MCI 34.

20e

MARINE CORPS INSTITUTE

PERSONAL FINANCIAL MANAGEMENT

MARINE BARRACKS WASHINGTON, D.C.

UNITED STATES MARINE CORPS

MARINE CORPS INSTITUTE 912 POOR STREET SE WASHINGTON, DC 20391-5680
IN REPLY REFER TO:

34.20e 1 Mar 98

MCI 34.20e, PERSONAL FINANCIAL MANAGEMENT 1. Purpose. MCI course 34.20e, Personal Financial Management, has been published to assist Marines in their management of personal financial matters. 2. Scope. MCI 34.20e addresses the need to inform our Marines of the many aspects of personal financial management. Items addressed are collecting and safeguarding important papers; veterans benefits; insurance policies, including Servicemen's Group Life Insurance (SGLI) and Veteran's Group Life Insurance (VGLI); miltary retirement; budget formation and management; choosing financial institutions; check writing, recording, and reconciliation; opening and maintaining checking accounts; obtaining loans; credit guidelines; and other pertinent subjects. 3. Applicability. This course is intended for instructional purposes only. It is designed for use by Marines in the ranks of Pvt-MSgt in all MOSs. 4. Recommendations. Comments and recommendations on the contents of the course are invited and will aid in subsequent course revisions. Please complete the course evaluation questionnaire located at the end of the text and return it to: Director Marine Corps Institute ATTN: Support Team Washington Navy Yard 912 Poor Street SE Washington, DC 20391-5680

G. White Lieutenant Colonel, U.S. Marine Corps Deputy Director

PERSONAL FINANCIAL MANAGEMENT CONTENTS Page Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i Student Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii Study Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Study Unit 1 Lesson 1 Lesson 2 Important Papers Identify, Locate, and Safeguard Your Important Papers . . . . . . . . . . . . . 1-1 Estate Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-8 Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-15 Military Benefits 2-1 2-17 2-22 2-25 2-31 2-38

Study Unit 2

Lesson 1 Life Insurance Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesson 2 Military Health Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesson 3 G.I. Bill Educational Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesson 4 Other Veterans Administration (VA) Benefits . . . . . . . . . . . . . . . . . . . . . . . Lesson 5 Retirement Pay Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unit Exercise ......................................................... Study Unit 3 Financial Planning

Lesson 1 Planning Your Financial Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesson 2 Choosing a Financial Institution and Type of Savings Program . . . . . . . Lesson 3 Selecting and Maintaining Your Checking Account . . . . . . . . . . . . . . . . . . Unit Exercise ......................................................... Study Unit 4 Financing Major Purchases

3-1 3-9 3-17 3-32

Lesson 1 Examining Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesson 2 Purchasing a Motor Vehicle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lesson 3 Purchasing Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unit Exercise ......................................................... Review Lesson

4-1 4-10 4-13 4-18

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STUDENT INFORMATION

TITLE& NUMBER: STUDY HOURS COURSE MATERIALS: REVIEW AGENCY:

PERSONAL FINANCIAL MANAGEMENT MCI 34.20e

Text

MARINE CORPS FINANCE CENTER Kansas City, Missouri 64197 2 Reserve Retirement Credits This course is scheduled for review by the American Council on Education during 1998.

RRC: ACE:

ASSISTANCE: For administrative assistance, have your training officer or NCO use the Unit Activity Report (UAR) or MCI Hotline: 1-800-MCI-USMC. For assistance concerning course content matters, call the instructor at DSN 288-0219 or Commercial (202) 433-0219.

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STUDY GUIDE
Congratulations on your enrollment in a distance training course from the Marine Corps Institute (MCI). Since 1920, the Marine Corps Institute has been helping tens of thousands of hard-charging Marines, like you, improve their technical job performance skills through distance training. By enrolling in this course, you have shown a desire to improve the skills you have and master new skills to enhance your job performance. The distance training course you have chosen, MCI course 34.20e, Personal Financial Management, provides instruction to all Marines on personal finances. Items addressed are collecting and safeguarding important papers; veterans benefits; insurance policies, including Servicemen's Group Life Insurance (SGLI) and Veteran's Group Life Insurance (VGLI); miltary retirement; budget formation and management; choosing financial institutions; check writing, recording, and reconciliation; opening and maintaining checking accounts; obtaining loans; credit guidelines; and other pertinent subjects. Because you have chosen to learn at a distance by enrolling in this MCI course, your professional traits are evident and we know YOU ARE PROPERLY MOTIVATED. You made a positive decision to get training on your own. Self-motivation is perhaps the most important force in learning or achieving anything. Doing whatever is necessary to learn is MOTIVATION. You have it! YOU SEEK TO IMPROVE YOURSELF. You enrolled to improve those skills you already possess and learn new skills. When you improve yourself, you improve the Corps! YOU HAVE THE INITIATIVE TO ACT. By acting on your own, you have shown you are a self-starter, willing to reach out for opportunities to learn and grow. YOU ACCEPT CHALLENGES. You have self-confidence and believe in your ability to acquire knowledge and skills. You have the self-confidence to set goals and the ability to achieve them, enabling you to meet every challenge. YOU ARE ABLE TO SET AND ACCOMPLISH PRACTICAL GOALS. You are willing to commit time, effort, and the resources necessary to set and accomplish your goals. These professional traits will help you successfully complete this distance training course.

STUDY GUIDE, continued

BEGINNING YOUR COURSE Before you actually begin this course of study, read the Student Information page. If you find any course materials missing, notify your training officer or training NCO. If you have all the required materials, you are ready to begin. To begin your course of study, familiarize yourself with the structure of the course text. One way to do this is to read the Table of Contents. Notice the Table of Contents covers specific areas of study and the order in which they are presented. You will find the text divided into several study units and a review lesson. Each study unit is comprised of two or more lessons, lesson or unit exercises, exercise solutions and references. LEAFING THROUGH THE TEXT Leaf through the text and look at the figures and tables. Read a few lesson exercise items (questions) to get an idea of the type of items in the course. If the course has additional study aids, such as a handbook or a plotting board, familiarize yourself with them. Turn to the first page of study unit 1. On this page, you will find an introduction to the study unit and generally the first study unit lesson. Study unit lessons contain learning objectives, lesson text, and exercises. Learning objectives describe in concise terms what the successful learner, you, will be able to do as a result of mastering the content of the lesson text. Read the objectives for each lesson and then read the lesson text. As you read the lesson text, make notes on the points you feel are important. To determine your mastery of the learning objectives and text, complete the exercises developed for you. Exercises may be contained in a lesson, at the end of a lesson, or at the end of a study unit. Without referring to the text, complete the exercise items and then check your responses against those provided. Continue on to the next lesson, repeating the above process until you have completed all lessons in the study unit. Follow the same procedure for each study unit in the course.

THE FIRST STUDY UNIT

READING THE LEARNING OBJECTIVES

COMPLETING THE EXERCISES

CONTINUING TO MARCH

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STUDY GUIDE, continued

SEEKING ASSISTANCE If you have problems with the text or exercise items that you cannot resolve, ask your training officer or training NCO for assistance. If they cannot help you, request assistance from your MCI distance training instructor by completing the Content Assistance Request Form located at the back of the course. When you have finished all the study units, complete the review lesson exam located at the end of the course text. Try to complete the review lesson exam without referring to the text. For those items you are unsure of, restudy the text. When you have finished the review lesson exam and are satisfied with your responses, check your responses against the answer key provided with your course materials. learned in the course. The following suggestions will help make the review interesting and challenging. CHALLENGE YOURSELF. Try to recall the entire learning sequence without referring to the text. Can you do it? Now look back at the text to see if you have left anything out. This review should be interesting. Undoubtedly, you'll find you were not able to recall everything. But with a little effort you'll be able to recall a great deal of the information. USE UNUSED MINUTES. Use your spare moments to review. Read your notes or a part of a study unit, rework exercise items, review again; you can do many of these things during the unused minutes of every day. APPLY WHAT YOU HAVE LEARNED. It is always best to use the skill or knowledge you've learned as soon as possible. If it isn't possible to actually use the skill or knowledge, at least try to imagine a situation in which you would apply this learning. For example, make up and solve your own problems. Or, better still, make up and solve problems that use most of the elements of a study unit.

THE REVIEW LESSON EXAM

PREPARING FOR THE FINAL EXAM

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STUDY GUIDE, continued

USE THE "SHAKEDOWN CRUISE" TECHNIQUE. Ask another Marine to lend a hand by asking you questions about the course. Choose a particular study unit and let your buddy "fire away." MAKE REVIEWS FUN AND BENEFICIAL. Reviews are good habits that enhance learning. They don't have to be long and tedious. In fact, some learners find short reviews conducted more often prove more beneficial. TACKLING THE FINAL EXAM When you have completed your study of the course material and are confident with the results attained on your review lesson(s), take the sealed envelope marked "FINAL EXAM" to your unit training NCO or training officer. Your training NCO or officer will administer the final exam and return the exam and answer sheet to MCI for grading. Before taking your final exam, read the directions on the generic DP-37 answer sheet carefully and complete all requested information.

COMPLETING YOUR COURSE

The sooner you complete your course, the sooner you can better yourself by applying what you've learned! HOWEVER--you do have 12 months from the date of enrollment to complete this course. In addition, you may be granted one 6-month extension if approved by your commanding officer. If you need an extension, please complete the Student Request/Inquiry form (MCI-R11) located at the back of the course, and deliver it to your training officer or training NCO. As a graduate of this distance training course and as a dedicated Marine, your job performance skills will improve, benefiting you, your unit, and the Marine Corps.

GRADUATING!

Semper Fi!

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STUDY UNIT 1 IMPORTANT PAPERS Introduction. A key to sound financial management is proper documentation. Most financial experts agree that preparing the necessary documents and keeping them up-to-date is the biggest challenge to successfully managing personal finances. These documents are essential to your financial well-being. Lesson 1. IDENTIFY, LOCATE, AND SAFEGUARD YOUR IMPORTANT PAPERS This lesson helps you identify important documents--your birth certificate, social security card, leave and earning statement (LES), motor vehicle title, military records, etc.--and provides strategies for storing and safeguarding them. Since these important papers define your personal financial status, it is important to organize and safeguard them. LEARNING OBJECTIVES 1. 2. 3. 4. Identify three categories of important papers. Identify sources for assistance in locating your important papers. Identify the appropriate places for duplicating your important papers. Identify safe and secure places to store your important papers.

1101. Categories of Important Papers Important papers generally fall into three categories: financial records, entitlement records, and personal records. Each category is broadly outlined below. a. Financial records. (1) LES. Each active duty Marine receives a monthly LES. Here is what it provides: (a) Detailed information (pay entitlements and deductions) covering your pay account for the previous month Forecasted amounts due for the paydays of the current month Leave balance Pay received

(b) (c) (d)

1-1

Note:

Each LES shows your cumulative record of pay, leave, and deductions for the year. This means you will not need to keep every statement, but occasionally you will need a copy of your current statement to qualify for a loan or substantiate your employment, so treat your LES with respect! Also, as you can see, you may need to refer to your LES when preparing your financial plans! Financial securities and investments. These are records of any stocks or bonds you may have purchased or sold. (Remember these transactions always affect your income tax and should be reported.) Life insurance policies. These policies guarantee a specific sum of money to a designated beneficiary upon the death of the insured or to the insured if he or she lives beyond a certain age. The danger of loss of life is called "risk." Death is naturally your greatest risk because, in most cases, your spouse and family depend on your income. You must plan for their support in case you die before your earning years are over. Estate planning documents. (a) Will. A will is a legal declaration of how a person wishes his or her possessions to be distributed after death. Every Marine should have a will, regardless of how much or how little he or she owns. You will learn how to draw up your will in the next lesson, Estate Planning. Trust. A trust is an agreement where a person (grantor) makes arrangements to give his or her property/assets to someone else (trustee) to manage and administer for the benefit of a designated third party (beneficiary). Trusts are also discussed at greater length in the Estate Planning lesson.

(2)

(3)

Note:

(4)

(b)

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Before you go on to the second type of financial documents (entitlement documents), write down the four pieces of information your LES provides: a. ____________________________________________________________ b. ____________________________________________________________ c. ____________________________________________________________ d. ____________________________________________________________

(The four pieces of information are your previous month's pay record; a forecast of your current month's pay record; your leave balance; and finally, your pay received.) b. Entitlement records. (1) (2) Titles (boats, cars, RV). A title justifies legal claim to property. Original deeds and mortgage liens. A deed is a document sealed as an instrument of bond, contract, or conveyance.

c.

Personal records. (1) Birth certificate. Issued by the hospital or attending physician to record parentage and the date, place, and time of birth. This certificate is required for getting a passport, entering the military, applying for a marriage license, and other significant lifetime events. Death certificate. Issued by the hospital or attending physician to substantiate the date, place, and time of death. This certificate is needed for insurance claims, social security, and veteran's benefits, as well as for estate claims. Social security card. Financially identifies you to the IRS and entitles you to social security benefits when eligible. These benefits are financed by taxes withheld from your earnings and contributions made by your employer. You also need a social security card to enroll dependents in the Defense Enrollment Eligibility Reporting System (DEERS). Your children may need social security numbers to be enrolled in school. Most states now issue social security cards at birth. Registration papers. Proves legal ownership of valuable personal possessions, such as cars and boats, and proves permission to be operated in that location.

(2)

(3)

(4)

1-3

(5)

Military records. Includes dates of service at various locations, promotions, awards, and retirement orders. You need your military records to obtain Veteran's Administration (VA) benefits or to pursue a career after leaving military service. School records. Includes diplomas (high school, college) certificates, and other academic awards. School records are useful when pursuing a career after you leave military service. Religious records. Documents that may include the date you joined a religious affiliation, date of baptism, and day of confirmation. They could also specify your preferred burial arrangements. Marriage certificate. Issued by the state to declare that a man and a woman are legally married. You need a marriage certificate for BAH or to obtain base housing. Different states have different marriage licensing requirements! Power of attorney. A power of attorney provides written authorization for a person you designate to legally represent you, that is, to be your agent, when you are not present. This person may be referred to as your "attorney-in-fact." Power of attorney is mandatory for all Marines in case of deployment.

(6)

(7)

(8)

Note: (9)

Note:

Are you familiar with these financial, entitlement, and personal records? Have you been making a mental inventory of which of these records you need? Which do you already have? Do you know where they are? Suppose you are unable to find a record? Where would you go to get a replacement copy? Read on! 1102. Locating Important Papers In your quest to locate these important papers, start with your family (father/mother). Your parents are likely to have your birth certificate, baptism record, and other legal documents pertaining to your early life. If you can't find a record at home, contact your legal assistance office. They are experts in directing you to the appropriate agency where you may obtain replacement papers and records. Below are some of the agencies where you might go for replacement copies. a. S-1. Your S-1 (personnel office on base) can provide assistance in obtaining copies of military records and other important documents. b. Hospitals. Normally, the hospital where you were born will be able to send you a copy of your birth certificate. And, if you or a family member dies at a hospital, death certificate records are kept there too. Hospitals are a good place to start. If they do not have the record they can often tell you where to go to get these records. 1-4

c. Circuit courts and agencies. These are referred to as "courts of record." Eventually, hospitals and other agencies file their records here. Circuit courts may hold marriage and divorce records. State agencies, such as the Department of Health and Human Services, can often provide replacement copies of important documents. There are so many state agencies, you may need to check with your Marine legal assistance officer for further guidance. Note: You should record your DD-214 (discharge certificate) and the deed to your house (if you own one) at a circuit court. New social security numbers or replacement cards are obtained at the Social Security Administration.

Now that you have collected your important papers, it would be wise to list them. Then make a duplicate copy of the list and a copy of each important paper or document. This relatively simple precaution gives you copies to work with while leaving the originals in a more secure location. Don't forget to update the files periodically. 1103. Duplicating Your Important Papers There are two kinds of facilities where you can make copies of your important papers: a. Libraries. Most libraries (base and off-base) have copiers you can use for a nominal fee.

b. Commercial. There are many professional printing and publishing businesses (listed in the "yellow pages") that make copies for you or allow you to use their reproduction equipment. Copy fees are usually not expensive.

IT IS ILLEGAL TO USE A GOVERNMENT COPIER MACHINE TO DUPLICATE IMPORTANT PERSONAL PAPERS!

Before you consider where to permanently keep your important papers, stop to recall some key points covered so far. Can you list the three categories of important papers you will be keeping together? a. _______________________________________________________________ b. _______________________________________________________________ c. _______________________________________________________________ (Answers: financial, entitlement, and personal)

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Name all of the personal records that you now have in your own collection of important papers. a. _________________________________________________ b. _________________________________________________ c. _________________________________________________ d. _________________________________________________ e. _________________________________________________ f. __________________________________________________ (Your list of personal records should include a copy of your LES, your investment papers, estate planning documents, life (and other) insurance policies, any titles or mortgage papers, and any other personal records, such as a marriage license.) Now if one of these documents is missing and your family does not have it, where would you go for assistance? ____________________________________________________ (Your legal assistance office or S-1 will guide you in your attempt to replace missing records. Remember to inquire at appropriate hospitals for copies of birth and death certificates and at circuits courts and state agencies for other records.) So far, you have identified what kinds of records and documents are important to keep and whom to go to for assistance in replacing them. Now, seriously consider what you will do with your important paper collection to protect it. 1104. Safeguarding Important Papers After listing your documents and copying them, consider carefully where to file and store the originals so they will not be in danger of being misplaced, stolen, or damaged in a fire or flood. Keep in mind three considerations when filing your important papers: affordability, convenience, and degree of safety. Any one of the following types of storage areas would ensure a higher degree of safety (and peace of mind) than your desk at home.

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a. Special safe. You can purchase or lease safes that are fireproof (and reasonably floodproof) to store your papers at home. This type of safe isn't expensive and, depending on your needs, could be your best choice. b. Lawyer's office. Your attorney may have special accommodations for storing clients' important papers. If not, he or she may assist you in your search for safe document storage. c. Safety deposit box. Visit your financial institution to find out its particular facilities, policies, and procedures since these vary from place-to-place. Be sure you understand the regulations and their meanings. Ensure that someone you trust has access to your safety deposit box in case something happens. After you have copied your important papers and decided where to keep your original documents, share the information with someone you trust. Tell that person what the documents are, how they are filed, and where those files are physically located. Now, test yourself to see if you remember where would you go to duplicate important papers? __________________________________________ (Answer: Commercial printing and publishing businesses or your local base or off-base libraries.) Will you ever use your government office copier to copy your important papers? ____________

(Answer: No!) Give one example of a location for your important papers that's more secure than your desk at home. _________________________________

(Answer: Special safes at home, at your lawyer's office, or in a safety deposit box at your bank.) Lesson Summary. You must keep your important papers in a safe place where you can locate them. Be sure to check on them periodically. In lesson 2, you will cover assets and liabilities in more detail. You will compare wills and trusts as estate planning instruments. This will help you develop a perspective on the factors you will need to balance to enhance your financial plan.

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Lesson 2. ESTATE PLANNING This lesson helps you gauge your financial standing or net worth by determining your assets and liabilities. This lesson also presents guidelines for ensuring these assets are protected and passed on to your loved ones using such legal instruments as a will, trust, or power of attorney. Your estate is everything you own (and everything you owe). Estate planning is an important part of personal financial management. Establishing an estate plan is the best way to ensure your family's future. LEARNING OBJECTIVES 1. 2. 3. 4. 5. Define the term "asset." Define the term "liability." List two sources available for legal advice in planning your estate. Describe the purpose of a will. Describe the purpose of a power of attorney.

1201. Assets An asset is defined as something of value which is owned, and is usually something tangible such as a building or car. When you talk about assets you immediately think about common ones, such as checking accounts and savings account balances. Look at other kinds of assets listed below. ASSETS CASH VALUE OF MUTUAL FUNDS, LIFE INSURANCE POLICIES, BONDS, STOCKS, AND LIQUID ASSETS REAL ESTATE PERSONAL POSSESSIONS SUCH AS CARS AND JEWELRY

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1202. Liabilities A liability is a legal responsibility to pay a debt. When you talk about liabilities, you immediately think about common ones such as automobile loans, credit card balances, or the balance on a mortgage loan for your house. Take a look at other kinds of liabilities listed below. LIABILITIES BANK LOANS INSURANCE LOANS FINANCE COMPANY LOANS PROPERTY TAXES OWED INCOME TAXES OWED DPP ACCOUNT BALANCES OTHER DEBTS AND BILLS

ASSETS - LIABILITIES = NET WORTH. By subtracting your liabilities from your assets, you can determine your net worth. If your assets are greater than your liabilities, you are said to have a negative net worth. Therefore, your goal would be to reverse that and make it positive. It would be a good idea to take the time now to make a list of your personal assets and liabilities and to come up with at least a rough idea of your financial balance. Does it seem generally to be what you thought it was, or was it a surprise? Does it suggest a need to adapt a new financial strategy, especially in these difficult and perplexing economic times? If so, in the process of getting information, you might need to contact a legal assistance agency. Legal assistance agencies are available to help you understand your legal matters and papers. 1203. Legal Assistance Agencies There are two types of legal assistance agencies that are available to help you with your legal matters. These agencies have experience and knowledge that is so essential when it comes to helping you understand your legal matters and papers. As you may already know, legal documents are not written in "plain English." There are clauses, addendums, and attachments that you should review and have explained before you dare sign your name to any document. Here are the two types of agencies you can call on for legal assistance. a. Staff Judge Advocate (SJA). The Marine Corps legal assistance programs that provide free professional help for Marines falls under the Office of the SJA. The SJA provides legal assistance attorneys to give legal advice and help prepare legal documents and correspondence. You should be reassured to know that any information you exchange with your legal assistance attorney either orally or in writing is confidential since the "attorney-client privilege" protects this communication. 1-9

Note:

A legal assistance officer is a licensed attorney, though not always licensed in the state where stationed.

