Attachment 1

Sample Lesson Plan for Financial Management
(based on TEN’s Personal Financial Choices program)

NOTE TO INSTRUCTORS:  This lesson plan is based on the TEN workbook and only incorporates some of the material in the book.  Depending on how much time you will have for your financial management course, you can add additional material from the workbook.
	The main idea is to get the debtors to think about money and how they handle financial situations.  Obviously, bankruptcy results from more than poor money management, but almost everyone can benefit from some budget planning.
	In our program, we ask the debtors to think about what money means to them and what they heard or experienced about money as they were growing up.  We also tell them to consider how emotions impact how they spend their money, either consciously or subconsciously.  We tell them it is important for them to think about goals they want to attain, not just goals relating to money but accomplishments they want achieve sometime in their lives.  After they understand their goals and what’s important to them, we tell them to communicate their goals to their spouses, significant others, children, etc.  We encourage married debtors to negotiate, if necessary, to find some common ground and name a goal they want to achieve.   Once they have identified a goal, we encourage them to develop a plan to achieve that goal.  Usually, achieving their goal means better money management so we begin to talk about the importance of making a budget, or financial plan, as we prefer to call it.
	We encourage them to track their expenses for 30 days so they can begin to realize how much money they actually spend in a month and how they spend it.  We tell them it’s much better to develop a budget using actual numbers rather than estimated amounts.  We then have them calculate how much money is spent for different expenses, discussing fixed, flexible and periodic expenses so they can understand that it is important to think about everything they have to pay.  Next we have them calculate how much money is coming into their household each month, averaging their pay periods, if necessary.  We only work with net figures after all required deductions, including their chapter 13 plan payment, if it is wage withheld.  The idea is to make them understand their cash flow, how much money comes into their household and how much is going out.  We then ask them to subtract expenses from income to see what is left over, if anything.  We also express to them that this is a process and if they are not where they want to be right now, they shouldn’t be discouraged but rather encouraged because understanding where they are is the first step to getting where they want to be.
	We spend some time on smart shopping ideas, impulse shopping, costly mistakes to avoid, and types and costs of credit, dangers of co-signing and the trap of rent-to-own and payday loans.  Our course is currently an 8-hour course and includes many other topics, but the most of the materials here can be covered in 2-2 ½ hours.   Also, included is an evaluation form that we ask all debtors to complete before leaving.  The TEN materials are wonderful, easy to use, and very well received by the debtors.  

A GOAL IS A DREAM WITH A DEADLINE.

PLANNING AND SETTING GOALS FOR FINANCIAL RECOVERY
Setting goals and establishing priorities are necessary to build a successful financial plan.  Financial success doesn’t just happen, you need a plan. Without a plan, you go from crisis to crisis and from paycheck to paycheck, always assuming that you will be able to catch up next month.  (Look at people who win the lottery and then are broke within a few years.) 
There are some steps you must take before you set your goals and develop a plan to achieve those goals.  You must:
•	decide what’s important to you by identifying your values; 
•	examine your philosophy of money and your emotions to determine what role they play in how you spend your money; and, 
•	communicate your values and your attitudes toward money and your financial objectives and expectations to those around you.  Then:
•	set realistic goals
•	make a plan to achieve your goal.

Step 1 - Identify values  
The fundamental beliefs you have about what is desirable and good are known as values.  Values grow from personal experiences.  Values are not right or wrong; they express what is most important to you.  You make choices everyday, big and small, based on your values.

Life Values Exercise

Name five things you want to do sometime in this life:

1.	____________________________________________________________________________________________________________________________________

2.	____________________________________________________________________________________________________________________________________

3.	____________________________________________________________________________________________________________________________________

4.	____________________________________________________________________________________________________________________________________

5.	____________________________________________________________________________________________________________________________________

Assume that you have just been given one million dollars, after taxes.  Name five things you would do with the money:

1.	____________________________________________________________________________________________________________________________________

2.	____________________________________________________________________________________________________________________________________

3.	____________________________________________________________________________________________________________________________________

4.	____________________________________________________________________________________________________________________________________
                      
5.	____________________________________________________________________________________________________________________________________

