Financial Counseling Certification Program Sixth Edition PDF

Financial Counseling Certification Program SIXTH EDITION © America’s Credit Unions 2024 Financial Counseling Certification Program SIXTH EDITION Copyright © 2024 America’s Credit Unions All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitte...

Financial Counseling Certification Program SIXTH EDITION © America’s Credit Unions 2024 Financial Counseling Certification Program SIXTH EDITION Copyright © 2024 America’s Credit Unions All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright owner. Additionally, you may not print, photocopy, or download copies of this publication for multiple users. This publication has been purchased for one user, and additional users are prohibited unless otherwise approved in writing by the copyright owner. With respect to the content of this publication, neither the America’s Credit Unions, nor any of its affiliates or its or their respective employees make any express or implied warranty or assume any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, commercial product, service, process, provider, vendor, or trade name/mark that is disclosed. Information provided herein does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only. Information provided may not constitute the most up-to-date legal or other information. References to any specific commercial product, service, process, provider, vendor, or trade name/mark in this publication also do not necessarily constitute or imply that such product or provider is endorsed, recommended, or warranted by America’s Credit Unions. The views and opinions of the authors expressed herein do not necessarily state or reflect those of America’s Credit Unions, and such reference shall not be used for advertising or product endorsement purposes. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher, America’s Credit Unions, is not engaged in rendering legal, accounting, or other professional services. No user or consumer of this content should act or refrain from acting on the basis of information contained herein without first seeking legal advice from counsel in the relevant jurisdiction. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. To order additional copies, visit cuna.org/FiCEP or call 1-800-356-9655. Stock #30763 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 6 TH ED. FICEP BOOK i Table of Contents Preface............................................................. v Acknowledgements.................................................. vii Introduction......................................................... ix Ch. 1 – Introduction to Financial Counseling............................... 1 Ch. 2 – Counseling Credit Union Employees............................... 3 Ch. 3 – The Financial Counselor......................................... 5 Ch. 4 – How to Change Behavior........................................ 9 Ch. 5 – Decision-Making Tools and Techniques............................ 13 Ch. 6 – Finance and Psychology........................................ 17 Ch. 7 – Communication Principles and Skills.............................. 21 Ch. 8 – Successful Money Management Traits............................. 27 Ch. 9 – Counseling Types and Elements.................................. 29 Ch. 10 – The Counseling Process....................................... 31 Ch. 11 – Before an Initial Meeting....................................... 33 Ch. 12 – Collect and Analyze Member Data (Step 1)........................ 35 Ch. 13 – Establish Goals and Objectives (Step 2)........................... 39 Ch. 14 – Develop a Spending Plan (Step 3)............................... 43 Ch. 15 – Develop a Debt Repayment Plan (Step 4)......................... 45 Ch. 16 – Develop an Action Plan (Step 5)................................. 51 Ch. 17 – Implement Plan, Follow Up, and Adjust (Step 6).................... 53 Ch. 18 – Track, Measure, and Report Financial Counseling Sessions............ 55 Ch. 19 – Credit Reports............................................... 59 Ch. 20 – Credit Scores................................................ 63 Ch. 21 – Ways to Increase Income...................................... 69 Ch. 22 – Ways to Decrease Expenses.................................... 71 Ch. 23 – Principles of Saving........................................... 75 Ch. 24 – How to Establish Good Credit.................................. 79 Ch. 25 – Before Extending Credit....................................... 81 Ch. 26 – Credit Cards................................................ 85 Ch. 27 – Medical Debt............................................... 89 Ch. 28 – Buying vs. Leasing a Vehicle.................................... 97 Ch. 29 – Low Credit Score Auto Lending................................. 99 Ch. 30 – Vehicle Repossession and Possible Solutions...................... 103 6 TH ED. FICEP BOOK iii Ch. 31 – Renting vs. Owning a Home................................... 107 Ch. 32 – Purchasing a Home.......................................... 109 Ch. 33 – Refinancing a Home Loan..................................... 115 Ch. 34 – Home Equity Loans.......................................... 117 Ch. 35 – Prepare Members for Retirement............................... 119 Ch. 36 – Variable Income and Self-Employment........................... 125 Ch. 37 – Collectors and Creditors...................................... 129 Ch. 38 – Judgments and Garnishment.................................. 133 Ch. 39 – Coach Members on How to Talk to Collectors and Creditors......... 137 Ch. 40 – Financing Higher Education................................... 139 Ch. 41 – Counseling Families......................................... 145 Ch. 42 – Unmarried Couples and Blended Families........................ 149 Ch. 43 – Separation, Divorce, and Budgeting After Divorce................. 151 Ch. 44 – Eviction, Seizure of Goods, and Foreclosure...................... 155 Ch. 45 – Bankruptcy................................................ 159 Ch. 46 – Life After Bankruptcy......................................... 165 Ch. 47 – Identity Theft and Fraud...................................... 167 Ch. 48 – Elder Abuse and Financial Exploitation.......................... 173 Ch. 49 – What to Do Before a Death................................... 177 Ch. 50 – What to Do After a Death..................................... 183 Ch. 51 – Referring Members and Possible Resources....................... 189 Ch. 52 – Taxes..................................................... 193 Ch. 53 – Insurance................................................. 197 Ch. 54 – Investments............................................... 205 Ch. 55 – Addiction................................................. 209 Ch. 56 – Military Veterans and Their Families............................. 213 Ch. 57 – Counseling Members with Justice System Involvement.............. 217 Ch. 58 – Overcome Member Objections................................ 221 Ch. 59 – How to Develop a Financial Counseling and Education Program...... 223 Ch. 60 – Self-Care for Financial Counselors.............................. 231 References........................................................ 235 Glossary.......................................................... 237 Index............................................................ 241 iv 6 TH ED. FICEP BOOK Preface Welcome Welcome to the Financial Counseling Certification Program (FiCEP) from America’s Credit Unions. Credit union members are experiencing financial problems. Many of these problems are the direct result of members not having the knowledge to effectively manage their finances. FiCEP provides the guidance and tools necessary to help credit unions counsel members, and may help your financial wellness. Additional Information in Online Classroom After purchasing this book, or registering for the FiCEP eSchool, you will receive an automated email that gives you directions to access an online classroom. The classroom contains additional information and resources, including exam details, sample forms, and more. Have questions or need more information? Visit cuna.org/FiCEP, or Email [email protected]. 