When you meet with your attorney, take with you any relevant background information about your problem, including documents, records, and correspondence. Those well versed in legal matters will advise that the best advantage you can give yourself in any legal situation is the sound, professional counsel of a lawyer. b. Private attorneys with private law firms. You always have the option of taking your legal problem to a private attorney. However, since it is usual for a private attorney to charge a fee for services rendered, be sure to visit your legal assistance office before trying this route. You've covered a lot of information so far. Stop to review some key points. What are credit card balances considered to be? _______________________________________________

(Credit card balances are liabilities.) What are savings account balances considered to be? _______________________________________________

("Savings" are your money; therefore, they are assets.) Name the two legal assistance agencies available to help you and your family. a. _______________________________________________ b. _______________________________________________

(Two legal assistance agencies available to help are the Staff Judge Advocate (SJA) and private attorneys.) Does the legal assistance office have licensed attorneys? _________ (Yes, the legal assistance office has licensed attorneys.) 1-10

1204. Drawing Up a Will Every Marine should have a current will that legally specifies the distribution of assets in case of death. This is true regardless of how little he or she owns! If you're married, it's especially important for both you and your spouse to each have a will. Whatever expense and bother you incur for the preparation of even a simple will could be very worthwhile and perhaps even pay large dividends when it's time to settle your estate. A will may save your survivors a small fortune in estate or death taxes. A will clearly stating your wishes could save your loved ones the trouble and cost of repeated court trips and legal fees. If you die without a will, then you have died intestate. When this occurs, a probate court will divide your property according to state laws. While intestate laws vary from state-to-state, most states are very interested in collecting estate taxes. After all, it's their last chance to tax the deceased! Besides avoiding taxes, there are other reasons why disposing of your estate according to a will instead of state law is better. For instance, disposal of your estate according to state law could cause serious financial problems and hardships for your survivors. Let's look carefully at what a will is and does and then at some precautions and guidelines for drawing one up. a. Will. What exactly is a will? A will is a legal declaration of how a person wishes his or her possessions to be distributed after death. It can be very short and simple or very complex and many pages long. Since a will is a legal document, you can often do more harm than good by writing it yourself without the benefit of legal guidance. You may use your legal assistance office since it is free or pay a civilian lawyer. After you have selected a lawyer to help you draft your will, you will next need to choose an executor. This is the person who will "execute" or carry out the directives of your will when you die. This should be someone you trust and someone who has agreed to administer your will. Have this person confer with your lawyer to get a clear idea of an executor's responsibilities and have any questions answered. Further, it is not wise to select your executor based on sentiment. Remember, the person you select is going to decide your affairs after you are deceased. Imagine that you are not able to handle your affairs right now because of a serious medical problem. Ask yourself if you would want this person to step in and take charge? Think about it! Note: Most people appoint their spouse as the executor. But, this is not always the wisest choice. You must keep in mind that there is a possibility of both spouses dying simultaneously. Not only does this reinforce the need for both spouses to have a will, but to appoint someone else as executor too.

b. Trusts. A trust is an agreement which a person (grantor) makes arrangements to give his or her property/assets to someone else (trustee) to manage and administer for the benefit of a designated third party (beneficiary). The beneficiary is usually an individual, but it can be an estate. So, to repeat the definition of a trust in a slightly different way, it is a legal arrangement where the beneficiary has been designated by the grantor to receive the benefits of the property 1-11

being managed and administered by the trustee. The trustee may be an individual, a bank, or a trust company. There are two basic types of trusts. (1) (2) Living Trust is a trust that takes effect while you are still alive. Testamentary Trust can be created after your death by your will or your "last will and testament," as it is sometimes called. An important factor for you to examine when creating a testamentary trust is possible income and estate tax savings. Seek sound legal advice, because sometimes those tax savings may not be enough to justify the added expense of setting up the trust.

When a living trust is created, you have the choice of making it revocable or irrevocable. A revocable trust can be changed or canceled as you wish. However, once an irrevocable trust is established, you cannot change it. All trusts have certain advantages and disadvantages, but a living revocable trust has a distinct advantage. Imagine that you have named a third party as trustee to a trust. Now you are in a position to observe and evaluate the trustee's performance and skill in managing the trust assets. If you are not satisfied with the results, you can revoke the trust or appoint another trustee. Be sure to choose someone you trust. For guidance concerning trusts, contact your legal assistance office. Trusts can be quite complicated, so it is important to make sure yours is drawn up by a lawyer who knows the pitfalls to avoid. Only careful preparation and drafting can ensure a sound trust. c. Guidelines for drawing up a will. As we have said before, a will (or a trust) is a specialized legal document, and you can often do more harm than good by writing it yourself without the benefit of legal guidance. Keep in mind the precautions listed below when planning your will: (1) Don't write it yourself unless you're a lawyer. It is possible that if you omit a single word or phrase you could cause your survivors considerable problems and unexpected costs. Since lawyers generally charge by the hour, have your records in order and decisions made before seeing the lawyer. You may even have your own outline or rough draft of your will for your lawyer to use. Don't make changes by marking out some information and writing in new information without getting legal advice. This kind of do-it-yourself rewrite of a will could invalidate the document entirely. Sign only the original copy of a will. Don't postpone the preparation of your will--tomorrow may be 1 day too late!

(2)

(3) (4)

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(5)

Review your will from time-to-time and have it updated as necessary to reflect the changes in your life. While having a will or trust is very important, make sure to keep it current. Keep in mind that tax laws change, as well as your personal circumstances. Consider changing your will or trust, for example, upon the following life events: (a) (b) (c) (d) (e) (f) The value of your assets changes substantially. The birth or death of an immediate family member or loved one. You marry, remarry, divorce, or separate. The executor named in your will dies or can no longer be considered competent. You change your legal residence. A guardian for a minor child is named or a new one is appointed.

Now for a quick review! You've looked at what a will is and how important it is to have one. Do you remember four guidelines to follow when you draw up a will for your family? a. ________________________________________________________ b. ________________________________________________________ c. ________________________________________________________ d. ________________________________________________________

(The four guidelines are don't write it yourself; don't make changes without legal advice; sign only the original copy; and don't postpone the preparation of your will.) 1205. Power of Attorney a. Definition and purpose. From time-to-time, most people will face some situation in which they are unable to be present for a legal transaction. Again, choose someone you trust when you grant power of attorney. For example, you are being deployed next week, you want to sell your car but you won't have time to do it before you leave. Therefore, you need to have someone you trust sell it for you. This person will be your agent, will be present at necessary transactions, and will act as your "attorney-in-fact." To do this, legally arrange to give your substitute person a "power of attorney," which is a written document transferring your legal authority to another person in the terms you set forth. Note: A power of attorney is mandatory for all Marines in case of deployment. 1-13

b.

Types. There are basically two types of power of attorney: (1) (2) General gives broad power and authority. Special (or limited) gives power confined to the specific act(s) described or for a specified time frame.

c. When a power of attorney is needed. A U.S. Marine needs a power of attorney more than most people. Legal situations can arise at any time, often when it is inconvenient or impossible for you to be present. You could be on leave, involved in permanent change of station (PCS) orders (especially while moving overseas), or away on TAD orders. These are ideal times to have granted a trusted person back home your power of attorney. d. The dangers of executing a power of attorney. Since the acts of your "attorney-in fact" are legally binding, there are two dangers to consider before giving someone power of attorney. (1) The first danger is there is always the possibility the person assigned with your power of attorney will be negligent or even malicious and abuse the power. Example: Marital or family problems could occur. An angry spouse or family member who had earlier been given power of attorney could exact revenge by emptying bank accounts or selling property. (2) The second danger is that, once arranged, it is extremely difficult to revoke a power of attorney. Drafting a special power of attorney for a limited time and specific events can narrow this danger.

Because of problems like these, many people, especially in real estate transactions, will not accept a power of attorney. The dangers of a power of attorney can be limited by giving a special power of attorney instead of a general power of attorney. In a special power of attorney, both the power and the time are limited. You may also prefer to frequently renew a power of attorney rather than grant a single one for unlimited or very long duration. Because of these dangers, it is obvious that a power of attorney should not be drawn until a legal assistance officer or a civilian attorney has been consulted. Lesson Summary. As you can see you must total your assets and liabilities to understand your overall financial status. We discussed how to obtain and keep important papers and how to plan your estate. To help you with these important legal matters, use a legal assistance agency. Keep in mind that all agencies providing assistance are very busy operations. So call ahead and make an appointment!

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Study Unit 1 Exercise: Complete items 1 through 9 by performing the action required. Check your responses against those listed at the end of this study unit. 1. What are the three categories of important papers? a. _____________________________________________________ b. _____________________________________________________ c. _____________________________________________________ 2. Identify who will first provide assistance in locating important papers. _____________________________________________________ 3. The one place that is inappropriate to duplicate your personal papers is _____________________________________________________. 4. List suggested safe storage areas for your important papers. a. _____________________________________________________ b. _____________________________________________________ c. _____________________________________________________ 5. Define "asset." _____________________________________________________ _____________________________________________________ 6. Define "liability." _____________________________________________________ _____________________________________________________

1-15

7.

List two sources available for legal advice. a. _____________________________________________________ b. _____________________________________________________

8.

State the purpose of a will. ____________________________________________________ ____________________________________________________

9.

State the purpose of a power of attorney. ____________________________________________________ ____________________________________________________

STUDY UNIT 1 SUMMARY This study unit identified your important papers and discussed why each is important. You discovered where you could find missing papers, where to make copies, and how important it is to store them in a safe place. Then, you were encouraged to take an inventory of your personal assets and liabilities, to consult with a legal assistance agency for professional guidance, and then to seriously consider planning for your estate using either a will or a trust. Finally, you described a power of attorney and how you may need to use one in your legal transactions when you cannot be physically present. Study Unit 2 will introduce you to Government Issued (GI) and VA benefits and retirement pay systems, all of which are special assets for you in military service. Study Unit 1 Exercise Solutions Reference 1. a. Financial b. Entitlement c. Personal records Legal assistance office personnel Government office copier a. Special safe b. Lawyer's office c. Safety deposit box 1-16 1101

2. 3. 4.

1102 1103 1104

Study Unit 1 Exercise Solution, continued Reference 5. 6. 7. 8. 9. Something of value which is owned Legal responsibility to pay a debt a. Staff Judge Advocate (SJA) b. Private attorneys A will is a legal declaration of how a person wishes his or her possessions to be distributed after death. A power of attorney is a written document transferring legal authority to another person in the terms you set forth. 1201 1202 1203 1204 1205

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STUDY UNIT 2 MILITARY BENEFITS Introduction. Do you know how lucky you are as a Marine to have service-sponsored life insurance, Veterans Administration (VA) GI benefits, and special retirement benefits? These programs have generous provisions. At first, digesting all the details of each program can be overwhelming. However, before planning how to use these programs to optimum advantage in your personal life, you will need to digest the details and consider your needs. This study unit will devote a lesson to each of these special benefit programs and describe its financial value to you. Lesson 1. LIFE INSURANCE OPTIONS Most people jump into a policy without having enough information about insurance. They also do not reevaluate their insurance coverage as their circumstances and needs change. This lesson will help you understand general life insurance and the benefits available to you from your Serviceman's Group Life Insurance (SGLI) and Veterans Group Life Insurance (VGLI) military insurance. You will see definitions to common insurance terms and discussions of different insurance options that are available outside of government-sponsored programs. This information may help you make appropriate choices when buying civilian life insurance. LEARNING OBJECTIVES 1. 2. 3. 4. 5. Match insurance terms with their correct definitions. Identify a description of the Servicemen's Group Life Insurance (SGLI). Identify a description of the Veterans Group Life Insurance (VGLI). Identify a description of a term life insurance policy. Identify a description of a whole life insurance policy.

2101. Why You Need Life Insurance Arranging for life insurance coverage now may seem unimportant. But think about those who rely on you financially. Your death would deprive your family of your income, yet they would still have to pay rent, car payments, credit card bills, and medical expenses. Life insurance provides the financial cushion that allows your loved ones to adjust financially to life without you. 2-1

Most people buy life insurance to provide financial protection for their dependents in the event of their death. Some people buy financial protection for their retirement years. For those in the military, maintaining adequate insurance is especially important. As a responsible, thoughtful Marine, you will want to carefully provide for your family in the event of your death, no matter how remote it may seem today. Think of your insurance needs in these terms. You will read about them in the next few pages. ACTIVE SERVICE INSURANCE BLOCK SEPARATION INSURANCE BLOCK RETIREMENT INSURANCE BLOCK

2102. Language of Life Insurance While some companies are beginning to issue policies with simplified language, most policies remain hard to understand because the insurance industry seems to have a language all its own. Here are some of the common terms you will be seeing in this study unit: Policy, premium, and beneficiary Term and whole life insurance Grace period and lapsed policy Face amount and cash surrender Policy loan Annuity Participating policy Rider Settlement option Accidental death benefit The definitions that follow are meant to help you understand these terms so you can begin to use them comfortably. a. Policy. A written contract or certificate issued by the insurance company that dictates the terms of the insurance. b. Premium. The amount of payment for insurance coverage paid by the policyholder to keep a policy in force. Depending on the terms of the policy, the payment could be made weekly, monthly, or yearly. c. Beneficiary. The person who is to receive the insurance proceeds when the insured dies.

d. Term insurance. Provides protection only for a specific period (number of years) at a certain cost. There are many types because the amounts of coverage and premiums change based on the age of the insured and the period of time (term) of coverage. The face amount of the policy is only payable if death occurs. Term insurance usually costs less than other types. 2-2

e. Whole life insurance. Provides protection (and keeps its annuity value) for the entire life span of the insured person. This type of insurance is initially more expensive than term insurance but premiums remain constant. f. Grace period. A set period of time during which overdue payments may be paid without penalty and the insurance coverage remains in effect. g. Lapsed policy. A policy that has terminated because premium payments to keep the insurance policy in force were not paid. h. Face amount. The amount of money stated on the policy to be paid upon the death of the insured person. The amount paid might be decreased by the amount of any policy loans. i. Cash surrender value. The money to be paid upon voluntary termination of a policy by the policyholder. The cash surrender value is always less than the face amount of the policy. j. Policy loan. A loan made by the insurance company to the policyholder. Generally, the face amount that would be paid upon the death of the insured person is decreased by the amount of the loan until it is repaid. For example, a policy with a face amount of $15,000 would only pay $10,000 to the beneficiaries if there was a $5,000 policy loan outstanding. k. Annuity. An investment yielding fixed payments beginning at a certain time in the policyholder's lifetime. Although sold by insurance companies, an annuity does not provide insurance, which means it does not pay a face amount to a beneficiary at the death of the insured. With an annuity, the policyholder is betting that he will live a long time and receive many payments. l. Participating policy. The premium is set high enough to build cash value that can be passed on to the policyholder as dividends. The premium is higher than that of a non- participating policy. m. Rider. An addendum the insurance company can attach to your life insurance policy.

n. Settlement option. The choice a policyholder or beneficiary makes concerning the way benefits are paid on an insurance policy. For example, the beneficiary could receive the money as a lump sum or as periodic payments over a time span. o. Accidental death benefit. An added policy provision for payment of a special extra benefit in case of accidental death. (An "accidental death benefit" is often referred to as a "double indemnity" clause.)

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Take a moment to see if you remember what you've read by answering the following question. Term insurance is defined as _________________________________________________.

(Term insurance is defined as protection only for a specific period (number of years) at a certain cost.) 2103. Servicemen's Group Life Insurance (SGLI) ACTIVE SERVICE INSURANCE BLOCK SEPARATION INSURANCE BLOCK RETIREMENT INSURANCE BLOCK

Remember the chart shown at the beginning of this lesson? SGLI fills the first block, which represents your active service timeframe. The government-sponsored SGLI program was created in 1965 to provide term insurance to all active duty personnel to cover their military years in a group plan. It was created to cover all active duty personnel and has the following features: Provides term life insurance to cover a serviceman's military years. Does not build cash value. Premiums depend on the level of coverage desired. Any individual or legal entity can be designated the beneficiary. Proceeds are payable to the beneficiary as a lump sum or in 36 equal payments. Continues to provide insurance protection for 120 days following separation from active duty. During this period, you can convert your SGLI coverage to Veterans Group Life Insurance (VGLI) without taking a medical examination. Although SGLI is probably a better deal than civilian policies, it is not mandatory. If you choose not to accept SGLI, you may so indicate on the SGLI application form. Additionally, coverage for less than $200,000 can be requested, in writing, at $.90 per $10,000 of coverage. How much does SGLI cost you per month? ____________________________

(SGLI costs $.90 per $10,000 of coverage).

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2104. Veterans Group Life Insurance (VGLI) ACTIVE SERVICE INSURANCE BLOCK SEPARATION INSURANCE BLOCK RETIREMENT INSURANCE BLOCK

The VGLI is an opportunity to extend your previous SGLI coverage. You then have the option to renew every 5 years through your life, so VGLI transitions from the active service to the separation timeframe block. Your VGLI program is designed to go into effect on the 121st day following your separation, thereby providing continuous insurance protection. Payments for VGLI coverage are made by you and sent directly to the Office of Servicemen's Group Life Insurance. VGLI has the following features: It's an optional term insurance. The face amount is based on and limited to the amount of coverage carried under SGLI. Coverage begins on the 121st day following military separation and lasts up to 5 years. (Renewable every 5 years thereafter.) Premiums range from $12 to $450, depending on age and level of coverage. Payments are sent to the Office of Servicemen's Group Life Insurance (OSGLI) in Newark, NJ. Can you remember which periods of time during and after service your SGLI and VGLI insurance covers? SGLI ________________________________________________________________ VGLI ________________________________________________________________

(SGLI covers the period of time when you are in the military and for 120 days afterward, and VGLI covers from the 121st day after your separation and is renewable every 5 years for the rest of your life.)

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ACTIVE SERVICE INSURANCE BLOCK

SEPARATION INSURANCE BLOCK

RETIREMENT INSURANCE BLOCK

Government-sponsored SGLI and VGLI programs are good, but you may want to supplement your SGLI or VGLI coverage. To do so, you should be familiar with other types of life insurance, especially when your retirement or separation draws near or as your life circumstances change. 2105. Comparison of Term and Whole Life Insurance Policies While whole life and term insurance are the basis for virtually all forms of life insurance, there are other types of insurance that combine the features of term and whole life insurance. Remember the definition for term insurance: It provides protection for only a specific period of time (number of years) at certain cost. The face amount of the policy is only payable if death occurs. a. Your term policy limits coverage to a specific period of time. As you get older, you may pay more for that coverage or the coverage may be for a smaller amount. The insurance company can also decide you are no longer eligible for their coverage, if the company deems you an unacceptable risk. There are two general types of term insurance: Level-term - the amount of insurance coverage remains the same over each renewal period; however, at the start of each renewal period the cost of the insurance increases. Example: A $100,000 level-term policy for a male nonsmoker might cost approximately $173 a year at age 35 and $443 per year at age 50. The increase in premium cost is the insurance company's way of addressing the increased risk that the company faces in providing $100,000 of insurance coverage for someone who is 50 versus someone who is 35. Decreasing term - provides a reduced amount of coverage for the same premium cost at each renewal. Example: The same 35-year-old nonsmoking male will continue to pay $173 per year, but by the time he is 50 years of age, his insurance coverage will have decreased to approximately $50,000. b. Your whole life policy provides the maximum amount of protection against your death for an indefinite amount of time, or throughout your "whole life." Premiums remain at a fixed rate and there is no change in the amount of insurance coverage for the entire lifespan of the policyholder. Whole life insurance companies also include a savings element called cash value. You may borrow against the cash value of your policy. 2-6

The comparison is easiest to understand when you first look at the way whole life works. When you buy a certain amount of whole life at a certain price, there generally will be no change in the amount of premium you will have to pay, no change in the period between payments, and no change in the amount of insurance coverage you will have for the rest of your life, no matter what happens to you! But, if you were to buy that same amount of coverage as term insurance, as you got older you would pay more for that coverage or the coverage would be for a shorter period. In fact, the insurance company could decide you were no longer eligible for their coverage. You see, with term insurance the company underwriters (who determine the acceptability of risks) adjust standards as insurance conditions change. This means you become, in effect, a new "case" for them to evaluate at the beginning of each new term. So, while term insurance looks great at the beginning because it is cheaper, you now understand that there are benefits to whole life coverage too! Do you remember what kind of life insurance is purchased for specified time periods? ________________________________________

("Term" insurance is purchased for specified time periods.) These two basic types of coverage, whole life and term, structure virtually all forms of life insurance. If you get professional guidance to help you understand the details of different plans under these two basic types, then choose according to your personal needs, you will be able to design a basic life insurance program most appropriate for your personal situation. Then, after you've set up your basic plan, you can explore ways to modify or increase that coverage. 2106. General Types of Insurance Policies Following are general types of insurance policies that are either term policies or combinations of term and whole life policies. a. Universal life. This is a type of term insurance policy that builds a cash reserve account similar to the cash value associated with whole life insurance. With a universal life insurance policy, the amount of premiums you pay is more than the actual cost of the term insurance. After the insurance company deducts its administrative expenses, the additional premium amount is allowed to build up for the policyholder. Then, the policyholder has the option of choosing either a fixed amount of death benefit to be paid to his or her beneficiary (the actual face amount of the insurance coverage) or a death benefit that increases (the face amount of the insurance coverage plus the cash value of the policy).

