F.A.R.E. Debt Education
Debt Education Program Summary
“On the Road to FinancialFreedom”
If you are here, you have attended or completed all of the following modules:
- Module 1 – Maslow?s Hierarchy of Needs & Guide to Better Budgeting
- Module 2 – You and Your Credit
- Module 3 – Good Credit, Bad Credit
- Module 4 – The Other Side of Credit
- Module 5 – Life After Debt
In Module 6, we will review the information you learned in the first 5 modules, followed by a Final Exam.
Let’s Start with some definitions
- Budget – It can help you determine where you are over spending as well as help you adjust bad spending habits.
- FICO® score – This is used to determine you credit risk, your interest rate, and even your reliability.
- Credit Rating – Measures credit worthiness. This are calculated from financial history, current assets, and liabilities and usually categorized as excellent, good, fair, or poor.
- Slow Credit – The type of credit you have when your credit report shows that you have a habitual history of paying your bills late.
- CRA – This is a company that assigns credit ratings for issuers of certain types of debt obligations.
Summary: Maslow and Better Budgeting
In Module 1, we discussed Maslow’s “Hierarchy of Needs” and how these needs influence our financial decision and better budgeting skills.
- Along with identifying how and why we spend the way we do, we also discussed:
- Asking ourselves – Why am I buying this?
- Needs vs. Wants
- Waiting a week
- Where is my money going
- The importance of having a spending plan or budget and that it is spending plan is a spreadsheet that shows the flow of money in your everyday life.
- What areas should be included in a spending plan including:
- Net Income
- Living Expenses
- And finally the importance of maintaining the spending plan once it is developed.
Summary: You & Your Credit
In the next module, we took a closer look at credit, credit scores and what it takes to have and/or maintain good credit. We learned that:
- Scores are objective because they are based on large volumes of verified statistical data.
- A credit rating measures credit worthiness. Credit ratings are calculated from financial history, current assets, and liabilities.
- The credit report outlines your borrowing, charging, and repayment activities. Credit reports can be obtained from one of the three major Credit Reporting Agencies (CRA).
- Additionally, we learned that:
- Accurate positive information can remain on your credit report forever.
- Accurate negative information can remain on your credit report for only seven years, with a couple of exceptions: Bankruptcy (10 years) and a Judgement (minimum 7 years or whenever the statute of limitations runs out).
Summary: Good Credit, Bad Credit
In the Module 3, we learned that Credit is a necessary part of our society.
- While good credit will help a person improve his or her quality of life, bad credit can hinder his or her ability to do so.
In order to get Good Credit, you need to have Credit.
- Having no credit history can be as much of a problem as having a bad credit history.
- Opening a Savings and/or Checking account is a good place to start to establish a credit history.
- Being as little as 30 days late will show up on your credit report and can negatively affect your credit score.
- Credit ratings, even bad ones, can be improved and fixed! The first step is requesting your credit report and verifying all the information is correct and accurate.
We learned the “4 Common Credit Mistakes” when trying to repair bad credit:
- Applying for new credit if you’ve already got plenty.
- Consolidating your accounts.
- Making a late payment.
- Asking a creditor to lower your credit limits.
Finally, we learned the next steps in improving and maintaining good credit were:
- Stay informed
- Live within your means.
- Talk to a financial professional or take a class.
- Interest Rate – Can have a fixed, variable, or in some cases, an introductory rate.
- Grace Period – Free period : if you pay your full credit card balance during the free period, you avoid extra fees called finance charges
- APR – This is how much the credit card will cost you, expressed as a percent of your balance per year.
- TILA – The law is designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs.
- FDCPA – Prohibits abusive communication and harassment tactics by creditors.
- FCBA – The law applies to “open end” credit accounts, such as credit cards, and revolving charge accounts – such as department store accounts.
Summary: Life After Debt
In Module 5, we looked at life after “getting back on track” financially. We discussed the three basic principals for getting rid of and staying out of debt:
- PURPOSE – Why do I want to get out and stay out of debt?
- PLANNING – What do I currently owe, what will it take to pay it back?
- DISCIPLINE – What daily lifestyle changes do I need to make to get the job done?
We identified some areas that are vital in attaining and maintaining your financial freedom including:
- Acquiring new Credit and staying within your budget.
- Paying bills on time and paying off high-interest bills early.
- Knowing where your money is going and discussing all major purchases first.
- “Paying Yourself First” by saving and investing or putting the money you save to work making more money.
- Types of low-risk saving and investments options to “Pay Yourself”.
Finally, we discussed “what’s next” and how to continue on the path to “Financial Freedom” including Celebrating success, Sharing what you have learned, and Giving back.