6 TH ED. FICEP BOOK v Acknowledgements America’s Credit Unions and the authors are grateful for the input of financial counselors, credit union staff, and others who shared their expertise in the development of this book. Their invaluable assistance, shared expertise, dedication, and commitment are greatly appreciated. Their willingness to share experiences will enrich financial education at credit unions nationwide. Carl Windom, AFC®, Navy Veteran, Kathryn Greiner, (Retired) Financial and Military PFM Literacy Specialist Windom Wisdom, Albany, GA University of Michigan Credit Union, Ann Arbor, MI Caroline Bays, Member Engagement Coordinator Tennessee League, Chattanooga, TN Kenneth R. King, (Retired) Executive Director Consumer Credit Counseling Service, Charity Helter, Business Development Manager Sheboygan, WI First Nebraska Credit Union, Lincoln, NE Lynette Hazelton, AVP of CU Relations Charles J. Pulvino, Emeritus Professor, Louisiana Credit Union League, Harahan, LA Department of Counseling Psychology University of Wisconsin–Madison, Madison, WI Mark Lynch, Co-Founder CU Difference, Sault Ste. Marie, MI Cheryl Ross, Retail Support Manager American Eagle Financial Credit Union, Marsha Glass, Collector II East Hartfort, CT Diversified Members Credit Union, Novi, MI Chris Wolgamott, Director of Financial Renee Judycki, Financial Services Representative Well-Being Credit Union Advantage, Southfield, MI Meritrust Credit Union, Wichita, KS Sally I. Gooding, Certified Financial Christopher Gardner, Marketing Manager Counseling Specialist Wright-Patt Credit Union, Beavercreek, OH South Florida Educational Federal Credit Union, Miami, FL Debra Casper, Financial Counselor Missoula Federal Credit Union, Missoula, MT Stephanie Quiroz, Community Relations Director, Marketing Emma Protsik, Supervisor of Financial Coaching GECU, El Paso, TX Ent Credit Union, Colorado Springs, CO Susie Fair, Senior Vice President of CU Support Jackie Cross, Collections Manager Louisiana Credit Union League, Harahan, LA and Financial Counselor Guardian Federal Credit Union, Portsmouth, VA Suzanne Lohrum, Vice President, Operations SIUE Credit Union, Edwardsville, IL Jorge Villarreal, Credit Resolution Manager Community Resource Credit Union, Baytown, TX 6 TH ED. FICEP BOOK vii Introduction The credit union motto is, “People helping people.” Becoming a Certified Credit Union Financial Counselor (CCUFC) through America’s Credit Unions FiCEP will enhance your ability to help members, and may help your financial wellness. Members can find themselves in financial trouble for a variety of reasons, such as medical emergencies, job losses, divorces, or other crises that increase expenses and decrease earnings. Others have been tempted by payday lending and uncontrolled use of easy credit. As a credit union financial counselor, your goal is to give each member the skills and information needed to have a stable financial future. After reading this book, you will be able to: 1. Identify financial attitudes, behaviors, and perceptions. 2. Evaluate which types of financial counseling members need. 3. Define a financial counselor’s role. 4. Exemplify skills and qualities of successful financial counselors. 5. Apply communication skills. 6. Interview members using the six-step counseling process. 7. Summarize saving principles. 8. Overcome member objections. 9. Provide credit union financial counseling for families. 10. Create a spending plan for self-employed members and those with variable incomes. 11. Educate members about credit reports, credit scores, collectors/creditors, judgments, and garnishments. 12. Role play with members conversations they may have with creditors. 13. Compare advantages and disadvantages of using credit cards. 14. Screen members for medical debt. 15. Highlight the pros and cons of various student loans. 16. Articulate steps members need to take to prevent vehicle repossessions. 17. Compare benefits of renting vs. owning a home, and find ways to reduce housing expenses. 18. Present steps members can take to prevent evictions, goods creditors can seize, and types of foreclosure. 19. Summarize bankruptcy consequences for debtors, and help members build credit if they file bankruptcy. 20. Detect identity theft and fraud. 21. Recognize signs of elder abuse and financial exploitation. 22. Collaborate with members on their retirement savings options. 23. Outline what members need to do before and after a death. 24. Determine if a member needs a referral to other professionals or assistance programs. 25. Help members understand tax basics, direct them to appropriate tax resources, and counsel them about wise uses of tax refunds. 26. Help members evaluate risks, and identify various forms of insurance. 27. Explain investment terms to members. 28. Identify financial warning signs of addiction, counsel partners of addicts regarding thier finances, and make appropriate referrals to other professionals. 29. Direct military veterans and their families to appropriate resources. 30. Lead a team in developing a financial counseling and education program. 31. Facilitate financial counseling for credit union employees. 32. Track, measure, and report counseling sessions. 6 TH ED. FICEP BOOK ix  Chapter 1 Introduction to Financial Counseling Financial Counseling's Possibilities and Limitations 5. E veryone follows counselors’ recommendations. Reality – Habits are difficult to change, and Financial Financial counseling members may not accept recommendations. counseling is: is never: 6. T he member will be as dedicated to Unpredictable A substitute for making the plan work as the counselor. professional therapy Reality – Some members may not be willing Creative A formula that fits to make the same commitment. every member 7. I f a plan fails, it is the member’s fault. Interactive Solely an information- Reality – Lack of cooperation from family gathering interview members and events beyond the member’s control may make it difficult or even impossible Spontaneous An opportunity for the to follow the plan. The counselor may also not counselor to take control clearly understand the member’s real issues or Weighing options An answer to every effectively communicate the solutions. problem 8. I f a plan fails, it means the member can Suggesting solutions A guaranteed solution never succeed. Reality – Early failures may be the foundation for later success. The member may be Financial Counseling Myths learning how to set a budget and follow 1. Counselors can provide instant relief. a spending plan, while figuring out what Reality – It will take time to restore balance to approaches will work for the family. members’ finances. 9. C ounselors can help everyone. 2. Budgeting means denying oneself. Reality – Some members may be in such dire Reality – Cutting back may be necessary, and financial straits that standard measures are not everything needs to be sacrificed. A unlikely to be effective. Others will refuse to budget puts the member in control. follow suggestions or a spending plan. 3. Budgeting requires an accounting 10. E  veryone wants to pay off debt. background. Reality – Some members are perfectly happy Reality – Budgeting requires an with manageable levels of debt. understanding of where money goes and a determination to match spending to priorities. 4. People in financial trouble spend too much. Reality – Natural disasters, chronic medical conditions, divorce, and other life events can severely affect a budget. 6 TH ED. FICEP BOOK 1 Who Needs Financial Employee Needs Counseling? Some credit union employees are likely to need Since financial counseling includes education, financial counseling and education before they everyone needs financial counseling. Credit can educate members and make referrals. unions need to examine the needs of both the Some employees may be preoccupied by members and credit union employees. financial worries, which can reduce credit union productivity. Other employees might, attempt to Membership Needs switch jobs to earn more, or get a second job, which Frontline staff can provide valuable information decreases their availability at the credit union. about members who need help in improving their Their health can be affected, which in turn raises credit scores, purchasing a second home, and the cost of providing benefits. other financial goals. Also, participation in financial education events might indicate members’ needs and desires for financial counseling, especially if members’ comments or questions reflect an interest in starting a business, debt repayment, or other related topics. Economic shifts within a community might affect members who need financial counseling. Economic shifts likely will have greater impacts on credit unions that have significant select employee groups (SEG). Many credit unions offering counseling services measure return-on-investment (ROI) by examining reduced charge-offs and delinquencies. Based on these measures, published accounts often put credit union ROI from financial counseling at well over 100% and sometimes even as high as 300% or 400%. 2 6 TH ED. FICEP BOOK  Chapter 2 Counseling Credit Union Employees Employee Benefits Obstacles of Financial Counseling When thinking about offering financial Providing financial education can: wellness plans to employees, consider possible 1. Increase productivity. Employees who are obstacles. First, it takes financial, human, and less worried about their finances at home time resources to implement these programs. spend less time thinking about, or dealing Second, if there is a perception that employees are with, personal financial issues on the job. not interested, leadership might not want to invest 2. Reduce absenteeism. Financial issues may resources. Without leadership buy-in, it is difficult lead to stress, which can cause physical and to implement a wellness program. Third, if the emotional symptoms. Employees program is new, it is difficult to know where to might miss work because they are not begin. Employers might be intimidated by the vast feeling well enough, physically or array of subjects and delivery methods, which can emotionally, to show up. lead to analysis paralysis and failure to launch. 