Now compare the two lists and see if there is any overlap – if so, you’ve just identified some things that you value and that can become goals – hopefully realistic goals.  Identifying these values form one part of your successful financial plan.  Your values lead you to choices about the way you live, things you want to have, and things you want to do.
Step 2 - Examine philosophy of money

Your basic emotions and attitude toward money play a large part how you spend your money, and so, your financial plan depends upon some insight into that.  Everyone has a philosophy of money and spending, whether or not it is talked about, generally learned in the early years.  You received messages about money from your parents or the adults around you, both verbally and by observation.  Knowing which of those messages you incorporated into your money philosophy can help you understand your own adult money behaviors.
You may have made a budget, or know someone who has, and it looks great on paper, but doesn’t work after the first few days.  It is because that budget is made up of things they should do, but doesn’t consider what they want or what their emotions compel them to do.   Until you understand your attitude toward money, any financial plan you propose is on shaky ground.  Making a financial plan that will be successful requires an examination of the attitudes that have guided spending behavior in the past so future budgeting can be disciplined and focused.
Here is a partial list of the emotions that get in the way to keep you from setting goals and developing a plan. Emotions that drive our buying habits include:

Loneliness		Happiness            Boredom		Disappointment
Frustration		Guilt			The Blues		Remorse
Competition	Love			Anger		Anxiety
Fear			Depression		Sadness		Excitment
Control		Jealousy		Power			Hopelessness

 Does your money control you or do you control your money?

How do emotions affect spending money?

Paying attention to emotions brings more balance to our lives by helping us develop healthier spending habits.   Once you pay attention, you might be surprised to discover how your basic attitudes and beliefs
relate to spending patterns. Here are a few questions to help you uncover these connections:
•	What are your moods when spending money?
_____________________________________________________
•	Are you depressed before you go shopping?
_____________________________________________________
•	Do you ever feel compelled to buy something to please the salesperson?
_____________________________________________________
•	Do you buy only for others and not for yourself, and if so, do you know why?
_____________________________________________________
•	On payday, do you take care of all your bills first or treat yourself to things you want first?
_____________________________________________________
•	Do you hold off paying bills to make sure you have money for other expenses?
_____________________________________________________
As you evaluate your responses, ask yourself whether or not your lifestyle and attitude are currently serving your best interests.	

	From The Money Tracker, Judy Lawrence, Dearborn Financial Publishing, 1996

Step 3 - Communication of values
The third step in setting goals is to communicate to make the world aware of what you value.  Communicating your values is necessary because it helps identify who you are and what is important to you.  Your values will then lead you to goals that you want to accomplish.  A major reason why couples argue about money often involves differing values and goals between the partners.  In a marriage or relationship, compromises may have to be made to prioritize goals, but it is important that each party know the other’s values and goals.  Communication will lead to common ground upon which mutually respected financial goals can be built.  Once goals have been established, then a plan to reach those goals can be made.  

Communicating Your Philosophy of Money -
How Far Apart are You and Your Spouse/Partner?

Risk taker – anything goes

Saver – saves beyond the point of sacrifice

Worrier – spins wheels worrying and doesn’t accomplish much

Detail Lover – nickpicks small things, misses big picture	

Simple Simon – money is dirty and evil

Mr./Mrs. Acquisition – identity depends on what he/she owns

Peter Pan – wants someone else to take care of it 

Spender – spends freely without considering consequences

Individualist – wants to keep his/her money separate

Conservative – careful decision maker, not impulsive

I am a ________________________________________________________

My spouse/partner is a ________________________________________________________
TIPS TO COMMUNICATE EFFECTIVELY
Communication also involves listening.  Sometimes when you listen, your own feelings and thoughts are so intense that you hear what you want to hear, what you expect to hear, or what you were afraid you might hear, rather than what’s actually being said.  Sometimes we just stop talking at all about sensitive subjects or about things that bother us.  People tend to work together more effectively with a genuine understanding of where each party stands.

•	Be aware that your body language and facial expressions sometimes express the opposite of what your words are saying.

•	Avoid “trigger words” that you know will cause a negative reaction or response.

•	On the other hand, don’t jump to conclusions or assume you know where the conversation is going.

•	Avoid nagging or lecturing.

