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AN AFRICAN-AMERICAN QUICK GUIDE TO FINANCIAL DISCIPLINE & RESPONSIBILITY
2018 FINANCIAL LITERACY SUPPLEMENT
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In Memoriam Dr. Calvin W. Rolark, Sr. Wilhelmina J. Rolark THE WASHINGTON INFORMER NEWSPAPER (ISSN#0741-9414) is published weekly on each Thursday. Periodicals postage paid at Washington, D.C. and additional mailing offices. News and advertising deadline is Monday prior to publication. Announcements must be received two weeks prior to event. Copyright 2016 by The Washington Informer. All rights reserved. POSTMASTER: Send change of addresses to The Washington Informer, 3117 Martin Luther King, Jr. Ave., S.E. Washington, D.C. 20032. No part of this publication may be reproduced without written permission from the publisher. The Informer Newspaper cannot guarantee the return of photographs. Subscription rates are $45 per year, two years $60. Papers will be received not more than a week after publication. Make checks payable to: THE WASHINGTON INFORMER 3117 Martin Luther King, Jr. Ave., S.E Washington, D.C. 20032 Phone: 202 561-4100 Fax: 202 574-3785 news@washingtoninformer.com www.washingtoninformer.com
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Cerita Battles SVP, head of Retail Diverse Segments Wells Fargo Home Mortgage
Understanding the Five C’s of Credit is a good Foundation for Financial Literacy
Wells Fargo is proud to sponsor again the Washington Informer’s Financial Literacy supplement. Understanding credit is an important part of financial literacy, which is imperative to preparing for many things in life that require financing. Learning the Five C’s of credit is a great way to increase your financial literacy, especially when it comes to being approved for a loan. These five terms – credit history, capacity, collateral, capital and conditions – are what most lenders take into consideration when they are deciding about loan approval. Understanding the Five C’s of credit will help you determine if you are ready to take on new debt or if you need some assistance in learning how to better manage your finances and improve your credit profile. Credit history is the record you have established while managing credit and making payments over time. It includes credit accounts opened or closed as well as payment history over the past 7 to 10 years. It also includes your credit score. Your credit score also can affect the amount you are approved to borrow and the interest rate you may receive. Capacity tells lenders how comfortably and consistently you will be able to make payments on a new account. Your debt-to-income ratio (DTI) is usually evaluated when lenders determine your capacity. DTI is the ratio of your current and any new debt compared to your before-tax income. Collateral is a personal asset you own, such as a car or home. Lenders are interested in collateral because it offsets the risk they take when they offer you credit. Capital represents assets you could use to repay the loan if you lost your job or experienced a financial setback. These assets could include savings or investments. Lenders evaluate your capital when you apply for large items like a home or car. Conditions refer to information you share with the lender to further determine loan approval. Lenders may want to know how you plan to use the money, such as purchasing a vehicle or other property. Other factors, such as environmental and economic conditions, may also be considered. If you would like to read more about the Five C’s of Credit, you can go here: https:// www.wellsfargo.com/financial-education/credit-management/five-c FS
www.washingtoninformer.com / THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT – OCTOBER 2018
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Eight Simple Steps to Better Financial Health By Ben-James Brown, Regional Banking District Manager Wells Fargo Bank Everyone knows the old adage: An apple a day keeps the doctor away. And while there may be some truth to this, we also know there are other steps involved in maintaining good health – from exercising and eating right, to getting enough sleep every night. The same can be said for your overall financial health – several things contribute to being financially healthy. Unfortunately, many Americans struggle with where to start. Research shows that 57 percent of Americans are struggling financially*, and 44 percent say they would not be able to cover a $400 emergency
expense without selling something or borrowing money2**. That’s why it’s important to stay on top of your financial health. Just like visiting your doctor for a routine check-up, it’s essential for everyone to understand the daily financial decisions they can make to establish healthy financial habits. Here are eight steps that can help you stay on track and can have a big impact on your financial health: • Pay yourself first – set aside some income for savings, about 5 to 10 percent • Track your spending – make sure you know where your money is going each month • Create a safety net – build up emergency savings to
cover 3-6 months’ of expenses • Pay down your high-interest debt – pay down the debt that costs you the most • Pay on time, every time – pay bills on time to improve and maintain your credit score • Know where your credit stands – check your credit report annually • Review your insurance annually – protect what counts by checking coverage annually • Save for a better retirement – save at least 10 percent of your income each year Each step moves you forward
in your journey to better financial health. These actions can help you make meaningful financial change in your life. Like eating an apple a day, small habit-forming actions to support your financial health can make a big difference over time. *Center for Financial Services Innovation, Consumer Financial Health Study (March 2015) **FED Board of Governors survey (2017)
Dedicated to advancing homeownership Homeownership is an important step in creating financial stability for individuals and communities. We’re committed to enabling and advancing sustainable homeownership through financing more homes, supporting and providing financial education.
Call, click or stop by, today! 4926 Wisconsin Ave. N.W. Washington, D.C. 20016 202-895-5150 1-800-771-3476 www.wfhm.com/dc-washingtondcbranch-washington
Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2018 Wells Fargo Bank, N.A. All rights reserved. NMLSR ID 399801. IHA 4673779 Expires 03/2019
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THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT – OCTOBER 2018 / www.washingtoninformer.com
Debunking Myths: Three Things You Don’t Need to Get Mortgage Loan Approval
John Jones Market Manager, Washington DC/ Northern Virginia Wells Fargo Home Mortgage
Owning a home is still a dream for many Americans and is viewed as a way to build wealth and strong communities. The 2017 State of Housing in Black America Report published by the National Association of Real Estate Brokers states that African Americans are applying for mortgages at higher rates than before.
for those who want to learn and understand more about credit and improving their scores, including the Wells Fargo Smarter CreditTM center at www.wellsfargo.com/smarter_credit.