3. Increase loyalty. Employees may stay Sometimes employees are tentative to discuss with employers who show they care about personal financial information with co-workers. employees’ careers and futures. Having a Also, the program might not cover information financial literacy or wellness plan at work that is important to them, such as goal-setting can elevate the culture in the organization, and retirement planning. leading to happier employees. One way to entice employees to participate 4. Increase benefit enrollment. If employees is to hold training sessions about financial are financially literate, they understand the counseling. This helps to show employees how value of their 401(k)s, health and disability members will benefit, and reminds employees benefits, and so on. they are members, too. It educates employees— showing them what a financial counseling session looks like, the benefits of meeting with a member one-on-one, and what the member can expect. The training sessions might decrease some uncertainty. At the very least, credit union employees will be prepared to refer members to the program. 6 TH ED. FICEP BOOK 3 Program Necessities 2. Understanding. It can be difficult to discuss 1. Confidentiality. Employees must trust that money issues with a co-worker, especially the information they share will not be shared when the person’s finances are not going with anyone who does not need to know. well. Being compassionate, empathetic, and patient during the meeting will build To achieve confidentiality: the rapport needed to allow the co-worker Hold meetings off-site or in private to share. Self-worth can be tied to financial locations. If at work, create a space that is wealth, so be sensitive. out of sight from other employees. 3. M ultiple methods and subjects. All Omit names when reporting appointments co-workers are at different life stages and as part of program tracking. This will have different needs, so be flexible. Some ensure managers do not see who has held prefer to learn in a classroom setting, while meetings and will only see the number of others prefer to take a self-paced, online meetings held. approach. Some prefer to meet one-on-one Store records in an area that is inaccessible and others enjoy meeting in small group to other employees. settings. If possible, find ways to mix up Ask co-workers’ permission before viewing the message and the delivery to appeal to account records, credit reports, and other different learning styles. Speaking to each sensitive information. This practice also employee’s situation will further engage works well with members, because it builds employees to participate. trust and reinforces confidentiality. 4. S urvey employees to gauge interest in Do not consult other departments, such various topics, formally and informally. as collections, without first obtaining permission from the co-worker. Conduct as much correspondence as possible by email, rather than by phone, if meetings are not in a private setting. 4 6 TH ED. FICEP BOOK  Chapter 3 The Financial Counselor Financial Counselor Role Vital Counselor Skills A counselor’s role is to advise and motivate Various skills can enhance a financial members. When working with members: counselor’s ability to work with members. 1. Understand the vital concepts of 1. A  sk perceptive questions. Questions are spending, managing debt, and saving. often the key to helping members recognize 2. Be able to share these concepts with attitudes and behaviors that undermine members in simple, easy-to-understand terms their financial status, and questions help that can be applied in everyday situations. the counselor understand each member’s 3. Understand the behaviors and situation and goals. Questions help engage attitudes that can make it difficult members in the process, so they discover to change financial practices. information for themselves. Give members 4. Be able to work side-by-side with time to ponder their answers. Waiting in members to assess their situations, silence for a member to respond can be an suggest solutions, and motivate change. effective tool for persuading members to address difficult topics. 2. O  bserve nonverbal clues. Members Essential Counselor Qualities may express concerns or nervousness 1. Good listener. Good listening skills are by fidgeting, evading questions, or other required to learn the full extent of a practices. Observe every aspect of a member’s situation, understand behaviors member’s attempts to communicate. and attitudes toward money, and determine what types of spending plans are workable. 2. Nonjudgmental. If members feel they are Open-Ended Questions being judged, they are unlikely to share There are two basic types of questions: information, follow recommendations, or Closed- and open-ended. Closed-ended return for future sessions. Members want questions generally require a yes or no objective analysis and sound advice. A response. Open-ended questions and state- good rule is to help members leave every ments invite others to answer in detail. The session with their self-respect intact. following are open-ended examples: 3. Control the interview and other member 1. What would you like to accomplish today? interactions. The financial counselor’s 2. Please tell me more about that. job is to help members achieve their 3. What obstacles are in the way? financial goals. When counseling a couple, 4. What has changed? avoid petty disagreements. Keep the 5. What are the top priorities? focus on finances, to achieve results. 6. How can you reduce spending? 7. How can income increase? 6 TH ED. FICEP BOOK 5  3. Help members assess behaviors and 6. Explore money management skills. attitudes. Poor habits and attitudes often Members may be unwilling to admit they do create barriers to successful financial not know how to balance a checking account management. Members sometimes need or determine how much the family spends input from an objective outsider to recognize each week. Be willing to help members with these patterns. basic skills, and also refer them to classes or 4. Express empathy for members. Empathy agencies that can help. involves showing you understand a member’s 7. A ssemble a complete financial picture. situation, while refraining from excusing You will often need creativity to persuade poor financial practices. members to share all details of their financial 5. Assist members to identify needs and wants. situation. Members with financial trouble This step helps members recognize excessive have often developed patterns of hiding or unnecessary spending. Often, members spending, ignoring financial obligations, must agree to sacrifice “wants” to achieve and denying the full extent of their financial financial stability and restrain spending. problems. Depending on money management roles within the family, they may hide information from their family members. Empathy vs. Sympathy 8. D evelop a workable budget. Members Creating a relationship based on trust is essential often need help creating a plan to manage to gain information about a member’s genuine needs spending, pay down debt, and build and motivations. savings. The member should leave financial Empathy builds trust because it means one counseling with a step-by-step plan. can imagine how it might feel to be in a 9. G ain agreement on budget with member. member’s situation. A workable budget means a budget the Sympathy may enable members to continue member is willing to implement. A budget their current behaviors. will not work if it fails to acknowledge a need Counselors should avoid sympathy because they to make weekly charitable contributions or may feel so strongly about a member’s plight that an addiction the member is unable to kick objectivity is lost and excuses behaviors, which may despite repeated efforts. allow a member to ignore the need to change. 10. S  uggest workable approaches and Sympathy may allow members to think they can potential solutions. Successful counselors deal with a problem by having a counselor handle offer members options to help them everything. Help members learn how to deal with succeed. This may include challenging their situation by reducing their anxiety, rather shoppers who love the thrill of the hunt than explaining away the situation so their anxiety to find trendy clothes in consignment disappears. stores instead of paying retail prices. It is Anxiety plays a valuable role in the financial tempting to make quick assessments of counseling process. Anxiety may be the catalyst for financial situations. A counselor may think members to seek help. Anxiety about the future may a member’s problem is spending too much, provide the motivation to change. when the real problem is failure to adjust Empathy will help counselors channel a member’s expenses. If the counselor and member anxiety in useful ways. arrive at a solution too quickly, they might overlook underlying causes or potential alternatives. 