Empowering Native People with Knowledge
In order to build and protect our assets, we must take control of our financial futures. To accomplish this, we must be armed with the knowledge to make informed financial decisions. Lakota Funds encourages our Native people to seek out resources that will help you build your personal financial skills and create wealth for your family today and future generations tomorrow.
Beware of Predatory Lenders
While we are working to create economic opportunity for our Native people, there are forces that continue to push low-income people further into the depths of poverty. Payday loans, title loans, and even rapid tax refunds are marketed as a quick and easy fix for financial problems, but they come with high interest rates and excessive fees that put a financial drain on families. These predatory lenders, often times located in reservation border towns, leave borrowers financially worse off with increased rates of bankruptcy, delinquency on other bills, and involuntary bank account closures.
Don’t Get Caught in a High-Cost Debt Trap
When facing the eyes of a desperate financial situation, a payday loan or title loan may seem like the only hope but there are other options. We urge you to steer clear of these predatory lenders.
Instead, focus on building an emergency savings fund. Even if you can only set aside $5 a month, you will be better prepared to handle an emergency vehicle repair or a higher than usual utility bill. Shifting into a saving mode will help you get out and stay out of the financial crisis mode.
In the event that you are facing a financial crisis and don’t have savings to cover upcoming expenses, we encourage you to look into the credit builder loan as an alternative to predatory loan products. Credit builder loans can be used to pay off debt and help build a positive credit history. Because they have a fair interest rate and a longer repayment term, it is easier to manage and doesn’t cause as much financial distress as predatory lending products.
Consumer Protection Financial Bureau
The central mission of the Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.
As such, they have designed an easy-to-use online complaint system. Consumers can fill out a form through the CFPB’s website to let them know about unfair lending practices.
Basics of Budgeting
Creating a financial budget is similar to how traditional Native communities managed resources. In traditional times, Native people dried buffalo meat to sustain their families through the winter and traded with other tribes to obtain items they did not have. The wise use of all of their resources was how Native communities thrived throughout the year.
In today’s modern economy, the same concepts still apply. If a person has a seasonal job, he saves his money to sustain his family through the winter. Today, money is our primary resource. Money provides goods that we do not have, such as electricity, food, and clothing. In order to wisely manage your resources today, it is important to create a budget.
Perceptions About Money
Before you begin budgeting, it is important to think about your financial culture and history. Ask yourself these questions to find out what your current relationship with money is like.
- What kind of feelings do you have surrounding money?
- How did your parents handle money?
- Did you ever save for items that you wanted as a child?
- Have you ever created a monthly budget and stuck by it?
- How do you feel about people that are financially successful?
Now that you have explored your relationship with money is like, what changes do you think you will need to make in order to have a bright financial future?
Developing a Monthly Budget
Your monthly budget will show how much money you have coming in (your income) and how much money you are spending (your expenses) each month. It will help you to identify items you need versus items you want. Needs are things you can’t live without, such as food and rent. Wants are items beyond your basic needs, such as going to the movies or eating out.
Sticking by your budget will help you stay out of debt and meet your financial goals. We offer a monthly budget worksheet to help you develop a spending plan that works for you. If you would like more help with your budget, please contact us.
Understanding Financial ToolsBanks and credit unions provide fundamental financial tools to help you achieve your goals. While many of our people have never had a savings account, we encourage our community members to utilize the tools banks and credit unions offer. Checking and savings accounts are useful tools to help you track your spending and stay on budget every month. Opening a bank account has many benefits:
- You know your money is safe.
- You don’t have to pay check-cashing fees.
- You can receive interest on the money you have in a savings account.
- Save time by paying your bills online.
Lakota Federal Credit UnionThe Lakota Federal Credit Union provides a variety of banking products and services to people who live, work, worship, volunteer, or attend school on the Pine Ridge Reservation. Find out how you can open a savings account at the Lakota Federal Credit Union. Learn More
Opening a Bank AccountOpening a bank account can be a critical step in helping you to manage your money and achieve your financial goals. While this is a fairly simple process, there are certain steps you will want to take.
- Choose an account type.
- Submit all necessary forms and documents.
- Make your first deposit.