However, there are still myths about the homeownership process that are keeping qualified buyers on the fence. It is important for homebuyers to learn about the requirements needed to become a homeowner. However, here are three things not needed to gain mortgage loan approval.
The 20 percent down payment requirement for home loan approval is a myth. It is true that for most mortgage loans, a down payment is required. And, if you can save a 20 percent down payment to purchase a home, that’s great. There are many benefits to a homebuyer who has that kind of down payment. However, loan programs do exist that do not require a 20 percent down payment. Some programs only require 3 percent down for qualified buyers, and if the homebuyer is a veteran, he or she may be able to purchase a home with zero percent down.
PERFECT CREDIT IS NOT NECESSARY TO QUALIFY FOR A MORTGAGE LOAN Credit history is very important when applying for a mortgage. It can impact the interest rate or the amount of money the lender will allow you to borrow. But, that credit score does not have to be perfect in order for a lender to grant loan approval. In fact, there are financing programs available for homebuyers with a range of credit scores or limited credit history, and some programs allow you to use rent, mobile phone or utility payments to show credit history. It’s important for consumers to know their credit score and understand what’s on their credit report before beginning the mortgage process. Knowing this important information is helpful in understanding if they are ready to purchase or may need some assistance to prepare for loan approval. There are resources aspiring homeowners can access to learn just where they stand when it comes to credit. A free report from each of the three credit bureaus is available to consumers once a year at www.annualcreditreport.com. Many resources are available
A 20 PERCENT DOWN PAYMENT IS NOT REQUIRED
HIGH INCOME IS NOT NEEDED TO BE A HOMEOWNER It is a myth that a homebuyer needs to have a high income to afford a home. It is true that in many markets across the country home costs are rising, but being rich is not a requirement of owning. For loan approval, the buyer needs to demonstrate they can afford the monthly mortgage payment and can handle the other financial responsibilities that come with owning a home. In addition to income, lenders review your assets, debt-to-income ratio, credit history, credit scores, and the amount of the loan compared to the value of the property. Wells Fargo is committed to advancing homeownership in African-American communities around the country and wants to be instrumental in raising the homeownership rate for this demographic. In fact, we have
completed the first year of our African-American lending commitment goal of creating at least 250,000 homeowners in 2027. In 2017, Wells Fargo helped more than 21,000 African-American families become homeowners. We continue to work hard within our business and by collaborating with local nonprofits to reach out and support homeownership in the African-American community. In D.C. we are proud to work with local organizations like the National Urban League, National Association of Real Estate Brokers (NAREB)
and with city officials to help prepare homebuyers for the process and assist them during their homeownership journey. This includes engaging in community conversations and participating in homebuyer education events. Homes are the building blocks for the American way of life. They make up our neighborhoods and our communities and play a pivotal role in our culture and in our civic engagement. Wells Fargo is committed to providing the support and guidance aspiring homeowners need to make their homeownership goals a reality.
Owning a home is still a dream
for many Americans and is viewed as a way to build wealth and
strong communities. The 2017
State of Housing in Black America Report published by the National
Association of Real Estate Brokers states that African Americans
are applying for mortgages at higher rates than before.
www.washingtoninformer.com / THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT – OCTOBER 2018
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THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT – OCTOBER 2018 / www.washingtoninformer.com
How to Get A “YES” to Your Loan Request
By Shelly M. Gross-Wade President & CEO FSC First
Congratulations – you are the owner and operator of a business that is five years old, generating revenues, paying payroll and personal property taxes, and employing local residents as full-time wage-earning employees. In fact, you’ve generated a profit at least three of the five years you’ve been operating. You’ve heard that there is a process to obtaining a business loan. Now, you desire to grow the company organically; however, you are perplexed as to how-to “ask the lender” for the financing needed to sustain and grow your business. For the past 40 years, FSC First has provided creative business financing solutions to support emerging growth companies. However, over the last 20 years, FSC First has generated legacy impact in Prince George’s County, MD by providing business development and technical assistance to more than 1,700 businesses. We have approved more than $121.9 Million Dollars in Direct Loans, Closed and Funded an average of $2.5 Mil-
lion Annually, and was instrumental in assisting business owners with attracting $1.4 Billion in Additional Public and Private Financing. We offer the following tips and strategies to enhance your opportunity to gain a “yes” to your loan request. 1. It is important that you speak with the lender in advance of the critical time frame when you will actually need the capital. Ideally, the lender should be somewhat familiar with your company’s products and services, and the challenges you’ve faced and overcome. Perhaps they have seen you making deposits at their financial institution or networking at various business outreach events. Either way, you should not be a stranger when approaching the lender with a request for financing. 2. Prepare and practice your elevator speech – who you are, the name of your company, and your latest accomplishment. For example, perhaps your company was just awarded a contract as a prime contractor, or you’ve just generated $500,000 in revenues, or doubled your workforce, or achieved some other
notable milestone. It is always good to keep a success story top of mind and be ready to share. 3. Speak to your need and have a specific dollar amount in mind when you approach the lender. For example, as a result of your company’s latest accomplishment, you will need to cover some capital expenditures to acquire additional leased space, more equipment to automate your operations, or hire more employees; and explain how investing in these areas will not only increase revenues but also increase your bottom line thus generating a profit. 4. Recognize that the lender will not have much time to fully evaluate the need on the fly. So, be prepared to leave a solid loan package that they can review and respond to within three to five business days. 5. At a minimum, the pre-qualifying loan package should include the following: • An Executive Summary – that defines the history of the company, the management team, and the objectives for seeking debt financing. • The recent three years of financial statements and tax re-
turns on the operating company. • Three years of personal tax returns on each owner of the company. • Two years of month-tomonth cash flow projections and the supporting assumptions that describe how you will achieve the forecasted revenues, cover the forecasted expenses, and demonstrate your ability to repay the loan. One may need to consult their financial advisor, Accountant or CPA for assistance with developing this document. Don’t be intimidated! Remember, obtaining a business loan is a process and not an event. Be prepared to provide timely clarifications and further documentation to the lender, upon request, until they are satisfied that making a loan to your company is a good credit risk. It is important that the lender understands your competitive advantage in your industry or community. FSC First manages several economic development finance programs and operates a revolving loan fund in partnership with local and regional financial institutions, including: BB&T, Capital One, Industrial Bank, Old Line Bank, PNC Bank, Revere Bank,
Sandy Spring Bank, Sona Bank, SunTrust Bank, TD Bank and Wells Fargo Bank. FS
OUR VISION
FSC First envisions a community where all small businesses have the financial tools they need to thrive.