6 6 TH ED. FICEP BOOK  Chapter 3 11. Motivate members to implement spending Effective counselors must: plans. Remind members why they are 1. C  onsider every member as unique. Each making changes, such as stopping collector member will have unique problems, calls or buying a business. Direct members strengths, and opportunities. Look for the toward positive results of personal change differences and translate them into individual to keep them engaged in the process. options a member can use to improve the 12. Combine optimism, enthusiasm, and financial situation. realism. Acknowledge the reality of their 2. A  void “automatic” responses to common situations. Some problems cannot be solved problems. Automatic responses have with persistence and hard work. When more exceptions that prevent one from providing drastic solutions are required, counselors adequate counseling. Look at the specific must be willing to address them. situation facing the member before offering 13. Assess progress. Help members recognize solutions. their progress to encourage them to 3. U  nderstand the member before offering continue changing behaviors to achieve a solution. For example, a counselor might their goals. suggest reducing food costs by not eating out. 14. Offer confidentiality. Never share their The member might respond that the family information with others. Refrain from doesn’t eat out; rather, the high food cost asking about their progress where others is due to a severe food allergy that requires may overhear. Privacy laws require financial purchasing expensive food. institutions respect members’ privacy. 4. B  uild positive relationships. Being friendly 15. Adjust plans as needed. A budget might and honest, and showing genuine concern not work if a family member is diagnosed are some of the components required to build with cancer, which could increase expenses a positive relationship. and decrease income. If a budget proves 5. U  se consistent, congruent words and unworkable, help the member figure out actions, that is, be sure your words match how to adjust it. your actions. An illustration of this working: 16. Make referrals when needed. A counselor’s when a counselor greets a member and says, scope of practice is limited to helping “I’m glad you’re here,” and continues to keep members deal with financial problems. all attention on the member. The focus on Anything beyond this requires referrals to the member is consistent with the words. other professionals. Needed referrals may include agencies that provide food stamps, addiction specialists, or tax professionals. 17. Offer hope. Even if a member’s situation is dire, offer hope. 6 TH ED. FICEP BOOK 7  Chapter 4 How to Change Behavior The Change Process Inspire Change 1. Recognize the need for change. Most Changing financial habits can affect members recognize change is needed. relationships, daily activities, jobs, hobbies, and Reinforce decisions by helping them vacations. understand potential consequences if they Inspiring this level of change requires a continue current practices. Show them the powerful incentive and discipline. Describe a cost of their actions, choices, and decisions. better financial future in terms members can 2. Gather information and introduce new understand. Help members visualize how paying ideas. When gathering information about off debts can change their lives in positive ways, a member’s financial status, introduce new immediately and long term. ideas about credit, debt, spending, earning, Share real stories with members about those and saving. who have completed the financial counseling 3. Revise the plan, as needed. Continually process and how it has changed their lives. review information, revise the spending plan Most members who use a spending plan learn as needed, and monitor results to see if more they have more money available to meet their changes are required. needs than before. With discipline and by tracking 4. Make changes part of everyday habits. spending, members will find they can maintain a Implementing a spending plan often steady, sensible flow of controlled spending that requires a new attitude and commitment. moves them from one payday to the next, even Success reinforces the value of that when emergencies arise. approach until it becomes a habit. Note: Practicing new habits eventually will turn into a first response when challenges threaten a member’s spending plan. The Change Process Step 1: Step 2: Step 3: Step 4: Recognize Gather Revise the Make changes the need information plan as part of every- for change and introduce needed day habits new ideas 6 TH ED. FICEP BOOK 9  Elements to Support Motivation 2. Attitude refers to the way one thinks and Elements that support the motivation the feelings one has about something. needed to make significant life changes are Attitude is subject to change in response (Rocha, 2012): to learning, and more likely to adapt to 1. Commitment, which is rooted in one’s sense changing circumstances. of purpose. 3. Behaviors are one’s actions and interactions 2. Confidence, the belief you can achieve with others. Attitudes are typically reflected your goals. in behaviors. 3. Sense of control, the belief you have the 4. Perception is a way to understand or interpret power to change. something. Provide information that leads a 4. Composure, the ability to think and act member to a change in perception. The events to achieve goals without feeling stressed. or facts do not change. What changes is the Anxiety can overwhelm the other key way the member perceives and reacts to these elements in motivation, lowering one’s sense events. For example, instead of worrying of confidence and control. income is insufficient, after perception changes the member now understands income is sufficient when there is a spending plan. Do Not Change Members’ Values Help members change their money attitudes, Emotionally Charged behaviors, and perceptions, not their values. Decisions Members may resist suggestions if they feel their According to research by cognitive values are being questioned. psychologists, the more emotionally charged a 1. Values are one’s deeply held principles on decision is, the more likely a person’s judgment standards of behavior, a judgment of what is to be clouded by biases and unreliable mental is important in life. As such, values are shortcuts. This can lead to hasty or less-than- relatively stable, and represent core ideas optimal conclusions. For instance, one may about desirable goals and behaviors formed see a sign in a store and think, “50% off! That by experiences. Values influence attitude. is a bargain!” This can lead to action before considering whether the person needs the item. Or if the price is favorable, the person might neglect comparing it to prices at other stores. Applying these findings to financial decisions Goals to Help Motivate Change suggests slowing down and consciously letting 1. Stop collection calls. the analytical part of the brain take over. Sure, 2. Reduce stress. this choice “feels right” now, but are there other 3. Be debt-free. options, and how do they compare? Even if this is 4. Increase disposable income. a bargain, does one need it, is it affordable, and 5. Strengthen personal relationships. what else could one do with the money? 6. Own a home. Subjectivity enters many decisions involving 7. Start a business. money, like the concept of quality vs. price. 8. Fund a comfortable retirement. But every decision can be improved by being as 9. Afford school and/or college tuition. objective as possible. Taking time to think through financial decisions leads to sound advice before making a big investment or purchase. 