Certificates of DepositCertificates of Deposit (CDs) are one of the safest forms of investment out there. A CD is a special type of deposit account that has a higher rate of interest than a savings account. When you purchase a CD, you commit to deposit a fixed sum of money for a fixed period of time. Typically, you can choose a time period anywhere from six months to five years. When you cash in your CD at the end of the time period you choose, you receive the money you originally invested plus any interest you accrued. Certificate of Deposit Tip: If you are going to invest in a Certificate of Deposit, make sure you can commit to the full amount of time. If you cash in on your investment before the maturity date, you may have to pay a penalty and forfeit some of your profit. To find out more about Certificates of Deposit, watch a short video produced by the Lakota Federal Credit Union. Watch Video
Other Safe InvestmentsInvesting your money is a way to gain a financial return and make a profit. But with so many investing options, it can be tricky. In the aftermath of the financial crisis most people felt that there weren’t any safe places to invest your money. The key thing to remember about investments is to weigh your risk and return. Pretty much every investment has some kind of risk level, whether it is very low or very high. Usually high-risk investments have a high return, and low risk investments have a lower return. While high-risk investments do have a greater return, you also have a higher chance of losing money rather than gaining a profit. Going with a low-risk investment won’t get you as big of a profit, but you have a much lower chance of losing money. The primary goal of low-risk investments is to protect what you have rather than earn a high return. You have to decide for yourself what kind of risk you are willing to take. Following are a few types of low-risk investments that are considered safe: Money Market Account A Money Market Account is like a savings account but it pays higher interest rates and usually has a higher minimum balance requirement. Also like savings accounts, Money Market Accounts allow you to make withdrawals anytime you want, but you might be limited to the number of withdraws per month. You will earn interest on the money you leave in your account. Retirement Accounts If you are earning income now, there will be a day when you retire and won’t be earning as much money. The best thing to do is open a retirement account as early as possible to start investing in your future now. If you are able to start contributing $1,000 per year beginning 40 years before you retire, and your money earns 10% annually, you will have over $500,000 by the time you are 65 years old. The most common types of retirement accounts are the Individual Retirement Account (IRA) and the 401(k). Retirement Account Tip: If you open your retirement account through your employer and they offer a match, contribute the maximum amount. This is essentially free money that will gain interest and help support you into your retirement years.
Credit as an Asset
In today’s economy, a credit score is a valuable financial asset. Poor credit can often be a barrier that keeps people from accomplishing their financial dreams. Many people do not realize the side effects of a poor credit rating or don’t think having a good credit rating is important. These days, poor credit can impact virtually every aspect of your life. Whether you are consistently late paying your auto loan or over the limit on your credit card accounts, a derogatory credit report can limit your lifestyle and create a barrier to your personal goals.
Following are some of the affects you may feel:
- Trouble Getting Loans Approved
- High Interest Rates
- Security Deposits on Utility & Cell Phone Service
- Difficulty Securing Rental Housing or Employment
- Higher Insurance Premiums
- Decreased Mental & Physical Health
To find out more about credit and how to use it as an asset, click below to download a resource worksheet.
Know What Your Credit Score Means
Sometimes known as your “financial GPA”, your credit score helps mortgage lenders, car loan companies, credit card companies, cell phone companies, landlords, and employers determine your credit worthiness. Your score is based on your rating in five general categories: payment history, total indebtedness, length of credit history, new accounts and credit requests, and your credit mix.
What is a Credit Report?
A credit report is a record of your credit activities – for example, any credit card accounts or loans you may have. Your credit report is a summary of these accounts, their balances, and how regularly you make payments. It also shows any delinquent bills.
Credit bureaus collect and store information that appears on your credit report. There are three major credit bureaus that operate nationwide, including Experian, TransUnion, and Equifax. Credit bureaus provide information to current or potential creditors, current or potential employers, current or potential insurers, government agencies that may provide you with benefits, and even potential landlords. The organizations or companies that receive your credit report use it to make decisions on things such as whether or not they want to do business with you or what kind of rates they will charge you.
In general, the information on your credit report stays on your report for seven years. If you file bankruptcy, that stays on your report for 10 years.
Obtaining a Copy of Your Credit Report
Since your credit can affect so many critical aspects of your life, such as housing, employment, and getting a loan, it is important that you regularly review your credit report. You are entitled to one free credit report every 12 months from each major credit bureau. Your credit report can be requested online at www.annualcreditreport.com or by contacting the companies directly by phone or mail.
Keep in mind that your credit report can be different at each bureau, so it is a good idea to request copies from each one. It has been suggested that you view your credit report three times a year, once from each major bureau.
P.O. Box 105873
Atlanta, GA 30348
Experian (formerly TRW)
P.O. Box 2104
Allen, TX 75013-2104
Consumer Disclosure Center
P.O. Box 1000
Chester, PA 19022
(800) 916-8800 or (800) 888-4213
Components of a Credit Report
Usually there are four types of basic information contained in your credit report:
Your full name, any known aliases, current and previous addresses, social security number, year of birth, current and past employers, and, if applicable, similar information about your spouse.