MISSION STATEMENT
FSC First is a flexible, risk tolerant alternative funding source that provides innovative and creative financing solutions and loan administration services to benefit small and emerging businesses.
First in Creative Business Financing Solutions FSC First provides access to financing to small and minority businesses through distinct loan products. The loans are a product of public-private partnerships between a consortium of participating banks, Prince George’s County, Maryland, and FSC First. • • • • • • •
SBA 504 Commercial Real Estate Loan Small Business Growth Fund (SBGF) City of Bowie Loan Fund Green Energy Loan Program Economic Development Incentive (EDI) Fund Video Lottery Terminal Fund (VLT) Commercial Property Accessed Clean Energy (C-PACE) Program
Celebrating
40 YEARS of Service 1978 - 2018
Phone: (301) 883-6900 | www.fscfirst.com www.washingtoninformer.com / THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT – OCTOBER 2018
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Building Financial Responsibility in Youth through Savings & Checking Accounts Lee Ross Special to the Informer Virginia Chesley learned a difficult lesson about the financial wherewithal of her children in 1990 when the newly divorced mother of three suddenly became ill with an appendicitis that required emergency surgery and an extended hospital stay. Though all of her banking accounts were fully operational, none of her children were aware of how to manage the household budget, bills, and accounts. “My oldest at the time was seventeen, but even he wasn’t clear on how I moved the household monies from one account to another to pay bills,” Chesley told the Informer. So with medical concerns over her blood pressure and the grogginess of surgery lingering, she said she was forced to give the trio an impromptu finance lesson from her hospital bed. “I taught each of them how to write a check, which credit union accepted our mortgage payments,
where the grocery store coupons were stashed, and how to balance the checkbook.” Chesley said that though much of the instruction she provided her kids in 1990 seems obsolete now because technology doesn’t require check or money order payments, few youth today have been taught how to manage their household’s affairs. “It’s a social responsibility that we have to teach young people, like reading and not talking to strangers because mismanaging money endangers their futures. Even oldschool financial planning we used down South, like ‘socking away’ cash money inside the house in cases of emergency has to become a part of every Black child’s personal plan.” Most banking institutions offer both savings and checking accounts for young people between the ages of eight and 18 that encourage savings and an early positive credit history. And while many require the accounts include a parent as co-signers, the accounts tend to
work in much the same way as regular accounts. Some institutions, like Wells Fargo offer Visa debit cards with a daily limit for purchases and withdrawals set by the parent. It is important to research the regulations of each bank to ensure certain benefits like no minimum balances, no monthly fees, and no overdraft fees, are included. Devon Steeple, 16, opened an account at TD Bank in January 2017, in preparation for a study abroad program with his church and told the Informer it was an eye-opening experience juggling his access to money with the many things he thought he wanted. “When your parents are constantly buying what you want, you never think about how much things cost or how purchasing one thing means you don’t have money to purchase others. Once I had to do it for myself, I realized there were a lot of things I didn’t really need,” Steeple said laughing. “Suddenly, a lot of things were not worth the
A sure-fire way of building financial literacy among children and young adults is teaching them to save, spend wisely, and work towards long-term financial goals. /Courtesy photo expense.” Steeple was helped tremendously by a daily routine with his dad after dinner of checking his account online against the receipts he had from purchases. “After a year of having the account, I have fewer receipts – some days, I have none at all. It’s like why spend money for milk at the store, when I can drink milk before I leave home and keep my money in my account. Those small $2 and $3 purchases add up and can mean more than $100 at the end of the month.”
