TREASURER’S TIPS
Includes valuable information on relieving debt stress, protecting your money,
saving for the future, and more!
Getting Ready to be a Homeowner
Owning a home of one’s own is the American Dream. The National Association of Realtors
conducted a study, and 87% of Americans said homeownership is the number one criterion for
defining “the good life.” Yet it can often be a long, difficult journey to homeownership. For many it
is a dream that seems out of reach. With careful planning and preparation, however,
homeownership is closer than you think.
STEPS TO HOMEOWNERSHIP
CAN YOU AFFORD IT?
Before you become a homeowner, you need to decide if you can afford to buy a home. Although
a home is a solid investment, renting may make more sense depending on your economic
circumstances. Expenses to consider:
• Mortgage payment.
• Homeowners insurance.
• Real estate taxes.
• Utilities.
• Maintenance and upkeep.
• Home furnishings.
• Repairs.
In addition to these expenses, you still have to be able to pay your other bills as well. To figure
out a budget, remember to include groceries, laundry/dry cleaning, medical bills/prescriptions,
credit card bills, child care, and entertainment.
You should chart your current expenses for a month and try to start a savings account for your
new house. A variety of expenses will need to be covered, such as:
• Down payment on the house.
• Closing costs.
• Inspection fees.
• Realtor fees/commission.
Owning a home is an expensive and never-ending adventure. Go over your finances and weigh
the pros and cons before you decide to take the plunge. It is much harder to get out of a house
mortgage than a rental agreement.
HOW’S YOUR CREDIT?
If you decide to buy a home, next review your credit score. If you have a good credit history,
when you apply for a mortgage you will be eligible for a lower rate of interest. This means big
dollar savings. One credit source states that the interest rate offered to a person with a score of
720 is 3.45% lower than the rate offered to a person with a score of 520. That adds up to a lot of
money: Bankrate.com states that on a 30-year mortgage for $100,000, the difference works out to
more than $85,000 in extra interest! (Check our Treasurer’s Tips on Credit Scores.)
HOMEBUYER EDUCATION
Neighborhood Housing Services offers 8 hours of homebuyer education to prepare you for
homeownership. Classes teach about credit scores, mortgages, realtors, and closing on a
property. For more information, call them at (216) 361-0516 or visit their website at
www.nhscleveland.org
DOWNPAYMENT ASSISTANCE
Several local agencies offer financial help with your down payment. The City of Cleveland's
Department of Community Development offers a mortgage assistance program. For more
information, click here. The site lists several neighborhood housing organizations, such as:
• Cleveland Housing Network www.chnnet.com
• Famicos Foundation www.famicos.org
• Ohio City Near West Development Corp. www.ocnw.org
USEFUL RESOURCES
Cleveland Board of Realtors www.cabor.com
Mortgage Bankers Association www.mbaa.org
Ohio Department of Commerce www.com.state.oh.us/real/scripts/information.htm
Consumer Credit Counseling www.cccservices.com
Finding the Right Mortgage and Realtor
MORTGAGES
If you are ready to become a homeowner, it is time to find the lender that is right for you. You
need to find someone who will not only give you a good rate, but will help you find the best type of
loan for you. The Mortgage Bankers Association suggests the following steps in selecting a
mortgage lender:
• Build a list of lenders.
• Decide if you need a special type of mortgage.
• Talk to a loan office.
• Compare rates for similar loans.
Build a list of lenders.
Talk with friends and family members who have recently bought or refinanced a home. Who did
they finance with and were they satisfied? Call your own bank or credit union. Since you already
have a financial relationship with them, they may offer a special deal. Look in the real estate or
business section of the newspaper or under “Mortgages” in the yellow pages of the phone book.
Shop around to make sure you are aware of the best deals available to you. Remember that this
may be the biggest purchase of your life.
Decide if you need a special type of mortgage.
There are a variety of mortgages available: Fixed-Rate Mortgages, Adjustable Rate Mortgages,
Convertible Mortgages, and Special Mortgages (such as those from the Veterans Administration
or the Federal Housing Administration). The Mortgage Bankers Association website, has an
overview of all these mortgages.
Talk to a loan office. Call or visit the lenders on your list. This will give you a better idea what it
will be like to work with them, and if they will meet your needs. You will have an opportunity to ask
questions, find out what kinds of loans they offer, and even request references from them that
you can check. Many banks now have this information on line saving you the time and trouble of
calls or visits.
Compare rates for similar loans.
When you visit lenders, ask about their mortgage rates and other costs, such as application fees
and points. Your lender will also help you determine how much house you can afford. Keep in
mind that how much money you can borrow is often greater than how much you can realistically
afford.
You and your lender will need to decide whether to include your insurance and real estate tax
payments in your loan. If you do not include the tax payments, the Cuyahoga County Treasurer’s
office offers Easy Pay, a free and convenient monthly direct debit payment program. Call 216443-7420 or click here for information on our EasyPay program.
REALTORS
Since you have secured financing, now it is time to find a realtor. How do you choose a realtor?
The National Association of Realtors says that you should ask:
• Does the agent have an active real estate license in good standing? You can find this
information by calling the Ohio Department of Commerce, Division of Real Estate & Professional
Licensing, 614-466-4100 or visit their website at:
www.com.state.oh.us/real/scripts/information.htm.
• Does the agent belong to the Multiple Listing Service (MLS) or have a reliable online
homebuyer’s search service? This is an information network of realtors, with descriptions of most
houses for sale in a given area.
• What real estate designations does the agent hold?
• How long has the agent been in business?
• Which party is the agent representing – you or the seller? The agent should discuss with you
the legal definitions of agency, so that you will know exactly where you stand.
• In exchange for your commitment, how will the agent help you accomplish your goals?
Be honest with your agent about your credit status, your pre-approved mortgage amount, and
how much of a house payment you can truly afford. Know how much you can afford to spend and
stay within your budget. Don’t let anyone talk you into a house payment that you cannot afford to
make. This is a big step forward for you, so don’t let yourself get off track in terms of how much
you can afford to spend. Making that mistake will lead you down the road to the legal foreclosure
process, which will cause you to lose the house. In addition, that process will cost you money,
time, disappointment, and frustration, and ultimately it will leave your credit rating ruined.
Pitfalls of Buying a Home
Whether you surf the Internet or browse the evening paper, you will find many articles about
dissatisfied homebuyers. Many believe they were misled by unscrupulous sellers, realtors,
builders, or mortgage lenders. Because this financial investment is so large, the losses can be
staggering!
Here are some home buying pitfalls we see in the Treasurer’s office.
Hidden Liens: Liens are an encumbrance on the title of your property and must be paid in order
to maintain clear title. Examples of liens are mortgages, taxes, and other debts. Some liens are
hidden even from title searchers and can cost you big bucks. Municipalities have the authority to
certify unpaid delinquent sewer charges on the local property tax bills. They can certify charges
incurred by the prior owner and can do so even after you buy the property. Since these charges
are a lien on the land, you will be forced to pay in order to keep the property.
Pro-rated Taxes:
Since real estate taxes are billed one year in arrears under Ohio law, they are typically pro-rated
to the date of sale based on an estimate. Unfortunately, the estimate can be wrong. It is based
on the current taxes, which are likely to increase by the time the new owner is billed. Taxes can
increase because the voters pass new levies, or because new construction is not yet reflected in
the valuation of the property. This can be particularly disastrous if the entire value of a new home
has not yet been incorporated into the land taxes. Consider having this protective language
written into your sales agreement: “If the selling price exceeds the auditor’s value by more than
10%, the taxes will be prorated based on the selling price.”