2-7

There are some special features to universal life insurance policies: The policyholder may pay premiums at any time in virtually any amount (up to certain levels). Payment of income tax on this cash reserve is deferred until the cash value is actually withdrawn. This cash value reserve can be used to borrow against for emergencies, to pay off a mortgage, for retirement income, or can be used to provide increased death benefits to the insured person's beneficiaries. However, because it is term insurance, the cost of a universal life policy will increase as you get older. b. Permanent (cash value). This insurance provides the same coverage for the entire life span of the insured person. There are participating and nonparticipating features in different types of permanent policies ranging from whole life to retirement insurance. Here are some of the ways this policy can be used: For loan purposes with the insurance company or a bank (the policyholder must pay interest on the loan to replace the cash value of the interest the company would have earned on that money if they had invested it themselves). The cash value of the policy is paid to the policyholder in cash should he or she decide to surrender the policy. c. Ordinary whole life. Whole life is also "permanent" (providing the same coverage for life) and you usually pay the same premium as long as you live, although some whole life policies let you pay premiums for a shorter period (such as 20 years or until age 65). d. Adjustable life. This type of policy protects through a combination of term and permanent coverages. The policyholder may "adjust" coverage by increasing or decreasing it as his or her needs increase or decrease by changing the amount paid as a premium (within certain limits), by changing the period of coverage, or even by switching coverage between the term and permanent life insurance aspects of a policy. e. Variable life. This is a form of permanent insurance where a portion of the amounts you pay as premiums is invested and the death benefit can "vary" by going higher than the original amount (depending on the earnings from your investment). f. Annuity and endowment. These pay a lump sum or income to you if you live to be a certain age, or pay a specified amount to your beneficiary if you die before then. Sorting out the differences between these types of insurance policies can be very confusing. You are learning a new but very important language! 2-8

The chart below will help you review the main differences between the various types of insurance. Table 2-1. Characteristics of Insurance Types TYPE UNIVERSAL FEATURES Cash reserves build from the amount you pay over the premium. The increase can be borrowed against or paid to the beneficiary. Policyholder can pay premiums at any time in any amount (with limitations). Income tax is deferred until the cash is withdrawn. The policyholder usually pays the same premium throughout the life of the policy (although sometimes he/she can arrange to pay a specified amount for a specified period of time). Covers whole life span. Premium can be borrowed with interest or paid to the policyholder upon surrender of the policy. Policyholder can "adjust" coverage to meet his/her needs by increasing or decreasing the premium amount or period covered. What "varies" could be the amount of death benefit or profits from the portion of the premium invested. Pay a lump sum or income to policyholder who lives to a certain age or after a certain amount is paid (or pays a beneficiary).

ORDINARY

PERMANENT

ADJUSTABLE VARIABLE ANNUITY AND ENDOWMENTS

2-9

Match each insurance type from column I with its special feature from column 2 by writing the letter of the special feature on the line before each type. Column 1 Type ___ 1. ___ 2. ___ 3. ___ 4. ___ 5. Ordinary Universal b. Variable Permanent Adjustable d. Because part of the premium is invested, the profits from this and/or the death benefit can vary. Covers whole life span. Usually pay same premium for life (or for a specified time period). Column 2 Special Feature a. Owner can increase or decrease (whole) coverage.

c. Builds cash reserves from amount paid over the premium.

e.

(1. b; 2. c; 3. d; 4. e; 5. a)

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2107. Choosing the Best Insurance Policy Before buying insurance, read the policy and understand the coverage you are buying. Make sure you consider the information in Table 2-2. Table 2-2. Insurance Purchase Considerations Know your insurance Make sure your insurance company is licensed with the state. If it is, rights the insurance commission can be helpful if a misunderstanding or dispute occurs between you and the insurance company. Insurance professionals can give you general guidelines about your rights when buying insurance. You can cancel or lapse a policy at any time, but you must pay the premium for the time the policy was in force. If your insurance company collects personal information about you, ask how it will be used. If your insurance company has incorrect information about you in their files that resulted in your being turned down for insurance, make sure it is corrected. Know the insurance company's rating Insurance companies are rated by independent rating services, such as Best's Insurance Reports (available in most libraries). A rating of "A" or better (A+ or A++) indicates financial stability and that the company is good on paying claims. Your insurance broker or state insurance commissioner can give you the rating. Use "A-rated" companies only! The amount of insurance you need depends on your situation, how old you are, marital status, number of dependents, income, etc.

Evaluate your needs

Read the free Federal "What You Should Know About Life Insurance" is a free publication government available quarterly. Contact: Consumer Information Center, Pueblo, publication CO 81009. Also, be aware that there are two types of insurance professionals: agents and brokers. a. An agent represents the insurance company. An advantage for using an agent is the insurance company must honor everything the agent promises you. A disadvantage is the agent can help you with just one company's policies. b. A broker sells a wide range of products from many companies. An advantage for using a broker is that he or she can help you compare many different policies and represents you, the consumer, not the interests of the insurance company. A disadvantage is the insurance company is not bound by the promises the broker makes to you. 2-11

2108. Determine the Amount of Life Insurance You Will Need Here are some money-saving tips: Shop around. Call at least three insurance agents. Make sure to ask each agent the same questions. Compare rates, ask about discounts and special rates. Read sources of information such as Consumer Reports. Purchase more than one kind of insurance from the same company (automobile, homeowner's, renters, etc.) Do not smoke; take care of your health. Carefully consider the reasons for adding riders or floaters to your coverage. Make sure your policy is guaranteed renewable. Decide how much life insurance you need. As you can see, picking a life insurance policy is a multifaceted problem. Since there are many factors involved in projecting the future economy (like inflation and recession) and one's future employment, there cannot be any fixed formula for determining the amount of life insurance a person should have--but, you could take one of the following approaches: multiple earnings, needs, or common sense. Table 2-3 will help you review the main differences between the various types of insurance.

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Table 2-3. Differences Between Insurance Formulas APPROACH Multiple Earnings DESCRIPTION Under this model the required amount of life insurance is a direct function of the insured annual income. One version of this approach multiplies current earnings by a factor of five and increases that amount by the value of the unpaid home mortgage plus $50,000 for each child living at home. EXAMPLE: A member with a spouse, two children in high school, $125,000 outstanding mortgage, monthly gross income (base pay, BAH) of $5,100. Required insurance: Salary: $5,100 x 12 x 5 = Outstanding Mortgage Balance Children: $50,000 x 2 = Total Insurance Requirements Needs

$306,000 125,000 100,000 $531,000

This technique of estimating insurance requirements examines the financial situation of the insured and considers other resources that may be available. While it takes more effort than the multiple earnings method, it produces an estimate specifically tailored to an individual's situation. The worksheet provides an outline for developing insurance requirements under the "needs" approach and explains the eight steps involved. (See the worksheet on page 2-14.)

Common Sense Calculates the future financial expenses of your family (like car, house, education). Based upon these expenses, you purchase the amount of life insurance you need. Use the life insurance calculation worksheet on page 2-16 to estimate your current and future insurance needs using the common sense approach. Try this situation to see if you remember how to calculate your insurance needs based on the multiple earnings approach: Situation: You are a sergeant with a spouse and no children. You have an outstanding mortgage of $63,000 and a monthly gross income (base pay, BAH) of $2,300. Using the multiple earnings approach, how much life isurance would you carry? a. $100,000 b. $138,000 c. $170,000 d. $201,000

(Answer: d)

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INSURANCE WORKSHEET (Needs Approach)

Step No. 1: Income for My Family When I Die. Determine the amount of income survivors have available: Military Death Gratuity Pay Back Pay and Allowances VA Death Benefit Payment Social Security Death Benefit Proceeds of SGLI/VGLI Insurance Policy No. ________________ Policy No. _______________ Other Sources of Income (explain) From ___________________ From __________________ From _________________ From __________________ Total Income Available to Survivors $___________ $___________ $___________ $___________ $___________ $___________ $___________ $____________ $____________ $____________ $____________ $_____________ Step No. 2: Expenses of My Family When I Die. Special Expenses (not continuing financial needs) Executor's Fund (Count of $5,000) Home Mortgage Payoff (1st Mortgage) Home Mortgage Payoff (2nd Mortgage) Funeral Expenses (Count on $5,000) Emergency Expenses (Count on $5,000) Auto Loans to be Paid Off Other Loans to be Paid Off (explain) For:_______________________ For:______________________ For:_____________________ For:______________________ Other Expenses (explain) For:_____________________ Total Expenses Upon My Death $__________ $__________ $__________ $__________ $__________ $__________ $__________ $__________ $__________ $__________ $__________ $____________

Step No. 3: Reconciliation of Family's Immediate Income Versus Immediate Expenses. immediate expenses-it does not provide for a continued source of $___________ income for their day-to-day, month-to-month living expenses. This will be the next greatest concern you will face. $___________ On the other hand, if the computation shows that your survivors $__________ will not have enough immediate cash available to cover their expenses, they will be in deep trouble and you'll need to take If the above "Income Minus Expenses" computation indicates immediate actions to ensure their financial security. that your family's income is enough to cover the immediate expenses they will face, your first concern about their financial Other than to immediately increase the amount of your life security well-being is satisfied, but remember, this only covers their insurance, there are very few actions you can take to provide a source of immediate funds, unless you have investments. Total Income Available to Survivors (from Section 1, above) LESS: Total Expenses Upon My Death (from Section 2, above) Excess Income Available Or Shortage (if shortage, show here in brackets)

Step No. 4: Information on Family's Insurance Policies Already in Force.

Policy No. Type Insurance Name of Insurance Company Beneficiary Face Value

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INSURANCE WORKSHEET, (Continued) (Needs Approach)

Step No. 5: Family's Monthly Income From: Surviving Spuse's Salary $___________ Survivor Benefit Plan Payments $___________ Dependency & Indemnity Comp. Payments $___________ VA Pension $___________ VA Benefits (explain) For Spouse: $___________ For Children: $___________ For Parents: $___________ Social Security Benefits: For Spouse: $___________ For Children: $___________ For Parents: $___________ Other Income (explain): For: ________________________ $___________ For: ________________________ $___________ Total Monthly Income for Family $___________ Total Monthly Income for Family $___________

Step No. 6. Family's Monthly Living Expenses. Rent Payment: $________________ Mortgage Payment $________________ Electricity/Gas Payment $________________ Telephone Payment $________________ Food $________________ Clothing $________________ Entertainment $________________ Transportation $________________ Loan Payments (explain) $________________ For: ________________________ $________________ For: ________________________ $________________ For: _______________________ $________________ Other Expenses: For: _______________________ $________________ For: _______________________ $________________ For: _______________________ $________________ Total Monthly Living Expenses $________________

Step No. 7. Reconciliation of Family's Monthly Expenses Versus Monthly Income. Total Amount of Monthly Income for Family While it appears they will be provided for, they should have an (From Secion 5 above) $___________ income "cushion" to guard them against emergencies, inflation, Total Amount of Monthly Expenses disasters, and the death of other family members. (From Section 6 above) $___________ Excess Income Available or Shortage On the other hand, if the computation shows that your survivors (If there's a shortage, show the will not have enough monthly income to cover their expenses, they amount in brackets.) $___________ will surely be in deep trouble and it is time to take immediate action to preclude this from happending. The quickest and least If the above monthly "Income Minus Expenses" computation expensive way to accomplish this is to immediately increase indicates that your family's monthly income (after your death) your insurance. Little can be done to protect your family after is enough to cover their anticipated monthly expenses, your you are gone - and you could be "gone" tomorrow! immediate concern regarding their financial security should be at ease.

Step No. 8. Determining How Much (If Any) Insurance You Need. After the above computations, you might find yourself in the fortunate position of having enough insurance to satisfy your present financial needs, as well as the needs of your survivors after you are gone. If this is the case, your family is indeed fortunate to have someone who cares so very much about their protection. By the same token, you might have determined that the amount of life insurance protection you are presently carrying will be insufficient to provide your family with the financial protection they will need and deserve. As your income level increases and you are able to place more money into sound investments which provide you the financial security you seek, your insurance needs might very well decline. But until you reach that "safety net," it is better to be safe than sorry! At the end of this study unit, you will find different methods of determining how much, if any, insurance you need. After reviewing the income and expenses your survivors would incur, it might be prudent to re-read this section of the lesson and take another look at your requirements.

Notes, Comments & Points to Check: ____________________________________________________________________________________________________________ ____________________________________________________________________________________________________________ ____________________________________________________________________________________________________________ ____________________________________________________________________________________________________________ ____________________________________________________________________________________________________________

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INSURANCE WORKSHEET (Common Sense Approach) Directions: Use this worksheet to estimate how much insurance you need. NEEDS Immediate Expenses Funeral Costs Uninsured Medical Costs Estate Settlement Costs Long-Term Needs Emergency Fund Repayment of Debts Family Living Expenses $__________ Homemaking Expenses (child care, house and lawn care, etc.) Education Fund Retirement Fund Other TOTAL NEEDS: ASSETS Current Life Insurance Any pension benefits $__________ Cash and Savings Equity in real estate (if it is to be sold) Investment (stocks, bonds, mutual funds, IRA, & Keogh plans) Social Security Survivor Benefits (monthly amount X # months) Other INSURANCE CALCULATION Total Needs Total Assets Life Insurance Needed AMOUNT $__________ $__________ $__________ $__________ $__________

$__________ $__________ $__________ $__________ $__________

$__________ $__________ $__________ $__________ $__________ $__________

$__________ $__________ $__________

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How many steps are in the needs approach? a. 3 b. 4 c. 8 d. 10

(Answer: c.) Lesson Summary. In this lesson you learned to talk the language of insurance, the timeframes of your SGLI and VGLI coverage, the typical options included in private insurance policies that you'll need to investigate as your separation or retirement draws near, and the three approaches you can take to determine your insurance needs. As you can see, insurance is an important consideration in your financial planning. Another important consideration is health and dental care for your dependents. You will cover these topics in the next lesson. -----------------------------------------------------------------------------------------------------------------Lesson 2. MILITARY HEALTH BENEFITS Military benefits are based on the need to maintain an effective, combat-ready force by rewarding those who have served their country and providing them with benefits and retirement pay based on their service. The system is meant to be attractive enough to encourage retention of highly qualified individuals to meet the military's needs. The military provides for the well-being of those who have served faithfully. As a Marine, you are entitled to many financial benefits. LEARNING OBJECTIVES 1. Identify the system that authorizes medical care for active duty, retired military, and their dependents. Identify the person whom most military hospitals employ to assist active duty and their dependents in using health care benefits. Identify the free hospital care facilities for Department of Defense (DoD) eligible persons. Identify the system that brings together the health care delivery systems and the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Identify the person to contact to enroll your dependents in the Family Members Dental Plan (FMDP).

2.

3.

4.

5.

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2201. Health Care Benefits Health care costs are drastically increasing. Fortunately, from your active service through retirement, you and your dependents are covered for both general medical and dental care. These are the options you have available to you: Health Benefits Advisor (HBA) Military Treatment Facility (MTF) Tricare Defense Enrollment Eligibility Reporting System (DEERS) Family Members Dental Plan (FMDP) The health care services provided to military personnel and dependents are complicated, but not impossible to use. Just like everything else, the more you know about how your health care services work, the better you will be at using the systems. 2202. Defense Enrollment Eligibility Reporting System (DEERS) DEERS is a computerized data bank maintained by DoD. Its purpose is to serve as the official record of eligibility for individuals receiving uniformed service benefits. Active and retired members are listed automatically, but members must initially report their dependents and any subsequent changes to dependent status (for example, birth, divorce, or marriage). Important papers needed for DEERS enrollment are: birth certificate and social security number. Registration in DEERS is absolutely critical to maintaining your official record of eligibility for health care treatment. PRIMUS and NAVCARE clinics and Tricare claims processors all use the system to verify specific eligibility. Questions regarding DEERS enrollment can also be directed to the DEERS Beneficiary Telephone Center at 1-800-538-9552; in California call 1-800-334-4162; in Alaska, Hawaii, or Puerto Rico call 1-800-527-5602. 2203. Health Benefit Advisors (HBA) To assist you and your dependents in using the health care services, almost every military hospital or medical facility employs HBAs. HBAs are consultants, but are not responsible for Tricare policies and procedures, and may have no authority to make benefit determinations or to obligate funds.

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2204. Military Treatment Facilities (MTF) MTFs provide free health care services for DoD active duty personnel, their dependents, and retired military personnel. MTFs are opertated by military personnel. First priority is the active duty member. All other DoD beneficiaries receive care on a space-available basis. MTF issues nonavailability statements, which may be required for civilian inpatient care and certain outpatient procedures. 2205. Tricare Overview Tricare is the DoD regional managed care program for members of the uniformed services and their families, and survivors and retired members and their families. Tricare brings together the health care delivery systems of each of the military services, as well as CHAMPUS, in a cooperative and supportive effort to better serve you and your family. All active duty members will be enrolled in Tricare Prime. All Medicare-eligible DoD beneficiaries, and those CHAMPUS-eligible beneficiaries who elect not to enroll in Tricare Prime, will remain eligible for care in MTFs on a space-available basis. Tricare introduces to beneficiaries three choices for their health-care delivery: Standard Extra Prime a. Tricare standard is a fee-for-service option which is the same as standard CHAMPUS. Annual deductibles under Tricare Standard and Extra are E-4 and below: ` E-5 and above: $150 for one person $300 for two or more $50 for one person $100 for two or more

Beneficiaries should check with their Tricare service center to determine if they need a nonavailability statement which may be required for civilian inpatient care and certain outpatient procedures.

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Tricare Standard benefits: Greatest flexibility in choosing health care providers. Most convenient when travelling or away from home. Enrollment not required. Space-available care in military hospitals, but at low priority. Pays for 80 percent of the approved or allowable cost. The disadvantage to Tricare Standard is its expense over all the other options. b. Tricare Extra offers a preferred provider option with discounts. The annual deductible is the same as for Tricare Standard. Tricare Extra benefits: Can choose any doctor in Tricare network. Is less expensive than Tricare Standard. Enrollment is not required. Can still seek space-available care in military hospital, but at low priority. Will pay for 85 percent of the approved or allowable cost. The disadvantage to Tricare Extra is it may still be expensive. c. Tricare Prime is an enrolled Health Maintenance Organization (HMO) option that provides guaranteed access to timely medical care. Tricare Prime benefits: Automatic enrollment for active duty personnel Priority for care at military hospitals and clinics Primary Care Manager provides and guides health care delivery Lowest cost for treatment among the three options Tricare Prime disadavantages: Requires enrollment for 1 year Retirees pay enrollment fee Retirees and their families must elect this option Very expensive to receive care outside Tricare Prime (Point of Service Option) Not available everywhere

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2206. Family Members Dental Plan (FMDP) Military dependents are covered for dental care through FMDP. As with Tricare, active duty Marines are not eligible for coverage since their treatment is free in military dental facilities. Your Health Benefits Advisor (HBA) or FMDP Customer Service (1-800-866-8499) can answer any questions you may have about the extent of your FMDP coverage and guide you through its related paperwork. FMDP benefits: Covers all types of professional dental services. Coverage ranges from 50 to 100 percent, depending on type of dental service. Low premiums with no deductible. Participating dentists will complete and submit your claim at no additional charge. Participating dentists are monitored to ensure a high level of quality in the service they provide. To obtain care in service hospitals or to have claims for civilian health care processed, all military members and their dependents must enroll in ______. a. Tricare b. HBA c. DEERS d. FMDP

(Answer: c.) Lesson Summary. This lesson introduced you to the range of health and dental benefits covering your dependents from the time you are actively serving through your retirement. These benefits are provided through Tricare and the Family Members Dental Plan (FMDP). Your Health Benefits Advisor (HBA) can give you updated and detailed information about both programs. These programs can save you money and time as long as you follow their procedures very carefully before getting treatment. Next, we will discuss your education benefits both during active duty and later under the G.I. Bill.

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Lesson 3. G.I. BILL EDUCATIONAL BENEFITS LEARNING OBJECTIVES 1. 2. Identify the agency that administers the educational benefits of the G.I. Bill. Identify the type of discharge that qualifies you for the educational benefits of the G.I. Bill.

In today's economy, the value of education is obvious. Yet, at the same time, educational costs keep spiraling upwards! The good news is that, as a service member, you have access to a tremendous cost-saving educational program called the G.I. Bill, which can help you during or after active service. 2301. G.I. Bill Programs The G.I. Bill is administered by the Veterans Administration (VA). Congress, through the G.I. Bill, authorized VA to pay tuition costs and some living costs for veterans enrolled in qualified colleges or training schools who maintain successful academic grades. There are three G.I. Bills currently in affect. The one that applies to you depends on when you entered the service. Table 2-4 shows which G.I. Bill applies to you. Table 2-4. Three G.I. Bills IF YOU ENTERED THE SERVICE... Between 1 Feb 1955 and 31 Dec 1976 Between 1 Jan 1977 and 29 June 1985 THEN... You are covered by the Vietnam-era G.I. Bill. You are covered by the Veterans Educational Assistance Program (VEAP). You are covered by the Montgomery Bill (Active Duty Educational Assistance Program). After 30 June 1985 Note: This program is available to some Vietnamera veterans still on active duty. However, specific conditions apply. For further information, contact your local education officer or VA representative. To qualify for G.I. Bill benefits, you must meet a minimum standard of discharge or separation when you leave the service to return to civilian life. This means your discharge must be "honorable." To receive maximum benefit, the participant must serve for 3 years.

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An individual may also qualify for the full benefit by initially serving 2 continuous years on active duty, followed by 4 years of Selected Reserve service, beginning within 1 year of release from active duty. The participant generally must have a high school diploma or an equivalency certificate before the first period of active duty ends. Completing 12 credit hours toward a college degree also meets this requirement. Individuals who initially serve a continuous period of at least 3 years of active duty even though they were initially obligated to serve less, will be paid the maximum benefit. Benefits under this program generally end 10 years from the date of the veteran's last discharge or release from active duty, but some extenuating circumstances qualify for extensions. Contact your nearest VA regional office for details about your benefits. 2302. G.I. Bill Benefits Table 2-5 compares the three types of G.I. Bill benefits: college/university degree coverage, cooperative training and remedial refresher programs, and tutorial assistance. Table 2-5. Types of G.I. Bill Benefits BENEFIT COVERAGE

College/university degree All or part of the cost for seeking an associate, bachelor, masters, coverage or doctorate degree (including overseas programs). Cooperative training and remedial refresher programs All or part of the cost for business, technical, or vocational courses leading to a certificate or diploma. Training in an apprenticeship program offered by a company. Correspondence courses. Flight training. Individual tutoring (for up to $100 a month) if you enter the school in the middle of the semester or later and if you have a deficiency. Note: Tutorial assistance has a maximum limit of $1,200. Also, the school must certify the specific tutor's qualifications and the hours of tutoring needed. The G.I. Bill can be used for obtaining most types of education or training. However, there are some restrictions.

