About the Consumer Financial Protection Bureau The Consumer Financial Protection Bureau (CFPB) is a federal government agency created to protect consumers in the wake of the 2008 financial crisis. We aim to make consumer financial markets work for consumers, responsible providers, and the economy as a whole. We protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law. We provide people with information and tools to make smart financial decisions. In a market that works, the prices, risks, and terms of the deal are clear upfront, so consumers can understand their options and comparison shop. All companies play by the same consumer protection rules and compete fairly on providing quality and service. To achieve this vision, the CFPB works to: * Empower: We create tools, answer common questions, and provide tips that help consumers navigate their financial choices and shop for the deal that works best for them. * Enforce: We take action against predatory companies and practices that violate the law, and we have already returned billions of dollars to harmed consumers. * Educate: We encourage financial education and capability from childhood through retirement, publish research, and educate financial companies about their responsibilities. INTRODUCTION PART 1: Introduction to the toolkit Welcome to the Consumer Financial Protection Bureau’s Your Money, Your Goals: A financial empowerment toolkit! If you’re reading this, you probably work with low-income or economically vulnerable people. Many people feel overwhelmed by their financial situations, and they often don’t know where to go for help. You’re in a unique position to provide that help. The people your organization helps already know you and trust you, and in many cases, they’re already sharing financial and other personal information with you. What is financial empowerment? You’ve probably heard the terms “financial education” or “financial literacy” before. These concepts describe the process of helping people learn about financial topics. Financial empowerment goes beyond acquiring knowledge. Financial empowerment includes financial education and financial literacy, but it focuses both on building your ability to manage money and use financial services and on helping to access products that work for you. When you are financially empowered, you are both informed and skilled. You know where to get help with your financial challenges and can access and choose financial products and services that meet your needs. This sense of empowerment can build confidence that you can effectively use your financial knowledge, skills, and resources to reach your goals. [start textbox] Financial empowerment Empowerment is the process of increasing people’s capacity to make choices and transform those choices into actions and desired results, according to the World Bank. Financial empowerment is building personal knowledge and ability to manage money and use financial services products that work for you. [end textbox] This is for you This toolkit is designed for anyone who works directly with low-income or economically vulnerable people in a wide range of organizations and on a broad range of issues. Users of this toolkit may have different titles, but you generally come from non-profit, community-based, or private sector organizations or city, county, or tribal government agencies, and you are generally responsible for working with people to: * Conduct needs assessments * Develop action plans * Provide resources and referrals needed to implement action plans * Monitor progress and evaluate results. [end textbox] If you feel knowledgeable about money and comfortable in your own approach to money management, credit, debt, and financial products, you can better help other people face money issues that may be complicating their lives. As you work through the modules of this toolkit, you’ll learn information about important financial topics and use tools that put this information into practice with the people you help every day. We designed Your Money, Your Goals and the training you may receive on using it to help you help the people you serve become financially empowered. The toolkit is a collection of important financial empowerment information and tools you can choose from based on the needs and goals of the people you work with. As a toolkit, it is different from a financial education curriculum. A curriculum generally has a specific set of goals, and you usually work through most or all of the material in the order it’s presented. Because this is a toolkit, you shouldn’t try to cover all of the information and tools with everyone you serve. It is designed to help you identify and share the information and tools that are best suited to help someone get started on solving specific financial challenges and reaching their goals. And, when they want or need additional help, the aim is to help you refer them for financial counseling or coaching. We developed this toolkit because individuals like you meet with thousands of people that need high quality, unbiased financial information and tools to help them better address financial issues. As you use this toolkit and other resources at http://www.consumerfinance.gov, you can help the people you serve become more financially empowered, reduce their financial stress, and manage their finances in ways that achieve their goals and dreams. Financial empowerment can build financial stability [ start text box] Your role in financial empowerment As a trusted source of information and resources, you are in a good position to provide financial empowerment services to the people you serve. You have access to and the trust of thousands of people who would benefit from financial empowerment services. You may feel more equipped and empowered to provide these services when you read the content and use the tools provided in the toolkit [end textbox.] Sharing financial empowerment information and tools may feel like a completely different job – one more thing you’re being asked to add to your workload. But, once you are familiar with the resources in this toolkit, we believe it can become natural to integrate its contents into the work you do every day. The Your Money, Your Goals toolkit brings together information, tools, and links to other resources you can use to help people build skills in managing money, credit, debt, and financial products. This can help them begin to build financial stability in their lives. Having all these resources in one place can make it easier for you to bring financial empowerment into your conversations. Depending on the situation, you may be able to help the people you serve take the first steps to: * Set goals and calculate how much money they need to save to reach these goals. * Plan for large purchases and life events. * Save money. * Establish an emergency savings fund. * Get and use tax refunds. * Track the specific ways they are using their money. * Bring their cash flow budgets into balance. * Make a simple plan to pay down debt. * Get, review, and fix errors on their credit reports. * Evaluate financial products and services. * Recognize when their consumer rights may have been violated and know how to take action. Making referrals People may look to you or to others in your organization for quality information on a variety of topics. Some of these questions may sound familiar. * “My credit report has information that’s not accurate. How can I fix it?” * “How can I tell if the student loan I can get at the bank is better than one I can get at school?” * “Should I borrow money from my credit card or take out a short-term loan to cover my bills until my next paycheck?” * “My employer says she can only pay me through direct deposit to a checking account or payroll card. But I’m worried about running into extra fees like I did on my last checking account. How can I figure out what will work best for me?” * “Should I borrow from my retirement account to pay off my debts?” [start textbox] Referral partners Only refer people to organizations that: * Have expertise in the area for which you are referring people to them * Have the time and interest to meet with and assist them * Are objective, which means they can show people the potential positive and negative consequences of specific actions * Will not sell products or services in the context of helping them [end textbox.] Some people may need more help than you are equipped to provide. This is where knowing how to use your organization’s resource and referral network will be important. Your organization may be able to provide you with a list of websites and local programs you may find helpful. Referral partners in your community may include certified non-profit credit counselors, certified housing counselors, financial counselors and coaches, free volunteer tax assistance sites sponsored by the IRS, and financial education programs. Sometimes, this is as simple as knowing what programs are being offered by other departments within your own organization. Other times, you may need to refer to a program run by another local organization in your community. It is important that these individuals and organizations don’t try to sell products or services to people when they are seeking financial empowerment assistance. Otherwise, there could be a conflict of interest - when the organization’s interests interfere with providing unbiased information and advice. Partner organizations should objectively show the upside and the downside of any specific action they discuss with a consumer and the impact these actions have on the consumer’s financial situation. If your organization or community doesn’t have a local referral guide for these services, you can use the Your Money, Your Goals Implementation Guide to help get you started.1 You can find this guide at http://www.consumerfinance.gov/your-money-your-goals. Using the toolkit The toolkit is divided into two parts: * The four-part Introduction is for you. This information can help you prepare to use the toolkit. * Modules 1 through 9 include information on specific topics and tools people can use to put that information to work. This section is like a toolbox, full of things you could use in a wide range of situations. Think of each module as a specific set of tools you can use depending on the situation. That’s why you don’t need to start with Module 1 and work all the way through the toolkit. For example, you may be helping a person who has just lost her job. Starting with Module 1: Setting goals and planning for large purchases would likely not be useful to her right now. On the other hand, Module 5’s tips for managing cash flow and identifying new resources could be useful to someone who doesn’t have enough cash to cover basic living expenses. Getting all the tools at once – or even five tools at one time – is likely to be overwhelming for most people. Only go over one or two tools at a time, beginning with a key topic and the tools that make the most sense for their situation. “But I don’t have time for one more thing…” One way to think about this financial empowerment work is that it is not an “add-on” service but rather something you can integrate into the work you are already doing. This doesn’t mean that it doesn’t require time on your part. While it requires time, that time will be front-loaded. In order to bring financial empowerment into the services you provide, you will have to spend time: * Learning the toolkit content * Becoming comfortable with the topics and the tools in the toolkit * Thinking about ways to introduce financial empowerment into your work * Potentially capturing the outcomes of financial empowerment for your organization This section provides you with two tools to get you started: * Tool 1: Financial empowerment checklist provides you with a tracking template for recording which tools or information you have shared with a particular individual. * Tool 2: Financial empowerment self-assessment can help you develop an understanding of your own financial knowledge, skill, and confidence. As you will see in the answer keys, the questions asked in this assessment are directly related to modules in Your Money, Your Goals. Tool 1: Financial empowerment checklist This checklist can help you identify the most relevant financial empowerment information and tools to share. It can also help you keep track of the information you have shared, including any referrals. Remember, even if you meet with someone regularly, you won’t cover all of the tools with him or her. By using this checklist, you can find the right module or tools based on the person’s most pressing financial challenge or the topic they’re most interested in. This checklist is organized by financial empowerment topic or module, followed by the tool or tools associated with it. The question(s) after each module title can help you identify the goal or challenge addressed in that module. To use the checklist: * Print a copy of the checklist for each person you are working with. * Mark off when you have covered the topic or tool. * Use the notes section if you are working with someone on an ongoing basis. Include information about your discussions, specific challenges, and whether you made a referral. * If you use the tool to track discussions with an individual, be sure to follow your organization’s rules regarding privacy and document storage. Financial Empowerment Checklist Name: Module 1: Setting goals and planning for large purchases Ask yourself: Does the person have clear goals? Is the person satisfied with her financial situation? Covered it Tool Notes and referral information Goal-setting tool Planning for life events and large purchases Buying a car Module 2: Saving for emergencies, bills, and goals Ask yourself: Does the person have money set aside for emergencies or unexpected expenses? Covered it Tool Notes and referral information Savings plan Savings and benefits: Understanding asset limits Finding a safe place for savings Increasing your income through tax credits Module 3: Tracking and managing income and benefits Ask yourself: Does the person track his income and know the options for receiving pay and benefits? Covered it Tool Notes and referral information Income and resource tracker Ways to increase income and benefits: Know your options Ways to increase income and resources Module 4: Paying bills and other expenses Ask yourself: Does the person pay bills on time each month? Does the person understand and take advantage of available financial products to pay bills and plan spending? Covered it Tool Notes and referral information Spending tracker Bill calendar Ways to pay bills: Know your options Strategies for cutting expenses When cash is short: prioritizing bills and planning spending Module 5: Getting through the month Ask yourself: Is the person able to make ends meet each month? Does the timing of income match the timing of bills and expenses? Covered it Tool Notes and referral information Cash flow budget Cash flow calendar Improving cash flow checklist Module 6: Dealing with debt Ask yourself: Does the person feel overwhelmed by her debts or by debt collectors? Is the person borrowing more money to pay off her debts? Covered it Tool Notes and referral information Debt worksheet Debt-to-income worksheet Reducing debt worksheet Repaying student loans When debt collectors call: Steps you can take Module 7: Understanding credit reports and scores Ask yourself: Has the person ever requested and reviewed his credit report? Covered it Tool Notes and referral information Getting your credit reports and scores Credit report review checklist Improving credit reports and scores Keeping records to show you’ve paid your bills Module 8: Money services, cards, accounts, and loans: Finding what works for you Ask yourself: Has an employer told the person that the company requires direct deposit? Is he interested in finding lower cost financial products or services to help manage income and expenses? Covered it Tool Notes and referral information Know your options: Money services, cards, accounts, loans Ask questions: Choosing where to get what you need Money services and banking basics Opening an account checklist Money transfers and remittances: What you need to know Module 9: Protecting your money Ask yourself: Has the person had issues with a financial product or service? Does the person know about basic steps to protect himself from scams, cons, fraud, and identity theft? Covered it Tool Notes and referral information Submitting a complaint to the CFPB Protecting your identity Red flags Learning more about consumer protection This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 2: Financial empowerment self-assessment Since financial empowerment covers a wide range of topics, it can be hard to know where to begin. Identifying what you know and don’t know may be the best place to start. Using this approach, you may find that you know more than you think you do. You may also find areas where you could benefit from a little more information or know-how. As someone who helps your organization serve individuals and families, it’s important for you to understand your own level of financial empowerment. Use this self-assessment to develop an understanding of your financial knowledge, skill, and confidence. As you will see in the answer keys, the questions asked in this assessment are directly related to modules in Your Money, Your Goals. This financial empowerment self-assessment has three parts: * Part 1: What you know can help you figure out the topics to focus on to build your financial empowerment knowledge and confidence. * Part 2: How you feel can help you identify how you feel about your own financial life. * Part 3: Your experiences can help you understand which financial products and services you’re familiar with and which are new to you. Part 1: What you know Answer each of the following questions by checking either the “true” or “false” column. True False Goals are not important to financial planning or budgets. To have enough money for emergencies, you must save 3 to 6 months’ worth of living expenses. A cash flow budget helps you track whether you will have enough cash and resources to cover your bills from week to week. If you can’t pay all of your bills, and collectors start demanding payment, you should pay the “squeaky wheel” first. The only way to receive employment income is a paycheck. Credit is when you owe someone money. Your total monthly debt payments may affect your ability to borrow more money. A poor credit history can keep you from getting an apartment, and in some states, insurance or even a job. The only cost of having a checking account is the monthly service fee. As a consumer, you have almost no rights when it comes to financial products and services. Financial empowerment self-assessment: Part 1 results Number correct: out of 10. Topics to Learn More About: Part 2: How you feel Use check marks to show which word or phrase (rating) best describes how you feel today. Statement Does not apply Strongly disagree Disagree Agree Strongly agree I have money set aside for emergencies and goals. I know how to claim state and federal tax credits. I am not worried about how much money I owe. I am confident about the information on my credit reports and my scores. I don’t worry about being able to pay my bills and expenses. I understand how credit works. I know how to get incorrect items on my credit report fixed. I feel confident about helping people begin to manage some of their financial challenges. I know where people in my community can go for credit and debt counseling and for free tax filing assistance. I know where to get help if I have a financial question or an issue with a financial product or service. Part 3: Your experiences Use check marks to show whether your answer to each question is “yes,” “no,” or “I don’t know.” Question Yes No I don’t know I have a savings or checking account at a bank or credit union, and I make regular deposits and withdrawals. I have applied for, received, and used a credit card. I have a loan that helped me to purchase a car or a home. I have taken out a payday loan. I have requested my own credit report and reviewed it. I track my income and spending. I have taken a loan from a pawn shop. I have used a check cashing business. I have had a car or other type of personal property repossessed. I have received demands for payment from debt collectors. I understand my rights and know what to do if I believe a financial services provider has tried to take advantage of me. I receive income via a method other than a paycheck (payroll card, direct deposit, or cash, for example). Answer key for Part 1: What you know Here are the correct answers for Part 1: What you know. If you did not answer the item correctly, see the toolkit module listed next to the answer for more information. Reading through the module indicated can help you understand the answer to the item and build your financial empowerment knowledge and confidence. Questions True False Module Goals are not important to financial planning or budgets. X Module 1 To have enough money for emergencies you must save 3 to 6 months’ worth of living expenses. X Module 2 A cash flow budget helps you track whether you will have enough cash and resources to cover your bills from week to week. X Module 5 If you can’t pay all of your bills, and collectors start contacting you to demand payment, you should pay the “squeaky wheel” first. X Module 4 The only way to receive the income you’ve earned from working is by receiving a paycheck. X Module 3 Credit is when you owe someone money. X Module 7 Your total monthly debt payments could affect your ability to borrow more money. X Module 6 A poor credit history may keep you from getting an apartment, and in some states, insurance, or even a job. X Module 7 The only cost of having a checking account is the monthly service fee. X Module 8 As a consumer, you have almost no rights when it comes to financial products. X Module 9 Answer key for Part 2: How you feel There are no right or wrong answers for Part 2: How you feel. That’s because the answers are your opinions about your own financial knowledge, feelings, and situation. Use the following chart to count up how many of each answer you had: Rating Does not apply Strongly disagree Disagree Agree Strongly agree Total for each Total of Strongly disagree + Disagree: Total of Agree + Strongly agree: * If the total of Agree + Strongly agree is greater than the total of Strongly disagree + Disagree, you feel good about many aspects of your financial life. * List below any that you rated as Disagree or Strongly disagree, and take a look at the modules that relate to these areas in Your Money, Your Goals to learn more. * If the total of Agree + Strongly agree is less than the total of Strongly Disagree + Disagree, you may be feeling stress about many aspects of your financial life. * Consider reviewing the entire toolkit and completing some of the worksheets on your own before you begin using it in your work. Statement If your rating is Disagree or Strongly Disagree, check out . . . I have money set aside for emergencies and goals. Modules 1 and 2 I know how to claim state and federal tax credits. Modules 2 and 3 I am not worried about how much money I owe. Modules 6 and 7 I am confident about the information on my credit reports and my scores. Module 7 I don’t worry about being able to pay my bills and expenses. Modules 4 and 5 I understand how credit works. Module 7 I know how to get incorrect items on my credit report fixed. Module 7 I feel confident about helping people begin to manage some of their financial challenges. Consider reviewing some or all of the content modules. I know where people in my community can go for credit and debt counseling and for free tax filing assistance. See the resources listed at the end of modules 6 and 7 and CFPB’s Creating a referral guide for creating a strong financial empowerment resource and referral network. I know where to get help if I have questions about financial topics or have an issue with a financial product or service. See the resources listed at the end of modules 6 and 7 and CFPB’s Creating a referral guide for creating a strong financial empowerment resource and referral network. Also see Module 9 to learn about submitting complaints to the CFPB. Answer key for Part 3: Your experiences There are no right or wrong answers for Part 3: Your experiences because it helps you identify the financial products, services, and situations you have had experience with. This is important because the people you’re working with may have experienced situations or used products and services you haven’t. If you’re not familiar with some of these topics and want to learn more, you can use the modules listed in the second column. You may also find it helpful to review those modules even if you have experience with these situations, products, services, and providers. Question Modules of Interest I have a savings or checking account at a bank or credit union, and I make regular deposits and withdrawals. Module 8 I have applied for, received, and used a credit card. Modules 6 and 7 I have a loan that helped me to purchase a car or a home. Modules 6, 7, and 8 I have taken out a payday loan. Modules 6 and 8 I have requested my own credit report and reviewed it. Module 7 I track my income and spending. Module 3 I have taken a loan from a pawn shop. Modules 6 and 8 I have used a check cashing business. Modules 3 and 8 I have had a car or other type of personal property repossessed. Modules 6 and 7 I have received calls from debt collectors. Module 6 I understand my rights and know what to do if I believe a financial services provider has tried to take advantage of me. Module 9 I receive my pay via a method other than a paycheck (payroll card, direct deposit, or cash, for example). Modules 3 and 8 This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. INTRODUCTION PART 2: Understanding the situation [start textbox] Assessment Assessment gives you a picture of what is going on now so you can better target information and skill building opportunities for yourself or the people you serve. Assessment involves gathering information to understand conditions today, as well as what someone knows, can do, or feels about a specific topic. This information is used to inform and plan for actions to change conditions, knowledge, abilities, behaviors, or beliefs. [end textbox] You may be wondering where you should start. Tool 1: My money picture may help you figure out a beginning point when you meet with someone. This tool will help you match each person’s goals and financial situation with specific modules and tools. It will also highlight circumstances where someone could benefit from a referral to a specialized counselor or an attorney. When you feel the time is right, you can simply ask the person to complete the assessment. You can then match the answers with modules in the toolkit or share the “Quick Tips” as a starting point for assistance. The tool is simple and only has a few key questions, so you might decide to gather the information in a conversation. Reading the questions and recording the answers may be useful if you’re working with someone that has limited literacy levels, is an English language learner, or with whom a question and answer format would be more productive. Part 3 of the Introduction provides tips on starting the conversation. You can say something like this as an introduction: We know that many issues in running a household involve money. You know where you are and where you’d like to go, and we would like to provide you with information and tools to help you use your money and resources to reach your goals. To get us started, we have this questionnaire, which you’ll see covers several topics. Your answers will help us build a plan to get you the information and tools that are going to be most useful to you right now. We won’t use the information you provide in any other way. Of course, using Tool 1: My money picture in a conversation is optional. Doing this can help you decide where to start in sharing resources from the toolkit. For example, if a person you’re working with has a goal to buy a car or a home, you can target Module 7: Understanding credit reports and scores because learning how to improve his credit history may help him qualify for a lower cost loan. If you are working with someone that is unable to make ends meet, you can target Module 5: Getting through the month. Finally, be sure you can provide assurance of confidentiality and describe your system for keeping this information secure (for example, a locked drawer in a file cabinet). If you keep a copy of the assessment, be sure you have a system for keeping the information completely confidential. As you proceed, be sure to follow your organization’s policies when it comes to storing and handling people’s personal information. Tool 1: My money picture Where I am – and where I want to go Please answer the following questions based on where you are today. There are no right or wrong answers. Your answers can help us provide you with information and resources that can help you with the financial issues you care about. If you could change one thing about your financial situation, what would it be? Question Yes No I don’t know Do you have dreams for you or your children that require money to make them happen? Are you behind on rent, car payments, or your mortgage? Are you behind on utility payments? Can you count on having about the same amount of income every week? When unexpected expenses or emergencies happen, do you have some money set aside to cover them? Do your money, benefits, and other resources cover all of your bills and living expenses each month? Do you have student loans or other debts you’re having trouble paying? Has your credit history made it hard to get a car, insurance, a phone, or a job? Do you have an account at a bank or credit union? Do you feel like you’re spending too much to get your money and use it to pay bills? Have you had issues with a financial product or service like a bank account, loan, mortgage, debt collector, or credit report that you haven’t been able to resolve? This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. My money picture key Use the following chart to help you determine where to start the financial empowerment work with the people you serve. Use the answers to the first and last questions as additional information to help you pinpoint the module and tool that will be most useful right now. If the person you’re talking with is facing bills they can’t pay today or this week, first help them address that situation. As you do, let them know that if they’d like, you or someone else can help them start working on ways to bring their income and expenses into balance. Question Response Quick Tips * Do you have dreams for you or your children that require money to make them happen? If No or I don’t know, see Module 1. Brainstorm a list of your hopes, wants, and dreams. Pick one and turn it into a goal with a timeframe. Make it specific and measurable. Figure out how much you need to save or set aside each week (or month) to reach your goals. * Are you behind on rent, car payments, or your mortgage? If Yes, call 211 or local emergency assistance center. For homeowners, call 888-995-HOPE. See Module 4, Tool 5: When cash is short: Prioritizing bills and planning spending. Call 211 or local emergency assistance center. By dialing 211, people in need of assistance are referred, and sometimes connected, to appropriate agencies and community organizations. For homeowners, call 888-995-HOPE or CFPB at 855-411-CFPB (2372). You can find contact information for certified housing counselors on CFPB’s website at http://www.consumerfinance.gov/find-a-housing-counselor. Are you behind on utility payments? If Yes, call 211 or local emergency assistance center. Can you count on having about the same amount of income every week? If No, Module 3 for information on tracking and managing variable income. Call 211 or local emergency assistance center. Make a referral to your local workforce opportunity center. Write down your total income and benefits and when they come in – both your wages and any benefits you receive (like SNAP or rental assistance). If your pay is irregular or changes from paycheck to paycheck, use the amount you receive in a week when you don’t work extra hours. * When unexpected expenses or emergencies happen, do you have some money set aside to cover them? If No or I don’t know, see Modules 2 and 4. Think about your last unexpected expense. How much did you have to spend the last time your car broke down or something unexpected happened? Keep track of everything you spend money on for a week. Review your spending and figure out whether you can make some changes. If you can, put aside a small amount each week. If you usually receive a tax refund, think about setting a goal for how much of it you want to save. * Do your money, benefits, and other resources cover all your bills and living expenses? If No or I don’t know, see Modules 4 and 5. Write down your total income and benefits and when they come in – both your wages and any benefits you receive (like SNAP or rental assistance). If your pay is irregular or changes from paycheck to paycheck, use the amount you receive in a week when you don’t work extra hours. Write down your bills and the due dates. Write down your total expenses – Add all of your expenses and other uses of cash (including savings and debt repayment) for the week. If you have enough income and resources in a month to cover the bills, but your income arrives after the bills are due, reach out to the companies to see if it’s possible to change the due date or make bi-weekly payments. Look for expenses you might be able to pay less for or temporarily cut back. * Do you have student loans or other debts you’re having trouble paying? If Yes or I don’t know, see Modules 6 and 4. Make a list of your debts with the amount of your payments and when they are due. If you can’t make a payment, call the business. Ask if they can change the due date, the payment plan, or the terms of the loan. If you want to reduce your debt, track your spending to see if you can spend less and make bigger payments toward your debt. Tools for student loan repayment options are available at http://www.consumerfinance.gov/paying-for-college. If you would benefit from debt management help, visit the National Foundation for Credit Counseling at https://www.nfcc.org or find a housing counselor at http://www.consumerfinance.gov/find-a-housing-counselor. If you would like to speak with an attorney about a debt collection lawsuit, you can learn how to find a lawyer at http://www.consumerfinance.gov/askcfpb/1433. * Has your credit history made it hard to get a car, insurance, a phone, or a job? If Yes or I don’t know, see Module 7. Pull your free annual credit report at https://www.annualcreditreport.com to find out what’s in your credit record. To fix errors in your record, report these errors to the credit reporting companies. For more information on how to dispute credit reporting errors, visit http://www.consumerfinance.gov/askcfpb/314. If you want help with getting an error fixed or strengthening your credit, check out the information and resources listed in Module 7 that can link you to local credit or housing counselors. * Do you have an account at a bank or credit union? If no see Module 8. If you don’t have an account and want to open one, shop around and compare several banks or credit unions. Ask them questions about: Their hours and the services they offer (such as online tools) The fees they charge (monthly fees, overdraft fees, etc.) The amount you need to open the account, as well as any minimum balance. Any other rules about the accountIf you want an account and have been turned down, ask the bank or credit union to explain the exact reason for their denial. You have the right to get a free a copy of your credit report that the bank or credit union reviewed before making its decision to deny your application. Look for errors in this credit report. You can find out more about how to do this at http://www.consumerfinance.gov/askcfpb/2035. * Do you feel like you’re spending too much to get your money and use it to pay bills? If Yes or I don’t know, see Module 8. Think about how you use financial services. Do you need to cash paychecks? Do you need to pay your bills? Do you want a safe place for your money? Does your employer or benefits provider require direct deposit? Ask yourself what’s most important to you if you want these services. Are hours and location more important to you than things like customer service, available products, or fees? How important is safety and security to you? * Have you had issues with a financial product or service like a bank account, loan, mortgage, debt collection, or credit report that you haven’t been able to resolve? If Yes or I don’t know, see Module 9. You can submit a complaint to CFPB at http://www.consumerfinance.gov/complaint or call toll-free at 855-411-CFPB (2372) or TTY/TDD 855-729-CFPB (2372). The Consumer Financial Protection Bureau (CFPB) has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not intended to be a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that the CFPB has prepared. INTRODUCTION PART 3: Starting the money conversation Starting the conversation [start textbox] If financial empowerment is not a part of your regular discussions, knowing when to bring up the topic can be a challenge at first. Here are some ways to start the conversation: * Use the My money picture tool. * Make the most of shorter discussions to introduce a tool or make a referral. * Follow up with people when they bring up financial issues directly or indirectly. [end textbox] Everyone has questions about money. It can be difficult, though, to talk about money, even with people that you know well. It can feel uncomfortable to raise the topic of personal finance because it’s so personal. But you may already be talking with people about other personal issues or their goals. Talking about money can get easier if you start the conversation at the right time in a way that acknowledges their personal goals. By approaching financial issues in a non-judgmental way, you will build trust that can allow you to help them start to address their financial challenges. Use the experiences that you’ve had in your own life or that friends and family have had to help you understand where the people you’re working with are coming from. When people feel that you respect them and that they can trust you, they’re usually more willing to open up and discuss financial topics that might otherwise make them feel uncomfortable. Financial empowerment opportunities in common situations Here are a few examples of situations where the toolkit’s information and tools and your organization’s referral network could strengthen the work that you are already doing. * In working with a couple on strengthening their relationship, it becomes clear that different spending habits and attitudes are a source of conflict. * An individual lands a new job, and she doesn’t understand how direct deposit works and whether it is a good idea for her. * Someone you are working with had his hours cut back at work. He knows he won’t have enough cash next month to cover the bills and needs a strategy for prioritizing bills and paying them off. * An individual just received a tax refund and would like to set it aside for emergencies but doesn’t have a bank account. * A woman who has just left an abusive relationship is concerned that her husband is making purchases in her name. * Someone you are working with is new to this country and hopes to eventually buy a home. He doesn’t understand how credit scores work and why they matter so much. How should I bring up money topics? Build it into existing program procedures Take a look at your existing organizational purpose, program procedures, and protocols. Often, you may find that introducing financial topics, such as credit, debt, savings, and cash flow, can help someone to become more economically self-sufficient. If economic self-sufficiency or a similarly stated purpose is part of your organization’s mission or is required by your funders, can you add these topics into your existing protocols, procedures or program offerings? Use the assessment tool If you have a lot of contact with someone, one of the easiest ways to bring up money is to use the My money picture tool from Introduction Part 2: Understanding the situation. Going over this series of questions will give you a clearer picture of where the person stands and what information might be most useful. Remember, you can: * Ask the person to complete the assessment either in your meeting or ahead of time. * Cover the questions in a conversation. * Ask the person to answer only a few of the questions. Make the most of short-term contacts It’s great to be able to build trust and discuss financial issues with the people you serve over the long term, but sometimes you just don’t have that kind of time. You can work on empowering people financially during short meetings, too. For example, if it’s early in the year and you’re winding up a brief meeting with someone you’ve just met, you could say: You: I've been working on my taxes ... not fun, but I think I'm getting a refund this year ... Have you done yours yet? George: No, not yet. I hate them. There are a lot of forms. You: Have you ever tried a VITA site? They do your taxes for free. Have you not gotten a refund in the past? You may qualify for the EITC tax credit, which can be a lot of money back. George: No, I always just go to the place in the mall, and sometimes I get a refund, but last year it was only like $125. You: Think about going to the VITA site -you can get your taxes done free. The IRS trains and certifies the volunteers.so they know what they are doing. Here, let me look up the one closest to your house. If you got a refund, what do you think you'd do with it? George: I don't know. When I've gotten one in the past it just gets used up if you know what I mean. You: That's okay. Have you thought about doing something different? George: Well, every year we talk about trying to get ahead a bit. Take care of some bills, you know. Maybe set a little aside. You: Good intentions! I know I have lots of good intentions. But I find that if I don't have a plan I don't follow through. Would you be interested in talking through some options or possible plans for your refund? Well, every year we talk about trying to get ahead a bit. Take care of some bills, you know. Maybe set a little aside. You: Good intentions! I know I have lots of good intentions. But I find that if I don't have a plan I don't follow through. Would you be interested in talking through some options or possible plans for your refund? Broaden the conversation In the next sections, we’ll offer you specific suggestions, tools, and tips for broadening and improving existing financial conversations that you have with people. For example, if you are working on obtaining employment and building job skills with Javier, you can talk with him about banking and savings after he gets a job in order to help him effectively manage his income.[start graphic] You: Congratulations on the new job! I'm so happy for you. Have you filled out any paperwork yet? Did they give you a direct deposit form? Javier: Thank you! Its been so great to be working again. Having my own income. I really want to be smart about my money this time. I've filled out a bunch of paperwork, but I have no idea what a direct deposit form is. You: It's a form that you could fill out so that your new employer can deposit your pay check directly into your savings or checking account at a bank or credit union. Javier: Oh, I don't have a savings or checking account. I had one a while ago but they kept charging me for things for no good reason, so in my last job I took my check to this place down the street and they gave me cash. You: I'm sorry you had such a bad experience. Banks and credit unions can seem really confusing sometimes. I know of a program that can help you get an account at a bank or credit union. And since you are worried about extra fees, here's information from the Consumer Financial Protection Bureau on how to avoid extra fees on your account. We could go over the way it works together if you're interested. It would be a safer place to keep your money. You could even start saving some of it for emergencies or your daughter's education. I remember you telling me how smart she is.[End graphic] Respond when people initiate Here’s an example of how it could sound if someone brings up a financial issue directly. Aaliyah, with whom you have regular and focused contact, says in one of your early meetings: [start graphic] Aaliyah: My utilities are due, but I don't get my next paycheck for five days, so I'm broke! You know how it is. And, I'm going to be late with the electric again. You: Oh no. I know being late means fees. Are you in danger of getting your electricity cut off? Aaliyah: No, I don't think so. I've only been late one other time this year that I can think of... You: Are you sure you'll have the money next week to cover this bill as well as other expenses you will have? Aaliyah: Well, I wouldn't say I'm sure. When it comes to money who is really sure about anything. I mean I think if I plan with my money, I'll do all of this work and still end up broke and disappointed. You know, putting all that effort into something and it gets you nowhere. You: Gosh, I get what you mean. But even though things don't work out exactly as planned, I've found plans with my money can help me make sure I get some of the big things like my car payment, rent, and utilities covered. There are a few tools I could show you if you might be just a little interested... Aaliyah: Mmmm. Well you know how I feel about planning, but I guess I could take a look... [end graphic] Here’s an example of how it could sound if someone brings up a financial issue indirectly. For example, during a meeting you ask Aaliyah how her kids are doing, and she says:[start graphic] Aaliyah: You know, they're good but we're feeling cramped at home now that they are bigger, and I'd really like to get them a yard to run around in, so we've been talking about moving. You: That sounds like a great idea. I remember that we ran a credit report for you when we first started working together. I know that landlords often take a look at your credit... Aaliyah: They do? I don't remember that happening before! What's on there? You: Yes, most of the time they will look at your credit when choosing who to rent to. Why don't we take a look at your credit history together next time to make sure that everything looks right to you.