•	Repeat back what you understood the speaker has said.  Try saying: “am I hearing you right?” “Do you mean . . . ?” “I’m understanding you to mean . . . is that correct?”

•	Make sure you are understood.

•	Keep emotions out of the conversations: discuss ideas, not feelings.

•	Timing is everything – choose to have a conversation at a quiet time or when demands on your time are reduced to a minimum.

•	Remember that you and your spouse/partner are a team and teams need to be on the “same page” or the plan will not be successful.

A GOAL SAYS:  THIS IS WHERE I WANT TO GO.

Step 4 - Setting and achieving goals

Goals form another part of your successful financial plan.  A goal is a specific result you intend to work toward. Turn your needs into goals.  If your needs are being met, then turn your wants into goals.  But be realistic.  A realistic goal is:
Specific – you identified what you want
Measurable – can tell how close you’re getting
Attainable – it’s reasonable and probable
Relevant – makes sense because it fits your need
Time-Related – has a definite target date

Write down your goals -----

Written goals are more likely achieved.
Written goals are easier to prioritize.
	Written goals are easier to evaluate.

Make a list of 3 – 5 goals and then prioritize your list:
Goals								Priority 
									Order	
_______________________________	_________
_______________________________	_________
_______________________________	_________
_______________________________	_________
_______________________________	_________

Now, focus on one goal:

Your goal: ______________________________________

________________________________________________

Step 5 – Make a plan – 
Make a plan – Imagine the actions that you need to take to get from where you are to where you want to be.  The more steps you can visualize leading from where you are to where you want to be, the more successful you will be to reach your goal.  Then, determine the best order for the steps – what to do first, second, etc.  What will it take to achieve your goal – time, money, people, energy, information?  Try to think of any possible roadblocks to reaching your goal.
Write down steps to achieve your goal:

A.	____________________________________________ 

B.	____________________________________________

C.	____________________________________________

D.	____________________________________________

E.	____________________________________________

F.	____________________________________________

TAKE THE FIRST STEP.  Many times goals are not reached because the first step was never taken.  You must actually do the things listed to achieve your goal.  If you encounter obstacles or delays, don’t lose sight of your goal.  Keep on keeping on.  Persistence wins more often than anything.  Everytime you achieve one of your goals, you will want to go back and assess your other goals and add new ones to get you to the next stage of where you want to be.  Reaching long term goals may depend on achieving several short term goals along the way.
No doubt reaching your goal involves better money management.  Now, let’s talk about tracking expenses so you can find out how you really spend your money.

How You Really Spend Your Money
Finding out how we spend those hard-earned dollars is called
tracking.  It helps to know exactly how much you have been spending and what you have spent it for.  That’s why you must write down every dime you spend.  Then you can begin to identify spending patterns and eliminate leaks that cost you financially and mentally.  
	Tracking is simply keeping track of all your expenditures – whether it is your Chapter 13 payment or a pack of gum.  Tracking your expenses enables you to look for patterns of spending:  those that are necessary so you can make sure you always have enough to cover those expenses; those expenses that change from month to month and could possibly be reduced or adjusted by better management of your assets; those leaks that are causing you to live paycheck to paycheck.  Tracking your expenses leads to actual numbers that can be manipulated by you so that you can control your money and not have your money control you.
How have YOU been spending your money?  Keep a record of
Your expenditures on a daily basis.  There are several ways to do this.  Attached are several worksheets.  Pick any one of the worksheets and write down every dime you spend for the next 30 days.  At first it will be a burden but it will soon become familiar and easier.  It is the only way you can begin to understand where all your money goes.

FIXED, FLEXIBLE AND PERIODIC EXPENSES

	There are different types of expenses.  The three types of expenses are fixed, flexible, and periodic.

•	Fixed expenses are	Rent, mortgages, spousal/child support,
the same every month:	Chapter 13 payment, childcare, car payment (if not included in Chapter 13 payment).

•	Flexible expenses		Food, utilities, clothing, gas & oil for car,
 occur every month but	medical expenses, miscellaneous.
 the amount varies:

•	Periodic expenses		Real estate taxes, some insurance,
 are not due every month 	car repairs, school expenses, gifts,
 but are paid regularly:	license tags.