Tutorial assistance

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The G.I. Bill is NOT payable for these types of courses: - Audited courses (or if taken and passed before) - Courses offered over the radio or open circuit television - Courses on subjects such as "bartending" and "personality development" Before you get into the details of using the G.I. Bill, take a minute to review the basic principles of the coverage it gives you, and consider how to apply them to the following question. If you decided to study abroad to learn another language (while learning about another culture at the same time), would the G.I. Bill pay your tuition? ____________________

(Yes, if the course of study would lead to an approved degree. You would need to check with your local VA office for advice.) 2303. General Procedure for Obtaining Educational Benefits Table 2-6 shows the steps to obtain educational benefits. Table 2-6. Obtaining Educational Benefits STEPS 1 2 3 4 PROCEDURE Select an educational program. Consult your VA representative at the regional office with jurisdiction over the state where you will attend school. Fill out the appropriate VA forms. Apply to the school. Once your course of study has been approved by your VA educational advisor and you establish eligibility with the school, you are ready to enroll. Once you start receiving benefits, comply with the standards of the school regarding attendance, conduct, and progress. Keep in touch with the VA to let them know of any changes as you go through your program.

5 6

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To review, the six steps to obtain educational benefits are listed below. Step 5 is incomplete. Please complete step 5! Step 1 - Select a program. Step 2 - Consult your VA representative (for the state where you will attend school). Step 3 - Complete the appropriate VA benefit forms. Step 4 - Apply to the school. Step 5 - Comply with ____________________________________________. Step 6 - Notify the VA of any changes.

(Step 5 - Comply with the standards of the school.) Before commencing any educational move, check with your local career planner and then your education counselor to map out a formal educational plan. Check to see if any of your military career experiences (such as attending formal schools or completing MCI courses) will earn academic credit toward a degree. You might be pleasantly surprised! Lesson Summary. In this lesson you learned about the educational benefits of the G.I. Bill, who is eligible; what the restrictions are; and the types of academic, vocational, and training programs covered. In lesson 4, you will learn about other VA benefits--more of your assets as a Marine. -----------------------------------------------------------------------------------------------------------------Lesson 4. OTHER VETERANS ADMINISTRATION (VA) BENEFITS LEARNING OBJECTIVES 1. 2. Identify the two types of disability pensions. Identify when a veteran's spouse would be entitled to burial in a national cemetery.

Regardless of whether you have a family of your own, or if you are currently on active duty, you need to factor several VA benefits into your plans. These include disability benefits, dependency and indemnity benefits, and burial benefits. Further, if you are a married veteran, you will qualify for VA financial aid for your spouse's and childrens' education, as well as a death pension for your surviving spouse.

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2401. VA Disability Pensions There are two types of disability pensions: a. Service-connected disability pension applies if you are disabled by injuries (or by diseases) incurred while serving on active duty. After separation from active duty, the veteran will usually qualify for monthly disability compensation, provided he or she was not separated or released under dishonorable conditions. The amount of this compensation is based on the veteran's percentage of disability, as determined by the VA. Amounts presently authorized are shown in table 2-7. Additional amounts are authorized for other severe disabilities such as loss of eyesight, limbs, vital organs, etc. Table 2-8 shows the conditions you must meet to get specific benefits and table 2-9 shows nonservice connected disabilities for which you may be eligible. b. Nonservice-connected disability pension applies if you are permanently disabled for a reason not traceable to your military service. Table 2-7. Service-Connected Disability Compensation Percentage of Disability 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Note: Monthly Pension $ 91 174 266 280 542 683 862 1009 1124 1870

A veteran having a 30-percent or higher rate of disability may be entitled to additional allowances for his or her dependents.

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Table 2-8. Service-Connected Disabilties CONDITIONS You were separated under honorable conditions. Disability is NOT the result of the abuse of alcohol or drugs. SPECIFIC BENEFITS Monthly compensation after separation from active duty. Note: Amount of compensation based on your percentage of disability as determined by the VA. Orthopedic or prosthetic devices provided, if necessary. If you die, or become a POW or MIA Survivors and dependents may receive funds for more than 90 days, or become disabled education or training. as a result of military service. Table 2-9. Nonservice Connected Disabilities CONDITION
You were separated under honorable conditions. You served at least 90 days during a wartime period. You have a limited income.

SPECIFIC BENEFITS
Pension

Note:

You must meet all three conditions to earn the pension.

Here is a situation to test your knowledge of nonservice connected disability: Mr. Edward Benson is a retired Marine who was honorably discharged in 1976. He lost his eyesight years ago because of an illness. He served two tours in Vietnam and now lives on a limited income. Does he qualify for a disability pension? __________________________________________________________

(Yes, because he meets all three criteria: an honorable discharge, at least 90 days service during wartime, and a limited income.) 2402. Dependency and Indemnity Benefits Because you are a veteran, your surviving spouse and dependent children are eligible for indemnity benefits if you die. a. Death due to service-connected disability (DIC) payments. The acronym "DIC" stands for "Dependency Indemnity Compensation." DIC payments are authorized for surviving spouses, unmarried children under 18 (as well as certain children considered "helpless" and those between 2-27

18 and 23 if attending a VA-approved school), and certain parents of service personnel or veterans who died from one of the following conditions: (1) Disease or injury incurred or aggravated in line of duty or while on active duty for training. An injury incurred or aggravated while on annual training for reserves. A disability otherwise compensable under laws administered by the VA. For these benefits to apply, death cannot be the result of willful misconduct.

(2) (3) Note:

b. Death due to nonservice-connected cause. Some surviving spouses and children (subject to the same restrictions as for DIC benefits) can even receive DIC payments of disabled veterans whose deaths were not the result of their service-connected disability. (1) If the veteran was continuously rated "totally disabled" for a period of 10 years or more or If the veteran was so rated for less than 10 years, then he or she must have been rated "totally disabled" for a period of not less than 5 years from the date of discharge from military service.

(2)

Payments under this provision are subject to offset by the amount received from any judicial proceedings brought on because of the veteran's death. Note: If death occurred after service, the veteran's discharge must have been under conditions other than dishonorable.

Take a moment to review by answering the following questions: Because you are a veteran, your surviving spouse and ______ are eligible for indemnity benefit payments when you die. (Answer: children/dependents) Situation: Bob and Ellen McDonald are applying for indemnity on their son Patrick who died last January during a training exercise. Are they qualified? ______________ (Yes. DIC payments are authorized for parents of service personnel or veterans who died from an injury incurred in the line of duty.)

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2403. Burial Benefits Veterans, service members, and dependents are eligible for burial in one of VA's 114 national cemeteries. An eligible veteran must have been discharged or separated from active duty under conditions other than dishonorable, and have completed the required period of service. Persons entitled to retired pay as a result of 20 years of creditable service with a reserve component are eligible. A U.S. citizen who served in the armed forces of a government allied with the United States in a war also may be eligible. The following are your specific burial benefits: a. Burial in a national cemetery. Veterans may be buried in any national cemetery. Furthermore, a veteran's spouse who did not remarry, a veteran's widow/widower, minor children and, under certain conditions, unmarried adult children also can receive this privilege. Arlington National Cemetery is under the jurisdiction of the Army. It has more limited eligibility than other national cemeteries. Eligibility for cremated remains in Arlington's columbarium is the same as eligibility for burial in VA national cemeteries. For information on Arlington burials, write to Superintendent, Arlington National Cemetery, Arlington, VA 22211 or call 703 695-3250. b. Burial in a private cemetery. A veteran can also choose to be buried in a private cemetery. In such cases, a certain amount is paid by the VA. c. Headstone or grave marker. A grave marker or headstone is provided and even shipped to the cemetery free of charge by the VA if the veteran's death occurred before November 1990. But, no headstone or gravemarker allowance may be paid for a veteran who died after October 31, 1990. d. Burial flags. An American flag is made available to drape the casket of an eligible veteran, after which it may be given to the next of kin, a close friend, or an associate of the deceased. The VA may also issue a flag for a veteran who is missing in action and is later presumed dead. (To arrange for a flag, you may apply at any VA regional office or most post offices.) e. Presidential memorial certificate. Presidential Memorial Certificates expressing the country's grateful recognition of a veteran's service in the armed forces and bearing the signature of the President are given to the next of kin of deceased eligible veterans or to the next of kin of persons who were members of the military at the time of death. f. Eligible recipients. This includes the next of kin (widow, widower, oldest child, parent, or oldest sibling), a relative or friend (upon request), or an authorized representative acting on behalf of such a relative or friend.

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g. Notice of a veteran's death. Normally, notice of a veteran's death is received at one of the VA's regional offices. That facility identifies the next of kin from the veteran's records and requests the Presidential Memorial Certificate from Washington, D.C. so the next of kin are spared that chore. (If there are no next of kin, interested friends should apply to a VA regional office to see if a certificate can be arranged.) h. Reimbursement of burial expenses. VA will pay a burial allowance up to $1,500 if the veteran's death is service-connected. VA also will pay the cost of transporting the remains of a service-disabled veteran to the national cemetery nearest the home of the deceased that has available gravesites. In such cases, the person who bore the veteran's burial expenses may claim reimbursement from VA. VA will pay a $300-burial and funeral expense allowance for veterans who, at time of death, were entitled to receive pension or compensation or would have been entitled to compensation but for receipt of military retirement pay. Eligibility is also established when death occurs in a VA facility or a nursing home with which VA contracted. Additional costs of transportation of the remains may be reimbursed. There is no time limit for filing reimbursement claims of service-connected deaths. In other deaths, claims must be filed within 2 years after the permanent burial or cremation. VA will pay a $150-plot allowance under the following circumstances: when a veteran is not buried in a cemetery that is under U.S. government jurisdiction; if the veteran is discharged from active duty because of disability incurred or aggravated in line of duty; if the veteran was in receipt of compensation or pension or would have been in receipt of compensation, but for receipt of military retired pay; or if the veteran died while hospitalized by VA. The $150-plot allowance may be paid to the state, if a veteran is buried without charge for the cost of a plot, or interment in a state-owned cemetery reserved solely for veteran burials. Burial expenses paid by the deceased employer or a state agency will not be reimbursed. When would a veteran's spouse be buried in a national cemetery? a. b. c. d. If the marriage lasted more than 10 years If the spouse did not remarry If this wish was documented in a (deceased) veteran's will If the marriage lasted at least 20 years

(Answer: b.)

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Suppose you died after leaving the military with a service-connected disability. What types of benefits might your spouse find himself or herself entitled to (after checking with the VA office)? Circle them below. financial medical educational burial

(Answer: Circle all except "medical.") Lesson Summary. This lesson contained a lot of legal language explaining some of the current benefits available to families of disabled and deceased veterans. The discussion covered whether any difference was made by such factors as the disability being a direct result of a service-related injury or not, and if the veteran had died as a direct result of the injury or not. The terms of your survivors' benefits are subject to change, so all "survivors" should know to check with their local VA office to find out exactly what benefits they are entitled to. -----------------------------------------------------------------------------------------------------------------Lesson 5. RETIREMENT PAY BENEFITS LEARNING OBJECTIVES 1. 2. 3. Identify the number of years of active service required to qualify for retirement pay. Identify which retirement plan would apply, given a retirement scenario. Calculate the monthly pay using the Retirement Table when given a retirement scenario.

2501. General Retirement Information Generally, to qualify for retirement, you must complete at least 20 years of military service (unless you retire for reasons of disability). It is always a good idea to know how to calculate your potential retirement pay. Note: Your retirement pay cannot exceed 75 percent of your basic monthly pay.

There are three general plans now in effect: the "final pay" system, the "high-3" retirement system, and the "two-tier" system (in addition to disability retirements which can be figured using part of the "two-tier" system). How many years you need to retire? ___________

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(Answer: 20) In previous years, it was a simple task for a service member planning a nondisability retirement to determine the amount of retirement pay he or she would receive for his or her active duty military service. However, over the past few years, two major changes have been made to military retirement pay. As a result, how you compute your retirement pay now depends on when you entered active military service. Table 2-10 shows when to use each retirement system. Table 2-10. Determining Retirement Pay Dates IF YOU ENTERED ACTIVE DUTY... Before 8 Sep 1980 Between 8 Sep 1980 and 31 July 1986 After August 1986 THEN COMPUTE YOUR RETIREMENT BENEFITS USING THE... Final Pay System (par a.) High-3 System (par b.) Two-Tier System (par c.)

2502. Calculate Your Retirement Pay Using the Final Pay System Table 2-11 shows how much of your pay you rate when you retire. Table 2-12 shows how to calculate your retirement pay using the final pay system.

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Table 2-11. Final Pay System Retirement Table

YEARS OF SERVICE 20 21 22 23 24 25 26 27 28 29 30 PERCENT 50 52.5 55 57.5 60 62.5 65 67.5 70 72.5 75

Note:

Your retirement pay cannot exceed 75 percent of your base pay. Table 2-12. Calculating Final Pay System STEPS PROCEDURE Multiply your years of service for retired pay by 2.5 percent. 20 years of service multipled by x.025 (=2.5%) 100 400 result .500 (=50%) retirement percent Multiply your basic monthly pay (for the grade in which you retire) by your retirement percent. Example: $2,000 your basic pay x .50=50% $1,000 your monthly retirement pay

Determine your retirement percent

Determine your monthly retirement pay

2503. Calculate Your Retirement Pay Using the High-3 System Table 2-13 shows what percentage of your base pay you would receive with the high-3 System. Table 2-14 shows how to calculate your retirement pay using the high-3 system. 2-33

Table 2-13. High-3 System Retirement Table YEARS OF SERVICE 20 21 22 23 24 25 26 27 28 29 30 PERCENT 50 52.5 55 57.5 60 62.5 65 67.5 70 72.5 75

Table 2-14. Calculating Retirement Pay Using the High-3 System

STEPS Determine your retirement percent. Determine your highest 3 years of active duty pay.

PROCEDURE Multiply the number of years of service by 2.5 percent. Example: $1850 year 18 average monthly basic pay $1950 year 19 average monthly basic pay $2200 year 20 average monthly basic pay

Compute your average monthly basic pay for these 3 years.

Example: $1850 + $1950 + $2200 = $6000 $6000 3 = $2000 average basic pay for highest 3 years of service

Determine your monthly retirement pay.

Multiply your average basic pay for highest 3 years by your retirement percent (2.5 x 22 years). Example: $2000 x 55% = $1100 your monthly retirement pay

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2504. Calculate Your Retirement Pay Using the Two-Tier System Table 2-15 shows what percentage of your base pay you would rate using the two-tier system. Table 2-16 shows how to calculate your retirement pay using the two-tier system. Table 2-15. Two-Tier Retirement Table Old Retirement (after age 62) YEARS OF SERVICE 20 21 22 23 24 25 26 27 28 29 30 PERCENT 50 52.5 55 57.5 60 62.5 65 67.5 70 72.5 75 New Retirement (before age 62) YEARS OF SERVICE 20 21 22 23 24 25 26 27 28 29 30 PERCENT 40 43.5 47 50.5 54 57.5 61 64.5 68 71.5 75

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Table 2-16. Calculating Retirement Pay Using the Two-Tier System TIER #1 Compute the first tier (what you will receive from the time you retire until age 62). a. Determine your retirement percent using the "new" retirement percents column of the retirement table shown in the chart (or multiply your years of service by 2.5% minus 1% for each year less than 20). b. Determine your average monthly basic pay for your highest 3 years' (36 months) salary during active duty. c. Multiply your average monthly basic pay by the "new" retirement percent. d. Round the amount DOWN to the nearest whole dollar. EXAMPLE: You have been working on your personal retirement figures. Compare your computations with these examples. Situation: Suppose you were a 43-year old GySgt with 20 years of active service. Your highest 3 years's (36 months) salary Upon reaching age 62, you will multiply your averaged $2050. The "new" retirement percent highest 3 years' (36 months) salary average by for 20 years of service is 40%. the "old" retirement percent for20 years of service, which is 50%. $2050 x 40% = $820 your monthly pension for the next 19 years until reaching age 62. $2050 x 50% = $1025 your monthly pension after reach age 62. 2505. Disability Retirements If you retire because of a disabling injury, you can usually choose to base your retired pay on your disability rating or your length of service. Table 2-17 helps you determine your eligibility. TIER #2 Compute the second tier of your retirement (what you will receive after reaching age 62). a. Determine your retirement percent using the "old" retirement percents column of table 2-12 (or multiply your years of service by 2.5%). b. Multiply that percent by your highest 3 years' (36 months) salary during active duty. c. Round the amount DOWN to the nearest whole dollar.

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Table 2-17. Disability Determination IF YOU CHOOSE TO BASE YOUR PAY ON... Your disability Your length of service THEN...

Multiply your basic pay by your disability rating (with 75 percent of your basic pay as the limit). Use the formula (final pay, high-3, or two-tier) based on the date you entered active duty. Note: If you are under the two-tier system, you are not subject to the 1 percent retirement penalty before age 62.

Check your understanding of retirement benefits by answering the following question. Suppose you joined the Marine Corps in June 1987 and you are now a Sergeant. You plan to retire (at age 40) in June of 2007 (with 20 years of active service). Which retirement plan will you rate to calculate your monthly retirement allowance? a. Final pay system b. High-3 system c. Two-tier system

(Answer: c) Lesson Summary. In this lesson you examined retirement pay systems available to you as a Marine. As with all the other entitlements and benefits, check with your local VA office to get the most current details affecting you or your family's benefits. Now, try answering the questions in the study unit exercise and see how much you remember.

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Study Unit 2 Exercise: Complete items 1 through 28 by performing the action required. Check your responses against those listed at the end of this study unit. Matching: For items 1 through 6, match the six insurance terms in column 1 with the brief phrase describing each in column 2. Select the ONE letter that identifies the best description for each term and place it on the blank before the term. Column 1 Insurance Terms ___ 1. ___ 2. ___ 3. ___ 4. ___ 5. ___ 6. Premium Beneficiary b. Policy Face amount Cash surrender d. Lapsed policy e. Person who is to receive the insurance proceeds when the insured dies Policy which has been terminated because premium payments have not been paid Amount available to a policyholder upon voluntary termination of a policy by the policyholder c. Amount which will be paid upon death of the insured Periodic payments for insurance paid by the policyholder a. Column 2 Definition Written contract or certificate stating the terms of the insurance contract

f.

7.

Describe the Servicemen's Group Life Insurance (SGLI). Who is eligible? When? Is it a term or whole life policy? ___________________________________________________ ___________________________________________________

8.

Describe the Veterans Group Life Insurance (VGLI). Compare it to the SGLI by stating who is eligible, when, and whether it is term or whole life insurance. ___________________________________________________ ___________________________________________________

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9.

Describe a term life insurance policy. What are the two special types? ___________________________________________________ ___________________________________________________

10.

Describe a whole life insurance policy. ___________________________________________________ ___________________________________________________

Matching. Match the type of insurance policy from column 1 on the left to its description in column 2. Column 1 Insurance Premium ____ 11. ____ 12. ___ 13. ___ 14. ____ 15. ____ 16. Universal life Permanent (cash value) b. Ordinary (whole life) Adjustable c. Variable d. Amnity endowment e. Coverage increases or decreases based on insured's needs Death benefit can vary by going higher than the original amount Provides the same coverage for the entire life span of the insured Builds a cash reserve Pays a lump sum or income to policy holder who lives to a certain age or after a certain amount is paid (or pays beneficiary) a. Column 2 Description Policyholder usually pays the same throughout the life of the policy premium

f.

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17.

Which of the following are the three formulas (approaches) to determine insurance needs? a. Multiple household Needs Tricare Multiple earnings Needs Common sense c. Multiple earnings Wants Tricare Multiple policies Desires Consumer sense

b.

d.

18.

The system that serves as the official record of eligibility for individuals receiving uniformed service benefits is ________. a. b. c. d. Military/Dependent Health Benefits System Military hospital or health facility within 75 miles Service Health Care Benefits Plan Defense Enrollment Eligibility Reporting System

19.

The system that brings together the health care delivery systems and CHAMPUS is ______________________.

20.

Who would enroll your dependents in the FMDP Plan? _______________________________________________________

21 .

Which agency administers the educational benefits of the G.I. Bill? _______________________________________________________

22.

What type of discharge qualifies you for all G.I. Bill benefits? _______________________________________________________

23.

Which of the following are the three types of G.I. benefits? a. College Compensatory training School assistance College Cooperative training Tutorial assistance c. Trade Cooperative training Math assistance Vocational Compensatory training English assistance

b.

d.

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24 .

What are the two types of disability pensions? _______________________________________________________ _______________________________________________________

25.

When would a veteran's spouse be entitled to burial in a national cemetery? _______________________________________________________

26.

How many years of active service are required to qualify for retirement pay? _______________________________________________________

Items 27 and 28 refer to the situation that follows. Read the situation carefully, then answer the items. Situation: Suppose you joined the Marine Corps in June 1987 and you are now a sergeant. You plan to retire (at age 40) in June of 2007 (with 20 years of active service). 27. Which retirement plan will you rate to calculate your monthly retirement allowance? _______________________________________________________ 28. In the situation above, if your highest average 36-month salary in June 2007 was $2,500, how much would your monthly retirement allowance be during the years before you were 62? _______________________________________________________ (Use this space to calculate)

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STUDY UNIT 2 SUMMARY In this study unit you read about Servicemen's Group Life Insurance (SGLI), Veterans Group Life Insurance (VGLI), private life insurance (term and whole life), some VA benefits, and retirement systems. In Study Unit 3, you will cover the concept of "planned" savings and suggest practical ways to implement savings into your financial plans. Study Unit 2 Exercise Solutions Reference 1. 2. 3. 4. 5. 6. 7. c. d. a. b. f. e. Term insurance on the group plan offered to all active duty service members when they first enlist (and for 120 day s after separation) Term insurance on the group plan offered to newly separated service members. It covers the period from 121 days after separation and is renewable every 5 years for the rest of your life. Provides protection for only a specific period (number of years) at certain cost. The full amount of the policy is only payable if death occurs. Provides the maximum amount of protection against your death for an indefinite period of time, or throughout your "whole life." c. f. a. d. e. b. b. d. Tricare Your S-1 or personnel officer 2102 2102 2102 2102 2102 2102 2103

8.

