Welcome to the "Mind Your Financial" Financial Literacy modules!

As you know, there is more to the Habitat program than just meeting requirements. You have to become loan-ready! As a supplement to the Budgeting classes, the following information will help you learn even more about taking control of your finances!

Please continue to work with the Finance Team about your specific situation as they are helping prepare you for your loan. The information in this and other financial modules is not a replacement for your work with them. 

In order to successfully complete this and the other Mind Your Finances modules, you will need to read the information given and answer the questions throughout.  

Each "Mind Your Finances" module is worth up to 3 Sweat Equity hours. 

Avoiding Financial Pitfalls

"Financial pitfalls" are the actions that you might make that will cost you financial success and security. Sometimes these are actions that you might do (such as co-signing a loan) and sometimes these are actions others might do (such as trying to scam you out of money). Knowing the pitfalls and how to avoid them is one of the keys to financial success. 

FIRST, Protect Your "Rep":

Your reputation (in relation to money) is reflected in your credit score, your savings accounts, and your ability to access money if you need it.  

TIPS about protecting your "rep": 

1. Keep your PERSONAL INFO to yourself. Do NOT tell people about your credit score or how much money is in your bank accounts. You may think they will just be happy for you, but they may see an opportunity to get money from you or use your credit for THEIR benefit.  

2. Keep your MONEY to yourself. Do NOT loan money, even to trusted friends, during the loan process. The bank ONLY looks at your paperwork and will only see that you took a sum of money out. You will not have an opportunity to explain why you removed the money. Do not count on being paid back in time to replace the money.  

3. Keep your SIGNATURE to yourself. Do NOT CO-SIGN LOANS.  When you agree to co-sign on a loan, you are agreeing to make the payment on the loan as if it was YOUR LOAN. If you are not financially prepared to take over the payments 100%, Many good people with great intentions have ruined their credit histories by co-signing for irresponsible people. Don't become one of them. Protect your reputation by keeping your credit to yourself.

Dear Sir or Madam,

I'm 28 years old and I need some help. When I was 24, I co-signed on my boyfriend's truck. He really needed help, and my credit was good. Unfortunately, he didn't keep up with the monthly payment and the car was repossessed. The bank is now sending me notices that I owe $15,000.00. I am barely getting by as it is. There is no way I can pay this.

Please help.

Jamie

P.S. - we are no longer together

Causes of Financial Pitfalls

Everyone makes mistakes. Everyone has to learn before they know something. Often, avoiding financial pitfalls is about gaining experience and knowledge.  As you get more educated and knowledgeable about money, it will be much easier for you to avoid making the mistakes that can cost you financially.  

Have you fallen into any of these financial traps?

Second, avoid Quick Fixes

Cash advances, payday loans, and charging to a credit card can create a vicious circle. The more you take advantage of these "quick fixes" the more you will pay over the long term. If you do not have enough income to pay your monthly expenses, you need to:

Lower your expenses
Increase your income
 

Many financial scams and schemes prey upon our desire to get money and get it quickly. But, not thinking through the decisions we make can lead to serious financial distress and fraud. 
 

Third, pay attention

Not paying attention can cost you thousands of dollars over time. Here are some common examples:

What are some ways to avoid both "get money quick" schemes and losing money due to inattention to detail?

1. Always read your statements and check your bank accounts frequently. 

2. Have fraud alerts set up for your accounts (many times this service is offered for free). 

3. Maintain fewer accounts. 

4. Don't rely on autopay -- make sure you are double checking what is being taken from your account. 

5. Balance your checkbook. 

6. Remember, "If it sounds too good to be true, it probably is." 

7. Ask yourself WHY a "deal" is only good for so long or has to be okayed so quickly. 

8. Ask yourself WHY someone needs your personal or account information. 

9. Ask yourself WHY someone would call you to lower a bill (what company wants you to pay them LESS money?).

Fourth, know your attitude about money

Whether we realize it or not, we place a lot of emotion into money. Money inspires love, hate, and envy.

Our attitudes about money develop over time, and research shows that most of these attitudes originated with our parents and how they felt about money.

Think about these things:

1. Did your parents talk to you about responsible spending or were they irresponsible in the way they spent money?

2. Did you view your parents as savers or spenders?

3. Many people who appear to have "money to burn" are living beyond their means with credit cards, car loans, and big mortgages. They are hurting their own financial future to impress you.

4. Seeing people on tv seems to indicate that money is easy to get, and having alot of it is what will make you happy. 

The attitudes you formed about money early in your life probably affect how you save, spend, and invest today. 

There are six major characteristic types in how people view money. They are Frugal, Pleasure, Success, Indifference, Powerful, and Self-worth.

Frugal: Frugal people seek financial security by living below their means and saving money. Frugal people rarely buy luxury items and some even have a hard time buying necessities. They save money because they believe money will offer protection from life's uncertainties; money makes them feel more secure.

Pleasure: Pleasure seekers use money to bring pleasure to themselves and others. This money profile is more likely to spend than to save. Pleasure seekers often live beyond their means by spending more than they make. Pleasure seekers can find themselves in deep debt if they are not careful.

Status: Some people use money to express their social status. Having the best and buying popular brand names are important to people in this profile. Status-spenders like to "show off" their purchases.

Indifference: People who treat money with indifference tend to place very little importance on having money. Having money makes them nervous. They would rather spend time and resources being independent by growing their own food or making their own clothes. They are hobby-oriented and involved with arts and crafts.

Powerful: Some people use money to express their power. This profile may also use money to control other people, including their spouses, children and friends.

Self-Worth: People who spend money for self-worth tend to judge their own worth by how much money they have. They believe that people only judge them based on the amount of money they have. They value how much they have accumulated.

