Ohio State University Extension, in collaboration with Godman Guild Association, would like to thank and acknowledge the U.S. Department Of Education for funding the Technology Access to Better Learning and Employment (T.A.B.L.E.) Project.
FAQs on Money Management
Budgeting and Savings Credit Basics of Banking Long Term Financial Planning Earned Income Tax Credit Other Useful Links
The course material given below is a study-at-home course offered by the Ohio State University Extension. In addition to information and worksheets, each lesson has a set of "Action Steps" to help you apply what you learn to your own money management situation.
Lesson 1 ( Chapter1.pdf ): This focuses on individual and family values about money. It gives you some suggestions about ways to talk with your partner and family about money matters. You are asked to think about and develop some financial goals to the future. There are suggestions and tools to help you start tracking your expense.
Lesson 2 ( Chapter2.pdf ): This lesson discusses cash flow, income, and expenses. There are worksheets on which to write critical information about your income, what you owe, and types of expenses so that you have a better picture of your current financial standing.
Lesson 3 ( Chapter3.pdf ): This lesson will help you examine your spending habits to see if any problems exist. Suggestions are given for changing spending practices and habits. An agreement is included to help you and other family members commit to a personal plan to reduce funding so funds can be used to reach important goals set in Lesson 1.
Lesson 4 ( Chapter4.pdf ): The focus on this lesson is on the pros and cons of using various types of consumer credit, wise credit management, and the importance of your credit history. Some checklists will help you determine if you have some credit problems, and worksheets help you compare some credit alternatives.
Lesson 5 ( Chapter5.pdf ): Guidelines and worksheets for developing a written budget are the focus of this lesson. The guidelines and tools are intended to help you actually plan future use of income so that you are in better control of day-to-day and longer term finances.
Lesson 6 ( Chapter6.pdf ): The first part of this lesson focuses on your net worth and how you own property. The second part will help you collect and organize your very important financial records.
Daily spending and saving decisions are at the center of financial planning. A budget is necessary for successful money management and requires that you outline how you will spend available income.
1. Add up your Income: To set up a monthly budget, you need to
determine how much take-home pay you get on a regular basis. If you get paid
once per month, this one is easy - it's the amount of your salary that you 'take
home'. If not, you'll need to do some math.
If you don't get paid by the month, use the following chart:
For weekly pay, multiply by 4.333, For every two weeks' pay, multiply by 2.167,
For twice-a-month pay, multiply by 2, For irregular monthly income, divide by
12.
You also want to make sure you add in other sources of income, such as interest
income, alimony or maintenance, child support, rent, or other payments. You
should add all of these sources in your plan, as well.
3. Figure out the difference: After you've created your budget, you need to keep records of your actual income and expenses. This information helps you to understand any "budget variances" - the difference between the amount you budgeted and what you actually spent for the month, or time period.
4. Track, Trim and Target: As you track your monthly
expenses, you may need to trim expenses. Some expenses are more easily trimmed.
For example, you need to make house payments and get groceries, but you may be
able to go without seeing that new movie. Cutting back is usually a better place
to start than cutting out; however, it may be a signal that you need to revise
your budget and financial goals.What should you cut first when a budget shortage
occurs? This question doesn't have easy answers, and the answers will vary for
different household situations. The most common overspending areas are
entertainment and food, especially away-from-home meals. Purchasing less
expensive brands, buying quality used products, managing credit card purchases,
and renting rather than buying are common budget adjustments techniques.
Budgeting is an ongoing process. You will need to review, and perhaps, revise
your spending plans on a regular basis.
The link given below gives an introduction to savings and lets you know all about understanding savings and savings products.
http://www.bankrate.com/brm/sstep.asp
How do I decide which credit card to apply for ?
The link given below gives a comparison of costs and features of credit cards.
The key to building and keeping good credit is to stay on top of your credit cards. The link below will show you how to get all the information you need from your credit card statement.
http://www.practicalmoneyskills.com/english/resources/tutor/statements/credit_state.php
How do I read my credit report ?
Many companies use your credit report to make decisions on extending credit, pricing auto insurance and many other important activities. The link below will show you how to read your credit report and keep it in good standing.
http://www.practicalmoneyskills.com/english/resources/tutor/statements/credit_report.php
How do I dispute inaccuracies in my report ?
After reviewing your credit report, write a letter to each of the credit reporting agencies and request that disputed information on the report be investigated. Keep a copy of all letters requesting updates. Save any other correspondence related to your credit report. Follow up if you do not get corrected reports.
For free information explaining these laws write to: Federal Trade Commission, Public Reference, Washington, DC 21580.
What is adverse (negative) information on my credit report ?