Creative Financing:
Make sure that you understand your financing package. Buyers sometimes believe that their
taxes and insurance will be included in their mortgage payment and, to their surprise and horror,
find themselves several years later in foreclosure proceedings with a huge bill for unpaid real
estate taxes, complete with penalties and interest. Some unscrupulous mortgage companies use
different tricks to keep monthly mortgage payments artificially low. The interest-only financing
package is one such trick, where the payments apply to interest only, and do not pay down the
principal amount of the mortgage at all. Another trick is the balloon mortgage, which keeps
monthly payments low for a period of time and then later inflates the monthly payment amount to
levels that may be completely unaffordable for the buyer. As always, the key here is to know how
much home you can afford and how much mortgage you can afford. Do not allow yourself to be
talked into paying more for a home than your budget allows, and do not allow yourself to be
talked into a financing package that is unsustainable for you over time.
Study the Neighborhood:
This is particularly important if you intend to reside in the home you acquire. Is your home the
nicest one on the street? Keep in mind that your property value can be adversely affected by
nearby homes that are deteriorating around you. Does your neighborhood consist mostly of rental
properties? Landlords seldom maintain their rental properties as nicely as they keep up the
homes in which they actually live. Do you long for a peaceful, quiet neighborhood? Make sure to
check out your prospective neighborhood after dark. The Crime Analysis division of the Cleveland
Police Department can provide crime statistics that are broken down by neighborhood. The
Cleveland police can be reached at (216) 621-1234. The Cuyahoga County Sheriff also maintains
a searchable database for registered sex offenders on his website at
sheriff.cuyahogacounty.us/default.htm.
Senior Homeowner Information
Congratulations on reaching the golden years! You’ve worked hard all your life and now it is time
to enjoy the fruits of your labor. One goal of the Treasurer’s Office is to improve services and the
quality of life for Cuyahoga County’s senior citizens. This aim includes providing one-stop
convenience for information about property tax payments and help with government and
consumer services.
SENIOR HOMEOWNER SERVICES
EasyPay Program: Real estate taxes in Ohio are due every six months. It can be a terrible
burden for many seniors to come up with a large payment all at once. That is why, as an
alternative, the Cuyahoga County Treasurer’s Office offers help to homeowners in budgeting their
taxes. The EasyPay Program allows taxpayers the option of paying your real estate taxes in
smaller monthly installments. For more information, please call 216-443-7420 or click here.
Homestead Exemption: This program provides a reduction on real estate tax bills to owners
who are age 65+ or permanently and totally disabled with income less than $25,400. For more
information, call 216-443-7050 or visit the Cuyahoga County Auditor’s website at:
www.auditor.cuyahogacounty.us/commservices/FAQ.htm.
Board of Revision: Your property taxes are determined by assessed value of your home and the
effective tax rate in your community. The tax rate is determined locally and your home’s
assessment is done by the Auditor. If you believe the valuation of your property is too high and
should be lowered, you have the right to contest the value through the Board of Revision. Call
216-443-7195 or visit the Board’s website at www.cuyahogacounty.us/bor.
Energy Assistance Program: The Home Energy Assistance Program (HEAP) helps qualifying
persons of all ages defer their winter heating costs. HEAP is administered by the Auditor’s Office
which can be reached at 216-443-7010 or on line at
www.auditor.cuyahogacounty.us/commservices/energyassist.htm
Senior Citizens: Fixed Income Doesn’t Mean Financial Nightmare
As a senior citizen living on a fixed income, it is not easy to get by while energy, food, and
medical bills keep rising. Finding a way to pay your bills can cause worry and stress, but you
don’t have to live this way. It is important for you to know that you are not alone.
According to the Miami University Scripps Gerontology Center:
•Almost 20% of Cuyahoga County’s population is age 60 or over.
•Over 33% of individuals age 60+ have at least one disability.
•43% of women and 23% of men age 60+ live alone.
•Over 14% of the individuals age 60+ live in poverty.
There are many people in Cuyahoga County waiting to assist you. If you need help and advice
with in dealing with your finances or just information on what services are available to you, please
be aware that considerable support is just a phone call away.
Department of Senior and Adult Services: This provides quality in-home and community
services to Cuyahoga County seniors, disabled and vulnerable adults so they may live as
independently as possible. These services include minor home repairs, home-delivered meals,
medical transportation, and others. For more information call 216-420-6750 or visit the DSAS
website at: www.cuyahogacounty.us/dsas
AARP: A nonprofit, nonpartisan organization for people age 50+ dedicated to “enhancing quality
of life for all as we age.” They provide information and resources on many issues. For more
information, call 866-389-5653 or visit the website: www.aarp.org/oh/
Legal Aid Society of Cleveland: This agency provides help for Senior Citizens in a variety of
legal matters including bankruptcy, estates, and consumer problems. To learn more, call 216687-1900 or visit their website at: www.lasclev.org
Tax Counseling for the Elderly: Tax-Aide is a program sponsored by AARP, which provides
free income tax preparation services to middle-income and low-income taxpayers age 60 and
over. For more information call 888-227-7669 or visit the AARP website at:
www.aarp.org/taxaide/
The Golden Buckeye Program:The Golden Buckeye program provides savings to older
Ohioans at nearly 20,000 participating businesses all over the state. If you are age 60 or older, or
are age 18-59 and have a Medicare-certified disability, you are eligible for a free Golden Buckeye
Card. Cardholders enjoy savings on “dining, entertainment, groceries, hardware, services and
more.” Cardholders are also eligible for the free Golden Buckeye Prescription Drug Savings
Program. For more information please call 866-301-6446 or visit the Ohio Department of Aging
website at: www.goldenbuckeye.com
Help in Preparing Your Income Taxes
Ever since the days of the Boston Tea Party, Americans have loathed and feared paying taxes.
Fortunately, many sources of help can make income tax time a bit less stressful. Tax clinics, tax
software, and on-line assistance are available to taxpayers. If you need help, listed below are
some of the options that you can explore to get some help and see what best fits your needs.
Free Income Tax Assistance
Several organizations in the Cleveland area offer assistance with tax returns. For more
information on the Saint Malachi Center and Notre Dame Club of Cleveland Tax Assistance
Program, call (216) 771-3036. For more information on the Slavic Village Development and Case
Western Reserve University tax assistance program, call (216) 429-1182 ext 115.
Volunteer Income Tax Assistance Program (VITA)
The IRS offers this program to help people with low-to-moderate incomes (approximately $36,000
or less in annual income) who need help in preparing their own income tax returns. For more
information, or to locate the nearest VITA site, please call 1-800-829-1040.
AARP Tax-Aide
Established in 1968 to provide income tax help to older individuals, AARP Tax-Aide offers
personal assistance to low- and middle-income persons in order to complete their tax returns.
There are currently 23 sites located in the Central Ohio Area. To find the site closest to you,
please visit the AARP website at: https://wpp.aarp.org/vmis/sites/taxaide_locator.jsp or call the
AARP Ohio Office at 614-224-9800. You also may e-mail specific questions to:
[email protected].
