Debt and Risk ManagementFONTBONNE UNIVERSITY FINANCIAL LITERACY AND DEFAULT PREVENTION

FACILITATED BY JAMES “VINNY” VINCENTASSOCIATE DIRECTOR, FINANCIAL LITERACY LIAISON

Money HabitudesSeminar Activity

To fully understand the real issues that make people argue, act irrationally or keep them from reaching their financial and life goals one must first assess their attitude toward money. It is a person’s attitude towards money which drives their actions and their course for decision making. Money Habitudes is an easy way to identify the issues that impact how we save, spend, earn, invest, go into debt and give away our money.

Complete Activity 1.1 to assess your Money Habitudes (combination of money habit and attitudes).

Debt: What Exactly Is It?

Simply put, debt is when you owe something to someone. You could owe money, time, or goods and services.

Good Debt: appreciates in value, asset life longer than loan, and positive financial leverage Examples of Good Debt: house, college education

historically rise in value over time will usually last far longer than the debt repayment period financial benefits received are higher than the cost of the debt

Bad Debt: depreciates in value, asset life shorter than loan or negative financial leverage Examples of Bad Debt: car, living room furniture

immediately depreciate in value once bought generally lasts shorter than life of loan (furniture); could last longer than life of loan if well maintained (car) no financial gain (furniture); could argue a car is necessary for work, but are there alternate methods of

transport?

Types of Debt

Credit Cards

ConsumerPayday Loans

Auto LoansHome Loans

College Loans

• Shop around• www.cardweb.com

• You’re the Boss!• Call to negotiate

better terms• Credit and loans are

tools – not excuses to bypass budget, ignore your goals, or skirt your own financial self-control

Managing Debt

List all your debt

Establish an

emergency fund

Arrange your debts

Pay off the first debt

Use the money

from the first debt and add

that to the amount

you pay on the next debt, etc.

Three Approaches to Eliminating Debt

Pay off the highest interest rate first

•Saves on cost of overall interest

Pay off the smallest debt first

•Leads to faster gratification but may not offer much financial gain

Create monthly cash low quickly

Risks We Face

Disability Illness Death Retirement Financial Property Liability Identity

Theft

Pure Risk

• Unintentional in nature (accidents)

Speculative Risk

• Chance of loss or gain (the lottery)

Managing Risks

Avoidance Assumption

Reduction Shifting

• Adjusting lifestyle choices, removing self from situations

• Assuming the risk, taking chance it works in your favor

• Can’t avoid, but can take steps to lower the intensity of risks

• Transferring the financial burden to another agency or individual

Identity Theft

Step

1

Step

2

Step

3

Step

4

Contact the FTC and Fill Out Their ID Theft Affidavit

Questions?

Contact James “Vinny” Vincent jvincent@fontbonne.edu 314.719.4353

Office Hours: Monday thru Friday (8:30am-4:30pm)

Lunch taken daily from 12:30pm – 1:30pm