[end graphic] Discussing difficulties or problems Many people have difficulty with credit or other financial products or services, and some may feel shame or embarrassment because of their situation. When you discuss these problems, first be empathetic. Then try to suggest or discuss in clear terms how to avoid a similar situation in the future. Explain how to get help from the CFPB and other federal, state, or local agencies if they can’t resolve problems with the financial services provider.2 The CFPB has already handled over 1,000,000 consumer complaints about a wide range of consumer financial products and services. Based on these complaints and research, the CFPB takes action to stop practices that are unfair, deceptive, abusive, or otherwise violate the law. In many cases, the CFPB partners with other federal agencies and state officials to address these problems. Through enforcement actions, the CFPB can require companies to refund money to customers when their consumer rights have been violated. If you submit a complaint to the CFPB, they will forward your complaint to the company and work to get a response. After your complaint is forwarded, the company has 15 days to respond, and, in some cases, up to 60 days to provide a final response to you and to the CFPB. You’ll be able to review the response and give feedback. If the CFPB finds that another agency would be better able to assist, they will forward your complaint and let you know. The CFPB shares complaint data with state and federal agencies that oversee financial products and services. We also publish basic information about complaints in the public Consumer Complaint Database so that consumers can see and learn from other people’s experiences. You can check out the Consumer Complaint Database here: http://www.consumerfinance.gov/data-research/consumer-complaints. You can submit a complaint: Online: consumerfinance.gov/complaint Toll?free phone: 855-411?CFPB (2372), 8am?8pm EST, Monday - Friday TTY/TDD phone: 855-729?CFPB (2372) Fax: 855-237?2392 Mail: Consumer Financial Protection Bureau PO Box 2900 Clinton, IA 52733-2900 Tool 1: Top money conversations Your Money, Your Goals covers a wide range of topics. These “top money conversations” cover some of the most important financial issues the people you serve may be facing. Top Money Conversations Do you have goals for yourself and your family? Are they goals you want to reach soon or in the next few years? How do you plan to reach them? See Module 1: Setting goals and planning for large purchases. Use Tool 1: Goal-setting tool to help the person: Brainstorm a list of hopes, needs, wants, and dreams and determine whether they are short-term or long-term. Turn those hopes, needs, wants, and dreams into SMART goals. If the goal requires saving or setting money aside to pay down debt, figure out how much to save each week (or month) to reach the goal. Identify the first steps the person can take to get started and when they’ll be completed. How do you handle unexpected expenses? Saving money now for unexpected expenses and emergencies can save you money later. See Module 2: Saving for emergencies, bills, and goals. Use Tool 1: Savings plan to help the person make a plan to save money for goals, expected and unexpected expenses, and emergencies. It sounds like you’re having trouble coming up with the money for certain bills. Sometimes that’s because the timing of your income doesn’t match the timing of the bills. Would you like to take a look at a tool that can help you look at your “money-in” and “money-out” to try to get the timing to work better? See Module 5: Getting through the month. Use either Tool 1: Cash flow budget or Tool 2: Cash flow calendar to help the person find ways to better match the timing of income and expenses so that he doesn’t come up short. If he’s interested in ways to cut spending, use the tools in Module 4: Paying bills and other expenses. Do you feel like you have too much debt? Did you know that there are rules debt collectors have to follow when they contact you? See Module 6: Dealing with debt. Use Tool 1: Debt worksheet to help the person account for his or her debt. This is an important first step toward managing and reducing debt. Tool 5: When debt collectors call: Steps you can take includes information on the process and sample letters people can use to correspond with debt collectors. Your credit history doesn’t just determine whether you get a loan. It can also affect how much you pay for deposits on your cell phone and utilities, how much insurance costs, and even whether you can get the job you want. I’ve got some tools you can use if you’re interested in getting your free credit report and checking to make sure it’s accurate. See Module 7: Understanding credit reports and scores. Use Tool 1: Getting your credit reports and scores, along with Tool 2: Credit report review checklist, to help the person identify mistakes on his or her credit report. It sounds like you’re having trouble getting an answer from the company about those extra charges on your account. You can submit a complaint to the CFPB, and they’ll forward it to the company and work to get a response for you. For complaints about a financial product or service (bank accounts or services, credit cards or prepaid cards, mortgages, student loans, vehicle loans or leases, payday loans, consumer loans, debt collection, credit reporting, money transfers, or virtual currency) see Module 9: Protecting your money. Tool 1: Submitting a complaint to the CFPB includes step-by-step instructions on submitting a complaint. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. INTRODUCTION PART 4: Emotions, values, and culture: What’s behind our money choices? Everyone has situations where they know what they “should” do but find themselves doing something else instead, especially when it comes to money. For example, you may have decided to save part of your tax refund to build an emergency fund. Instead, you use it to help a family member pay off his medical bills because not helping a family member in need would go against the values you were raised with. Or you may use it to splurge on something you have wanted. You’ve been working hard, and making this splurge for yourself or your family feels good. Financial decisions, no matter how well intended, are never made in a vacuum. Many things influence both our short- and long-term financial decisions. Here, we will focus on three of the influences on financial decision-making: emotions, values, and culture. Emotional influences on financial decisions When people talk about money, it’s not just about the numbers. They are really discussing what money means to them. Attitudes and behaviors around money are wrapped up in feelings around security, failure, family, love, and status. It’s important to listen carefully to the people you’re helping to try to determine their emotional reactions to money and its meaning. Then you can integrate their emotions and feelings into your discussions about their finances. Instead of just asking a person to give you the basic numbers, try asking questions about how she feels when you’re discussing her finances. You could try questions like: * “What does money mean to you?” * “What is your first memory about money?” * “What is the most difficult thing about money for you? For your family?” [start textbox] Values Core values are underlying principles that help people prioritize how they spend their time and money. Values inform how we decide what is more important when alternatives compete for our time, energy, and - importantly - money [end toxtbox]. Helping people become aware that financial decisions are influenced by emotions and past experiences may help them understand what drives some of their financial choices. It can also help you better understand their unique strengths and challenges. Understanding personal values around money Each of us has a unique set of values that shape how we prioritize what we do with our time, energy, and - importantly - money. Just in a single day, we may make many choices about “what is more important:” * The enjoyment of eating out at a restaurant or the benefits of the less expensive option of eating at home * Buying an expensive holiday present for a relative or buying a less expensive gift and saving what is left over * Paying for financial obligations, such as child support and student loans, before spending money for “wants” Think about the values that drove some of your recent decisions. Were you deciding between family obligations and investing in your career? Were you deciding between enjoying today and preparing for tomorrow? Values run deep When asked to examine why they hold the values that they hold today, many people find that those values are connected to the early, formative experiences of their lives. The formation of our values can run so deep that it is often difficult to figure out where they came from. Family, religious views, cultural background, experiences in childhood and later in life, and your own personal reflections on what is important can all contribute to the set of values that drive your choices. For example, in some cultures it is expected that family members help each other financially until all get ahead. Consider these stories: * Hernan’s parents worked multiple jobs and scrimped and saved throughout his childhood so that he could be the first in his family to go to college. Today, as an adult father of two, Hernan typically cashes in his vacation time. He’d rather put that money into the kids’ college funds. * Tina’s father never made it to Europe. Toward the end of his life, he confided that he always regretted that fact. Lately, when she’s killing time surfing travel websites, she wonders if she’ll ever save enough to travel. She’s beginning to think she should just go now before it’s too late. What values are involved in each decision in the stories above? Which of your own values affect what you think of these situations and your thoughts on what each person should do? Cultural influences on financial decisions No decisions, including financial ones, are made in a vacuum. People make all of their decisions within the very powerful context of culture, including family, ethnicity, region, community, socio-economic status, generation, and religion. Each of these factors influences beliefs, values, and experiences about money and the way financial decisions are handled. Differences in cultural values can affect financial behavior. For example, Western culture values individuality and personal well-being, which means it’s generally considered appropriate for each person to support themselves financially. In some other cultures, family members support each other financially throughout their lives. If they save money, it may go to a family member they believe needs it. If someone chooses to spend his extra income on his extended family or neighbors instead of saving it in an emergency fund, this doesn’t mean that he has bad financial habits. Instead, he may just be making financial choices in a cultural context that is different from your own. It’s important to understand cultural influences without being judgmental. When you discuss financial goals and choices with people, seek to understand their values and cultural influences. This can help you discuss financial decision-making in a way that makes them feel understood and respected. They might agree to a financial plan that makes rational sense and know that it’s what they have agreed to do, but this is often not enough to override their feelings or cultural context in the moment when decisions are made. Remember that while their priorities may seem counterproductive to you, within their culture, they may feel completely appropriate. Conflicts around culture and values Sometimes, you may find that people are caught in the middle of cultural conflicts around money. Their family culture may value saving and avoiding debt. But their broader community may value material things like new cars or expensive clothes, which could require taking on debt to purchase. Or the culture in which they were raised might value caring financially for parents as they age, while their coworkers are not expected to take on that same responsibility. Conflicts can also take place within a family. One spouse may have a family background that encourages him to save for his children’s education, while the other feels that children should be responsible for paying their own way. One parent may want to save the family’s tax refund; the other will think that money should go toward things the family needs or simply wants now. These kinds of conflicts can lead to emotional decisions that may not look rational from the outside but make perfect sense given each person’s background, values, and culture. When you are working with families or couples who have conflicting emotions about money, it is important to remember that you have your own attitudes and feelings toward money. Your attitudes and feelings are probably different from the attitudes and feelings of the people you’re working with. Be sure that you are not offering advice based solely on your own preferences. Asking questions to understand what’s behind decisions When discussing people’s financial behavior, don’t just accept their expressed wants at face value. Take time to ask questions that can help you discover their underlying attitudes, needs, goals, and roadblocks. Ask them questions like: * “Who handles the finances in your family?” * “How does your community of faith view money?” * “How did your family handle finances when you were growing up? Did you discuss money openly?” * “How do your friends view money? How do you think this may influence you?” * “What do you want your children to learn about money? What do you think they are learning from you now?” It’s often difficult for people to open up about money, but taking the time to help them understand their values and attitudes about money can provide both you and the people you serve with new insights. These insights can help them make lasting and productive changes that help them reach their goals. Once you understand the cultural factors that guide someone’s behavior, you can coach them toward financial choices that help them effectively manage their obligations and line up with their true values and desires. This might mean that you help them figure out a compromise. For example, you might help them figure out how to take responsibility for their own financial obligations without asking them to abandon their commitment to help their extended family. Keeping your personal values in check Our own values about money and financial issues may affect the way that we approach financial empowerment and our interactions with the people we serve. Our values affect what we think of situations and our thoughts on the best course of action. It can sometimes be tempting to “set someone’s priorities straight,” or tell them what you would do in their situation. Ultimately, however, this is not a successful strategy. Information, advice, and other support will only “stick” when it is aligned with a person’s own deeply rooted beliefs and values. In fact, imposing your own values on someone else can be counterproductive. The person might feel judged and stop talking with you about money and financial decisions. Consider using some combination of the following strategies for keeping values in check: Examine your own values. Being more aware of the values that you hold and understanding your experiences can help you to realize whether they are getting in the way of helping someone. Knowing what your values are and where they came from does not mean that you have to give up those values. It just means that, while you are acting as a source of support and information, you will be better able to take the other person’s point of view into account as you help them weigh the financial choices in their lives. Ask “implication” questions. Rather than telling someone which is the “better” course of action, ask questions that help identify the risks and rewards of each choice: * “If you continue on this path, what is the short-term gain or the long-term impact?” * “Does this financial choice help you and your family get to where you want to go? Who in your life will be affected by this course of action and how?” Then, stop and listen. Let the person tell you what is important to her. Together, evaluate what drives financial decisions. Helping someone understand what drives his financial behavior is one of the most powerful outcomes you can help someone achieve. He can use that new insight to examine today’s financial decisions and potentially re-evaluate other behaviors. You can help people achieve those insights by asking about the reasons for and against different courses of action and prompting them to talk through why those reasons are important. When you spot what might be someone’s core value, name the value and ask follow-up questions that define the value: * “It sounds like being a source of support to your siblings is really important to you. Would you agree with that?” * “Has that always been a core value of yours? What first made you feel this was so important?” * “What makes helping your siblings important to you?” Keeping your personal values in check doesn’t mean that you shouldn’t help people understand the consequences of their choices. Try to find a balance. On the one hand, you need to understand the person’s perspectives and values. On the other hand, you have a responsibility to make sure that they understand the real-life, long-term consequences of their decisions. Choices made today might support or limit options tomorrow for things like helping a family member in need, starting a family business, or saving for personal goals, such as buying a car or a home. Have a conversation about the consequences of their choices, and how new behaviors line up with their existing values. Once someone understands their core values and how they influence their financial choices, help them understand how a new or different financial behavior is in line with their existing values. Helping people identify the reward based on their own value set gives them much stronger footing as they try to change their behavior. People are much more likely to stick with new behaviors that they believe will benefit them when they are in line with their values than when they try to change just because they think they are “supposed” to. MODULE 1: Setting goals and planning for large purchases If you have a 10-minute session… If you have a 30-minute session… If you have multiple sessions… Tool 1: Goal-setting tool Tool 1: Goal-setting tool. Tool 2: Planning for life events and large purchases Follow up to see if goals were written down. Follow up to see if any steps have been made toward reaching goals. Consider using Tool 3: Buying a car (if this is a goal). Every person or family has a different idea of the future they want to build. Some of the ideas they have are focused on the next few weeks or months, and others are long-term. What do you want for yourself and your family in the near future? What do you want to see in the next few years? These ideas of your future are your hopes, wants, and dreams. These are important questions, but people sometimes hesitate to ask them because they feel their life is out of control and they can’t change the direction they’re going. If you’re like most people, thinking about some of your goals means thinking about the money you need to achieve them. Your goal may be having enough money to pay all of your bills each month, even though your income varies from week to week. Your goal could also include saving money to buy gifts at holiday time, set up an emergency fund, purchase a car, send your child to college, or pay off a large debt. Depending on the goal, it can take just a week, a month, or a few months to reach. These are short-term goals. You may also have long-term goals - things that will take many months or even years to reach. Life events and large purchases People often put off saving for large purchases or significant life events because they feel like they don’t have enough money to save or they are busy struggling to make ends meet today. They feel like they just can’t worry about saving for these types of big ticket items or goals. But not thinking about, planning for, or saving for these things may mean that there is no money to cover the costs that come with them. Here are just a few examples of the types of expenses we’re talking about: * Moving in with a partner, getting married, getting separated, getting divorced, or becoming widowed * The birth of a child * Faith-based celebrations * Your daughter’s quinceañera * Your child’s high school graduation celebration * Post-high school training or education expenses for your children * Purchase of a car * Purchase of a home * Training or education to help you get a different job or a higher paying position * Starting a new job * Tools or equipment you need for your trade or profession * Wedding expenses for your children * Short- or long-term disability * Illness * Loss of a job (covering the gap unemployment benefits don’t cover) * Celebrating a landmark birthday or anniversary * Death of a family member * Retirement * Your own final expenses Some of these events are likely to occur, and others may never happen to you. But some of them will be inevitable. These events can be quite costly. While there are many variables that affect the cost of life events from one person or family to another, here are some average costs of life events in the U.S.: * Out of pocket childbirth expenses for women with insurance coverage – $3,4003 * Quinceañera - coming of age celebration for 15-year old girls in Latino families – $15,000 to $20,0004 * Typical funeral costs – $8,5005 Because of the expenses that are associated with life events, people often set goals, particularly long-term goals, around them. Setting SMART goals Setting goals helps you turn your needs, wants, hopes, and dreams for the future into something concrete that you can take steps to achieve. When you set goals, you can: * Work toward making your future better. * Prioritize how you spend your money so that it goes toward things that really matter to you. * Measure and track your progress toward getting the things you want out of life. * Take pride in bettering your life and the life of your family. SMART goals have five important characteristics. They are Specific, Measurable, Able to be reached, Relevant, and Time bound. When setting a new goal, think about the following: Specific Ask yourself: What will I achieve? Who will benefit from the goal? What specific thing will I accomplish? Why is the goal important? Is this goal related to covering the expenses associated with an expected life event? A specific goal has a much greater chance of being met than a general one because it provides something defined to reach for. Measurable Ask yourself: How much? How many? How will I know when it is done? You should be able to track your progress toward meeting the goal. Able to be reached Ask yourself: Is this goal something that I can actually reach? You might want to get out of high credit card debt tomorrow or become a millionaire in a year, but for most of us, those are totally impossible goals. That doesn’t mean that your goals should be easy. Your goal may be a stretch for you, but it should not be extreme or impossible. Relevant Ask yourself: Is this something that I really want? Is now the right time to do this? Set goals that matter to you and are a priority in your life. Time bound Ask yourself: When will I reach this goal? Goals should have a clearly defined time frame, including a target or deadline date. This helps ensure they are measurable and that actions are planned to reach the goal by the target date. Here are some hopes, wants, or dreams you might have for your family and how they could be translated into SMART goals. Hopes, Wants, or Dreams SMART Goals I’d like to be able to pay all of my bills each month. Short-term goal: I will review my budget to see if there are ways to cut my spending by the end of the month. Long-term goal: I will meet with the Community Action Program to see if I qualify for job training and other benefits by the end of the month. I really want to save some money in case something happens in the future and I lose my job. I will save $60 over the next three months to start an emergency fund. I want to get out of credit card debt. I will pay down $1,000 of my debt over the next 18 months. I’d like a safe, stable place to raise my children. Short-term goal: I will save $1,600 for the required first month’s rent and deposit in the next six months so that I can move into a new apartment by June. Long-term goal: I will save $3,000 for a down payment, apply for additional down payment help, and purchase a home in four years. I’d like to buy a new television. I will save $400 and buy a new television in six months. I’d like to help my child go to college. Short-term goal: I will read to my child every night to show that school and learning are important. Long-term goal: I will save $5,000 in a fund to help pay my child’s tuition in ten years. Building a plan Every goal requires two things: commitment and time. To reach goals, you may also need: * Information * Tools * Transportation * Money * Other resources * An action plan - small steps needed to reach a goal * Assistance from a professional – This may include a regular meeting with a financial coach or counselor who helps you identify goals, build a plan, and decide how to take the steps to reach your goal. Turning goals into financial targets For goals that require money to reach, you will want to know how much to set aside every week (or month) to meet the goal. When figuring out how much you need to set aside every week to meet your goal, you need two pieces of information: the total amount you need to reach your goal and the number of weeks you have to reach your goal. Then, you can plug those two pieces of information into this formula: [start graphic] total amount needed for goal divided by number of weeks to reach goal equals amount to set aside each week. Here is an example: It is January 1st, and you’ve just set a new goal to save $500 in an Emergency Fund by the time your kids start school at the end of August. You already have your first piece of information: the total amount needed for your goal is $500. To get the second piece of information, the approximate number of weeks, just count the number of months from January to August and multiply by 4. You should arrive at 32 (8 months x 4 weeks).6 You can plug these numbers into the formula: $500 ÷ 32 = $15.65 (rounded) You would need to set aside about $15.65 every week in order to have $500 by the end of August. (If you want to put money aside monthly instead of weekly, divide $500 by 8 months instead of 32 weeks.) If you feel you cannot set aside that much every week, you can lengthen the time to reach your goal. It’s helpful to use this formula when figuring out if your goal is actually reachable in the timeframe you have set. What about revising goals? Goals aren’t something to set and then forget. You need to keep your goals in sight, and you may sometimes need to revise them. Revise your goals when: * The amount of saving every week or month toward the goal is more than what makes sense for your family. * Emergency savings are used and need to be rebuilt. * Your circumstances change due to life events (such as when you lose a job or get a new job, start earning more money, have a new child, have a health emergency, etc.). * Your values change and a goal no longer feels relevant. To revise one of your goals, take a look at what has changed. If the amount of saving every week or month toward the goal is more than what is possible for you, ask yourself whether you can change either the total amount of savings or the length of time you have to save. For example, in September you decide to buy a new television by the end of November. You’ve looked at models, and the one you want is $600. If you start saving at the beginning of September, you have approximately twelve weeks to save. When you plug this into the formula to see how much you’d need to save, you find that you would need to save about $50 every week (or about $200 every month) in order to meet this goal. But what if you don’t have $50 extra dollars in your budget every week? Does that mean buying a new TV is a bad goal? No – it just means you need to adjust your goal. Are you willing to buy a less expensive television? If you decide that you can spend $300 on your new TV instead of $600, you’ve cut the amount you need to save each week in half. But if you don’t want to buy a cheaper television, you can decide to lengthen the time you’ll save up for it. Instead of saving for three months, you can extend the time you’ll save to six months. By giving yourself twice as much time to save, you can bring your weekly savings down to $25 and purchase your desired television in February instead of November. If you’ve used your Emergency Savings, they’ve done their job. Now it’s time to replenish them. Create a new goal by figuring out how much Emergency Savings you’d like to have and by when. Calculate the amount you need to save weekly or monthly and start saving. (See Module 2: Saving for emergencies, bills, and goals for more information on this topic.) When your circumstances change due to life events (such as when you lose a job or get a new job, start earning more money, receive a lump sum from a tax refund or inheritance, have a new child, have a health emergency, etc.), take stock of your new situation and your goals. If you have less money to put toward savings goals, adjust the length of time and/or the total savings for your goals to make them manageable in your new situation. For example, if you get a tax refund, consider putting some of the lump sum toward one of your goals. This may help you reach the total you need for a goal faster. When your values change and a goal no longer feels relevant, think about what you want for your family in the future. If the goal you set before no longer feels relevant to your life, set it aside and begin setting new goals that do feel relevant. Remember, setting goals and working toward them is a process that never really ends. If one of your goals has been achieved, it’s time to start the process again and set a new goal. Think about what you want for yourself and your family and create a new goal. Tool 1: Goal-setting tool This tool can help you with the process of setting goals. Identifying goals is important because it helps you plan for and reach what matters most to you. All goals take time and commitment to reach. Many goals also require information, help from a professional, tools, action plans, and money. If you decide to make a budget, be sure to include money you need to set aside for your goals. Step 1: Brainstorm list of hopes, wants, and dreams Fill in the chart below with the hopes, wants, and dreams you have for yourself and your family. Write the things you hope, want, or dream about achieving in less than six months in the short-term column. Write the things you hope, want, and dream about achieving in more than six months in the long-term column. Short-term. What I want to achieve for myself or my family within six months Long-term. What I want to achieve for myself or my family that will take more than six months Step 2: SMART goals Use your list of hopes, wants, and dreams to create SMART goals. Use the checklist to make sure your goals are specific, measurable, able to be achieved, relevant, and time bound. You may have many things you want to achieve. If you can focus on one or two, you may have a better chance of reaching that goal. Short-term goal Goal: Specific. Measurable. Able to be reached. Relevant (important to you). Time bound (is there a deadline?) Long-term goal Goal: Specific. Measurable. Able to be reached. Relevant (important to you).Time bound (is there a deadline?) Step 3: Action plan Use the following worksheet to create an action plan. Remember to include resources you may need to reach your goals, including: * Information * Tools * Assistance from a professional * Transportation * Other resources Action step Resources needed Date to complete step Completed Step 4: Figure out weekly target If your goal requires money, use this chart to figure out the amount of money you will need to set aside each week to reach your goal. Example Goal Amount needed ÷ Number of weeks to deadline = Weekly amount Example: I will save $50 within 6 months to start an emergency savings fund . $50 24 weeks $50 ÷ 24 = $2 per week (about $8 per month) Short-term Goal Amount needed ÷ Number of weeks to deadline = Weekly amount Goal: Long-term Goal Amount needed ÷ Number of weeks to deadline = Weekly amount Goal: Once you know how much you need to set aside each week to reach a goal, be sure to add it into your budget or cash flow budget. For more information on cash flow budgets, see Module 5: Getting through the month. For ideas on finding money to save, see Module 2: Saving for emergencies, bills, and goals. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 2: Planning for life events and large purchases This tool can help you plan for life events and large purchases, such as a celebration, a car, or the tools you may need to make a living in your trade. Follow these steps: 1. Think about the life events you are likely to experience and the large purchases you might need to make. If you rely on a car to get to and from work, you will probably need to replace it at some point in the future. If you use tools in your trade, they may need to be updated or replaced periodically. Brainstorm a list of these types of expenses using the timeline chart below. Consider where you are now, and when you are likely to experience some life events (like a graduation party) or need to make large purchases. If your child is ten years old now, a high school graduation party will be in about eight years. If your car is five years old or has a lot of miles on it, you may need to replace it within the next five years or less. 2. Estimate the costs of these expenses. Research the costs of the large purchases you plan to make or costs associated with life events you are expecting. If the life event or purchase is likely to happen more than five years from now, remember that the cost of almost everything gradually increases over time. 3. Identify potential ways to pay for these expenses. For example, you can borrow money to buy a reliable used or new car. If you plan to borrow money, consider saving some money for a down payment to keep your monthly payments as low as possible. Many large purchases may require a combination of borrowing money and paying a portion up front to cover the cost. 4. Identify ways to keep the costs as low as possible. For example, for your daughter’s graduation party, can you save on the rental of a location by holding it in a rent-free or reduced-rent facility like a community center or a public park? Can you save on the meal by involving family and friends in helping you prepare food rather than hiring a catering company? Planning for life events and large purchases worksheet Timeframe Large purchase or life event Total cost Ways to pay Ways to cut expenses Within 1 year 1-2 years from now 2-5 years from now 5-10 years from now 10-15 years from now 15-20 years from now More than 20 years from now Use Tool 1: Goal-setting tool to estimate how much you will need to set aside each week or month to reach your goals. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Buying a car A vehicle may be a lifeline for you or your family if there are no local employment opportunities or inadequate public transportation options. For some, access to affordable vehicle financing is necessary when it comes to stable employment, healthcare, and education opportunities. Even though your vehicle can help you to access economic opportunities or achieve financial independence, it can quickly become a financial burden if you don’t learn how to protect yourself from getting stuck with an auto loan you can’t afford. Here are four ways you can protect yourself: 1. Be prepared before you shop for an auto loan You can’t always plan the timing of purchasing a new or used vehicle, but you can take steps to prepare. Not being prepared can potentially cost you hundreds or thousands of dollars over the life of the loan. Check your credit score before shopping for an auto loan and make sure your credit report doesn’t have any errors, so you can negotiate the best rate. You may be able to take some steps that will help you raise your score in a relatively short period of time. A better score will secure a lower interest rate and reduce the amount of money that you end up paying. You can learn more about your credit reports and scores in Module 7: Understanding credit reports and scores. Take the CFPB auto loan worksheet with you to the lender or auto dealership and use it to compare the total cost of different financing options. The first step is to record each loan offer and compare them using interest rate and length of the loan. This might take some time, so plan ahead. You can find the auto loan worksheet at http://www.consumerfinance.gov/consumer-tools/auto-loans. 2. Know what you can negotiate Just like you can negotiate the price of the vehicle, you can also negotiate your loan terms. You can negotiate for a better interest rate, how long you will be paying the loan, whether you buy and the price of optional add-ons, and some dealer fees. Our auto loan worksheet can help you keep track of all the factors of your loan that you can negotiate. 3. Avoid long-term loans if you can When comparing your offers and negotiating a loan, it’s important to know if you can afford the monthly payment, but be sure you look at the total cost of the loan. A smaller monthly payment may mean the loan is extended over a longer period of time – 60 months, 72 months, or more, instead of 36 or 48 months. If your income or job is not secure, having an extended loan is a risk as you could lose the ability to make monthly payments in the future. For older vehicles, a longer loan could be a problem if the life of the loan is longer than the expected life of the vehicle. For example, in the chart below, you can see how a lower monthly payment increases your total interest cost. The chart assumes a $20,000 loan and an interest rate of 4.75 percent. [start graphic] Table with three columns and five rows. Row 1: Loan Term, Monthly Payment, Total interest paid. Row 2: Loan Term: 36 months (3 years); Monthly Payment: $597; Total interest paid: $1,498. Row 3: Loan Term: 48 months (4 years); Monthly Payment: $458; Total interest paid: $1,999. Row 4: Loan Term: 60 months (5 years); Monthly Payment: $375; Total interest paid: $2,508. Row 5: Loan Term: 72 months (6 years); Monthly Payment: $320; Total interest paid: $3,024. [end graphic] 4. Review your loan contract before signing Before you sign your new loan contract, make sure everything matches what you agreed to during the negotiation. Consider reviewing with a friend or partner to help you review all of the paperwork before signing the loan documents. Lenders are required, under the federal Truth in Lending Act (TILA), to give you written disclosures about important terms before you’re responsible for the loan. Read that information before you sign the contract and drive away. Check the Annual Percentage Rate (APR), the amount financed, the finance charge, and the total of all your payments. Some dealers will allow the customer to take possession of the new vehicle before the loan is approved by the lender. This could put the loan that you thought you had at risk. Before you drive away, make sure you and the lender have both signed all of the paperwork and that you have copies of each document. Be prepared for your family too Our resources will also help if you are asked to be a co-signer for an auto loan. You may be one of many people who want to help a family member or friend, but remember that being a co-signer would put you on the hook for monthly payments if the other borrower stops paying the loan. For more information about buying a car or getting an auto loan visit http://www.consumerfinance.gov/consumer-tools/auto-loans. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. MODULE 2: Saving for emergencies, bills, and goals If you have a 10-minute session... If you have a 30-minute session... If you have multiple sessions... Tool 1: Savings plan Tool 2: Savings and benefits: Understanding asset limits Tool 3: Finding a safe place for savingsTool 4: Increasing your income through tax credits Savings is money you set aside today to use in the future. Sometimes it’s for something people know they will need soon, and sometimes it’s for something that won’t happen for several years. People save for many reasons: * Unexpected expenses and emergencies * A bill they know will be due every few months, like car insurance * Annual expenses like children’s school supplies * Their own goals, like a new TV, appliances, a home, their children’s education, or retirement Emergency savings Everyone has unexpected expenses and emergencies – a car repair, the need to travel to help a sick family member, paying the bills when you’ve had a cutback in hours or even lost your job. When you save in advance for unexpected expenses and emergencies, you can handle them when they happen without having to skip paying your other bills or borrow money. When you have to skip paying other bills to pay for an emergency, you often pay late fees. And if not paying your bills results in services being shut off - like your electricity or other utilities - you have to come up with even more money to turn them back on. When you borrow money for unexpected expenses, you have to pay fees and sometimes interest. And on top of that, you’ll probably have to use some of your future income to pay back the money you borrow. So saving money now for unexpected expenses and emergencies can save you money later. Emergency fund An emergency fund or a rainy day fund can be an important part of your savings plan. Having money set aside to cover unexpected expenses can save you money on interest, fees, or other costs that come from borrowing the money you need. How much should you save? Start with $500 as your goal.7 This is enough to cover a lot of common emergencies: many car repairs, a plane ticket to care for a sick family member, or minor medical costs. Once you reach $500, consider reaching for $1,000. This may be enough to help cover your rent if you lose your job, take care of major car repairs, or pay for many household repairs. Other reasons to save It is also important to save for periodic expenses - those that come only once or a few times a year, such as renter’s insurance, income taxes, car insurance, or children’s school supplies. While they’re not unexpected, it still may be hard to come up with all the money when you need it. Saving money is particularly important for people whose income fluctuates, or varies. An hourly worker who is not guaranteed a fixed number of hours each week has fluctuating income. Someone who is employed seasonally and only receives income for eight out of twelve months, for example, has fluctuating income, too. Regular saving while you’re earning income is crucial to ensuring that you can cover your expenses and pay your bills on time when your income is lower than expected or stops for a period of time. But knowing it’s important to save and actually saving are two different things altogether. Saving isn’t just a goal; it is a habit you cultivate. That’s why it’s important to learn how to save. Taking the first step Anyone who has tried to save knows that setting money aside isn’t as easy as it sounds. First, you have to make the decision to save. Then you have to find the money to save. There are basically only two ways to find money to save: * You can decrease spending on one or more items. Then put that money “not spent” into savings. The easiest way to find a chunk of money to save is to cut one major cost. This may mean dropping a service you’re paying for but may not be using very often, or cutting back on television services (from premium cable service to basic) or phone service (from unlimited texts and calling to a different plan). If there are no “major costs” you can cut, you may have to cut back a little bit in several different categories of spending. For example, you may need to cut back on eating dinner out, and consolidate errands to spend less on gasoline. But the big challenge is socking away the money you’ve saved by spending less. If you don’t have a place to set it aside, it can be easy to spend the money that you worked hard to hold onto. If you have cash, you should move the money you have saved by not spending it into a savings jar or envelope in your home. Then in order to keep it safe, you could deposit the money into a savings account at a bank or credit union, or set it aside on a prepaid card. Some prepaid cards have a set-aside feature, sometimes called a “purse” or “wallet.” This feature lets you set aside some of your funds on the card for savings. You can put some of your money into the savings purse for safekeeping but if you need to use the funds for an unexpected expense you can easily transfer it back to the spending portion of the card. [start textbox] Receiving your pay through direct deposit Using direct deposit saves you both time and money. You don’t have to wait in line or pay a fee to cash your check first. And the funds are generally available as soon as they are deposited. That means you get paid on time, at the start of the payday, even if you aren’t working that day. [end textbox] You can also increase your income. This can mean taking another part-time job or ensuring you file your taxes and claim tax credits for which you qualify. For example, you could save part of your tax refund for emergencies or unexpected expenses, set it aside for predictable annual expenses (such as back-to-school or holiday shopping), use it to pay down debts, use it to take care of car repairs, or save for household maintenance needs. Again, you must make sure that some of that new income gets moved into the place you have decided to save it. Module 2, Tool 4: Increasing your income through tax credits, explains the Earned Income Tax Credit (EITC) and the Child Tax Credit and how they can help you increase the income you have available to pay bills, pay down debt, or save for your goals. Sometimes you can experience an unexpected increase in income. For example, you may get unanticipated overtime or extra hours at work. Consider setting aside some of this “extra” pay into your savings account. If you get paid bi-weekly, there are two months each year when you get three pay checks instead of two. You can take advantage of this “extra” paycheck to save for unexpected expenses later in the year. These are great opportunities to put some money away into your emergency savings fund. That way, you have a cushion to rely on when times are leaner. Making savings automatic If you receive a regular paycheck, one way to build savings is through direct deposit into a bank or credit union account, onto a payroll card, or by setting up a system of savings. * If you have a bank account and direct deposit, you can arrange to automatically deposit some of your paycheck to a savings account every time you are paid. If your weekly paycheck of $245 is directly deposited into your checking account every week, you can have $10 automatically transferred into a savings account. Once you set this system up, you may forget about that $10. By year’s end, you will have over $500 in savings. * If you receive a tax refund, you can choose to split it in up to three different accounts, like checking, savings, and a retirement account. The IRS has a special form that allows you to split your refund at the same time you are filling out the rest of your tax return. You can put some in your checking account if you need to spend it soon. You can also put some in your savings account or a retirement account or even buy a savings bond. The IRS will automatically send the amount of money you choose to each account you designate when it sends out your refund. Like prepaid cards, some payroll cards have a set-aside or “purse” feature. This feature lets you set aside some of your funds on the card for savings. Ask your employer if a savings feature is available on your payroll card. When you pick any prepaid card, be sure to ask about all of the card’s fees so that you’ll know what the card will cost when you have it and use it. People who save successfully generally choose a system of saving for their goals. These can include savings for their children’s education and for their own retirement expenses. They make the decision one time, set up the system, and then they save money from every paycheck without having to think about it. Check with your employer to learn more about direct deposit and other options for automatically saving some of your paycheck. This can help you be ready for long-term expenses or for those weeks or months your income stops or is less than you planned because of seasonal changes in the availability of work. You can use Tool 1: Savings plan to figure out why you need to save, how much you need to save, and how you can start to find the money to save. Savings plan Most people can expect around $2,000 worth of unexpected or emergency expenses in a year.8 According to a report from the Federal Reserve, nearly half of all adults surveyed said they could not cover an emergency expense costing $400 or would cover it by selling something or borrowing money.9 Unexpected expenses can include medical bills that aren’t covered by insurance, auto repairs, and home and appliance repairs. You still have to pay bills if you lose your job. A savings plan can be a great way to get started on the path to saving for such unexpected expenses. A savings plan includes: The reasons you are saving. This could be something like an emergency fund, money to pay for your car insurance in three months, or to ensure you have enough money set aside for back to school expenses. Your total savings target. Your savings plan will help you come up with an amount of money you can save every month to reach all of your savings goals. Your strategies for saving. These are the specific ways you are going to find money you want to set aside to save. Most people find they have to make choices about cutting back on one expense (or more) to have the money to save for something else. Or they have to figure out a way to get more income. If you have a regular paycheck, another strategy is using direct deposit or transferring a set amount into a savings account each time you get paid. And, if you usually receive a tax refund, you might want to build a plan to save part of your refund. Tool 4: Increasing your income through tax credits explains the Earned Income Tax Credit and the Child Tax Credit and how these credits can help you save for your goals. A safe place for your savings. You have to work hard to save money. You want to make sure you put it in a safe and secure place. An important part of your savings plan is deciding where you will put the money you have saved. What are the benefits of a savings plan? * Your plan builds your own personal safety net one paycheck at a time, and as you build savings, you can have peace of mind knowing you have a little money set aside for the unexpected or emergencies. * As you watch small amounts add up, you’ll move closer to reaching your goals and almost always pay less than when you use credit. * You’ll save money by avoiding late fees, interest charges, and other costs related to not covering expenses or borrowing money. And when you avoid borrowing, you don’t have to commit future income to paying off your debt. Consider this scenario using different options for taking care of emergency expenses. It examines the costs of paying for an unexpected auto repair with emergency savings, a credit card, or a payday loan. (Some states have laws that restrict or prohibit payday loans.) COST OF UNEXPECTED AUTO REPAIR = $35010 Emergency savings Credit card Payday loan Amount needed $350 $350 $350 Annual Percentage Rate (APR) None 15.99 percent APR $15 for every $100 borrowed for 14 days. This means a 391 percent APR Repayment terms None Must pay at least a certain amount each month. For the purposes of the example, we are choosing a fixed monthly payment of $25 Must pay back loan amount ($350) plus fee ($52.50) within 14 days. Total interest and fees $0 $40 over 16 months $52.50 for each 14 day loan Time to repay None 16 months11 14 days Total cost of auto repair $350 $390 $402.50 The total cost of a payday loan depends on how long it takes you to save up to pay back the entire loan. The average borrower takes out five loans in a row before repaying (and not borrowing again shortly thereafter).12 If you renew or roll over this loan four times, you would be in debt for 10 additional weeks and could pay up to $262.50 in fees plus the $350 you borrowed, for a total of $612.50. Saving for education People with families may want to work toward making a better life for their children. Saving for children’s college or technical training may be one of a parent’s financial goals, as a path to “a better life” for their children. Training and education after high school (including completion of a General Education Development test, or GED) can be an important investment of both time and money. It is likely to lead to higher wages on average, less chance of unemployment, and a greater chance for financial security. Median Weekly Earnings, 2015(13) [start graphic] Vertical bar graph titled Median Weekly Earnings, 2015 showing savings ($0 - $2,000) across education. Less than High School Diploma: $493, High School Diploma $678, Some College, no degree: $738, Associates Degree: $798, Bachelor's Degree: $1,137, Master's Degree: $1,341, Professional Degree: $1,730, Doctoral Degree: $1,623, All workers: $860. [end graphic] Saving for children’s education can reduce the amount of money that must be borrowed and may increase the number of options children have for education and training after high school. There are many financial products geared toward helping people save for children’s education, but the first step is setting a goal. Once you’ve decided to set a goal for saving for your children’s college or technical training costs, you can start putting money aside in a savings account, a certificate of deposit, or an investment option designed specifically to help people save for this purpose. One option is a 529 college savings plan. These are tax-advantaged savings plans designed to help parents, guardians, grandparents and others save and invest for children’s education. For more information on saving for college using a 529 Plan, visit http://www.collegesavings.org. People who want to teach their children about saving may be able to start a savings account for their children. Each financial institution has its own policies, so research both local and online bank and credit union options.14 What are the benefits of opening a savings account for a child? * Providing a safe place for a child to put money earned or received as gifts * Introducing a child to saving and using financial services * Helping a child to learn to plan for the future Savings accounts for children A new way to save for retirement If you’d like to get started on saving for retirement, but your employer doesn’t offer a retirement plan, the U.S. Treasury has developed myRA to help you to set aside money for that goal. It is a simple, safe, affordable way to start saving for retirement. Here are some important features of a myRA account: * It costs you nothing to open an account. * You pay no fees for maintenance of the account. * You contribute an amount you choose – $5, $20, $200 – whatever fits your budget. * You can enjoy the tax advantages this type of investment brings. You can set up automatic contributions, and if you change jobs, the account stays with you. You can also withdraw the money you put into your account at any time without paying taxes or penalties. It’s safe – you won’t have to worry about your investment. The investment is backed by the U.S. Treasury and will not go down in value. You can sign up online at no cost with three simple steps: 1. Open your myRA account at https://myRA.gov. 2. Set up automatic direct deposits from your paycheck or other sources. 