E-FILE ASSISTANCE
The IRS has entered into partnership agreements with several companies to promote electronic
filing. This preferred method for filing your income taxes is both more convenient for taxpayers
and at the same time makes the IRS more efficient in handling its workload during its peak
season. Listed below are just a few of the companies involved. For a complete list of these
companies, or for more information about on-line help, tax software, or any other tax issues, you
can visit the IRS’s website at: http://www.irs.gov/efile/lists/0,,id=101223,00.html
123EasyTaxFiling.com
My1040EZ.com
Tax Advisors on Call
H&R Block
TurboTax for the Web
Income Tax Credits
Unfortunately, many taxpayers do pay too much in income taxes because they do not take
advantage of all the tax credits for which they might be eligible. According to the IRS, a tax credit
is “a dollar-for-dollar reduction of taxes owed.” A 2003 study by the United States General
Accounting Office showed that about 2 million taxpayers overpaid their 1998 taxes by $945
million because they failed to itemize deductions.
The IRS lists some of the credits that taxpayers may be eligible to claim:
Earned Income Tax Credit: This is a refundable credit for low-income working individuals and families.
Income and family size determine the amount of the EITC. When the EITC exceeds the amount of taxes owed,
it results in a tax refund to those who claim and qualify for the credit. For more information, see IRS Publication
596, Earned Income Credit (EIC).
Child Tax Credit: This credit is for people who have a qualifying child. The maximum amount of
the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for
child and dependent care expenses. For more information, see IRS Pub. 972, Child Tax Credit.
Child and Dependent Care Credit: This is for expenses paid for the care of children under age
13, or for a disabled spouse or dependent, to enable the taxpayer to work. The amount of
qualifying expenses is limited. The credit is a percentage of those qualifying expenses. For more
information, see IRS Pub. 503, Child and Dependent Care Expenses.
Adoption Credit: Adoptive parents can take a tax credit of up to $10,390 for qualifying expenses
paid to adopt an eligible child. A credit of up to $10,390 may be allowed for the adoption of a child
with special needs, even if you do not have any qualifying expenses. For more information, see
IRS Pub. 968, Tax Benefits for Adoption.
Credit for the Elderly and Disabled: This credit is available to individuals who are either age 65
or older or are under age 65 and retired on permanent and total disability, and who are citizens or
residents. There are income limitations. For more information, see IRS Pub. 524, Credit for the
Elderly or the Disabled.
Education Credits: Two credits are available – the Hope Credit and the Lifetime Learning Credit
– for people who pay higher education costs. The Hope Credit is for payment of the first two
years of tuition and related expenses for an eligible student for whom the taxpayer claims an
exemption. The Lifetime Learning Credit is available for all post-secondary education for an
unlimited number of years. A taxpayer cannot claim both credits for the same student in one year.
For more information, see IRS Pub. 970, Tax Benefits for Education.
Retirement Savings Contribution Credit: Eligible individuals may be able to claim a credit for a
percentage of their qualified retirement savings contributions, such as contributions to a
traditional or Roth IRA or salary reduction contributions to a SEP or SIMPLE plan. To be eligible,
you must be at least age 18 at the end of the year and not a student or an individual for whom
someone else claims a personal exemption. Also, your adjusted gross income (AGI) must be
below a certain amount. For more information, see IRS Pub.590 (Chapter 4), Individual
Retirement Arrangements.
There are other credits available to eligible taxpayers. For more information, visit the IRS’s
website at: www.irs.gov or call the toll-free IRS Tax Help Line at 1-800-829-1040.
Avoid Income Tax Scams
Remember the old saying, “If it sounds to good to be true it probably is.”According to the Federal
Trade Commission, one in nine Americans has been a victim of fraud. With the April 15 deadline
looming to file income taxes, beware of unreasonable schemes and promises to reduce your
taxes.
The IRS recently released its “Dirty Dozen” list for 2005, to remind us that tax scams take many
forms. Anyone pulled into these schemes can face not only repayment of taxes, but additional
interest and penalties.
Here is the IRS’s “Dirty Dozen” list of tax scams. Anyone who suspects tax fraud should call the
IRS at 1-800-829-0433 or visit the website: www.irs.gov
1. Trust Misuse. Unscrupulous promoters urge taxpayers to transfer assets into trusts.
They promise less income subject to tax, deductions for personal expenses, and reduced
estate or gift taxes. But some trusts do not deliver the promised tax benefits, and the IRS
is actively examining these arrangements. Numerous promoters and their clients have
been prosecuted since 2001. As with other arrangements, seek advice from a trusted
professional before creating a trust.
2. Frivolous Arguments. Promoters make outlandish claims: that the Sixteenth
Amendment authorizing income taxes was never ratified; that wages are not income; that
filing a return and paying income taxes are merely voluntary or violate your constitutional
rights. These claims are bogus and have been thrown out of court. You have the right to
contest your tax liability, but not to disobey the law.
3. Return Preparer Fraud. Dishonest return preparers can cause many headaches for
taxpayers. They attract new clients by promising large refunds, but cheat in order to skim
a portion of their clients’ refunds or charge inflated fees for their services. Choose
carefully when hiring a tax preparer and always ask around and shop around. No matter
who prepares your return, you are ultimately responsible for its accuracy. Many tax
preparers have been prosecuted in recent years.
4. Credit Counseling Agencies. Be careful with credit counseling organizations that claim
to fix credit ratings and debt problems, but charge their own high fees, service charges, or
mandatory “contributions” that add to your debt. The IRS has made it a priority to audit
these organizations because some provide little value for the money.
5. "Claim of Right" Doctrine. In this scheme, the taxpayer tries to deduct the entire amount
of his or her wages, labeling it “a necessary expense for the production of income” or
“compensation for personal services actually rendered.” This alleged deduction has no
legal basis under the Internal Revenue Code.
6. “No Gain” Deduction. Similar to “Claim of Right,” the taxpayer tries to deduct all
adjusted gross income on Schedule A, labeling it “Other Miscellaneous Deductions.”
7. Corporation Sole. The Justice Department has taken on many promoters of this
scheme. Participants apply for incorporation under the pretext of being a “bishop” or
“overseer” of a one-person, phony religious organization, claiming to be exempt from
federal income taxes. If you are not a leader of an actual bona fide church, you have no
business claiming any rights under the Corporation Sole statutes.
8. Identity Theft. Be very careful about disclosing personal financial data. Identity thieves
use stolen data to access accounts, run up charges, and open new loans. Do not let
scam artists access your data through phony correspondence, e-mail, or other inquiries.
The IRS does not use e-mail to contact taxpayers. If you have any doubt whether a
contact from the IRS is authentic, call 1-800-829-1040 to confirm it.
9. Abuse of Charitable Organizations and Deductions. The IRS has seen greater use of
tax-exempt organizations improperly to shield income or assets from taxes. The taxpayer
moves assets or income to a charitable organization but maintains control over them,
claiming a tax deduction with no real benefit to the charity.
10. Offshore Transactions. Despite a recent crackdown, some still seek to avoid U.S. taxes
by illegally hiding income in offshore bank and brokerage accounts or using offshore
credit cards, wire transfers, foreign trusts, or private annuities to do so.These abusive
transactions are illegal.
11. Zero Return. Promoters enter all zeros on the tax return, even if a taxpayer made money.
This is illegal, and adding the phrase “nunc pro tunc” does not change that.