2104

9.

2105

10.

2105

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

2106 2106 2106 2106 2106 2106 2108 2202 2205 2206

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Study Unit 2 Exercise Solutions, continued Reference 21. 22. 23. 24. 25. 26. 27. 28. Veterans Administration Honorable b. Service-connected Nonservice-connected If the spouse did not remarry 20 years "Two-tier" $1,000 ($2,500 X 40% = $1,000 (a month)) 2301 2301 2302 2401 2403 2501 2504 2504

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STUDY UNIT 3 FINANCIAL PLANNING Introduction. So far you've learned about the papers that identify you financially, your need to plan for a will and insurance, and some of your government VA benefits including educational funds, disability insurance, and retirement pensions. Now you're ready to plan for your financial future--commitment to saving. Making a commitment to saving is not easy. Savings outlays are an expense and reduce your spendable income. Nevertheless, you should allot a portion of your monthly income towards savings. If you feel this is not possible now, perhaps a benefit of this course will be to show you how to manage your finances so you can implement a savings program in the future. Whatever your income, budgeting (including a sound savings program) should be a realistic and reasonable goal. What are your financial goals? How will you achieve them? This lesson introduces a fundamental approach to financial planning--saving. Budgeting and saving regularly will provide you and your family with financial security. This lesson describes the basic steps to develop a sound financial plan. Financial planning assistance is available to you if you need it. Lesson 1. PLANNING YOUR FINANCIAL GOALS LEARNING OBJECTIVES 1. 2. 3. 4. 5. 6. 7. Identify the three main activities in financial planning. Identify the equation for determining financial status or net worth. Identify the two general purposes of saving. Classify expenses as fixed or variable. Identify the basic steps to developing a budget. Identify the key to proper budgeting. Identify the two sources available for assistance in financial planning.

3-1

3101. Three Main Activities in Financial Planning The three main activities in financial planning are Evaluate your financial status Set financial objectives Plan your budget 3102. Evaluate Your Financial Status A financial plan is like a road map. First, you find out where you are. Then you find the best way to get where you want to go. Where you are is your current net worth, determined by the following equation: Assets - (minus) liabilities = net worth The best way to get where you want to go is to plan savings and budgeting strategies. To review, answer the following question: To evaluate your financial status, you must calculate your net worth, which is determined by your assets minus your ____________________________________________________. (Answer: Liabilities or debts) 3103. Two General Purposes of Saving The principle vehicle that actually takes you to your destination is saving. Saving has two general purposes: It enables you to achieve your personal financial objectives. It provides you and your family with a financial security blanket. Your savings security blanket can provide for emergencies or in case you become unable to support your family. What are the two general purposes for saving? ______________________________________________________________________ ______________________________________________________________________

3-2

(Answer: It enables you to achieve your personal objectives, and it provides a security blanket in case of emergencies.) Having a financial plan is essential, but a commitment to saving is the key to your plan. And a key part to successful saving is starting early. The earlier you start, the bigger the payoff down the road. 3104. Set Financial Objectives by Working Backwards Personal financial objectives consist of two types: short-term and long-term. Short-term objectives are the building blocks used to attain the long-term objective. Long-term objectives are things like buying a home, establishing a business, getting a degree, paying for college tuition, or affording an active retirement. Suppose your long-term objective was to buy a house. What steps would you take to achieve this goal? That is, what would be your short-term objectives? One way to uncover these short-term objectives is to work backwards. Thinking backwards in terms of time, what would you need to consider? These become your short-term goals. - You would need savings (a healthy bank account). - How would you get that? - Get a steady job with a steady income. - How would you get that? - Get education/training/certification/skills. - What is the first step toward getting qualified? - Get a realistic look at your abilities and background with your career planner. - What is the next step? - Enroll in courses or training. Your first short-term objective in this case would be to "enroll in courses or training." You don't have a crystal ball and these are rapidly changing times! So, be prepared to adjust even long-range plans. Take the time to figure out the details, because any time you don't have enough money, you will have to extend your timeframe. When your plans look as realistic as you can make them, then commit to them. Your decision to commit will be directly related to the degree of success you will have in reaching your goals and will give you the edge you need to succeed. What is one way to uncover the short-term objectives that lead to the achievement of a long-term objective called? _______________________________________________________________________ 3-3

(Answer: Working backwards) 3105. Classifications of Expenses Expenses may be classified in one of two ways: a. Fixed expenses are expenses that are the same or almost the same every month (such as rent or mortgage payments, car payments, installment payments on large purchases, utilities payments, and insurance premiums). b. Variable expenses are expenses that vary from month-to-month such as food, clothing, automobile expenses (gas and oil), entertainment, miscellaneous unbudgeted "necessities," and other unforeseen expenses such as medical emergencies, major home or auto repairs, etc. Determine which of the following are fixed or variable expenses: car payment_________ doctor____________ food__________

(Answers: Fixed, variable, variable) 3106. Plan a Budget A budget is a master plan for sound financial management. Your budget helps you set goals for spending (and saving) your money. The sample budget in table 3-1 shows how monthly income is allocated. Notice the three subheadings: net income, fixed expenses, and variable expenses. After that, you will see how to plan a budget step-by-step.

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Table 3-1. Sample Budget RECORD OF EXPENSES FIXED EXPENSES Rent/mortgage 525 Utilities: Gas Electric Water Telephone Auto payment Furniture/appliance Other (identify and list separately) VARIABLE EXPENSES Food 205 Auto expenses 105 Clothing 98 Necessities 100 a. 75 21 49 28 48 30 12 12 43 29 21 37 39 25 16 23 WEEK 1 $ WEEK 2 WEEK 3 WEEK 4 TOTAL FOR MONTH 525

_______ _______ _______ _______ _______ _______ _______

_______ _______ _______ _______ _______ _______ _______

_______ _______ _______ _______ _______ _______ _______

34 101 18 45 310 38 ---

34 101 18 45 310 38 --

The three basic elements of a budget are (1) Net income is your Marine Corps take-home pay (after taxes) and any other income (from a part-time job, earnings of your spouse, interest earned from savings accounts, etc.). Fixed expenses are expenses that are the same or almost the same every month (such as rent or mortgage payments, car payments, installment payments on large purchases, utilities payments, and insurance premiums). Variable expenses are expenses which vary from month-to-month such as buying food, clothing, automobile expenses (gas and oil), entertainment, miscellaneous unbudgeted "necessities," and other unforeseen expenses such as medical emergencies, major home or auto repair, etc.

(2)

(3)

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Use only your net income to prepare your budget because it is the amount you actually have available. Don't attempt to prepare a budget based on anticipated income. Use only income you are sure of. b. Your budget is a plan to spend, and, if properly prepared, it is a master plan for sound financial management. When you draw it up, it is a written agreement you have made with yourself. But first, how do you draw it up? c. Seven steps to developing a monthly budget (1) Determine your net income. Remember to use your take-home pay and any other income to calculate your net income. List your fixed expenses (such as rent, car payments, and insurance premiums). List your variable expenses (such as food, clothing, gas, and entertainment). Write down what you spend or plan to spend on each fixed and variable expense. Use records from previous monthly expenses to help you determine fixed and variable expenses. Remember that some expenses (such as car insurance, medical bills, or property taxes) may be yearly or semi-yearly expenses rather than monthly expenses and need to be factored in. Total your expenses. Add up your variable and fixed expenses for that month. Subtract total expenses from your net income (take-home pay). Determine the amount you can spend on saving. The remainder of your net income, after fixed and variable expenses have been subtracted, can be put towards savings. If the remainder for investing in savings is too low, look for ways to reduce your expenses. The phrase "spend on saving" may sound strange, but that is exactly how you should approach saving--as an expense. Pay your savings program just as you pay your other bills; it's the best way to ensure that you save consistently.

(2) (3) (4)

(5) (6) (7)

Part of planning your budget is to get realistic figures for your budget. You can do this by keeping an accurate record of your income and expenses for at least three consecutive months. You should give further consideration to fixed and variable expenses, since those recorded for a two-month period probably do not represent all your expenses. Other expenses may be due on a quarterly, semiannual, or annual basis instead of monthly. Also, you may encounter emergency expenses such as home repairs, automobile repairs, emergency leave, etc. Therefore, the key to proper budgeting is to keep complete and accurate records that take all known and foreseeable expenses into consideration.

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After computing, recording, and verifying your figures, you can now analyze your financial situation. Are you spending too much money on clothing or entertainment? Are your automobile expenses higher than you planned? Table 3-2 shows average expenditures for one person. It should help you see where you might be overspending, and where you can cut back to add to your savings. Table 3-2. Typical Expenditures
Expenditure Clothing Food Housing Medical Savings/Investments Transportation Other Percentage of Income 5% 15% 30% 5% 5% to 10% 15% to 20% 15%

Since you can easily see where you have overspent or overbudgeted, it will now be obvious to you which areas within your budget require adjustment or remedial action. On the other hand, if you are within your budget and have income in excess of your expenses, it would be wise to increase the amount of your income allotted to "savings" (assuming that the additional income can be applied toward savings on a regular basis). Otherwise, the additional income should be deposited to savings as it occurs. The temptation to spend the extra money as a "reward" for staying in your budget will be great, but must be avoided! Because of the rapid changes in today's economy, your budget must be reviewed and updated frequently, possibly every three months, to be accurate, realistic, and effective. Your budget is of no value unless you "live" within it! What is the key to proper budgeting? ______________________________________________________________________

(Answer: To keep complete and accurate records)

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3107. Develop Your Budget Do you remember the seven steps to developing a budget? If not, turn back to paragraph 3106. Use them to complete the following worksheet, then update your budget a minimum of every quarter (every 3 months). Table 3-3. Budget Worksheet Type of Expense FIXED Rent/mortgage Utilities Gas Electric Water Telephone Other (Identify) Auto Payment Furniture/appliance Insurance Premium Other (Identify and list separately) VARIABLE: Food Auto Expenses Clothing Necessities (laundry, barber, cosmetics, etc.) Entertainment Savings Other (Identify and list separately) Total Expenses _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ Amount You Spend

3108. Assistance Available in Budget Planning You have at least two sources of help in your financial planning. They include the following: Marine Corps Family Services Center The Navy-Marine Corps Relief Society

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a. The Marine Corps Family Services Center has a lot of excellent literature available. It frequently offers classes and offers individual counseling at some locations. Check with your center for further information. b. The Navy-Marine Corps Relief Society is a private, non-profit emergency relief organization. Its purpose is to provide temporary assistance to Marines and sailors, active duty and retired, and their family members or survivors in need. The society can guide you concerning whom to see, where to go, and what to do about your particular problem. Lesson Summary. This lesson pointed out the two general purposes of saving which are basic to your financial planning, and the key to proper budgeting. The next lesson will teach you how to choose a financial institution and savings program. -----------------------------------------------------------------------------------------------------------------Lesson 2. CHOOSING A FINANCIAL INSTITUTION AND TYPE OF SAVINGS PROGRAM

Introduction. How financially informed are you? Do you think CD stands for compact disc? Do you know how to select the financial institution and savings plan that's right for you; one that will enable you to achieve your long-term financial objectives? This lesson helps you select a financial institution that fits your financial plan and introduces some of the basic types of savings programs these institutions offer. Choosing a savings plan starts with researching financial institutions and the various savings programs they offer. Selecting the right financial institution can help you meet your current financial needs, and choosing the right savings program is the best way to insure your financial future. To make this important choice, you need to learn about the following three topics: Financial terminology Financial institutions Savings programs

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LEARNING OBJECTIVES 1. 2. 3. 4. 5. Match twelve important financial terms with their definitions. Identify four basic types of financial institutions. Identify three factors in choosing a financial institution. Identify five specific types of savings plans. Identify the minimum age at which an individual can normally withdraw funds from an Individual Retirement Account (IRA). Identify three types of electronic deposit systems. Identify the block numbers on an LES that indicate the amount deposited to your account under direct deposit.

6. 7.

3201. Financial Terms a. The three terms below pertain to interest. (1) Simple interest is an amount of money paid for the use of money, usually expressed as a percent of the principal amount. Simple interest is a straight percentage. For example, 5 percent interest on a $10,000 principal is $500. Accrued interest is interest which has accumulated but has not been paid to the lender. Compound interest is interest earned over a period of time and is periodically added to and becomes part of the principal. With compound interest, you make more money on your investment since your interest is added to your initial investment (the principal) and it, too, earns interest.

(2)

(3)

b.

The three terms below pertain to investments. (1) Maturity as it applies to investments (such as treasury notes, savings bonds, CDs, etc.) means the date when full earned payment is due you, the investor. A dividend is a payment in cash or stock to the owners (stockholders) from the earnings or capital of the company invested in. If you own stock in a company that makes a profit, your share of the profit (depending on how much stock you own) is paid to you as a dividend.

(2)

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(3)

Yield, as used in the financial market, is the annual net return on an investment expressed as a percent. The yield is your return on your investment. A $1,000 bond that pays $100 interest has a yield of 10 percent.

c.

The three terms below pertain to financial standing (managing debts). (1) Balance sheets are lists of a person's (or company's) assets, minus the liabilities, giving the net worth as of a certain date. Bankruptcy is the condition of a debtor who has been adjudged insolvent by a court of competent jurisdiction. If you are forced into bankruptcy, the courts decide how you will repay your debts. If your assets are greater than your liabilities, then you are solvent. To file for bankruptcy, you file a court petition saying you are insolvent, meaning you do not have enough assets to pay your liabilities. Solvency is the condition that exists when a person's (or company's) total assets are more than total liabilities.

(2)

(3)

d.

The three terms below pertain to property and loans. (1) An asset is something of value that is owned. You may have to put up one or more of your assets as collateral for a loan. Collateral is property or evidence of property that is given to a creditor to guarantee or provide security for the payment of a loan or debt. If you default on a loan (do not pay it back according to the agreement), the lender can seize and sell your collateral. A lien is a claim on property usually made to secure payment of a debt or fulfillment of some form of contract obligation.

(2)

(3)

Interest earned over a period of time and added to the principal is called _______________.

(Answer: Compound interest) 3202. Four Basic Types of Financial Institutions The four basic types of financial institutions are Commercial banks Savings banks Savings and loan associations (S&Ls) Credit unions 3-11

Table 3-4 lists each of these institutions and their advantages and disadvantages. You should consider these advantages and disadvantages when you choose where you want to place your savings. Table 3-4. Advantages and Disadvantages of Financial Institutions Financial Institution Commercial Banks Savings Banks Advantages Disadvantages

Offer the broadest range of lending, saving, and Offer lower interest rates and checking services and generally guarantee their many fees. interest rates. May have lower fees and more personal service. Have limited services and a They offer savings services with the possibility limited number of locations. of year-end dividends paid out on interest earned. Offer low-cost savings and checking services, often with good rates. Have lower lending rates and fees because they are not-for-profit. Earnings are paid out to members as year-end dividends. Have few branches and can be high risk. Most bank failures have occurred among S&Ls. You must be a member of a credit union; their charters prevent them from doing business with the general public. Have few branches.

Savings and Loan Credit Unions

Please read each of the following situations and choose the most appropriate type of financial institution--commercial bank, savings bank, S&L association, or credit union. Suppose you wanted your personal finances handled by an institution that offered lending, checking, and saving services. Which type would you choose? ______________________________________________________________________ Suppose you wanted to buy shares in a financial institution that didn't offer its services to the general public and charged a generally lower rate of interest for borrowing. Which type of institution would you choose? ______________________________________________________________________ Suppose you wanted to join a financial institution that offered a somewhat higher rate of interest and maybe offered dividends. Which type would you join? ______________________________________________________________________ (Answers: Commercial bank, credit union, and savings bank) 3-12

3203. Three Factors to Consider When Choosing a Financial Institution You may want your personal finances handled by an institution that offers lending, checking, and saving services. You may also want the convenience of many branches and ATMs (automated teller machines). You want a place to put your savings. You may want a better rate of interest than at a commercial bank and are interested in an institution that offers dividends. There are three main factors to consider when choosing a financial institution for your savings: insurance, terms and conditions, and customer service. Pick an insured financial institution with great service, good terms, low costs, and high interest rates. Make sure it meets your personal needs as well. a. Insurance. While most institutions offer insurance protection for their accounts, some state-chartered financial institutions are not required to carry such insurance. It is important that you choose a type of financial institution for savings that has insurance to protect your investment if it fails. Such insurance is usually provided by one of the following agencies: FDIC Federal Depositors Insurance Corporation SCUSIC - State Credit Union Share Insurance Corporation Note: Most insurance coverage protects only deposits. Check with your financial institution to see what insurance coverage it provides.

Financial organizations must pay a premium for insurance protection for their depositors. A financial organization that does not carry insurance will often pay a higher interest rate on savings accounts. However, at such an institution, savers have no protection from losing part or all of the money in their accounts if the financial organization defaults. b. Terms and conditions. Choose a financial institution that has terms and conditions that support your financial plan. The terms and conditions that financial institutions impose and/or offer customers are varied and change constantly. For instance, are canceled checks returned with the monthly statements? Can you arrange for automatic deposit of your paycheck? How about immediate credit on deposits? How about a loan or line of credit? What are the fees for these services? Sometimes you have to compare differences in rates, loan fees, and accessibility very carefully. But, remember, don't consider opening an uninsured account unless you are willing to gamble! c. Customer service. Customer service is the financial institution's way of providing you with personal service. Do they have many locations and automated teller machines (ATMs)? Are the hours of operation convenient? Can you bank from home or by phone? 3-13

Three factors you should consider when choosing a financial institution for your savings are insurance, terms and conditions, and ________________________________________.

(Answer: Customer service) 3204. Savings Plans Table 3-5 provides a comparison of the five major types of savings plans. It may help you make your decision. Table 3-5. Five Types of Savings Plans
Type Advantages/Disadvantages Description

Funds are immediately available for withdrawal Basic savings Advantage: Funds immediately or transfer to checking. However, you may not or traditional available account Disadvantage: Lower interest rates earn as much interest as with other types of savings programs, and interest earned on savings accounts is fully taxable. Certificate of Deposit (CD) Advantage: Earns higher interest rate than most savings accounts Disadvantage: You must keep funds in a CD for a specified time and penalized for early withdrawal. Advantage: Safe investment and high fixed rate of interest Disadvantage: Requires a minimum investment and funds are tied up for a specified term. Advantage: Same as treasury bonds; can be bought directly from a Federal Reserve or from brokers Disadvantage: You must wait until the bond matures (1-7 years) or interest is lost. Advantage: Earn a high rate of tax-deferred interest Disadvantage: Penalty for withdrawal before age 59 Earns a higher rate of interest than most savings accounts, but you must keep your funds in a CD for a specified term, such as 6 months or a year, and you pay financial penalties for early withdrawal. Safest program since the government backs your investment. They earn a high rate of fixed interest (the interest rates remain the same). But, a minimum investment is usually required and your funds are tied up for a specified term, usually at least 5 years, until the bond is mature. Offer the same advantages as treasury bonds, but they can be bought directly from a Federal Reserve Bank or from brokers. As with bonds, you must wait until the note matures (usually 1-7 years) or you lose the interest. Offer good interest rates and earnings are not taxed until you begin making withdrawals at retirement, when your income and therefore the tax you'll pay on it is lower. However, if you withdraw funds before age 59, you pay a 10 percent penalty plus taxes owed (unless you are permanently disabled).

Treasury Bonds

Treasury Notes

Individual Retirement Accounts (IRAs)

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After figuring your expenses, you have $500 left over for savings. You want to earn the most interest with the least risk, and you are confident you will not need the money for at least 2 years. Which savings plan makes the most sense for you? a. Basic savings b. CD c. IRA d. Treasury bond

(Answer: b) What is the normal age required to withdraw funds from an IRA account without penalty? _____________________________________________________________________

(Answer: 59 years) 3205. Setting Up Your Savings Account for Electronic Deposit In addition to other savings programs, you should have a basic savings account so that you can earn some interest on your money and have the money available immediately if you need it. A good way to put money into a savings account is through an electronic deposit system. This system allows the bank to automatically withhold a specified savings allotment from your paycheck and deposits it into your savings account. You can set up your electronic savings deposit in three ways: through "S" (savings), "B" (bond) allotment, or "direct deposit." a. "S" (savings) allotment. A set amount of money is withheld from your paycheck at the mid-month and the beginning-of-the-month paydays. This amount is automatically deposited to your savings account at the end of the month. b. "B" (bond) allotment. Many Marines purchase U.S. Savings Bonds by means of a "B" (bond) allotment deduction from their paycheck. There are many amounts and types of savings bond deduction plans. Obtain information about them at your administrative or disbursing office or from your savings bond representative. c. Direct deposit. Direct deposit is the U.S. Treasury's name for an electronic funds transfer system that transfers your salary directly to your checking and/or savings accounts. The direct deposit system is fast and reliable because it uses the Federal Reserve Distribution System.

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The three types of electronic deposit systems are "S" (savings) allotment, "B" (bond) aloment, and _____. a. Split allotment b. Income distribution c. Direct deposit d. Tax deferral

(Answer: c.) 3206. LES Block Numbers Indicating Your Direct Deposit Amount Check blocks 29 and 30 of your LES to be sure the amount you wish is being taken out of your paycheck. BLOCK 29 Amount of your pay for the 1st of the month BLOCK 30 Amount of your pay for the 15th of the month

If the actual amount of your pay varies $5 more or less from the amount in block 30, you will receive an "advice-of-deposit" notification. This will inform you of the deposit date and the amount that will be deposited in your account. Which blocks of your LES do you check to see what part of your salary was deposited after deductions? ______________________________________________________ (Answer: 29 and 30) Lesson Summary. In this lesson you learned some basic financial terminology, how to choose the type of institution for your savings needs, how to set up your savings account electronically, and how to select the type of savings program that will meet the financial goals you identified in lesson 1. Lesson 3 will teach you how to select a checking account plan and how to maintain your checking account. Remember to check out the institution of your choice carefully and get the scoop on terms and security of funds before depositing or investing a cent.