3. Access your account online and watch your savings grow. Visit https://myRA.gov to learn more, or call 855-406-6972 to speak with a myRA representative. You can save while receiving public benefits If you receive public benefits and want to start saving for emergencies and goals, you may want to know about asset limits. Assets are things that you own. Assets can include money in a savings or checking account, as well as your car, home, land, and business inventory. Knowing each program’s asset limits may help you avoid unexpectedly losing your benefits when you’re saving to reach your goals. Since different benefits have different limits and many states have their own asset limit policies, you may find Tool 2: Savings and benefits: Understanding asset limits helpful for figuring out the asset limits for your benefits. Asset Limits Asset limits are rules about how much you can have in assets before your benefits are reduced or taken away. Since assets help people achieve financial security, some assets will not count against allowable limits. Generally, the assets that may count against allowable limits are “liquid,” which means they are similar to cash. Some examples of liquid assets are money in a checking account, savings account, or investment accounts. On the other hand, a home or a car that you own are assets, but since they’re not liquid assets, some states do not count them against the allowable limit. A safe place to save Setting aside money to save can be hard. It’s important to understand the risks and the benefits of each of the places you can put money until you want or need to use it. As you think about the options, be aware of the potential costs of each financial product. Tool 3: Finding a safe place for savings can help you identify where you’d like to keep your savings. Federal insurance for financial institutions Two organizations established by the federal government ensure that the money people deposit in banks or credit unions will be there when they want to withdraw it. The Federal Deposit Insurance Corporation (FDIC) insures money in banks. The National Credit Union Administration (NCUA) insures money in credit unions. In general, the limit is $250,000 per depositor, per insured institution. This is much more than most people will have in an account.15 So, if you have no more than $250,000 in a savings account in an insured bank and the bank fails, you will get all your money back. FDIC and NCUA do NOT insure money that people use to buy stocks, mutual funds, life insurance policies, annuities, or other securities, even if they are purchased from a bank or credit union. Your banking history report If you are considering opening a savings account, it’s important to understand the impact that your banking history report may have on the type of account you may be able to open. When you complete the application to open an account at a bank or credit union, the bank or credit union often contacts companies called “specialty consumer reporting companies” that have information on checking account history. Banks and credit unions contact companies like ChexSystems, TeleCheck, Early Warning, and others like them to find out if you have had prior difficulties using a checking account, including overdrawing an account and not paying back what you owe, writing bad checks, or suspected fraud. These companies collect information about how consumers manage their savings and checking accounts. They must follow reasonable procedures to assure maximum possible accuracy of the information in the reports, and they can’t include most negative information that’s more than seven years old. In practice, some checking account reporting companies disregard information that is more than five years old. Banks and credit unions then use the information to assess the risk of opening an account for you based on your past history of managing accounts like the one you want to open. The report includes: * Information about prior accounts, such as routing transit number and account number * The date information was reported about an account * The reason for the report, such as an unpaid overdraft balance * Whether your prior banking institution suspected you of committing fraud * Information on returned checks from retailers and other businesses If you are denied a checking account, you have the right to review your credit report. The bank or credit union’s denial notice should give you the name, address, and phone number of the consumer reporting company and instructions for getting a copy of your credit report. Be sure to make your request right away because your right to get a free copy only lasts for 60 days from the date you learn of the denial. When you receive a copy of your report, review it for accuracy. A credit counselor or financial coach may be able to help you understand your credit report. For more information about credit reporting, see Module 7: Understanding credit reports and scores. Finding and fixing mistakes in your banking history report If you find mistakes in your banking history report, you can dispute them by sending a letter describing the mistake and including copies of any evidence. You may use either regular or certified mail to send your letter. You can order your own free banking history report from ChexSystems, TeleCheck Services, and Early Warning. Company By phone By mail Online ChexSystems 800-428-9623 ChexSystems, Inc. 7805 Hudson Road, Ste. 100 Woodbury, MN 55125 http://www.consumerdebit.com TeleCheck Services 800-366-2425 TeleCheck Services, Inc. ATTN: Resolutions Department – FA. P.O. Box 4514. Houston, TX 77210-4514 (Include a daytime phone number, a copy of your driver’s license, your Social Security number, and a copy of a voided check.) Early Warning 800-325-7775 Tool 1: Savings plan This tool can help you make a plan to save money for: * Your goals * Expenses * Unexpected expenses and emergencies There are two steps to making a savings plan. First, answer the set of questions below to see if setting up an emergency fund or rainy day fund may be right for you. If yes, complete the savings plan using the worksheet that follows. To complete this worksheet, you will need to know: * Your savings goals – If you haven’t set these, consider using the information and tools in Module 1: Setting goals and planning for large purchases. * Strategies you can use for saving money – The worksheet encourages you to be as specific as possible. See the example in the worksheet to get started. * Where you will put the money you save Is an emergency fund or rainy day fund right for you? Answer the following questions to see if setting up an emergency fund or rainy day fund may be right for you and your family. Goals: Do you have the savings needed to reach your goals? Yes No Expenses: Do you have money set aside for expenses that come one to four times per year? For example, car insurance, renter’s insurance, tools for your trade, back to school expenses, birthdays, holidays Yes No Unexpected Expenses and Emergencies: Do you have money set aside for unexpected expenses or emergencies? For example, a flat tire or other car trouble, medical expenses, need for a new appliance, job loss Yes No Living expenses for months or weeks with no income or income that is less than expected: Do you have money set aside to cover your living expenses during the months you will be earning little or no income? Yes No If you answered “no” to any of these questions, developing a savings plan may be a great next step for you. For questions above to which you answered “no,” how do you pay for goals, expenses that come one to four times each year, and unexpected expenses and emergencies? Check all that apply to you. I don’t know. It just seems to work out. I don’t pay other bills to cover the emergency or unexpected expense. I borrow money from other family members or friends. I get a payday loan. I get cash through a pawn shop. I use a credit card. I use my tax refund. I use a car title loan. Savings plan16 Name Date Savings goal Total amount needed Months to reach goal Monthly amount to save Strategies for saving and amount saved per month Safe and secure place for savings Example: To save $1,000 in an emergency fund within 10 months $1,000 10 $100 (total amount needed ÷ months to reach goal) Cut back to basic cable, $40. Cut out one fast food meal per week for family, $60. Total saved per month, $100 Savings account at a bank or credit union (will generally require a minimum deposit) Once you have your savings plan, be sure to add it into your budget or cash flow calendar. For more information on cash flow budgets, see Module 5: Getting through the month. For more information on setting up an account to save in, see Module 8: Money services, cards, accounts, and loans: Finding what works for you. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 2: Savings and benefits: Understanding asset limits Asset limits and savings [start textbox] Even if you receive public benefits, you can generally have some savings. Savings are important for building your financial stability. [end textbox] If you are receiving public benefits (such as cash assistance (TANF), food stamps (SNAP), Supplemental Security Income (SSI), Medicaid, etc.), you may want to complete this tool to know how your savings might affect your benefits. Assets are things you own that have value. Your money in a savings or checking account is an asset. A car, home, business inventory, and land are examples of assets, too. Assets help you build financial security for you and your family. But if you receive public benefits, some of your assets may affect the benefits you receive. In general, your liquid assets – like cash or money in savings or checking account – are counted. You may still be eligible to receive benefits even if you own a home or a car. In some states, if the value of your car exceeds a certain amount, the amount over that value may be counted. Whether an asset counts against the limit depends on the program and the state. It is important to note that some benefits are federal, and some benefits come from the state. Be sure you find out the rules that apply to the benefits you get in your own state. If you save money from the Earned Income Tax Credit or any other portion of your tax refund, this savings is generally not counted against your limit for up to 12 months. Please note that rules regarding benefits change regularly, so check the rules annually to ensure accuracy. Benefits and asset limits list Benefit Asset limits as of October 2016 How to get more information I get SNAP: Supplemental Nutrition Assistance Program While the states have discretion, the Federal Asset Limits for SNAP benefits are up to $2,250 in countable resources (bank account) or $3,250 if one household member is over 60 or disabled.17 . States using broad-based categorical eligibility have no asset limits.18 This means that if an individual qualifies for TANF, SSI, or General Assistance, he automatically qualifies for SNAP... In 22 states and the District of Columbia, there are no asset limit tests for SNAP. In an additional 12 states, households with seniors or people with disabilities who have gross income under 200 percent of poverty do not face an asset limit.19 To get information about SNAP benefits in your state, call your state hotline number. You can find the hotline number by visiting. http://www.fns.usda.gov/snap/state-informationhotline-numbers. I get TANF: Temporary Assistance for Needy Families $1,000 to $3,000 in most states Nevada’s limit is $6,000.20 Alabama, Colorado, Hawaii, Illinois, Louisiana, Maryland, Ohio, and Virginia have no asset limits.21 To find out more about your state or tribal TANF program, visit http://www.acf.hhs.gov/programs/ofa/help. I get SSI: Supplemental Security Income $2,000 if single, $3,000 if married. Individuals with significant disabilities with an age of onset of disability before age 26 are now able to save up to $14,000 annually into a tax advantaged ABLE account without loss of benefits. To find out more about SSI or to apply for benefits, visit https://www.ssa.gov/agency/contact to get the contact information for your local Social Security Administration Office. I get SSDI: Social Security Disability Insurance No asset limits To find out more about SSDI or to apply for benefits, visit https://www.ssa.gov/agency/contact. I get: Public Housing Generally, only the income from assets is used in determining eligibility. To find out more about public housing options and eligibility, contact your local housing office at http://portal.hud.gov/hudportal/HUD?src=/states. I get LIHEAP: Low Income Home Energy Assistance Program Some states and tribal governments use categorical eligibility for LIHEAP. This means if someone in the household receives TANF, SSI, or SNAP, they are eligible for LIHEAP benefits. While most states do not have asset limits, where they exist they range from $2,000 to $5,000. To find out about your state or tribal LIHEAP program, visit https://liheapch.acf.hhs.gov. https://liheapch.acf.hhs.gov/ I get: Family Medicaid22 No asset limit test due to Affordable Care Act Regulations that took effect in 2014 To find out more about your state’s Medicaid program, visit https://www.medicaid.gov/medicaid/by-state/by-state.html. I get SCHIP or CHIP: State Child Health Insurance Program No asset limit test in most states; contact state administrator for details To find out more about your state’s CHIP program, visit https://www.medicaid.gov/medicaid/by-state/by-state.html. I get: Medicare Part D Extra Help (also known as Low-Income Subsidy) Your combined savings, investments, and other countable assets cannot be more than $27,250, if you are married and living with your spouse. $13,640 if you are not currently married or not living with your spouse.23 Countable assets exclude home, vehicles, personal possessions, life insurance, burial plots, irrevocable burial contracts, and back payments from Social Security or SSI. For information about eligibility, contact your State Health Insurance Counseling and Assistance Program (SHIP). The SHIP offers free help with your Medicare questions. To find your state SHIP program, visit https://www.shiptacenter.org. I get: Medicare Savings Programs Your combined savings, investments, and other countable assets cannot be more than: $10,930, if you are married and living with your spouse. $7,280 if you are not currently married or not living with your spouse Countable assets exclude your home, one vehicle, burial plot, up to $1,500 for burial expenses if you have put that money aside, furniture, and other household and personal items.24 Some states have higher or no asset limits. For information about eligibility, contact your State Health Insurance Counseling and Assistance Program (SHIP). The SHIP offers free help with your Medicare questions. To find your state SHIP program, visit https://www.shiptacenter.org. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Finding a safe place for savings Setting money aside can be hard. It often means you have to cut back on spending or you might have to find a way to earn more income. Once you have set money aside, you need to find a safe place to store that money. Even though it has some drawbacks, for some, a secret place in their home may feel like a safe place. For others, it may be an account in a bank or credit union. If you do not know where to put your money or want to make sure the place you have chosen is safe, think about the benefits and risks of each option below. Some benefits and risks are listed to help you get started. Safe place to keep your money Benefits Risks Other important information A secret place in your home No costs to maintain it. Easy to access. Convenient Can be lost, stolen or destroyed in a fire or natural disaster. Might put you at risk of a home invasion crime With a family member or friend No costs to maintain it Can be lost, stolen or destroyed in a fire or natural disaster. Might put your friend or family member at risk of a home invasion crime. May put your money at risk if your friend of family member betrays your trust On a prepaid card Easy to access. Convenient. No bank or credit union account needed May have fees for activation, loading funds, using the card, etc. May not have the same protections from loss or theft as a bank account if your card or account information is lost or stolen Check the card agreement to ensure that you understand the fees and whether you have protection from loss or theft. Report loss, theft, or wrong charges right away to the card provider In a federally insured savings, checking, or share account If the institution is federally insured, up to $250,000 per depositor is protected Unlike cash, the money cannot be lost, stolen, or destroyed in a fire or other disaster. You can generally get it back if someone steals it by using your ATM or debit card May be charged fees if you do not follow the rules for the account, such as having to keep a minimum balance to avoid a monthly fee You may not be able to open an account for a period of time if you have had an account closed because of unpaid account fees and debts in the last five years. Be sure you understand any monthly fees and other fees U.S. Savings Bonds The money cannot be lost or destroyed in a fire or other disaster. If you have a paper bond, the funds can still be recovered You lose some of the interest if you cash the bond before it matures. More difficult to access if you need the money right away Based on this information, the best place for me to keep my savings is: This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. Tool 4: Increasing your income through tax credits Tax credits can make a big difference. They may give you a refund that can be saved for emergencies or unexpected expenses, set aside for annual expenses (back to school or holiday shopping), used to pay down debts, and more. This tool covers two common tax credits, the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). Note: Starting in 2017 the IRS will be required to do additional verification of information on tax returns claiming the EITC and the CTC. This may cause some delay in the receipt of refunds which include these tax credits.25 Consider visiting a Volunteer Income Tax Assistance (VITA) program to file your taxes and make a plan to use your tax refund. The IRS trains the volunteers, and getting your taxes done doesn’t cost you anything. This preserves your income and can make a big difference in your ability to start and fund your savings or pay your bills and expenses. Find one at http://irs.treasury.gov/freetaxprep or call 800-906-9887. Earned Income Tax Credit The Earned Income Tax Credit (EITC) is a benefit for working people who have low- to moderate-income. Your tax refund is based on your income and filing status. For the 2017 tax season, the following income limits apply for the EITC:26 Household size Income limit if filing as single, head of household, or qualified widower Income limit if married filing jointly Maximum tax credit Three or more qualifying children $47,955 $53,505 $6,318 Two qualifying children $44,648 $50,198 $5,616 One qualifying child $39,296 $44,846 $3,400 No qualifying children $14,880 $20,430 $510 Also, investment income must be $3,400 or less for the year. This information changes every year. To make sure you have the most current information, visit: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/eitc-income-limits-maximum-credit-amounts-next-year. Your kids are “qualifying children” if:27 * They have a social security number that is valid for future employment. * They have lived in the U.S. with you (or your spouse if married filing jointly) for more than half of the year. * They are under age 19 or under age 24 if they are a full-time student or are “permanently and totally disabled.” * They are your son, daughter, adopted child, stepchild, foster child or a descendent of any of them such as your grandchild, brother, sister, half-brother, half-sister, step brother, step sister or a descendant of any of them such as a niece or nephew If you do not have any qualifying children, you may still be entitled to the Earned Income Tax Credit if you are between ages of 25 and 65, live in the U.S. for at least half of the year, and do not qualify as a dependent for anyone else. Child Tax Credit The Child Tax Credit reduces the taxes you owe by up to $1,000 for each qualifying child under the age of 17 who meets each of the following tests:28 To make sure you have the most current information https://www.irs.gov/publications/p972/ar02.html Your kids are qualifying children if: * They are a U.S. citizen, a U.S. national, or a U.S. resident alien. * They lived with you for more than half of 2015, * They did not file a joint return for the year (or files it only to claim a refund of withheld income tax or estimated tax paid), * They did not provide over half of his or her own support for 2015, * They are under age 17 at the end of 2015, * They are your son, daughter, adopted child, stepchild, foster child or a descendent of any of them such as your grandchild, brother, sister, half-brother, half-sister, step brother, step sister or a descendant of any of them such as a niece or nephew. If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit. The Child Tax Credit phases out if your adjusted gross income exceeds the following: * $110,000 if married filing jointly * $75,000 if single, head of household, or qualifying widower * $55,000 if married filing separately This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. MODULE 3: Tracking and managing income and benefits If you have a 10-minute session... If you have a 30-minute session... If you have multiple sessions... Tool 1: Income and resource tracker Tool 2: Ways to receive income and benefits: Know your options. Tool 3: Ways to increase income and resources All three tools Income Income is the money that comes into your household. You use income to pay for the things you need and want. It comes from part-time or full-time work, self-employment, and investments. Gifts from others, tax refunds, and inheritances can also be income. Public benefits can also serve as income, but these financial resources are not as flexible as other types of income because there are usually restrictions about how they can be spent. Income can be regular: this means it comes into your household on a schedule and in an amount that you can count on. Or it can be irregular: which means you can’t predict accurately when you will receive it or how much you will receive. These ups and downs can make it hard to be sure that you’ll have money to pay your bills and have enough on hand for expenses like food and transportation. Sometimes income is seasonal: you may receive it for only some months out of the year. For example, if you live in a northern state and work in the building industry, you may be very busy with work from March through November, but not working at all from December through February. Finally, income may be a one-time occurrence. Your tax refund is an example of a one-time source of income within a year. Managing income can be very challenging if it is irregular, seasonal, or is one-time-only because you may not know how much money is coming in or when it will be coming in. Your bills and expenses, however, continue. Even if your income doesn’t come in, your rent will still be due every month. It can also be hard to use irregular, seasonal, or one-time income to cover expenses in the months you may not have income. When you have the money, you may need or want to spend it instead of setting some aside for bills and expenses in other months. You can use Tool 1: Income and resource tracker to track your income, whether it is regular, irregular, seasonal, or one-time within a year. It is the first step in planning how you can manage your income differently to cover spending in months you may not have income. This is also an important step in creating a cash flow budget, which is explained in Module 5: Getting through the month. If you find that your income is less than you need or want, you can use Tool 3: Ways to increase income and resources. Deductions from your pay There are two kinds of deductions you may have from your pay: * Mandatory, which means they must be taken out * Voluntary, which means you choose the amount of any optional deductions Mandatory deductions include: * Federal income tax * Social Security, which is part of FICA (Federal Insurance Contributions Action) – 6.2 percent of your pay is held for Social Security, with your employer contributing another 6.2 percent on your behalf.29 * Medicare, which is also a part of FICA – 1.45 percent of your pay is withheld for Medicare with your employer contributing another 1.45 percent on your behalf. * State income tax (in most states) * Local taxes (in some communities) * In some cases, wage garnishments Voluntary deductions may include: * Employee share for health, dental, or vision insurance * Employee contributions to employer-sponsored retirement (401K or 403B plans) * Union dues * Employee contributions to life insurance premiums * Charitable contributions Wage garnishments If you have unpaid debts, and the creditor sues you for the debt and wins, the creditor might collect the debt by garnishing your wages. This means that the creditor gets a court order and sends it to your employer, who must send the collector part of your paycheck (unless the law protects your income from garnishment). If you don’t remember being sued for a debt and you don’t know why your wages are being garnished, ask your employer for a copy of the wage garnishment order. The order should include contact information for the creditor. Your wages can also be withheld or garnished to pay child support and student loans, back taxes, or other debts to a government agency. Any wage garnishment request should include some information about the type of debt, too. Federal law limits wage garnishments Generally, federal law limits wage garnishment so that consumers can take home enough income to live on, even if their wages are being garnished. Some state laws provide greater additional protections that allow consumers to keep more of their wages than the federal limits. To learn about these state law protections, you may want to consult an attorney in your state. There are exceptions for the collection of child support and debts due for federal or state taxes. Generally, the amount that can be garnished from wages under federal law is limited to the smaller of two amounts: * 25 percent of disposable income or * The amount that a person’s weekly earnings exceeds 30 times the federal minimum wage of $7.25 ($7.25 X 30 = $217.50) In other words, if someone earns $300 a week: * 25 percent of their disposable income would be $75.00 * The amount that a person’s weekly earnings exceed 30 times the federal minimum wage of $7.25 is $82.50 * Minimum wage ($7.25) x 30 = $217.50 * $300 - $217.50 = $82.50 In this example, federal law limits wage garnishment to $75.00 because $75.00 is less than $82.50. All mandatory deductions are protected from garnishment. Mandatory deductions include: * Federal, state, and local taxes * FICA contributions Your voluntary deductions are not protected from garnishment. Voluntary deductions are direct deductions that you choose on your own. They can include pre-tax contributions to your flexible spending account, health savings account, or retirement savings account. Garnishment of federal benefits and support payments Most federal benefits are exempt from garnishment. These federal benefits include: Social Security, Supplemental Security Income (SSI), Veterans’ Benefits, as well as retirement and pensions. A list of federal benefits generally exempt from garnishment can be found at the Federal Trade Commission at https://www.consumer.ftc.gov/articles/0114-garnishing-federal-benefits. But if you owe a debt to the federal government for student loans or back taxes, for example, the federal government may be able to garnish this money. Still, there are limits to how much the federal government can garnish for a debt to the government. If you are facing garnishment of your income or benefits, consider consulting a lawyer. This can help you understand your legal rights and responsibilities and take steps to protect your rights if that becomes necessary. You may qualify for free legal services through legal aid, depending on your income and where you live. Check your state’s Legal Aid Directory at http://lsc.gov/find-legal-aid. Servicemembers can get legal assistance through their Judge Advocate General’s (JAG) office. You can find your local JAG office at http://legalassistance.law.af.mil/content/locator.php. You can also contact a lawyer referral service in your area and ask for an attorney with experience in garnishment and debt collection. Some attorneys may offer free services or charge a reduced fee. If the debt you owe is to the government or is for child support, there may be different rules. For example, the state child support enforcement agency may not need to get a court order and may establish the amount due by an administrative proceeding. The amount that can be taken from your wages may also be different. This kind of garnishment can be complicated too, so you may want to consult a lawyer. Benefits Benefits are payments from local, state, tribal, or federal government agencies. They are often designed to help individuals and families that don’t have the resources to cover their basic living expenses. You can only get benefits if you apply for them and qualify to receive them. For most benefits programs, eligibility is based on: * Income * Circumstances – whether you have dependents or have a disability, for example * Assets – savings, a vehicle (or more than one vehicle), money in investments, for example Benefits are like income in that they can be used to pay for some of the things you need. The difference between income and benefits is that some benefits may only be used for a specific purpose. For example, if you qualify for the Supplemental Nutrition Assistance Program (SNAP), you can only use those benefits to purchase groceries. If you qualify for Medicaid, you can only use those benefits to cover qualified health expenses. Benefits are important financial resources that cover living expenses. That’s why it is important to track benefits the same way you keep track of your income. Having benefits can also free up cash to pay for other living expenses not generally covered by benefits, such as: * Gasoline for an automobile * Car repairs * Cell phone service * Debt repayment In some states, people may receive their unemployment benefits and other government benefits on a prepaid card.30 Instead of getting checks, they receive a card, and each month the benefit amount is loaded onto the card. The federal government also allows you to have certain federal benefits, such as veterans’ benefits or Social Security benefits, deposited to your checking or savings account, a federally insured prepaid card of your choosing, or a prepaid card that they arrange. On the back of your government benefits card, there is a phone number you can call in case something happens to your card. It is also usually written on your cardholder agreement. Write this number down and keep it somewhere safe. If your government benefits card is lost or stolen, be sure to call that number or log into your account online to report this right away. If you can’t find the number to report a loss or theft, call the agency that provides your benefit. If someone else uses the card and your PIN number, there is a chance these benefits will not be replaced. You have protections in case of an error or fraudulent transaction if: * You are paid through a payroll card arranged by your employer. * You receive government benefits (other than needs-tested benefits31) through a government-arranged card. * You receive any payments from the federal government onto your own prepaid card. For example, you generally can’t be held responsible for most fraudulent charges or other errors on these cards, if you report them in a timely manner. In addition, the card provider may be required by federal law to credit the disputed amount to your account while investigating the problem if the investigation will take longer than 10 business days. You should call your card provider as soon as you notice your card is missing or notice any charges you don’t recognize. The amount you can be charged in fees for using a government benefits card depends on the government agency and the financial institution issuing the card. Be sure to read the cardholder agreement carefully to understand the cheapest ways to access your benefits. Getting income and benefits There are different ways to receive income and benefits. Sometimes, you have a choice about how you will receive them, but in other situations, you may not. For example, some benefits programs require that funds are deposited directly to a card or a bank account. Some employers may only pay you using a traditional paycheck. If you are only paid electronically, you must get a choice of more than one electronic method (for example, either use the employer’s payroll card or use direct deposit to your own checking account). You may get your income or benefits in one or more of the following ways: * Cash * Paper check * Direct deposit (to a checking or savings account or prepaid card) * Payroll card (prepaid card arranged by an employer) * Government benefits cards (prepaid card arranged by a government agency) Why does this matter? Each way to get income has advantages and disadvantages. Some of these advantages and disadvantages may make it easier or harder for you to manage your income. To better understand the pros and cons of each method, use Tool 2: Ways to receive income and benefits: Know your options. Once you have tracked your income, be sure to add it into your budget or cash flow budget. For more information on cash flow budgets, see Module 5: Getting through the month. Tool 1: Income and resource tracker Income is the money that comes into your household. Benefits are financial resources that come into your household. You can use this tool to track all of income and financial resources that you receive during a month. Once you have written the amount and when you receive the income, benefit, or other resource, first identify whether the income is: * Regular - comes at a predictable time during the month * Irregular - is not predictable * Seasonal - is only received during some months during the year * One-time - only comes one-time or once a year (a gift or tax refund, for example) It is usually easier to track net income because that is the money you actually have available to pay for your living expenses. Net income is your gross income minus taxes and other deductions. Gross income is what you earn before taxes or other deductions are taken from your pay. * On this worksheet, enter net income you have earned in each category. Then: * Add each column to get weekly income totals. Add the total for each week to get the monthly total. * Get a total by source by adding each row. * Put a check in the column that best describes the income: regular, irregular, seasonal, or one-time. Income for the Month of: Source of income / benefits Frequency Week 1 Week 2 Week 3 Week 4 Total by source Job Regular, Irregular, One-time, Seasonal $ $ $ $ $ Second job Regular, Irregular, One-time, Seasonal $ $ $ $ $ Self- employment Income Regular, Irregular, One-time, Seasonal $ $ $ $ $ SNAP Regular, Irregular, One-time, Seasonal $ $ $ $ $ TANF Regular, Irregular, One-time, Seasonal $ $ $ $ $ Social Security / SSI Regular, Irregular, One-time, Seasonal $ $ $ $ $ Disability Insurance (SSDI) Regular, Irregular, One-time, Seasonal $ $ $ $ $ Veterans’ benefits Regular, Irregular, One-time, Seasonal $ $ $ $ $ Child support Regular, Irregular, One-time, Seasonal $ $ $ $ $ Tax refund Regular, Irregular, One-time, Seasonal $ $ $ $ $ Other Regular, Irregular, One-time, Seasonal $ $ $ $ $ Weekly total: Weekly $ $ $ $ $ Total monthly income and benefits: $ Once you have tracked your income, be sure to add it into your budget or cash flow budget. For more information on cash flow budgets, see Module 5: Getting through the month. For more information on financial services that may help you manage your income, see Module 8: Money services, cards, accounts, and loans: Finding what works for you. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 2: Ways to receive income and benefits: Know your options Salaries, wages, and public benefits can be provided in a variety of ways. These include cash, paychecks, direct deposit, payroll cards, and government benefits cards. Each method has pros and cons when it comes to convenience, security, and fees. Cash Definition Benefits Risks Tip Paper or coin money minted by the U.S. Government Accepted everywhere Could be lost or stolen. Some people find it tempting to spend cash they have on hand (it “burns a hole in your pocket”). Can be more difficult to track spending for personal budgeting and tax purposes. Not all bill payments can be made in cash. Avoid carrying around or leaving large amounts of cash in your home. If cash is lost or stolen, it’s hard to get it back. [] Cash is an option that works for me Paper check Definition Benefits Risks Tip A paper check for salary, wages, or benefits made out to an individual Income can be deposited to a checking or a savings account or onto a prepaid card. If you do not have a bank account, some banks and credit unions do not charge a fee to cash “on us” checks that are written from accounts that are held with their institution. Otherwise, you may have to pay a check cashing service to cash them. Bank and credit union accounts are sometimes the only cost-free way to cash paychecks. If you don’t have an account, unless your employer’s bank or credit union cashes “on us” checks for free, you may have to pay to cash them at a bank, credit union, or check cashing service. If you deposit a paycheck in a bank or credit union account or onto a prepaid card, you may not be able to access all the funds immediately. May not be offered by all employers or government agencies If you cash your checks at a check cashing store, these stores may try to offer you a payday loan. This can be very expensive – if you’re considering one, make sure you understand the costs. [] Paper check is an option that works for me Direct deposit Definition Benefits Risks Tip Employee pay or government benefit is electronically sent to your bank or credit union account, or your own prepaid card. Reduces your risk of loss or theft compared with carrying cash or checks because funds are sent directly to a bank or credit union account. Funds are usually available to you immediately. No check cashing fees.Many banks and credit unions also offer checking/savings accounts with no monthly fees when you set up direct deposit. Funds can be accessed via a debit card, ATM card, with a checking account, or by personal checks. The debit/ATM card you get with a bank or credit union account has consumer protections for funds taken by error or theft. Many employers allow you to split the deposit between checking and savings accounts, which can help you build savings. If direct deposit is made to a prepaid card, the card may lack full consumer protections for funds taken by error or theft. Can be charged fees if you write checks or use debit card without sufficient funds. Have to go to an ATM or get cash back at a merchant to get cash. May not be offered by all employers or government agencies Ask your employer how to arrange for direct deposit. If you receive your pay through direct deposit, your money is often available on your payday. Be aware of ATM fees you may be charged. Generally, you can avoid ATM fees by using your own bank or credit union’s ATMs. [] Direct deposit is an option that works for me Payroll card and government benefits card Definition Benefits Risks Tip Payroll card: Prepaid card arranged by an employer through which people access their salary or wages Government benefits card: Prepaid card arranged by a government agency through which benefits recipients can access benefits payments – Electronic benefits transfer (EBT) cards are a type of government benefits card, which replaced paper-based benefits for needs-based programs such as Temporary Assistance to Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), and other programs.32 Safer and more secure than carrying cash or checks.These cards have full consumer protections for funds taken by error or theft, except for government-issued cards for needs-tested benefits.33 You use it just like a prepaid or debit card. Potential inactivity and service fees – You may face fees to get full access to your wages, for example. Have to go to an ATM or get cash back at a merchant to get cash – Some cards have limits on how many times you can access an ATM in a 24-hour period. Not all merchants accept EBT cards. Cards for needs-tested benefits lack full consumer protections for returning funds taken by error or theft. Ask questions about fees for using the payroll card or government benefits card. Your employer can require that you receive your pay by electronic means, but must give you a choice between a payroll card and a direct deposit to an account of your choosing (which can generally be a bank or credit union account or prepaid card). For EBT cards, some benefits can be lost if they are not used within a certain amount of time. Be sure to ask if this applies to your benefit and keep track of your balance. If you have a bank account and are offered an EBT card, ask if you can have cash benefits sent to your bank account instead. [] Payroll or government benefits card is an option that works for me This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Ways to increase income and resources There are two ways to bring in more income. You can bring in more income through a one-time activity. This would include selling items in a garage sale or online. This would also include getting a tax refund by claiming tax credits for which you qualify. You can sometimes bring in more income or resources on a regular basis. This would include getting a part-time job, applying for benefits you may qualify for, or starting a small business. Increasing income through workforce development programs One way to potentially increase income for the long term is to use a local workforce development program to develop skills to fill high-demand jobs. Workforce development programs provide skills training that can prepare you for a new job where you work now or for another company or organization. They may be offered through vocational schools, career-technical schools, community colleges, universities, unions, and other apprenticeship programs. How do you find a workforce development program in your community? Start with the U.S. Department of Labor services locator at https://www.dol.gov/general/location. If you enter your zip code, you will get a list of programs in your area. You can also visit an American Job Center to explore careers, find out about education and training required for different careers, get advice on applying for jobs and interviews, and more. To find a center near you, visit https://www.careeronestop.org/LocalHelp/service-locator.aspx. You can also visit https://www.careeronestop.org for online tools and information. Your state probably has a state career or workforce development website or portal. There, you may find online assessments for your interest and skills and links to in-person and online training. Many community colleges also provide these types of assessments and services. Deciding when to claim Social Security If you’re getting close to retirement age, you may be thinking about claiming Social Security retirement benefits to add to your income. Choosing when to begin collecting Social Security retirement benefits is an important financial decision. Social Security often becomes a primary source of income in later life, and that’s when medical and health costs may be at their highest. Claiming early (right when you’re first eligible) can threaten your financial security in retirement. Your benefit increases by as much as 75 percent if you wait to claim Social Security retirement benefits at age 70, instead of 62. The CFPB’s Planning for Retirement Tool at http://www.consumerfinance.gov/retirement/before-you-claim can help you visualize how your Social Security payments will grow each year that you delay claiming. Ways to increase cash, income, and other resources Use this tool to identify ways you can increase your income. Note that not all of these may apply to you. Check the options that may work for you and use this as a plan to increase cash, income, and other resources. One-time activity This might work Strategy for increasing income Next Steps Hold a yard sale/garage sale. Sell items online. Claim tax credits if you qualify. Other: Regular income This might work Strategy for increasing income Next Steps Seek a raise or additional hours at current job. Change tax withholding (if you generally receive a large tax refund). Get a part-time job. Do odd jobs (providing childcare, doing yard work, running errands for someone, etc.). If eligible, apply for public benefits (TANF, SNAP, Medicaid, public housing, SSI, unemployment). Rent a room in your home if allowed in your community. Start a part-time small business or use your talents or hobbies to make items to sell online. Search the Internet for reputable opportunities to provide services to other businesses. Long term This might work Strategy for increasing income Next Steps Seek opportunities for training or education that would increase wage at current job or help you get a better job. Decide when to claim Social Security. Other: This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. MODULE 4: Paying bills and other expenses If you have a 10-minute session... If you have a 30-minute session... If you have multiple sessions... Tool 1: Spending tracker Tool 3: Ways to pay bills. Know your options. Tool 4: Strategies for cutting expenses. Tool 5: When cash is short: Prioritizing bills and planning spending Tool 2: Bill calendar “To stay financially healthy, you should spend less than you earn.” This rule of thumb may work for many people, but it isn’t very helpful if you can’t afford to pay all of your bills and living expenses. For others, balancing personal priorities and cultural expectations can sometimes be a challenge. And if your work is seasonal or irregular, you may be able to cover everything when you’re working but struggle to cover expenses in the months or weeks when you’re not. Where does the money go? No matter your situation, it can be helpful – empowering, even – to separate your needs, obligations, and wants. This can help you set priorities and understand more clearly where you can make changes if you decide your spending isn’t matching your priorities. Needs are the things you must have to live. These include shelter and utilities, food, medication, clothing, [start textbox]Needs, wants, and obligations Needs, wants, and obligations are all things you spend money on. But, what are the differences among them? Needs are things you must have to live. Wants are things you can survive without. Obligations are debts you owe because you borrowed money (such as a car loan or mortgage) and payments you’ve been ordered to make (such as child support). [end textbox] and transportation. Even with needs, you often have to decide among a wide range of options that can meet those needs. Deciding what you can afford, maintain, and want to pay for, can be a challenge. Obligations include debts you owe and payments you’ve been ordered to make, such as child support, spousal support, and other judgments. Wants are the things you can survive without. For example, while a reliable car to get to work is a need, a new car with expensive features is both a need and a want. But, it’s not always so clear-cut. One person may view something as a want, and another person may see it as a need. Separating needs, obligations, and wants empowers you to set priorities. Many people who track their spending for a week or a month discover that they are spending money in small ways that add up and sometimes don’t match their priorities. Once they track their spending, they’re better able to make decisions about which bills and expenses can be reduced. To get a clear picture of how you’re using your money and resources now, use Tool 1: Spending tracker. For specific ideas on cutting back use Tool 4: Strategies for cutting expenses. Planning for and paying bills Many people have recurring obligations like rent, utilities, car payments, child support payments, and insurance payments. Most of these obligations have a fixed due date, and if you are late, even by just a few days, you will likely pay an extra fee and risk a negative entry in your credit history. You may be able to avoid late fees and other consequences of late or nonpayment if you: * List your regular bills. * Set up a bill payment calendar so you can see when payments are due. Tool 2: Bill calendar can help you visualize what you need to pay and when. If you use a smartphone, text messaging, or e-mail, you might prefer to explore bill reminder services and apps. These services can send you reminders when it’s time to pay your bills. Another aspect of bill payment is the method that you use to pay bills. In general, you can pay your bills using: * Cash * Money orders * Checks * Credit cards * Debit cards * Automatic deduction from your bank account * Online bill payment Tool 3: Ways to pay bills: Know your options is designed to help you choose a bill payment method that works for you. For example, if you prefer to pay bills in person using cash, you have to get to a payment location, which costs you time and gas money or transit fare. If you use automatic bill payment from a checking account, you’ll save time, but you’ll need to make sure that you have sufficient funds in the account to cover the automatic payment. Otherwise, you may pay an overdraft fee. Considering the advantages and disadvantages of each bill payment method empowers you to make choices that can help you save time and money, avoid additional or unnecessary fees, and create a reliable record of bill payment. This record may improve your ability to access credit. Unexpected expenses Managing unexpected and periodic expenses can strain your budget and cause you stress. Examples of unexpected expenses include: * Fees for a school field trip for one of your children * Tools you did not anticipate needing to buy for your job * The cost of attending a family member’s funeral in another state * Car or home repairs * Medical bills resulting from a sudden illness or injury Periodic expenses are different. These occasional expenses are often predictable, but they can be hard to manage if you do not prepare for them. Common periodic expenses include: * Insurance premiums * Driver’s license renewal and car registration * Income taxes (if you owe money) * Property taxes * Holiday-related expenses * Health insurance co-payments When cash is short When your income is less than usual or you’ve had an unexpected expense, your regular bills and living expenses don’t stop. When you can see that you’re coming up short for your bills and living expenses, you can either try to find ways to increase cash and resources (see Module 3: Tracking and managing income and benefits) or look for ways to cut your spending. Tool 4: Strategies for cutting expenses includes some tips and suggestions that can help you try to match what’s coming in with what’s going out. You are responsible for paying all of your obligations on time. But when you don’t have enough money to cover your obligations and living expenses you may have to make a short-term plan to get through the month. Sometimes your plan may involve paying some bills late or missing a bill. When bill collectors are calling and you’re trying to decide which of your obligations to pay first, it can sometimes just seem easiest to pay the “squeakiest wheel” – but this might not be the best approach. Sometimes the plan will mean ignoring the squeaky wheel for a short time until you can build a plan for repayment. Part of making this short-term or longer-term plan is to help you identify the consequences of failing to pay certain bills. This can help you prioritize your expenses if you just can’t pay everything. Action Some potential consequences Five days past the due date for your rent Pay the late fee as outlined in your lease agreement. Risk the possibility of eviction. Strain your relationship with your landlord. Create stress for you. Miss your car payment Pay the late fee as outlined in your loan agreement. Risk the possibility of repossession of your car. Create a situation in which you need more cash the following month – to catch up the car payment you missed. Risk a negative entry on your credit reports and a drop in your credit scores. Miss your electric bill payment Pay the late fee. Create a situation in which you need more cash the following month – to catch up the electric bill you missed. If you are late for several months, your electricity could be cut off. To get it turned on, you will have to catch up on payments and pay a reconnection fee. Miss a credit card payment Pay the late fee as outlined in your credit card agreement. Risk an increase in your interest rate on what you already owe (if you are 60 days late). Risk an increase in the interest rate on new purchases. Risk a negative entry on your credit reports and a drop in your credit scores. If you find you can’t pay all of your bills on time, try calling your creditors to make short-term arrangements. Finally, after you have examined the consequences of not paying or paying bills late and have called your creditors, make a short-term plan. Use Tool 5: When cash is short: Prioritizing bills and planning spending, to make a plan. This tool is designed to help you first protect expenses associated with earning an income. If you miss these costs, you may harm your ability to earn the money you need to pay any of your bills. When creditors call Do not ignore bills you can’t pay. If you must miss a payment, call and explain that you will miss a payment and the reason for it. You may wish to contact a certified housing, credit, or debt counselor for specialized assistance in building a plan to pay your debts and pay your monthly bills and expenses. Module 6: Dealing with debt describes your rights in debt collection and includes tips for responding to debt collectors. For additional information on what debt collectors can and cannot do, visit Ask CFPB at http://www.consumerfinance.gov/askCFPB. If a creditor (a credit card company or medical provider, for example) sues you, carefully review and respond to any court documents. A written response is generally required. If you don’t respond at all, the court will usually assume that what the creditor said is correct, and issue a money judgment against you. If you can’t go to court on the date scheduled, ask the court for another hearing date. If you are served with a lawsuit, you should also try to find an attorney who can advise and represent you. You may qualify for free legal services through legal aid, depending on your income and where you live. You can find a legal aid office in your state at http://lsc.gov/find-legal-aid. Servicemembers can get legal assistance through JAG. Find your local JAG office at http://legalassistance.law.af.mil/content/locator.php. Older consumers can also call the Center for Elder Rights Advocacy at 866-949-2372 to find out if there is a senior legal services program in the area that may be able to help. Tool 1: Spending tracker Most people can’t tell you how they spend their money during a month. Before deciding on changes to your spending, it is a good idea to understand how you use your money now. This takes three steps: 1. Keep track of everything you spend money on for a week, two weeks, or one month. A month is best because all of your income and your bills will be included. But, keeping up with the tracking for a month may be a challenge. 2. Analyze your spending. See how much you spend in each category. Notice any trends and look for expenses you can eliminate or cut back on. 3. Use this as information to make changes in your spending. Tracking your spending is a lot of work and it takes commitment. But it’s important work. Many people are actually able to find money to save for emergencies, unexpected expenses, and goals by tracking their spending. Others are able to make their budgets balance. Get a small plastic case or envelope. Every time you spend money or pay a bill, get a receipt and put it into the case or envelope. If the receipt doesn’t include what you purchased, take a few seconds and write it on the receipt. If you don’t get a receipt, write down the amount and what you purchased. Analyze your spending. Use this tool, for each week of the month. Go through your receipts. Enter the total you spent and the date in the column that makes most sense to you. See how much you spend in each category and add the weekly amounts. Once you have these totals, add them together to get your total spending for the week. Notice trends. Circle those items that are the same every month (for example, rent, car payment, cell phone payment). These are often your needs and obligations. This will make creating your budget easier. Identify any areas you can eliminate or cut back on – these will generally be wants. Here is a list of the categories that are used in the spending tracker. Childcare and education Childcare costs, diapers, school supplies, school materials fees, field trip and other activity fees Court-ordered obligations Child Support, restitution, etc. Debt payments Credit card payments, payday loan payments, pawn loan payments, car title loan payments, and other loan payments Eating out (meals & beverages) Any meals or beverages purchased outside of the home Entertainment Going to the movies, going to concerts, sports equipment/fees, sporting events, lottery tickets, memberships, alcohol, books/CDs, subscriptions Gifts and donations Donations to religious organizations or other charities, gifts Groceries Food and beverages to be brought into the home, including baby formula and food Healthcare Co-payments, medication, eye care, dental care, health insurance premiums Household supplies Things for your home like cleaning supplies, kitchen appliances, furniture, other equipment Housing and utilities Rent, mortgage, insurance, property taxes, electricity, gas, water, sewage, phone, television, Internet service, cell phone Personal care Haircuts, hygiene items, dry cleaning Pets Food, healthcare costs, other costs associated with caring for your pets Savings Saving for emergencies, goals, back to school expenses, holiday purchases, children’s education, saving for retirement Tools or other job-related expenses Tools, equipment, special clothing, job-related books, machinery, working animals or livestock, union dues Transportation Gas, car payment, insurance payment, repairs Analyze Your Spending: Week [] for the Month of [] On this worksheet, enter each amount from your receipts into its matching category column. Take care to make sure the entry also matches the correct date. Add each column. Add the total of all of the columns to get total spending for the week. Print and complete multiple copies of this sheet to analyze spending over the period of a month or longer. Day of the week Childcare and education Court+-ordered obligations Debt payments Eating out Entertainment Gifts and donations Groceries Healthcare Household supplies Housing and utilities Personal care Pets Savings Tools or other job-related expenses Transportation Total SUN MON TUE WED THUR FRI SAT Total Review your spending tracker. Which items cannot be cut or reduced? List these in the chart below. When you make your cash flow budget, you will just fill these in. Spending that cannot be cut Reason Are there items that can be completely eliminated? If yes, the money you spend on these items can be used on other things like saving for emergencies or goals or paying down debt. Spending that can be eliminated Steps to eliminate Are there items that can be realistically reduced? If yes, list them below. Set new spending targets for these items and include them in your cash flow. Spending that can be reduced New spending target Once you have tracked your spending, be sure to add it into your budget or cash flow budget. For more information on cash flow budgets, see Module 5: Getting through the month. For more information on financial services that may help you pay your bills, see Module 8: Money services, cards, accounts, and loans: Finding what works for you. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 2: Bill calendar Figuring out which bills to expect throughout the month helps you plan to have enough money or other financial resources on hand to pay them. It can also help you think of ways to reduce your expenses over the course of the month. Some people find that thinking ahead helps reduce the stress when the bills arrive in the mail. Create a bill calendar using this tool: * Gather all of the bills you pay in one month OR use the information from your pending tracker. * Write the due dates for these bills. Since due dates are when bills must arrive, write the date bills must be sent. If you’re paying by mail, mark the due date at least 7 days before it is due. For in-person or electronic bill payment, mark one or two days before the due date to ensure you are not late. * Write the company or person you owe the money to, and the amount that is due on the date the bill must be sent in order to arrive on time. * Put this calendar somewhere you will see it every day to ensure you are not forgetting about important bills. The back of the bedroom door is a good example. For more information on financial services that may help you pay your bills, see Module 8: Money services, cards, accounts, and loans: Finding what works for you. Month: SUN MON TUE WED THUR FRI SAT Total bills for week SUN MON TUE WED THUR FRI SAT Total bills for week SUN MON TUE WED THUR FRI SAT Total bills for week SUN MON TUE WED THUR FRI SAT Total bills for week This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Ways to pay bills: Know your options With information about the advantages and disadvantages of each bill payment method, you can make choices that may help you to: * Save time. * Save money. * Avoid additional or unnecessary fees. * Create a reliable record of bill payment. Bill payment method Advantages Disadvantages Cash Easy to understand. When you pay cash directly to the company there are often no additional costs. Buying or using a special product such as a money order or a prepaid card may cost money. May be inconvenient as this requires in-person payment of bills. Bill payment services may charge you fees to make a cash payment. May be difficult to prove payment unless you have a receipt. Cost of traveling to the businesses you are paying money to. Your cash can be lost or stolen when you are on the way to pay your bills. Money order Easy to understand. Can be mailed, so more convenient than cash. Can be safer than a check in some cases, as no personal banking information appears on the money order May be inconvenient because you have to buy the money order. Cost per money order. May be hard to prove payment unless you have the money order receipt and receive the receipt for payment. Costs of mailing the payments. Like cash, it would be hard to recover if lost. Check Convenient once the checking account is set up at a bank or credit union. Can be mailed, so more convenient than cash. Easier to prove payment if there is a dispute. Option for online bill payment through the bank or credit union. Funds in checking account are safe. Requires an account at bank or credit union - you may not be able to get a checking account if you have a negative banking history report. The bank or credit union may charge nonsufficient fund fees, or overdraft charges if you pay bills by check without enough money in your account. May be difficult for some people to understand and manage a checking account.Time to write out checks and mail them. Costs of mailing the payments Credit cards Convenient. Can pay bills over the phone or online. Easier to prove payment if there is a dispute. Protects you from having to pay for charges if your card or information is stolen or lost. Can be set up to automatically pay recurring bills with no risk of overdraft.Having a credit card can help build your credit history if you make payments on time and stay below 30 percent of your credit limit. It creates another bill you have to pay. Creates debt - You are borrowing money to pay for bills and other items when you use a credit card. Costs more than paying for the purchase with cash or a check if you can’t pay the credit card balance in full and have to pay interest on the balance Prepaid cards Convenient. Can pay bills over the phone or online. Easier to prove payment if there is a dispute Check the card agreement to understand whether you will be charged a fee for using the card to pay a bill. Automatic debit from a checking/savings account, prepaid card, debit card, or automatic charge to a credit card Convenient. Reduce the chances of paying late - Set it up once and forget it. Can be linked to a debit card (checking account) or credit card. Easier to prove payment if there’s a dispute. Saves time If there is not enough money for the payment in the checking account when the automatic debit happens, you would have to pay additional fees. If you have an issue with the card you are using for payments and have to replace it, you will have to remember to update the card information with the billers that are being paid with automatic debit. Automatic charges to a credit card create debt you still have to pay and interest if you don’t pay in full every month. Online bill payment Convenient. You can choose between making one-time payments each billing cycle or setting up recurring (automatic) payments using your bank, credit union, or prepaid card account through the provider’s online web services or through the biller’s website. You can also often use a mobile app for bill payment. Be sure to keep track of your balance. It will help you avoid late fees. Automatic payments reduce the chance of being late. If set up through your bank or credit union, you may be able to receive warnings or alerts if you do not have enough money in your account to pay a bill. May include options for setting up payment from cell phones/smart devices. Saves time Takes time to set up and learn. Possible risks of overdraft and fees or a rejected payment if there is not enough money in the account when the payment occurs This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers that you provide to them about your personal or financial situation. Tool 4: Strategies for cutting expenses This tool focuses on ways to decrease spending or uses of cash and other financial resources. Not all of these may apply to you. Check the ideas that may be an option for you, and use this as a plan for getting more information or resources. Strategies list Cut back on regular (recurring expenses). This might work Expense Strategy Estimated savings Television Check with your provider about lower cost plans or discontinue cable. Internet Check with your provider about lower cost plans. Phone Check if you qualify for a “Lifeline” phone rate.34 Cell phone plan Review prepaid or fixed call plans. Check if you qualify for a “Lifeline” phone rate. If you’re using a smartphone, check to see if there are cheaper data plans. Keep track of your data usage to make sure you don’t go over your limit. Insurance Check to see if you can get a better rate with other companies or if moving all insurance coverage to one company will save you money and for other discounts. If you have a young driver in the home, ask about a good student discount. Increase the deductible on auto, renter’s, or homeowner’s insurance to lower the premium payment. Home energy expenses Check to see if you’re eligible for energy assistance, weatherization programs, a discounted rate from your utility, or other incentives. Find ways to save on energy. Turn off and unplug unused electric appliances. Insulate and use weather stripping around doors and windows. Set thermostat higher in summer and lower in winter. Get rid of regular (recurring) expenses. This might work Expense Strategy Estimated savings Online video membership Consider using a pay-per-use rental service. Discount store memberships If you don’t use them regularly, or they’re not saving you any money, consider eliminating them. Gym membership If you don’t go regularly, consider canceling it. Avoid fees. This might work Expense Strategy Estimated savings Financial services fees Review your financial services accounts. Are you paying: To cash your checks? Maintenance fees on checking or savings accounts? ATM or overdraft fees? Annual fees for credit cards? Could you switch to a no-fee or lower-fee account? Late fees Pay bills and fines like parking tickets on time. Parking tickets and other fines cost more if you pay them late. Renew your license and registration on time. Return library materials on time. Other strategies This might work Strategy Helpful tips Estimated savings Negotiate a new due date for bills to make them easier to handle in cash flow. Avoid eating out; cut one meal out per month. If you buy lunch at work, consider bringing lunch instead. If you have children, identify the restaurants that have “kids eat free” nights. Avoid buying fountain drinks and coffee out. Use coupons. Buy second hand furniture or clothing. Do not buy or rent DVDs or CDs. Visit your local public library. To avoid late fees, return the items by the due dates. Buy items you use in bulk if they are cheaper that way. Look at the price label for cost per serving. Sometimes larger quantities don’t actually save money. Maintain your car. Get regular oil changes and keep tires inflated. This can save on fuel and prevent major repairs. Other: Other Other Other: Total reduction in spending for one month: Once you have identified strategies for cutting your spending, adjust your cash flow budget. See Module 5: Getting through the month. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 5: When cash is short: Prioritizing bills and planning spending Even when you have done everything you can to increase sources of income or cut spending, you may still find yourself short on cash. This tool can help you create a short-term plan for weeks or months you cannot pay your bills. Remember, you are responsible for all of your bills and expenses. If you miss payments now, you will have to make them up in the future. Focus area Your expense Protect your income. If you need a car to get to and from work, stay current on your car payment and insurance. Maintain other expenses needed to keep your job, such as paying for the tools you need or required licenses. Protect your shelter. Whether you rent or have a mortgage, the costs of losing your home are big. Remember to include the taxes, condo fees, and mobile home lot payments you need to stay housed. If possible, maintain your utilities. They are difficult to live without, and reconnection is expensive. Pay your obligations. Examples include: child support, income taxes, student loans, etc. Protect your assets and health. Don’t let essential insurance coverage lapse; this includes auto, renter’s, homeowner’s, and health insurance premiums. Include the cost of your co-pays and needed prescriptions. Not having insurance may mean you cannot drive your car, and it puts your assets, including your health/your family’s health, at risk. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. MODULE 5: Getting through the month If you have a 10-minute session... If you have a 30-minute session... If you have multiple sessions... Tool 3: Improving cash flow checklist Tool 1: Cash flow budget or Tool 2: Cash flow calendar Check in on cash flow budget development or management [start textbox] Tracking your money and expenses Some banks and credit unions provide online financial management tools that help you track your income, your budget, and your cash flow. If you have an account at a bank or credit union, check online or call your financial institution to see if these tools are available to you. When you enter personal or banking information make sure the website is secure. [end textbox] When it comes to money, timing matters. People often find themselves flush with cash or resources one week and pay several bills at once or splurge on something fun. But then they come up short the next week for a necessity or obligation. That’s why monthly budgets sometimes don’t work out from week to week. If the timing of your income doesn’t match the timing of your expenses and you haven’t planned for it, you may come up short. A cash flow budget projects how much income you expect to receive and what you expect to come in and to spend each month, and when. A cash flow budget is different from a regular budget because it breaks your monthly budget down week by week, accounting for when money and other financial resources are expected (income) and when they must be used on needs, wants, and obligations. A cash flow budget can help you identify where you’re falling short within the month. It can help you figure out if you have the financial resources on hand to cover the most important expenses, so you don’t fall short covering the rent, for example. A cash flow budget can also help you target areas where you can cut back or postpone expenses. A cash flow budget is even more important for people who have irregular, seasonal, or one-time income. It can help you project and plan ways to spread the income you receive over the weeks or months you don’t have money coming in. Making a cash flow budget Making a cash flow budget involves three steps: * Keep track of everything you earn and spend money on for a week, two weeks, or one month. You can use the income and financial resource tracker from Module 3 and the spending tracker from Module 4 to do this. * Analyze your spending. You can use the spending tracker from Module 4 to do this. * Use this information to create a cash flow budget. You can use Tool 1: Cash flow budget to complete this step or Tool 2: Cash flow calendar. Your cash flow budget is about setting targets for how you will use your income going forward. There are expenses such as rent and your car payment that you cannot cut back. These are commonly called fixed expenses. Cutting back on these expenses requires major changes, such a moving or selling a car. Sometimes, though, you may find that you need to do this to make your cash flow work. If you find you want to cut back in some other areas, put these new target levels of spending on your cash flow budget. For example, if you spend $350 per month on groceries, you may decide to buy food in bulk to decrease the amount you spend on groceries to $300. It’s important to be realistic when you set targets. Your cash flow budget is about setting targets for how you will use your income going forward. Tool 1: Cash flow budget Building a cash flow budget is important because it can help you make sure you have the resources on hand to cover the most important expenses. This is especially important if your income is irregular, seasonal, or one-time. There are expenses such as rent and your car payment that you cannot cut back. These are commonly called fixed expenses. Cutting back on these expenses requires major changes, such a moving or selling a car. Sometimes, though, you may find that you need to do this to make your cash flow work. If you find you want to cut back in some other areas, put these new target levels of spending on your cash flow budget. For example, if you spend $350 per month on groceries, you may decide to buy and cook food in bulk and use coupons to decrease the amount you spend on groceries to $300. It’s important to be realistic when you set targets. Your cash flow budget is about setting targets for how you will use your income going forward. You can create a cash flow budget using the following form. Here are some important tips to get you started: Beginning balance for the week Your beginning balance for each week is the ending balance from the week before. When you start a cash flow, count the money you have in your pocket, on a prepaid card, or in an account you use to pay your bills to get your beginning balance. Cash flow budget item Week 1 Week 2 Beginning balance for the week $37.00 to get a starting balance, total your cash, prepaid card, and account balances. Sources of cash and other financial resources Sources of cash and other financial resources Sources of cash and other financial resources Income from job SNAP Public housing voucher Total sources of cash and other financial resources Uses of cash and other financial resources Uses of cash and other financial resources Uses of cash and other financial resources Housing Utilities Groceries Eating out (meals and beverages) Transportation Total uses of cash and other financial resources Ending balance for the week Total sources of cash and other financial resources Add your beginning balance for the week to the other income you get that week. The total is the amount you have to pay for all of your expenses during that week. Cash flow budget item Week 1 Week 2 Beginning balance for the week $37.00 Sources of cash and other financial resources Sources of cash and other financial resources Sources of cash and other financial resources Income from job $305.34 SNAP $280.00 Public housing voucher $650.00 Total sources of cash and other financial resources $1,272.34 add together your beginning balance and all of the sources of cash and financial resources for the week. Uses of cash and other financial resources Uses of cash and other financial resources Uses of cash and other financial resources Housing Utilities Groceries Eating out (meals and beverages) Transportation Total uses of cash and other financial resources Ending balance for the week Total uses of cash and other financial resources Add all of your expenses and other uses of cash (savings and debt repayment) for the week. Note that some financial resources may only be used for specific expenses. For example, SNAP (Supplemental Nutrition Assistance Program) benefits can only be used for food and for plants and seeds to grow food for people in your household to eat. SNAP cannot be used for: * Any nonfood item, such as pet foods, soaps, paper products, and household supplies, grooming items, toothpaste, and cosmetics * Alcoholic beverages and tobacco * Vitamins and medicines * Any food that will be eaten in the store * Hot foods Subtract your total uses of cash and other financial resources from your total sources of cash and other financial resources This will give you your ending balance for the week. It will also show you whether you have enough cash and other financial resources to make it through the week. Cash flow budget item Week 1 Week 2 Beginning balance for the week $37.00 $142.37 Sources of cash and other financial resources Sources of cash and other financial resources Sources of cash and other financial resources Income from job $305.34 SNAP $280.00 Public housing voucher $650.00 Total sources of cash and other financial resources $1,272.34 Uses of cash and other financial resources Uses of cash and other financial resources Uses of cash and other financial resources Housing $650.00 Utilities $59.97 Groceries $180.00 Eating out (meals and beverages) Transportation $240.00 Total uses of cash and other financial resources $1,129.97 Ending balance for the week $142.37. The ending balance is total sources minus total uses. This becomes your beginning balance for the next week. Cash flow budget worksheet Week 1 Week 2 Week 3 Week 4 Week 5 Beginning balance for the week Sources of cash and other financial resources Sources of cash & other financial resources Sources of cash & other financial resources Sources of cash & other financial resources Sources of cash & other financial resources Sources of cash & other financial resources Income from job Income from part-time job Income from self-employment TANF SNAP Public housing voucher Other: Total sources of cash and other financial resources Uses of cash and other financial resources Uses of cash & other financial resources Uses of cash & other financial resources Uses of cash & other financial resources Uses of cash & other financial resources Uses of cash & other financial resources Credit card payments Payday loan payments Personal loans Other debt Other payments Savings: emergency fund Savings: goals Savings: children's education Savings: retirement Rent or mortgage payment Homeowners or rental insurance Electricity Gas Water and sewer Cable or satellite television Internet service Phone and cell phone service Groceries Eating out (meals and beverage) Car payment Gas for car Car maintenance Tools of the trade and other job-related expenses Health insurance Health care deductibles and co-pays Personal care Childcare, diapers, and school fees and supplies Entertainment Contributions Total uses of cash and other financial resources Ending balance for the week (sources – uses) Be sure to use tools you may have completed in other modules to build your cash flow. Look at Module 1: Setting goals and planning for large purchases, Module 2: Saving for emergencies, bills, and goals, Module 3: Tracking and managing income and benefits, Module 4: Paying bills and other expenses, and Module 6: Dealing with debt. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive personal and financial information. The CFPB does not collect any information from you or the organization using this Tool. The CFPB is not responsible and has no control over how others may use the information that you provide to them about your personal or financial situation. The CFPB recommends that you do not include names or account numbers and that users follow their organization’s policies regarding retention, storage, and disposal of documents that contain personal information. Tool 2: Cash flow calendar A cash flow approach to managing your money involves paying attention to the timing of your sources and uses of cash and other financial resources. This is important because timing matters when you are making sure you have enough to cover your expenses. Use the information from your Module 3, Tool 1: Income and resource tracker and Module 4, Tool 1: Spending tracker to create a cash flow calendar using the blank calendar provided here. Start each new month by carrying over your balance from last month. Then enter the sources and uses of cash and other financial resources for each day of the week. At the end of every week, take your beginning balance, add your total sources, and subtract your total uses. That number will be what you have left, your weekly ending balance. Here is a sample week to show you how the tool works: 1. Beginning balance: $130 (from week before) 2. What came in (Income / Benefits / Resources) SUN , 16 MON , 17 TUE , 18 WED , 19 THUR , 20 FRI , 21 SAT , 22 Total SNAP: $280 Pay: $305 $585 3. What went out (Bills / Spending) SUN , 16 MON , 17 TUE , 18 WED , 19 THUR , 20 FRI , 21 SAT , 22 Total Food $180. Phone bill: $60 Gas: $30 Car payment: $180 $450 4. Ending balance Beginning balance: $130 Total sources: $585, including SNAP Total uses: $450 Ending balance: $265, including $100 in SNAP Cash flow calendar worksheet Week of Month 1. Beginning balance: 2. What came in (Income / Benefits / Resources) SUN , 16 MON , 17 TUE , 18 WED , 19 THUR , 20 FRI , 21 SAT , 22 Total 3. What went out (Bills / Spending) SUN , 16 MON , 17 TUE , 18 WED , 19 THUR , 20 FRI , 21 SAT , 22 Total 4. Ending balance Beginning balance: $ Total sources: $ Total uses: $ Ending balance: $ Reproduce this sheet to manage your cash flow for additional weeks. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Improving cash flow checklist If you created a cash flow budget using Tool 2: Cash flow calendar, you may find that some weeks are not working out - you are not able to pay your bills on time. You can make sure you have the cash or resources at the right time by avoiding large periodic payments. Instead, make smaller payments throughout the month or year. This strategy is called smoothing out cash flow. Some of the suggestions below may not work for you. Check the ones that may be options for you, and use this checklist as a plan to put the ideas into action. Strategy list This might work Strategy Helpful tips Next steps Negotiate new due dates for bills to better line up with when you get income. Start with businesses where you have a long-standing relationship. Negotiate splitting a monthly payment into two smaller payments. For example, if a $700 rent payment is due the first of the month, see if you can make a $350 payment on the 1st and the 15th. Avoid large, lump sum or periodic payments by making monthly payments – car insurance, for example. You may have to pay a small fee to make this arrangement, but it may make handling these payments more manageable. Set up a savings account, and automatically deposit a monthly portion of large, lump sum payments into the account, so you are prepared when they are due. For this you need regular income and a bank or credit union account. Explore level payment plans for utilities. This is especially important in extreme climates – with high heating bills in the winter or high cooling bills in the summer. You often have to be a customer in good standing to qualify for these programs. Check with your local utility providers. Check to see if you qualify for an energy assistance program. Ask for a referral to the agency in your community that manages energy assistance programs. Explore debt consolidation. If you have many debts and good credit, consider exploring debt consolidation with a bank or credit union. This can make managing your cash flow easier because the monthly payment may be smaller – but it may take you longer to completely pay off the debts and cost more in the long run. Remember that if you consolidate your debts into your mortgage, falling behind on those payments could put your home at risk. Be sure you understand the terms and are not paying more interest with your new loan. Refinance your home for lower interest rates. If you have trouble with a home loan, talk with your lender about the possibility of a modification. If you refinance, be sure to do the math to ensure the new rate (including the fees) really does save you money over time. CFPB’s Owning a Home tool can help you understand the various steps in choosing a home loan: http://www.consumerfinance.gov/owning-a-home. Consider selling your vehicle and purchasing a less expensive one. If you have a high interest rate on your existing auto loan, investigate refinancing if interest rates have dropped. Getting an auto loan can be complicated. Learn how to prepare so you can save money, reduce stress, and get the auto loan that’s right for you by using the CFPB’s Auto Loans tool: http://www.consumerfinance.gov/consumer-tools/auto-loans. Check to make sure you’re withholding enough tax with your employer. This can help ensure you do not end up with a large income tax bill because your withholding was too low. If you have student loans, check to see if you have repayment options. See if you qualify for income-based repayment or other programs. The CFPB’s Paying for College tool can help you identify repayment options: http://www.consumerfinance.gov/paying-for-college/repay-student-debt. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. MODULE 6: Dealing with debt If you have a 10-minute session... If you have a 30-minute session... If you have multiple sessions... Tool 2: Debt-to-income worksheet Tool 1: Debt worksheet. Tool 5: When debt collectors call: Steps you can take Tool 3: Reducing debt worksheet.Tool 4: Repaying student loans What is debt? [start textbox] Student loan debt For many people, student loans make up a big portion of the debt they owe. Sometimes people borrow more than they will be able to afford, given the likely pay they will earn in their profession. Sometimes people get into trouble because they don’t understand the terms of their loans and the consequences of letting interest build up. [end textbox] Debt is money you owe another person or a business. When you owe someone money, you have a liability. When you owe money, you have to pay it back, sometimes in scheduled payments. You will often use money from your future income to make those payments. While borrowing money may give you access to something today, you may have monthly payments for months or years to come. This obligation can decrease your options in the future. Debt is different from credit. Credit is a complicated topic. For our purposes, credit is the ability to borrow money. Debt results from using credit. You can have credit without having debt. For example, you may have a credit card on which you don’t currently owe money because you paid the balance off and haven’t made new purchases with it. Good debt, bad debt? Sometimes people label debt as “good” debt or “bad” debt. Some debt can help you reach your goals or build assets for the future. People will often say that borrowing for your education, for a reliable car, to start a business, or to buy a home can be a good use of debt. But it’s not always that simple. For example, borrowing to further your education may be a good use of debt because earning a certification or a degree may lead to a better paying job and more job security. But if you take on the debt and don’t earn a certificate or degree that helps you get a better job, this student debt has set you back instead of helping you reach your goals. Taking out a loan to get a reliable car to get to and from your job can help you pay your bills and save for goals. However, if you borrow 100 percent of the car’s value, you may end up owing more than the car is worth. Or if you buy a more expensive car than you need, you’ll have less money for other bills each month. While it may get you to work, it might keep you from getting to your financial goals. Borrowing money to start a business may help create income for yourself and others. If the business fails, however, you may end up owing money and not having any income you can use to make the payments. Finally, taking out a loan to buy a home of your own may be a way to reach your personal goals. But if you are unable to keep up with the payments or if you end up owing more than your home is worth, that debt may set you back for a long time. That’s why even debt that many people consider “good” should be approached with caution. Some people consider loans such as credit card debt, short-term loans, and pawn loans “bad” debt. This is because they may carry high fees and interest, and when they have been used for things you consume (like meals out, gifts, or a vacation) they don’t help build assets. But, these sources of debt can help cover a gap in your cash flow if you have a way to repay them. So, there is no one type of debt that is “good” or “bad.” That’s why it’s important to first understand your goal or your need. Then you can shop for the credit you need, especially for large purchases like a car or a home, before you make your final decision on your purchase. Secured and unsecured debt Another way to understand debt is whether it is secured or unsecured. Secured debt is debt that has an asset attached to it. When debt is secured, a lender can take that asset if you don’t pay. Here are examples of secured debt: * A home loan – The debt is secured with the home you are buying. If you don’t pay your loan, the lender can foreclose on your home, sell it, and use the money from the sale to cover some or all of your loan. * An auto loan – The debt is secured with your car. If you don’t pay your loan, the lender can repossess (repo) your car and sell it to cover some or all of the loan. * A pawn loan – The debt is secured with the item you have pawned. The lender physically holds the item during the loan. If you don’t make the payment when it is due, the pawned item is eventually sold. * A secured credit card – The debt is secured by funds you deposit at a bank or credit union. Your credit limit will generally equal your deposit. For example, if you deposit $300, your credit limit will be $300. Unsecured debt does not have an asset attached to it. Here are examples of unsecured debt: * Credit card debt from an unsecured card * Department store charge card debt * Signature loans * Medical debt * Student loans Rent-to-own In a rent-to-own arrangement, consumers lease items such as furniture, electronics, or appliances and typically have the option to purchase. This can be done by continuing to make payments for a set period of time or by paying off the balance during the term of the lease. If you don’t make the payments made as agreed, the item can be taken back and you don’t receive a refund for any of the rental payments. If you do not pay these loans, since there is no asset to repossess, they often go directly to collections. For more information on student loan debt, see Tool 4: Repaying student loans. In Tool 1: Debt worksheet, you can list all of your debts and determine whether they are secured or unsecured. How much debt is too much? [start textbox] Debt-to-income ratio The debt-to-income ratio is a simple calculation: Total of your monthly debt payments ÷ monthly gross income (income before taxes) The result is a percentage that tells you how much of your income is going toward covering your debt. For example, if you have a debt-to-income ratio of 36 percent, you have 64 cents out of every dollar you earn to pay for everything else, including all of your living expenses and taxes. [end textbox] One way to know if you have too much debt is based on how much stress your debt causes you. If you are worried about your debt, you may have too much. A more objective way to measure debt is the debt-to-income ratio. The debt-to-income ratio compares the amount of money you pay out each month for debt payments to your income before taxes and other deductions. The resulting number, a percentage, shows you how much of your income is dedicated to debt - your debt load. The higher the percentage, the less financially secure you may be because you have less left over to cover everything else. Everything else is all of the other needs, wants, and obligations you pay each month that are not debt. These include: * Rent * Savings * Taxes * Insurance * Utilities * Food * Clothing * Childcare * Recurring healthcare expenses, including medications * Child support and other court-ordered obligations * Charitable contributions and gifts * Other family expenses In Tool 2: Debt-to-income worksheet, you will determine what your debt load is. And if you find out that it is higher than you want, you can use Tool 3: Reducing debt worksheet to make a plan to get out of debt. Rent-to-own arrangements In rent-to-own arrangements for consumer goods such as furniture, fixtures, electronics, or appliances, you lease the items and typically have the option to purchase the item by continuing to make payments for some specified period of time, or by paying off the balance during the term of the lease. Items rented/purchased this way tend to be more expensive than items purchased outright. If the payments are not made as agreed, the lessor/seller can take the item back. You have the option to return the item at any time. If you return the item or the lessor/seller takes it back, you do not get a refund of money already paid. In most states, these transactions are treated as leases, but in some states they are considered credit sales under state law. Co-signers: Agree to repay the loan If you co-sign a loan, you should understand the extent of your obligation. A co-signer is a co-borrower and has the same obligation to pay a debt as the borrower. In most cases a lender or creditor does not even have to first attempt to seek repayment of a debt from the borrower before seeking repayment from you as a co-signer. Co-signing a loan is not simply serving as a character reference for someone else: a co-signer is at risk of having to repay any missed payments. And, if the borrower defaults on the loan, you as a co-signer have generally agreed to repay the entire loan. Your credit score may also be affected, for example, if the borrower is late with or fails to make any payments. Co-signing a loan may also affect your ability to obtain a future loan because a creditor may take into account the increased amount of debt that you have as a result of co-signing for a loan. Lenders sometimes ask for a co-signer when they are concerned that a prospective borrower will not be able to repay a loan. The co-signer helps decrease a lender’s concern about repayment. If you decide to co-sign for a loan, you should read the terms of the loan and consider carefully before taking on the risk of co-signing. Special protection for active duty servicemembers There are special obligations on creditors under the Military Lending Act (MLA) for active duty servicemembers and their covered dependents. For example, as of October 3, 2016, the MLA caps certain credit costs on most types of consumer loans to an annual rate of 36 percent (referred to as the Military Annual Percentage Rate or “MAPR”). Included in the MAPR are costs like finance charges, credit insurance premiums or fees, and additional fees associated with credit, such as application or participation fees, with some exceptions. These restrictions apply to most types of consumer credit, such as credit cards (beginning October3, 2017), payday loans, and deposit advance products. There are some exceptions, such as residential mortgages and certain secured loans for the purchase of personal goods and vehicles. Credit agreements that violate the MLA are void from the start. Payday loans A payday loan – which might also be called a “cash advance” or “check loan” – is a short-term loan, generally for $500 or less. Payday loans generally come due on your next payday. You must give the lender access to your checking account by electronic debit (ACH) or write a check for the full balance in advance that the lender has an option of depositing when the loan comes due. Depending on your state law, other loan features can vary. For example, payday loans are often structured to be paid off in one lump-sum payment, but interest-only payments – "renewals" or “rollovers” – are not unusual. In some cases, payday loans may be structured so that they are repayable in installments over a longer period of time. These installments are typically due on the consumer's payday and with the lender generally having the ability to automatically collect payments from the consumer's bank account by means of depositing post-dated checks or ACH authorizations. Loans like this are offered at a traditional storefront payday lender or online. Some ways that lenders might give you the loan funds are providing cash or a check, loading the funds onto a prepaid card, or electronically depositing the money into your checking account. The cost of the loan (finance charge) may range from $10 to $30 or more for every $100 borrowed. A typical two-week payday loan with a $15 per $100 borrowed fee equates to an annual percentage rate (APR) of almost 400 percent. By comparison, APRs on credit cards can range from about 12 percent to 30 percent. State laws and other factors can influence how much you can borrow and the fees you are charged. Some state laws do not permit payday lending and in other states lenders may choose not to do business. How do payday loans work? Here is an example of how a 14-day payday loan generally works: [begin graphic] Borrower visits a storefront payday lender and completes an application. (There is generally no traditional credit check or consideration of ability to repay the loan; the borrower only needs a bank or credit union account, so he can write a post-dated check or provide electronic access to the account. Lenders periodically require a borrower to provide a paystub or benefits receipt.) Loans can also be taken out online. Borrower gets loan (the median loan amount is $350) and pays $10-$30 per $100 borrowed ($15 per $100 is the median fee for storefront payday loans). The borrower provides the lender with 14-day post-dated check for the amount of the loan + the fee ($350 + $52.50 = $402.50) or authorization to take the money out of the borrower's bank or credit union account. In 14 days, the loan is due. Often, the borrower does not have $402.50 to satisfy the debt. Instead he will pay the fee again ($52.50) and renew the loan for another 14 days. (Note: 14 days is used for example purposes only. Repayment may fall on the next payday or another minimum period as specified by state law.) Every 14 days, the borrower must pay the full amount or renew the debt by paying another fee of $52.50. The average borrower takes out five loans in a row before repaying (and not borrowing again shortly thereafter). Applied to this loan example, that would mean a fee of $262.50 to borrow $350. [end graphic] If you are thinking about using a payday loan, it’s important to be aware of common misunderstandings and the facts about payday loans. * Consumers only use payday loans for emergencies. Fact: Most borrowers do not use their first loan for emergency expenses. The Pew Charitable Trusts’ Payday Lending in America35 found that 69 percent of first-time borrowers use the loan to pay for regular bills, while only 16 percent use them for emergencies such as a car repair. * Borrowers can pay back the loan without reborrowing. Fact: While they may pay it back on time, many borrowers have to either immediately take a new loan or take another one in the same pay-period. The Pew Charitable Trusts36 found on average, payday borrowers are in debt for five months out of the year and pay an average of $520 in fees on top of the money they have borrowed. Avoiding debt traps If you are considering short-term loan products to meet an immediate need, it’s important to avoid debt traps so they don’t stop you from reaching your goals. Short-term loans that have to be paid back in just one payment or a couple of payments may lead to a debt trap. A debt trap is a situation in which people take a loan and have to repeatedly take new loans to make the payment on the first loan. For many people, it can become difficult to escape the cycle of borrowing to cover the loan payment and still be able to pay for other expenses like food, rent, and transportation. A debt trap can happen when people use short-term loans that have to be paid back in just a couple of payments, and they do not have the money to repay the loan and the finance charges when they are due. These loans have many things in common. They: * Are small dollar loans - generally under $500 * Must be repaid quickly - 14 days is a typical payday loan term, for example * Require you to give the lender your bank account information, so that the lender can automatically take payment from your bank account if you fail to pay back the loan Make sure you understand how your loan will be repaid and how much the loan could ultimately cost you before agreeing to use this form of credit. If you find that you cannot make your loan payment and cover your other expenses without taking a new loan, ask the provider for a repayment option that gives you more time to pay off the loan. Alternatives to high-cost credit There are ways to avoid the risk of a debt trap if you’re in a situation where you need money quickly. If you are short on cash, consider some alternatives: * Use your own emergency savings. * Use lower-cost short-term loan alternatives from a credit union or bank. * Borrow from a friend or family member. * Use a credit card – while it will increase your monthly card payment, it could be cheaper in the long run. * Negotiate for more time to pay if the loan is for a bill that is due. * Think about what you are borrowing the money for. Is it a need, an obligation, or a want? If it’s a want, consider whether it’s possible to spend less money for it, not purchase it, or wait until you have the money for it. Consider this scenario using different options for taking care of an emergency expense. It looks at the costs of paying for an unexpected auto repair with emergency savings, a credit card, or a payday loan. COST OF UNEXPECTED AUTO REPAIR= $350 Cost information Emergency savings Credit card Payday loan Amount needed $350 $350 $350 Annual Percentage Rate (APR) None 15.99 percent APR $15 for every $100 borrowed for 14 days – This means a 391 percent APR. Repayment terms None Must pay at least a certain amount each month – For the purposes of the example, we are choosing a fixed monthly payment of $25. Must pay back loan amount ($350) plus fee ($52.50) within 14 days Total interest and fees $0 $40 over 16 months $52.50 for every 14-day loan Time to repay None 16 months37 14 days Total cost of auto repair $350 $390 $402.50 The total cost of a payday loan depends on how long it takes you to save up to pay back the entire loan. In the example above, if you renew or roll over this loan four times, you would be in debt for 10 additional weeks and could pay up to $262.50 in fees plus the $350 you borrowed, for a total of $612.50. The average borrower takes out five loans in a row before repaying (and not borrowing again shortly thereafter). 38 Dealing with a debt collector [start textbox] When the phone rings… Sometimes it’s hard to know if a caller is really a debt collector. To avoid falling victim to a scam, ask for the name, number, and address for the debt collector and request information about the debt in writing. Be wary of sharing your personal information by phone. If a stranger asks for your Social Security number, date of birth, or bank account information, this can be a red flag. [end textbox] Often people find out they have a debt in collection when they receive a letter or phone call from a debt collection agency. Sometimes, they don’t remember owing a debt, so they are surprised when they find out that a debt is in collection. Debt collectors use persuasive techniques to get you to send in money to pay your debt. Before you send in money, you should confirm that you actually owe the debt. You should also confirm that the collection isn’t fraudulent and is legitimate. You may be able to confirm this information during an initial or follow-up discussion with the debt collector, but be careful of fraudulent debt collectors. Make sure that you recognize the debt, and confirm that you have not already paid it. Many people know they do owe the debt and are able to confirm that the collector is the right person to pay when they receive the first phone call or letter. If you are sure it is your debt and that you haven’t paid, paying right away can benefit you because it allows you to resolve the matter. If you pay the debt, it’s important to request a receipt so that you have a record confirming that you paid the debt. If you are uncertain that the debt is yours or that the collector has the authority to collect it, you can ask the debt collection agency to verify the debt. You can do this by sending a letter within 30 days of the debt collector’s providing you with certain information regarding the debt. That information includes the name of the creditor, the amount owed, and statements concerning how to dispute and seek verification of the debt. Use the sample letters in Tool 5: When debt collectors call: Steps you can take. Even if the debt may be yours, the Fair Debt Collection Practices Act (FDCPA) gives you the right to tell the debt collector to stop contacting you. Once you make this request, the collector can contact you to tell you that they will stop. Or they may notify you that they or the creditor plans to take other action (for example, file a lawsuit against you). After that, they must stop all contact by phone, mail, or otherwise. Stopping contact does not cancel the debt. The debt collector can still sue you and can still report your debt to the credit reporting companies (Equifax, Experian, and TransUnion). You can ask a debt collector to stop contact at any time, so keep in mind that you could ask them for more information first. What to do if a debt collector sues you [start textbox] Don’t ignore court documents You won’t be able to stop a lawsuit by a debt collector by refusing to accept service of the lawsuit or by refusing to sign the receipt that shows you got the lawsuit. By doing these things you’ll essentially be ignoring the lawsuit. If you ignore a lawsuit, it's likely that a judgment will be entered against you for the amount the creditor or debt collector claims you owe. Often the court also will award additional fees, including attorney fees, against you to cover collections costs. [end textbox] If you're sued, you should respond to the lawsuit. You can respond by filing a written “answer” yourself or through an attorney, but you must do so by the date specified in the court papers. When you answer the lawsuit by denying that you owe the debt or some part of it, the debt collector must show the court evidence that proves you owe the debt. Tip: If you dispute the debt or the amount owed, you should do that in the court action before the court makes a judgment. You may lose the ability to dispute that you owe the debt if a court issues a judgment against you. Judgments against you give creditors and debt collectors much stronger tools to collect the debt from you. Depending on your state’s laws, the creditor or debt collector may be able to: * Garnish your wages * Place a lien against your property (that may prevent you from selling it or getting a loan against your property) * Garnish or freeze the funds in your bank account * . While there is an appeal process after a judgment has been entered, you have a much better chance to fight a collection in court if you defend the case before the court decides the case and enters a judgment against you. In other words, don’t ignore the lawsuit – respond to the court documents. If you would like to speak with an attorney about a debt collection lawsuit, you can learn how to find a lawyer at http://www.consumerfinance.gov/askcfpb/1433. Your rights in debt collection Debt collectors may not harass, oppress, or abuse anyone they contact. They are not allowed to: * Call repeatedly or continuously to annoy, abuse, or harass you or any person at the called number * Use obscene or profane language * Threaten to use physical violence or to harm anyone’s reputation or property * Publish lists of people who refuse to pay their debts (Reporting correct information to a credit reporting company is legal.) * Call you without telling you who they are * Make false threats that they may have you arrested * Lie or mislead you It’s illegal for a debt collector to misrepresent the amount owed, to falsely claim to be an attorney, or to threaten to do things that cannot legally be done or that the debt collector has no intention of doing. Tip: It is a good idea to keep a file of all letters or documents a debt collector sends you, and keep a copy of anything you send to a debt collector. If you send in proof of payment, send only a copy and keep your original. Record the dates and times of your conversations and take notes about what you discussed. These records can help you if you have a dispute with a debt collector, meet with a lawyer, or go to court. You can submit a complaint to the Consumer Financial Protection Bureau about problems with debt collection, regardless of whether it’s a debt on a credit card, mortgage, or anything else. To submit a complaint, go to http://www.consumerfinance.gov/complaint or call 855-411-CFPB (2372). Medical debt39 For many Americans, a large portion of the money they owe is medical debt. Thirty-six percent of working age adults in America reported having trouble paying medical bills in 2014.40 Medical debt has increasingly been a major factor in the decline in credit scores for some individuals. And medical debt is becoming a greater factor in the decision to file for bankruptcy, as people find that they could make ends meet were it not for their medical debts.41 The majority of individuals who filed for bankruptcy due to medical debt had health insurance.42 Once people have medical debt, they are much less likely to seek medical care.43 This can increase the amount that patients spend on treatment because their conditions may become worse – and more expensive – by the time they get medical care. What are the factors that can lead to medical debt? Medical debt is almost always the result of someone suddenly becoming ill or injured. Even with health insurance, co-pays and deductibles can add up. This is one reason that emergency savings is important. Secondly, the cost of care is almost never fully known upfront. Unlike the cost of a house or car, where you should know what you will pay when you sign the loan agreement, when you accept responsibility for payment of your treatment at a hospital or other medical provider, you generally have no idea how much the treatment will cost. You may also not know your share of the cost. Invoices and bills may be confusing. In situations where you are treated by multiple health care providers, you may receive several bills rather than one itemized bill – and these bills may be sent over a period of weeks or months. This causes confusion because it may be harder to recognize the charges contained in each bill. You may hesitate before paying or delay payment because you have questions about the amount covered by insurance or the treatment you’re being charged for.44 Unless you know how much the treatment should cost, how much the insurer will cover, and how much you will be responsible for paying, it’s difficult to figure out whether you are being charged the right amount. This means that you must review each medical bill carefully and contact providers or insurers when you have questions.45 Uninsured individuals are generally charged more for services. Insurance companies negotiate discounts for services. This means that if you are uninsured, your bill will likely be higher than the bill that someone who has insurance receives for the same procedures and care. What you can do to avoid medical debt While there are no easy answers, there are specific things you may be able to do to lessen the impact of medical debt:46 * Get health insurance. When you choose a plan, think about both the cost of the monthly premium and the out-of-pocket costs, such as deductibles, co-pays, and co-insurance. While a plan with higher out-of-pocket costs may save you money on monthly premiums, if you or someone in your family needs to go to the doctor or hospital, you may have to pay more for those services than you would with a different type of plan.47 Visit https://www.healthcare.gov to find out more about your options for health insurance. * Get cost estimates up front before deciding whether to proceed. * Find out if there’s a prompt payment discount, which can be substantial. This may mean cutting back in other areas for a few months in order to pay the bill and secure the discount. * Ask for a discount. * Ask about “charity care” from the hospital before or immediately following treatment. Applications are usually available at the intake desk and online. Remember: you may have a limited time to request charity care, so submit your application as soon as possible. * If you are asked to put a hospital bill on a credit card, watch out. Many hospitals have some obligation to provide for charity care for those who can’t afford treatment. Once you put your hospital bill on a credit card, you might not be eligible for the charity care program. Some medical providers even offer a credit card for you to use at the provider’s office. Healthcare credit cards can have tricky terms, so make sure you know what you’re getting into before you decide to use one.48 * If you can’t afford to pay for the care even after charity care and discounts have been applied, take steps to work with the provider to set up a reasonable repayment plan. Get your repayment plan agreement in writing and request the following terms: * No interest on the debt * Monthly statements showing the amount paid and the outstanding balance * That the debt servicing stays with the healthcare provider and not be turned over to a third-party collection agency * An agreement that you do not have to make full payment right away if you are late or miss a payment on your plan. * If you’re insured as a Qualified Medicare Beneficiary (QMB) and you receive an incorrect billing statement charging you for services that are covered by Medicare, you may want to dispute the bill. Remember to explain in your written dispute that as a QMB you have no legal obligation to make further payment for these costs. You can find more information about disputing a debt and a sample dispute letter in Tool 5: When debt collectors call: Steps you can take. * Check your credit report to make sure debts you have paid are reported accurately and any errors are removed from your credit history. If the credit reporting company doesn’t respond, contact your state’s consumer protection agency, attorney general, or the CFPB. * If you do get sued by a medical service provider or hospital, respond. Get legal assistance from the legal aid organization in your community or other lawyer. Student loan debt The CPFB has a section on its website dedicated entirely to helping you plan for ways to pay for education and training after high school. In fact, these tools will help you think through the entire process of planning for and paying for school, including: * Choosing a loan * Comparing financial aid packages and college costs across more than one school * Managing your money while in college * Repaying your student loans If you have student loan debt, start with the Repay Student Debt section of the webpage, which can be accessed at http://www.consumerfinance.gov/paying-for-college/repay-student-debt. Should you use a debt settlement service? Debt settlement companies say they can renegotiate, settle, or in some way change the terms of your unsecured debt to a creditor or a debt collector. That may include reducing the balance, interest rates, or fees you owe. You can try to do this yourself by contacting your creditors. Debt settlement companies often charge expensive fees, and some charge illegal up-front fees. Some debt settlement companies advertise that they will help consumers, but they provide little or no assistance. You should avoid doing business with any company that promises to settle the debt if the company: * Charges any fees before it settles your debts. * Touts a “new government program” to bail out personal credit card debt. * Guarantees to you that it can make the debt go away. * Tells you to stop communicating with the creditors. * Tells you it can stop all debt collection calls and lawsuits. * Guarantees that the unsecured debts can be paid off for pennies on the dollar. Tool 1: Debt worksheet Before you can make a plan for your debt, you have to know where you stand. You can start by making a list of who you owe money to and how much you owe them. This is the first step in managing and reducing your debt. Be sure to include debts owed to friends and family, credit card companies, banks, department stores, payday lenders, for court-ordered child support payments, and to local, state, or federal government for things like property taxes, student loans, and back income taxes. To complete this worksheet, you may need to get all of your bills together in one place. For each debt, you will need to know: * The person, business, or organization you owe money to * The amount you owe them * The amount of your monthly payment, which includes the principal, interest payments, and any fees you may owe * The interest rate you are paying and other important terms Debt worksheet Use this worksheet to list who you owe money to and how much you owe them. This is the first step in managing and reducing your debt. Type of debt Lender Total amount borrowed Amount still owed If secured, by what? Interest rate Payment due date Total payment amount Notes Mortgage Vehicle loan Appliance / furniture loan Student loan(s) Credit card 1 Credit card 2 Payday loan Car title loan Other Other Total monthly debt payment: $ This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 2: Debt-to-income worksheet Your debt-to-income ratio is like your blood pressure. Your blood pressure measures the amount of pressure on your heart; your debt-to-income ratio measures how much pressure debt is putting on your budget. The debt-to-income ratio is a simple calculation. It is the total of your monthly debt payments divided by your monthly gross income. Gross income is the amount of your income before any taxes or other deductions are taken. The result is a percentage. That tells you how much of your income is going toward covering your debt. Another way of seeing the debt-to-income ratio is that it represents how much of every dollar you earn goes to cover your debt. For example, if your debt-to-income ratio is .45, or 45 percent, then 45 cents out of every dollar you earn goes toward your debt. This leaves you with 55 cents of every dollar to cover your rent, taxes, insurance, utilities, food, clothing, child care, and so on. In addition to using the debt-to-income ratio to measure how much pressure debt is putting on your budget, you can also use it as a benchmark if you take steps to reduce your debt. As you pay down your debts, your debt-to-income ratio will also decline. This means money is being freed up to use on other things like saving for your goals, unexpected expenses, and emergencies. Figure out your debt-to-income ratio Your total monthly debt payment (from Tool 1) Divided by your monthly gross income (Income before taxes) Equals your current debt-to-income ratio Understanding your debt-to-income analysis If your debt-to-income ratio is higher than a certain percentage, it could be difficult to pay all your monthly bills because so much of your income will be going to cover debts. A high debt-to-income ratio may also impact your ability to get additional credit because creditors may be concerned that you wouldn’t be able to handle their debt on top of what you already owe. The following debt-to-income ratio ranges are guidelines, not rules. In fact, many creditors set their own rules. What is an acceptable level of debt to one creditor may not be to another. * For renters: Consider maintaining a debt-to-income ratio of 15-20 percent or less. * This means that monthly credit card payments, student loan payments, auto loan payment, and other debts should take up 20 percent or less of your gross income. * If you have court-ordered, fixed payments, such as child support, count these as debt for this purpose. * For homeowners: Consider maintaining a debt-to-income ratio of 28-35 percent or less just for the mortgage (principal and interest), taxes, insurance, and condo or homeowner association fees. * For homeowners: Consider maintaining a debt-to-income ratio for all debts of 36 percent or less. * This means that if you have a mortgage and other debts, credit card payments, student loan payments, auto loan payment, and other loan payments – your debt-to-income ratio should be below 36 percent. Some lenders will go up to 43 percent or higher for all debt.49 * If you have court-ordered, fixed payments, such as child support, count these as debt for this purpose. If your debt-to-income ratio is above these limits, you may want to use Tool 3: Reducing debt worksheet to develop a plan to reduce your debt and lower your debt-to-income ratio. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Reducing debt worksheet There are two basic strategies to reduce your debt: the highest interest rate method and the snowball method. Look through the pros and cons for each method and decide what works best for you. Highest interest rate method Focus on the unsecured debt with the highest rate of interest, and eliminate it as quickly as possible, because it is costing you the most. Once it is paid off, focus on the next most expensive debt. PRO CON You eliminate the most costly debt first. In the long-run, this method can save you money. You may not feel like you are making progress very quickly, especially if this debt is large. Snowball method Focus on the smallest debt. Get rid of it as soon as possible. Once you have paid it off in full, continue with the payment, but now dedicate it to the next smallest debt. This way, you create “a snowball of debt payments” as you eliminate each debt. How? You keep making the payments, but you are redirecting them to the next debt as each debt is paid off. PRO CON You may see progress quickly, especially if you have many small debts. For some people, this creates momentum and motivation. You may pay more in total because you are not necessarily eliminating your most costly debt first. Debt reduction worksheet Step 1: Pick your debt reduction strategy: ? Highest interest rate method: List your debts from highest interest rate to lowest. ? Snowball method: List your debts from smallest to largest in terms of the amount you owe. Step 2: In the column labeled Extra Payment, list the extra payment you will dedicate to the payment of debts until you have it paid off. Step 3: When this debt is paid off, allocate the entire payment (monthly payment + extra payment) you were making to the next debt on the list. Lender Total amount borrowed Amount still owed Monthly payment Extra payment Payment due date Date paid off in full This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 4: Repaying student loans Repaying student loans There are two general types of student loans: federal student loans and private student loans. Federal student loans are loans funded by the federal government. Older federal student loans may have been made by private lenders and guaranteed by the federal government. No federal student loans have been made by private lenders since 2010. Private student loans are nonfederal loans made by a lender such as a bank, credit union, state agency, or a school. With both federal and private student loans, delinquent payments will impact your credit report and may result in collections. Private student loans do not generally offer the widely available, flexible repayment terms or borrower protections featured in federal student loans. Federal student loan repayment There are many options for paying back federal student loans. Do not ignore student loan paperwork - nonpayment and delinquency reduces options for repayment plans, as many repayment plans require loans to be in good standing to qualify. Not all loans are eligible for all repayment plans. Below is a summary of some of the repayment options. * Standard repayment – Most borrowers start with this payment plan. This repayment plan has fixed payments of at least $50 per month for up to 10 years. * Income-based repayment (IBR) – Payment is limited to 10 or 15 percent of discretionary income, which is the difference between your adjusted gross income and 150 percent of the Federal Poverty Guidelines. Payments change as income changes, but will never be higher than the standard payment amount. The length of repayment can last up to 25 years. After 20 or 25 years of consistent payment (you have missed no payments or caught up with payments), the loan will be forgiven. You may have to pay income tax on the portion of the loan that is forgiven. To qualify for this repayment plan, you must be able to show partial financial hardship. A similar IBR plan is available to borrowers who received their first Direct Loans on or after July 1, 2014. The monthly payment cannot exceed 10 percent of your discretionary income, and the maximum repayment term is 20 years. This option is available only for borrowers with federal Direct Loans. * Pay As You Earn (PAYE) – Payment is limited to 10 percent of discretionary income, but will never be higher than the standard payment amount. Payments change as income changes, and the length of repayment can last up to 20 years. After 20 years of payments, the loan is forgiven, and taxes may be owed on the amount forgiven. To qualify for PAYE, you must be able to show partial financial hardship. PAYE is only available for borrowers with federal Direct Loans. * Revised Pay As You Earn (REPAYE) – Payment is limited to 10 percent of discretionary income, but may be higher than the standard payment. Payments change as income changes, and the length of repayment can last up to 20 or 25 years. After 20 or 25 years of payments, the loan is forgiven, and taxes may be owed on the amount forgiven. REPAYE is only available for borrowers with federal Direct Loans. * Graduated repayment – The payment is lower the first year and then gradually increases every 2 years for up to 10 years. * Extended repayment – The payment is fixed or graduated for up to 25 years. The monthly payments are lower than the standard or graduated repayment plans, but you will pay more interest over the life of the loan(s). You must have at least $30,000 in outstanding Direct Loans to qualify for extended repayment. You may also qualify for deferment or forbearance in certain circumstances. In deferment, payment of both principal and interest is delayed. If you have a subsidized federal loan, the government pays your interest during the deferment. If you have an unsubsidized loan, you must pay the accruing interest or it will build up. When interest builds up on student loans, it may be capitalized, which means it becomes part of the principal loan amount that you owe. This means you will ultimately end up owing more and paying interest on the interest. Deferments are only granted for specific circumstances including: * At least half-time enrollment in college, trade school, a graduate fellowship, or a rehabilitation program for individuals with disabilities * Unemployment * Certain periods of military service * Times of economic hardship * Peace Corps service Forbearance means that you stop paying or pay a lesser amount on your loan for up to 12 months.50 Like deferment, interest continues to build up during forbearance, even on subsidized federal loans. When applying for a different repayment option, be sure to continue making your loan payments under your current payment schedule until you receive written notification that you have been approved. This ensures your loan continues to be in good standing. Finally, you may also apply for loan forgiveness, cancellation, or discharge in certain situations, including: * Total and permanent disability * Death (someone would apply on your behalf after you die) * Closed school * Teacher loan forgiveness ( if you are a teacher working in certain educational settings) * Public Service Loan Forgiveness (after making 120 consecutive loan payments while working in the public service sector) Except in the above circumstances, it is very difficult to eliminate federal student loan debt, even in bankruptcy. If you are interested in filing for bankruptcy and have federal student loans, you may want to talk with a bankruptcy lawyer. Private student loan repayment Private student loan repayment options are generally more limited. Private lenders may offer forbearance options and alternative repayment plans, including plans where payments start low and gradually rise over the loan term (known as “graduated payment plans”). Some private lenders may also modify loans based on borrowers’ financial circumstances, on a case-by-case basis. Finally, lenders may agree to cancel or forgive debt upon the death or disability of a borrower. To learn more about these options, contact your student loan servicer. It’s important to note that unpaid federal student loans can be collected in special ways, but private student loans cannot. For instance, the Department of Education can garnish some federal benefits, such as Social Security and certain Veterans’ Assistance benefits without a court order. If you are afraid that your federal benefits could be garnished to pay off federal student loans, consider talking to a lawyer. Although private student loan collectors cannot garnish your federal benefits, they can sue you in court to try to collect the remaining debt. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. Tool 5: When debt collectors call: Steps you can take Ask for more information If you have questions about the debt, ask the debt collection agency for specific information before you send money or acknowledge the debt. You can do this by sending a “verification letter,” asking the debt collector to provide you with certain information regarding the debt. The letter you receive from the debt collector should contain a notice about your right to request more information about the debt. The notice should include the name of the creditor, the amount owed, and statements concerning how to dispute and seek verification of the debt. The sample letter below asks for more information about a debt. * Read the information below. * Edit the letter as needed to fit your situation. Delete any bullets that don’t apply to you. * Print and send the letter as soon as you can. Keep a copy for your records. Send this letter as soon as you can and, if at all possible, within 30 days of when a debt collector first provides you with certain information regarding the debt, including information about the validity of the debt. Most often, this information will be sent to you in writing. Even if 30 days have passed, you can still ask for the information. If you ask in writing before 30 days have passed, a debt collector has certain legal responsibilities to give you some information. If the debt collector makes vague statements about what will happen if you do not pay, read their response to your letter carefully. Consider replying to ask for more details. Debt collectors are prohibited from deceiving you by threatening to take actions they can’t take or don’t intend to take. But if they tell you that they intend to sue you, you should take that seriously. State laws have statutes of limitations, or limited time periods when creditors or debt collectors can file a lawsuit to collect a debt. These periods of time can be two years or longer; the period of time varies by state and by the type of debt. In some states, affirming the debt or making a partial payment on the debt can restart the time period. You may want to consult an attorney in your state to know when the statute of limitations expires before making any payment on a debt. If you would like to speak with an attorney about a debt collection lawsuit, you can learn how to find a lawyer at http://www.consumerfinance.gov/askcfpb/1433. Sample letters You can use the sample letters below to respond to a debt collector. You can also find additional sample letters for disputing a debt, specifying how you wish to be contacted, or requesting that the collector contact you through your lawyer, at http://www.consumerfinance.gov/askcfpb/1695. A debt collector may not have a legal obligation to provide some or all of the information you seek, even if you request it within the 30-day period. If the collector doesn’t give you what you request, that doesn’t necessarily mean the debt collector has broken any laws or has given up a legal right to collect from you. Sample letter to a debt collector asking to verify the debt You can ask a debt collector to stop contacting you The following example letter tells the debt collector to stop contacting you unless they can show evidence that you are responsible for this debt. Stopping contact does not cancel the debt. So, if the debt collector still believes you really are responsible for the debt, they could still take other action. For example, you still might be sued or have the status of the debt reported to one or all of the three national credit reporting companies (Equifax, Experian, and TransUnion). You may not want to make a request to stop contact if the debt is your home mortgage. Sample letter Your benefits are protected from garnishment If a debt collector sues you in court and gets a judgment, then it can ask your bank or credit union to turn over money in your bank account. This is called garnishment. Social Security, VA benefits, and certain other federal benefits are generally protected from garnishment to pay a debt to a private person or company. If you receive these benefits, and they are your primary source of income, tell a collector when the collector first contacts you. When a collector knows that it cannot garnish your federal benefits, the collector may be less likely to sue you to collect the debt. There are exceptions for the collection of child support and debts due for federal or state taxes. For more information about protections for income from Social Security or VA benefits – and some limited exceptions – visit http://files.consumerfinance.gov/f/2015050_cfpb_consumer-advisory-your-benefits-are-protected-from-garnishment.pdf or AskCFPB at http://www.consumerfinance.gov/askcfpb/1981. What you can expect Even if your income is protected, a collector can still continue to communicate with you, and ask you to pay the debt. It may also offer a payment plan or attempt to settle the debt. If your benefits are protected from garnishment, you may have better options – so remember to let the debt collector know if your primary source of income is federal benefits. You can use this letter to tell a debt collector that you receive income from Social Security or VA benefits. Sample letter This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. MODULE 7: Understanding credit reports and scores If you have a 10-minute session... If you have a 30-minute session... If you have multiple sessions... Tool 1: Getting your credit reports and scores Tool 2: Credit report review checklist Tool 3: Improving your credit reports and scores. Tool 4: Keeping records to show you’ve paid your bills People sometimes confuse the words debt and credit because they are both connected to borrowing money. Debt is different from credit. Credit is a complicated topic. For our purposes, credit is the ability to borrow money. Debt results from using credit. You can have credit without having debt. For example, you may have a credit card on which you don’t currently owe money because you paid the balance off and haven’t made new purchases with it. When you use your credit and have loans to pay, your track record in making your payments becomes part of your credit history. Companies called credit reporting companies pull this history into credit reports. A credit report is a type of a consumer report. It looks at some of your bill paying history, public record information, and a record of how often you have applied for credit. Your credit reports contain information about how you have used credit. For example, it shows how much credit you have, how much of your available credit you are using, whether you have made your payments on time, and whether debt collectors have reported that they are attempting to collect debt that you owe. There are other types of consumer reporting companies that track and report your history of paying bills for a specific product or service and other transactions with certain types of businesses. The information they collect depends on the company and its specialty industry. We’ve put together a list of many of these companies at http://files.consumerfinance.gov/f/201604_cfpb_list-of-consumer-reporting-companies.pdf. Credit scores are calculated using the information in your credit report, and many lenders use them to decide how much money they can lend you and how much interest to charge. Why do credit reports and scores matter? Some people say credit reports and scores don’t matter to them because they never plan to get a loan. But the information in your credit report is also used to make a lot of other decisions about you. A good credit history can help you: * Get and keep a job. * Get and keep a security clearance for a job, including a military position. * Get an apartment. * Get insurance coverage. * Get lower deposits on utilities and better terms on cell phone purchase plans. * Get a credit card. * Get a better credit score, all of the information used to calculate your score comes from credit reports. If any of these things are important to you, improving your credit report can help you get them. Having a positive credit history and good credit scores can open doors for you. Not having a positive credit history or good credit scores can create obstacles for you and end up costing you more money in terms of the price you will pay for loans, credit cards, and other services. That’s why it’s important to pay bills on time and pay attention to what’s in your credit report. Scores are calculated based on the information in the report – so at least once a year, take the time to make sure the information in your report is accurate. You can get one free copy of your report every 12 months at: https://www.annualcreditreport.com. What is in a credit report? Credit reports are created by credit reporting companies, which are types of consumer reporting agencies. They collect information about consumers from many sources, including “furnishers” – people or companies that provide information about consumers’ credit, banking, payment, and other behavior. Credit reporting companies organize information from furnishers into reports and sell these reports to businesses so they can make decisions about whether or not to lend to you. The nationwide credit reporting companies that maintain and sell credit reports are Equifax, Experian, and TransUnion. Each of these companies is likely to have a file on you if you have a credit history. Your files at all three are likely to be similar, but there may be differences. Sometimes information about you is not provided to all three nationwide consumer reporting companies. A credit report contains five sections. These sections include: * Header/identifying information: This includes your name and current address, as well as other information that can be used to distinguish or trace your identity, either by itself, like your Social Security number, or when combined with other personal information, including date and place of birth. This information may not be complete - all of the jobs you have held, for example, may not be listed. But what is listed should be accurate. A credit report does not include some personal information such as race or ethnicity. * Public record information: This section includes public record data of a financial nature, including consumer bankruptcies, judgments, and state and federal tax liens. Records of arrests and convictions generally do not appear on your credit file, but other types of consumer reporting agencies, such as employment background screening agencies, often include them. Other public records that usually do not appear in credit reports are marriage records, adoptions, and records of civil suits that have not resulted in judgments. * Collection agency account information: This section will show if you have or have had any accounts with a collection agency and the status of those accounts. * Credit account information: This section may include accounts, also referred to as tradelines, you have now (open accounts) or that you had before (closed accounts) with creditors. This may include: * Company name * Account number * Date opened * Last activity * Type of account (for example, mortgage, auto loan, credit card) and status * Whether you are a co-signor, authorized user, or guarantor * Date closed, if the account is no longer open * Credit limit * Items as of date (any amount currently owed and whether you are current or late with payments) and the balance * Whether you have a past due amount and the number of payments that were 30, 60, and 90 days late * Whether the account was charged off * The date information was reported to the credit bureau Some accounts may not be listed, especially older accounts or those you have closed, or accounts for which information was not provided to that specific credit reporting company. So there may be inconsistencies across credit files and credit reporting companies in the contents of this section. It is important to make sure that the accounts listed do, or did at one time, belong to you. * Inquiries made to your account - Companies look at your credit report when you apply for credit or when they review your account. There are two types of inquiries – hard and soft. Hard inquiries result when you apply for credit and a lender reviews your credit report, which is listed as an “inquiry” on your report. Soft inquiries result from marketing offers, reviews of your credit history by one of your existing creditors, and your requests for a copy of your report when you obtain your own report. Only hard inquiries are listed as an “inquiry” when your report is provided to others – they do not see soft inquiries. Consumer reporting agencies collect this information and sell it to other businesses, which use it to make decisions about you. How do they use this information to make decisions? Businesses that use this information believe that how you have handled credit in the past is a good predictor of how you will handle it in the future. If you have struggled with managing your credit in the past (especially the recent past), they believe you are likely to struggle again. And other people that make decisions about whether or not to do business with you, such as landlords, employers, insurance companies, and utility companies, may see these struggles as an indication of how dependable you will be in the future (as a tenant, employee, or customer). Negative information In general, negative information can be reported to those who request your credit report for only a specified period of time: seven years for most items. A bankruptcy can stay on your credit report for 10 years. For civil suits and judgments, the information can be reported on your credit report for seven years or until the statute of limitations has expired, whichever is longer. There is no limit to the length of time that positive information can stay on your credit report. Even though credit reporting companies and other companies called specialty consumer reporting companies cannot include information that is beyond the limits provided in the Fair Credit Reporting Act (FCRA) in most consumer credit reports, they may continue to keep the information in your file. Why? Because there is no time limit in terms of reporting information (positive or negative) when you are: * Applying for credit of $150,000 or more * Applying for life insurance with a face value of $150,000 or more * Applying for a job with an annual salary of $75,000 or more Example credit report Each of the three nationwide credit reporting companies - Equifax, Experian, and TransUnion - has its own presentation format. This is an example of a credit report that highlights the key sections you will find in all three companies’ credit reports. It is an example credit report and not based on the format of any one credit reporting company. Each company’s format varies in layout, look, and level of detail reported. Example document: This includes your name, current address, as well as other information that can be used to distinguish your identity by itself like your Social Security number, or when combined with other personal information, including date and place of birth. File number: 12345678 Date issued: 9/30/2013 Personal information Name: Miguel Smith SSN: XXX-XX-1234 Other names: Miguel S Smith, Miguel Simon Smith Date of birth: 12-1-1980 Telephone number: 555-555-1000 Addresses reported: 457 First Street, Littletown, MI 09876. 