Steeple seems to have learned the lesson the account was meant to provide, his father, Benjamin said. To show support for his son’s spending thrift, the elder Steeple occasionally transfers money into his son’s account. “My dad was so proud when I started hitting my savings and spending targets. It’s like me being a sprinter and crossing the finish line ahead of everyone else. I’m sure that in the next few years I’ll be able to start investing money and making my savings work as a nest for my future.” FS
Sal Khan Founder, Khan Academy
Learning better ways to manage your money doesn’t have to cost a thing
The more you understand how your money works, the more confident you’ll feel about your financial decisions. That’s why we created Better Money Habits® in partnership with Khan Academy—an independent, nonprofit organization with the mission of providing a free, world-class education for anyone anywhere. Better Money Habits is a one-of-a-kind online approach to financial education that’s customizable and answers tough financial questions in practical ways. Get the financial know-how you need at BetterMoneyHabits.com
Bank of America, N.A. Member FDIC. ©2018 Bank of America Corporation. All rights reserved. ARWNNGS8
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Industrial Bank Teaches Financial Literacy at D.C. Jail
Informer Special Report
Industrial Bank, one of the largest African-American owned banks in the country recently celebrated the success of one of its most innovative programs: teaching banking and financial literacy to the incarcerated. Designed to provide resources to detained men and women that would help acclimate them into re-entry upon release, the 2017 kickoff, initiated by Clinique Chapman, Program Manager (Forensic Social Worker) at the D.C. Department of Corrections, awarded certificates of completion to a new group September 25. Chapman and Jaqueline Boles, Senior Vice President of Retail Banking at Industrial teamed up and implemented a program for Industrial Bank to teach Financial Literacy to select residents of the D.C. Jail. With the support of Industrial’s president and CEO, B. Doyle Mitchell, the Branch Manager at the U. Street Branch,
Lisa Hinton, and other key bank personnel, classes were taught that have produced many positive results. Participants in the program receive perks while incarcerated, as well as reductions in their sentences. During the certificate of completion ceremony at Correctional Detention Facility and Correctional Treatment Facility, Mitchell gave an amazing speech to the young men, followed by empowering words delivered by the DC DOC’s Director, Quincy Booth. “We consider it a privilege and an honor to provide financial literacy training to these fine men. They are very different than they have been characterized to be and are working very hard to get back on the right track,” Mitchell said. “Our officers deserve all the credit for the life changing work we are doing.” The first two groups began in January 2018. Groups have consisted of residents at both CDF and CTF, Medium and Maxi-
mum custody levels. In addition, one of the two recent cohorts included the men of the Young Men Emerging (Y-ME) Unit. The
Y-ME unit consists of programming specifically geared to those 18-25 years of age. The young adults are called “mentees,” cou-
5 The ceremony for the Young Men Emerging (Y-ME) Unit brought smiles and positive energy to the graduates and the Industrial Bank and DC DOC personnel who attended. / Photo Courtesy of DC Department of Corrections 3B. Doyle Mitchell, President and CEO of Industrial Bank, gave a power message at both ceremonies. / Photos Courtesy of DC Department of Corrections 6Graduates at the Correctional Detention Facility ceremony display their certificates and are flanked by Industrial Bank and DC DOC program participants. / Photo Courtesy of DC Department of Corrections
pled with approximately six mentors who are seasoned adult men who have experienced incarceration in the federal penal system with upwards of 20 years served. Topic areas covered in bi-weekly, 1-hour sessions include: the importance of savings, checking, how to write bank teller slips, budgeting, understanding and managing your credit, effective communication, guest speakers such as an investment banker who discussed creating wealth and life insurance/retirement planning. One of the mentors on the Young Men Emerging Unit demonstrated his thanks for the wealth of knowledge imparted by the bank volunteers by depositing (via a family member within the community) $1,000 to open the families first savings account with Industrial Bank. With his new savings account the mentor and his family have taken a monumental step toward proving that financial literacy can positively impact his impending reentry to the community. Financial literacy is an especially essential tool to assist those within the criminal justice system and specifically those who have been incarcerated for a long period of time. Some people have been incarcerated so long or were incarcerated at such a young age, they are uncertain about how to even use an ATM machine. The training provided by Industrial Bank will be ongoing for the foreseeable future and will go a long way towards helping the participants feel more comfortable about returning to society. FS
www.washingtoninformer.com / THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT – OCTOBER 2018
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FOOTPRINTS TO YOUR ® FINANCIAL FUTURE Our dedicated team of employees conducts an average of 800 community service and financial literacy hours annually to over 50 non-profit organizations, churches and schools mostly in low to moderate income areas in the Washington, DC Metropolitan area. We believe in strengthening our local communities and partnering with organizations that are doing all they can to make a difference in the communities where we live and work.
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@ ibmortgage@industrial-bank.com www.industrial-bank.com 202-722-2000
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@lndustrialBank1934 @Banklndustrial @Banklndustrial
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Five Ways Parents Can Teach Financial Literacy to their Teenagers By Theodore R. Daniels Founder and President Society for Financial Education and Professional Development, Inc. One of the most valuable gifts we can give our children is to teach them good financial habits. Yet surveys tell us that when it comes to personal financial lessons, parents have a long way to go in teaching their kids basic money skills. Each day parents face the financial needs and wants of their children, which increases dramatically when they become teenagers and young adults. Talking about financial matters with one’s kids is not always easy, but the sooner parents starts, the better off their kids will be. Budgeting and spending money wisely should begin during childhood when kids earn or receive an allowance. Let your teenagers know that financial decisions involve important choices and understanding “opportunity cost,” which involves the tradeoff between options that require giving up something else. Here are five ways parents can increase the financial literacy of their teenagers:
financial goals to accomplish over the short-term, intermediate term, and long-term.
1. TALK TO YOUR TEENAGERS ABOUT YOUR FAMILY’S HOUSEHOLD FINANCES:
3. HAVE “WHAT IF” DISCUSSIONS.
income and expenses on a regular basis. Make it fun and engaging. Explain to them how income is spent, saved, and invested. Teach them how they can reduce household expenses to save for their college education or family vacation.