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Lesson 3. SELECTING AND MAINTAINING YOUR CHECKING ACCOUNT Introduction. The checking account is perhaps the most useful, and certainly the most used, item in an individual's financial arsenal. But few people keep their checkbooks in good working order. This lesson gives an overview of the three types of checking accounts and the three ways they may be set up, writing checks, preparing deposit slips, and (most important) balancing your checkbook. LEARNING OBJECTIVES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Identify the most important reason for having a checking account. Identify the three types of checking accounts. Identify three ways checking accounts may be set up. Identify correctly written checks. Identify correctly written check registers. Identify correctly written deposit slips. Identify the reason to keep deposit receipts. Identify the four types of check endorsements. Identify the steps to balancing your checking account. Identify the most important thing to remember about managing your checking account.

3301. Why Have a Checking Account? The most important reason to have a checking account is for safety, it is simply unwise to leave or carry large amounts of cash around! Also, in this day and age, it is highly impractical not to have a checking account. Once upon a time cash was the common method of payment, but, for many reasons, payment by checks has largely replaced payment by cash. Here are some other reasons to have a checking account: Convenience - Checks save time. You do not have to personally pay bills. Payments can be made anytime. Accuracy - Canceled checks are proof of payment. Using checks helps you keep within your budget since you record your expenses. 3-17

Establish credit - A checking account is a good reference when you apply for a loan, open a charge account, etc. Most adults have a checking account, but few maintain their account properly. Proper maintenance of your checking account enables you to Avoid unnecessary fees and penalties Track your spending habits Stick to your budget and savings plan Get the most mileage out of your money What is the most important reason to use checks? ______________________________

(Answer: It is unwise to carry large amounts of cash around.) Managing your checking account can be divided into three topics. Opening or setting up a checking account Writing and recording checks Balancing your account

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3302. Types of Checking Accounts Banks offer a variety of types of checking accounts. Three of them are described in table 3-6. Table 3-6. Types of Checking Accounts Type Regular Features No minimum balance necessary No interest paid on balance Usually a charge for check writing Monthly maintenance charge likely Minimum balance usually necessary Bank pays interest on balance Possible charge per check and monthly maintenance charge if balance falls below minimum Bank pays higher interest rate on balance Large minimum balance necessary No charge for check writing Possibly no monthly maintenance charge

NOW (Negotiable Order of Withdrawal) account Super NOW Account

3303. Types of Checking Account Services Banking has become a competitive industry which means you, the consumer, benefit. Today, banks offer many special services so be smart! Shop around before deciding where to put your hard-earned money. Two types of special checking account services offered by some financial institutions are Bill paying account. Funds are deposited in your account and the depositor requests the payment of specific amounts for various purposes. This permits you to earn interest on all of your funds except the portion that you request to be used for payment of specific bills. You can pay bills for fixed expenses (such as utilities, gasoline, and other credit card purchases, etc.) by telephone using special codes and numbers. Credit cards to back up checking. Checking accounts can be set up to allow certain credit cards to provide an emergency advance of funds to prevent an overdrawn checking account. This overdraft protection coverage has various names and different methods are used to apply for it Make sure you understand the repayment procedures and the type of interest rate charged if you choose this type of account.

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3304. Setting Up a Checking Account There are three ways you can set up a checking account. Accounts are set up according to who can write checks against them. Joint accounts. Two or more people are authorized to use the account. Many married couples use joint accounts. Individual accounts. Only one person is authorized to use the account. If you are single, you would probably have this type of account. Business accounts. One or more people are authorized to write checks for a company or organization. If a checking account has two signature cards (meaning two people are authorized to use the account), the account is termed a ______.

(Answer: Joint account) When you first establish your checking account, you will have to fill out a signature card. The signature card records your check-signing signature. Sign (or endorse) this card exactly as you would sign the checks in your checking account. Figure 3-1 shows a sample signature card.

Fig. 3-1. Signature card for joint account. 3-20

3305. How to Write and Record Checks Once you have opened your checking account, you must learn the correct procedures for writing and recording your checks. In short, you must know how to prepare three items: the check, the check register, and the deposit slip. a. The check. A check is a written order instructing the bank to pay money from your account to a payer. Figure 3-2 shows an example of a correctly written check.

Fig 3-2. Sample check. The circled numbers in figure 3-2 identify where to enter information. Follow them with their steps in table 3-7 to complete the check writing process.

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Table 3-7. How to Write a Check Step 1 2 Explanation Check number. The assigned sequential number of the check used in record keeping. Most checks have pre-printed check numbers. Date: Write today's date. Do not postdate checks. Postdating a check (writing a future date on the check) is a dangerous and illegal practice. Besides, the check may still be paid before the date, since bank scanners cannot read the hand-written date. Pay to the order of: Write the name of the person or business to whom you are writing the check. Amount in numbers: Write in numbers the amount to be paid. Amount written out: Write in words the amount to be paid. Any amount under one dollar is written as a fraction. To prevent anyone from altering your checks, extend a line all the way to the word DOLLARS. Memo: Write the purpose for the payment here. This will help your record keeping. Signature: Sign the check EXACTLY as you did on the signature card when you opened the account. Signing the check makes it negotiable or payable.

3 4 5

6 7

Important things to remember about writing checks: Always use ink to prevent anyone from attempting to alter it. Initial all changes. If you make an error, cross out the error, put in the correct information, and then initial the change. Void and rewrite the check if required. Keep track of voided checks. If you do void a check, file it with the canceled checks you receive with your bank statement, or tear it up and throw it away. Be sure to record it in your check register. When you want cash from your checking account, don't make a check out to "cash." Instead, make the check out to yourself. In that way, if you lose the check, no one else can cash it. b. Check register. When you write a check, use an ATM card to withdraw money from checking, or use a debit card to withdraw money or make a purchase, you must record the transactions in your check register. In the register you also record the date, amount of each deposit, and balance after you make each "deposit" (amount of cash and/or checks put into your account). Check registers have one of two types of entries. The double line entry is shown in figure 3-3 and the single line entry is shown in figure 3-4. The double line entry provides separate space to compute your addition or subtraction, whereas the single line entry expects you to compute in your head or on other paper. 3-22

As an example for both types of entries, let's assume that on 20 June you wrote a check to your doctor in the amount of $95 for your annual physical, and the following day you deposited $200 to your checking account. The circled numbers in figure 3-3 show where you would put the information in a double line entry.

Fig 3-3. Sample check register (double line entry). Notice that in the double line entry (figure 3-3), you wrote the amount of the transaction (check or deposit) on the first line in the balance column and you wrote the new balance on the second line. Looking at the circled numbers representing the same information in the single line entry (figure 3-4), notice how you would record the same transaction to the left of the balance column and the new balance on the same line to the right.

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Fig 3-4. Sample check register (single line entry). The circled numbers in figures 3-3 and 3-4 identify where to enter information. Follow them with their steps in table 3-8 to complete the check register. Table 3-8. Explaination of Check Register Entries Number 1 Explanation Number or transaction code: Record the number of the check here. This will help you keep track of checks and help you balance your account when the bank sends your statement. Date: Write the date of the check.

3 and 4 Transaction description: Write the name of the payee (the person or business to whom you are writing the check) here. If your register has two spaces (as many do), write the purpose of the check underneath the payee. The purpose information would likely duplicate what you wrote in the MEMO line of the check. 5 and 6 Payment/debit: Write the amount of the payment or withdrawal to be subtracted from your account. Some registers also provide space to record any fees (check writing or cashing fee, ATM fee). (Notice the dollars column is separate from the cents column.) 7 8 Deposit/Credit: Write the amount to be deposited to your account here. Balance: Compute your checking account balance by subtracting the amount of the payment/debit or by adding the amount of the deposit/credit. 3-24

Now that you've completed the check register, you must transfer the information directly to the check you are writing. This will ensure that you write the check exactly as the transaction appears in your register. c. Deposit slip. In addition to blank checks and a check register, your checkbook contains deposit slips printed with your name and account number. Deposit slips are used to itemize any cash and checks that you put into your account. When you make a deposit, make sure you retain the deposit receipt. It can serve as proof that you actually made the deposit in case the deposit doesn't appear on your bank statement. See figure 3-5 for a completed deposit slip and table 3-9 for its explanation.

Fig 3-5. Completed deposit slip with cash being received. The circled numbers in figure 3-5 identify where to enter information. Follow them with their steps in table 3-9 to complete the deposit slip.

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Table 3-9. Completing the Deposit Slip Number 1 2 3 4 5 6 7 Explanation Date: Write the date of the deposit here. Signature: Sign here if you plan to get some cash back from your deposit instead of depositing the full amount. Currency and coin: Write the amount of any currency (cash) or coins you are depositing. Checks: List each check separately and identify it by its source. Total: Total the amount of currency, coins, and checks you are depositing. Less cash received: Write the amount of cash (if any) you want back. If you want no cash back and want to deposit the full amount, enter a dash. Net deposit: Write the amount that is left after subtracting the cash you want back from the total amount of your deposit. This is the amount you will record in the Deposit/Credit box of your check register.

Why should you keep your deposit receipt after making a deposit into your bank account? a. b. c. d. FDIC regulations require it To use when preparing federal income taxes To prove that the deposit was made To submit all deposit receipts to your bank at year's end

(Answer: c) Complete and maintain all documents associated with checking accounts very carefully. Failure to do so or doing so carelessly could result in an overdrawn account or make it very difficult to trace a check you have written! 3306. Check Endorsements If you make your deposit using a check, you must endorse the check before the bank will accept it. To endorse a check, sign your name on the back exactly as it appears on the front of the check. Your endorsement must appear within the top inch-and-a-half of the left end of the check. There are four types of endorsements: A blank endorsement (which is your signature alone) should not be made on a check until you are at the bank and ready to cash or deposit the check. Otherwise, if you misplace the check and if it has a bank endorsement, anyone can cash it!

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To avoid the possible misuse of your check, make a restrictive endorsement. The restrictive endorsement contains the words "FOR DEPOSIT ONLY" with your signature below. A check endorsed in this way cannot be used for any purpose other than to deposit to a specified account. If you wish to transfer a check payable to you to another person or account, the proper endorsement would be the words "PAY TO THE ORDER OF (NAME OF THE SECOND PARTY)" with your signature below. This type is a special endorsement. Finally, if for some reason your name is misspelled on the check, attempt to have the check reissued to you. If this is impossible or impractical, you must first sign your name exactly as it appears on the face of the check (misspelled), and then sign your name correctly below it. Look at the comparison of these four types in figure 3-6.

Fig 3-6. Four types of endorsements. If you were given a check on which your name was misspelled (and you were not able to have the check reissued) how could you cash it? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

(Answer: First sign your name exactly as it appears on the face of the check and then sign it correctly below it.)

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3307. How to Balance Your Checking Account Balancing your account helps you manage your cash flow, control spending, and guard against over-drawing your account. You can also keep track of any fees you are paying for writing checks, using ATMs, etc. Since you should balance your checkbook monthly, make sure you have your checking account at a bank that sends monthly statements. These are the documents you need to balance your checking account: bank statement, check register, canceled checks and deposit slips, and reconciliation form. All of these forms are described in the following pages. Bank statement. See the sample statement in figure 3-7 on the next page. The financial institution will provide periodic "statements" (usually monthly) which list all transactions affecting your funds during that time, including your beginning and ending balances, all deposits made, all checks written which the financial institution has paid, and any service charges deducted from your account. These paid ("canceled") checks and your deposit slips are often included with the checking account statement when it is sent to you.

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Fig 3-7. Bank statement. Check register. Compare your bank statement with your check register to make sure the checks you wrote were cashed by the recipients. Having outstanding checks (those not yet canceled) can throw off your records. Also compare your canceled checks with your check register to detect any recording errors. Check to see if the balance you have in your check register matches the balance on the bank statement (at the time the statement was sent out).

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Canceled checks and deposit slips. Canceled checks are checks that have been paid. The canceled checks and your deposit slips are often not included with your checking account statement when it is sent to you. Reconciliation form. If there is a mistake on your bank statement, you should use a reconciliation form like the one in figure 3-8 to "reconcile" (balance) your checking account. One is usually printed on the reverse side of your monthly bank statement. Table 3-10 shows the steps to balance your checking account: Table 3-10. Steps in Balancing a Checking Account Step 1 2 3 4 5 Action Compare each transaction on your bank statement with your check register. Make corrections to your register as necessary. Take the closing balance number from the bank statement. Add deposits made since the bank closing date. Subtract withdrawals, fees, or checks written since the closing date. Compare the result to the check register.

Fig 3-8. Reconciliation form.

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3308. Maintain Your Checking Account The last and most important information you need to know about a checking account is that you must never write a check in excess of the amount of funds in your checking account! If you write a check on your account and do not have the money to cover it, the bank will return the check to the payee unpaid. The check will be marked "NSF" for "not sufficient funds," and is said to be a "bad check" or to "bounce." Most financial organizations assess a service charge for processing a "bad check," with a typical charge of $25 or more. And many will not allow you to ever write a check there again! Both the Marine Corps Manual and the Legal Administration Manual states that Marines are expected to pay their just financial obligations in a proper and timely manner. Writing a check on a closed account or writing a check when there are insufficient funds in your account to cover such a check are serious criminal offenses under both military and civilian law. Writing a bad check on base can lead to non-judicial punishment (NJP) and revocation of base check-writing privileges. In addition to the personal financial problems resulting from dishonored checks, these checks create an air of mistrust in the civilian community towards all Marines and thereby jeopardize check cashing privileges for other Marines and their dependents. Why is accuracy in all checking account documents so important? ______________________________________________________________________ (Answer: To prevent you from writing a bad check.) Lesson Summary. In this lesson, you learned how to select a checking account plan and how to set up and maintain the checking account.

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Study Unit 3 Exercise: Complete items 1 through 32 by performing the action required. Check your responses against those listed at the end of this study unit. 1. The three main activities in financial planning are evaluating your financial status, setting financial objectives, and planning your _____________. a. long-term objectives b. short-term objectives 2. c. d. budget savings

The equation for determining financial status or net worth is a. b. c. net worth = liabilities - assets. net worth = liabilities + assets. net worth = assets - liabilities.

3.

State the two general purposes of saving. a._____________________________________________________ b._____________________________________________________

4. 5.

One method of setting financial objectives is to work ____________. Automobile payment, rent, insurance, and utilities are all examples of _____ expenses. a. fixed b. variable

6.

State the key to proper budgeting. _______________________________________________________

7.

Your two sources for assistance in budget planning are _______________ and ________________________.

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Matching: For items 8-11, match the term in column 1 to its definition in column 2. Column 1 Term ___ more ___ ___ 8. ___ 10. 11. Accrued interest 9. Yield Solvency Collateral a. b. c. d. Column 2 Definition The condition when the assets weigh than the liabilites What has accumulated but not paid What you put up as security for a loan Annual net return on an investment (percent)

12.

List four basic types of financial institutions. a._____________________________________________________ b._____________________________________________________ c._____________________________________________________ d._____________________________________________________

13.

List three factors to consider when choosing a financial institution. a._____________________________________________________ b._____________________________________________________ c._____________________________________________________

14.

The five types of savings programs are IRAs, basic or traditional accounts, treasury bonds, treasury notes and _______________________. The minimum age you can normally withdraw frunds from an IRA is ______. List three types of electronic deposit systems. a._____________________________________________________ b._____________________________________________________ c._____________________________________________________

15. 16.

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17.

State the LES block numbers which indicate the amount deposited to your account under direct deposit. ________________________ What is the most important reason for having a checking account? ________________________________________________

18.

19.

What are the three types of checking accounts banks offer? a.____________________________________________________ b.____________________________________________________ c.____________________________________________________

20.

List two types of special checking account services offered by some banks. a._______________________________________________________ b._______________________________________________________

21.

What are the three ways you can set up your checking account? a._________________________________________________ b._________________________________________________ c.._________________________________________________

22.

Why would you not make out a check to "cash?" ______________________________________________________

23. 24.

The place you record the checks you have written is called the ______________. Why should you keep your deposit receipts for your checking account? _________________________________________________________

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Directions: Use the sample DEPOSIT SLIP, CHECK, and REGISTER provided below to complete items 25 through 27. 25. Suppose on 30 January 1993 you receive your Marine Corps paycheck for $350 and also receive a $10 check from Aunt Sally as a birthday gift. Correctly complete the deposit slip below to show these deposits.

26.

Enter the two deposits made (in item 25) on the register below.

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27.

Having made these deposits, on the next day (31 January 1993) you purchase groceries at Bestway Foods with a check (#101) for $53.18. Please fill out the sample check below for this amount and also enter this check into the register in item 26.

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Matching: For items 28 through 31, match each type of check endorsement in column 1 with the letter of the appropriate sample in column 2. Place answers in the spaces provided. Column 1 Type of Endorsement ___ 28. Blank
a.

Column 2 Sample

___ 29.

Restrictive

b.

___ 30.

Special

c.

___ 31.

Misspelled

d.

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32.

State the most important thing to remember about a checking account. ________________________________________________________

STUDY UNIT 3 SUMMARY As you can see, there are alot of factors (other than income) that enter into a personal savings plan. First, you must have a goal to maximize your chances for success. Then, take some time to visit and talk to various financial institutions about what they can do for you and your money. Find out about the financial institution before you deposit your money! As you learned in this study unit, there are always several account plans from which you may choose the one best for your needs. Once you choose an account, ensure that you understand what it means and can mean (its terms and conditions). Finally, if the financial institution you choose is not INSURED, remember you are taking a big risk. In the next and final study unit, you will learn financial aspects of making major purchases like motor vehicles and homes. Study Unit 3 Exercise Solutions Reference 1. 2. 3. c. c. a. b. 3101 3102 3103

4. 5. 6. 7. 8. 9. 10. 11. 12.

13.

14. 15.

Enable you to achieve your personal objectives Provide you and your family with a financial security blanket backwards a. to keep complete and accurate records a. Marine Corps Family Services Center b. The Navy-Marine Corps Relief Society b. d. a. c. a. Commercial banks b. Savings banks c. Savings and loan associations d. Credit unions a. Insurance b. Terms and conditions c. Customer service Certificate of deposit (CDs) 59 1/2

3104 3105 3106 3108 3201 3201 3201 3201 3202

3203

3204 3204

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Study Unit 3 Exercise Solution, continued Reference 16. a. Savings allotments ("S") b. Bond allotments ("B") c. Direct deposit Blocks 29, 30 It is unwise to carry large amounts of cash a. Regular b. NOW (Negotiated Order of Withdrawal) c. Super NOW a. Bill paying and b. Credit card a. Joint b. Individual c. Business If you lose it, no one else can cash it. Check register Receipt will serve as proof that you made the deposit 3205

17. 18. 19.

3206 3301 3302

20. 21.

3303 3304

22. 23. 24. 25.

3305 3305 3305 3305

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Study Unit 3 Exercise Solutions, continued Reference 26. 3305

27.

3305

28. 29. 30. 31. 32.

c. d. b. a. Never write a bad check

3306 3306 3306 3306 3308

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STUDY UNIT 4 FINANCING MAJOR PURCHASES Introduction. Any type of planning has these three phases: . . Determine where you are. Decide where you want to be. Plan how to get from here to there.

Now that you have a good idea of where you are financially now, you can decide where you want to be in the future and make your plans more specific. This study unit helps you practically plan for the types of hurdles that lay ahead. It will list and describe basic costs of credit and of buying a car or a house. You will learn where to go to borrow money and how to use credit wisely. Even if your main objective is not buying a car or a house, you must have a thorough understanding of credit because that's how you will probably pay for your biggest investments. Lesson 1. EXAMINING CREDIT LEARNING OBJECTIVES 1. 2. 3. 4. 5. Identify credit terminology. Identify two disadvantages of using credit. Identify six guidelines for using credit. Identify six suggested precautions to safeguard your credit cards. Identify general advantages and disadvantages to apply for a loan from three types of financial institutions. Identify three undesirable clauses that should be avoided when making a loan agreement.

6.

Credit means "buy now, pay later." Credit permits you to purchase goods or services as you need them, but pay for them over time. Uses range from "credit-card shopping" to arranging "loans" from financial institutions for very expensive items. Borrowing with credit is so popular in today's society that many of us could not imagine a world without credit--a world in which we would have to wait until we had saved the cash for such things as going to school or buying furniture, automobiles, houses, or other items. Our national and global economies are very dependent upon the availability of credit to consumers. 4-1

Lenders extend credit because, in return, they expect the original loan amount plus a finance charge for the use of the money. The amount of credit you can obtain depends on your net worth, your income, and your credit rating. 4101. Credit Terminology Before diving into this topic, become familiar with the fundamental terms of credit. APR (Annual Percentage Rate). This indicates the actual cost of a loan per year. It combines the interest charged and any fees. When comparing the costs of loans, use the APR. Credit line. This is the amount of credit a lender will extend to you. For example, a new credit card may come with a credit line of $1,000. Your credit line depends on your net worth, your income, and your credit rating. Credit rating. Your credit rating or credit history is a summary of your bill-paying behavior over a number of years. All creditors may submit bill-paying information to a credit agency. The credit agency then produces a credit report. Any place that you apply for credit can access the credit report. Finance charge. This is usually expressed as interest, a percentage of the original loan amount (called the principal). Installment credit. Installment credit allows a buyer to pay for a purchased item in regular installments, usually monthly payments. Since the goods purchased are used as security for the loan, the seller owns the goods until all payments are made. Interest. Interest is a charge for a financial loan, usually a percentage of the amount loaned. When using credit to make a purchase, always add the interest costs to determine the true cost of what you are purchasing. Open end credit. You promise to repay the full balance owed each month with no finance charge added if the bill is paid in full when due. Credit of this type includes some credit cards, such as American Express and Diner's Club, as well as utility and telephone bills, doctor bills, etc. Principal. This is the original loan amount. Interest is calculated on the principal. Revolving credit. This is a line of credit that may be used over and over again. The most common form of revolving credit is a credit card from Visa, MasterCard, or most department store charge accounts. With a revolving credit agreement, you have the option of paying the balance in full each month or making a minimum payment.

