Financial Freedom - Mrs. Nelson Economics
Financial FreedomA Workbook For UnderstandingPersonal Finance
The Florida Council on Economic Education would like tothank those whose support made this project possible.THANK YOU!813.289.8489 2011 Florida Council on Economic Educationwww.fcee.org
Dear Floridians,As your state Chief Financial Officer, my primary goal is to help youkeep and protect your hard-earned dollars. One of the keystones inprotecting your financial health and promoting economic prosperity ishaving a solid foundation in financial literacy.Many of us realize the importance of practicing sound financialprinciples like basic money management and budgeting. However,one in four Floridians do not adequately set money aside, plan forretirement or manage their debt. At the collegiate level, universityadministrators state that they lose more students to credit card debtthan to academic failure.Financial literacy is one of the most powerful tools that we can giveto the young people of Florida, equipping them to achieve financialstability and steer clear of debt and financial fraud.Along with preparing young people to go out and earn a living, it is equally critical to prepare them tomanage what they earn. Those who know how to manage their money have money to start businesses,provide jobs and invest in their communities, including supporting educational opportunities for others.I commend the commitment and progress that the Florida Council on Economic Education has madein improving the lives of Floridians through financial literacy with the help of dedicated parents andeducators.Together, we can pass on valuable lessons to the next generation, and help foster long-term economicprosperity and freedom.Sincerely,Jeff Atwater
The Florida Council on Economic Education gratefully acknowledges and thanks thefollowing individuals for their contributions, time, expertise and advocacy. Theseeducators are the “Best of the Best” and the FCEE is proud of the work they havedone to bring Financial Freedom to the next level.Project ManagerBrett Burkey - 2009 Economic Educator of the YearSpanish River High School, Boca RatonContributorsAndrea Caceres-Santamaria - Seminole Ridge Community High School, LoxahatcheeMary Chowenhill - 2011 Economic Educator of the Year, Robert E. Lee High School, JacksonvilleDenny Dawson - Marine and Oceanographic Academy, Fort PierceTom Glaser - 1996 Economic Educator of the Year, Mater Academy Charter, Hialeah GardensDeborah Kozdras - Gus A. Stavros Center for Free Enterprise and Economic Education, USFBeverly Ledbetter - 2003 Economic Educator of the Year, Pasco High School, Dade CityVirginia Meachum - 2010 Broward County Social Studies Teacher of the Year, Coral Springs HighSchool, Coral SpringsPatricia Sibson - 2008 Economic Educator of the Year, Florida Virtual, JacksonvilleSteven Tommeraas - Glades Central High School, Belle Glade813.289.8489 2011 Florida Council on Economic Educationwww.fcee.org
FOREWORDIn your hands or on your screen is a road map of the perilous highways and bi-ways of the personal financeworld. Though the landscape has changed, success in navigating still remains an achievable goal. A person whoattains financial freedom scales that summit by making sound choices, staying true to themselves, living withinor even below their means, paying themselves first, and remaining devoted to a solid set of priorities. Theseprinciples have always been true; it’s just the world we apply them to has changed. The recent housing bubble,the mountains of consumer debt, the rising cost and uncertainty around healthcare, the number of graduatesreturning to the nest with a suitcase full of college loans, and the ever increasing threat that even the best laidplans can be dashed from one cyber attack are enough to frighten anyone. The American Dream used to meana house surrounded by a white picket fence, kids, dog, a car in the driveway and a chicken in every pot. Now theAmerican Dream for many is to simply get out of debt. To make matters more complicated, the recent recessionand the fundamental causes have resulted in a wave of new rules and regulations surrounding the institutionsthat manage our financial systems and markets. It seems the challenges may be too daunting to overcome. Butthe difference between benefiting or becoming a victim of your finances will always boil down to the choicesyou make. Recently, too many people were dazzled by rapidly rising housing prices, easy credit, and unrealisticexpectations. Our society celebrated consumption while disregarding thrift. Apparently, no one thought that a“Home-saving” channel on television would be profitable. Once the momentum was established, it was too greata force for many to ignore. Today, the ashes of that flame-out are everywhere. Though many people are suffering,the aftermath can serve as a great compass for the choices you make forward. It is quite possible that people whopaid themselves first, saved instead of recklessly spending, kept their debt load manageable, looked to the futureinstead of living for the moment, had a true understanding of all opportunity costs and didn’t get caught up in thewave of unrealistic expectations are not among the wounded today. The clear point to make here is that thosehave always been the answers to the mysteries of achieving “Financial Freedom”.813.289.8489 2011 Florida Council on Economic Educationwww.fcee.org
