MoneyCounts:
A Financial Literacy Series
What is Financial Literacy?
Dr. Daad Rizk
MoneyCounts: A Financial Literacy Series
301 Outreach Building
University Park PA 16802
dar39@psu.edu
814-863-0214
Learning Objectives
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Define Financial Literacy
Discuss mission, needs and benefits
Discuss Core Competencies
Review principles of budgeting, credit and
debts management, saving and investing
MoneyCounts: A Financial Literacy Series
What is Financial Literacy?
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To explore strange new worlds
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To seek out new life and new civilizations
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To boldly go where no one has gone before
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Topic is personal
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Topic is emotional
– Mission:
• To provide financial knowledge and skills to make informed decisions and take
effective actions regarding money management
– Subliminal -Underlined Mission
• To alter people’s core attitudes and beliefs as a prelude to changing their behavior
MoneyCounts: A Financial Literacy Series
Why Financial Literacy?
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USA Population = 319 million
Taxpayers = 116 million
Credit card debt = 889 billion
Student loan debt = 1,297 trillion
Mortgage debt = 13,355 trillion
– Total Personal Debt = $16,642 trillion
– Debt per Citizen = $52,178
• Citizen = man, woman, child
U.S. Debt Clock
MoneyCounts: A Financial Literacy Series
What does that mean?
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College student graduates with $27,000 in student loan (average)
1 out of 2 college graduates go back to live at home
Unemployment rate 10.8% -11% (varies)
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Average of 9 months to 1.5 year to find work
49% of taxpayers do not have saving accounts
Average credit card debt per taxpayer = $7,600
• Total saving per family $8,640
U.S. Debt Clock
MoneyCounts: A Financial Literacy Series
No College Fund?
MoneyCounts: A Financial Literacy Series
Life on the Edge
MoneyCounts: A Financial Literacy Series
MoneyCounts: A Financial Literacy Series
• Core Competencies MyMoney.gov
– Earning
– Saving & Investing
– Borrowing
– Spending
– Protecting
MoneyCounts: A Financial Literacy Series
 Gross versus net paycheck
 Understand your paycheck
 Verify and adjust your
exemptions and deductions
on your W4 (withholding)
 Benefits and taxes
 Learn about potential benefits
and taxes
 Education is important
Knowledge
 Invest in your future, plan for
your career through education
– search the market
Action/Behavior
 Saved money grows
 Start saving early, pay yourself
first
 Banking – saving and checking
accounts
 Comparison shopping for a
financial institution – reconcile
your accounts
 Long-term financial planning
 Plan for retirement, child
education, renting versus
owning a home
 Eliminate or reduce waste
Knowledge
 Replace waste with saving
Action/Behavior
 Difference between needs and
wants
 Develop a quantitative
awareness of your spending
habits
 Get the most/best value for
your money
Knowledge
 Develop a spending plan
 Track spending habits
 Live within your means
 Understand the social and
environment impact of your
spending decisions
Action/Behavior
 Distinguish net income from
loans
 Cost of borrowing – Penalty,
Interest, late fee, surcharge
(PILS)
 Amortization schedules
 Credit Score - FICO (Fair Isaac
&Company) Equifax, Experian,
TransUnion
 Credit cards
Knowledge
 Borrow only what you need
not want
 Avoid high cost loans, avoid
penalties, late fees, and
surcharge
 Minimize interest payments
 Get your free annual credit
report, check your financial
grade, review and correct if
necessary
 Shop for low interest cards,
use only in emergencies, avoid
paying (PILs)
Action/Behavior
 Risk management and
insurance coverage
 Shop for insurance, review and
update insurance, build up an
emergency fund
 Identity theft
 Watch for your social security
number and card, your date of
birth and your banking
information
 Fraud and scam
Knowledge
 If it is too good to be true, it
most certainly is
Action/Behavior
MoneyCounts: A Financial Literacy Series
• Student Specific Topics
Plan Your Finances [Penn State Office of Student Aid]
– Budgeting
– Cost and Student Aid
– Borrowing & Repayment of Student Loans
MoneyCounts: A Financial Literacy Series
Basic Steps
• Steps to Financial Literacy–Practical Elements
– Commitment to change
• Acknowledge the financial challenge
• Take the Pledge to make changes
• Get the family on board
– Financial challenges
» 65% of couples argue
» 45% of divorce cases
Examiner.com
MoneyCounts: A Financial Literacy Series
Assessment
• Assess your financial situation
– Examine:
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Earning
Saving
Spending
Borrowing
Protecting
MoneyCounts: A Financial Literacy Series
Organization
• Clean out financial clutter
– Organize information
– Protect against identity theft
MoneyCounts: A Financial Literacy Series
Expectations
• Set yourself up for success
– Get the family involved
– Create a plan
– Designate a task for each member
MoneyCounts: A Financial Literacy Series
Money In
• Earning
– Explore ways to increase earning
• Turn a hobby into cash
• Get more education/specialization
• Explore seasonal work
– Review paystub for tax withholding and
deductions
• Take advantage of pre-tax benefits
• Take advantage of tuition assistance
• Take advantage of military/government programs
MoneyCounts: A Financial Literacy Series
Money Saved
• Saving
– Pay Yourself First
• Make Saving automatic
• Set SMART goals and work toward them
• Get the family involved
– Establish an emergency fund
• Expect the unexpected – EXIT Strategy
• 3 – 6 months
MoneyCounts: A Financial Literacy Series
Money Spent
• Spending
– Wants Versus Needs
• Wants disguised as needs
• Examine spending habits
– Evaluate one by one
• Set a budget
• Adopt a cause
• Get the family involved
– Live within your means
MoneyCounts: A Financial Literacy Series
How Time Changes Values?
