, shelter, clothing Hobbies and entertainment Health care Loans Copyright © 2016, 2013, 2011 Pearson Education, Inc PERSONAL FINANCIAL MANAGEMENT AFFECTS WORK PERFORMANCE • Personal finances impact all areas of your life – – – – – – Create a personal financial plan now Finances assist you in reaching life goals Monitor your money Keep debt under control Protect yourself from identity theft Don’t allow it to negatively affect your work or add stress Copyright © 2016, 2013, 2011 Pearson Education, Inc PERSONAL FINANCIAL MANAGEMENT AFFECTS WORK PERFORMANCE • Maintain a positive credit report – Employer may require a credit check – Use credit wisely – Pay your bills Copyright © 2016, 2013, 2011 Pearson Education, Inc TOPIC SITUATION Oscar TOPIC RESPONSE: Where are you unnecessarily spending money? Copyright © 2016, 2013, 2011 Pearson Education, Inc MONEY MANAGEMENT Budgeting • Create financial goals • Budget: a detailed financial plan used to allocate money for a specific time period – Reflects your goals – Identifies, controls, and prioritizes spending • Be honest and precise when creating a budget Copyright © 2016, 2013, 2011 Pearson Education, Inc 10 WISE USE OF CREDIT Manage Your Credit • Managing credit and establishing savings is the best way to stay out of debt • Do not abuse the privilege of loans and credit cards – – – – – Consider interest rates Hidden costs Purpose of the loan Amount of payments How long to pay off loan Copyright © 2016, 2013, 2011 Pearson Education, Inc 24 WISE USE OF CREDIT Manage Your Credit • Do not accept all credit card offers • Use credit only for items you can afford • Spend wisely and pay off the balance each month • Avoid cash advances Copyright © 2016, 2013, 2011 Pearson Education, Inc 25 TOPIC SITUATION Simone TOPIC RESPONSE: What are the risks if Simone does not pay the credit card balance in full each month? Copyright © 2016, 2013, 2011 Pearson Education, Inc 26 TALK IT OUT Identify potential terms and conditions that you should consider before getting credit from a lender Copyright © 2016, 2013, 2011 Pearson Education, Inc 27 CREDIT REPORTS • Credit report: a detailed credit history on an individual • Fair Isaac Corporation (FICO) score is the most common credit score rating system – Scores 300-850 – The higher the score, the better the rating • Higher ratings allow you to secure loans at a lower rate Copyright © 2016, 2013, 2011 Pearson Education, Inc 28 CREDIT REPORTS • Credit report information: – Includes all personal identification information • Previous names, addresses, and employers – Details credit cards and loans • Shows balances and payments – Shows liens, foreclosures, or bankruptcies Copyright © 2016, 2013, 2011 Pearson Education, Inc 29 CREDIT REPORTS • Three credit reporting agencies are Equifax, Experian, and TransUnion – Under federal law, you are entitled to a free copy of your credit report from these agencies once every 12 months – Use the annual credit report authorized by Federal law – Take advantage of this free review – Report any errors immediately Copyright © 2016, 2013, 2011 Pearson Education, Inc 30 SAVINGS AND INVESTMENTS • Begins saving now – Put away funds for short-term goals or emergencies – Rule of thumb: Have at least five-eight months’ income saved for emergencies – Have savings in a financial institution – If available, use an automatic deduction plan • Funds are automatically deducted from your paycheck into your savings Copyright © 2016, 2013, 2011 Pearson Education, Inc 31 SAVINGS AND INVESTMENTS • Begin saving and investing now – Saving: determine if you should use a regular savings account or a Certificate of Deposit • Decide if you may need money readily available – Investing: typically long term • Stocks, mutual funds, real estate • Involves risk – Establish investments after you have a savings account Copyright © 2016, 2013, 2011 Pearson Education, Inc 32 IDENTITY THEFT • Identity theft: when another individual uses your personal information to obtain credit in your name • Prevent by: – Do not share Social Security number to anyone – Disposing of any communication that contains your personal information by shredding – Keep copies of important information in a safe place Copyright © 2016, 2013, 2011 Pearson Education, Inc 33 IDENTITY THEFT Tips to Remember • Do not give out your SSN over the telephone or Internet without verifying the authenticity of the company or individual requesting the information • If using the Internet, check for a secure website • Document all important numbers and keep them in a safe place • Practice good personal financial management Copyright © 2016, 2013, 2011 Pearson Education, Inc 34 IDENTITY THEFT Tips to Remember • Remove your name from credit card and marketing lists • Monitor your credit and bank accounts regularly • If you receive a call from a collection agency and not have poor credit, not ignore the call Copyright © 2016, 2013, 2011 Pearson Education, Inc 35 IDENTITY THEFT If You Become a Victim of Identity Theft • File a police report • Contact your bank, credit card companies, and cell phone provider • Do not change your social security number; contact the Social Security Administration Fraud Department • Contact the credit reporting agency fraud lines Document everything you Copyright â 2016, 2013, 2011 Pearson Education, Inc 36 ADDITIONAL FINANCIAL MATTERS • Consider the long-term impact of your financial choices • Be cautious when lending money to others or co-signing a loan Keep your financial information secure Copyright â 2016, 2013, 2011 Pearson Education, Inc 37 CREDIT AND FRAUD RESOURCES • Counseling services: – The National Foundation for Credit Counseling – Myvesta Foundation • Credible credit reporting agencies and resources: – Equifax – Experian – TransUnion Copyright © 2016, 2013, 2011 Pearson Education, Inc 38 ... report information: – Includes all personal identification information • Previous names, addresses, and employers – Details credit cards and loans • Shows balances and payments – Shows liens, foreclosures,... OF CREDIT Manage Your Credit • Do not accept all credit card offers • Use credit only for items you can afford • Spend wisely and pay off the balance each month • Avoid cash advances Copyright... After studying these topics, you will benefit by: • Recognizing the significance of money management and budgeting on personal and professional success • Distinguishing the wise use of credit