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800 -351 -4195 www. faircredit. org
The Core of Counseling 1. Cash Flow Review 2. Debt Analysis (AAA Excel Form) You must understand their cash flow (budget) and debt load (list of creditors) to provide complete and effective counseling. These two areas will and should consume much of your counseling time.
Count off and Divide • Count off and divide into three groups • Team up with individuals you don’t work with on a daily basis
Prep for Counseling You will be presented with a scenario Work on the following as a group 1. 2. 3. 4. Choose a team leader to write and present Two vital questions you would ask Two recommendations you would give Present a similar situation encountered at your CU
Group Scenario #1 Angela and Mike have been late on their car payment and don’t want it to be repossessed. Angela’s income has been reduced and they don’t know what to do. They also have $12 k in credit card debt that they are worried about.
Group Scenario #2 James keeps maxing out his overdraft line of credit. He has tried to increase the line, but does not qualify for a larger LOC. He is frustrated because he needs to make a payment to one of his creditors today.
Group Scenario #3 A couple tells you that a payday lender keeps taking money out of their account, and now they can’t pay their other bills. They just received another letter stating their wages would be garnished if they didn’t pay the debt off in full.
Video Scenario Credit Card Debt
Partner Up • Communication Exercise • Roles – The person with the darker shirt will face the screen – The person with the lighter colored shirt will face away from the screen – The person facing away from the screen will need a piece of paper and a writing utensil
Communication Exercise • The person facing the screen will look at the image and instruct the other person on how they should draw on their paper. • The person drawing must remain silent, no questions • You will have Two Minutes
Questions • What recent event made them realize they need help? • How long have they been struggling with this financial issue? • What does the problem stem from? • What do they hope I can do for them? • How can I get them to open up?
Questions (Cont) • Have they taken any steps to remedy the situation? • What are their L/T and S/T goals? • What are their concerns? • What debts do they have that they are not concerned about? • What payments are they current on?
Questions (Cont) • Do I have access to their cash flow records? (checking, credit) • Am I speaking to the decision maker? • How can they alter spending? • What changes are they unwilling to make? • How do they feel about my recommendations?
Presenting the Program to Sr. Management – Improves Member Retention – Reduce Losses – Prevent Delinquencies – Reduces Bankruptcy Filings – Offer Financial Products to Members – Assistant to the Collection Dept
AAAFCF Counseling Programs Ø Ø Ø Ø Credit Counseling Budget Counseling Debt Management and Re-payment Housing Counseling Foreclosure Prevention ID Theft and Fraud Counseling Community Classes and Education Matched Savings Accounts
What to include in your Resource List • • • Food Bank Utility Assistance DWS Prescription/Medical Mental Health Marriage/Family Counseling • Legal Services • Consumer Protection • Debt Management Provider • Childcare • Clothing • Disability • Education Assistance • HUD Agency • Sr. Citizen Services • Tax Preparation Services • Online Consumer Education
Basic Online Resources • • • www. consumercents. com www. annualcreditreport. com www. donotcall. gov www. optoutprescreen. com www. utahtaxhelp. org
Current Financial Roles • Who is the CFO, Accountant, Auditor – Who pays the bills – Who makes family purchases – Who decides for/against major financial changes?
U. S. National Debt Clock The Outstanding Public Debt as of the 3 rd of November 2010 at 2: 45 PM: $13, 675, 524, 345, 897 Debt Per Citizen: $44, 026 Debt Per Taxpayer: $124, 092
How much is one Trillion? $100 $1 Million $10 k $100 Million
U. S. Personal Savings Rate
Average Credit Card Balance
We are starting to SAVE again!
How do we Compare • • What do we hear in the Media? What stats do they use to illustrate Utah’s economic status?
Unemployment Rates • UT Unemployment Rate = – 3. 8% (2008), 6. 6% (2009), 7. 5% (Today) • National Rate ~ 9. 5% • CC Debt at 8 year low • Why I don’t rely on these stats
UT Foreclosure Rates As of Sept 2010 • UT is 6 th for Mortgage Default < Behind NV, FL, AZ, CA, ID As of Aug 2010, year to year • Home Sales dropped 36% – Tax incentive expired • Creates a double dip effect – Lowest mortgage rates I have ever seen • Great time to Finance of Refi
UT Bankruptcy Rates • Known for High BK rates – Usually in the Top 5 • 1 in 191 residents filed BK in 2009 – (Typically < 1 in 40 households) • Large Families, Lower Median Age, 45 th in per capita income, high cost of living. • Wage Garnishment Laws, no Usury Laws
Why do we Spend more than we Earn? • Marketing – Radio, TV, Internet, Billboards, E-mail, Newspaper, Inserted in programs • Entitlement – – – • • You Deserve… You Have Earned… You Need… Great new “stuff” we can buy Easy access to Credit
Spend-Spend • • • Cash for Clunkers New Car Tax Credits Homebuyer Credits Special Deals Black Friday Sales Just because you can get a “good deal” doesn’t mean you can afford to buy it or even need it.
Stop Deficit Spending • • Many use debt to maintain lifestyle Avoid accumulating more debt Cost of the debt you accumulate Better to cut expenses
NEEDS VS WANTS Do I really need a house this expensive?
I need transportation, but am I converting this NEED into a WANT?
I need clothing, but am I converting this NEED into a WANT?
I need food, but am I converting this NEED into a WANT?
I need to communicate, but do I need a cell, home phone, fax machine, internet, long distance plan on the home phone, caller ID, Voicemail, Text plan, Data/Internet plan on my cell?
The Great Wall • No matter how stressed a consumers finances are, they will not follow advice to cut the cable/satellite – “It is my only form of entertainment” – “My kids have to have it” – “It isn’t that much per month”
“Overloaded” with Debt?
STEP ONE STOP CREATING MORE DEBT!!! • Make tough decisions • Income > Expenses
Unsecured Debts 1. 2. 3. 4. Request help from Creditors Consolidation Loan/ Balance Transfer Debt Management Plan Liquidating Assets ____________________________ 5. Settlement (Self) 6. Bankruptcy 7. Postpone Decision
Stop Making Excuses to Yourself
7…… 6…… 5…. . . 4. Build Savings 3. Eliminate Debt 2. Adjust habits/lifestyle 1. Track Expenses
Will Vander. Toolen [email protected] org Director of Counseling & Education AAA Fair Credit Foundation Certified Credit and Debt Counselors HUD Certified Housing Counselors 800 -351 -4195 www. faircredit. org