Fixed expenses are not negotiable so you must subtract those set amounts from your net income.  Periodic expenses are also definite amounts so you must make room for them in your budget.  Even though you don’t pay periodic expenses every month, it is important not to overlook them.  Flexible expenses are the areas where you can make adjustments as needed.  Sometimes you can change flexible expenses into fixed expenses, for example, by paying utilities on a budget system where your payment will be the same amount each month.  Once you determine how much you need in each area, then you can chart your spending to determine percentages of income spent per category.

Monthly Expenses Worksheet
				                                                                                 	
	         Fixed Expenses

1.  Housing (rent or mortgages)                                     $______________               
     (if not included in chapter 13 payment)  
2.  Childcare                                                                  $______________
3.  Chapter 13 payment	                                             $______________          
    (if not payroll deducted) 			               $______________
4.  Child or spousal support (if not payroll deducted)    $______________
5.  Car insurance				                         $______________
     Other ______________________	       	     $______________
     Other ______________________	         	     $______________
     Other ______________________	               $______________

				Total Periodic expenses	     $_______________

		Flexible Expenses                                                                
6.  Groceries					               $______________
7.  Utilities:  			        Gas                     $______________
                                                        Electric                 $______________                                                           
                                                        Water                   $______________
                                                        Trash                    $______________
8.  Telephone 						     $______________
9.   Cell phone					               $______________
10.  Newspaper 				                         $______________
11.  Cable & internet					     $______________
12.  Clothing					            	     $______________
13.  Dry cleaning, laundry supplies		               $______________
14.  Medical & Prescriptions (not health insurance)	     $______________
15.  Dental & braces				               $______________
16.  Transportation (bus, parking, tags)	               $______________ 
17.  Gasoline					            	     $______________
18.  School lunches				            	     $______________
19.  Tuition, books, school expenses		               $______________
20.  Haircuts					               $______________
21.   Gifts                    				               $______________
22.  Eating out & recreation			               $______________
23.  Bank fees, postage stamps, magazines		     $______________
24.  Savings					            	     $______________
25.  Church or charitable contributions             	     $______________
      Other ______________________	               $______________
      Other ______________________	               $______________
      Other ______________________		     $______________
      Other ______________________	               $______________
      Other ______________________	               $______________
      Other ______________________		     $______________

                  			Total Flexible expenses	     $_______________

Periodic Expenses   
                                                               
26.  Insurance:   Homeowners                           	     $_______________
		   (if not included in mortgage payment)
                           Life			      		     $_______________
       AAA            	                      	     $_______________                                                           
                           Health		                       	     $_______________
                            (if not payroll deducted)      		
		       Other_______________      	     $_______________
27.  Real estate taxes                                                   $_______________
       (if not included in mortgage payment)                     
28.  Car repairs				            	     $_______________
       Other ______________________	               $_______________
       Other ______________________	               $_______________
       Other ______________________	               $_______________
				Total Periodic expenses	     $_______________

Fixed ________ + Flexible _______ + Periodic __________=
                                      Total Expenses:  $______________ 
You now have the first part of your financial plan:  Your expenses.   
Now, let’s take a look at the second part:  Your income.   

CALCULATING NET INCOME

	The second part in formulating a budget or financial plan is to determine your monthly net income.  Net income is what is left over after taxes and other deductions are subtracted (insurance, child support, chapter 13 payment, union dues, etc.)  There are two ways to calculate monthly income:  1) Take your net pay per pay period and multiply it by the number of pay periods you have per year (24, 26, or 52), and then divide by 12; or, 2) Multiply your net pay by the average number of pay periods in a month.

Examples:

1)  Multiply net pay by number of pay periods and divide by 12:
   Weekly	   $400 x 52 = $20,800.  / 12 = $1,733.33
  	Bi-weekly (every other week) 	   $400 x 26 = $10,400. / 12 = $866.67
  			   Twice a month 	   $400 x 24 = $9,600.  / 12 = $800.

2)	Multiply your net pay by the following:
   Weekly	   $400 x 4.333 = $1,733.20
Bi-weekly (every other week)	   $400 x 2.167 = $866.80
			   Twice a month 	   $400 x 2	     = $800.

To your monthly net pay add child support payments, pension, or social security or other income that you receive.