12. Employment Tax Evasion. Some schemes instruct employers not to withhold federal
income tax or other employment taxes from wages paid to their employees. This advice
has resulted in criminal convictions, and employers still have to pay the back taxes, plus
penalties and interest. Note also that employees who have nothing withheld from their
wages are still responsible for paying income tax.
Know About Consumer Fraud
Nearly 25 million adults were reported as victims of fraud in the United States according to a
government study released in 2004. This amounts to more than one in ten adult Americans being
scammed during that year. Clearly consumer fraud is a very serious problem in this country – and
growing at an alarming rate.
Fraudulent practices are often pursued through telemarketing, newspaper and magazine
advertisements, direct mail, catalogs, and posters. Fraud now occurs on the Internet, through email, and in some TV and radio advertisements.
Listed below are some of the more common consumer frauds:
•Advance Fee Loans – Consumers have been asked to pay a fee for a loan or credit card. The
loan/credit card did not materialize.
•Guaranteed Loans or Credit – These offers may be for home-equity loans that do not require
equity in your home or for unsecured credit cards, without regard for your credit history. After
paying the required fees, you will typically be turned down for the loan because you do not meet
the “qualifications,” and the promised money never appears.
•Credit Repair – Consumers are told they can pay to have negative information removed from
their credit reports or to establish a new credit record. This cannot be done and the schemes are
illegal.
•Vacation Prizes – Often, the accommodations are poor and the time you select is not
available.
•Health and Diet – Consumers are offered pills and herbal formulas at a substantial cost to
control weight gain or cure hair loss. Be careful of ads that use mysterious phrases such as
“miraculous cure,” “secret formula,” or “ancient ingredient.”
•Chain Letter – Normally the consumer is asked to send a small amount of money to names
listed on the letter. Often, the letter claims it is legal or approved by the government. Chain
letters are almost always illegal and most people who participate lose their money.
•Work-At-Home – The most common forms of this scam are envelope stuffing or craft assembly
that require the consumer to pay a fee to get started. Those who respond usually receive no
supplies. Instead, they simply receive instructions on how to place the same ad.
•Investment Opportunities – Consumers are promised outrageously high rates of return with no
risk. The promoters of fraudulent investments often operate a particular scam for a short time,
spend the money they take in, and close down before they can be detected. They will often
reopen, using another name, to sell another scam.
•Buyers’ Club – A consumer is billed, usually on a credit card, for memberships that were not
authorized by the owner of the card.
•Phishing – Someone pretending to be an official, from a bank or government agency, asks a
consumer to verify or confirm personal information for a made-up reason. Some actually pose as
an employee from a fraud department. Most often, legitimate inquiries of this nature will not ask
for your personal information.
•Found Money – Consumers are contacted by persons claiming to know where lost or
unclaimed property is located. They ask for an advance fee to process the claim and are never
heard from again. Another variation of this scam involves identity theft. Consumers are asked to
provide all sorts of personal information such as social security number or bank information and
that information is used to steal a person’s identity. If you believe you have unclaimed property,
contact our office at 216-443-7466 and we will assist you with your search.
If you feel you have become a victim of any type of fraud or scheme, report it to your local police
department, or to the city/state consumer protection office, and to the Federal Trade Commission.
You may also wish to contact the National Fraud Information Center at 800-876-7060 or by email
to the Fraud Watch home page on the Internet www.fraud.org. You should never feel
embarrassed. Reporting such situations is important. Very few frauds are actually reported. The
lack of exposure allows the person committing the fraudulent acts or schemes to continue on to
the next person.
Identity Theft – Beware! Be Alert! Be Smart!
Each year, millions of Americans fall victim to identity theft, fraud, and other scams. These
financial crimes are on the rise. According to the Federal Trade Commission:
• Ten million individuals were victims of identity theft in 2002; that is 5% of the U.S. population.
•Over 2,000 victims every day lose $20,000-$30,000 per incident.
•In the next five years, it is estimated that one in four people will be a victim, or a relative of a
victim, of identity theft.
Because criminals are getting bolder, consumers must take steps to protect themselves against
identity theft. Once your key personal information (such as birth date and social security number)
is stolen, criminals can use that information to obtain credit cards or loans to buy big-ticket items
like cars and trips. This could result in multiple problems for you: a ruined credit report; hassles
over payments you do not owe; new obstacles to getting a job, car, apartment, or loan; or even
the possibility of being arrested for a crime you did not commit.
To protect yourself, the Ohio Attorney General’s office suggests:
•Do not throw out credit card statements, bills, insurance papers, or bank statements where a
criminal could retrieve them from the trash. Shred or destroy them first.
•Keep a list or photocopy all your credit cards, account numbers, expiration dates, and
telephone numbers of the customer service and fraud departments in a secure place, so that you
can quickly notify your creditors if your cards are lost or stolen.
•Never give out personal or financial information over the phone to anyone who calls to solicit a
purchase or donation.
•Be wary if anyone calls you to “confirm” personal or financial information.
•Do not leave your Ids in an unsecured location or lend your IDs to friends.
If you become an identity theft victim:
•Immediately contact the police and file a report.
•Notify your bank and credit card companies and send them a copy of the police report.
•Cancel your credit card accounts and your bank accounts, and open new accounts with new
numbers.
•Contact the three national credit bureaus to add a “fraud alert” to your credit file. The 3
bureaus are:
•
•
•
Experian – 888-397-3742
Equifax – 800-525-6285
TransUnion – 800-680-7289
IDENTITY THEFT VERIFICATION PASSPORT PROGRAM
The Ohio Attorney General’s Office has instituted an Identity Theft Verification Passport program.
Once a police report is taken and the victim’s identity confirmed, you can fill out a “Passport”
application that the officer can provide. The officer can also assist you in filing the application,
which should take less than 10 minutes. The “Passport” application and police report is then sent
to the Attorney General’s office, which verifies the information and issues a Passport card. This
card helps victims identify themselves when someone else commits crimes using the victim’s
stolen identity.
For more information on the Passport program, call the Ohio Attorney General’s office at 888694-3463 (888-MY-ID-4-ME) or visit the website at: www.ag.state.oh.us.
Preventing Theft of Funds in Organizations
They can come in all shapes and sizes . . . they are your neighbors, your trusted friends, perhaps
even the leaders in your community organizations. One thing is certain; embezzlement is the
most common financial crime in the nation and a predominant factor in the failure of many types
of small businesses and non-profit organizations. Losses attributed to individual acts of
embezzlement are more significant than losses attributed to all other types of business crimes
combined. Not only is the money gone, but the hard-earned process of winning the community’s
trust is generally destroyed with the discovery of the financial loss.
Many embezzlers have been involved with the organizations they steal from for years without any
prior incidents or without having been exposed. They are often the most hardworking volunteers
in the group. These individuals do not necessarily set out to steal money for their own personal
use. They may begin by borrowing funds without approval, knowing that what they are doing is
wrong but intending to make it right eventually. Embezzlement tends to occur when three
elements coincide: a person develops a need for more money, the opportunity to embezzle
exists, and the person can find a way to rationalize the misconduct. The only way you can
prevent theft from happening is to establish firm controls that minimize opportunities to steal your
money.
HOW CAN YOU PROTECT AGAINST EMPLOYEE THEFT???