10 6 TH ED. FICEP BOOK  Chapter 4 Hierarchy of Needs of a member referred to a counselor because Humans must satisfy their basic needs before his loan application to buy a luxury vehicle was they can address other needs. Typically, people denied. The member earnestly tells the counselor focus on finding food and shelter before pursuing he truly needs that car. From the member’s self-fulfillment needs. point of view, that may be true. To change this It’s important to understand the level of a perception, the counselor must understand what member’s needs. Basic needs have a dramatic type of need the man is attempting to meet with impact on members’ perceptions, making that the luxury vehicle purchase. The need could be the moment when they’re apt to be most open to boosting his self-esteem or a need for love and change. belonging if the member thinks buying a luxury Other needs may be more difficult to pinpoint, vehicle will give him acceptance in a desirable yet doing so is important to change a member’s social circle. perception. For example, examine the perceptions Maslow’s Hierarchy of Needs Se lf- Ne Fu ed lfi s llm en t Self-Actualization Morality, Creativity, Spontaneity, Acceptance, Achieving One’s Full Potential Ps N Self-Esteem Needs yc e ho ed Confidence, Achievements, Respect of Others, lo s Connections, Need for Individuality gi ca l Love and Belongingness Needs Friendship, Family, Intimacy, Connections Safety and Security Needs Ba ed N sic s Health, Employment, Family, Stability e Physiological Needs Air, Food, Water, Shelter, Clothing, Sleep 6 TH ED. FICEP BOOK 11  Chapter 5 Decision-Making Tools and Techniques Decision-Making Tools Force-Field Analysis Helping members with the decision-making Force-field analysis is a method used to view process is essential. Three approaches to decision all the forces in favor of or against a plan, so making can help a counselor work with a member a decision can be made. Analysis begins with to weigh possible solutions: essential obligations, stating a problem. Then, a member lists the forces force-field analysis, and cost-benefit analysis. supporting its achievement, followed by a list of the forces against it. Each force is rated for its Essential Obligations ease of change and then ranked by its degree of The first step is to define which financial importance. Finally, the member decides who will obligations are essential. These are the needs the do what, and when. member must fulfill. Next, the counselor works with the member to define the non-essentials. Comparing these two lists, the counselor and Force-Field Analysis Example member examine past practices to examine what June wants to cut her telephone and internet costs, is essential and what is non-essential. This helps but faces resistance. She has listed the forces for the member eliminate the nonessentials and achievement and forces against achievement in order perhaps even pare down the list of essentials. of importance. Once the lists are refined, the member can June knows she faces a big problem, because weigh options and make the best, balanced choice. changing cell phone habits has been a losing battle For example, this method can be used to weigh for her family in the past, as is getting her sons to decisions within a spending plan, decide if a help pay the cell phone costs. She decides the best purchase is suitable, or determine if it is necessary approach to involving her sons is to disclose the full to move to a smaller apartment. extent of her financial problems so they understand the potential consequences of failure. At ages 16 and 19, they may be ready to help if they understand the alternatives. June sets a deadline for talking with her sons, and selects a date to cancel her cell plan and discontinue high-speed internet service. 6 TH ED. FICEP BOOK 13  Cost-Benefit Analysis 4. Finally, the member rates the seriousness of Weighing the costs and benefits of two possible failure for each solution. solutions can help members determine if solutions A counselor can serve as a reality check in this are workable and beneficial. process, pointing out the likelihood of success or 1. This process starts by determining the making suggestions for the cost-benefit list. Make possible solutions for a situation. sure the member looks beyond the financial costs 2. Next, the member lists the costs and benefits and benefits to include the social and emotional for each solution. impact of a decision. 3. Based on these lists, the member rates the Ideally, solutions have a high chance of success likelihood of success for each solution. and a low cost of failure. Cost-Benefit Analysis Issue: Solution #1: Solution #2: Costs (in priority order): Benefits (in priority order): Costs (in priority order): Benefits (in priority order): 1. 1. 1. 1. 2. 2. 2. 2. 3. 3. 3. 3. Likelihood of success rating: Likelihood of success rating: Seriousness of failure rating: Seriousness of failure rating: Decision: 14 6 TH ED. FICEP BOOK  Chapter 5 Decision-Making Techniques These techniques can be used to help members learn new ways to examine their choices and make decisions. Scaling Scales are rating systems used to assign numerical rankings to needs, goals, or levels of motivation. Assigning a rank can help a member determine the value of a specific action or goal and its priority in plans for spending, saving, and debt. Scaling Example Counselor – On a scale from 1 to 10, how important is it for you to be able to pay your bills on time? Member – 9. Counselor – What steps could you take to make this possible? Reframing Reframing involves looking at something differently. Options include looking at the other side, amplifying what is said, or exaggerating the situation. Reframing Example Member – I am afraid I will lose my house because I am unable to follow this spending plan. Counselor – It sounds like you have a powerful motivation which improves your odds of success. Using Exceptions Using exceptions requires focusing on the positive outcome. A counselor talks about a problem long enough to define it, then highlights exceptions to the situation. This often helps members with goal-setting and motivation. Using Exceptions Example Member – I rarely stay in control when I use a credit card. Counselor – Tell me of a time when you were in control. Member – I promised my wife I would not increase our credit card debt for the holidays, so I paid off all new purchases by the end of the month to keep the total owed at the same amount. Counselor – What made that different from other attempts? How could that apply to this situation? 6 TH ED. FICEP BOOK 15 Decision-Making Techniques (continued) Future Pacing Future pacing moves members into the future by helping them envision things as they could be. This motivates members to stick to their spending or debt repayment plans to achieve their visions of a better future. Future Pacing Example Member – I do not know where or how to start. Counselor – Imagine the future. Where would you like to be financially in three years? Member – I would like to sleep at night without worrying how I will pay my bills. Counselor – What do you have to do now to get to that point? Quotes and Stories Quotes and stories can demonstrate to members that achieving their goals is possible because others have done so. Quotes and Stories Example Member – I do not know where to start and I feel I will be stuck in this situation forever. Counselor – I worked with a member in a similar situation who used a spending plan. That member is now where you want to be. Metaphors Metaphors take an existing situation and express it in terms that represent an alternate reality. The best metaphors are used sparingly, drawing on the member's experiences to make effective comparisons, and avoid confusion. Metaphors can help in blending with members, to show understanding of their perspectives and to motivate them to act to improve their situations. See Chapter 7 to learn more about blending. Metaphors Example Member – Retiring is scary because I have always worked full-time and used my surgical nursing skills to generate extra income. Now I will be giving up my working income. Counselor – Entering retirement is a little like preparing for surgery. You think you have made the right choices, but unsure what the outcome will be until it is over. 16 6 TH ED. FICEP BOOK  Chapter 6 Finance and Psychology Several studies show financial education Poor Financial Habits can help consumers learn how to control their 1. Spending too much. Because it is easy to spending, reduce debt, and build savings. This use credit cards, some members fail to keep guidance may also enhance members’ confidence track of what they spend. Some also may have that they can take charge of their finances. difficulty separating wants from needs or are A lack of understanding finances is not the unwilling/unable to distinguish between the only obstacle standing between many people two. Some “want it now” and may be unwilling and their adherence to optimal spending/saving to delay gratification until they can afford it. habits. Individuals who have chronic financial 2. S aving too little. Members may fail to realize challenges might benefit from discovering the how much more they spend due to interest root causes of their unhealthy relationships costs when using debt to pay for items, with money. This is a good first step toward rather than saving and paying for items making lasting improvements in their financial in full. Some members may justify their health. Identifying and dealing with deep-seated lack of savings by saying they are placing psychological issues behind financial challenges is a percentage of every paycheck in a 401(k) beyond a financial counselor’s scope of practice. account. These funds are unavailable for purchases unless the owner is willing to pay A lack of understanding a significant tax penalty and significantly reduce interest earnings. finances is not the 3. C arrying too much debt. “How much can you afford?” It is a simple