Financial FreedomTable of ContentsOverview . 1What Is Financial Freedom? . . 3Chapter 1: Managing Money . . 4Introduction . 4Learning the Language . 4Step 1: Tracking One Week of Spending Habits. . . 6Step 2: Setting a Realistic Budget. . . 10Step 3: Maximizing Your Purchasing Power by Being an Informed DollarStretcher . . 11Chapter 2: Banking Basics . . 16Introduction . . 16Learning the Language . . 17Should You Use a Bank? . . 18What You Need to Open a Bank Account . 21Interest: How is Interest Calculated?. . 22The Rule of 72 . . 24Saving Money . . 25What is a Checking Account? . . 27How to Manage a Checking Account . 29How to Write a Check . . 30813.289.8489 2011 Florida Council on Economic Educationwww.fcee.org
The Checkbook Register . 31How Banks Make Their Money . . 34Chapter 3: Job Search . . . 35Introduction . . 35Learning the Language . . 36Why Consider Getting a Job . 36How to Begin the Job Search . . . . 40Making Contact with Potential Employers . . . . 44Follow‐up on Job Applications . . . 49Part II: Working for Yourself . . . 51Go It Alone or Have Partners . . . 52Business Plan . . 53Chapter 4: Consumer Credit & Debt . 58Introduction . . 58Learning the Language . . 59What is Consumer Credit? . 60What is the Difference Between Credit and Debit? . . 61Reading a Credit Card Statement . . 62What if you are Denied Credit? . . 65New Credit Card Legislation . . . 66What Is and Is Not Included in a Credit Report? . . . 67How to Read a Credit Report . . 68Improving and Maintaining a Good Credit Score . . 69813.289.8489 2011 Florida Council on Economic Educationwww.fcee.org
Good Debt vs. Bad Debt . . . 70Tying Everything Together . 71Chapter 5: Automobiles and Auto Financing . . . 72Introduction . . 72Learning the Language . . 74New or Used: Deciding what is Best for you . . . . 76Buying New . . . . 77Estimating Car Costs . . . 78Financing a New or Used Car . . . 79Car Financing . . 80Shopping for a Car Loan . . . 81Car Leasing . . . 81Chapter 6: Managing Risk . . 83Introduction . . . . 83Learning the Language . . . . 84Auto Insurance 101 . . . . 86Understanding Coverage . 87Factors that Impact your Rates . . 89Learn the Language 92Types of Life Insurance . . 93Healthcare Insurance 101 . 95Patient Protection and Affordable Care Act (PPACA) . 96Types of Healthcare Insurance . . 97813.289.8489 2011 Florida Council on Economic Educationwww.fcee.org
Chapter 7: Finding a Place to Live . . 99Introduction . 99Learning the Language . . 100Before you Begin . . . 101How Much Can You Afford? . . . 101How Can You Protect Yourself? . . . 103Knowing What You Want . 103Finding a Rental Property . 104What to Look for in the Lease . . 106Renter’s Rights and Responsibilities . . 107Landlord’s Rights and Responsibilities . . 108Avoiding Common Renting Errors . 108Finding a Property to Buy . . 109What to Look for in a Mortgage Agreement . . 109Description of Different Mortgage Types . 110Advantages and Disadvantages of the Different Mortgage Types: . . 111Chapter 8: Internet Safety and Identity Theft . 113Introduction . . 113Learning the Language . . 114Internet Safety . . 115Identity Theft . . 116813.289.8489 2011 Florida Council on Economic Educationwww.fcee.org
What to do if you think your ID has been stolen . . 117Internet Safety and Identity Theft Awareness Quiz . . 119Chapter 9: Affording a Higher Education . . . 120Introduction . . 120Learning the Language . . . 121Choosing Your Future . 122The Process of Choosing and Applying for College . . . 122Private Colleges/Universities versus Public Colleges/Universities .123Cost of Attendance . . 123Applying for Federal Student Aid (Financial Aid) . . . 125Financial Aid Awards (Grants and Loans) . 127Loan Know How Quick Check Quiz . . 130Work‐Study Program . . . 133Bright Futures Scholarship Program . 133Some Words of Advice . . . 135About the Florida Council on Economic Education . . 136813.289.8489 2011 Florida Council on Economic Educationwww.fcee.org
OVERVIEWWelcome to the Florida Council on Economic Education’s Financial Freedompublication. This is a comprehensive package of interactive instructions on how tonavigate personal finance. To paraphrase a popular advertising tagline, “this is notyour father’s financial world” and it requires a full assessment of the tools necessaryto avoid the various pitfalls. The recent financial collapse and the resulting recessionwere clear signals that all people need a foundation in modern money skills. But also areminder that careful cost/benefit analysis will almost always indicate the right path totake.This collection of lessons covers nine broad topics, in chapter form, providing a solidset of principles to guide you but also harnessing the valuable resources currently available through the internet.Each chapter follows a consistent format that presents essential fundamentals with reinforcement and assessmentactivities. There are links to additional readings as well as carefully selected active learning exercises to strengthencomprehension. Every topic is supplemented by numerous video clips, fun illustrative exercises, and extensionactivities that truly make this a multi-media learning device. Each section is accompanied by power point slidesthat summarize the cogent details in the subject area. This is an educational package that works best with anaccompanying computer and headphones.This workbook can be used as a text or supplement in a Financial Education class or as a self-study guide in thefinancial literacy component of an Economics or Financial Algebra class. It is appropriate for use from middle-schoolto adult education classes. The publication presents these nine subjects: Managing Cash Banking Basics Finding a Job Consumer Credit Buying or Leasing a Car Managing Risk With Insurance Find a Place to Live Internet Safety & Identity Theft Financing Your EducationChapter One is all about maximizing your purchasing power through a realistic budgeting process. The key is to beconscious of