# 1 – Recognize The Warning Signs:
• Regularly examine your prior year’s financial activity to see if revenues are on track. If not,
find out why. If the past records are in disarray, obtain the bank statements and check them to
figure out when you should be expecting money to come in.
• Make sure that expenses are recorded, verified, and approved by the group before purchases
are made. Periodically audit the books with unannounced cash counts, inventories of equipment,
and examination of the underlying documents that show your accounts receivable and accounts
payable. These measures can uncover phony purchases, unrecorded sales, and routine pilfering
of property.
• Keep an eye on the “unpaid” list, especially in fundraising sales. Always balance the accounts
for each of your fundraising programs as they are concluded.
•
Bounced business checks could indicate funds being stolen from your account.
•
Unexpected declines in profits or increases in expenses may be a sign that cash is being
siphoned off illegitimately.
•
Slow collections can be a device to mask embezzlement.
•
Unusual write-offs of bad debts may be a cover-up for fraudulent financial schemes.
•
Cash handlers who never take a vacation could be covering their tracks. It is best to rotate
duties occasionally and get another person to do the job for at least a short period, in order to get
a better perspective on what is going on at each workstation, especially in those positions where
employees are handling cash.
#2 – Establish Internal Controls:
To set up an effective internal audit system, the key is to divide financial responsibilities and
functions so that no one employee controls all aspects of a transaction. For example:
•
Require checks to be countersigned by two responsible officials.
•
Endorse all checks as “for deposit only,” and provide the specific account number.
•
Do not keep cash lying around. Establish protocols that require regular bank deposits to be
made every day, every other day, or at least weekly.
•
Have two people count all cash and fundraising monies.
•
The treasurer should verify all incoming money and provide receipts.
•
Have a person other than the treasurer go through the incoming mail.
•
Delegate the responsibility for receiving checks and cash to someone other than the person
who records the incoming funds.
•
Make sure that volunteers who are responsible for ordering goods and supplies are not the
same ones who are responsible for receiving them or paying for them.
T-11
•
If possible, do not give the authority to write off bad debts to the same person who has the
authority to pay bills.
These steps are not enough by themselves. Take an inventory of property and have bank
accounts audited by an outside party annually. If you can, screen your volunteers and have them
submit to a security check before handling money. Even with the finest internal auditing system,
the danger of collusion still exists. Therefore, some organizations protect themselves by bonding
their members. Bonding is an insurance policy that covers an organization for losses of money or
property that stem from dishonest acts of a "bonded" member. Last but not least – try not to
become an organization that depends on one or two people to handle all financial activity. If you
suspect embezzlement, take action immediately. A lack of internal controls can be very costly
and ultimately ruin the reputation of your entire organization.
Free Annual Credit Reports
In 2003, the “Fair and Accurate Credit Transactions Act of 2003” was enacted. In Ohio, the new
law takes effect on March 1, 2005. It gives all consumers the right to obtain a copy of their credit
report from each of the three major credit-report agencies (Equifax, Experian, and TransUnion)
free of charge once a year. Consider staggering your three requests throughout the year to get
the most up to date information. You may go on-line to order your free reports at:
www.annualcreditreport.com or send in the written application on the reverse side of this Tip.
Each agency puts together its report differently, so it is a good idea to check all three. Your credit
report could contain erroneous information. Errors are expensive because they can translate into
higher interest charges when borrowing money. Report any inaccuracies immediately to the credit
reporting agency that made the error. Here is the contact information:
• Equifax: (800) 685-1111, www.equifax.com
• Experian (formerly TRW): (888) 397-3742, www.experian.com
• TransUnion: (800) 888-4213, www.transunion.com
This law entitles consumers only to a free credit report, not a free credit score. Your credit score
translates all the information in your credit report into one number, which may be used by lenders
to fix the rates offered to you when you try to borrow money for a home mortgage or a car loan, or
even when you apply for an insurance policy. Many employers now also use your credit score as
an indicator of whether or not you can handle responsibility when you apply for a job. Your credit
score may be obtained from these same agencies for a fee ranging from $4 to $6.95 per agency.
Note that your credit score is based on the information in your credit report. Therefore, if you want
to have your credit score changed, you need to review carefully the information contained in your
credit report. For more on credit scores, see “What Is a Credit Score?”
This legislation was inspired by a sharp rise in identity theft in recent years. This occurs when
someone uses your information to take over or open accounts in your name, running up large
balances and leaving you to sort out the mess. You can uncover and remedy identity theft most
effectively by checking your credit history thoroughly and often.
What is a Credit Score?
A credit score is a number used by lenders to help determine if you are likely to pay back a loan
on time. Your credit score is a picture of your credit risk at a snapshot in time, based on your
capability and experience in repaying your debts. The Fair Isaac Corp. developed the most widely
used credit score, which is known as FICO score.
Your credit score is based on information about your credit history, which is compiled in a credit
report. The better your credit history, the higher is your credit score. How much a lender will let
you borrow, and the rate of interest they will charge you, is determined by your credit score. This
applies to all kinds of credit: credit cards, car loans, personal loans, and mortgages.
WHAT’S IN YOUR CREDIT REPORT?
Three major agencies prepare credit reports. They are:
• Equifax: (800) 685-1111, www.equifax.com
• Experian (formerly TRW): (888) 397-3742, www.experian.com
• TransUnion: (800) 888-4213, www.transunion.com
Each agency may have somewhat different information or score your credit a little differently, but
they all look at the same types of information to calculate your score. That information is:
• How do you pay your bills? (35%) Do you pay on time or are you late? Have you ever had an
account referred to a collection agency? Have you filed for bankruptcy?
• How much do you owe? (30%) The amount of debt or money you owe is evaluated as
compared to your credit limit. If you owe close to your credit limit, it could have a negative impact
on your score.
• How old is your credit history? (15%) The longer you have had credit, the more points you
get if you have a good track record. This means paying on time and keeping your credit balances
low.
• How many and what types of credit do you have? (10%) Do you have a variety of credit
accounts? Different kinds of credit, such as credit cards, mortgages, and car loans show how you
handle money. But having too many credit card accounts may have a negative impact on your
credit score.
• Have you made any new credit applications?(10%) Rate shopping for the best mortgage rate
or car loan will not hurt your credit rating. But applying for too many credit cards or opening
multiple accounts may have a negative impact on your credit rating.
WHY ARE CREDIT SCORES IMPORTANT?
Buying a house? Buying a car? Applying for a job? Applying for insurance? Chances are that
someone will check your credit report. Why? Most lenders and employers want to know if you are
a good risk. Do you pay your bills on time? Have you filed for bankruptcy? These are some
indicators of your reliability and trustworthiness.
If you have a good credit history and a high FICO score, when you apply for a car loan or a
mortgage you increase your chances of obtaining a lower rate of interest. What does this mean to
you? A lower rate of interest on a loan means big dollar savings for you. According to Fair Isaac,
“The difference in the interest rates offered to a person with a score of 520 and a person with a
score of 720 is 3.45%.” That adds up to a lot of money. Bankrate.com, an authority on financial
matters, states that “on a $100,000 mortgage over 30 years. That difference would cost more
than $85,000 extra in interest charges!
Most insurance companies now use credit reports to help determine what their customers pay for
insurance coverage. According to the Allstate Insurance website, “Auto insurance policyholders
with the least favorable scores are over 60% more likely to experience losses that are greater in
number and severity than those with the most favorable scores. The dollar amount of losses
experienced by homeowners’ policyholders with the least favorable scores is more than twice as
much as for those with the most favorable scores.” This means that improving your credit
score may reduce your insurance rates and help you save money!