question and one only obstacle standing that members with poor financial habits cannot answer. Often, these members think between many people of each new obligation as only a few dollars a month and do not add up the total owed. A and adherence to optimal “no payments until next year” offer is likely irresistible. Members often fail to read the spending/savings habits. fine print that stipulates if the loan is not paid off by a designated date, interest will be Counselors can guide members to consider charged dating back to the loan issue date. their money attitudes and behaviors and suggest Likewise, debt consolidation is appealing, strategies to steer finances in a positive direction. since it allows members to maintain their It is important for counselors to identify these lifestyles with loans that lower the monthly issues and refer members to community resources payment and extend the repayment period. and professionals for help. 6 TH ED. FICEP BOOK 17  4. Caring too little about one’s financial Extreme Financial future. Some members may be unaware Approaches there is no room in their budgets for minor The Klontz Money Script Inventory describes emergencies. Some major emergencies can four general categories of outlooks and put a dent in any budget, and commonplace approaches likely to cause serious financial events can cause difficulties for people living trouble (Klontz et al., 2011): paycheck-to-paycheck. Failing to plan for the 1. Money avoidance is based on the view that future may result in a member being unable money is evil or undeserved. Avoiders see to achieve long-term dreams like home money as a source of fear or disgust and ownership or starting a business. avoid earning, saving, or spending it. They 5. Reliance on others. Some members rely may give away what little money they have to on parents or others to provide credit or avoid having any money under their control. money. This includes Parent Plus student 2. Money worship is the belief that money is loans and paying expenses. Some rely on synonymous with happiness and success. others rather than working toward financial Despite evidence to the contrary, worshippers goals and achieving true independence. may insist money holds the solutions to all problems. Dysfunctional responses of money worshippers can include workaholism, compulsive spending, etc. Spending Cycles Money habits and learned C  ycle 2 = Earn/Spend/ result, they rarely have enough behaviors are typically revealed Borrow/Spend. These money. One can persuade by a preferred spending cycle. members have difficulty them to change their ways by Typically, a counselor’s goal is to denying themselves. They identifying reasons to save, like help members move from cycles confuse wants with needs having funds for car repairs. 1, 2, and 3, to cycle 4, where because they believe they Members are more likely to earnings, savings, and spending deserve whatever they want save if they give the reason or are balanced. and they deserve it now. They purpose a name. Once they Cycle 1 = Earn/Spend/Earn/ earn money, spend it, borrow can visualize the results of Spend. People caught in this money, and spend that. As saving, they are more apt to cycle are living paycheck-to- a result, they rely on debt to make it a priority. paycheck. They earn money, establish and maintain the Cycle 4 = Earn/Save/Spend. spend it, earn some more, standard of living they feel they This group has learned the and spend that. Any solution deserve. vital rule for financial security, developed through financial Cycle 3 = Earn/Spend/Save. “Pay yourself first.” This group counseling must deal with Although this group believes earns money, saves some lifetime habits related to this they can save money, most immediately, and budgets or cycle, by dividing each paycheck of the time they have no spends what is left. Saving into specific spending categories money left because something is a priority because they and “capturing” money for always comes up. They want understand its role in meeting savings and paying down debt to save, but they put savings long-term goals and creating before it can be spent. low on the priority list. As a financial stability. 18 6 TH ED. FICEP BOOK  Chapter 6 3. Money status associates wealth with 5. Lenders. Responsible lenders often play a self-worth. Money is viewed as a means vital role in helping consumers understand of “keeping score,” with an emphasis how debt works. Encouraging consumers to on materialism and elevating one’s make set payments as part of repaying debt socioeconomic status. The pursuit of within a reasonable time can contribute elevating status through the accumulation of to an understanding of how debt works. wealth trappings also leads to high levels of Unfortunately, some lenders contribute anxiety and unhappiness. to problems by encouraging consumers to 4. Money vigilance is the perceived need for stretch out payments, which may increase secrecy about one’s financial affairs. Whether the overall cost. Often, this type of financing they have a lot or a little money, individuals does not address members’ real needs to in this category may withhold information change spending patterns and lifestyles. about their finances from their partners. They also tend to avoid buying everything, Family Influence even things they need. Attitudes about money often begin at home. The impact of childhood experiences on how one thinks and feels about money goes beyond Behavioral Influences whether parents passed down attitudes about the 1. Learned patterns. People often fall into value of saving or taught one how to balance a spending patterns that date back to receiving checkbook. an allowance or spending the earnings from Family may continue to influence attitudes and a first job. The patterns that work when behaviors in money management today, including: younger may be insufficient when older. 1. Family resources, both emotional and 2. Parents. Grown children may find economic. themselves repeating parents’ mistakes, or 2. Socioeconomic status, especially shifts in parents may manage money well and fail status (“moving up in the world” or reduced to educate children about sound financial living standards). practices. 3. Cultural beliefs and traditions. 3. Society delivers messages encouraging the 4. Parental modeling of financial management, pursuit of immediate gratification. Marketing spending and saving habits, and willingness campaigns telling consumers, “You deserve to discuss household finances. a break today,” outnumber financial 5. Dysfunctional patterns that affect family responsibility reminders. finances and attitudes about money, such as 4. Creditors. Credit card companies and forms of addiction. merchants encourage consumers to buy things now and pay later. The minimum Of course, childhood experiences are not the payment schedule makes it possible for only influence on spending and saving habits. consumers to quickly run up huge levels Attitudes and behaviors involving money are of debt. Consumers who believe making affected by experiences, education, preferences, the minimum payment means they are and financial circumstances. Thus, children from fiscally responsible often are stunned when the same family may grow up to become very they learn their total debt has grown, often different types of money managers. because they continued to buy more. 6 TH ED. FICEP BOOK 19  Chapter 7 Communication Principles and Skills Communication Principles Selective Perception Understanding communication principles can Individuals see things differently, often as help financial counselors impart meaningful a result of the patterns they experience. This information to members. shift in focus is known as selective perception. 