where every dollar is spent and weigh each potential purchase against your long-term goals.Chapter Two introduces the reader to the basics of banking, both traditional and contemporary. This section isconscious of the fact that banking services are in the middle of a gradual transition away from the manual processesof the past to the on-line and paperless methods gaining popularity. The reader will survey banking products andfees as well as the steps involved in managing various accounts.Chapter Three addresses the world of job searching. How to hunt and capture the right job, and the professionaldevelopment necessary in order to keep the job. Inside are instructions on how to construct the perfect resume andprepare for the interview process. There is also a section on the benefits of entrepreneurship as an alternative toworking for someone else.813.289.8489 12011 Florida Council on Economic Educationwww.fcee.org
Chapter Four tackles the extremely important subject of consumer credit. This section reveals the secrets toestablishing a good credit rating and the means to keep track of it. The different types of credit and credit servicesare discussed and what to do if you are denied credit. An emphasis is placed on the importance of a good creditscore when accessing all kinds of financial services and modern conveniences.Chapter Five discusses the often intimidating process of acquiring transportation. The often asked questionsof “new or used” and “buy or lease” are explored here. In addition, the process of shopping for a car and theconfusing dealership language are simplified to prepare the person anxious for some new wheels.Chapter Six covers the vast world of risk management by addressing three types of insurance most people carry:life, auto, and health. The different types of insurance are clarified as well as a discussion on how to shop for theinsurance you need. A lot of attention is paid to the limbo health insurance is currently in as our nation struggleswith how to define it. Careful consideration is given to the laws that dictate Florida insurance consumers and theriddles are solved surrounding all of the technical jargon.Chapter Seven talks about the evolving topics around finding a place to live. The recent housing crisis has causedour nation to re-evaluate home owning. This chapter takes on the questions surrounding “buying or renting” andsimplifies the leasing and mortgage processes. There is significant attention paid to the rights and responsibilitiesof home owning as well as home leasing. The focus is to help the reader make the right decision in this turbulentmarket.Chapter Eight unravels the confusion around financing an education. This section focuses on getting the most outof one’s education dollars by unmasking the college loan process, pointing out where to look for financial aid andscholarships, showing how to budget for post-secondary education and ultimately make the right choice to fit one’sneeds.Chapter Nine addresses the increasing prevalence of identity theft in our transactional interactions. Though allkinds of threats are discussed, extra emphasis is placed on the cyber form as so much of our lives dwell online. Thereader is provided with an explanation of identity theft, how to protect personal information, and what to do if yourdefenses are breeched.We hope this satisfies some of the gaping need for financial literacy training in this rapidly changing world.Hopefully, with the right guidance, the next generation can avoid the mistakes currently feathering society’s bed.With so much of America’s social safety net unraveling, people will need to rely more heavily on their own financialplanning. Frugality and sacrifice will have to temper the choices as people now live longer and healthier lives.Children born today can expect to live well into their eighties; will they have the means to support a comfortable lifefor that long? It is still very possible to achieve Financial Freedom.813.289.8489 22011 Florida Council on Economic Educationwww.fcee.org
What Is Financial Freedom?What does financial freedom mean to you? Does it represent the ability to acquire lots of shiny new things?Does it suggest a life of sound sleeping, free from worry over debt? Is it the endless journey in “keeping upwith the Jones’” or an uncluttered existence without storage units for your possessions?Wow, a 7,000 square foot house sounds nice, but what about the monster mortgage? A closet full of designerclothes would suit me well, but the interest rate on the credit card is killing me. The notoriety of a prestigiousuniversity’s diploma on my wall, my friends will be envious. But I’ll be the one who’s green trying to paybackall of those loans. Most of us are not billionaires who can buy whatever our hearts desire. We have to makechoices – sometimes hard choices – about how to handle our limited resources.The bankruptcy courts are full of people who thought housing prices would always go up, so that they couldget rich quick by flipping that 7,000 square foot house for a tidy profit. Or those who thought a 50,000 a yeareducation was going to guarantee a six‐figure paycheck. And that closet full of clothes? They’re all out ofstyle now and won’t accommodate that extra weight gain. Too many people found their financial futuressac
Welcome to the Florida Council on Economic Education’s Financial Freedom publication. This is a comprehensive package of interactive instructions on how to navigate personal finance. To paraphrase a popular advertising tagline, “this is not your father’s financial world” and it requires a full assessment of the tools necessary
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