Not only can your insurance rates and interest charges be affected by your credit report, but it
can affect your employment options also. Many employers now check the credit reports of
prospective employees, taking the view that information about how you handle your personal
finances is a reasonable indicator of your ability to handle responsibility on the job. A bad credit
report could jeopardize your ability to get a good job. Some employers also require employees to
maintain a good credit report as part of their employment.
See “How to Improve Your Credit Score” for more tips on what steps you can take to raise
your credit score and put yourself in a better position to save yourself money on loans. Also see
“Free Credit Reports in Ohio as of March 1” for information on how you can obtain a free copy
of your credit report annually from each of the three credit rating agencies. Consider staggering
your three requests during the year to get the most up-to-date information. These other Tips are
available at our web site treasurer.cuyahogacounty.us/default.asp
RESOURCES
Fair Isaac
Federal Trade Commission
Allstate Insurance
Consumer Credit Counseling Service
www.myfico.com
www.ftc.gov
www.allstate.com
www.cccservices.com
How to Improve Your Credit Score
The first thing you need to do is check your credit report. The “Fair and Accurate Credit
Transactions Act of 2003” gives every consumer the right to get a copy of his or her credit report
free of charge once a year. You should be able to get a free copy of your credit report from each
of the three major credit-reporting agencies: Equifax, Experian, and TransUnion. Credit reporting
companies may report different data or may report the same data differently, so it is a good idea
to check all three. Consider staggering your three requests throughout the year to get the most
up-to-date information.
An error in your credit report could impact your credit score and that could cost you money!
There are many sources of inaccuracies: for example, data from someone with a similar name
may have been wrongly reported as yours, or various recording errors may have occurred. If you
find any errors, report them immediately to the credit-reporting agency that made the error.
Report the error in writing, and be sure to keep a copy for yourself. Once you report the error, the
credit-reporting agency must investigate and respond to you within 30 days. Keeping track of your
credit score could pay off in lower car payments, lower mortgage interest, lower insurance rates,
or better job opportunities.
Other ways to improve your credit score:
•Pay your bills on time, and pay off debts as soon as you can.
•Keep balances low on credit cards, and use them responsibly.
•Ask a friend or family member to co-sign a small loan and pay it back on time.
•Open a small savings account and borrow against it.
•Many banks offer a secured card, guaranteed by a deposit you make.
•Establish credit with an agency that reports to the credit bureau.
•If you have written bad checks and are now listed on “check systems,” you can work your way
off the list by enrolling in Get Checking. Call 614-552-2222.
•If you need help managing your finances, seek credit counseling.
With steady attention and time, you can improve your credit score and start saving money.
RESOURCES
Fair Isaac
Federal Trade Commission
www.myfico.com
www.ftc.gov
Consumer Credit Counseling Service
www.cccservices.com
Guidelines for Financial Record Keeping
Birth certificates, marriage certificates, death certificates, bank records, property deeds, home
mortgages, insurance documents, and bills are just a few of the many records that are part of our
everyday lives. Keeping these records safe but accessible is important. If you keep your records
up to date and in order, you will find that it is much easier to:
•Prove that a bill has been paid.
•Save time and stress by not having to search for papers.
•Show legal proof of events (marriage, birth, divorce, custody, death).
•Prove ownership (purchase or sale of items or services).
•Correct errors on bank statements, credit card bills, and other bills.
•Prove claims to insurance, Social Security, or veterans’ benefits.
ORGANIZATIONAL TIPS
When organizing your records, you should follow a few simple guidelines:
•Store your records in an accessible place so that they will be easy for you to use, and take
care to keep them up to date.
•Store your records in a fireproof cabinet or insulated steel box with a lock for privacy.
•Make sure a family member or trusted friend knows where to find your records in case of an
emergency (and has the key if they are locked).
•Update your records at least once a year to make sure that all of your information is correct.
•Keep documents that are hard to replace, such as original copies of birth, marriage, and death
certificates, adoption, divorce, and child custody papers, and the deed to your house in a safe
deposit box.
WHAT RECORDS SHOULD BE KEPT
The Ohio State University Extension Office suggests the following schedule for keeping old
records (www.ohioline.osu.edu/mm-fact/0008.html):
Bank Records
Educational & Employment Records
Family Health Records
Home Purchase & Improvement Records
Income Tax Records
Insurance Policies
Property Tax Records
Retirement & Pension Plans
Warranties
3-6 years
Permanent
Permanent
During ownership (plus 3-6 years
after disposing of the property)
Permanent
While in force
Permanent
While in force
During ownership
To aid in your organization, the Ohio State University Extension Office has a useful leaflet called
“Know Your Valuable Papers: What and Where?” that you can download from their website at:
www.ohioline.osu.edu/pdf/l237.pdf. This leaflet provides a convenient place to list your personal
and financial information as well as to identify the location of your most important documents.
Debt Stress: You Can Beat It!
According to the Federal Reserve Board:
•22% of a household’s wages are committed to paying the
interest on debts and a part of the principal.
•U.S. consumer debt (credit cards plus car loans) recently
passed $2 TRILLION, which averages $7,296 per person.
•Some consumers carry balances that are more than their annual salaries.
Credit card bills arrive in the mail once a month for each card. Debt collectors may be calling on
the phone on a daily basis. Utilities are threatening to cut off your services. The car dealer is
threatening to repossess your car. All of this pressure can and does cause constant anxiety and
extreme stress.
Debt stress can cause problems in all areas of your life. It can invade your workplace. When you
are distracted by worries about how to cope with your debts, your productivity at work is likely to
decrease. It also can invade your home. Studies show that the leading cause of divorce is
financial pressure, leading to arguments over money. It can even take over your life. Big financial
decisions, like where to live, what car to buy, what you can afford to spend on a monthly, weekly,
or daily basis can be affected by debt stress. Clearly you are not in any position to make the best
decisions about your life when you are weighed down by grave worries about your ability to pay
your bills.
Debt stress can even make you physically ill. Researchers at the Ohio State University found that
“people who reported higher levels of stress about their debt showed higher levels of physical
impairment and reported worse health than those with lower levels of debt.” They also showed
that “people with a higher proportion of their income tied up in credit card debt also showed
higher levels of physical impairment.”
HOW TO HANDLE DEBT STRESS:
According to the Consumer Credit Counseling Service of Atlanta, some tips about the best ways
to handle debt stress are:
•Assess your current financial situation. The only way to get a handle on what you owe is
to figure out how much you owe. Gather up all your credit card statements and other bills and
total up everything you owe.
•Create a debt repayment plan. Once you know how much you owe, then you can work out a
plan to pay off your debt. This should include either trimming expenses or increasing your
income or both.
•Avoid adding to your debt. Avoid making any purchases with your credit cards until you pay
off your current balances. Then, make a pact with yourself not to charge any purchases unless
you have a specific plan in place to pay off the balance in 90 days or less.
•Commit to managing your money. At least twice a month, allow some time to managing
your finances. This includes paying bills, balancing your checkbook, and analyzing your
expenses.
• Get help if you need it. If you are overwhelmed and not sure where to start, contact
Consumer Credit Counseling Service of the Midwest at 1-800-355-2227 or visit their website at:
http://www.cccservices.com/home.asp
Debt: You Can Break Free!