2. HAVE A SERIOUS DISCUSSION ON DETERMINING THE FAMILY’S FINANCIAL VALUES.
Ask the question: what is most important to insure the family’s financial well-being? Financial values should be prioritized. Shelter (having a place to live), food, transportation, and education are some of the basic life expenditures. While these values will vary from family to family, they can serve as a guide for use of financial resources. This includes the development of an individual or family budget, and
Talk honestly with your teenagers about financial situations or scenarios that can impact a family’s financial condition. For example, a change in the economy that would affect the income of the household or unexpected
illness or injury that can limit employment. Discuss adjustments in expenses that may have to be made to ensure household sustainability.
4. TALK TO YOUR TEENAGERS
about the benefits of savings by investing a portion of the money they earn or their allowance to increase its value over the years.
5. BE A GOOD MONEY MANAGER MODEL FOR YOUR TEENAGERS.
Your children will learn from they see you do. Therefore, it is important to show your children how to manage money, including credit, so that the family lives without financial stress of worrying about how to make ends meet and sustains longterm financial health. FS
One of the most valuable gifts we can give our children is to teach them good financial habits.
Society for Financial Education and Professional Development, Inc. Enhancing financial and professional growth . . . Established in 1998, SFE&PD was one of the first educational nonprofits to deliver customized financial literacy programs for individuals and professional development opportunities for financial educators nationwide. The Society for Financial Education and Professional Development (SFE&PD) has a proven track record as a national leader in the financial literacy field in the United
SFE&PD Seminars and Workshops Offered: College and University Financial Literacy Seminars • • • • •
Credit Management Personal Money Management Student Loan Management Investor Education Homeownership
Community-Based Financial Literacy Seminars • • • •
Credit Management Budgeting Banking and Investing Automotive Financing
Financial Literacy for Faith-Based Institutions and Divinity Schools • Maximizing Your Financial Blessing • Faith-Centered Approach for Stewardship of Financial Resources • Church Budgeting and Financial Reporting • Managing and Maintaining a 501(c)(3) Org. • The Church and Risk Management • And more. Professional Development Seminars • Preparing for Leadership • Workplace Dynamics 101 • Keys to Professionalism • Team Dynamics / Presentation Skills • Conducting Effective Meetings • Navigating the Corporate Culture
Financial Literacy Workshops in the Workplace • Personal Money Management • Credit Management • Retirement Planning • Life Cycle Financial Planning • Investment Allocations • Budgeting • Financial Coaching
Services •
Financial Education Curriculum Development
.
Society for Financial Education and Professional Development, Inc
1800 Diagonal Road • Suite 600 • Alexandria, VA 22314 • 703.920.3807 • www.sfepd.org
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Safe Banking for Seniors
Annually, seniors lose approximately $2.9 billion* due to fraud. As individuals age, many become more financially secure as they have achieved homeownership, saved a retirement nest egg and acquired assets and investments. Unfortunately, however, many also struggle with isolation, cognitive decline and poor physical health. This combination of both positive and challenging attributes makes older Americans a target for financial fraud. To combat the problem, having a close, trusted support group of family, friends, community members and caretakers is important. It is also important to practice safe banking practices. Your local bank and its representatives are trained to pinpoint signs of elder abuse and report suspicious activity. “At United Bank, we are committed to safe and sound banking practices,” says United Bank Market President Mike Proctor. “Our employees are trained to watch for suspicious activity and we utilize predictive software that may identify changing patterns and trigger an alert to notify us of any uncharacteristic activity.” Bank surveillance is not
enough. Prevention through education is key. Not sure what to watch for? Read below for some of the most prevalent scams.
3 TOP SCAMS 1. TELEMARKETING/ PHONE SCAMS
Purchasing items over the telephone versus the internet creates no paper trail, making these transactions almost impossible to trace. There are several types of telemarketing scams. One of the most prevalent involves the scammer posing as someone else. For example, the wrongdoer may convince the senior that a relative or close friend has been in an accident and needs the money for treatment or they may call and lead a senior to believing he or she is with a well-known charity and solicit a donation.
2. INVESTMENT SCHEMES
When they retire, seniors are often looking for ways to maximize their savings while minimizing risks. If an investment opportunity seems too good to be true, it probably is. Scammers
try to take advantage of people and steal their financial resources by requesting a large upfront payment in order to reap astronomical returns. Once the lump-sum investment is made, the scammer vanishes, along with the funds.