Developing a Positive Financial Attitude about Money

Think of your money profile as a "diagnosis." Now that you know what you are, what kinds of goals do you need to set to move toward where you want to be? Remember, these goals can be short, medium and long-term.

Does this scenario sound familiar: Cheryl lives paycheck-to-paycheck. She gets a raise every 1-2 years. Each time her salary is increased, she increases her spending. Her financial picture is stagnant. She never puts money away for a rainy day and constantly adjusts her living to her income. What should Cheryl do to change her financial future?

By letting her paycheck dictate her monthly spending, Cheryl has lost control. Cheryl needs to create a budget and control her spending on her own, allocating money for savings.

For most people, money is a limited resource. Do you manage this resource or does this resource manage you?

Now is the time to take control of your money.

You can build a positive money attitude by overcoming five major obstacles:

• Fear
• Cynicism
• Laziness
• Bad Habits
• Pride 

Even if you feel you already have a positive money attitude, it is important to keep these obstacles in check. 

Fear

Fear of losing what you have is the top reason why people struggle financially. Everyone has a certain amount of fear when it comes to his or her finances. There is uncertainty with employment, illness, or unexpected expenses (car and home repairs). People can become so fearful of their finances, that they live in denial.

Cynicism

Cynics always see the glass as half empty. Does this statement sound familiar: "I'll never get ahead." Our friends and family can contribute to cynicism by saying things like "You will never amount to anything." The key to overcoming cynicism is to combat negative thoughts with positive ones (remember the little blue engine who made it up the hill by chanting "I think I can"?)

Laziness

Laziness is failing to act, or saying "I'll do it tomorrow." People fighting the laziness obstacle fail to make financial matters a priority. This person fails to seriously review their financial situation, make a budget, or even pay bills.
 

Bad Habits

Bad habits develop over time. Most bad habits are developed because of convenience or comfort. It is convenient to pay bills at the end of the month, no matter when they are due. On the other hand, it is comfortable to buy breakfast every morning rather than preparing breakfast at home. Our bad habits cause us to spend more than we should and miss important deadlines.

Pride

Everyone has an opinion about personal finance, but not all opinions are correct. As adults, we are expected to know how to manage our finances. It is difficult to admit what we do not know. Finance is a topic where many have strong opinions but few have knowledge.

The key to creating a positive financial attitude is to remain open to learning and putting new behaviors into action. The following are simple steps you can take to get started:

• Go to your bank and talk about your accounts with a bank representative.
• Ask questions. Go to financial seminars hosted by the bank. Don't purchase or utilize costly bank services until you've compared them against other banks.
• Have an open discussion with a family member about what you have learned in this course.
• Balance your checkbook.
• Have lunch with a friend and discuss a financial product such as savings accounts.
• Watch a financial show on TV.
• Start using an online budgeting tool, like the one provided at mint.com or through your bank's online checking.
• Find someone you trust who appears to manage money well. Ask them to be your financial mentor.

By taking action, you will develop a better understanding of finances.

Fifth, Take your time

Look at the advertisement below. 

What technique is this advertisement using to promote sales?

People are more likely to overspend when they are pressured and rushed. This is why sellers of big-ticket items (cars, appliances, electronics) rely on "limited time offer" marketing. By pushing you to make a fast decision, sellers are limiting your ability to:

• Think your purchase through
• Comparison shop 

If you are being pressured to make a purchasing decision in a short amount of time, here are three pieces of advice to help you resist a tempting offer.

1. Tell yourself: There's always going to be another deal.
   • Have you ever noticed the same store holding a "liquidation sale" every month? Or an auto dealer offering "limited time only" deals all year round? The fact of the matter is that there are always going to be deals. Buy on your terms, and your calendar, not those set by others.
2. Sleep on it.
   • By instituting a "24 hour rule," you will be better able to defend yourself against `impulse buys.' You will be surprised at the number of items you DON'T want to buy the next morning.
3. If it sounds too good to be true, it probably is. 
   • This is a good piece of advice your grandmother may have told you. If something doesn't "feel" right, don't do it. Keep your money and wait for the next purchase/ investment opportunity.
4. Leave the $ at home. 
   • When you are researching a large purchase, don't take your credit cards, checkbook or cash with you to the store. This way you will not be tempted to make a quick decision.

Finally, do your research and shop around

Have you ever filled out a credit card application you received in the mail? Did you know that when it comes to credit cards, you have 1000s of options? Why settle for the one that arrived in your mailbox?

Don't let financial products choose you. You need to choose them based on interest rates and fees associated with them, not based on being "pre-approved."

Studies show that most people do not comparison shop when it comes to credit, checking and savings accounts. Just like with food or any purchase, the more research and comparison shopping you do, the more you'll be able to save.

And the best things in life are free

Let's face it, we all spend money to feel good. Some of us are able to keep our spending under control while others splurge and throw their entire budget off.

What are some items or services you purchase to feel good about yourself? If you are trying to build up your emergency fund and meet specific financial goals, it is hard to go long periods of time without splurging on "treats." One way to help with temptation is to teach yourself that the best things in life are free. Your task is to find a way to feel good that does not involve spending money. Here are some ideas:

• Enjoy nature (beaches, parks, nature walks)
• Socialize with friends by holding a backyard BBQ (not going out to eat)
• Visit the library with your children, take out books by the dozen & rent movies too
• Trade services with friends, instead of paying for them (hair, nail care, babysitting)
• Cultivate a handicraft or other hobby that does not involve spending money
  

So, how do we avoid financial pitfalls?

Follow this prescription for success and build up an immunity to fees, fines, and scams.

• Budget
• Pay Attention
• Know your attitude about money
• Take your time
• Do your research & shop around
• Understand that FREE is always the best price! 

Please make sure you have read all of the material and completed all of the activities in this module before clicking submit.