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4102. Determine If You Should Borrow and Use Credit Despite the Disadvantages The advantages of using credit include: It's convenient. It may be used to meet emergencies. It helps you establish a credit rating. You may get better service on an item. You can get earlier use of an item. Credit can also allow you to take advantage of bargains, as long as you need the item and you do not pay more in interest than you save on the item. There are two main disadvantages to using credit. You pay extra in interest and it is so easy to use, it encourages unnecessary spending! a. Interest costs. Because companies charge to lend you their money, always add interest costs to the cost of what you are investing in. For example, people with 30-year mortgages, in some cases, can pay triple for their houses. Banks and finance companies charge lower interest rates for large loans for cars and houses than other businesses that deal with time-payment plans like department stores and oil companies, or bank credit card companies such as VISA and Master Card; these sometimes charge 1 1/2 to 2 percent as a "finance charge" (interest) on the unpaid balance of your account per month. This doesn't sound like much, but when you compound it on an annual basis, 1 1/2 percent becomes 18 percent, and 2 becomes 24 percent! b. Impulse spending. Probably the biggest disadvantage of credit is that it's so easy to use, it encourages unnecessary spending. To avoid such spending, only carry your credit cards when you actually plan on purchasing an item or service on credit. What are two disadvantages of using credit? ______________________________________________ ______________________________________________

(Answer: Interest costs and impulse spending)

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4103. Six Guidelines for Using Credit If you decide to use credit, follow the guidelines listed in table 4-1. Table 4-1. Credit Guidelines ACTIONS TO TAKE Shop around Pay cash REASONS Find the lowest interest rate! Consider paying cash. Maybe the investment is not really necessary right now or you could save up and pay for it with one or two paychecks.

Ensure it's a wise investment Make sure it is a wise investment. It would be very discouraging to wind up paying for something outdated or worn out! Put as much down as you can Monthly limit Reduce debt The larger the down payment, the less your payments will be, and the fewer the number of months you must make payments, or both! Set monthly credit spending limits. Make sure the payment will fit into your budget! Always try to reduce debt. Resist the temptation to keep buying the most you can on credit! Instead, try to pay off debt in advance and even save the amount in your budget allotted to credit payments!

Can you summarize the guidelines for using credit in one or two sentences? __________________________________________________________ __________________________________________________________

(Credit guidelines are to shop for the lowest interest rate, consider paying cash, consider whether you are making a wise investment, pay as much down as you can, set a monthly credit-payment spending limit, and always try to reduce debt.) Look at table 4-2 showing comparisons between interest and payment periods. See how much more it would cost you to buy a car on credit for 48 months instead of 36? Sure, the payments are smaller; at 10 percent, they would be $490.56 instead of $385.52. But, you're paying an additional $845 for those smaller payments!

4-4

Table 4-2. Interest Comparison Chart PAYMENT PERIOD INTEREST 10% 15% 18% 20% 4104. Credit Cards The following types of cards are generally lumped into one category: Credit cards allow you to pay back what you borrow at your own pace, provided you pay the minimum due. Examples: Visa, MasterCard, Optima, Discover Time and Attendance (T&A) cards require you to pay the amount in full each month, but they do not charge interest. Examples: Amex, Diner's Club, Carte Blanche Debit work like checks, with the amount you spend automatically deducted from your account. Examples: Any bank debit card. (Note: not really credit, but you could forget to write the amount you take out in your register, so be careful that you do.) Charge cards offered by department stores and oil companies. They work the same as credit cards, but normally can be used only to buy products from the issuing company. Examples: Texaco, Sears, Pennys, etc. Although credit cards may be convenient, the danger of loss or theft requires you to take good care of them. An unscrupulous person could use your card and run up thousands of dollars of charges. Federal laws help protect you. A court can punish a person who illegally uses a credit card with a fine of up to $10,000 and confinement up to ten years. Table 4-3 lists some easy and sensible precautions you can take to safeguard your credit cards and protect yourself from credit card fraud. 36 MONTHS $17,660 18,969 19,783 20,336 PAYMENT PERIOD 48 MONTHS $18,505 20,305 21,432 22,202

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Table 4-3. Safeguard Your Credit Card PRECAUTION Sign your credit cards. EXPLANATION When you sign your credit card, anyone who finds the card will have to forge your signature to use it. Although this may not stop the illegal use of the card, it may act as a deterrent. Do not leave any cards lying around; make sure you have a special place to keep any cards you use and that you return them when done. Keep this list (including account numbers) in a safe place and check your cards against it to make sure none is missing! If the company does not require it back, cut it into little pieces and throw it away! Make sure the amount(s) is/are correct and that the total amount is in the "total" block. An unscrupulous person could use one of those carbons to make a card with your name.

Know where your credit cards are.

Keep a list of cards you use.

Get rid of any card you no longer use. Check your credit card slips. Ask for any carbons from your charge slip.

Which of the choices contains two of the six guidelines for safeguarding your credit cards? a. b. c. d. Check your credit card slip and ask for the carbons from your charge slip. Never obtain more than one credit card and know where it is at all times. Keep a list of your credit cards and use as many different cards as possible. Sign your credit cards and carry them with you always.

(Answer: a.) 4105. Loans A loan is a type of credit and is defined as a sum of money lent at interest over a period of time. Here are some terms you should know: Collateral is property used to secure the loan. For a lender to secure a loan using collateral, the borrower must make a pledge of property in case he doesn't repay the money borrowed. In most cases, the collateral is the property bought with the borrowed money. For example, when a loan is obtained to buy a house, the house itself is the collateral.

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Cosigner. For a lender to secure a loan using a cosigner, another responsible person makes a pledge, in writing, that he, the cosigner, is legally responsible to repay the loan if the borrower does not repay it. For example, when a loan is secured by a cosigner and the borrower defaults on the loan, the cosigner must repay the loan. When you apply for a loan, creditors have 30 days to respond to your application. They must give you a reason for denial. If it's based on information from a credit bureau, you can contact the bureau and receive a report on your file. Lenders look for the "3 C's" which are a. Character. Are you reliable? Do you pay your bills? You may be asked for references or the names of other creditors. b. Capacity. Is your income enough to pay the debt? What about other expenses?

c. Collateral. Do you have enough assets? (If collateral is not necessary, the loan is called an "unsecured loan.") When you take out a loan you sign a loan agreement that should state The total number of payments and their amounts APR and total finance charge Security agreement, if collateral is pledged A word of caution: avoid loans designed to consolidate your debts. Consolidation loans are intended to help consolidate many debts into one debt and should be avoided if at all possible. Your monthly payment for a consolidation loan may be smaller than the total of many monthly debts, but the loan often involves a longer repayment period, with possibly more total interest being paid. 4106. Choosing a Financial Institution For Obtaining a Loan Consider these factors when choosing a financial institution for obtaining a loan: Credit rating requirements Interest and fee charges Use table 4-4 to help you compare financial institutions for obtaining a loan.

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Table 4-4. Financial Institution Comparison TYPE Credit Union ADVANTAGES Possibly small down payment (on autos) Low interest rate Low interest rate Easy to obtain a loan (doesn't require as high a credit rating as other institutions) DISADVANTAGES May require a member to maintain a share balance equal to their monthly loan payment Requires a much higher credit rating than other institutions May have highest interest rates May have prepayment penalties

Commercial Bank Finance Company

What is the definition of collateral? a. b. c. d. A disclosure of payment schedule by the lender A pledge of someone who is legally responsible for a debt if you do not pay it A pledge of property made by the borrower to secure a loan A processing fee charged by the lender for conducting a credit check

(Answer: c.) You want to take out a loan, but do not have a good credit rating. Which financial institution would make it easiest for you to obtain a loan? ________________________________________ (Answer: Finance company) 4107. Loan Contracts Although federal laws provide some protection to you as a borrower, you need to know all the facts about your loan and understand your loan agreement. Here are some terms you should know: Promissory note. When you borrow money, the lender wants some assurance that you are going to repay the loan. Therefore, you must usually sign a "promissory note." This note is a written promise by you, the borrower, to pay the lender a sum of money, either when the lender demands it or at an agreed time. In addition to the promissory note, the lender may require the loan to be secured.

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Secured loan. A loan can either be "secured" or "unsecured." A secured loan provides protection to the lender. The protection is provided through the borrower pledging something of value as assurance that he will repay the loan. Whether the lender will require security depends on the amount you want to borrow and whether you are a good credit risk. Loans are usually secured through collateral or a cosigner. Truth in lending. The Consumer Protection Act, also known as the Truth in Lending Act, requires a lender to give full disclosure of all costs of the loan including: (a) (b) (c) The annual interest rate and the total amount of interest you will pay during the life of the loan. Any requirements for credit life or health and accident insurance. Any separate fees for investigating your credit or handling your loan.

If it is necessary for you to obtain a loan, you should be on guard for some undesirable clauses in your loan contract. Table 4-5 gives a list of undesirable clauses you need to be aware of. Table 4-5. Undesirable Clauses UNDESIRABLE CLAUSE Balloon payment DESCRIPTION Requires you to pay off the debt with a large final payment (after smaller early payments). The small early payments may look appealing, but if you cannot pay off the large one at the end of the contract period, you could lose the property that was security for the loan.

Prepayment penalty Describes how much you will be penalized for deciding to make larger clause payments to pay off your loan before the original term ends. (A penalty could really hurt if you wanted to sell your car, home, or furniture before moving to a new duty station!) Confession of judgment clause Also known as an acceleration clause, is a statement that legally admits you are in the wrong if you miss a single payment. In that case, you must immediately pay off the entire amount due or give up your legal rights. (Fortunately, these clauses are illegal in most states.)

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What is a promissory note? _______________________________________________________

(Answer: A promise by the borrower to repay the lender.) What are three undesirable clauses to avoid when making a loan agreement? a.______________________________________________________ b.______________________________________________________ c.______________________________________________________

(Answers: Balloon payments, prepayment penalty clauses, and confession of judgment clauses) Lesson Summary. Has this lesson given you food for thought? Do you think you can apply the guidelines for using credit to make practical decisions regarding what to use credit for and what to save for? Will you know which type of financial institution to apply to if you need to arrange for a loan? Do you know what kinds of clauses in a loan agreement to avoid? Don't forget to keep careful track of all your credit cards. The fewer cards, the easier (and safer) for you! In the next lesson you will learn about what to consider before purchasing a motor vehicle. -----------------------------------------------------------------------------------------------------------------Lesson 2. PURCHASING A MOTOR VEHICLE LEARNING OBJECTIVES 1. 2. Identify five extra expenses incurred when purchasing a motor vehicle. Identify two precautions to take when signing a buyer's contract for a motor vehicle.

Financing major purchases combines information you have seen in this course--setting goals and objectives, financial planning and budgeting, using credit wisely, and obtaining a reasonable loan from a reputable institution.

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Two major purchases for which you may need to use credit are motor vehicles and real estate. Before you buy a car or house, consider the extra expenses beyond the selling price. Make sure you understand how the financing works. In terms of taxes and insurance, the "motor vehicle" category legally includes cars, trucks, vans, motorcycles, recreational vehicles, and in some instances, boats. It is a fact that first-time car buyers think their car will cost only one-third of its full cost. Before you buy that red Camaro, you'd better plan for all the costs of ownership. Otherwise, that dream machine could make your life a financial nightmare. 4201. Five Extra Expenses in Purchasing a Car Listed below are the 5 extra expenses in purchasing a car that you must consider before "signing on the dotted line." a. Taxes (sales and personal property). When you buy a motor vehicle, many states require you to pay a one-time state sales tax to obtain the title registration and license plates. Your county, city, or state may also require you to pay a property tax at this time. Each of these taxes could be hundreds of dollars (based on the value of your vehicle), so be sure you find out the rate of taxation in advance and include provision for taxes in your budget. b. Registration. After purchasing your motor vehicle, you must register the vehicle with a state (normally the state of your permanent residence). This requires you to pay a registration fee, and in return, you get your vehicle's registration and license plate. Also, you may be required to pay an annual license renewal fee. c. Insurance. Insurance costs are high and rising. Insurance rates vary from state to state, but are usually higher for persons under the age of 25. Therefore, if you are in this age bracket, your insurance costs will probably be exceptionally high. Some types of insurance you should have when owning a motor vehicle are: (1) Personal liability. If you are personally at fault (liable) in an accident, the liability components of your policy protect you against bodily injury and property damages caused to third parties in the accident, including legal bills. The insurance covers repairs to other cars in an accident in which you are liable, but will not cover your car. Some states require this insurance, and will take your driver's license as well as fine you if they catch you without it. Comprehensive. This covers repairs for damage caused by weather (hail, flood, etc.) theft, or vandalism. Your lender will usually require you to have comprehensive insurance.

(2)

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(c) Collision. This covers the cost of vehicle repairs after an accident and insures the lender against the loss of his asset (the motor vehicle) in the event of an accident. Most lenders require this insurance, too. d. Repairs. When you own and operate a motor vehicle, you can be certain that sooner or later something is going to fail. A part that fails translates into costly component repairs or replacement. Sometimes these can cost more than the original purchase price of the motor vehicle. e. Operation/Maintenance. Now that you have figured in the taxes, registration, insurance and repairs, add in the actual costs of operating the vehicle. These costs depend on the number of miles you'll drive and the type of driving you do. Examples of these costs are oil, gasoline, tune-ups and tires. The cost to replace the four tires on your new red Camaro is approximately $422.00. Your car is going to get 11 miles to the gallon of gas, which means it is going to cost you approximately $28.00 to travel 200 miles. Consider all these facts before committing yourself to a 5-year loan! What five extra expenses will you have to add to your budget (beyond your monthly loan payment) when you buy a motor vehicle? a._________________________________________________________ b._________________________________________________________ c._________________________________________________________ d._________________________________________________________ e._________________________________________________________

(Answers: Taxes, registration, insurance, repairs, and operation/maintenance) 4202. Precautions To Take When Signing a Contract to Purchase a Motor Vehicle Whether you are buying a new or used car, examine your legal contract. If you have any questions, get legal assistance. Before purchasing a motor vehicle, always check the seller's record with a consumer protection organization such as the Better Business Bureau, a consumer fraud agency, or a state regulatory agency.

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Before signing, check that All verbal sales "promises" for any contract are written into it. Any blank spaces on the contract are crossed out (so the salesperson will not be able to add something later). In addition, when buying a USED motor vehicle, check to see that the dealer has placed a "Buyer's Guide" in the window with information about the following: a. b. c. Any warranty (or an "implied" warranty) coverage Your rights to inspection by a mechanic of your choosing Any potential problems to look out for in a used car

Do you remember what two things you should look for when signing any contract? a.___________________________________________________ b.___________________________________________________

(Answers: Any promises should be in writing and any blank lines should be crossed out) Lesson Summary. This lesson listed some areas to consider before purchasing a motor vehicle. As you can see, there is much more to buying a motor vehicle than driving it off the lot! The next lesson presents considerations for purchasing real estate.
-----------------------------------------------------------------------------------------------------------------------------

Lesson 3. PURCHASING REAL ESTATE LEARNING OBJECTIVES 1. 2. 3. Identify three family needs to consider before house-hunting. Identify three preliminary settlement expenses (in addition to mortgage payments). Identify five types of mortgages.

When purchasing a home, be prepared to make many big decisions and expensive commitments. Become informed and make your plans first! 4-13

4301. Consideration Factors in Purchasing a Home Here are some factors to consider when purchasing real estate: a. Savings plans. How much of your savings do you want to invest for the down payment and standard moving expenses (which can be very high)? Next, consider looking realistically at your prospects for income. If you are in a highly specialized field, can you reasonably expect to find work for the foreseeable future? b. Family needs. (1) (2) Location. What are your family's needs in terms of location? Community services. What types of community services do you consider necessary for your life style? Condition of property. How much work are you prepared to do on your house?

(3)

Exactly what is a mortgage? It is the monthly payment for the money borrowed to buy the real estate. This monthly payment includes interest charges, taxes on the property, and any insurance coverage. Think for a moment in terms of risk. If illness or some other type of disaster strikes, you could be unable to make a mortgage payment on time, or perhaps at any time. The wise and safe idea is to minimize the risk of losing your home by keeping a financial "cushion" and by careful planning. When you have considered all these factors, you will be able to compare types of mortgages and decide which is the best type for your personal financial situation. The three family needs to consider before house-hunting are location, community services, and ___________. a. b. c. d. Zoning restrictions Size of the property Condition of the property Real estate

(Answer: c.)

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4302. Consider Preliminary Settlement Expenses "Settlement" is the legal term for the meeting between you, your lawyer, the seller and his or her lawyer to transfer ownership of real estate. During settlement there are various costs that must be paid to finalize the purchase of the home. Prepare to pay these types of costs at settlement. a. Down payment. Amount of money that you pay up front toward the purchase of your home. The larger the down payment, the smaller your monthly mortgage payments. b. "Points" on mortgage loan. Points are up-front interest charges levied by banks and mortgage companies. One point represents one percent of the amount. Example: On a loan amount of $100,000, the bank might state an interest rate of "7.5 percent plus 1 point." In this case, the one point would be $,1000 and would be paid up-front, usually at closing. c. Closing costs. Miscellaneous charges, adding up to hundreds of dollars, for immediate taxes and legal fees and for establishing your escrow account. Your escrow account is used to pay future annual or monthly taxes and insurance. What are preliminary settlement expenses that you should be prepared to pay when you buy a house? ______________________________________________________ ______________________________________________________ ______________________________________________________

(Answer: Down payment, "points," and closing costs) 4303. Mortgages You must obtain a mortgage when you purchase a home on credit. A mortgage is the monthly payment for the money you borrowed to buy the home. Your mortgage payment includes interest charges, taxes on the property, and any insurance coverage. A mortgage is a long-term commitment. When you buy a home with a mortgage, it is risky. If illness or some other type of disaster strikes, you could be unable to make a mortgage payment on time, or perhaps at any time. The wise and safe idea is to minimize the risk of losing your home by keeping a financial "cushion" (remember your savings?) and by careful planning.

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The Veteran's Administration (VA) guarantees loans made to service members, veterans, reservists, and unremarried surviving spouses. VA guarantees loans made for the purchase of refinancing of homes, condominiums, and manufactured homes. VA guarantees part of the total loan, permitting the purchaser to obtain a mortgage with a competitive interest rate, even without a down payment if the lender agrees. VA requires a down payment for the purchase of a manufactured home. VA also requires a down payment for a home or condominium if the purchase price exceeds the reasonable value of the property or the loan has a graduated payment feature. With a VA guaranty, the lender is protected against loss up to the amount of the guaranty if the borrower fails to repay the loan. A VA loan guaranty can be used to Buy a home Buy a residential condominium Build a home Repair, alter or improve a home Refinance an existing home loan Buy a manufactured home with or without a lot Buy and improve a manufactured home lot Install a solar heating or cooling system or other weatherizaton improvements Purchase and improve a home simultaneously with energy-efficient improvements Refinance and existing VA loan to reduce the interest rate and make energy-efficient improvements Refinance a manufactured home loan to acquire a lot Eligibility: Applicants must have a good credit rating with an income sufficient to support mortgage payments, and agree to live on the property. To obtain a VA certificate of eligibility, complete VA Form 26-1880, "Request for Determination of Eligibility and Available Loan Guaranty Entitlement," and submit it to the nearest VA regional office. When shopping for a mortgage, a big question is, "How much can I afford to pay?" You must consider the following: Present and future housing needs. Consider your needs from now through the next 5 to 10 years, as this is the average turnover period in real estate. Amount of savings expenditure. While planning for mortgage payments you will have to make on your newly purchased home, you must consider how much of your savings you will want to invest for the down payment. Also, you must consider how much you can spend on normal moving expenses (which can be very high). Outlook for income. Be sure to look realistically at your prospects for income. Table 4-6 shows five types of mortgages and their descriptions.

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Table 4-6. Mortgage Types

TYPE Fixed rate DESCRIPTION Has a fixed interest rate and fixed duration of time. Both of these factors are determined by the lender and borrower at settlement. Two examples of fixed rate mortgages: 30 years at 7 percent interest 15 years at 8 1/2 percent interest Has a variable interest rate that is lower at the beginning, then gradually increases to a certain point, and then stabilizes. For example: a 5-year graduated payment mortgage could work like this Year 1 2 3 4 5-30 Adjustable Rate Mortgage (ARM) Assumable Balloon Percentage Rate 5 5 1/2 6 6 1/2 7

Graduated payment

Has an interest rate which generally begins at a lower rate and is adjusted at set time periods throughout the remainder of the mortgage--this interest rate can either increase or decrease, and is based on some type of monetary index. (ARMs have an annual cap and a lifetime cap.) With an assumable mortgage, you take over the previous owner's mortgage payments. The most undesirable kind of mortgage. At the end of the duration of the mortgage, there is one large payment for the original amount borrowed. For example, if you were to get a balloon mortgage for $100,000, your payments would be only for the interest until your last payment, when you would have to pay the whole principal of $100,000!

Which type of mortgage is used in this example: Buy a house for $100,000 with monthly payments of $600 (but still owe the entire $100,000 at the end of the loan)? ______________________________________________________

(Answer: Balloon mortgage)

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Lesson Summary. This lesson discussed the three family needs to consider before beginning your house hunt. You also covered the preliminary settlement expenses you can expect to incur during the process of buying real estate. In addition, the lesson presented the major characteristics of five types of mortgages that are available to finance your house. Now that you know all about the varied and complicated options available, you will hopefully make very careful decisions. If you take your time to study the details, you can only benefit. Now, try your hand with the study unit exercise and see how much you can remember. After that, the course has a review lesson exam to help prepare you for your final exam. Good luck! -----------------------------------------------------------------------------------------------------------------Study Unit 4 Exercise: Complete items 1 through 20 by performing the action required. Check your responses against those listed at the end of this study unit. Matching: For items 1 through 5, match the term in column 1 with its definition in column 2. Place your answers in the spaces provided. Column 1 Terms ___ ___ ___ ___ ___ 1. 2. 3. 4. 5. APR Credit rating Installment credit Principal c. Revolving credit a. Column 2 Definitions A line of credit that may be used over and over again b. The original loan amount A summary of your credit history d. The actual cost of the loan per year e. Allows you to make monthly payments

6.