MoneyCounts: A Financial Literacy Series
Money Borrowed
• Borrowing
– Get copies of your credit reports
– AnnualCreditReport.com
• Equifax
• Experian
• TransUnion
– Clean & protect credit reputation
– Watch out for student loans
– Understand the cost of borrowing
MoneyCounts: A Financial Literacy Series
Debts
• Pass the Debt Test? 20/10 Rule
– All Debt (outside mortgage) should not exceed
20% of net annual income
– Monthly payment should not exceed 10% of
monthly take home income
– Pay by due date and in full (if possible)
– Watch debt to limit ratio - Keep your credit card
charges at no more than 30% of your credit limit to
protect your FICO Score
MoneyCounts: A Financial Literacy Series
Mortgage
• Mortgage
– Monthly payment should not exceed 28% -30% of
net monthly income
– Send ½ a payment every 2 weeks instead of one
payment a month
• $800 a month = $9,600 a year (800 X 12)
• $400 every 2 weeks = $10,400 a year (400 X 26)
MoneyCounts: A Financial Literacy Series
Freedom from Debts
• Debt Management Strategies
– Pay debt with highest interest rate first
– Pay debt with small amounts first to free funds
• Save for Big Purchases
– Calculate cost of items before you charge on credit
cards
MoneyCounts: A Financial Literacy Series
Understanding Budgeting
• Where does all the money go?
– Create a BUDGET
• Examine spending HABITS
• Practice TRACKING
– Identify and document your
• Fixed monthly expenses
• Variable and periodic monthly expenses
• Document your spending
– Analyze, divide and conquer
– Identify ways to reduce/control spending
MoneyCounts: A Financial Literacy Series
Budget at a glance
• Earning
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100%
Saving
Housing
Meals
Loans
Car
All other
10%
30%
20%
10%
10%
20%
MoneyCounts: A Financial Literacy Series
Budget at a glance
1. Saving 10.00%
10.00%
10.00%
2. Housing 30.00%
10.00%
3. Utilities 5.00%
4. Food 20.00%
5.00%
30.00%
5. Transportation 10.00%
10.00%
6. Entertainment 5.00%
20.00%
5.00%
7. Debt 10.00%
8. Other 10.00%
MoneyCounts: A Financial Literacy Series
Waste Reduction
• Manage Waste!
– Average family throws $1,500 a year of unused
food items
• Expiration date, sell by date, use by date
• No time to cook
• Want to try new products
• It was on sale
MoneyCounts: A Financial Literacy Series
Risk and Insurance
• Manage Risk
– Review Insurance coverage periodically
– Assess current and future need
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Health/medical
Life and Term insurance
Disability
Home insurance
Car insurance
– Protect Identity from theft
MoneyCounts: A Financial Literacy Series
Retirement
• Manage Retirement
– Start saving early – compound interest
– Do not rely solely on Social Security Funds
• Delay SSF to get full benefits
– Save money in your assets – Home
– Invest and manage risks
MoneyCounts: A Financial Literacy Series
TIPS
• Join a movement/Adopt a cause in life
– Environment (3 R’s)
• Recycle, reuse, reduce
– Health
• Food, exercise
– Charity
• Learn to give, make a difference
MoneyCounts: A Financial Literacy Series
Promote the Knowledge
• Share a TIP!
Things do not change, WE CHANGE
Henry David Thoreau
MoneyCounts: A Financial Literacy Series
MoneyCounts:
A Financial Literacy Series
Thank You!
Comments and Questions
Dr. Daad Rizk
MoneyCounts: A Financial Literacy Series
301 Outreach Building
University Park PA 16802
dar39@psu.edu
814-863-0214