1. There are cultural differences in Financial counselors need to learn what is shaping communicative styles. members’ perceptions, help them understand 2. Initial impressions affect communicative the impact on their financial situations, and help interactions. members expand their perspectives to see other 3. When a crisis occurs that disrupts normal possibilities. day-to-day life, members pay full attention. Presenting information in a variety of ways 4. Communication has content, relationship, improves communication effectiveness and and contextual elements. overcomes the selective perception that looks for information the member can relate to, and Paralanguage discards the rest. At the same time, counselors Words deliver meaning by their content, how need to remain aware of their own preferences they are said, and by their timing. Using the to avoid the tendency to present information in a right word in the right way is the best method for manner most comfortable for themselves. delivering the appropriate message. The possibilities for message confusion Patterned Responses multiply when this difference in word meaning is Some communication patterns are so ingrained combined with paralanguage, or language defined the response is automatic—known as patterned by the manner in which words are said. responses. One example: an exercise that asks Financial counselors must be aware of these one to read a color name printed in a color that differences, especially when engaged in sensitive does not correspond to the word’s meaning (for conversations. Imagine a counseling session instance, the word “black” printed in pink letters). involving a married couple. If a counselor looks at Adults often find this difficult because the colors both and says, “To get out of this hole, you have and words provide a contradictory message, to change your spending,” the couple is likely which undermines their established pattern for to understand the counselor believes spending communicating about colors and words. changes are essential. If the counselor looks only A member may come to a counseling session at one and says, “To get out of this hole, you have with an established pattern for thinking about to change your spending,” the couple is likely to finances. This pattern may be at odds with a think the counselor believes that person is at fault counselor’s established pattern. Recognizing these and the only one who needs to change. differences will help a counselor find ways to express financial ideas in terms the member can understand and accept. 6 TH ED. FICEP BOOK 21 Hard and Soft Approaches 2. Setting/content. Counselors must create Hard approach communicates in ways that an environment that enables members to are orderly, specific, and straightforward. It feel comfortable and willing to share. At the may sometimes be perceived as aggressive. same time, counselors should pay attention Reason and logic tend to dominate the hard to content that resonates with a particular approach to communication. member. This provides clues about the Soft approach offers possibilities and member’s learning style and underlying suggestions, avoiding absolutes or directives. concerns related to financial issues. 3. Message. A member’s message can be broken Using the soft approach can help overcome down into three elements: barriers to communication about financial topics. Content is what members say, which may For example, a counselor may say, “Is it possible be at odds with how they act. to have this done by Tuesday? How can we make Theme reflects a member’s most important sure everything is in place to get this done?" thoughts about a situation. This may The soft approach helps overcome resistance include feelings about the need to change. by using humor, metaphors, or personal stories. Bid is what a member wants to happen, It offers options and opportunities, rather than though giving it to them may be orders and directives. The soft approach reminds impossible or unwise. For example, members they are in control, and the counselor is a member may want a loan without a there to offer support. counselor asking questions. 4. O  wn thoughts and feelings. Successful counselors observe their own thoughts and Communication Skills feelings and decide if it is best to share. Building communication skills in six areas can improve your ability to communicate. Pacing and Blending 1. Pacing. Counselors use pacing to create a Observing feeling of connection with a member, by By observing what is going on with members, matching physical characteristics, such as counselors realize how to be most effective when posture, energy level, and breathing. advising. Observe: 2. Blending. Counselors use blending to 1. Member. A member will deliver three types display communication patterns that match of information: a member’s, such as speech rate, tone, Nonverbal body language includes facial vocabulary, and appearance. Blending can expressions, eye contact, posture, and help build a relationship and put members attentiveness. Observing and analyzing a at ease. Do not overuse blending and appear member’s nonverbal communication helps fake. Concentrate on subtle changes that indicate a member’s state of mind. mimic members without mocking them. Cognitive explanations reveal the thought process a member uses to examine issues If an upbeat counselor only uses high energy and arrive at explanations. with a member who has low energy, the member Emotions reflect how a member is feeling might not reveal the real issue. If the counselor about the experience. A member may be successfully blends and connects with the hesitant to talk about emotions, so tone of member, the member will “follow” the counselor voice, rate of speech, and other clues often into a more upbeat approach to the financial reflect unspoken feelings. situation. 22 6 TH ED. FICEP BOOK  Chapter 7 Counselor Dress Code 2. I mperative leads. Direct members to say more: “Tell me why that is important to you.” Dress is one way financial counselors can Follow with silence to give members time to blend with members. Some members prefer think. that counselors wear business casual attire, 3. S elective restatement. Select a sentence or while others prefer a suit. Members may feel other information offered by the member, counselors wearing suits are intimidating and restate it, and wait for the member to unable to relate to members’ problems. Other respond. members might feel business casual is too informal. Asking Good Questions In an effort to blend with all members, Good question types include: some counselors wear business casual attire 1. Procedural. This is the most effective (slacks/skirt and dress shirt) and keep a suit because it draws out information about who, jacket or blazer in their office. what, where, when, why, and how. 2. Miracle. This asks members to imagine the Active Listening best outcome. For example, “If a miracle Active listening requires being fully engaged happened right now that solved your and combining verbal information with nonverbal problem, what would change?" cues. If a counselor is talking but not taking time to listen, the counselor is unaware of how the Poor question types include: member is feeling and what the member knows. 1. L imited responses. Avoid using questions To improve listening, take a deep, cleansing that force members to choose among a breath before meeting with members to help clear limited number of responses, multiple- the mind and relax. choice, and/or binary (this or that). An important part of listening is repeating 2. Dilemma. Avoid forcing members to pick vital information back to members to let between two no-win options or a specific them know they’re heard and understood. response, such as making the payment now or dropping it off on payday. These questions Tactics to affirm information include: are manipulative and often undermine other 1. Restating or paraphrasing. These can be attempts to communicate. used to confirm one understands what a 3. Obvious. Questions that are so obvious they member is trying to convey. answer themselves. 2. Summarizing. To improve communication, summarize the key issues. This helps the counselor highlight key information and Summarizing Approach remain in control of the session, especially Common approach: "We have talked when operating on a tight schedule. about a lot of things. Let me summarize what I have heard so far. [Summarize situation.] Did I Exploring miss anything?" Use exploring skills to make providing information the member’s responsibility. These Better approach: “We have talked about are listed in order of effectiveness. a lot of things. I want to make sure we are 1. Declarative leads. This means stating you both on track. Please summarize what you are need to learn more: “I would like to know taking away from our time together." more about why you opened a new credit card." 6 TH ED. FICEP BOOK 23 Focusing Question Categories If the following communication items occur, Consider grouping questions into three focus the discussion on the member’s role and categories: responsibility. 1. Background draws out details. For 1. Generalizations are created by using example, "How have your finances words like always, sometimes, or never. changed recently?" Focusing allows a counselor to challenge 2. Problem asks the member to identify generalizations to determine the underlying issues: "What concerns you most about problem. your current spending plan?" 2. Blaming involves shifting responsibility. 3. Consequences focuses on the future: Focusing allows a counselor to determine if it "What do you think will happen if costs is true or an excuse. are not reduced?" 3. Mind reading involves statements that are difficult to prove. Focusing allows a counselor to determine the specifics behind the statement. 4. Lack of referential index makes a vague statement that releases a member of responsibility; for example, “I do not know where my money goes.” By focusing on exactly where the money goes, a counselor helps the member assume responsibility. 5. Rule stating involves words like should; for example, “I know I should pay with cash.” A counselor may reply, “Let us look at times when you pay with a credit card so we can find alternatives." 