List the two disadvantages of using credit (or borrowing). a. b. ______________________________________________________ ______________________________________________________

7.

Considering paying cash, deciding whether or not you are making a wise investment, paying as much down as you can, and setting a monthly credit payment spending limit are all guidelines to using credit wisely. What else should you try to do? a. b. c. d. Consolidate your loans into one big loan with one credit payment per month. Use credit to save your cash and postpone paying as long as possible. Reduce credit debt whenever you can by paying it off ahead of time. Renegotiate new and longer terms of payment.

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8.

Signing any credit cards you use, keeping a list of your credit cards, getting rid of any cards you don't use, checking credit card slips for errors, and asking for the carbons from sales slips when you charge are all precautions to safeguard your credit cards. Which one of the following is another? a. b. c. d. Keeping all your unsigned credit cards together Carrying all credit cards with you always Using various cards instead of just one Making sure you don't ever leave one of your credit cards lying around

9.

Lenders look for the "3 C's" which are ________, _________, and __________. a. Charisma Collateral Cosigner Charm Cosigner Capacity c. Character Capacity Collateral Cosigner Collateral Capacity

b.

d.

10.

If you were in the military and wanted to buy a new motor vehicle using a loan with a low rate of interest, and making a small down payment, which kind of financial institution would you probably apply to for your loan? a. b. c. d. Credit union Finance company Commercial bank Savings and loan bank

11.

List three undesirable clauses to avoid when making a loan agreement. a.______________________________________________________ b.______________________________________________________ c.______________________________________________________

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12.

List five extra expenses incurred when purchasing a motor vehicle. a.______________________________________________________ b.______________________________________________________ c.______________________________________________________ d.______________________________________________________ e.______________________________________________________

13.

List two precautions to take when signing any contract. a.______________________________________________________ b.______________________________________________________

14.

Two basic family needs to consider before starting your house hunting are the location of the house and the community services that are available. What is a third? a. b. c. d. Real estate company listing the house Zoning laws of the community Choice of available financing Condition of the property

15.

If you were at settlement and had paid your down payment, closing costs, points on the mortgage loan, homeowner's insurance premium, and utility deposits, you still would have to pay for your ____________ . a. b. c. d. real estate agent's commission system of credit sales tax escrow account

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Matching: For items 16 through 20, match the type of mortgage in column 1 with the letter of its description in column 2. Place your answers in the spaces provided. Column 1 Type of Mortgage ___ 16. ___ ___ ___ ___ 17. 18. 19. 20. Adjustable rate mortgage (ARM) Assumable Graduated Balloon Fixed rate mortage a. Column 2 Description Low interest rates but risky, because you pay the entire principal at the end of the loan. 30-Year loan, with a fixed interest rate and duration time. You take over the previous owner's mortgage payments. The interest rate is adjusted at set periods over the life of the loan. The interest rate starts low, but increases-for the first-time home buyer who expects to earn more later.

b. c. d. e.

STUDY UNIT 4 SUMMARY This study unit emphasized applying guidelines to using credit when you make major purchases. In lesson 1, you examined some basic considerations in obtaining and using credit. In lessons 2 and 3, you learned the considerations you need to remember when you purchase a motor vehicle and real estate. Study Unit 4 Exercise Solutions Reference 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. d. c. e. b. a. a. b. c. d. c. a. a. b. c. 4101 4101 4101 4101 4101 4102 4103 4104 4105 4106 4107

You pay extra in interest It is too easy to overspend-impulse spending

Balloon payment Prepayment penalty Confession of judgement 4-21

Study Unit 4 Exercise Solutions, continued Reference 12. a. b. c. d. e. a. b. d. d. d. c. e. a. b. Taxes Registration Insurance Repairs Operation/maintenance All verbal sales "promises" should be written in contract Any blank spaces on the contract should be crossed out 4201

13.

4202

14. 15. 16. 17. 18. 19. 20.

4301 4302 4303 4303 4303 4303 4303

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PERSONAL FINANCIAL MANAGEMENT REVIEW LESSON EXAMINATION INSTRUCTIONS: The purpose of the review examination is to prepare you for the final examination. When you are confident you know the course material, try to complete the review exam without referring to the text or other references. When you compete the review exam, compare your responses with the answer key provided. For any questions you missed, check the referenced pages and restudy those topics. Select the ONE answer that BEST completes the statement or answers the question. After the corresponding number on the answer sheet, blacken the appropriate circle. 1. Which of the following are the three categories of important papers? a. b. c. d. 2. Financial, entitlement, personal Life insurance, investment, estate Social security, registration, military Titles, deeds, mortgages

Who can direct you to the appropriate agency to locate a missing important paper? a. b. c. d. Legal Assistance Office Navy/Marine Corps Relief Circuit Court Police Department

3.

Where can you go for duplicating personal important papers? a. b. c. d. Libraries or commercial copying services Government offices Printing businesses or government offices Personal businesses

4.

What are the three most secure types of storage areas? a. b. c. d. Desk at home, office desk, safety deposit box Lawyer's office, office desk, special safe Legal assistance office, lawyer's office, special safe Special safe, lawyer's office, safety deposit box

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5.

What is the best and most complete definition of an asset? a. b. c. d. A motor vehicle A home Something of value which is owned Cash value

6.

What is the best and most complete definition of a liability? a. b. c. d. Tax bills Legal responsibility to pay a debt Mortgage commitments Credit card balances

7.

Choose the two sources available to you for legal assistance. a. b. c. d. S-1 office and company office Company office and legal assistance office Staff Judge Advocate's office and private attorneys Staff Judge Advocate's office and Navy and Marine Corps Relief office

8.

What is a will? a. b. c. d. Document to choose an executor after death Agreement to control your assets after death Document to describe an estate after death Legal declaration distributing a person's possessions as desired after death

9.

What is a power of attorney? a. b. c. d. Power to buy assets on behalf of a lawyer Power to substitute for an attorney Written instrument authorizing an attorney to act Written instrument transferring your legal authority to someone else

10.

The amount of money a policyholder must pay the insurance company periodically to keep the insurance policy in force is a/an ________. a. b. option premium c. incentive settlement

d.

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11.

An insurance policy that has been terminated because payments were not made is called a _______________ policy. a. b. limited universal c. lapsed temporary

d.

12.

A government-sponsored term insurance policy for all active duty personnel is called __________. a. b. DOD insurance SGLI c. d. VGLI Federal insurance

13.

A term insurance you may elect 121 days after separation from the service is called _______ . a. b. SGLI permanent c. VGLI indemnity

d.

14.

A life insurance policy that covers you for a specific time is called ________________ insurance. a. b. time term c. d. whole life specific

15.

An insurance policy that provides coverage for the entire life span of the insured person is called _______________ insurance. a. b. whole life medical c. d. term SGLI

16.

To receive care in service hospitals or to have claims for civilian health care processed by Tricare, all active duty and retired military sponsors and all family members have to enroll in the ___________. a. b. c. d. Defense Enrollment Eligibility Reporting System Military/Dependent Health Benefits System Service Health Care Benefits Plan Military hospital or health facility within 75 miles

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17.

The person who enrolls your family in the Tricare Active Duty Family Members Dental Plan (FMDP) is your ____________. a. b. c. d. dentist S-1/personnel office Health Benefits Advisor (HBA) field XO

18.

Which system brings together the healthcare delivery systems and CHAMPUS? a. b. c. d. S-1/personnel office Your doctor Military hospital personnel office Tricare

19.

Which agency administers the G.I. Bill? a. b. GI Administration DOD c. d. VA HUD

20.

What type of discharge qualifies you for all G.I. Bill benefits? a. b Good of Service Dishonorable c. d. Honorable General

21.

Name the two types of disability pensions. a. b. c. d. Limited, complete Divested, invested Service-connected, non-service connected Employed, unemployed

22.

A veteran's spouse would be entitled to burial in a national cemetery if the _______. a. b. c. d. Marriage lasted more than 10 years Spouse did not remarry a civilian Wish was documented in a (deceased) veteran's will Marriage lasted at least 20 years

23.

How many years of active service are required to qualify for retirement pay? a. b. 25 20 c. d. 15 10

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24.

If you were a sergeant who joined the Marine Corps after August 1986, which plan would you use to calculate your monthly retirement allowance? a. b. Final pay Two-tier c. d. High-3 Disability

25.

Using the retirement table below, what would your "first-tier" monthly retirement salary be if your highest 3-year salary averages $2,600 and you have completed 20 years of active service? a. b. $1140 $1100 c. d. $1045 $1040

RETIREMENT TABLE Old Retirement Years of Service 20 21 22 23 24 25 26 27 28 29 30 26. Percent 50.0% 52.5% 55.0% 57.5% 60.0% 62.5% 65.0% 67.5% 70.0% 72.5% 75.0% New Retirement Years of Service 20 21 22 23 24 25 26 27 28 29 30 Percent 40.0% 43.5% 47.0% 50.5% 54.0% 57.5% 61.0% 64.5% 68.0% 71.5% 75.0%

One main purpose for saving is to enable you to achieve your personal objectives. What is the other main purpose? a. b. c. d. Make sure you have enough funds in your account to buy a car. Have enough funds so you can go on vacation once a year. Enable you to provide a financial security blanket for emergencies. Make sure you avoid the high cost of interest charged for credit buying.

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27.

What is the key to proper budgeting? a. b. c. d. Use estimated, fixed, and variable expenses. Add a certain amount to cover any miscellaneous expenses. Make sure you have correctly estimated your income. Keep complete and accurate records.

Matching: For items 28 through 32, match each financial term in column 1 with the letter of its description in column 2. After the corresponding item number on the answer sheet, blacken the appropriate circle. Column 1 Financial Term 28. 29 30. 31. 32. Compound interest Solvency Simple interest Dividend Collateral Column 2 Description a. Evidence of property a debtor presents to a creditor to guarantee payment of a loan b. Payment to owners from the earnings of a company c. Amount of money paid for the use of money over a period of time d. Condition when total assets are more than liabilities e. Interest is periodically added to and becomes part of the principal

33.

What are four basic types of financial institutions? a. b. c. d. Mutual banks, allotments, credit unions, savings banks Commercial banks, savings and loan associations, savings banks, credit unions Finance companies, savings banks, credit unions, Navy Relief Disbursing, mutual banks, credit unions, savings banks

34.

Three factors to consider when choosing a financial institution for your accounts are terms and conditions, customer service, and _______. a. b. c. d. financial rating asset/liability ratio insurance electronic capabilities

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35.

Here are four of the most familiar types of savings accounts: basic savings, treasury bonds, treasury notes, and IRAs. Which is the fifth type? a. b. CDS Automated c. d. ATM IRS

36.

The minimum age at which you can draw funds from your IRA without penalty is ___. a. b. 55 59 1/2 c. d. 60 61 1/2

37.

Which of the following systems are electronic deposit methods? a. b. c. d. Income distribution, "S" (savings allocation), "B" (bond allocation) "S (savings allocation), "B" (bond allocation), direct deposit Income allotment, direct deposit, "S" (savings allocation) Checking, direct deposit, "B" (bond allocation)

38.

To verify the salary amounts and when they were deposited into your account, look at blocks ______ and ________ of your LES. a. b. 20 and 21 24 and 25 c. d. 29 and 30 39 and 40

39.

The most important reason for having a checking account is to ______. a. b. c. d. Keep a written record of expenditures Avoid carrying a large amount of cash around Simplify payment of financial obligations Organize a budget

40.

What are the three basic types of checking accounts? a. b. c. d. Commercial, residential, business Regular, NOW account, Super NOW account Direct, managed, tax-free Joint, individual, company

41.

One special checking account service offered by some financial institutions is a bill-paying account. What is another? a. b. c. d. Insurance account to pay to insure your funds IRS account to automatically pay your taxes Use of credit cards to backup checking account Special tax free account R-7

42.

Why should you keep your deposit receipts? a. b. c. d. You can add them up to estimate your taxes. To prove you made the deposit. You can use them to regulate your financial priorities. They will help you keep track of your checks.

R-8

43.

Of the three following deposit slips, which one has been completed correctly? a.

b.

c.

R-9

44.

Below are three pages from a check register. Which one has been properly maintained? a.

b.

c.

R-10

45.

Of the three following checks, which one has been completed correctly? a.

b.

c.

R-11

Matching: For items 46 through 49, match each type of check endorsement in column 1 with the letter of the appropriate sample in column 2. After the corresponding item number on the answer sheet, blacken the appropriate circle. Column 1 Type of Endorsement 46. 47. 48. 49. BLANK RESTRICTIVE SPECIAL MISSPELLED a. Column 2 Sample

b.

c.

d.

R-12

50.

What is the most important thing to remember about a checking account? a. b. c. d. You must never write a check in excess of the amount in your checking account. You can postdate a check if you know when you will have enough funds to cover it. Your checks are the safest and most convenient way to spend money! If you should lose your checks, your checking account funds will grow!

51.

One major disadvantage of using credit is that you pay extra in interest. Another is that it a. b. c. d. encourages unnecessary spending and debt. complicates your bookkeeping, and it becomes easy to make mistakes in computation. is expensive to write a lot of checks. is expensive to mail a lot of checks.

Use the five guidelines for using credit listed below to answer item number 52. Shop around (for the lowest interest rate). Consider paying cash (instead of charging). Consider whether or not the item is needed and will last. Pay as much as you can in the down payment. Set a monthly credit-payment spending limit. 52. What is the sixth guideline? a. b. c. d. Always strive to reduce debt (by paying off loans ahead of time). Consolidate your loans into one big loan with one credit payment per month. Use credit to save your cash and postpone paying. Renegotiate new and longer terms for credit loans.

Use the following list of five precautions to take to safeguard your credit cards to answer item number 53. Sign your credit cards. Keep a list of cards you use. Get rid of any card you no longer use. Check any credit card slip. Ask for any carbons from your charge slip. 53. Which of the following choices is the sixth precaution? a. b. c. d. Make sure you know where all your credit cards are located. Keep all unsigned credit cards together. Carry all your credit cards with you always. Use a variety of cards instead of just one.

R-13

54.

The type of financial institution that may charge the highest interest rate on loans is a __________. a. b. c. d. credit union finance company commercial bank savings & loan association

55.

When you enter into a loan agreement, it is wise to make sure these types of clauses are not in it: a. b. c. d. Annual interest rate, balloon, confession of judgment. Prepayment penalty, confession of judgment, accident insurance. Balloon, credit life insurance, loan handling. Balloon, prepayment penalty, confession of judgment (acceleration clause).

56.

When you purchase a motor vehicle, be prepared for these extra expenses: annual registration, operation/maintenance, insurance, repairs, and _________. a. b. taxes repainting c. d. road testing undercoating

57.

When you sign a buyer's contract for a motor vehicle, be sure that all verbal sales promises are written into the contract and that ____________. a. b. c. d. a lawyer is present a mechanic is present you use a pen with black ink any blank spaces on the contract are crossed out

58.

The three things a family needs to consider about a house it may wish to buy are the condition of the house, the community services that are available, and __________ . a. b. c. d. location of the property choice of available financing zoning laws of the community real estate company listing the house

R-14

59.

If you were at settlement and had paid your down payment and points on the mortgage loan, you still would have to pay for your __________. a. b. c. d. sales tax closing costs system of credit real estate agent's commission

Matching: For items 60 through 64, match the type of mortgage in column 1 with the letter of its description in column 2. After the corresponding item number on the answer sheet, blacken the appropriate circle. Column 1 Type of Mortgage 60. 61. 62. 63. 64. Assumable mortgage Balloon mortgage Adjustable rate mortgage (ARM) b. Fixed rate mortgage Graduated payment mortgage c. You take over the previous owner's mortgage payments The interest rate begins low and is adjusted at set periods throughout the duration of the mortgage; it can either go up or down based on a monetary index The interest rate starts low but increases to a certain point and stabilizes Fixed interest rate and fixed duration of time determined by the lender and borrower a. Column 2 Description Low interest rate but risky because you pay the entire principal at the end of the loan

d.

e.

LAST PAGE OF REVIEW EXAM

R-15

Review Lesson Solutions Reference 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. a. a. a. d. c. b. c. d. d. b. c. b. c. b. a. a. c. d. c. c. c. b. b. b. d. c. d. e. d. c. b. a. b. c. a. b. b. c. b. b. c. b. R-16 1101 1102 1103 1104 1201 1202 1203 1204 1205 2102 2102 2103 2104 2105 2105 2202 2203 2205 2301 2302 2401 2403 2501 2501 2504 3103 3106 3201 3201 3201 3201 3201 3202 3203 3204 3204 3205 3206 3301 3302 3303 3305

MARINE CORPS INSTITUTE COURSE EVALUATION QUESTIONNAIRE MCI 34.20e Personal Financial Management

Directions: This questionnaire is extremely important to the Marine Corps Institute. The course you have just completed has undergone extensive development and revision. As an integral part of the continued success of this course, YOUR HELP IS NEEDED. By completing this questionnaire, your responses may result in a need to review the course. Please take five minutes to complete the questionnaire and return it to MCI in the self-addressed envelope provided with your course materials. Additional comment sheets may be attached to this questionnaire. If you want to be contacted by the course instructor, please provide your name, rank, and phone number. Regardless of whether you want to be contacted or not, please enter your primary military occupational specialty (MOS). Information About YOU: Name (Optional) Rank MOS

Telephone Number (Optional) DSN Commercial (Area Code)

Information About the COURSE: 1. How long did it take you to complete this course including the review lesson examination? ___ Less than three hours If more than fifteen hours ___ Three to six hours enter number of hours ___ Seven to ten hours here: ______ ___ Eleven to fourteen hours Were the learning objectives stated at the beginning of each lesson clear? (Circle your response) a. Yes b. No

2.

If you circled "NO" please list below the study unit and lesson number for those unclear objectives.

MARINE CORPS INSTITUTE COURSE EVALUATION QUESTIONNAIRE Information About the COURSE (continued): 3. Did the figures, that is illustrations, photographs, tables, charts, etc., clearly support the information/text within the lesson? (Circle your response) a. Yes b. No

If you circled "NO" please list the figure or table number(s) below. ______ ______ ______ ______ ______ ______ ______ 4.

______

Did the exercise at the end of a lesson or study unit test your skills and knowledge gained by studying the lesson? (Circle your response) a. Yes b. No

If "NO" please list the exercise question/item number, the lesson number, and the study unit number below. (Attach additional sheet, if necessary) Question Number ______ 5. Lesson Number ______ Study Unit Number ______

When you read the lesson the first time, did it make sense to you? (Circle your response) a. Yes b. No

If "NO" please list the lesson number and/or paragraph number below. ______ ______ ______ ______ ______ ______ ______ ______ 6. Would you recommend that a revision be made to any portion of this course? (Circle your response) a. Yes b. No

If "YES", is your recommendation based on (check all that apply): ___ ___ ___ ___ 7. Outdated procedures or process. Outdated equipment or material. Information not accurate. Other (Please describe) Enter Study Unit Nos. ____ Enter Study Unit Nos. ____ Enter Study Unit Nos. ____

Comments: Please attach separate sheet.

Review Lesson Solutions--continued Reference 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. a. b. c. b. a. d. c. a. a. a. a. b. d. a. d. a. b. c. a. d. b. e. 3305 3305 3305 3306 3306 3306 3306 3308 4102 4103 4104 4106 4107 4201 4202 4301 4302 4303 4303 4303 4303 4303

R-17

MARINE CORPS INSTITUTE COURSE CONTENT ASSISTANCE REQUEST MCI 34.20e Personal Financial Management Use this form for questions you have about this course. Write out your question(s) and refer to the study unit, lesson exercise item, or the review lesson exam item you are having a problem with. Before mailing, fold the form and staple it so that MCI's address is showing. Additional sheets may be attached to this side of the form. Your question(s) will be answered promptly by the Distance Training Instructor responsible for this course. NAME RANK MOS

COMPLETE MILITARY ADDRESS (INCLUDING RUC IF KNOWN)

TELEPHONE NUMBER DSN YOUR QUESTION: COMMERCIAL (Area Code)

INSTRUCTOR'S RESPONSE:

MARINE CORPS INSTITUTE--STUDENT REQUEST/INQUIRY-MCI - R-11 (3/96)

MCI 34.20e Personal Financial Management SECTION 1. STUDENT IDENTIFICATION INSTRUCTIONS: Print or type clearly: (Section 1. Information is needed by MCI to act/respond to input provided in Section 2.) DATE: _______________

RANK

FIRST NAME MI. LAST NAME

MOS

RUC

SOCIAL SECURITY NO.

MILITARY ADDRESS (INCLUDE ZIP CODE) (Reservists may use civilian address)

SECTION 2. STUDENT REQUEST/INQUIRY INSTRUCTIONS: Complete only those sections requiring an action/response from MCI.

FROM: CHANGE NAME: RANK: SSN: RUC: NAME: RANK: SSN: RUC:

TO:

The following materials are needed: Lessons: Manual: Answer Sheets: Others: Final Exam Overdue: Lesson sent to MCI on ___________ Missing Diploma or Completion Certificate: The course or program was completed (day) ________ (month) ________ (year) ________ Exam sent to MCI on ____________

Request Extension _____ (Students are only eligible for one extension prior to their Course Completion Date (CDD))

Request Reenrollment _____ (Students are only eligible for reenrollment once and only after their CDD. If already reenrolled and disenrolled, a new enrollment must be requested)

Request New Enrollment ______

OTHER Requested Action:

AUTHORITY: Title 5, USC, Sec. 301. Use of your Social Security Number is authorized by Executive Order 9397 of 22 Nov 43. PRINCIPAL PURPOSE: The Student Request/Inquiry is used to transmit information concerning student participation in MCI courses. ROUTINE USES: This information is used by MCI personnel to research student inquiries. In some cases information contained therein is used to update individual student records maintained by the Marine Corps Institute. MANDATORY OR VOLUNTARY DISCLOSURE AND EFFECT ON INDIVIDUAL NOT PROVIDING INFORMATION: Disclosure is voluntary. Failure to provide information may result in the provision of incomplete service to your inquiry. Failure to provide your Social Security Number will delay the processing of your request/inquiry .