CESIDebtSolutions University: A Comprehensive Financial Literacy Curriculum

Chapter 2 - Banking Basics

If you are one of someone who doesn’t understand finance or banking, this chapter hopes to simplify the banking jargon and provide you with the basics. A bank is an institution where you put your money. It helps you carry out routine money transactions like transferring funds, recording where your funds are going, paying your bills, depositing your salary, and enabling you to save money in a structured way. Apart from these transactions, banks also offer accounts for savings, checking, loans, credit cards, and investment instruments.

Why should I bank?

You may be stashing your savings in piggy banks or shoe boxes! Or, you may be using check cashing services that charge you hefty fees. Whatever the case, sooner or later the shoe box or piggy bank is going to fill up or you will need to write a check. Without a banking account, your options are quite limited. You are at the mercy of whatever fees somebody wants to charge to cash your paycheck or give you a money order. If you are thinking of keeping your money at home in a piggy bank, consider this:

• Your money will not grow (i.e. you’ll get no returns in terms of interest).
• If a disaster like a robbery or a fire occurs in your home, all your money will vanish.

On the other hand, if you put your money in a bank, it will increase in value, earn some interest and grow. Also, money deposited in the bank is safe because your account is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor (through 12/2013). Some additional advantages to having a bank account include:

• Many employers offer direct deposit of your paycheck to your bank account saving you the hassle of driving around and paying fees to access your money.
• The majority of banks offer online banking at no cost to their account holders. Online banking allows you to have 24-hour access to your accounts to transfer money, pay bills and check your balances.
• Having and properly maintaining a bank account can help you to build or improve your credit.

Before you put your money in the bank, it is prudent to know how a bank operates and how it makes your money grow.
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Chapter 4 - Building The Budget

A budget is an account of your anticipated income and expenses for a given period. It helps you to set up a system that will make your money work for you and is your ally in times of financial stress. Your personal spending plan, if designed correctly, will guide you to financial security and peace of mind. A well-constructed budget also provides you with an opportunity to do a “test run” on the distribution of your resources.

For some, the mere mention of setting up a budget brings on an anxiety attack. They confuse guidelines with restrictions. In actuality, a spending plan is your pathway to financial success. It keeps you focused and moving forward rather than standing still, or worse — back- pedaling. By sticking to the guidelines you set, you will reach your goals in record time.

The advantages of budgeting your income and expenses cannot be overstated. A recent poll of people who have filed bankruptcy revealed that most did not develop a budget, or they developed one but failed to stick to it. (The absence of a savings plan was another common thread among people who fall victim to bankruptcy.)

A budget can cover any length of time. Most government agencies and corporations establish an annual budget to track income and allocate funds for the fiscal year. A budget can be developed to manage resources for a specific item, such as a wardrobe expenses or purchasing a new car. This discussion will focus on creating an outline to effectively manage your monthly financial activity.
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Chapter 6 - Planning for Prosperity

Prosperity is multi-faceted. Like a brilliant gem, it has many faces and aspects. Excellent health, secure housing, fulfilling relationships, inspiring adventures, and adequate financial resources are a few of the more popular themes that most people envision when defining prosperity. Such ideas stimulate the creative juices and unleash the energy that drives us onward. For many, the overall objective is to arrive at a moment in our lives where we can step back and enjoy the pursuit of life’s simple pleasures without having to earn a paycheck. This chapter will discuss the basic components of planning for that moment. Regardless of one’s age, it is wise to identify our goals and implement a plan for achieving them. Waiting for the last moment to ensure that your needs will be met after you retire, is irresponsible and foolhardy. We must pay as much attention to our future security as we do to satisfying immediate comforts and desires. It is recommended that you be prepared to replace 75% of your pre-retirement income after you leave the workforce to maintain your standard of living.

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Chapter 8 - When Things Go Wrong

Kristy Levin is turning 30 this year. She ismarried with a one year-old daughter and is a stay-at-home mom. But, all is not well in the Levin household.As a result of a lot of credit card debt accumulated by Kristy when she was in college, she is still struggling to pay off her cards. Because she is now out of the workforce, Kristy's husband is finding it difficult to cope single handedly with the household expenses as well as her minimum debt payments. Kristy is terrified that she has no other option than to file for bankruptcy, but, the consequences of doing so are still stressful to her. She worries about her child's future and whether she can really start from scratch again to get her life back on track.

Like many others in similar situations, Kristy finds it is easy to be complacent about increasing debt until it is too late. Soon, even stretching your monthly income to its limit barely covers your expenses or supports your existing standard of living. The solution is to pay attention to warning signs before a crisis develops.
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