Lenders, employers, insurers, and others may deny your credit application if adverse information appears on your credit report. This may include the following:
Collection Amounts, Late payments, Charge-off accounts, 50,90, or 120 days late, bankruptcy, tax liens, judgments, excessive inquiries, account closed-grantor's request.
How does adverse information affect me ?
Adverse or negative information on a credit report is any information that may cause you to be turned down for credit, reduce your chances for loan approval, or make you pay higher interest.
Most negative information can legally be on your report for seven years.
Bankruptcies may be reported for up to ten years.
Some civil lawsuits and judgments may be reported for more than seven years.
Credit scoring is another method that some lenders use to determine whether you meet their lending guidelines. This is done by the computer. The computer gives points for positive information and takes away points for negative information. Each creditor has its own guide to evaluate your credit score. If your score is high enough, your credit application will likely be approved.
How can I improve my credit score ?
Don't open new credit cards that you don't need just to increase your available credit. This approach could backfire and actually lower your score.
Try to keep your total account balances as low as possible. High outstanding debt may negatively affect your score, as you have a greater chance of missing payments.
Correct any incorrect information that might appear on your credit report.
If your credit is severely damaged, or you have a very short credit history, there are still ways to improve your credit over time. Consider opening new accounts responsibly and paying them off on time.
If you fall behind on paying a bill because of illness, unemployment, or family issues, write a short explanation to the credit reporting agencies. They will add it to your credit report. Also, call your creditor to explain the circumstances and, if possible, work out a payment schedule you can meet.
To minimize the number of inquiries on your credit report, don't apply for multiple credit cards over a short period of time, or for a card you're not likely to get. Apply for new credit accounts only as needed.
Make all of your payments on time. If forced to miss a payment, be sure to pay the following month. Accounts more than 60 days past due will be indicated on your credit report.
What are the different kinds of credit ?
There are four types of Credit:
Long Term Credit: Mortgages, car loans and other installment loans, which are repaid over several month or years are considered long-term credit.
Short Term Credit: One type of short-term credit is used to purchase items or services in a single payment, usually with no interest charge. Utility bills are examples of this kind of credit.
Secured Credit: This requires something of value to be promised to the lender as collateral in case the debt is not repaid. Home mortgages and car loans are examples of secured debt.
Unsecured Credit: This is a loan without collateral. The lender depends on the borrower's promise to repay.
To open a bank account, you will need to bring the following identification:
When opening a bank account you should balance cost and convenience. Shop around to different banks. Some banks offer accounts with no monthly fee and no minimum balance, others offer accounts with monthly fees and a minimum balance but more ATM (automatic teller) machines and branch locations, while still others pay out interest.
! Beware of extra ATM surcharges for using other banks' ATM machines. Some can charge up to $2 in extra fees just for withdrawing money.
Check to see if the bank requires:
Some larger banks now offer online banking so you can pay your bills online. Other newer banks are completely online.
The link below is a quick lesson in how to fill out a deposit slip.
http://www.practicalmoneyskills.com/english/resources/tutor/statements/deposit.php
An error in writing a check can make it un-cashable or could even allow someone else to cash it for more than you intended. The link below will help you to write checks correctly.
http://www.practicalmoneyskills.com/english/resources/tutor/statements/write_check.php
How do I read my bank statement ?
To keep track of where your money goes and how much you have, it's important to know how to read a bank statement. The link below explains the information it contains.
http://www.practicalmoneyskills.com/english/resources/tutor/statements/bank.php
What is a debit card and what does it do ?
A debit card is a banking card enhanced with automated teller machine (ATM) and point-of-sale (POS) features so that it can be used at merchant locations. A debit card is linked to an individual's checking account, allowing funds to be withdrawn at the ATM and point-of-sale without writing a check. Each financial institution creates an identity for its debit card to customize the product and differentiate it in the market. Debit cards can also be called deposit access cards.
A debit card enables the cardholder to pay for purchases directly via his or her checking account, replacing cash and checks.
What are the different types of bank accounts ?
Current or Checking Account:
If you have a current or checking account, you can
write checks to pay bills without having to go to the financial institution or
post office to buy a money order or cashier's check. You can also set up some
amounts for recurring bills (such as rent or mortgage or a car payment) to be
automatically withdrawn (debited) from your account, so that you don't even have
to write checks for those.
You can also have an ATM card attached to your account which you can use for
cash withdrawal. Your ATM card may even have a debit function which allows you
to use it also for point-of-sale purchases at merchants.
Savings Account: A savings account is an interest-bearing deposit account with no stated maturity, as opposed to time deposit. You can withdraw or deposit funds into your savings account any time. It pays daily interest on your balance and is normally credited to your account every month. You can choose to receive an account statement or a passbook to keep track of all your transactions and interest earned.