Debt is an alarming fact of life for many Americans. According to the National Foundation for Debt
Management:
•The average household has 10 credit cards.
•The average interest rate is 18.9%.
•The average credit card balance is $8,000.
•The typical “minimum monthly payment” is 90% interest, 10% principal.
If you are swimming in debt, you are not alone. Many famous people have struggled with debt.
Thomas Jefferson, Abraham Lincoln, Ulysses Grant, Mark Twain, and P.T. Barnum all had
serious financial problems and some even faced bankruptcy. But they overcame their financial
struggles and so can you.
Experts suggest these simple ways to reduce your debt:
•Develop a budget and stick to it.
•Pay more than the minimum on your loans and your credit card.
•If you have more than one credit card, pay down your cards with the highest interest rates first.
If the interest rates are the same, pay the minimum on the larger ones and concentrate on paying
off the smallest one. Keep this up until they are all paid off.
•Consolidate your debt on fewer credit cards to get better interest rates.
•Cut up unnecessary credit cards.
•Call the credit card company, especially if you have been a customer for some time, and ask
for a lower rate of interest on your credit card.
•Use credit cards for emergencies only. Use cash whenever possible.
If you need help making a budget or organizing your credit, call the Consumer Credit Counseling
Service at 614-552-2222 for a free consultation about your credit status and your overall budget
situation.
. . . AND DON’T FORGET TO SAVE
When developing your budget, don’t forget to try to save some money regularly for your
retirement, a vacation, a child’s education, or unexpected expenses. It may seem hard to find
money to save, but with a little effort and thought you will find that you can save money in
unexpected ways. America Saves offers these tips on “Finding Money to Save”:
•Save 50 cents in loose change per day = $15 a month saved
•Bring lunch to work (save about $3 a day) = $60 a month saved
•Borrow, rather than buy, one book a month = $15 a month saved
•Eat out 2 fewer times a month = $30 a month saved
•Pay the credit card bill on time to avoid a fee = $25 a month saved
•Buy grocery store brands = $10 a month saved
•Eliminate premium cable channels = $20 a month saved
Check with your employer about ways to save for your retirement. Find out about work-related
saving programs that may be available to you, such as 401(k) retirement programs or Deferred
Compensation programs, and participate to the extent you can manage it. This avenue can be
especially important if your employer will match or supplement your savings in a retirement
program – that is free money to you. Start your own Individual Retirement Account (IRA), which
allows you to save money and at the same time reduce the income taxes you have to pay this
year by the same amount. Buy U.S. Savings Bonds. Open a savings account. Get started as
soon as possible. This allows you to maximize the time value of money, a very powerful force for
accumulating savings by piling up interest payments over time. Whatever your goals may be, get
in the habit by starting to save now and give yourself time to watch your money grow!
Teaching Children About Money
The American Bankruptcy Institute, the Federal Reserve Board, and the National Endowment for
Financial Education have provided the following statistics:
•Personal bankruptcy filings in this country remain at historic highs.
•More young people file for bankruptcy than graduate from college.
As parents, we should teach our children to be responsible with money so we can break the
vicious cycle that many Americans face today. Children look to their parents as role models. They
typically develop their attitudes and habits through the examples they see in the home and look to
their parents for advice in life skills and money management.
Children learn from play. Parents who recognize this fact take time to play games with their
children. What a golden opportunity to teach your children about money! The examples listed
below are just a few ideas for educating small children in their early years.
•Play grocery store or bank with play money.
•Let children pay for items (with your money) when shopping.
•Take them to the bank to open their own savings account.
•Have children clip coupons and give them some of the amount saved.
•Set up 3 jars: one jar marked “savings,” another for “spending,” and the third for “charity.”
Encourage them to divide their earnings equally among the three jars.
As children grow older, you can begin to involve them in actual life situations that they can
understand. These ideas help reinforce what they have already learned.
•Give them odd jobs to earn money.
•Take them to the bank and let them make their own deposits.
•Have them check prices through newspaper ads, catalogs, and flyers before making a
purchase.
•Take them grocery shopping to learn to compare labels and prices.
•Match part of what they save to make a purchase of their choice.
•Play family board games involving money, like Monopoly, Life, and Pay Day.
By the time a child has become a teenager, they will have greater awareness of what it takes to
earn money, and how much their earnings will allow them to spend.
•Encourage them to keep a journal to record what they have earned and spent. This will help to
establish a balance between wants and needs, keeping records, and taking responsibility for the
decisions they have made.
•Help them to develop an uncomplicated budget for their spending.
•Let your child assist in some decisions that will help benefit the family, such as budgeting and
planning for a family vacation.
•Allow your children to do the family’s grocery shopping.
•Discuss the pros and cons of using credit cards.
•Have them assist in shopping and comparing the prices of cars, as well as the cost for car
insurance.
•Involve them in discussions about planning for college.
We need our children to be as financially aware as possible by the time they are ready to leave
the nest. We want them to be able to make good financial decisions for themselves and avoid
becoming one of the negative statistics listed above. Today, a great many resources are available
to parents for teaching children about money.
•Involve your child in Junior Achievement, www.ja.org. This program is open to children
grades K-12. It encourages, educates, and inspires children to improve the quality of their lives
and have the ability to achieve their dreams.
•Older children can take advantage of the FDIC program called Money Smart,
www.fdic.gov/consumers/consumer/moneysmart, to enhance their money skills. Through this
program, you can build financial knowledge, develop and expand financial confidence, and learn
to use banking services more efficiently.
•Discover Jump$tart, www.jumpstart.org. Acting as a clearinghouse, this program identifies
personal finance materials for educational use and offers a wide variety of tools that can be used
both in the classroom and at home.
Saving for College
We all want children to have a good education. But paying for it can become a nightmare if you
fail to plan ahead. Some parents think that grants or scholarships will be available to cover
everything. Guess again. According to “FinAid: The Smart Student Guide to Financial Aid”:
• Only 7% of students actually receive private sector scholarships.
• The chances of winning a scholarship are 1 in 15.
• Pell Grants cover only 10% of current costs at four-year private colleges.
• Work-study grants cover only 10-20% of college costs.
How much will a college education cost? According to the most recent figures from the College
Board, which is responsible for conducting the SAT test:
• Average public four-year college tuition costs for the 2004-2005 school year were $5,132.
• Average private four-year college tuition costs for the 2004-2005 school year were $20,082.
• Adding in the costs of room and board, those annual average costs jumped to $11,354 for
public schools and $27,516 for private schools.
WAYS TO SAVE FOR COLLEGE
According to MSN Family, the best ways to save for college are:
• 529 COLLEGE SAVINGS PLANS – A 529 college savings plan is an investment account that
allows you to set aside money for your child’s education and let it grow tax-free. One such plan is
the Ohio Tuition Trust Authority’s College Advantage 529 Savings Plan.
• PREPAID TUITION PLANS – Prepaid tuition plans are investment accounts that let you pay for
a child’s future college tuition (or a portion of it) at today’s prices.
• COVERDELL EDUCATION SAVINGS ACCOUNT – A Coverdell account is like an IRA, except
that it is used for education, not for retirement purposes.
• CUSTODIAL ACCOUNTS – Custodial Accounts are savings accounts in your child’s name that
you control (if you are the custodian) until the child reaches legal adulthood (18 to 21 years of
age).