If you are self-employed or have income that varies each pay period, you must take what you’ve earned year-to-date and divide by the number of months that have passed.  Or, if your income will be similar this year, you can take last year’s income from your tax form and divide that number by 12.  

Income vs. Expenses Worksheet

A financial plan should include:  
                                    Income – all the money you have to spend
                                    Expenses – all the money you owe/spend 

	Now let’s see where you stand.  Write in the total monthly income from page 5 and the total monthly expenses from page 7 and do the math.

Total Monthly Net Income   $________________
Subtract total expenses (-)  $________________
Difference  (+ or -)	    $______________

If you have any money left over, that is what you can begin to save.  If your expenses exceed your income, you must make adjustments by reducing expenses or increasing income.  Remember, tracking your expenses can help identify “leaks” in your spending.

The Difference Between Needs and Wants

Needs are what you must have to survive, the essentials, in your life.  Wants are things that make your life easier or more enjoyable.  Wants can become needs by convincing yourself a want is a need. For instance, you could convince yourself that you need an S.U.V, when really, a car or van is all you need.  In addition, be realistic.  For example, under “foods” remember you need to be healthy, so don’t write simply, “bread and water.”

	    WANTS					  NEEDS

What foods do I want to eat?	         What foods do I need to stay healthy?
__________________________	____________________________
__________________________	____________________________
What clothes do I want to have		What clothes do I need for work or
		in style?					recreation?
__________________________	____________________________
__________________________	____________________________
What kind of house will impress		What kind of housing meets my
		people?					basic needs?
__________________________	____________________________
__________________________	____________________________
What kind of car can I drive to 		What kind of car do I need to get to 
  make people think I’m important?			work?
__________________________	____________________________
__________________________	____________________________
Where does most of your money go?  Does it go for wants or needs?

SMART SHOPPING

PLAN AT HOME.  This is where good shopping begins.  Be an informed shopper. This means checking ads to compare prices and products.  You need a plan to know what to buy, when to buy and where to buy.

MAKE A LIST.	Write down what you need and what quantities of each.  When food shopping, organize your list by the location of things within the store.  This will save backtracking, prevent forgetfulness, and help stop you from buying items you don’t need.

MAP OUT YOUR SHOPPING TRIP.	If you have multiple places to go, decide the order in which you will stop at each location.  This will save gas and keep you on a schedule.  Look for items that are on the bottom or top shelves.  High-priced ticket items are usually placed at eye level.

READ LABELS.	Good information labels give facts such as what the item is made of and the care it needs.  Food labels list ingredients in order of quantity, meaning the ingredient of which there is the most is listed first.

COMPARE PRICE & QUALITY.	Use ads to find the lowest price available for the item you want to purchase.  The same item often costs different prices at different stores.  Do this especially for food items that you buy on a regular basis.  Even though some grocery store may have “specials”, if you pay more for the items that you always buy, you haven’t saved any money.

SERVICE WARRANTIES.	Most service warranties end up costing as much or more money than the repair would have cost.  Often the company will find a loophole which keeps them from having to honor the warranty.

AVOID IMPULSE BUYING.   Beware of your mood when you shop – if you are tired or hungry, you are influenced easier.  Try not to shop when you are in a hurry.  If it’s not on your list, don’t buy it.  If it’s worth buying, put it on your next list.  For major purchases, do not buy on the same day that you shop.  “Sleep on” your decision to make a major purchase and determine if the deal seems as good to you the next day.  Be patient.  Learn to say “No.” 

SALES.	The best sales are held by established stores.  They want to keep your good will and business.  Sales are held for many reasons:
	To make room for new goods;
	To sell surplus or shop-worn goods;
	To get you into the store;
	To introduce new products.

When you buy at sales:
•	Shop at the start of the sale for the best selection.
•	Be sure the sale price is an actual reduction from the regular price.
•	Consider the time, energy and money costs of getting to the sale.
•	Watch for imperfect or damaged articles.
•	“Special purchases” may be lower quality goods brought in specifically for the sale.
•	Check styles; items likely to go out of style may be poor buys.
•	Nothing is a bargain unless you need it.