13476 Avenue A, Big City, WI 43526 Employment data reported Employer name: Riviera Restaurants Position: Manager Date reported: 3/2013 Hired: 11/2010 Employer: Freer Chiropractic College Position: Food services Date reported: 6/2008 Hired: 3/2008 Public Records This section includes public record data of a financial nature, including consumer bankruptcies, judgments, and state and federal tax liens. Big City Wisconsin Court Docket# 200900001467. 515 C St, NE, Big City, WI 43528 Date filed: 8/3/2015 Type: Chapter 7 Bankruptcy Amount: $11,987 Responsibility: Individual Big City Municipal Court Docket #200700056712. 4326 Fourth Street, SW, Big City, WI 43530 Date filed: 4/14/2015 Type: Civil Judgment Amount: $4,763 Responsibility: Individual Plaintiff: Bank of Big City Plaintiff attorney: Lisa Perry Collections This section will show if you have any accounts with a collection agency and the status of those accounts. Reliable collections (Y76381): Account #3629 Original creditor: ABC Megastore Amount placed: $2,500 Opened: 7/2/2013 Account type: Open Balance: $1,000 Responsibility: Individual Account information This section includes accounts you have now or that you had before with creditors. Littletown Bank (B62391), Account #2010004637 Balance: $14,285 Pay status: 30 days past due Date updated: 8/30/2013 Account type: Automobile High balance: $16,500 Responsibility: Individual Past due: $395 Date opened: 2/5/2013 Terms: $395/month 48 months Payment received: $349 Account type: Automobile Last payment made: 7/5/2013 8/5/13 7/5/13 6/5/13 5/5/13 4/5/13 3/5/13 Balance $14,285 $14,680 $14,988 $15,294 $15,598 $15,901 Scheduled Payment $395 $395 $395 $395 $395 $395 Amount Paid $0 $395 $395 $395 $395 $395 Past Due $395 $0 $0 $0 $0 $0 Rating 30 OK OK OK OK OK Bank of Wisconsin (B42394), Account #543298760192XXXX51 Balance: $3,603 Pay status: Paid or paying as agreed Date updated: 8/30/2013 Account type: Revolving; Credit Card High balance: $9,869 12/09 Responsibility: Individual Credit limit: $10,000 Past due: $0 Date opened: 6/1/2008 8/2013 7/2013 6/2013 5/2013 4/2013 3/2013 2/2013 1/2013 12/2012 Balance $3,683 $3,764 $3,848 $3,933 $4,020 $4,109 $4,200 $4,293 $4,388 Scheduled Payment $147 $151 $154 $157 $161 $164 $168 $172 $176 Amount Paid $147 $151 $154 $157 $161 $164 $168 $172 $176 Past Due $0 $0 $0 $0 $0 $0 $0 $0 $0 Rating OK OK OK OK OK OK OK OK OK Continued… 11/2012 10/2102 9/2012 8/2012 7/2012 6/2012 5/2012 4/2012 3/2012 Balance $4,485 $4,585 $4,686 $4,790 $4,896 $5,005 $5,115 $5,227 $5,345 Scheduled Payment $179 $183 $187 $192 $196 $200 $205 $209 $214 Amount Paid $179 $183 $187 $192 $196 $200 $205 $209 $214 Past Due $0 $0 $0 $0 $0 $0 $0 $0 $0 Rating OK OK OK OK OK OK OK OK OK Inquiries made to your account This section includes a record of any time a company requests information from a credit-reporting agency about you. Inquiries that display to others The following companies have received your credit report. Auto Loan Store 90 President Lane, Big City, WI 43529 Requested on: 6/2013 Super Store 100 First Street, Anytown, IA 78691 Requested on: 12/2012 Promotional inquiries The following companies received your name, address and other limited information about you so they could make a firm offer of credit or insurance. They did not receive your full credit report. These are not displayed to others and do not affect your credit scores. Dress for Success Fashion House 31 Fashion Lane, Big City, WI 43530 Requested on: 7/2012 EZ Loan Store 220 4th Avenue, Littletown, MI 09876 Requested on: 4/2013 Account review inquiries The companies listed below obtained information from your consumer report for the purpose of an account review of business transaction. These are not displayed to others and do not affect your credit scores. Bank of Wisconsin 457 State Street, Big City, WI 43532 Requested on: 3/2013 Terms used on credit reports can be confusing. Here are definitions credit reporting companies sometimes use of some key terms used on credit reports: Term Explanation Authorized user A person permitted to use a credit card account, but who is not responsible for the account – The payment status of the account (positive or negative) is shown on the credit report of both the authorized user and the account’s owner. Payment status The history of the account including on-time payments as well as delinquencies and other negative items Delinquent An account that has not been paid on time and is late – Generally delinquencies are expressed as being 30, 60, 90, or 120 days or more delinquent. Default Default means that the consumer is not meeting the requirements agreed to when he took out the loan. An account that has been delinquent (late) for several 30 day billing cycles is generally considered to be in default. Charge off When a business decides an account is uncollectible – However, the consumer is still responsible for the debt, and collections will likely continue on this debt. A debt is charged off when it is so delinquent that the lender can no longer consider it as something that it is likely to be able to collect. This doesn’t mean that the debt itself is erased – the consumer still legally owes the debt and it can be collected. In many cases the right to collect the debt is taken over by a collection agency. Closed date The date an account is closed – An account can be closed by the business or the consumer. If there is still a balance when the account is closed, the consumer is still responsible for paying this. Chapter 7 bankruptcy A legal process in which the consumer’s assets are used to pay off creditors – Any eligible debts not paid through the assets are discharged. This will be in the public records section of the credit report. Chapter 13 bankruptcy A legal process in which a consumer enters into a payment plan to pay off creditors using future income – These are arranged by the courts. Once the payment plan is complete, remaining eligible debts are discharged. This will be in the public records section of the credit report. Discharge When the court releases a consumer of responsibility for a debt as part of the bankruptcy process Dispute A right consumers have to challenge and require investigation of information they believe is incorrect on their credit reports – Consumers must initiate the dispute process. End user The business or individual that receives a credit report Information provider or furnisher A business or individual that reports information to a credit reporting company Disputing errors on credit reports If you find something wrong on your credit report, you should dispute it. You may contact either the credit reporting company (most often TransUnion, Equifax, or Experian) or the company that provided the incorrect information (the information furnisher). It can be a good idea to contact both. You will need to explain what you think is wrong and why. If you have evidence (a receipt for payment, copy of a cancelled check, etc.) you can include a copy of this and a copy of the part of your credit report that contains the disputed items. You may want to circle or highlight the disputed items. If you submit your dispute in writing rather than online, never send original documents - only send copies. You may want to send this information with your letter using certified mail return receipt requested. This will give you notification of when the credit reporting company and information furnisher receive your dispute letter and provide proof of notification. Tool 2: Credit report review checklist includes an example of a dispute letter. Whether you file your dispute directly with the creditor (the information furnisher) or the credit reporting company, they generally have 30 days to investigate your claim. They get another 15 days if the consumer submits additional information, after the original dispute letter. Five business days after completing the investigation, they must send you written notice of the results. Either way, if the dispute results in a business changing the information it furnished about you, the business must notify various credit reporting companies that it shared the information with. And, if you filed your dispute with a credit reporting company, it must fix your file and notify the furnisher of the error. You can also submit a complaint to the Consumer Financial Protection Bureau. See Tool 1: Submitting a complaint to the CFPB in Module 9: Protecting your money for more information. What are credit scores? Credit scores are numbers created by mathematical formulas that use key pieces of your credit history to calculate your score at a moment in time - like a photograph. Companies that make credit scores each use their own complicated mathematical formulas to do this. The information used in this formula comes from your credit reports – such as information on the number and type of loans and other forms of credit you have used and are currently using, whether you’re making your payments on time, and whether you’re 30 days or more late (delinquent) on any of these accounts. Credit scores provide a standardized way for businesses that offer credit to understand the risk that you may have difficulty paying back a loan. The current common credit scoring formulas are designed to predict whether someone is likely to fall behind on loan payments for 90 days or more. For these scores, the higher the number, the less risky you are predicted to be. There are multiple companies that calculate and sell credit scores. Credit scores vary because different score companies use the information stored by the three major credit reporting companies in different ways. These companies may create different credit scores for different types of credit. Scores produced by different companies may also vary because they don’t always share the same score range. Sometimes the three nationwide credit reporting companies store slightly different information used to calculate the score, which can also contribute to differences. As a result, you have more than one credit score. Different banks, credit card companies, and lenders may use different credit scores based upon information from different credit reporting companies. These scores may differ from each other, sometimes significantly. This can make deciding which credit score to purchase, if any, confusing for consumers. Also some credit card companies are providing a score for free. How are credit scores calculated? Credit scores are calculated based on the information in your credit report. Even though different credit scores have different mathematical formulas, they all use the information from your credit report. So, while some pieces of information in your credit reports may be more important or less important, depending on which company is calculating your score, the key is to understand the information in your credit reports. FICO (calculated using formulas made by Fair Isaac Corporation) and VantageScore (calculated using formulas made by VantageScore Solutions) are two of the most commonly used credit scores. Detailed information about the way that FICO and Vantage scores (and other credit scores) are calculated is not public. These scores typically range from 300 to 850. A FICO score above 700 is considered good by most businesses, and the scores considered the best are 750 and higher. While there are certain similarities and many differences in the credit score formulas, here is information that FICO makes available to the public on what goes into its scores.52 Figure 1: WHAT GOES INTO FICO SCORES? [start graphic] Pie cart titled Figure 1: What goes into FICO scores? Payment History: 35%, Amounts owed: 30%, Length of credit history: 15%, New credit: 10%, Types of credit used: 10%. [end graphic] Payment history tracks whether you are paying your bills on time and as agreed. This is the biggest factor in your FICO scores. Paying bills late, not paying bills at all, and having bills that go to collections will cause your scores to drop. The impact on a score from a single late or missed payment decreases over time. Paying your bills on time can help increase your score. Debts that go to collections and to judgment will cause it to fall. Amounts owed include the amount owed that you are paying down as agreed. It also includes your credit utilization rate. Your credit utilization rate is how much of your available credit you are using. As the amount you owe goes up as a portion of your credit limit, your score will drop. Length of credit history is the next factor that impacts your scores. Your score increases the longer you have a credit history. The more established credit accounts you have, the “thicker” your credit file will be. A thick credit record can provide strong evidence of how you have used credit and your payment behavior. If you have just one or only a few credit accounts, you will have a “thin file.” New credit is tracked by measuring inquiries about you for credit. If there are too many inquiries about you, the model interprets this to mean you have a high demand for credit. Because this may be an indicator of risk, your scores may drop. When you are shopping for credit, however, you can compare offers for a home, car, or private student loan. FICO and most other models give you a short window of time – generally 14-45 days – when multiple inquiries for the same type of product will be considered as only one inquiry. For most credit scoring models, these types of inquiries do not have a significant impact on your score. And your score is not affected at all when you check your credit report yourself (such as at https://www.annualcreditreport.com). Finally, types of credit used are considered. Your FICO scores increase if you have both credit cards (revolving credit) and loans (installment credit such as a mortgage or car loan) in good standing. Generally, it is considered a positive to have a mortgage, an auto loan, and not too many credit cards. Scores may also be provided by VantageScore, another score provider. Like the FICO scores, the method used to calculate VantageScore credit scores is not public. Similar to FICO, VantageScore explains generally how your credit history, credit usage, and other actions can influence the scores it calculates. Figure 2: WHAT GOES INTO VANTAGESCORES?53 [start graphic] What influences your VantageScore credit score? Payment History: Extremely influential, Age and type of credit: Highly influential, Percent of credit limit used: Highly influential, Total balances/debt: Moderately influential, Available credit: Less influential, Recent credit behavior and inquiries: Less influential. [end graphic] How much of your available credit are you using? This is your credit utilization rate. The amount of credit you’re using compared to the amount you’ve been given is your “credit utilization rate.” If you want to maintain your credit score, many experts advise keeping your use of credit at no more than 30 percent of your total credit limit. That’s because credit scoring formulas penalize you for using too much of the credit you have available to you. This means your credit score may drop because you have used a significant percentage of the revolving credit available to you. For example, you may have a high percentage of your credit limit charged on a card, and you want to qualify for better rates on new credit. In this case, you may want to reduce your balance amount by paying down your credit card before you apply for new credit. The easiest way to understand credit utilization is through an example: If someone only has one credit card with a $5,000 credit limit, and she has charged $3,500 on this card, her credit utilization rate is calculated as follows: $3,500 (amount charged to credit card) divided by $5,000 (credit limit) = .7 or 70 percent If she sets a goal of lowering her revolving utilization of this card to 25 percent or less, her revolving balance should be no more than: $5,000 (the credit limit) multiplied by .25 (25 percent) = $1,250 You don’t know when a credit card company will report your balance to credit reporting companies. If at any time during the month your total charges are higher than the credit limit the utilization scoring model is based on, you run the risk of lowering your credit score. This means that the amount you have charged on a credit card can affect your credit score even if you pay that amount down at the end of the month. Are you “credit invisible”? A limited credit history can create real barriers if you are looking to access credit. You might want credit to start a business, or buy a house or car, or you might just want credit that comes with better terms, including at a lower interest rate. That’s because a limited credit history can make it very difficult for a lender to use a credit scoring model to calculate a score for you. The CFPB reported in 2015 on the number of U.S. consumers who have little or no credit record at the one of the nationwide credit reporting companies. The report highlighted two groups of people. The first group is consumers without a credit history - “credit invisibles.” The second is the “unscorable,” which means that they have a thin file and insufficient credit history (9.9 million people) or they have stale files and lack any recent credit history (9.6 million people).54 The report found that: * About one in 10 U.S. consumers (or 26 million people) can be considered “credit invisible” because they do not have any credit record. * 19 million consumers have unscorable credit records. About 8 percent of the adult population has credit records that are considered unscorable based on a widely-used credit scoring model. * Consumers in low-income neighborhoods, as well as Black and Hispanic consumers, are more likely to be “credit invisible” or to have an unscorable record. Almost 30 percent of consumers who live in low-income neighborhoods can be considered credit invisible, and an additional 15 percent have records that are unscorable.55 If you are “credit invisible” now and want to change that, you can. If you don’t have a credit history and want to build one, see Tool 3: Improving your credit reports and scores for information on steps you can take to build a credit history. Tool 1: Getting your credit reports and scores Start with your free annual report You can get one free copy of your report from each of three nationwide credit reporting companies every 12 months. Some states and territories allow for an additional free report each year: Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, Vermont and Puerto Rico. You can get an additional free report if you: * Are unemployed and plan to look for employment in the next 60 days * Are receiving public assistance * Have reason to believe that your credit file is inaccurate due to fraud * Have had a consumer reporting agency place a fraud alert on your credit file (based on your good faith suspicion that you have been the victim of fraud, including identity theft) * Have had a consumer reporting agency place a fraud alert on your credit file after submitting an identity theft report * Have had adverse action taken (you have been denied credit, employment, insurance, etc.) because of information in your credit report – In this case, you have 60 days to request your report. How to order your free credit report To order through the website, visit https://www.annualcreditreport.com. You will complete a form with basic information (your name, Social Security number, address, etc.). You will select the report(s) you want - Equifax, Experian, and/or TransUnion. Then for each report, you will be asked a series of security questions such as: former addresses, amount of a loan you have, phone numbers that have belonged to you, counties you may have lived in, etc. Note that each credit reporting company has a slightly different process to “authenticate” you, or make sure you are you who say you are. If you are unable to answer these questions, request your report using one of the alternative methods listed below. Once the site has confirmed your identity, you can download and save a PDF version of your report, print the report, or both. Be sure you do this in a safe and secure location. Avoid doing this on public computers, such as those at a library. Alternative methods to get your free annual credit report You may find that you will have to use another method. Order by phone: 877-322-8228. You will go through a verification process over the phone. Order by mail: Download the request form from https://www.annualcreditreport.com. Print and complete the form. Mail the completed form to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281 Track when you have printed or received your credit reports Source of credit report Equifax PO Box 740241 Atlanta, GA 30374. http://www.equifax.com Experian http://www.experian.com TransUnion LLC PO Box 1000 Chester, PA 19016. http://www.transunion.com Date printed or received Beware of imposter websites offering free credit reports. Some companies offer free credit reports, but you may have to buy another product or service to get it. DO NOT use a search engine (Google or Yahoo, for example) to find the annual credit report site. Go directly to https://www.annualcreditreport.com. If you are under 18, you should not have a credit report unless: * You are an authorized user or joint owner on an account * You are an emancipated minor * Your state law allows you to enter contracts below the age of 18, and you have done so * You have student loans * You have been the victim of identity theft or credit or financial fraud Currently, only Experian allows minors (once they reach the age of 14) to obtain their own credit reports. Call 888-397-3742 to get your file. With TransUnion, you can send an email to childidtheft@transunion.com to see if a credit file exists. Or you can visit the TransUnion website and complete the Child Identity Theft Inquiry Form. If the minor has a legitimate credit history (he or she is the joint owner of or an authorized user on an account), then a parent or guardian must order the report. For the Equifax report, call 877-784-2528. Currently, an adult - the parent or legal guardian - must order the credit report on behalf of the minor.56 Getting your credit scores Unlike your credit report, which you can get at no cost to you, you usually have to pay if you want to buy a credit score. There are certain instances in which you are entitled to a credit score for free, for example if you are denied a loan on the basis of your credit score. In addition, one of your lenders, such as your credit card company, may provide you a credit score for free on your statement.57 There are many credit scores you can purchase in the marketplace. The type of credit score most used by lenders is a FICO score. Another score also used by lenders is the VantageScore, which you can purchase through Experian or TransUnion. Any score you purchase will most likely differ from the credit score used by a bank, lender, or other third-party to assess your creditworthiness. You cannot know ahead of time whether the scores you purchase will vary a little or a lot from a score used by a bank, lender, or other third-party. You should not rely on credit scores you purchase exclusively as a guide to how creditors will view your credit quality. Knowing what is in your credit report and fixing errors is more important to building your credit than buying a credit score. Just buying a credit score may not tell you what you need to know before you apply for a loan. Tracking when you ordered scores To order your FICO score visit http://www.myfico.com. There may be a cost for each score you order. These companies also offer other credit reporting and monitoring services for a fee. Equifax score: Date: Experian score: Date: TransUnion score: Date: You have the right to get a free credit score if: * You apply for a mortgage loan, and the lender uses your credit score. The lender must send you a notice telling you this and include your score. * Your application for credit is turned down, and the lender used your credit score. You will get a notice (disclosure) from the provider explaining this with your credit score. * You get less favorable terms from a lender than the terms available to most people who get credit from that lender, and the lender used your credit score as part of determining your loan terms. You will get a notice (disclosure) from the provider explaining this with your credit score. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 2: Credit report review checklist Once you get your credit report, you will want to review it carefully. Ordering it is not enough - you have to read it. Credit reports may have mistakes. And if there are mistakes, you are the one who is most likely to find them. If you find a mistake, you should dispute it. Use the following worksheet to review each section of your credit report. Do this for each credit report you get throughout the year. Then, keep the completed checklist with your credit report. Your credit report contains a lot of personal and financial information. Be sure to keep any copies of your credit reports in a safe and secure place. If you do not want to hang on to your credit reports, be sure to shred them before getting rid of them. Credit report review checklist Today’s date: Name of credit reporting company: Yes Check to make sure these items are correct Is your name correct? Is your Social Security number correct? Is your current address correct? Is your current phone number correct? Are the previous addresses they have listed for you correct? Is your marital status listed correctly? Is the employment history they have listed for you accurate? Is everything listed in the personal information section correct? Is there anything listed in the public record information? Is it correct? Highlight the information you think may not be correct. Review each item under the credit account (trade account) section. Are the accounts on the list still open? Are all of the current balances correct? Are accounts where you are an authorized user or joint owner listed? Are zero balances recorded for debts discharged in bankruptcy? For debts paid in full? Are you listed as a co-signer on a loan? Is this correct? Are accounts that you closed listed as “closed by the consumer”? Is negative information reported on each credit account correct? Look for late payments and missed payments. Highlight those items you think are not correct. Are any accounts listed more than once? Check to make sure the same account is not listed multiple times in the collections section. Is old negative information still being reported? If yes, highlight the information that has exceeded the negative information reporting limit, which is usually seven years. Do you suspect that you have been the victim of identity theft after reviewing your credit reports? If you find something wrong with your credit report, you should dispute it. To correct mistakes, it can help to contact both the credit reporting company and the source of the mistake. You may file a dispute not only with the credit reporting company, but also directly with the source of the information. Explain what you think is wrong and why, and include the same supporting documentation. Except in very limited circumstances, the furnishers and credit reporting companies must investigate. You may file your dispute online at each credit reporting company’s website. If you file a dispute by mail, your dispute letter should include: Your complete name, address, and telephone number; your report confirmation number (if you have one); and the account number for any account you may be disputing. In your letter, clearly identify each mistake separately, state the facts, explain why you are disputing the information, and request that it be removed or corrected. You may want to enclose a copy of the portion of your report that contains the disputed items and circle or highlight the disputed items. Include copies (not originals) of any documents you have that support your position. You may choose to send your letter of dispute to credit reporting companies by certified mail, return receipt requested, so that you will have a record that your letter was received. You can contact the three nationwide credit reporting companies online, by mail, or by phone. Experian Equifax TransUnion Contact online https://www.ai.equifax.com/CreditInvestigation http://www.experian. com/disputes http://www.transunion.com/credit-freeze/place-credit-freeze Contact by mail Download and complete the dispute form: http://www.equifax.com/cp/MailInDislcosureRequest.pdf Mail the dispute form with your letter to: Equifax Information Services LLC P.O. Box 740256 Atlanta, GA 30374 Address provided on your credit report or mail your letter to: Experian P.O. Box 4000 Allen, TX 75013 Download and complete the dispute form: http://www.transunion.com/docs/rev/personal/InvestigationRequest.pdf Mail the dispute form with your letter to: TransUnion Consumer Solutions P.O. Box 2000 Chester, PA 19016 Contact by phone Phone number provided on credit report or 800-864-2978 Phone number provided on credit report or 888-397-3742 800-916-8800 Keep copies of your dispute letter and enclosures. If you suspect that the error on your report is a result of identity theft, visit https://www.identitytheft.gov for information about identity theft and steps to take if you have been victimized. This will include filing a fraud alert and possibly filing a security freeze. Whether you file your dispute directly with the creditor (information furnisher) or the credit reporting company, each generally has 30 days to investigate your claim. They get another 15 days if you submit additional information after the initial dispute letter. Five business days after completing the investigation, they must send you written notice of the results. If the dispute results in a business changing the information it furnished about you, the business must notify various credit reporting companies that it shared the information with. And, if you filed your dispute with a credit reporting company, it must fix your file and notify the furnisher of the error. You can also submit a complaint to the Consumer Financial Protection Bureau at http://www.consumerfinance.gov/complaint or by calling 855-411-2372. Steps to filing a dispute checklist Yes Steps to filing a dispute Write a letter to the credit reporting company that sent you the report. You can find a guide to writing the letter, along with a template, at http://www.consumerfinance.gov/askcfpb/2029. Provide the account number for the item you think is not accurate. For each item, explain concisely why you believe it is not accurate. If you can, include copies of bills or cleared checks (money order stubs) that show you have paid them on time. Provide your address and telephone number at the end of the letter, so the credit bureau can contact you for more information if necessary. Make a copy of your letter before you send it to the credit reporting company. Send the letter. You may choose to use certified mail with return receipt to have proof of when the letter was received. The credit reporting company or the creditor generally has 30-45 days to investigate your claim. Be sure to keep copies of everything you send to the credit reporting companies, including the dates you sent the items. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Improving your credit reports and scores Your credit report shows information about how you have used credit, such as how much credit you have, how much of your available credit you are using, whether you have made your payments on time, and whether anyone has sent a loan you owe to a debt collector. A credit score is a number that is used to predict how likely you are to pay back a loan. Your credit score starts with the information about you from your credit report. A mathematical prediction formula is applied to this information. That prediction formula, which is called a scoring model, creates a number, and this number is your credit score. You will have more than one credit score because there are many different credit scoring models. To get and keep a good credit score: * Pay all your loans and bills on time. * Make sure information in your credit report is correct. * If you currently have access to credit, don’t use too much of the credit that is available to you. If you want to qualify for credit, focus on improving your reports and scores now. Use this worksheet to ensure you are focusing on the areas that matter most. You may want to talk with a credit or housing counselor to build your plan to improve your credit report and scores. See the Resources list at the end of this module for links to get you started in finding an accredited counselor. Strategies for improving credit reports and scores list I’m doing this Strategy for improving credit reports and scores Next steps Obtain your free credit reports annually. Online: https://www.annualcreditreport.com. By phone: Call 877-322-8228. By mail: Go to https://www.annualcreditreport.com to print the form. Use Tool 1: Getting your credit reports and scores. Review your credit reports for accuracy. Use Tool 2: Credit report review checklist. Dispute errors found on your reports. Use Tool 2: Credit report review checklist. Understand your credit scores. Review the content of Module 7 on What are credit scores?. Pay bills on time. It is the most effective way to improve your credit reports and credit scores. Review the tools in Module 4: Paying bills and other expenses. Keep the amount of credit available that you use low. (While there is not an “official” published limit, many financial experts recommend keeping the amount of credit used between 25 and 30 percent58 of the credit available.) Keep unused credit card accounts open. This brings down your overall credit utilization rate. However, if your goal is paying down debt and you may be tempted to use the card, keeping the account open may not help you reach your goal. If you close some credit card accounts and put most or all of your credit card balances onto one card, it may hurt your credit score if this means that you are using a high percentage of your total credit limit. Develop a plan to take care of outstanding judgments or liens. You may be able to negotiate with a creditor or collector. Review Module 6: Dealing with debt. Diversify credit sources. Get on a payment plan for medical debt, and make sure your healthcare provider is not reporting the balance as outstanding. If you have medical debt, you may be eligible for assistance with your bills. Call your provider to find out. Pay down old debt or debt in collections. This may improve your credit history – your report – if the debt is currently being reported on any of your credit reports. However, paying off old debts may not impact your credit score. Before you make a payment on debt that you have not paid for three or more years, you may wish consult with a credit specialist or attorney regarding the statute of limitations on the debt. If the statute of limitations period has passed, making a payment may re-start the clock on creditors’ ability to file a lawsuit to collect the debt, depending on the debt and state law. Use credit building products: Secured credit cards – This can be a way to build a positive credit history. But because credit limits tend to be low with these cards, be sure to watch your credit utilization rate and not get too close to using the full limit. Credit builder loans – Visit a bank or credit union to find out about these products. With some credit builder loans, you make monthly payments first, and receive the loan amount when it is paid off. This helps you avoid taking on debt while you build a positive payment record. These loans can be very effective in creating new history and can have a positive impact on your reports and scores. Some non-profit organizations provide access to secured cards or credit builder loans. Be sure to ask about the terms, just like you would ask a bank or credit union for details about its products. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that the CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 4: Keeping records to show you’ve paid your bills When building or rebuilding credit – or managing finances more generally – it is important to create a paper trail. What does this mean? It means you must keep records. You keep records so you can prove you have: * Paid a bill on time that a creditor has reported late * Paid a debt that a creditor has reported unpaid * Sent a letter to a debt collector who has claimed it was not received * Insurance coverage * A warranty for a cell phone * Paid your rent in cash (receipt) Record keeping can be difficult. Here are a few steps to getting your record keeping system in place. * Get a calendar or use Tool 2: Bill calendar in Module 4: Paying bills and other expenses. Write onto the calendar when regular payments are due. * Hang this calendar in a place you will see it daily or in your money management spot. * Find a money management spot in your home. It can be a desk, a file cabinet, a drawer, or a crate. * Get folders or envelopes. You can even re-use large envelopes you receive in the mail. Give each category a color. For example, you could identify them like this: * Income in green folder * Saving and Asset Investments in yellow folder * Expenses in blue folder * Debt in purple folder * Credit reports in beige folder Put insurance policies, deed to home, title to car, birth certificates, warranties for big items like washer and dryer, and other permanent documents in another folder. Consider storing this folder in a portable fireproof box - portable so you can take it if you need to evacuate your home and fireproof so it is protected in case of a fire. Alternatively, you can store these in a safe deposit box at a bank or credit union. * Put information in the right folder during the month. * Receipts from grocery store --> blue folder * Slip from deposit into savings --> yellow folder * Checking account statement --> yellow folder * Paycheck stub --> green folder * Credit card bill --> purple folder * Dispute letter to credit reporting company and return receipt --> manila folder * Once a week, sit down to pay bills. Always check them for accuracy first. Check your account balances. Total up spending so far in each category if you have a budget. * Then take all of the records for the month and store them together. Either: * Keep them in the folders, put a big rubber band around them and put a label with the month on it, OR * Take the information out of each folder and put it in a big envelope and write the month on it. By doing this, you keep all of the information for each month together. For bills paid online or via mobile device or taxes filed using electronic filing (e-filing), print out confirmation pages and put those into your folders. Keeping records checklist Yes Important record Tax returns and supporting documentation, including e-fling confirmations Paycheck stubs Bank records Debts – loan agreements, statements of payment Insurance documents Monthly credit card statements – paper or electronic Receipts – for anything that you need to include on your taxes, for any big purchases, for anything you may want to return. Technology and appliance instructions and warranties Medical bills and anything related to prescriptions Wills, power of attorney, or any other important legal document Birth certificates, marriage license, death certificates Retirement documents Documentation of money owed to you This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that the CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. MODULE 8: Money services, cards, accounts, and loans: Finding what works for you If you have a 10-minute session... If you have a 30-minute session... If you have multiple sessions... * Tool 1: Know your options: Money services, cards, accounts, and loans Tool 2: Ask questions: Choosing where to get what you need * Tool 3: Money services and banking basics Tool 4: Opening an account checklist * Tool 5: Money transfers and remittances: What you need to know Finding and choosing financial products and services Financial products and services are the tools that you use to store money, make payments and purchases, send money to someone, and pay for things over time – like savings accounts; checking accounts with debit cards; prepaid, payroll, government benefits and EBT cards; credit cards; money transfers and bill payment services; and loans. Banks and credit unions may come to mind when you think about places to get financial products and services. Other places also offer them. Here are a few: * Department stores – credit cards or charge cards * Automobile dealers – car loans * Retail superstores, convenience stores, grocery stores, and other stores – check cashing, bill payment, money orders, prepaid cards, and money transfers * Check cashers and payday lenders – check cashing, money transfers, bill payment, money orders, prepaid cards, and short-term loans * Online companies – money transfers, bill payment services, loans, financial management tools, online “wallets” or “accounts” * Mortgage companies – loans for homes * Commercial tax preparers – refund anticipation checks (RACs) and prepaid cards * Consumer finance companies – loans * U.S. Postal Service – money orders and money transfers The federal government makes student loans, offers savings bonds, and issues federal benefits on a prepaid cards to recipients who do not have or choose not to use their own bank account or prepaid card. One important key to finding the right financial service provider is figuring out the reason you need one. You may want a safe and secure place to put the money you are saving for your goals, unexpected expenses, or emergencies. You may want a convenient way to pay your bills. You may be looking for a loan to buy a car. Or, you may want to repair or build your credit history to improve your credit scores. In other words, you may want to first identify your needs, then choose the product or services that will satisfy those needs. Selecting a financial service provider can be hard because there are so many choices. Use Tool 1: Know your options: Money services, cards, accounts, and loans to help you figure out the primary reason you need financial products or services. Then use Tool 2: Ask questions: Choosing where to get what you need to ensure you get the right questions answered before using a financial service provider. If you are not clear about the different kinds of financial service providers or the products and services they offer, use Tool 3: Money services and banking basics to learn more about them. If you want to open a bank or credit union account, use Tool 4: Opening an account checklist. If my employer offers me a payroll card, do I have to accept it? No. Your employer can’t require you to receive your wages on a payroll card. Your employer has to offer you at least one other alternative. For example, some employers will give you a choice between direct deposit into your bank account, direct deposit to a payroll card, and a paper check. Others may not offer paper checks. Depending on the state you work in, your state’s laws may also require that your employer make additional choices available. Your employer or the card issuer also must provide you with the card’s terms and conditions. Knowing the fees that you might be required to pay will help you compare your choices. When you compare a payroll card to another prepaid card, or to a bank account, find out for each product about the fees you could be charged, including fees for ATM withdrawals, purchases, paper statements, customer service calls, and checking your account balance by phone or ATM. Some cards charge an inactivity fee if you do not use them. If you start using a payroll card and you don’t like it, you can ask your employer to switch you to another option. So before you agree to receive your wages on a payroll card, make sure you understand the fees you may be charged for using it. Managing a bank or credit union account If you decide to open a bank or credit union account, it’s a good idea to learn in advance the rules related to that account and to find out how much you could be charged in fees. This helps by allowing you to make the most of your money. Each bank and credit union has its own rules and fees, so it’s a good idea to shop around first. No one likes to see fees reducing their checking account balance every month. You may not be able to eliminate all the fees charged by your bank or credit union. Here are six tips for reducing the number or amount of fees you pay: 1. Keep track of your balance to avoid spending more than you have available or going below your minimum balance requirement. For example: * Make note of every time you use your debit card, write a check, or pay a bill online. * Check your balance at the ATM before you withdraw cash. * Ask if your bank or credit union offers low-balance warnings via e-mail or text alerts. * Ask your bank or credit union when the money you deposit will be available for your use. * Ask your bank how it processes debits to your account (debits are when money is taken out of your account). * Know that your charges and withdrawals are not always processed in the order in which you make them. * Monitor your account online, with text alerts, or with a mobile app. You can set up alerts for low-balance to help you avoid fees. 2. See if you can get a low-fee or free checking account. Many financial institutions waive monthly service fees if you maintain a minimum balance or sign up for direct deposit. Ask about accounts you may be eligible for, such as a senior or student account, or just a basic checking account with a low minimum balance requirement and a limited number of “free” checks and withdrawals. 