3. CHECK FRAUD
There are several variations of check fraud. The senior may write a check to someone, and that person alters the amount or orders checks with a new address to write fraudulent checks. Additionally, blank checks could be stolen and forged for any amount. Scam victims are not just older Americans. Anyone can be a target. Identity theft among all ages hit a record high in 2017. According to Javelin Research and Strategy, approximately 16.7 million individuals were affected by ID theft in 2017. Losing money is one consequence of scams or identity theft, but other incidentals include a damaged credit history, making it more difficult to borrow money in the future. To help better guard against abuse, the Community Bank of the Nation’s Capital, United Bank, is participating in a
bank-wide “Safe Banking for Seniors” campaign. Efforts are concentrated during the months of September and October, with bank-hosted seminars on avoiding scams. Educational materials are available at all United Bank locations throughout the year. Education empowers our communities and United Bank is a proud community partner and resource in the area. If you believe you may have
been a victim of a scam and live in the Greater Washington area, contact Adult Protective Services using its hotline, available 24 hours, 7 days a week: 202.541.3950. For more information on United’s “Safe Banking for Seniors” campaign visit a local branch or BankWithUnited.com. *MetLife Mature Institute Report FS
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16 State Attorneys General Join DC in Defending Its Student Loan Laws By Charlene Crowell Across the country, 44 million American owe more than $1.5 trillion in student debt. In the District of Columbia, residents have the highest debts in the nation. The average student loan borrower in the District owes $46,000 in federal loans. Nearly one in four student loan borrowers locally carry $80,000 or more in student loans. And when it comes to loan repayments, one in seven District borrowers is also past due. With data points like these, it is clear why the District’s Attorney General Karl Racine would make consumer protection of student loan borrowers a priority. A local law empowers the District’s Department of Insurance, Securities and Banking to develop a licensing oversight infrastructure for the District. It also created a Student Loan Ombudsman position charged to enforce licensing provisions of the local law, conducting examinations of student loan servicers, and receive and respond to borrower complaints. From a borrower perspective, this type of oversight represents actions that protect student loan borrowers. They are signs of local government acting in the best in-
terest of its residents. Student loan servicers have a range of duties that include receiving and processing student loan repayments, enrolling borrowers in alternative repayment plans, and processing applications for loan forgiveness for borrowers dedicating their careers to public service. In recent years, servicers have also been challenged for practices that harm student loan borrowers. Quality student loan servicing is especially critical when addressing racial disparities in student loan outcomes. With less wealth than their white peers, Black students are more likely than other racial groups to borrow and to borrow more for their education A 2016 analysis found that Black students on average graduated with about $7,400 more student loan debt than their white peers. So when the nation’s largest student loan servicer, Navient, was sued by the Consumer Finan-
cial Protection Bureau (CFPB) in January 2017, once again students of color were disproportionately affected. According to Richard Cordray, CFPB Director at the time, “Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.” Unfortunately, the Student
Loan Servicing Alliance (SLSA), a trade organization representing student loan servicers and affiliates disagreed so much with the District’s student loan laws that it filed a federal lawsuit challenging the law. “Adding state requirements on top of already stringent federal guidelines violates federal preemption and creates additional
layers of complexity,” said Winfield Crigler, SLSA Executive Director. “This lawsuit is about preserving uniform federal guidelines to ensure borrowers know what to expect from their servicer regardless of where they live.” That allegation is disproved in a 2017 CFPB state-by-state recap of student loans That report showed that the District saw steep rises in both the number of loan complaints and those related to debt collection. The 498 student loan complaints filed in the fiscal year ended in September 2017 represented a 66 percent increase over the previous year. Similarly, related debt collection complaints were up 44 percent from the prior year and totaled 88 in number. The District’s legal defense of its own laws recently gained the support of 16 state attorneys general. An amicus brief, sometimes known as a ‘friend of the court’ brief, underscored the practical importance of preserving state regulation of student loan servicers, and was jointly filed by state AGs in California, Connecticut, Delaware, Illinois, Iowa, Indiana, Main, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont and Virginia. “With no effective federal oversight, state laws and enforcement actions have played a critical role in protecting borrowers from shoddy and predatory servicer practices…Ousting the States from that critical protective role would threaten the well-being of millions of our residents and improperly override our sovereign prerogative to exercise our police powers to protect our residents,” states the joint brief. For AG Karl Racine, state actions provide another opportunity for consumer defense. “State Attorneys General are stepping in to fill the regulatory and enforcement gap and protect consumers when the federal government can’t or won’t protect them,” said Racine. “One group of consumers we are focused on protecting is student borrowers, who are particularly vulnerable to scams and abusive business practices. It is critical that the District take action around this issue because our residents have the highest student debts in the nation.” Charlene Crowell is the Deputy Communications Director with the Center for Responsible Lending. She can be reached at Charlene. crowell@responsiblelending.org. FS
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Delayed Gratification, the Key to Financial Responsibility Shantella Sherman Special to the Informer A recent Temple University study found that the key difference between people with consumer debt and those without, everything else being equal, was that the latter had mastered delayed gratification and how to wait for long-term benefits. In laymen’s terms: It’s the decision to put some things on layaway to keep household money available and savings untouched. In the world of wealth equity, the gap between many communities of color and white families, may lean heaviest on this lack of impulse control. And while many young people speaking with the Informer during the 2018 Congressional Black Cau-
cus’ Annual Legislative Conference in September expressed a desire to save but a lack of money to save, they also recognized that what they did spend could easily be counted as wasteful. For instance, one young lady said she spent an average of $15 a day – everyday -- on Starbucks lattes. When the tally for a month of lattes totaled more than $400, she gasped at the reality of having surrendered $5,040 away on beverages in the run of a year. “Cutting those drinks from large to small, making one trip a day instead of three, or setting it aside as a weekend treat only, could add most of that money into a savings account, an investment or a more feasible way of paying for college tuition than student loans,” finan-