6. Challenging and confronting. Challenge members to respond directly to questions about financial practices; for example, “Your goal is to save monthly. What steps are you taking?” 24 6 TH ED. FICEP BOOK  Chapter 7 Communication Skills To-Do List Consider this communication skills to-do list when working with members. Body Language Body language affects how a message is received. To build trust, body language must match the words being said because people usually give greater weight to actions than words. Be conscious of own body language and the member's. Maintain a relaxed posture while speaking or listening. Make eye contact. Be aware of facial expressions. Dress appropriately. Nod occasionally to acknowledge a strong point. Avoid crossing arms. Refrain from nervous habits like wringing hands, picking at nails, etc. Speech and Attentiveness Speak clearly, concisely, and confidently. Discuss important issues. Refrain from irrelevant long stories or personal anecdotes. Clarify or restate parts of conversation to verify understanding. Ask if member understands and can restate key points of conversation. Do not assume member understands. Practice active listening. Make mental notes of key points a member is saying. Patience Give members time to fully communicate issues. Remain focused on what member is trying to communicate. Do not rush to end conversation. Take a breath. Repeat and ask if correct when confused. Positive Attitude Take positive approach and share thoughts optimistically. Focus on solutions. Reflection Reflect on the last argument, heated discussion, or failure to get idea across. What was done correctly? What could have been done differently? Were ideas shared assertively? Was there active listening? Following up with members will show full commitment to helping solve their financial problems and show openness to future communication. 6 TH ED. FICEP BOOK 25  Chapter 8 Successful Money Management Traits If members wish to successfully manage their 7. U  se credit carefully. The budget analysis finances, they must: process of mapping out income, expenses, 1. Plan. Planning enables a member to and debts is a great tool to determine how create a financial destination roadmap. much money is available for a new loan. If Planning includes setting goals, members avoid creating debt often, credit is determining action steps, and creating likely to be available when they need it. measurable objectives that motivate 8. U  se insurance to manage risk. From members by recording their progress. a personal finance perspective, risk 2. Find reliable information. Many who seek management refers to protecting a member’s financial assistance have made mistakes by assets with insurance and wise financial acting on inaccurate information. Provide practices. At a minimum, this means members with trustworthy resources. insuring items the member cannot afford to 3. Budget. A budget analysis averages all replace and/or obtaining life insurance to income, divides all expenses to a monthly protect income. It also means being aware amount, and helps clarify a member’s of insurance costs and determining if the financial situation. This moves members member is spending too much to obtain it. beyond a paycheck-to-paycheck mindset 9. Invest. Investing well requires learning so they see the need to set aside money for how to select products to help hedge for unpredictable expenses. inflation, while protecting investment from 4. Save. Give members ideas for creating loss. This includes understanding various and building savings. Whether this means options for investing and how to avoid depositing spare change in a jar every week unwise investments. or scheduling direct withdrawals from every 10. Avoid consumer fraud. Teach members paycheck, the process needs to be scheduled, to be wary of “something for nothing” cumulative, and continual. offers and the possibilities of identity 5. Prepare for retirement. Experts emphasize theft or fraud. the value of saving as early as possible so earnings can grow with compounding interest. These represent vital skills that can be used to A good first step is to take advantage of expand the financial literacy of members, credit payroll-deducted employer retirement plans. union staff, and the community. Refer members to 6. Create a spending plan. Some counselors other professionals for topics out of the financial use the terms “budget” and “spending plan” counselor’s scope of practice. interchangeably. A spending plan includes expenses, money to enjoy, and money allocated to savings. In this system, finances are “balanced” to take care of the past (debt), present (current expenses), and future (short- and long-term savings). 6 TH ED. FICEP BOOK 27  Rethink Spending and Debt For some members, learning new ways to think about how they spend may mean adopting new approaches to how they live. Instead of using credit to supplement income, members can opt for choices allowing them to go about their daily lives without continually adding new debt. Counselors provide reassurance about the value of selecting other approaches for achieving financial stability. Core truths of creating a stable financial future are: 1. Not everyone needs debt to live lavishly. A home mortgage and auto loan are not requirements for every member. While these lending products can be highly beneficial, they can become a trap if they cost more than a member can afford in terms of time, money, or energy. 2. Choosing a different path can lead to financial freedom. While a family with one car may have less “freedom” to roam, they have an opportunity to rethink how they spend money and time. The same type of thinking applies to families who opt for affordable choices when deciding to pursue the goal of home or vehicle ownership. 3. Spending less can lead to bigger rewards. These rewards may not be apparent to short- term thinkers, but those with a long-term view will see the benefits of making spending decisions as a family and learning to do more with less. 4. Paying on time is vital to gain respect as a responsible consumer, either as an individual who wants access to a variety of goods and services or as a potential borrower who needs a higher credit score to qualify for a lower interest rate. 5. Every decision regarding debt deserves thoughtful consideration. Some members go into debt without thinking about how long it will take to repay or how much it will cost when interest and fees are added to the principal. 6. M  embers pay the price for credit card advantages. While merchants pay fees to credit card companies, the bulk of the earnings for credit card issuers comes from consumers who pay fees and interest. Recognizing this may help members stop thinking about credit cards as a convenient way to pay, and start seeing them as an expensive way to get what they want when they want it. 7. P  aying off debts is better than settling for minimum payments. Making minimum pay- ments is a trap for the unwary, locking them into a cycle of endless financial obligation. Instead, look for ways to show and encourage members that paying off debts now will give them greater rewards later. 8. S  aving creates possibilities. The only way to truly get ahead and retain control is to save. This includes saving for day-to-day purchases and for lifetime goals like funding a college education. 9. F  reedom from debt is priceless. Despite media messages about the beauty of using credit cards to add pleasure to one’s life, debt-free spending is better. An irreplaceable sense of prosperity often comes with owning something “free and clear.” Another way to say that is, “Rich is the one who owes no one.” 10. Individuals can determine their financial futures. Financial mistakes and life events can cre- ate debts and challenges that may appear difficult to overcome. Most members who consult financial counselors retain the ability to change their financial futures. The quicker they get started, the more they can achieve. 28 6 TH ED. FICEP BOOK  Chapter 9 Counseling Types and Elements Types of Counseling Counseling Elements Financial counselors may offer: In all three types of counseling, discuss these 1. Remedial counseling helps members cope elements: with debt they cannot afford or poor money 1. Budget, an essential part of helping members management. Remedial counseling is often gain financial stability. Budgets are used to required if a member faces a financial determine how earnings will be allocated emergency, such as utility shut-off. and make it possible to restrain spending. 2. Preventive counseling helps members This assures money is available to meet living with good financial habits manage financial expenses, repay debt, and meet other short- challenges due to life changes. Preventive and long-term goals. Some counselors like to counseling also can be used to prepare call the budget a personal spending plan. members for large purchases. Known as “pre- 2. Credit. Help members manage spending to purchase counseling,” this form of couns