Careers
Financial Health and Management
In this presentation, finance expert Zareen Amber explains the fundamental principles of financial health management and its importance in achieving long-term goals. The primary focus is on credit scores, specifically how the FICO model evaluates a borrower's reliability through factors like payment history and debt levels. A critical strategy highlighted is maintaining a credit utilization rate below thirty percent to ensure a strong rating from major reporting agencies. To help viewers monitor their status, the source suggests utilizing digital tools like Credit Karma or Mint to track spending and manage budgets effectively. Finally, the author emphasizes the necessity of digital security measures, such as two-factor authentication, to protect personal information from identity theft.
Speaker:
Zareen Amber
About this Webinar
Beginner
Level
7
Minutes
Transcript
Hello everyone, my name is Zareen Amber and thank you for joining me for my presentation on financial health management. A little about myself: I've been a financial planning and analysis expert for over 12 years. I graduated from Babson College with a concentration in finance and entrepreneurship, and I've worked in the finance, pharmaceutical, and manufacturing industries. Now, why is financial health management important? Well, it's important at every stage in your life. A basic understanding helps you on the right path, and financial health gives you wealth. In terms of STEM, managing your financial health correctly allows you to fund STEM programs. How do we buy things like a car, a house, or go on a vacation? We do so by getting credit. Credit is basically agreeing to borrow money or purchase goods and services now with a promise to pay back later, often with interest to the lender. Most of us don't have the cash payment upfront, so we need to wait until the end of the month to have the money to pay for things. Lenders—like credit card companies (American Express, Visa), car dealerships (Ford, Toyota), department stores (Macy's), and banks—provide this credit. Lenders won't give you a loan unless they look at your credit score, which is basically your risk rate. It shows how well you manage your finances and credit history. Your score affects the terms and interest rates you receive. There are three major Consumer Reporting Agencies (CRAs): 1. Equifax 2. Experian 3. TransUnion Lenders most frequently use your FICO score (Fair Isaac Corporation) to determine credit risk. This score ranges from 300 (poor) to 850 (exceptional). The Five Key Ingredients of a FICO Score: 1. Payment History (35%) 2. Amount Owed (30%) 3. Length of Credit History (15%) 4. New Credit (10%) 5. Type of Credit (10%) Credit utilization is a very important part of managing your score. This is the amount of credit you use relative to your total limit. The "magic percentage" for credit utilization is 30%. For example, if you have a credit limit of $1,000, you should spend under $300. Even if you pay on time and in full, going over 30% utilization can lower your score. To manage this, you can: • Pay off all debt on time. • Increase your credit limit (e.g., if your limit is $2,000, keep spending under $600). • Open a new credit card to increase your total limit. • Monitor your usage using apps like Mint, Wallet Hub, or Credit Karma. It is also important to track your spending on food, entertainment, and bills to see where you can cut down. Finally, ensure you have financial security measures in place, such as dual-factor authentication and voice authentication. This protects you against identity theft, which can mess up your credit without you knowing.