Determining the difference between ‘needs’ and ‘wants’ and then spending only when necessary are essential components to wealth building. /Courtesy photo. cial planner Malcolm Jolly, told the Informer. “That’s just coffee; can you imagine how much money the average person spends ‘willy-nilly’ on a continuous basis? Financial responsibility means stopping yourself from haphazardly spending.” A Nielsen report, Black Impact: Consumer Categories Where African Americans Move Markets, released in February 2018 adds dollars and cents clarity to Jolly’s sentiments. African Americans make up 14 percent of the U.S. population, Nielsen said, but has outsized influence over spending on essential
items such as personal soap and bath needs ($573 million), feminine hygiene products ($54 million) and men’s toiletries ($61 million). Nielsen research also shows Black consumers spent $810 million on bottled water (15 percent of overall spending) and $587 million on refrigerated drinks (17 percent of overall spending). Luxury, non-essential products such as women’s fragrances ($151 million of a $679 million industry total), watches and timepieces ($60 million of $385 million in overall spending) and even children’s cologne ($4 million out of $27 million) also play well
to an audience that’s keen on image and self-care. While this may spell success to various corporations and ensure manufacturers meet their bottom line each year, it does little to build personal or community wealth. Retired banker Delores Portsmouth told the Informer African Americans must retrain themselves and then teach their children to resist the urge to make impulse purchases that actually rob their households of the ability to grow financially. “We are sometimes emotional shoppers, and so your husband or boss hurts your feelings, so you go to the shopping mall and buy shoes or jewelry to make yourself feel better, or you get a tax refund on Thursday and before nightfall on Sunday, the money is spent,” Portsmouth said. “When you gain stock of yourself, you have spent money that could have been invested or put away. You see we used to know that if your heel on your shoe breaks, you take it to a cobbler – they’re still out there – and get it repaired, you don’t invest in an entire new pair shoes. You chose not to spend that money, even though you had it, because you understood that one of your kids may need something, or an unexpected bill may arise.” FS
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Individuals of Color Find Unique Savings Opportunities with Sou-Sou By Stacy M. Brown WI Senior Writer @StacyBrownMedia In and outside of the inner cities and just about everywhere Black Americans and immigrants call home, there remains one interesting way in which many save substantial amounts of money. It’s called a sou-sou, a rotating savings club that includes a group of individuals who gather to contribute an equal amount of money into a fund. The money is collected either on a weekly, twice-a-month or monthly basis and comprises a pool – or, as most involved refer to it as, a hand. Each payout goes to members in specific, but prearranged, order and it rotates until all members have received an equal share. “The way I’ve seen Black people come together to rent out Black Panther theaters and get sou-sous popping for early tickets … do not tell me we can’t come together,” Chloe A. Hillard wrote on Twitter. In a 2017 article titled, “How the Black Community Took Bank-
ing into Their Own Hands,” MarketWatch.com quoted the Federal Deposit Insurance Company when it reported that more than 18 percent of African-Americans don’t have traditional bank accounts, compared with 7 percent of all Americans. But where banks don’t fit the bill, communities have created their own solutions, including grass roots traditions and minority-owned banks and credit unions, the report said. “People turn to the alternative forms of financing and credit because they don’t have the same access [to mainstream services],” Vicki Bogan, associate professor of economics at Cornell University, said in the article. “And that’s perfectly rational.” The article continued: For much of American history legislation restricted minority access to mainstream financial services. Segregation and Jim Crow laws barred Blacks from regular banks and forced them to look for other options. One informal alternative was a sou-sou.
“Saving has always been a challenge for me. While I continuously applied the pay-yourself-first principle to my finances, I struggled to stick to my budget,” Kerry McDonald, a freelance writer and mother of two young boys, wrote for kerryfreelancewriter.com. “So, when I wanted to start a cake-decorating business, I needed another way to pay my startup costs. I preferred not to take out a loan because of interest charges. When my co-worker suggested we start a sou-sou, I was ecstatic and thankful for her excellent suggestion.” As detailed in Essence magazine, here is how sou-sous work: The group elects a treasurer who will collect the members’ contributions. She will also create a payout roster, or members can request to receive their hand at any given date during the cycle. Everyone agrees on how much and how often they want to contribute. If ten members are contributing $100 a week, each week a member will receive a $1,000 hand or cash lump sum. The cycle begins again after ten weeks. Any member who can afford it, can also double their con-
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5 Sou-sou and other cooperative economic models helped create both personal and collective wealth among Blacks before traditional loans and financial assistance opened to them. / Courtesy photo tribution and get paid two hands in one cycle. There is no interest to be collected, so you will always get out the exact amount that you put into the pot. Sou-sou, which comes from the Yoruba term “esesu,” originated in West Africa, but is practiced in many African and Caribbean countries. Over the years, sou-sou has evolved, but the basic concept remains the same. Somalis call it “hagbad” or “ayuuto”; in Jamaica, it is known as a “partner”; in Guyana, a “box hand”; Haitians call it a “min”; and if you are Southern African, you may know it as “stokvel.” Cooperative economics grew from mutual benefit and relief societies from the turn-of-the century when large numbers of immigrants from the Caribbean and migrants from the American South, made their way to urban areas like New York, Detroit, Boston, and St. Louis. With no official channels – city, state, or federal, in place to stabilize these quickly evolving communities, the newcomers banded together. Creating some of the nation’s longest social services platforms,
including the Trinidad Benevolent Association, the American West Indian Ladies Aid Society, and the Bermuda Benevolent Association, operated according to sociologist / author Ira De Augustine Reid for: mutual benefit and relief, economic and political adjustment in the U.S.; and the perpetuation of desirable conditions in their homelands. While the sou sou paid for mortgage and business down payments, other regular outings, literary forums, and gatherings paid out death and sick benefits to its members. Then, like now, the concept of collective or group economics and self-sacrifice remain central. For McDonald, it meant cutting out a regular expense. “I needed to free up some money to go towards my sou-sou, so I decided to eliminate one bill from my monthly budget,” McDonald said. “I compared my cable and internet bills to see which was costing me more and canceled my $50 per month cable service – a whopping savings that helped me start my business.” To find out more about sou-sous, visit www.investsousou.com. FS
