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Zach Teutsch, DirectorInvestor Education ProjectNational Labor College
Financial Empowerment
Responding to the Foreclosure Crisis
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Origins of the Foreclosure Crisis: Productivity Grew—Wages Didn’t
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Productivity
Wages
The Housing Market Bubble
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Homeowners are not to blame!
The foreclosure crisis was caused by:
Wall Street Greed
Regulatory Failures
Unstable Economy
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Advice for Homeowners: Tip #1: Start Early
The sooner you take action, the more likely you will be able to save your home.
Homeowners should take action when they first have trouble paying their mortgage
Do not wait for a foreclosure filing before seeking help
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Advice for Homeowners:Tip #2: Seek Help
Seek help - you wouldn’t try to negotiate a grievance with the boss alone
Work with a non-profit housing counselor who is familiar with loan modifications
Free help is available from government-qualified housing counselors
Be wary of scams offering help for a fee
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Advice for Homeowners:Tip#3: Stick With It
The mortgage modification process can take a long time to complete
Keep copies - the bank may ask for the same document multiple times
Continue to seek a modification even if you also receive a foreclosure notice
Stay in contact with your bank and HUD approved housing counselor
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Finding a housing counselor Be wary of scams asking for money Free home counseling is available to
homeowners facing foreclosure Housing and Urban Development maintains a
list of free, government-approved counselors www.makinghomeaffordable.gov Hotline Number: (888) 995-HOPE
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Neighborhood Assistance Corporation of America
Founded with assistance of the Boston Hotel and Restaurant Employees Union Local 26
Save the Dream mortgage modification events Organizes campaigns to challenge predatory
lending and encourage banks to modify mortgages
Visit www.naca.com or call (888) 404-6222
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Affordable Housing Centers of America
Formerly the ACORN Housing Corporation Home Equity Loss Prevention (HELP) program Offices in 19 cities, 14 states, and DC Help homeowners in person, via phone or via
internet Visit www.ahcoa.org or call (888) 409-3557
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Union Plus--Save My Home Hotline
Housing counselors are available 24/7 Run by Money Management International
(MMI) with 46 years of credit counseling experience
If you have a Union Plus Mortgage, you may also be eligible for additional assistance
Visit www.unionplus.org or call (866) 490-5361
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Questions?
Do you save money every paycheck?
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1. Yes2. No
Is an increasing percentage of your income going towards paying down debts?
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1. Yes2. No
Is your savings cushion adequate?
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0%0%
1. Yes2. No
Can you only make the minimum payments on your credit cards?
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50%50%1. Yes2. No
Are you often late paying bills?
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50%50%1. Yes2. No
Are you using credit to pay for things you used to buy with cash?
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50%50%1. Yes2. No
If you lost your job, would you be under immediate financial strain?
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50%50%1. Yes2. No
Do you know how much you owe?
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50%50%1. Yes2. No
Are you being threatened by collectors with possible legal action?
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50%50%1. Yes2. No
Financial Security: The Basics
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Becoming Financially Secure There are no secret
shortcuts to financially security.
The keys are patience, time and discipline.
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Four Steps to Financial Security
Spend Less Than You Earn
Eliminate Debt
Emergency Fund
Invest
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Spend Less Than You Earn
Every month we get richer or poorer. If we take in more money than we spend, we
get richer. If we take in less than we get poorer. We can build a surplus at any salary.
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Saving $1,000 Per Year
Ditch the latteNix the lottery ticketsBring a brown bag lunchsometimes
Reduce smokingGet the right cell phone plan
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What are some ways to Save $3 per day?
Expensive Ways to Spend Money
More than 20% of Americans use Payday Lenders, Pawnshops, etc.
Over half of households carry a credit card balance from month-to-month.
These are ways that we end up spending much more than the price of items we buy.
If we pay only the minimum on our credit cards we end up paying as much as 5 times our original bill.
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Credit Card Companies How do credit card companies
make profits? What sort of customers do they
love? Why?
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Eliminate Debt
High-Interest Debt is Crippling
Eliminate Debt as Soon as Possible.
Two Approaches Highest Interest Rate First Smallest Balance First
Don’t Let the Credit Card Company Own Your Life.
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Emergency Fund
Before We Talk About Investments…
Emergency Fund Experts Say That We Should
Set Aside 2-6 Months Salary in case there are unexpected expenses.
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Retirement at a Glance
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Personal Investments
Social
Security
Pensions
The 3-Legged Retirement
Stool
One-Legged Retirement Approach
No Pension No Social Security Just Savings/Investment Wobbly! Unstable! Avoid!
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The 2-Legged Retirement Approach Most Americans have only
two legs to their retirement. Social Security Personal Savings
Stable as long as it leans on something: Generous employer
contributions Strong stock market
performance Be Careful!
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Defined Benefit Pensions Are Important!
Defined Benefit = payments are guaranteed. Pension benefit is based on salary and years
served. The stock market doesn’t impact your ability
to retire. Employer takes on risk, not employee. Money managed by investment professionals.
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Financial Security: Investing
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Time To Invest
Once we have gotten rid of our debt and setup our emergency fund, we can set aside money every month for investment.
Automate so we don’t have to remember every month. Auto-pay ourselves first!
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Money Grows
“The most powerful force in the universe is compounding interest.”
The sooner you start saving and investing, the sooner you will have the resources you need.
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$1,000 Over 30 Years
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$1,000 A Year for 30 Years
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Mutual Funds
Each person owns a share of the basket of investments
Professionally managed
Fund types: Actively managed funds (staff buy and sell
stocks or bonds to try to make money) Index funds (passive, fees are usually lower)
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Index Funds
Lower Fees
Lower Taxes
Diversified
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Asset Allocation
Asset classes are different types of investments
- stocks, bonds, real estate, etc
Allocation means the percent of total money available that you invest in each class.
The investment mix should give you the highest return for the lowest level of risk for your particular circumstance.
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“Do not put all your eggs in one basket”
Age and Asset Allocation
The younger you are the more risk should be in your portfolio (including Deferred Comp) to increase it’s likely return.
The older you are the more conservative you should be so you can minimize risk.
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Questions?
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401(k) Plans
401(k) Plans Two Kinds of Tax Advantages
Help Now 401(k) 403(b) 457
Help Later Roth IRA Roth 401(k)
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401(k) Plans
Contain Mutual Funds Look for Low Fees. Diversify Yourself or
Choose a Pre-Diversified Fund.
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401(k) Plans Is it a Good Deal?
Match? Mutual Fund Options?
Fees
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Smart Choices in Difficult Times Try hard to conserve funds
meant for retirement. Understand the tax bite
Withdrawals before 59½ can carry a 20-30% tax that can be avoided but by waiting until 59½.
20% will be held by plan manager to insure tax payment.
If you rollover, do it directly to avoid taxes.
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Wrapping Up
Other Resources Investor Workshops:
http://www.nlc.edu/investor-education.html Available 24/7 Workshops in chunks of 20 minutes or less. Objective. User-friendly.
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Putting Learning Into Practice Write down two things you’d
like to accomplish financially in the next three months on the worksheet.
Put your address on the envelope.
Put the worksheet in the envelope, seal it, and return it to me.
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Acknowledgements
This program is made possible by a generous grant from the FINRA Investor Education Foundation. The FINRA Investor Education Foundation, supports educational projects that give investors the tools and information they need to better understand the basic principles of saving and investing. For details about grant programs and other new initiatives of the Foundation, visit www.finrafoundation.org.
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