• IRA AND ROTH IRA ACCOUNTS – A traditional IRA and a Roth IRA are both investment
accounts that allow you to save money for retirement or college while avoiding significant taxes.
• US SAVINGS BONDS – These are good vehicles to save for college. The IRS regulations give
you the option of claiming the interest annually rather than when the bond matures. If you make
this claim during the year the bond is purchased, your child will not have to pay any tax on its
earnings at the point when the bond matures. Check with your accountant on this money saving
option.
HOW TO MAKE IT EASIER TO SAVE
FinAid suggests the following savings strategies to make it easier to save:
• Save early and often.
• Save as much as you can.
• Save regularly.
• Make saving automatic.
• Earmark savings for college.
For more information, visit the following websites:
www.finaid.org
www.collegesavings.org
www.collegeadvantage.com
Student Aid Programs
Every year, millions of students graduate from high school. A college education is often the
foundation to achieve their dreams. Funding that education may not be as hard as it seems.
Student aid is available from many sources. A good place to begin searching is the local library.
Most libraries have a student aid section. Some sources to research include:
•Federal Student Aid Programs
•State Student Aid Programs
•Foundations
•Religious Organizations
•Civic Groups
•Unions
•Parent’s Employers
•Organizations related to your field, such as the American Medical or Bar Associations
FEDERAL STUDENT AID PROGRAMS
The U.S. Department of Education provides $33 billion each year to students attending “postsecondary schools.” They provide financial aid through a variety of programs, including:
•Federal Pell Grants: For undergraduates only. They don’t have to be repaid.
•Federal Stafford Loans: Available to both undergraduate and graduate students, they must
be repaid. First-year undergraduates are eligible for loans up to $2,625. Amounts increase for
each year of study. The interest rate varies but never exceeds 8.25%.
•Federal PLUS Loans: Unsubsidized loans made to parents. The interest rate varies but
never exceeds 9%.
•Campus-Based Programs: Administered by participating schools.
•Federal Supplemental Educational Opportunity Grants: For undergraduates only, they
range from $100-$4,000.
•Federal Work Study: Provides jobs to both undergraduate and graduate students so they can
earn money to pay education expenses.
•Perkins Loans: Low interest (5%) loans that must be repaid. Loans can be up to $4,000
annually for undergraduates and up to $6,000 annually for graduate students.
To qualify for these programs, the student must be: (1) a U.S. citizen or an eligible non-citizen
registered with the Selective Service; (2) attending a participating school; (3) working toward a
degree or certificate; and (4) making satisfactory academic progress. You must also have a
financial need, have no drug convictions, and not owe a refund on a federal grant or be in default
on a federal education loan. For more information, contact your college financial office or visit the
U.S. Department of Education website at: http://www.fafsa.ed.gov/
OHIO FINANCIAL AID PROGRAMS
The Ohio Board of Regents manages state-funded financial aid programs, including:
•Part-Time Student Instructional Grant: For Ohio residents who are enrolled part-time in
undergraduate studies at an eligible Ohio college or university.
•Ohio Instructional Grant: Provides need-based tuition assistance to full-time undergraduate
students from low-income and moderate-income families.
•The Ohio War Orphans Scholarship Program: For children of deceased or severely
disabled Ohio veterans who served in the armed forces during a declared war or conflict.
•Regents Graduate/Professional Fellowship Program: Merit-based financial aid to Ohio
college graduates who enroll for further study at participating Ohio institutions.
•Ohio Safety Officers College Memorial Fund: Provides tuition help to child or spouse of a
peace officer, firefighter or certain other safety officers killed in the line of duty.
•Nurse Education Assistance Loan Program: Provides financial help to Ohio students
enrolled for at least half-time study in an approved Ohio nurse education program.
•The Ohio Academic Scholarship Program: Provides competitive, merit-based financial
assistance to Ohio high school graduates who are academically outstanding and who enroll for
full-time undergraduate study in Ohio colleges or universities.
•Robert C. Byrd Honors Scholarship Program: Awards financial assistance to students who
demonstrate outstanding academic achievement in high school.
•Ohio Student Choice Grant Program: Provides financial help to full-time students who enroll
for baccalaureate study in Ohio private non-profit colleges and universities.
• Student Workforce Development Grant Program: Provides tuition assistance to Ohio
students enrolled full-time in private career schools.
For more information, visit the Board’s website at: http://www.regents.state.oh.us/sgs/
OTHER USEFUL WEBSITES FOR FINANCIAL AID INFORMATION
FastWeb www.FastWeb.com
USA Funds www.usafunds.org
Bill and Melinda Gates Foundation www.gmsp.org/
I Know I Can www.iknowican.org/
Cleveland Scholarship Programs, Inc., www.cspohio.org/
Ohio College Access Network (OCAN) www.ohiocan.org
Association of Student Financial Aid Administrators www.finaid.org/
Credit Cards on Campus: “Easy Money or Easy Trouble?”
According to a 2001 survey by the Nellie Mae Education Foundation:
•83 percent of undergraduates have at least one credit card.
•The average student credit card balance is $2,327.
•6% of college students have more than $7,000 in credit card debt.
•Graduating students have an average of $20,402 in combined education loan and credit card
balances.
A study by a Harvard law professor estimates that 120,000 people age 25 and under filed for
personal bankruptcy in 2000. This is the fastest growing group of new bankrupts – up 50% in ten
years.
With a little education and planning, credit cards don’t have to be a nightmare. If used wisely,
credit cards can help you build a good credit history. A good credit history helps you get a lower
rate when you borrow money to buy a house, buy or insure a car, rent an apartment, or get a job.
Your credit history is compiled into a credit report. The Fannie Mae Foundation explains that a
credit report is “a record of how you have paid your credit card debt and other loans. A credit
report shows how much debt you have, if you have made payments on time, or if you have not
paid back some loans at all.”
Every financial decision you make has consequences. What you spend today will not be saved
for tomorrow. If you run into money troubles now, that credit history will haunt you in the future.
Be careful what you spend, and do not be lulled by easy credit into living beyond your means.
MAKE THE BEST USE OF YOUR CREDIT
•Pay off your credit cards every month if possible.
•Pay on time. Avoid late fees.
•Charge less than the maximum amount allowed on your credit card.
•Compare interest rates. Some cards charge up to 20% in interest. Shop around for lower
interest rates. Consolidate your debt on fewer credit cards to get better interest rates.
•Be aware of annual fees and introductory offers. Some companies charge you as much as
$50 a year just for you to have their card. Others may offer a low “introductory rate” at first, but
then raise the rate to a much higher level in a few months.
•Pay more than the minimum due each month. This pays off the balance faster and you won’t
end up paying out so much in interest.
•Only apply for the amount of credit that you actually need. Cut up unnecessary credit cards.
If your card balances get too high, use the cards for emergencies only and use cash where
possible.
•If you have more than one credit card, pay down your cards with the highest interest rates first.
If the interest rates are the same, pay the minimum on the larger ones and concentrate on paying
off the smallest one. Keep this up until they are all paid off.
•Call the credit card company, especially if you have been a customer for some time, and ask
for a lower rate of interest.
“Without proper education in personal finance, today’s young students may become
tomorrow’s bankruptcy candidates.”
-Dara Duguay, Executive Director
Jump$tart Coalition for Personal Financial Literacy