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In and outside of the inner cities and
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What’s in Your Wallet? The Future
Shantella Y. Sherman Informer Special Editions Editor In 1980, just weeks before my 10th birthday, my parents took me by the hands, across town, and into an Edwardian Baroque-styled building at the corner of 19th & K Streets. I was dressed in a tailored lavender suit, courtesy of the Ester Shop, lace gloves, and patent leather Mary Janes for the occasion. The slow walk down a long, narrow corridor with storied walls and marble floors grew from a long tradition – a sort of family ritual – that signaled my matriculation from seed to seedling. The thoughtless spending of Birthday and Christmas gifts, as well as the weekly allowance, was coming to an abrupt end. It was time to establish both a savings account and long-term (8year) financial plan that would usher in a healthy appreciation for earning money and spending wisely. My brother’s account was already open and his bank book held several pages of stamps and signatures, so while I still would have preferred to spend recklessly on Now & Later candy and Jolly Ranchers, sibling rivalry forbade I ignore the challenge of surpassing his entries. Looking back on that day, I am firmly reminded of the importance my family lent to financial responsibility. Ear-wigging a conversation between elder women not long after, I heard an aunt reply to the announcement that I now had a bank book, “Some women may not have children or a formal education, but she can be defined by her integrity, her bank book, and her passport.” Understanding
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that those assembled had reared families on a living of sharecropping, doing ‘days-work,’ minding other people’s children, or taking in washing, the value of a dime – let alone a dollar – was Gospel. These women had purchased homes, paid for parochial and college educations for their children and grandchildren, and contributed widely to the communities around them through saving, limited spending, and group economics. One of those ladies, Mrs. Netta Wimbush, 97, told me recently, that the goal in having children open accounts before becoming teens was to help them develop a healthy relationship with money before they became earners and assigned too much value in reckless spending. It’s a relationship Wimbush likens to a romance. “When you believe in the power of someone or something, you allow it to run you. You feel compelled to do what it wants and the Black people have more money running from their pockets and through their fingers today than ever before,” Wimbush said. “The money controls them, they feel euphoric when they have it and spend it. They show off what they own from having it, but money is a selfish lover, who robs you of common sense. Kelly Miller used to say, ‘The negro buys what we wants and begs for what he needs’. In the end, it’s not what you own, it’s what owns you.” Wimbush told me about The Fervent Five -- Herman E. Perry, James A. Robinson, Thomas J. Ferguson, W.H. King, and Henry C. Dugas who opened Citizens Trust Bank in 1921. Their mission was to promote financial stability and business development, by stressing the principles of thrift and home ownership to as many Black people as possible. She pointed to Oseola McCarty, the Hattiesburg, Miss., washerwoman whose frugal living allowed her to save more than a quarter of a million dollars -- money she willed as an endowment for African-American students to attend the University of Southern Mississippi. The difference between being poor and having a poverty mentality is the relationship people have with money. “Five men using collective economics to create wealth for others, a washerwoman who had no husband or children and who could have been off buying
expensive things and living fine, but instead squirreled away that money until it could be of benefit to generations of others through education,” Wimbush said. “We have to learn again to nest for others. That commercial says, ‘what’s in your wallet?’ The future of my people is in my wallet as long as I don’t spend it on a good time. That’s the way I look at it.” This Informer Financial Literacy supplement, Nesting celebrates the life’s goals of Wimbush, the Fervent Five, and McCarty in introducing the benefits of Children’s Savings Accounts (CSA) to readers. Additionally, we have documented the history of col-
lective economics opportunities, like Sou-Sous saving clubs, as well as current campaigns like the Buy the Block initiative (see online) which helps groups of neighbors, purchase property in
communities targeted for gentrification. There are tips to changing your relationship with money into one that proves healthy and productive. FS
It was time to establish both a savings account and long-term (8-year) financial plan that would usher in a healthy appreciation for earning money and spending wisely.
Tips to Financial Responsibility through Delayed Gratification
Lee Ross Special to the Informer
Breaking the cycle of impulse spending can prove daunting, but with concerted efforts and a plan for success, many African Americans are reaping the financial benefits. Here are a few the Informer believes will be helpful:
Determine with each purchase if it is a want or a need.
If it is a want, put the item back and wait at least 24 hours before purchasing it. Increase the time period for larger dollar purchases. If it is something you determine you need, challenge yourself further – Why do I need this? Is it something that I can borrow from someone else? Does it have to be purchased ‘new’? A good example: When my children were in college, two or three purchased books they needed for classes taken at different times, so that a $200 book with 5 users, costs only $40. They also borrowed neckties and blazers from each other when required to give speeches or take professional development class.
Pay Yourself First.
Saving has to become a priority by setting aside five to 10 of each paycheck before any other bills or sundries are purchased. This may sound a bit tricky, but the logic is in making adjustment to what you consider a need. This may mean going to the deli of a supermarket and asking for $2.50 worth each of Swiss cheese, sliced turkey and luncheon loaf, rather than paying $4.75 for packaged product of each. By the way, there is nothing wrong with store brands and using coupons.
Invest Your Money.
Look for investment and savings options that grow your money over time without you having to do anything. High-yield savings accounts that pay interest, investment accounts that compound over time and even certificates of deposit, which pay out interest after months or years, are good options.
Shop with a List.
One of the easiest ways to wreck your budget is to walk into a store without a list of what you need. Stores are designed to entice you into purchasing knickknacks you simply do not need. You need only look at the items displayed around the checkout stations to see how easily it is to buy on impulse. How many times have you walked into a Target or Walmart for one thing and walked out with several bags? Rule: If you do not need it, it is NOT on sale. Some savings become evident when labels are removed, and consumers identify the real costs associated with their regular purchases. / Courtesy photo.
THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT – OCTOBER 2018 / www.washingtoninformer.com
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