TIPS FOR SHOPPING.	DON’T shop on payday.  DON’T shop when you are tired.  DON’T shop for food when you are hungry.  DON’T buy to please the salesclerk or the “free sample” lady.  DO take your written goals with you as a reminder. 

TIPS TO DECREASE SPENDING.  Use direct deposit for your paycheck because you will be less likely to spend money if it goes straight into your account.  Pay your bills on time to avoid late fees, extra finance charges, utility re-connect fees, and eviction notices.

IMPULSE SHOPPING

	Have you ever noticed that bread and milk are in the opposite back corners of the grocery store?  That’s because grocers depend on your “impulse buying” to turn a $10 shopping stop into a $50 shopping stop.  On your way to the bread and milk, you are going to see items that you must have, or that look too good to pass up.  We justify this by figuring we may as well do some shopping while we are there to avoid “wasting our time.”  Most of the shopping that you do at that time is impulse shopping.  
You must stick to your list, no matter how short it is.  Everytime you give in to impulse spending, it sets you farther back in your spending plan and leaves you further away from your goals.  Retail store owners scheme to get you to spend money on things you did not intend to buy – after all, it’s their job to do that.  
Before buying anything on impulse, first ask yourself:
	Is there something else I need to spend this money on?
	Have I already spent too much money on things like this?
	Once I buy it, can I afford to maintain it?
	Is it a gadget, or a useful tool?
	Will I really have time to use this?

Ten Costly Mistakes to Avoid

1.	Don’t cosign loans for relatives, including children.

2.	Don’t cosign loans for friends.

3.	Don’t borrow from retirement funds to pay credit card debt.

4.	Don’t take out a second mortgage to pay credit card debt.

5.	Don’t sell your car to someone who will take over the payments.

6.	Don’t let your car insurance lapse or your homeowners insurance lapse.

7.	Don’t spend money you don’t have, even if you know more money is coming.

8.	Don’t use cash advances on credit cards to make payments.

9.	Don’t be late with regular payments so a late fee is charged.

10.	Don’t mail a check before the funds are in your account.

DANGERS OF COSIGNING
Cosigning is usually not a good idea – either to cosign for someone or have someone cosign for you.  When you cosign, you are borrowing the money even though you don’t actually receive the money or the benefit of it.  The creditor has the right to receive and demand payment from you if the other party fails to make payments.  
When someone needs a cosignor, it is because a trained loan officer has decided that he or she is not financially able to handle that debt.  What makes you think that you signing the loan agreement will change their financial situation?  It doesn’t, it only puts you and your paycheck on the line and the bank or loan company will not hesitate to go after you.  Often, the loan is in serious default before the lender even notifies you, so when they do contact you they expect immediate payment.   
For your own protection or the protection of your friends and relatives, make sure before cosigning any loans, you have the ability to pay the entire loan because it may indeed become your responsibility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

Payday Loans = Costly Cash

“I just need enough cash to tide me over until payday.”

“GET CASH UNTIL PAYDAY! . . . $100 OR MORE . . . FAST.”

The ads are on the radio, television, the internet, even in the mail.  They refer to payday loans – which come at a very high price.

Check cashers, finance companies, and others are making small, short-term, high-rate loans that go by a variety of names:  payday loans, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans.

Usually, a borrower writes a personal check payable to the lender for the amount he or she wishes to borrow plus a fee.  The company gives the borrower the amount of the check minus the fee.  Fees charged for payday loans are usually a percentage of the face value of the check or a fee charged per amount borrowed – say, for every $50 or $100 loaned.  And, if you extend or “roll-over” the loan – say for another two weeks – you will pay the fees for each extension.

Under the Truth in Lending Act, the cost of payday loans – like other types of credit – must be disclosed.  Among other information, you must receive, in writing, the finance charge (a dollar amount) and the annual percentage rate or APR (the cost of credit on a yearly basis.)

A cash advance loan secured by a personal check – such as a payday loan – is very expensive credit.  Let’s say you write a personal check for $115 to borrow $100 for up to 14 days.  The check casher or payday lender agrees to hold the check until your next payday.  At that time, depending on the particular plan, the lender deposits the check or you redeem the check by paying the $115 in cash or you roll-over the check by paying a fee to extend the loan for another two weeks.  In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR.  If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.