3. Watch out for overdraft fees. Overdrafts occur when you spend or withdraw more money than is available in your checking account and your bank or credit union pays the difference and charges you a fee. Many banks and credit unions will charge you overdraft fees for each transaction you make without enough money in your account, with each one costing you between $30 and $35. Banks and credit unions may also charge nonsufficient funds fees when they return or reject a check or bill payment that otherwise would have overdrawn your account. 4. Use your financial institution’s ATMs. When you use ATMs in your bank’s network, there is generally no charge. Many banks or credit unions offer ATM locator maps on their websites and mobile apps. 5. Open and review all of the mail from your bank or credit union. Review account statements every month to make sure they are correct and report errors immediately. You have the right to receive written notice if your minimum balance requirement, fees, or other account terms change. 6. Never write a check if you don’t have sufficient funds in your account. This can create a number of problems for you. Your bank or credit union will charge you a fee. The merchant may also charge you a fee. Bouncing a check or overdrafting your account is expensive and can reduce your ability to access financial services in the future. Overdraft Coverage Programs An overdraft occurs when you spend or withdraw more money than is available in your checking account. Banks or credit unions provide an advance to cover the shortfall in your account and charge you a fee. This is sometimes called overdraft coverage or overdraft protection. On the surface, overdraft programs might seem like a good deal - they prevent people from being charged bounced or returned check fees by the financial institution and the merchant. But in reality, this protection can be expensive. The bank or credit union will charge you a fee and may also charge you every day that your account is overdrawn. You must pay the bank or credit union back for the amount it covered, as well as pay all the fees. You can’t be charged a fee for an overdraft with your debit card (including at the ATM) unless you “opt in” to overdraft coverage and fees. This means you have to actively choose to have it. If you have opted in previously, you can opt out now. If you do not opt in, your bank or credit union will generally decline your card (without charging a fee) if you attempt to withdraw cash or make a purchase that exceeds your balance. Even if you don’t opt in, however, you can still be charged an overdraft fee if a recurring payment you have set up with your debit card number or via a direct billing arrangement overdraws your account. You can also still be charged overdraft fees for check or online payments that exceed your balance. If you want to have a checking account and don’t want to pay overdraft fees, use these approaches: * Keep track of your balances. Remember, not all deposits are available for use immediately. Signing up for direct deposit may make your paycheck available sooner. * Sign up for low balance alerts that you can receive via email or text at your bank, credit union, or with your prepaid card provider. * Know when regular electronic transfers, such as rent payments or utility bills, will be paid. * Link your checking account to your savings account, credit card, or line of credit. If you run out of money in your checking account, the bank will pull money from the place you’ve chosen. The fee for this is usually lower than an overdraft fee, but it is still cheaper not to overdraft at all. Your federal benefits are protected from garnishment If a creditor sues you for a debt and wins a judgment, then it can ask your bank or credit union to turn over money from your account. This is called a “garnishment.” Generally, money in your bank account can be garnished. But certain funds in your bank or credit union account are protected from garnishment. Federal law requires banks to automatically protect Social Security, VA benefits, and certain civil service retirement benefits from garnishment if they are direct deposited into your account. Other income may also be protected from garnishment by private creditors. Examples include state public assistance, federal student assistance, payments from a disability insurance policy, and income from a retirement or pension plan. In some states, state unemployment compensation may also be exempt. (There are some exceptions to this rule, which are explained below.) Here’s how the automatic protection under federal law works. Your bank protects two months’ worth of benefits If a creditor tries to garnish money in your account, your bank must check your account history for any Social Security or VA benefits direct deposited to your account in the last two months. The bank must protect two months’ worth of benefits from garnishment and let you use that money, even if the bank freezes other funds. If your account has more than two months’ worth of benefits, the bank can freeze that money. Here is an example: [start textbox] Benefits on a prepaid card Many people receive Social Security or VA benefits on a prepaid card. If your benefits are loaded onto a Direct Express card or to a prepaid card of your choosing, they are still automatically protected from garnishment just like money in a bank account. [end textbox] * If you receive $1,000 in Social Security each month, your bank will see that $2,000 in Social Security was direct deposited in the last 2 months. The bank must allow you to access up to $2,000 in the account. Those funds cannot be frozen or garnished. * But if you receive $1,000 in Social Security benefits by direct deposit each month, and you have $3,000 in your account, the bank can freeze or garnish $1,000 of the $3,000. The bank must give you access to the remaining $2,000 so you can continue to pay bills and withdraw this cash as usual. Exception for government debts, child support and spousal support Social Security and Social Security Disability Insurance (SSDI) can be garnished to pay government debts, such as back taxes or federal student loans, and debts for child or spousal support. Some other benefits, such as Supplemental Security Income (SSI), are protected from garnishment – even to pay a government debt or child or spousal support. If the bank freezes your money If your bank freezes any money in your account, it must send you a notice of garnishment. These procedures are controlled by state law, and state laws vary greatly. You will need to respond to the notice of garnishment to claim any other exemption provided by your state law or under federal law. You can then ask a judge to decide whether your money should be protected from garnishment based on factors such as the source of your income and the applicable state or federal exemption. It is very important for the judge to know that your money comes from Social Security or VA benefits before the judge decides whether your money should be turned over to the creditor. You can seek help from a lawyer. If you can’t afford a lawyer, you may be eligible for free legal help. Check your state’s Legal Aid Directory at http://lsc.gov/find-legal-aid. Automatic protections don’t apply to paper checks If you receive Social Security or VA benefits by check and then deposit the check into your bank account, the bank does not have to protect two months’ worth of benefits in the account automatically. This means that your entire account balance could be frozen and you’ll need to go to court to prove that income comes from protected federal benefits and should not be garnished. To take advantage of the automatic protections for direct deposited Social Security and VA benefits, you can sign up to have these benefits directly deposited to your bank account or loaded onto a prepaid card. Money you owe to the bank or credit union Under certain circumstances, your bank or credit union may be able to take money out of or “set-off” your account to collect a debt. For example, if you have an overdue loan payment or an overdraft fee with the bank or credit union that holds your account, it may attempt to collect that charge from your account. Whether or not this is legal depends on the type of account and institution, your depositor agreements, and federal and state law. Additionally, if your account contains money protected or exempt from garnishment due to federal or state law, there may be a question about whether those funds can legally be taken from your account. While many states protect from set-off certain benefits, such as Social Security or unemployment compensation, other states do not. Check with your bank or credit union for information about their policies. If your account is set-off and you are unable to resolve the issue, you can also seek help from a lawyer. If you can’t afford a lawyer, you may be eligible for free legal help. Check your state’s Legal Aid Directory at http://lsc.gov/find-legal-aid. Consider finding legal help in your state Consider talking with a lawyer in your state about other state and federal laws that may help protect your money and other assets from garnishment. Federal and state laws may protect the money you receive from other sources from garnishment. This may include money you receive from a pension or retirement plan, federal student loans, child support, or spousal support payments. Other laws in your state may also protect your money and assets, too. To learn more about how they may be protected, consider finding legal help. You may even qualify for free legal help. You can use our sample letter in Tool 5: When debt collectors call: Steps you can take, in Module 6: Dealing with debt to tell a collector that your Social Security or VA benefits are protected from garnishment. But using this letter doesn’t substitute for consulting a lawyer. If your debt is owed to the government (for example for taxes or student loans) or is for child support, there are different rules. In this case the creditor may be able to garnish a percentage of the federal benefits in your bank account. If this happens to you, you may want to consult a lawyer. Using a prepaid card A prepaid card is a card that you use to access money that is loaded onto the card in advance. There are different types of prepaid cards. With most cards, you can spend the money on the card for daily expenses or withdraw cash from an ATM. You can also choose to have your wages directly deposited on most cards. Prepaid cards have different features, functions, and fees. To decide which prepaid card is right for you, learn about your choices. Here are some questions to consider when choosing a card. What type of card is right for you? There are different types of prepaid cards. You can make the best choice about which card is right for you when you understand key differences. An open-loop prepaid card is a card with a network logo on it. Examples of networks are Visa, MasterCard, American Express, and Discover. These cards can be used at any location that accepts that brand. Most prepaid cards have a network logo on them. A closed-loop prepaid card is a card you can only use at certain locations. For example, a closed loop card might be good only at a specific store or group of stores, or on your public transportation system. Most closed-loop cards do not have a network logo on them. A reloadable prepaid card is a card you can add more money to. This type of card is sometimes called a General Purpose Reloadable Card, or GPR Card. Some cards start out as non-reloadable, but can be reloaded once you complete a registration process. Some prepaid cards are “non-reloadable,” meaning you can’t add more money to them. A payroll card is a prepaid card you get from your employer that you receive your paycheck on. A government benefit card is a prepaid card used by a government agency to pay certain government benefits, such as Temporary Assistance to Needy Families (TANF) and unemployment insurance. Some college ID cards are also prepaid cards. Some colleges offer a “closed-loop” card, which you can only use to pay for things on campus. Other schools offer an “open-loop” card, which you can use at any retail location that accepts that network brand. What fees will the card charge? Read the information about the card carefully to understand all of the fees. For some types of cards, important information is included on or inside the card package. Consider how you plan to use the card and shop for the best deal. There are different types of fees a card might charge. Some of the activity your card provider might charge you for includes: * Monthly usage * Transaction fee * Account or card reload * Bill payment * ATM withdrawal * Balance inquiry * Additional card * Inactivity * Stop payment * Lost or stolen card replacement * Card cancellation Not every card charges each type of fee. Some cards charge a monthly fee but not per- transaction fees. Other cards may skip the monthly fee but charge you transaction fees each time you use the card. What protections does the card have? You may have different protections for fraud or errors, depending on the prepaid card you choose. With some cards, such as payroll cards, you have legal rights to get your money back after unauthorized charges or errors. For other types of cards, you might get protection if the card provider chooses to offer it. Check your cardholder agreement to find out about your specific card’s terms and conditions. Effective October 1, 2017, the CFPB’s new rule will extend new legal protections to most prepaid cards. Your rights to recover money taken from your prepaid card account depend on what type of card it is, what your contract promises, and how quickly you report the loss after you discover it. Reporting the loss or wrong charge right away can help to stop additional losses from your account. Network-branded prepaid card providers usually give some protections for loss or theft, but you should check your card provider’s website or your cardholder agreement to find out the specifics. If your card is a payroll card or a certain type of government benefit card, or if you receive federal payments onto your card, you may have certain error resolution rights that protect you from unauthorized transactions under federal law. You likely have the protections provided by the networks as well. Call your card issuer right away if your card or PIN is lost or stolen or if you see unauthorized charges. It’s a good idea to register your prepaid card. Registration typically provides you with more protections if your card is lost or stolen. Some prepaid card providers may require you to register your card and verify your identity when you buy or receive the prepaid card, or soon after. The card provider might limit your use of the card until the card is registered. Know your rights You have certain rights under the law or under the terms of your cardholder agreement. It’s important to know your rights and how to exercise them. You have the right: To choose how you get paid Your employer may offer to pay you on a prepaid card they choose, called a payroll card. Your employer can’t require you to receive your wages on a payroll card. The employer must also offer you at least one other way to get paid – for example, a paper check or direct deposit to an account of your choice, such as a bank account or your own prepaid card. Some states allow your employer to require that you be paid electronically, but you always have the right to choose the account where the money is sent. To choose how you receive some government benefits Depending on the kind of benefit you receive, you may have a choice of how you receive your government benefits. For example, for some types of government benefits, you may have a choice between receiving the benefits on a government-arranged prepaid card or directly deposited into your bank account or your own prepaid card. Other types of government benefits are only provided using a government-arranged card. To fraud and error protection with payroll cards and certain government benefit cards You have protections in case of an error or unauthorized transactions if you are paid through a payroll card arranged by your employer, receive certain types of government benefits through a government-arranged card, or receive any payments from the federal government onto your own prepaid card. For example, you generally can’t be held responsible for unauthorized charges or other errors on these cards, if you report them immediately. In addition, the card provider may be required by federal law to credit the disputed amount to your account while investigating the problem if the investigation will take longer than 10 business days. You should call your card provider as soon as you notice your card is missing, or notice charges you don’t recognize. Depending on your card, you may have: * Protections for loss, theft, or errors. Depending on the type of card you get, you may have protections in case of an error or unauthorized transaction. For example, cards with a Visa, MasterCard, American Express, or Discover logo typically have some protections. Check your cardholder agreement to find out about your specific card’s terms and conditions. Effective October 1, 2017, the CFPB’s new rule will extend new legal protections to most prepaid cards. * Insurance if the bank issuing your card goes out of business. For bank accounts, if your bank goes out of business, the government guarantees you will get all of the money in your individual bank account back, up to $250,000, through FDIC (Federal Deposit Insurance Corporation) insurance. Credit union accounts have similar insurance through the National Credit Union Administration (NCUA). Your prepaid card may also have FDIC or NCUA insurance; check your cardholder agreement to find out. Checking your prepaid card balance There may be several ways to check your prepaid card account balance. You should check the terms of your prepaid card program to find out what methods are available to check your account balance and whether there is a cost for those methods. Automated customer service: You often can call customer service (the number is usually on the back of your card) to check your balance, and if you get your balance through the automated phone system, you usually won’t be charged a fee. Live customer service: You can call customer service to check your balance, but some prepaid card providers will charge you a fee to talk with a live agent. Online/Mobile: Some cards allow you to check your balance online or with a mobile app. You may need to set up an account with the prepaid card provider to check your balance online. Usually this service is free. Text message: Some prepaid card providers will give you your account balance through text message free of charge. Like with any other text message, you may pay a fee to your cell phone provider for receiving the text. ATM: Some prepaid cards allow you to check your balance at an ATM, but you may pay a fee for this service. Paper statement: You can sometimes request a paper statement or account history that shows your balance and recent transactions, but many prepaid card providers that offer paper statements charge a fee for this service. After Oct. 1, 2017, at least 24 months of account history must be made available at no fee, upon request. Tool 1: Know your options: Money services, cards, accounts, and loans Deciding where to get financial products can be hard because there are so many choices. Begin by thinking about the reasons you need a financial product. Below, pick your top three reasons. Checklist of common reasons to find a financial service provider Ranking What I want to do or accomplish? I want a safe and secure place to keep my money. I want to be able to make purchases without having to carry cash or go into debt. I want a low cost and easy way to pay and manage my bills. I want to bank and pay bills online. I want to have my paycheck directly deposited. I want to accumulate savings. I want to save for retirement, my children’s education, or other life events. I want to buy a car. I want to buy a home. I want to be able to get small loans quickly and without a hassle. I want to build my credit history. I want to send money to someone. Check off the three reasons for finding a financial service product and provider you identified above and read about the options that may be the best fit for your priorities. I want a safe and secure place to keep my money. Financial service provider Products that can meet your need Bank or credit union Savings account, checking account, or certificate of deposit Retailer, bank or credit union, check cashing store or online Prepaid card (may currently lack the same consumer protections as a debit card linked to a checking account) TIP: Don’t carry around large amounts of cash or leave cash in your home. It’s not safe and could be stolen or lost. Banks and credit unions are safe places to keep your money. To avoid fees, be sure to ask if you have to keep a minimum amount in the account, and always monitor your account regularly to know how much money you have in it. To reduce your risk of overdraft fees, tell your bank or credit union that you don’t want to pay overdraft fees when you pay with your debit card or make an ATM withdrawal. I want to be able to make purchases without having to carry cash or go into debt. Financial service provider Products that can meet your need Bank or credit union Debit card (attached to a savings or checking account) Retailer, bank or credit union, check cashing store or online Prepaid card TIP: Read the information you receive about the fees related to using your product. If you are being charged fees that you don’t understand, ask questions. If no one can explain the fees to you, it could be a red flag, and you may want to think twice before choosing this product. To avoid fees, be sure to ask if you have to keep a minimum amount in the account and always monitor your account regularly to know how much money you have in it. To reduce your risk of overdraft fees, tell your bank or credit union that you don’t want to pay overdraft fees when you pay with your debit card or make an ATM withdrawal. I want a low cost and easy way to pay and manage my bills. Financial service provider Products that can meet your need Bank or credit union Checking account Bill payment services Money orders Retailer, bank or credit union, check cashing store or online Money orders Bill payment services Prepaid cards (use like a debit card to pay bills; some offer bill payment services) U.S. Postal Service Money orders TIP: Make sure to check how you can pay for your bills. Some utilities and other companies accept only certain bill payment options. You may want to consider setting up scheduled, automatic payments that send money from your bank or credit union account or your prepaid card to the company you need to pay. You can set this up through the company you need to pay. If the amount changes, the company will notify you at least ten days before the money is scheduled to be sent. I want to bank and pay bills online. Financial service provider Products that can meet your need Bank or credit union Checking account and online banking Internet-based bill paying service Online bill paying Retailer, bank or credit union, check cashing store or online Prepaid card (use like a debit card to pay bills; some offer online bill payment services) I want to have my paycheck directly deposited. Financial service provider Products that can meet your need Bank or credit union Savings account or checking account Employer Payroll card (prepaid card arranged by your employer) Retailer, bank or credit union, check cashing store or online Prepaid card I want to accumulate savings. Financial service provider Products that can meet your need Bank or credit union Savings account or certificate of deposit TIP: You can open an account for yourself or a joint account with your spouse or another person. If you open a joint account with someone, that person will usually have the same rights to the money in the account that you do, so only open a joint account with someone you trust with your money. To avoid fees, be sure to ask if you have to keep a minimum amount in the account. I want to buy a car. Financial service provider Products that can meet your need Bank or credit union Car loan Automobile dealer Dealer financing I want to buy a home. Financial service provider Products that can meet your need Bank or credit union Mortgage company Mortgage I want to be able to get small loans quickly and without a hassle. Financial service provider Products that can meet your need Credit card company Credit card Pawn shop Pawn loan Finance company Signature loan Payday loan provider Payday loan (requires a bank account) TIP: Use the annual percentage rate (APR) to compare how much loans cost. You can compare the cost of loan products with different fee structures on an “apples-to-apples” basis. It also takes into account the amount of time you have to repay the loan. I want to build my credit history. Financial service provider Products that can meet your need Bank or credit union Credit builder loan. Loan for an asset (car, home, etc.) Other lenders Credit builder loan. Credit card Credit card company Secured credit card. Credit card TIP: Check your credit reports regularly (at least once a year) and make sure the information in your credit reports is correct. You can receive a free credit report once every 12 months from each of the nationwide credit reporting companies. Call 1-877-322-8228 or visit https://www.annualcreditreport.com. I want to send money to someone quickly. Financial service provider Products that can meet your need Retailer, some check cashing stores, U.S. Postal Service, online companies Money Transfers. Peer-to-peer transfers (using the internet or a mobile app to send money from your account or credit card directly to another person’s account) Bank or credit union Wire Transfers or other money transfers. Some banks and credit unions now offer peer-to-peer transfer services. TIP: New protections apply when you send money out of the U.S. Before you pay, you should receive information about the exchange rate, the fees and taxes you’ll pay, and the amount that will be received. You will also receive information about when the money will be available at its destination, your right to cancel the transfer, how to get any error fixed, and how to submit a complaint. Other protections also may be available to you, depending on how you send the money and the laws in your state. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 2: Ask questions: Choosing where to get what you need Once you know the reasons you want a financial product or service and the type of place that offers it, use this tool to identify the questions that are most important to you. Then make notes about the answers and use this tool to compare them. Financial service provider comparison Convenience and access Financial service provider 1: Financial service provider 2: Financial service provider 3: Do I feel welcome? Is it close to where I live or work? Is it open during hours I can visit (such as lunch, after work, or on weekends)? Can I get information in my own language or in a format that is accessible to me? Can I pay bills and check balances any time of day by phone, online, or with a mobile app? Is there a charge for these services? Is staff available to answer my questions in person, by phone, text or via email? Is there any cost? If I transfer money, how convenient is it for the recipient to receive the funds? Accounts, cards, and money services Financial service provider 1: Financial service provider 2: Financial service provider 3: Does it offer savings or checking accounts? Does it offer check cashing, money transfers, prepaid cards, or bill payment services? If I get a checking or savings account, will I get a debit card? Are there monthly account maintenance fees? Is there a way to avoid the monthly fee? Is there a fee for going below a minimum balance? Is there a product that helps me ensure I will not overdraft or pay overdraft fees? Are there fees for making purchases or other costs, such as inactivity fees? What are they? Is there a fee for making a deposit? What are the fees if I overdraft? Can I transfer funds to avoid overdrafts? Will I earn interest on savings? What is the rate of interest I will earn (APY)? How often will I receive account statements? Is there choice between online and paper statements? Loans and credit cards Financial service provider 1: Financial service provider 2: Financial service provider 3: Does it offer credit cards, small dollar loans, mortgages, lines of credit? What are the fees associated with getting a loan? What are the fees associated with getting a credit card? Are there annual fees? What is the interest rate on the loan or credit card? What is the interest rate including all fees on the loan (APR)? If I am borrowing money, how much will my payment be? When is it due? How long will it take to repay? What will the total cost be? Safety and security Financial service provider 1: Financial service provider 2: Financial service provider 3: Is the money I deposit FDIC or NCUA insured? Is my money protected if someone steals my debit card or prepaid card and or uses it without my permission? If I transfer money, when will it arrive? Consider the information about the fees, taxes, and the exchange rate before paying for the transfer. Other criteria important to me Financial service provider 1: Financial service provider 2: Financial service provider 3: Does it offer additional services I need like a notary services or a safe deposit boxes? Other: This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Money services and banking basics Part of selecting the right financial service provider is knowing what product(s) or service(s) you need. Use the following tool to learn more about the basic financial products or services that may be available to you. Identify the places in your community where you can get the products or services you are interested in. Common financial products or services Transaction or payment products or services Description Next steps Checking account Deposit money in and withdraw money from this account by writing checks or using a debit card. Suitable for frequent transacting. Many checking accounts include access to mobile and online bill pay. Always keep track of your account activity to ensure sufficient balances to cover payments and withdrawals and avoid overdraft fees or bounced check fees. The equivalent account from a credit union is called a share draft account. I should look into this. Where can I get it and next steps: Check cashing Turn paychecks, government checks, or personal checks into cash, often for a fee. Get immediate, non-recourse (meaning once you get the funds, you are free and clear) access to funds minus a fee. I should look into this. Where can I get it and next steps: Debit card with a checking account You can use this card to make purchases at businesses (like grocery stores and gas stations) with money in your checking account. You can also use this card to make deposits to and withdrawals from a checking account at ATMs. I should look into this. Where can I get it and next steps: Prepaid card A card that you use to access money you have paid in advance. A prepaid card can refer to a number of different types of cards. You can buy prepaid cards that you can add money to (reload) and continue using over and over. Some types of prepaid cards also allow you to take money out at an ATM. Reloadable prepaid cards generally charge a monthly maintenance fee, and some charge for reloads or each time you use the card. Prepaid cards may carry fewer consumer protections in the event of loss or a disputed charge than checking account debit cards until Oct. 1, 2017. Some prepaid cards also offer a “wallet” or “purse” feature you can use to help you save when you have extra money. This feature allows you to move some of your funds to a place where you can’t use them when you are paying for items or using your card at an ATM. You can move the money in the reserve back to your regular account if you need it. Gift cards are a special type of prepaid cards that are typically used up after you deplete the value on the card. I should look into this. Where can I get it and next steps: Money transfer Send money from one person or place to another. I should look into this. Where can I get it and next steps: Bill payment services Use cash, a money order, a bank account, a prepaid card, or another payment method to pay utility, mortgage, or other bills, in person, by phone, through a website, or through a mobile phone application. I should look into this. Where can I get it and next steps: Money order Buy a money order to pay a business or other party; can be used instead of a check, but it can be harder to prove payment later. I should look into this. Where can I get it and next steps: Depository products or services Description Next steps Savings account Deposit money in and withdraw money from an account; earn interest (currently interest rates are low); build up money for emergencies. Not intended for frequent transacting. I should look into this. Where can I get it and next steps: Certificate of deposit Deposit a fixed amount of money for a specific amount of time. You pay a penalty to get your money out early. The size of the penalty varies, and could amount to more than the interest you have earned if you withdraw the money before the maturity date. Generally earns more interest than a regular savings account. I should look into this. Where can I get it and next steps: Credit products or services Description Next steps Credit card Borrow money up to an approved credit limit. Make purchases using the card or the number and card security code. A minimum monthly payment is required. Will be charged interest on unpaid amounts; can be charged other fees. I should look into this. Where can I get it and next steps: Line of credit Borrow money up to an approved credit limit. Getting approved for a line of credit is different from a credit card. It may be secured with collateral (such as a home) or be unsecured. May be used for overdraft protection in a checking account. I should look into this. Where can I get it and next steps: Car loan Borrow money to buy a used or new car. This will be an installment loan. The loan will generally be secured by the vehicle (collateral). I should look into this. Where can I get it and next steps: Business loan Borrow money to start or expand a business. Ordinarily, this will be an installment loan with periodic payments due. Equipment or other business assets, or personal assets may be pledged against the loan (collateral). I should look into this. Where can I get it and next steps: Mortgage Borrow money to build or buy a home. This will be paid back in installments. The home loan or mortgage will be secured by the home (collateral). I should look into this. Where can I get it and next steps: Credit building products or services Description Next steps Secured credit card Borrow money up to a limit that is secured by a deposit. This deposit acts as collateral if you do not pay the credit card as agreed. I should look into this. Where can I get it and next steps: Credit building loan Borrow money specifically to build a credit history or improve credit scores. This may be available at banks or credit unions in your community or through a local non-profit. I should look into this. Where can I get it and next steps: Other products or services Description Next steps Small dollar/signature loan Borrow small amounts of money. Generally, the loans have to be paid back quickly, and the interest rate and fees are higher than bank or credit union loans or credit cards. I should look into this. Where can I get it and next steps: Payday loan Borrow small amounts of money. You provide a check written for some time in the future - generally two weeks, or give permission for the lender to electronically debit your bank account. If you don’t repay the loan and fees in full, the lender can cash the check or process a payment from your bank account. If your account does not have enough money in it to cover the amount, you may have to pay a fee to extend the loan due date (rollover or renew the loan) or take out a new loan for the amount you don’t repay). I should look into this. Where can I get it and next steps: Pawn shop loan Borrow money against an item that the pawn shop holds during the loan. If you do not pay back the loan as agreed or renew the loan, the pawn shop can sell the item to cover the debt. The loan amount is often much less than the item is worth. I should look into this. Where can I get it and next steps: Car title loan Borrow money against your car, with the car title being held as collateral. If you do not pay back the loan as agreed or renew the loan, the car can be repossessed and sold to cover the debt. The loan amount is often much less than the car is worth. I should look into this. Where can I get it and next steps: Technology-based services Description Next steps Online banking Manage your bank or credit union account through a secure website. This option may include a method to pay bills from your account, and is available through many banks and credit unions. I should look into this. Where can I get it and next steps: Mobile banking Use your smart phone to manage accounts and make payments through your bank or credit union’s website or mobile application. I should look into this. Where can I get it and next steps: Alerts Sign up for alerts on your bank account to tell you if your balance is low, and on your credit card to tell you if your balance is higher than the amount you select. These email or text alerts can help you keep track of your bank account and your card balances. I should look into this. Where can I get it and next steps: This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 4: Opening an account checklist Opening an account at a bank or credit union If you decide that a checking or savings account is the right product for you, opening an account at a bank or credit union is really quite simple. First, you may want to get a recommendation from a trusted friend or family member for a bank or credit union. Find out about: * The services it offers * The fees it charges * The interest it pays for savings accounts You will usually need between $25 and $100 to open a savings or checking account at a bank. Some credit unions may only require a deposit as low as $5 to open an account. TIP: Be sure to find out how much you must keep in the account at all times to avoid fees. This is called the “minimum balance requirement.” This may not be the same amount of money you need to open the account, so it’s important to understand. You will also need two forms of identification to open an account. Some banks or credit unions will take one form of identification and a bill with your name and address on it. You will usually be required to present: * A U.S. government or state issued form of identification with your photo on it, such as a driver’s license, U.S. Passport, or military identification and one of the following: * Your Social Security card * A bill with name and address on it * Your birth certificate If you do not have a U.S. government-issued form of identification, some banks and credit unions accept foreign passports and Consular IDs, such as the Matricula Consular card, which is an official Mexican Government identification document. Other countries, such as Guatemala and Argentina have similar IDs. Consulates in the United State offer them. Visit your country’s consulate for more information about how to get an ID card and the banks and credit unions to learn whether they accept it. Accounts that pay interest Interest is considered income. If you earn interest, you must pay taxes on it. In order to open an account that pays interest, such as a savings account, you must have a Social Security number or an Individual Taxpayer Identification Number (ITIN).59 If you do not have a Social Security number, you do not have an ITIN, or you have not applied for an ITIN, you can open an account that does not pay interest. If your faith community’s beliefs do not allow you to receive interest, some banks and credit unions have developed no-interest accounts that may meet your needs. Barriers to opening an account Not having the proper identification can be one barrier to opening an account. Another potential barrier is a negative rating with specialty consumer reporting agencies like ChexSystems, TeleCheck, Early Warning, and others that report on checking accounts or banking histories. These agencies collect information from merchants, banks, and credit unions about how consumers manage savings and checking accounts. Banks and credit unions use reports developed by these agencies to decide if someone can open a new account. You may have a negative rating if you or someone you had a joint account with has struggled with a checking or savings account in the past and: * Had a lot of bounced checks and non-sufficient funds (NSF) fees * Not paid debts and fees owed to a bank or credit union related to an account * Been suspected of fraud related to a bank or credit union account * Have had an account closed (involuntarily) by a bank or credit union Involuntary closures stay on your ChexSystems report for five years and on the Early Warning System report for seven. Overdrafts remain on your consumer record for five years, even if you have paid back what you owe the bank or credit union. Each bank or credit union has its own policies about the way the information in your banking history report impacts your ability to open an account. This can include the amount of time that has passed since there were events like an involuntary closure or repeated overdrafts. Some banks and credit unions require you to pay these old charges and fees before you are allowed to open a savings or checking account. In other cases, you may be offered the opportunity to open a “second chance” or checkless checking account that has different features and restrictions than a standard checking account. Depending on the account’s rules, you may be allowed to open a standard checking account after six to twelve months with a restricted account if you have not overdrafted or bounced any checks. You can order copies of your ChexSystems, TeleCheck, and Early Warning reports: Company By phone By mail Online ChexSystems 800-428-9623 ChexSystems, Inc. 7805 Hudson Road, Ste. 100 Woodbury, MN 55125 https://www.chexsystems. com TeleCheck Services 800-366-2425 TeleCheck Services, Inc. ATTN: Resolutions Department – FAP.O. Box 4514 Houston, TX 77210-4514 (Include a daytime phone number, a copy of your driver’s license, your Social Security number, and a copy of a voided check.) Early Warning 800-325-7775 If you find mistakes, you can dispute a mistake by sending a letter (you may choose to use certified mail) describing the mistake and copies of any evidence. Opening an account checklist Use this checklist to ensure you have what you need to open an account at a bank or credit union. What you need Got it Need it A U.S. or foreign government-issued form of identification with your picture on it – Note that each bank or credit union has its own policy on which foreign IDs it accepts. Another form of identification – your Social Security card, a bill with your name and address on it, your birth certificate A Social Security number or ITIN (individual taxpayer identification number) Minimum amount of money to open the account Information about minimum balance required in the account to avoid monthly service fees Information about monthly service fees Information about direct deposit and if it eliminates the monthly fee Information about per-check or transaction fees Information about fees associated with use of ATMs Information about internet banking and online bill pay access and any costs Information about overdraft fees and how to opt-out Information about low balance alert notifications This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 5: Money transfers and remittances: What you need to know Consumers in the United States send billions of dollars in remittance transfers each year. The Consumer Financial Protection Bureau (CFPB) has issued rules to protect consumers who send money electronically to foreign countries. A “remittance transfer” is an electronic transfer of money from a consumer in the United States to a person or business in a foreign country. It can include transfers from retail “money transmitters” as well as from banks and credit unions that transfer funds through wire transfers, automated clearing house (ACH) transactions, or other methods. Disclosures The rules generally require companies to give disclosures to consumers before they pay for the remittance transfers. The disclosures must contain: * The exchange rate * Fees and taxes collected by the companies * Fees charged by the companies’ agents abroad and intermediary institutions * The amount of money expected to be delivered outside of the U.S., not including reductions for certain fees charged to the recipient or foreign taxes * If appropriate, a disclaimer that additional fees and foreign taxes may apply Consumers must also receive information about when the money will arrive and how the consumer can report a problem with a transfer. The company can give a pre-payment disclosure and a receipt, or the company may provide a single combined disclosure before the sender pays for the transfer, so long as proof of payment is given when payment is made. Companies must provide the disclosures in English. Sometimes companies must also provide the disclosures in other languages. The right to cancel: After paying, you will typically have 30 minutes (and sometimes more) to cancel the transaction at no charge, unless the transfer has already been picked up or deposited into the recipient’s account. The right to have errors resolved: Companies must investigate if a consumer reports a problem with a transfer. For certain errors, such as if the money never arrives, you may be able to get a refund or have the transfer sent again. You can learn more here: http://www.consumerfinance.gov/askcfpb/1765. The company may not be required to refund or resend the money if an error occurred because you provided incorrect information to the provider, such as the wrong account number. The rules also contain specific provisions applicable to transfers that consumers schedule in advance and for transfers that are scheduled to recur on a regular basis. What is covered? The rules apply to most remittance transfers that are: * More than $15, * Made by a consumer in the United States, and * Sent to a person or company in a foreign country. This includes many types of transfers, including wire transfers. The rules apply to many companies that offer remittance transfers, including banks, thrifts, credit unions, money transmitters, and broker-dealers. However, the rules do not apply to companies that consistently provide 100 or fewer remittance transfers each year. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. MODULE 9: Protecting your money If you have a 10-minute session... If you have a 30-minute session... If you have multiple sessions... Tool 1: Submitting a complaint to the CFPB Tool 2: Protecting your identity. Tool 3: Red flags Reference Tool 4: Learning more about consumer protection on specific consumer protection issues. Follow up to make sure any identity theft issues or complaints are being addressed. An empowered consumer understands her rights. When you know you have rights, you can take steps to protect yourself. There are many laws that protect your rights when it comes to financial products and services. It is the CFPB’s job to enforce these laws and handle consumers’ complaints about financial products and services. Have an issue with a product or service? The CFPB has already handled more than 1,000,000 consumer complaints about: * Credit cards * Mortgages * Bank accounts and services * Student loans * Vehicle loans or leases * Payday loans * Other consumer loans (including installment loans, pawn loans, and title loans) * Debt collection * Money transfers or virtual currency * Credit reporting * Prepaid cards * Other financial services (including check cashing, money orders, cashier’s checks, credit repair, debt settlement, refund anticipation loans, foreign currency exchange, and traveler’s checks) Every complaint we receive gives us insights into problems that people are experiencing in the marketplace and helps us to identify and prioritize problems for potential action. Submitting a complaint to the CFPB To submit a complaint, go to http://www.consumerfinance.gov/complaint. From there, select the product or service that your complaint is about. Fill out the form, providing as much detail as possible. The form will ask you: * To describe what happened, in as much detail as possible * What you think a fair resolution to your issue would be * For your information (name/address/email) * For detailed information about the product and company you are complaining about – You will be asked to scan and upload any documentation that you have to support your complaint (account agreements, monthly statements, proof of payment, etc.). You will then be able to review and edit the information before clicking “Submit” to send your complaint. If you need help while you’re online, click on the link that says “Form Trouble? Chat now.” to talk with CFPB team members. You can also submit a complaint over the phone by calling the CFPB at 855- 411-CFPB (2372), toll free. U.S.-based call centers can help you in over 180 languages and can also take calls from consumers who are deaf, have hearing loss, or have speech disabilities. Tool 1: Submitting a complaint to the CFPB provides detailed information on how to submit a complaint, and how you can track the process. If you want more information on how complaints are handled, you can visit our complaint page at: https://www.consumerfinance.gov/complaint.60 It’s your money – take care Ask questions Even though the terms may be unfamiliar at first, shopping for financial products and services is no different from shopping for other kinds of products and services. Remember the following: * Don’t be intimidated. You are the customer. * If you want to work with a financial counselor or adviser, interview a few before choosing one. * Before you sign anything or give personal or financial information about yourself to an adviser, ask questions: What are your qualifications? How do you get paid? Are you working in my best interest? * If your friends or family members give you advice or information, it’s up to you to question them: Where did you get the information? Who gets paid what? Are you making any money on this? “I have an amazing offer for you.” Most of us have seen or heard something like this – offers to receive millions of dollars from a foreign prince or a lottery you did not enter; jobs that say you can earn $80/hour while working at home. Unfortunately, if the "opportunity" appears too good to be true, it probably is. If you run across an amazing sounding opportunity, job, or product, do your research with a critical eye, especially if you are receiving the “opportunity” via an unsolicited email! Con artists and scammers use creative and innovative schemes and appeals to get you to part with your money. Follow these principles to detect con artists and scammers: * Beware of promises to make fast profits and investments that claim to offer high returns at little or no risk. * Do not invest in anything unless you fully understand the deal. Consider running the opportunity by others that you trust to make sure that they share your understanding. * Check the paperwork you are asked to sign. If the promises made to you are not in the paperwork, that is a danger sign. * Don't assume a company is legitimate based on the "appearance" of the website. * Beware of requests for money from people you do not know. Research the parties involved and the nature of the deal or job. If you don’t know how to do this, ask someone that you trust to help you, or don’t deal with that person. * Contact state and local consumer or regulatory agencies to see if there is a complaint against the company. * Don't open spam. Delete it unread. And, never respond to spam. * Don’t open e-mail attachments from people you don’t know or attachments that you did not expect to receive. You can say no Scammers and con artists target polite people because they have a harder time saying no. If you feel pressured to make a decision, chances are you are being scammed. It may be hard, especially if it is a friend or relative, but just saying “No, I am not interested,” may save you from a financial loss. If people are pressuring you on the phone, you don’t have to continue the call. This is especially true if they are trying to verbally coerce you into buying, donating to, or investing in something. Tell them to take you off their list and then hang up. Take care of your information Just as you have to protect your money, you also have to protect your personal information. Never give out personal information, such as account numbers, passwords, or answers to security questions over the phone or through email. Banks, credit unions, and other financial institutions will never call or e-mail you asking you to verify personal information. Only provide the information if you initiated the call to a number you know is from the company or if you directly typed in the website address and you see signals that the site is secure. A secure website has: * A URL that begins with “https:” * A lock symbol next to the URL * Security authentications and certificates You can prevent identity theft by guarding your identifying information carefully and only sharing it with a few trusted people. Use the checklist in Tool 2: Protecting your identity to make sure you are taking the right precautions in protecting your identity. Tool 1: Submitting a complaint to the CFPB When it comes to submitting a complaint to the CFPB, you have lots of options. Online: Visit http://www.consumerfinance.gov/complaint. If you need help while you’re online, click on the link that says “Form Trouble? Chat now.” to talk with CFPB team members for help on submitting a complaint. By phone: Call toll-free 855-411?CFPB (2372), 8am to 8pm ET, Monday through Friday We can help you with your issue in more than 180 languages. TTY/TDD: 855-729?CFPB (2372) By mail: Consumer Financial Protection Bureau PO Box 2900 Clinton, IA 52733-2900 Complaint Process Here is what will happen when you submit a complaint: Complaint submitted: You will receive email updates and can log in to track the status of your complaint. Review and route: We'll forward your complaint and any documents you provide to the company and work to get a response from them. If we find that another government agency would be better able to assist, we will forward your complaint to them and let you know. Company response: After your complaint is sent to the company, the company has 15 days to provide a substantive response to you and the CFPB. In some cases, companies have up to 60 days to provide a final response. Complaint published: We publish information about your complaint - such as the subject and date of the complaint - on our public Consumer Complaint Database at http://www.consumerfinance.gov/data-research/consumer-complaints. With your consent we also publish your description of what happened, after taking steps to remove personal information. Consumer review: We will let you know when the company responds. You can review that response and give us feedback. Analyze and report. Complaints help with our work to supervise companies, enforce federal consumer financial laws, and write better rules and regulations. We also report to Congress about the complaints we receive and post some consumer complaint data on our website at http://www.consumerfinance.gov/data-research/consumer-complaints. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. Tool 2: Protecting your identity Though it might not seem like it, your identity is one of the most precious things you possess. Thieves who are able to steal your identifying information can pretend to be you, buying things on accounts that you own or are under your name. This leaves you with their bills! It can also create problems with your credit reports and scores. Identifying information is anything that is specifically unique to you, such as your: * Credit card and bank account numbers * Driver’s license number * Date, city, and state of birth * Social Security number * Passwords or PIN numbers Many people think that identity theft happens primarily online, and if you don’t shop online, you are safe. The reality is that most identity thefts take place offline. In addition, in over half of the cases of identity theft, the thief is someone that the victim knows. Because of this, it’s important to be cautious with your identifying information – both online and in the real world. Steps to protect your identity checklist Check your credit report Steps to protect your identity Done Remove your name from all three credit bureaus’ (Equifax, Experian, and TransUnion) mailing lists by calling to opt-out at 888-567-8688 or online at https://www.optoutprescreen.com/?rf=t – choose “forever” removal option. This prevents prescreened offers from falling into other people’s hands. Check your credit at all three credit agencies each year using the free https://www.annualcreditreport.com. If you see anything that is incorrect or suspicious, contact them immediately. (See Module 7: Understanding your credit reports and scores for more information.) Limit access to your information Steps to protect your identity Done Don’t carry your Social Security card or number in your wallet or purse. Remove your name from many direct mail marketers’ lists by registering with the Direct Marketing Association online form at https://dmachoice.thedma.org. Removing your name from marketers’ lists will create fewer opportunities for thieves to steal your information. Remove yourself permanently from most telemarketers’ lists by registering your phone number with the Do Not Call Registry at 888-382-1222 or at https://donotcall.gov. Never give your personal information to someone who calls you and asks for it, even if they say they are from your financial institution. Use a shredder, scissors, or your hands to tear all papers with identifying information or account numbers into tiny pieces before throwing them out. Give out your Social Security number only when absolutely necessary. Often when someone asks for it, you are not required to give it to them. Practice online security Steps to protect your identity Done Commit all passwords to memory. Never write them down or carry them with you (not even on a post-it by your computer!). Make sure passwords include upper- and lower-case letters, numbers, and do not include any words that can be found in a dictionary or names and dates that can be associated with you (your children’s names and birthdates, for example). Longer passwords are better. The best practice is to have a different password for each account. If you find it too hard to keep track of so many passwords, have separate, longer, harder-to-guess passwords for your financial accounts than for ordinary uses like your e-mail. Don’t give out your financial or personal information over the Internet, unless you have initiated the contact or know for certain with whom you are dealing. Never share identity information online unless the site is secure with an encryption program, so no one can intercept your information. If secure, the web site address will start with https, not http. There will also be a lock icon (() near the web address. Do not reply to emails asking for personal banking information, even if they have a bank or PayPal logo! Financial Institutions will never ask for personal information via email. According to the Federal Trade Commission (FTC), identity protection means treating your personal information like cash or a valuable commodity. This means being careful not to leave it around, and being thoughtful about who is asking for it, why they need it, and how they’re going to safeguard it for you. This is the FTC’s list of common red flags that your identity has been stolen: * There are mistakes on your bank, credit card, or other account statements. * There are mistakes on the explanation of medical benefits from your health plan. * Your regular bills and account statements don’t arrive on time. * You get bills or collection notices for products or services you never received. * You receive calls from debt collectors about debts that don’t belong to you. * You get a notice from the IRS that someone used your Social Security number. * You receive mail, email, or calls about accounts or jobs in your minor child’s name. * You receive unwarranted collection notices on your credit report. * Businesses turn down your checks. * You are turned down unexpectedly for a loan or job. If your identity has been stolen The FTC recommends the following three steps if you believe that your identity has been stolen: 1. Place a fraud alert on your credit file. Call one of the nationwide credit reporting companies, and ask for a fraud alert on your credit report. The company you call must contact the other two, so they can also put a fraud alert on your file. An initial fraud alert is good for 90 days. If you want to place an extended alert on your credit report after your identity has been stolen, you must file either a police report or a report with a government agency such as the FTC, known as an “identity theft report.” An extended alert is good for seven years. An extended alert requires that the creditor contact you in person or through the telephone number or other contact method you designate to verify whether you are the person authorizing or making the credit request. * Equifax: 800-525-6285 * Experian: 888-397-3742 * TransUnion: 800-680-7289 2. Order your credit reports. Each company’s credit report about you is slightly different, so order a report from each company. When you order, you must answer some questions to prove your identity. Read your reports carefully to see if the information is correct. If you see mistakes or signs of fraud, contact the credit reporting company. 3. Create an identity theft report. An Identity Theft Report can help you get fraudulent information removed from your credit report, stop a company from collecting debts caused by identity theft, and get information about accounts a thief opened in your name. To create an Identity Theft Report, first file a complaint with the FTC at https://www.ftccomplaintassistant.gov/#&panel1-1 or 877-438-4338; TTY: 866-653-4261. Your completed complaint is called an FTC Identity Theft Affidavit. Next, you can take your FTC Identify Theft Affidavit to your local police, or to the police where the theft occurred, and file a police report. Get a copy of the police report. The two documents comprise an Identity Theft Report. The FTC recommends this step, but you can still plan an extended fraud alert using just the FTC Identity Theft Affidavit, without going to the local police department. For more information from the Federal Trade Commission, visit https://www.identitytheft.gov. A further step: Consider a security freeze. You can also place a “freeze” on your credit report. A security freeze means that potential new creditors cannot access your credit report. Only a limited number of entities can see your file while a freeze is in place, including existing creditors, certain government entities like child support agencies, and companies that monitor your credit file at your direction to prevent fraud. Because most businesses will not open credit accounts without checking your credit report, a freeze can make it hard for identity thieves to open new accounts in your name. Be mindful that a freeze does not prevent identity thieves from taking over existing accounts. Credit reporting companies may charge for this service. In some states, identity theft victims are not charged to place a security freeze. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 3: Red flags If you find you have checked one or more of these red flags when you are considering a financial product or service, pause and take a closer look. Red flag list Sales tactics and red flags for loans and other financial products or services Sounds familiar Red flag Description Pressured sales tactics You are pressured to purchase things or to take out loans you don’t want or can’t afford. Lack of uniformity Different staff or salespeople are telling you different things regarding pricing or other information. Won’t put it in writing No one will give you clear information in writing - even when you ask for it. Unexplained fees No one can explain what certain fees are for or why they are so high. No clear cancellation or return policy There’s no clear cancellation or return policy. Don’t assume that you are able to return a product or cancel a purchase. Inconsistent information on interest rates The salesperson tells you about an interest rate, but the numbers on the form are much higher. Pushed to purchase You are being pushed to make a big-ticket purchase immediately. Steering and coercing Aggressive sales tactics are used to steer and coerce you toward a high cost loan, even though you could have qualified for regular prime loans. Red flags when signing loan documents Sounds familiar Red flag Description Paperwork doesn’t match the sales pitch The promises made to you by a salesperson are not in the papers that you are asked to sign. Confusing fine-print A good rule of thumb is to refuse to sign anything that you don’t understand. Incomplete paperwork Never sign a contract with blank spaces to be filled in later. Additional insurance and other add-on products Some lenders may insist on or imply that borrowers must buy unnecessary items - additional insurance, unneeded warranties, monitoring services, etc. They get incorporated into the loan amount, and the borrower pays interest on them over the life of the loan. Prepayment penalties Prepayment penalties are fees lenders require a borrower to pay if the borrower pays off a loan early. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. This tool may ask you to provide sensitive information. The CFPB does not collect this information and is not responsible for how your information may be used if you provide it to others. The CFPB recommends that you do not include names, account numbers, or other sensitive information and that users follow their organization’s policies regarding personal information. Tool 4: Learning more about consumer protection Protecting your rights as a consumer starts with knowing that you have rights. The following consumer protection laws establish consumer rights related to financial services and products. This is not a comprehensive list, but it provides a starting place for understanding some of the many rights and responsibilities about which financial educators and coaches should be familiar. Read the summary of each law below. Put a check in the “Follow Up for More Information” column if knowing a little more about this law will help you or people you know. Then follow the link listed within the “Short Description” or visit our website at http://www.consumerfinance.gov for more information. Consumer Protection Law Short Description Regulation B: Equal Credit Opportunity Act The Equal Credit Opportunity Act (ECOA), implemented by Regulation B, makes it unlawful for any creditor to discriminate against any applicant, in any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised certain consumer rights. ECOA and Regulation B prohibit certain creditor practices, such as refusing to provide credit if an applicant qualifies for it because of any prohibited basis; discouraging applicants from applying for credit because of any prohibited basis; or offering less favorable terms to an applicant than to someone similarly situated because of any prohibited basis. ECOA and Regulation B require creditors, among other things, to: Notify applicants of actions taken on their applications within specified periods. If the creditor furnishes applicant information to credit bureaus, to do so in the names of both spouses on an account. Retain records of credit applications for a specified period. Solicit information about the applicant's race and certain other protected characteristics in applications for certain residential mortgages for government monitoring purposes. Provide applicants with copies of appraisals used in connection with residential mortgage applications. For more information about this law, including information about how to detect discrimination and protect yourself against it, visit http://www.consumerfinance.gov/fair-lending. Regulation C: Home Mortgage Disclosure Act The Home Mortgage Disclosure Act (HMDA), implemented by Regulation C, requires certain mortgage lenders to collect and report loan data that can be used to: a) help determine if financial institutions are serving the housing needs of their communities, b) assist public officials in distributing public-sector investment to attract private investment to areas where needed, and c) assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes. This data is available for use by the public as well as by federal and state regulatory and enforcement agencies. Data fields required to be reported under HMDA include, for each application, the action taken by the creditor; the location of the property to be mortgaged; the race, ethnicity, and sex of the applicant; and the income relied on in the application. For more information about this law, visit http://www.consumerfinance.gov/learnmore. Regulation E: Electronic Fund Transfer Act Establishes the basic rights, liabilities, and responsibilities of consumers who use electronic fund transfer services or send remittances and of the financial institutions and other companies that offer these services. “Electronic fund transfers” include transactions, for example, where you swipe your card at check-out, make purchases with your card by phone or online, or make deposits or withdrawals at an ATM. Remittance transfers are, sometimes called “international wire transfers” and they include many common ways of transferring money to people in other countries. Protects individual consumers engaging in electronic fund transfers or remittance transfers. Restricts inactivity and service fees and limits how quickly funds can expire for gift cards, gift certificates, and certain other prepaid cards. Requires all fees and other important terms to be clearly communicated in writing. Applies to any transaction initiated through an electronic terminal, telephone, computer, or magnetic tape in which a financial institution is told to either deposit or withdraw from an individual’s account at the financial institution. Establishes “opt in” provisions for overdraft fees on ATM transactions and non-recurring debit card transactions (Financial institutions are prohibited from charging overdraft protection fees on these unless consumers opt in.) For more information on the “opt in” provisions for overdraft fees, visit http://www.consumerfinance.gov/blog/whats-your-status-when-it-comes-to-overdraft-coverage. For more information on remittance transfers (also covered under Regulation E), visit http://www.consumerfinance.gov/eregulations/1005. Regulation F: Fair Debt Collection Practices Act The Fair Debt Collection Practices Act (FDCPA) is the main federal law that governs debt collection practices. The FDCPA prohibits debt collection companies from using abusive, unfair or deceptive practices to collect past due debts from you. The FDCPA covers the collection of consumer debt such as mortgages, credit cards, medical debts, and other debts primarily for personal, family, or household purposes. It covers personal debt, not business debt. The FDCPA does not generally cover collection by the person or business from whom you first borrowed money - it covers third party debt collections (debt collection agencies and debt-buyers involved in collection) and attorneys who collect debt on behalf of their clients. For a summary of this law visit http://www.consumerfinance.gov/askcfpb/329. Regulation M: Consumer Leasing Act Ensures that people who lease personal property receive meaningful disclosures that enable them to compare lease terms with other leases and, where appropriate, with credit transactions. Limits the amount of balloon payments in consumer lease transactions. Provides for the accurate disclosure of lease terms in advertising. For more information on leasing an automobile, visit http://www.consumerfinance.gov/askcfpb/815. Regulation P: Privacy of Consumer Financial Information (Gramm-Leach-Bliley Act) Governs the treatment of non-public personal information about consumers by financial institutions and by institutions that use, re-use, or re-disclose information from financial institutions. This type of information includes your account information and your Social Security number. Provides a method for consumers to prevent a financial institution from disclosing that information to other businesses or individuals by “opting out” (There are exceptions to this.) Restricts when financial institutions may disclose non-public personal financial information to other businesses or individuals. Requires financial institutions to send privacy notices to consumers in specified circumstances. For a link to Regulation P, visit http://www.consumerfinance.gov/policy-compliance/rulemaking. Regulation V: Fair Credit Reporting Act Provides guidelines and limitations for persons that get and use information about consumers to: Determine the consumer's eligibility for products, services, or employment. Share such information among affiliates. Furnish information to consumer reporting agencies. Limits the reporting of outdated negative information. Limits who can access information in a consumer’s credit file. Establishes consumer rights including the following: Consumers must be informed their file has been used against them - the information has led to a denial of a product, service, or employment. Consumers have the right to know what is in their file. Consumers have the right to dispute incomplete or inaccurate information; consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information. For answers to common questions regarding this law, visit http://www.consumerfinance.gov/askcfpb/search?selected_facets=tag_exact%3AFair+Credit+Reporting+Act. For a list of consumer reporting agencies, visit http://files.consumerfinance.gov/f/201604_cfpb_list-of-consumer-reporting-companies.pdf Regulation X: Real Estate Settlement Procedures Act Provides advance disclosures of settlement costs to home buyers and sellers. Prohibits kickbacks or referral fees for settlement services. Regulates mortgage servicers’ management of escrow accounts established to ensure the payment of real estate taxes and insurance. Requires mortgage servicers to correct errors and provide certain information requested by borrowers. Requires mortgage servicers to provide information to delinquent borrowers about mortgage loss mitigation options and to establish policies and procedures for continuity of contact with servicer personnel regarding these options. For more information about this law, visit http://www.consumerfinance.gov/know-before-you-owe and http://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance. Regulation Z: Truth in Lending Act Promotes the informed use of consumer credit by requiring disclosures about its terms and cost, such as APR (annual percentage rate). Establishes uniform terminology for credit disclosures, such as APR. Gives consumers the right in certain circumstances to cancel credit transactions that involve a lien on a consumer's principal dwelling. Regulates certain credit card practices. Provides a means for fair and timely resolution of credit billing disputes. Additional examples of what this law covers: Requires a maximum interest rate to be stated in variable-rate contracts secured by the consumer's dwelling Imposes requirements on home-equity plans and mortgages. Regulates practices of creditors who extend private education loans. For more information on this law, visit http://www.consumerfinance.gov/askcfpb/787. Regulation DD: Truth in Savings Act Ensures consumers are able to make informed decisions about accounts offered at depository institutions. Requires depository institutions (banks, credit unions, and thrifts) to provide disclosures so that consumers can make meaningful comparisons among depository institutions. This tool is included in the Consumer Financial Protection Bureau’s toolkit. The CFPB has prepared this material as a resource for the public. This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified financial advisor, attorney, or otherwise qualified professional. The CFPB is not responsible for the advice or actions of the individuals or entities from which you received the CFPB educational materials. The CFPB’s educational efforts are limited to the materials that CFPB has prepared. Resources61 If you have a consumer complaint, visit http://www.consumerfinance.gov/complaint For additional resources, visit the Consumer Financial Protection Bureau website at http://www.consumerfinance.gov/askCFPB Setting goals and planning for large purchases Getting an auto loan: http://www.consumerfinance.gov/consumer-tools/auto-loans Take control of your auto loan: A step-by-step guide: http://files.consumerfinance.gov/f/documents/201606_cfpb_take-control-of-your-auto-loan-guide.pdf If you would like help managing debt or rebuilding credit, visit the National Foundation for Credit Counseling: https://www.nfcc.org Paying bills and other expenses If you are in a natural disaster, visit the following for more information: https://www.fema.gov/disaster-survivor-assistance-program For information on enrolling in a health insurance plan: https://www.healthcare.gov If you have a medical emergency you cannot afford, visit your state department of health and human services listed here: http://bhpr.hrsa.gov/shortage/hpsas/primarycareoffices.html Getting through the month For MyMoney.gov budgeting resources: http://www.mymoney.gov/Fast/Pages/Results.aspx?k=Budgeting%20worksheets&s=All If you want more information on budgeting: http://www.mymoney.gov/tools/Pages/tools.aspx For more information on benefits: https://www.benefits.gov If you want more information about finding a job, visit this site to get started: https://www.dol.gov/general/audience/aud-unemployed To find an American Jobs Center located near you: https://www.careeronestop.org/LocalHelp/service-locator.aspx If you lose your job, visit the following for more information: https://www.benefits.gov https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/health-and-retirement-benefits-after-job-loss#.UM6BmXPjkt8 Dealing with debt CFPB.gov, Know Before You Owe: http://www.consumerfinance.gov/know-before-you-owe Consumer.gov, Coping with Debt: https://www.consumer.ftc.gov/articles/0150-coping-debt MyCreditUnion.gov, Pocket Cents: http://www.mycreditunion.gov/what-credit-unions-can-do/Pages/paying-off-Credit-Cards.aspx StudentAid.ed.gov, Repay Your Loans: https://studentaid.ed.gov/sa/repay-loans Medicare.gov, 4 Programs that Can Help You Pay Your Medical Expenses: https://www.medicare.gov/Pubs/pdf/11445-4-Programs-that-Can-%20Help-You-Pay-Your.pdf If you have a medical need you cannot afford, visit your state department of health and human services listed here: http://bhpr.hrsa.gov/shortage/hpsas/primarycareoffices.html If you would like help managing your debt or rebuilding credit, visit the National Foundation for Credit Counseling: https://www.nfcc.org Housing counselors throughout the country can provide advice on buying a home, renting, defaults, foreclosures, and credit issues: http://www.consumerfinance.gov/find-a-housing-counselor For information on finding a lawyer to represent you in a lawsuit by a creditor or debt collector: http://www.consumerfinance.gov/askcfpb/1433 Understanding credit reports and scores AskCFPB: http://www.consumerfinance.gov/askcfpb/creditquestions If you would like help managing your debt or rebuilding credit, visit the National Foundation for Credit Counseling: https://www.nfcc.org Consumer.gov, Building a Better Credit Report: https://www.consumer.ftc.gov/articles/pdf-0032-building-a-better-credit-report.pdf Protecting your identity https://www.identitytheft.gov 1 See http://www.consumerfinance.gov/your-money-your-goals for this guide. The U.S. Department of Health and Human Services, Administration for Children and Families Office of Community Services has also developed a guide that can assist organizations in mapping local resources. See “Building Financial Capability: A Planning Guide for Integrated Services” available at http://www.acf.hhs.gov/sites/default/files/ocs/afi_resource_guide_building_financial_capability_final.pdf. 2 You can also submit a complaint on behalf of the person you’re helping. See Module 9: Protecting your money for information on submitting a complaint to the CFPB and other authorities. 3 Rosenthal, Elizabeth, American Way of Birth, Costliest in the World, NY Times, June 30, 2013. See http://www.nytimes.com/2013/07/01/health/american-way-of-birth-costliest-in-the-world.html?pagewanted=all&. 4 Kennedy, Bruce, These Girls’ Parties Can Cost More than a Wedding, MSN Money, August 9, 2013. 5 National Funeral Directors’ Association: http://www.nfda.org/news/statistics. 6 This calculation is designed to simplify planning. Because there are 35 weeks in 8 months, using a 32-week framework can help individuals reach their goal more quickly or allow them to miss their target for up to three weeks in the period and still reach their goal on schedule. 7 While the target amount for an emergency fund will vary from person to person based on their needs, $500 to $1,000 has been suggested as a starting point. See https://americasaves.org. 8 Brokeck, Stephen, Understanding the Emergency Savings Needs of Low- and Moderate-Income Households: A Survey-Based Analysis of Impacts, Causes, and Remedies, Consumer Federation of America, 2008. 9 Board of Governors, Federal Reserve System. Report on the Economic Well-Being of U.S. Households in 2015. May 2016. See https://www.federalreserve.gov/2015-report-economic-well-being-us-households-201605.pdf. 10 The annual percentage rates (APRs), fees, and terms of repayment described below are for example purposes only. Actual credit card and payday loan terms vary, and some states restrict payday loans. The CFPB notes that, APRs on credit cards often range from about 12 percent to 30 percent. For payday loans, the CFPB notes that the cost of the loan (finance charge) may range from $10 to $30 for every $100 borrowed. See CFPB, What is a payday loan? November 6, 2013, http://www.consumerfinance.gov/askcfpb/1567. Also see Consumer Financial Protection Bureau, Payday Loans and Deposit Advance Products: A White Paper of Initial Data Findings, April 24, 2013. See http://files.consumerfinance.gov/f/201304_cfpb_payday-dap-whitepaper.pdf. 11 Most credit card companies allow customers to pay a percentage of the amount owed, which makes the minimum payment vary from month to month. To pay off this credit card balance in full, the individual will have to make $25 payments for 15 months, and then pay just over $15 in the sixteenth month. 12 See the CFPB’s Supplemental findings on payday, payday installment, and vehicle title loans, and deposit advance products, June 2016: http://files.consumerfinance.gov/f/documents/Supplemental_Report_060116.pdf. 13 See Bureau of Labor Statistics, http://www.bls.gov/emp/ep_chart_001.htm (accessed July 2016). 14 Many financial institutions do not allow a child to open an account in their own name. This is because account agreements are considered legal contracts and most states do not let minors sign contracts. If this is the case, the parent or guardian can open an account jointly with the child. 15 Federal Financial Institutions Examination Council (FFIEC) Consolidated Reports of Condition and Income, data as of June 30, 2016. 16 This table refers to a monthly savings plan. Irregular savings deposits from such places such as tax refunds can also be entered as a one-time deposit. An example could include depositing $200 of a $2,000 tax refund. 17 Certain resources are NOT counted, such as a home and lot, the resources of people who receive Supplemental Security Income (SSI), the resources of people who receive Temporary Assistance for Needy Families (TANF), and most retirement (pension) plans. The procedures for handling vehicles are determined at the state level. See United States Department of Agriculture Food and Nutrition Service, http://www.fns.usda.gov/snap/eligibility. 18 States have the option to enroll people using broad-based categorical eligibility. This effectively eliminates the asset test specifically for SNAP because people are enrolled based on their enrollment in other programs. See http://www.fas.org/sgp/crs/misc/R42054.pdf. See also United States Department of Agriculture Food and Nutrition Service, http://www.fns.usda.gov/sites/default/files/snap/BBCE.pdf. 19 “Broad Based Categorical Eligibility in the SNAP Memo as of Nov. 2012 (updated April 2015).” http://www.fns.usda.gov/sites/default/files/snap/BBCE.pdf. 20 Nevada increased its limit to $6,000 in 2014. https://dwss.nv.gov/TANF/TANF_FAQ-Eligibility_Criteria-R/S. 21 Urban Institute Welfare Rules Databook, Office of Planning, Research, and Evaluation, ACF, HHS, OPRE Report 2014-52, September 2014, pages 74 and 166. See http://wrd.urban.org. Additionally, since the most current version of the HHS publication was released, Illinois also eliminated asset limits on TANF, http://www.dhs.state.il.us/page.aspx?item=69797, Section H. 22 See https://www.federalregister.gov/articles/2012/03/23/2012-6560/medicaid-program-eligiblity-changes-under-the-affordable-care-act-of-2010#h-28. 23 See “Understanding the Extra Help with Your Medicare Prescription Drug Plan” from the Social Security Administration at https://www.ssa.gov/pubs/EN-05-10508.pdf. 24 See https://www.medicare.gov/your-medicare-costs/help-paying-costs/medicare-savings-program/medicare-savings-programs.html#collapse-2624. 25 For more information go to https://www.irs.gov/for-tax-pros/new-federal-tax-law-may-affect-some-refunds-filed-in-early-2017. 26 See https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/eitc-income-limits-maximum-credit-amounts-next-year. 27 See http://www.irs.gov/Credits-&-Deductions/Individuals/Earned-Income-Tax-Credit/Qualifying-Child-Rules. 28 See http://www.irs.gov/uac/Ten-Facts-about-the-Child-Tax-Credit. 29 FICA and Medicare contributions are accurate as of August 2015. 30 Some states also distribute child support via prepaid cards. 31 Needs-tested benefits in a program established under state or local law or administered by a state or local agency, such as SNAP, TANF, or WIC, are not subject to these protections. However, needs-tested programs administered directly by the federal government, such as SSI, are protected. 32 The availability of EBT cards and other government benefits cards, their fees and other details vary from state to state and program to program. 33 Needs-tested benefits in a program established under state or local law or administered by a state or local agency, such as SNAP, TANF, or WIC, are not subject to these protections. However, needs-tested programs administered directly by the federal government, such as SSI, are protected. 34 For more information on Lifeline phone rates, see https://www.fcc.gov/consumers/guides/lifeline-support-affordable-communications. 35 The Pew Charitable Trusts State and Consumer Initiatives. Payday Lending in America. October 2013. http://www.pewtrusts.org/en/multimedia/data-visualizations/2012/payday-lending-in-america. 36 Ibid. 37 Most credit card companies allow customers to pay a percentage of the amount owed, which makes the minimum payment vary from month to month. To pay off this credit card balance in full, the individual will have to make $25 payments for 15 months, and then pay just over $15 in the sixteenth month. 38 See the CFPB’s Supplemental findings on payday, payday installment, and vehicle title loans, and deposit advance products, June 2016: http://files.consumerfinance.gov/f/documents/Supplemental_Report_060116.pdf. 39 For more information on medical debt and its impact on consumers, see the CFPB’s Consumer Credit Reports: A study of medical and non-medical collections at http://www.consumerfinance.gov/reports/consumer-credit-reports-a-study-of-medical-and-non-medical-collections. 40 Collins, Sara R., Rasmussen, Perta W., Doty, Michelle M., and Beutel, Sophie. The Rise in Health Care Coverage and Affordability Since Health Reform Took Effect, The Commonwealth Fund, January 2015. See: http://www.commonwealthfund.org/publications/issue-briefs/2015/jan/biennial-health-insurance-survey. 41 Associated Press, New Medical Billing Standards, February 13, 2014. See http://bigstory.ap.org/article/new-billing-standards-help-patients-debt. 42 See http://www.cnn.com/2009/HEALTH/06/05/bankruptcy.medical.bills. 43 Kalousova, Lucie and Burgard, Sarah A. Debt and Forgone Medical Care, University of Michigan Institute for Social Research, July 2012. 44 See Consumer Financial Protection Bureau, Consumer credit reports: A study of medical and non-medical collections, December 2014. See http://www.consumerfinance.gov/reports/consumer-credit-reports-a-study-of-medical-and-non-medical-collections. 45 See Consumer Financial Protection Bureau, Consumer credit reports: A study of medical and non-medical collections, December 2014. See http://www.consumerfinance.gov/reports/consumer-credit-reports-a-study-of-medical-and-non-medical-collections. The Healthcare Financial Management Association (HFMA) notes, “There is confusion among healthcare consumers about how to obtain clear, understandable pricing information. The differences among healthcare charges and prices and the widespread variations in service, quality, and outcomes all are shrouded in an air of uncertainty and complexity. The all-too-common result is misunderstanding.” (Brian Workinger, Front-Line Perspectives on price Transparency and Estimation, HFM Magazine, Sept. 2014). 46 Ibid. 47 For definitions of insurance terms and tips on using insurance coverage, see the U.S. Department of Health and Human Services From Coverage to Care: A roadmap to better care and a healthier you at https://marketplace.cms.gov/outreach-and-education/downloads/c2c-roadmap.pdf. 48 For tips on healthcare credit cards, see http://www.consumerfinance.gov/about-us/blog/whats-the-deal-with-health-care-credit-cards-four-things-you-should-know. 49 See https://www.fha.com/fha_requirements_debt. 50 See https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance#what-is-deferment. 51 This example is fictional. The credit card payment schedule is based on a credit card with a 22 percent APR. In this example, the individual is paying down a high balance of $9,869, paying the minimum payment each month calculated at 4 percent of the balance. He is not using the card to make additional purchases. While credit card companies use a variety of methods to determine finance charges, a simple interest calculation was used for the purposes of this example. Amounts were rounded to the nearest dollar. According to the credit card payment calculator on Bankrate.com, making the minimum payment of 4 percent, it will take the consumer 15 years and 3 months to pay off this credit card debt. He will also pay $8,165 in interest assuming no late fees. 52 Pie chart values are from FICO. See http://www.myfico.com. 53 “Recent behavior” refers to recent credit behavior and inquiries. “Age of credit” refers to the length of time accounts have been open. 54Analysis was conducted using information from the CFPB’s Consumer Credit Panel, which is a random sample of de-identified credit records purchased from one of the nationwide credit reporting companies and is representative of the population with credit records. By comparing information in the credit panel from December 2010 with 2010 Census data, the Bureau was able to estimate the number of consumers who were credit invisible or had unscored credit records. See Data Point: Credit Invisibles at http://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf. 55 The exact definition of what constitutes insufficient or stale information differs across credit scoring models, as each model uses its own proprietary definition. 56 See http://files.consumerfinance.gov/f/201405_cfpb_tipsheet_youth-good-credit.pdf. 57 See http://www.consumerfinance.gov/blog/millions-of-consumers-will-now-have-access-to-credit-scores-and-reports-through-nonprofit-counselors. 58 For two examples, see http://www.chicagotribune.com/classified/realestate/sns-201204201830--tms--realestmctnig-a20120428apr28,0,222450.column and http://www.experian.com/blogs/news/2012/09/24/rebuild-your-credit. 59 Internal Revenue Service. See https://www.irs.gov/individuals/general-itin-information. 60 The Privacy Impact Assessment for the Consumer Response System is available at http://www.consumerfinance.gov/privacy-office/consumer-response-database. 61 This toolkit includes links or references to third-party resources or content that consumers may find helpful. The Bureau does not control or guarantee the accuracy of this outside information. The inclusion of links or references to third-party sites does not necessarily reflect the Bureau’s endorsement of the third-party, the views expressed on the outside site, or products or services offered on the outside site. The Bureau has not vetted these third-parties, their content, or any products or services they may offer. There may be other possible entities or resources that are not listed that may also serve your needs.