Time Deposit: Time deposit is a deposit account paying a fixed rate of interest for a fixed term, varying normally from seven days to a year or more. You cannot withdraw funds before maturity without giving advance notice, and early withdrawal may lead to partial loss of interest. Upon maturity of your time deposit, your bank may automatically renew it together with the interest earned, alternatively, you may transfer it to your other accounts or withdraw the funds.
What are the different methods of banking ?
Branch Banking
Depending on where you live, it may have been illegal years ago for banks to have more than one office/branch or have branches outside their home county or state. Today, all of the major banking companies operate branch offices in multiple states. This provides people all over the country with access to the widest possible array of banking services. You can shop for the best terms for your deposit accounts and borrowing needs and are not constrained to only what is available in your home town.
Telephone Banking
Telephone banking refers to the ability to conduct banking over the phone by using the keypad on your telephone to enter data and navigate through the automated system. This method is especially useful for those who have arranged direct deposit for their paychecks and other incoming funds. It is used to move funds among your various accounts, make loan and other payments and monitor the balances in your accounts all from the comfort of your home 24/7.
On-line Banking
On-line banking refers to using the internet to do your banking. To do so you log on to the bank’s web site by means of your user identification number and password. Once on the site, you can do many of the transactions that you can do in person or by telephone. With internet banking you may never have to set foot in the physical facility of the bank. In essence, you can do business with your bank right from your own computer.
How long will my savings last ?
The link to the calculator given below calculates the number of years your savings will last depending on the following four factors: Amount in savings, Annual interest rate, Monthly withdrawal you would like to make and Years you would like savings to last.
http://www.bankrate.com/brm/calc/svgs_income/savings_income.asp
How much money can I save in my 401(k) plan ?
The link to the calculator given below calculates the amount in your 401(k) plan at retirement.
http://www.bankrate.com/brm/calc/401kadvice.asp
What is Earned Income Tax Credit (EITC) ?
The Earned Income Tax Credit (EITC) is a refundable Federal tax credit for eligible individuals and families who work and have earned income under $33,692 ($34,692 for married filing jointly). The EITC reduces the amount of tax you owe, and it may give you a refund.
1. You must have a valid social security number that allows
you to work.
2. You must have earned income during the year.
3. Your earned income and modified Annual Gross Income must each be less than:
* $11,230 ($12,230 for married filing jointly) if you have no qualifying
children, or;
*$29,666 ($30,666 for married filing jointly) if you have one qualifying child,
or;
*$33,692 ($34,692 for married filing jointly) if you have more than one
qualifying child.
4. Your investment income cannot be more than $2,600.
5. Your filing status can be any filing status EXCEPT married filing a separate
return.
6. You cannot be a qualifying child of another person. If you are filing a joint
return, neither you nor your spouse can be a qualifying child of another person.
7. Your qualifying child cannot be used by more than one person to claim the
EIC.
Basically, a qualifying child is a child who:
1. Is your son, daughter, adopted child, grandchild, great-grandchild,
stepchild, or eligible foster child, and;
2. Was (at the end of the tax year) under age 19 or under age 24 and a full-time
student, or; permanently and totally disabled at any age during the year; and
3. Lived with you in the United States for more than half of the tax year.
Who is an eligible foster child ?
A child is your eligible foster child for the earned income
tax credit if all the following apply.
1. The child is placed with you by an authorized placement agency. (An
authorized placement agency includes a state or local government agency or
court. It also includes a tax-exempt organization licensed by a state.)
2. You care for that child as you would your own child.
3. The child lived with you for more than half of the tax year, except for
temporary absences
Earned income includes all the taxable income and wages you
get from working.
There are two ways to get earned income:
1. You work for someone who pays you, or;
2. You work in a business you own.
Taxable earned income includes:
· Wages, salaries, and tips;
· Union strike benefits;
· Long-term disability benefits received prior to minimum retirement age;
· Net earnings from self-employment.
Once you know that you qualify for the EITC, you need to know how to figure the amount of the credit. You have two choices of how to figure the credit: Have the IRS figure the credit for you. If you would like the IRS to do this, see Publication 596 , Earned Income Credit, or Figure the credit yourself. To do this you must use the Earned Income Credit Worksheet (EIC Worksheet) in the instruction booklet for Form 1040, Form 1040A, or Form 1040EZ, and the Earned Income Credit (EIC) Table in the instruction booklet.
For more information, see Chapter 4, Figuring and Claiming the EITC, in Publication 596 .
Other useful links for more information on managing your finances !
Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture
All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.
Keith L. Smith, Associate Vice President for Ag. Adm. and Director, OSU Extension.
TDD No. 800-589-8292 (Ohio only) or 614-292-1868