						Federal Trade Commission – Consumer Alert
February 2000

Terms of a Loan: Real cost of credit

	The Truth in Lending Act, the federal disclosure law, does not set interest rates or other charges but it does require that the lender disclose the terms of the credit plan so that you can “comparison shop” for credit.  

Compare the following elements of one loan with the same elements of another loan to get the best deal:

Annual percentage rate.  The interest rate, or the APR, is the percentage cost of credit on a yearly basis.  A loan’s interest rate must be stated as an annual percentage.  The finance charge may be high or low, but when the rate is stated as an annual percentage rate, or APR, you can easily compare one loan to another.  Some lenders charge a fixed APR, while others charge a variable APR.    

Finance charge calculations.  The finance charge is the total dollar amount you pay to use credit.  Lenders use various methods to determine your average daily balance, on which finance charges are calculated.  The most common method is the average daily balance, in which each month’s daily balances are added together, then divided by the number of days in the month.  Some banks include new purchases when computing the interest and some banks do not include new purchases.  Other banks calculate the average daily balance for two billing cycles – current month and the previous month – which results in a higher finance charge.  
These methods result in vastly different amounts of interest due.  When shopping for revolving credit, look for a loan that calculates charges based on the most recent cycle and that excludes new purchases.  To look at how the method affects the interest due consider the following:  An account begins its first month with a zero balance.  The account holder then charges $1,000 and makes the minimum payment.  The next month, the account holder charges another $1,000 and pays off the balance.  The account’s interest rate is 19.8%.  The four different calculation methods result in the following interest payments due:
•	Average daily balance, including new purchases:  $33.00
•	Average daily balance, excluding new purchases: $16.50
•	Two-cycle average daily balance, including new purchases: $49.05
•	Two-cycle average daily balance, excluding new purchases: $32.80

Grace period.  The amount of time a lender allows before charging interest on the loan is called the grace period.  Many credit card companies give 25 days from the date of the bill before they assess finance charges, others recently have changed to 20 days.    If a company offers no grace period, you pay interest from the moment the bank learns of a charge to your account even though you haven’t received a bill.

Annual fees.  Many credit grantors charge an annual fee that ranges from $15.00 - $395.00.  The annual fee applies even if you do not use the card or if you do not pay any finance charges because you pay off your balance every month.

Late fees/overlimit fees.  Most lenders charge a set fee of $10.00 - $30.00 if they do not receive payment by the due date.  Some banks will grant you one or two “free” late dates over a year without charging the late fee, as a courtesy if you call asking for the fee to be waived.  If you have a temporary “teaser” low interest rate and miss your payment due date by even one day, your rate is usually hiked to over 20 percent on the entire balance.  Over-limit fees will be charged any time you spend over your credit limit.  These fees can be extremely expensive, averaging from $15.00 to $30.00, no matter what small amount you are over your limit. 

Types of Credit

Revolving credit allows you to borrow money at any time up to a set limit.  As you pay the borrowed money back, it becomes available again to borrow.  The lender allows you to pay back the money in a lump sum or over an extended period of time.  If you pay back the debt over time, you are charged a fee each month on the amount that you owe.  This fee is called interest.  The most common types of revolving credit are credit cards, such as Visa or MasterCard, department store cards, and gasoline cards.  Make sure you understand how interest is charged.

Installment credit allows you to borrow a specific amount of money at one time for a defined purpose.  You establish a payment plan with your lender to repay the loan on a regular basis over a period of time.  The amount of interest that you will pay is determined in advance and calculated into your set monthly payments.  This type of credit is common for larger purchases such as a home, a car, or education.

Secured credit requires you to provide something of value to guarantee that you will repay your debt.  It is usually used for installment loans.  If you fail to repay, the lender takes your item as repayment.  Personal valuables such as a car or household items are used to secure the loan.

Chapter 13 Debtor Education Seminar
Evaluation Form
Session 2

Date ____________

1. Overall, I feel the course was ________________________.

2. The part I liked best was ___________________________
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3. The part that could be improved _____________________
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4. Did you learn: about what you expected  ________________
more than expected _______ a lot more than expected ______.
5. What question do you have that was not answered today?
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6. Comments/suggestions (Remember, these seminars are for you.)        
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