The accounts you have with banks, retailers, credit-card issuers, utility companies, and other lenders. Accounts are also identified by type, such as mortgage, student loan, revolving credit, or installment loan. The date the account was opened, how much you owe, your credit limit, any co-signers, status of the account and your payment pattern over the past two years is also listed.
Public Record Information
State and county court records on bankruptcy, tax liens, or monetary judgments.
The names of those who have obtained copies of your credit report within the past year (two years for employment purposes). There are two types of inquiries. Hard inquiries are ones you initiate by applying for a loan or setting up some other kind of credit account. Soft inquiries are made by companies that send out promotional information, such as pre-qualified notices, or current creditors who are monitoring your account.
Filing a Dispute
If you see something that is incorrect on your credit report, you can file a dispute with the credit bureau. There will be instructions on your credit report on how to file a discrepancy. Usually, you will need to fill out some kind of form and submit it to the credit bureau. Your creditor has 30 days to respond, so fixing mistakes on your credit report can take time.
Improving Your Credit Score
Whether you have a really low credit score, or even an average credit score, there are things you can do to improve it. If you haven’t always managed your credit wisely, first focus on rebuilding your credit history. Then move onto improving your score. The best strategy for improving your credit is to consistently make wise decisions over time, and remember that rebuilding your credit takes time. Here are a few tips to start on your path to improving your credit history.
- Check your credit report.
- Improve your payment history.
- Reduce the amount you owe.
- Increase your length of credit history.
- Take on new credit accounts wisely.
- Create a credit mix.
Working with a Credit Coach
If your credit history is preventing you from reaching your financial goals, we can help you rebuild your credit and learn how to improve your credit score. Our coaches will lead you every step of the way towards better financial habits. We will provide you with resources to help you achieve your financial goals.
Education as an Asset
Obtaining a degree or vocational certificate can set you apart from other applicants when looking for a job. Investing in education is one of the most important things people can do to increase their earning potential and provide a healthy home for their families.
Paying for College
With tuition costs on the rise, paying for college can be a dilemma for many families. There are many solutions to help cover tuition costs: savings, loans, grants, or scholarships. Whatever route you choose, your overall strategy for paying for college should be to graduate with the least amount of debt as possible.Saving
Lakota Funds recommends that families start saving for a child’s higher education as early as Kindergarten. By simply opening a savings account for a child, he or she is seven times more likely to go to college. Starting to save early can also help reduce your child’s debt that he or she graduates with by thousands of dollars. Our Child Development Account program is a great way to start on this path.
Another savings option is the 529 plan. A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions. Investing in a 529 plan may offer college savers special tax benefits. Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible college expenses. To find a 529 plan in your state, visit www.savingforcollege.com.
Tribal colleges are educational institutions that are controlled and operated by Native American tribes. These unique institutions, usually located on or near Indian reservations, have become a vehicle for passing on and preserving on traditional Native cultures. Tribal colleges provide access to post-secondary education, accredited degrees, and vocational training for both Indian and non-Indian students. Below is a list of South Dakota tribal colleges.
Oglala Lakota College
490 Piya Wiconi Road
Kyle, SD 57752
Sinte Gleska University
P. O. Box 409
Rosebud, SD 57570
Sisseton Wahpeton College
P. O. Box 689
Sisseton, SD 57262
Free Tax Sites
Volunteer Income Tax Assistance, or VITA, sites offer free tax assistance from IRS-certified volunteers. These sites help inform tax payers of credits, such as the Earned Income Tax Credit, that they may not have known about otherwise. In addition, they assist tax payers by providing information that can help them make wise financial decisions. For example, e-filing through a VITA site rather than obtaining a rapid refund from a paid tax preparer can save a family hundreds of dollars.
Lakota Funds offers an annual VITA site for our community members.
Maximize Your Tax Return
It is easy to be tempted to splurge once you receive your tax return, but think twice before you go out and buy a new car stereo or go on a shopping spree at the mall. Spending your tax return foolishly will only leave you in the same financial situation as you were in before. However, investing your tax return wisely and learning how to make your money grow more money can improve your financial health as well as the quality of life for you and your family.
If you receive a tax return (especially one of significant size) you have the opportunity to create wealth for yourself and your family. Here are some ways to build assets with your tax return:
- Pay off debt.
- Open an Individual Development Account.
- Start an emergency savings fund.
To learn more about these options and how to build assets with your tax return, click below to download a resource worksheet.