O w n y o u r b o o k s ! D e m y s t i f y i n g f i n a n c i a l p l a n n i n g & cultivating democratic engagement D e v i n C a s e - R u c h a l a ~ B l o o m i n g t o n C o o p e r a tj v e L i v i n g ~ S h a r e d C a p i t a l C o o p e r a tj v e
Agenda • Icebreaker/Intros (~15 min) • Actjvity Part 1: Dream house “yes, AND...” – Breakout Actjvity (~10 min) – Regroup/discussion (~10 min) • Actjvity Part 2: Budgetjng for your dream house – Breakout Actjvity (~10 min) – Regroup/discussion (~10 min) • Actjvity Part 3: Managing your dream house budget – Breakout Actjvity (~10 min) – Regroup/discussion (~10 min) • Closing discussion (~15 min)
What words come to mind when you think about “Finance”?
Why understand finance? F i n a n c e , b u d g e t s , e t c . a r e . . . . Boring? Probably. Cryptjc & Spooky? Possibly. Empowering? Defjnitely.
Goals of this workshop: 1. Understand how budgets work 2. Explore what managing a budget might look like 3. Provide tools/resources for fjnances and fjnancial management 4. Get creatjve & have fun!
Breakout groups & intros • Split into 2-3 groups or else groups of 8-10 • In your groups intros (~ 5 min): – N a m e – Preferred pronouns – Co-op affjliatjon – Positjon tjtle (if relevant) – Anything the group should be aware of – Favorite part (room, feature, etc.) of your house
Activity Part 1: Building your dream house (“yes, AND...”) • First person: “We are going to start our dream co-op house and in our dream house we are going to have...” • Next person: “yes, AND we are going to have...” • FIRST: decide if you are going to rent, build, or own the property • Write down each item on a stjcky note and put in a vertjcal list on the notepad • Go around the group at least twice • Get creatjve!
What’d you come up with? • Did you decide to build, rent, or buy? • What’d you put in your house? • Yes! BUT... How do we pay for this?
Activity Part 2: Budgeting for your dream house 1. Organize the list into variable costs and fjxed costs – Variable costs: stufg you use up/pay for every month (food, utjlitjes, etc.) – Fixed costs: big one-tjme purchases (including the house itself, unless you are rentjng) 2. Determine how much each item costs – Assign a total price to each item on the list (give it guess) – Put a stjcky note with the price next to the stjcky note for the item
Activity Part 2 (cont.) 3. Finding the monthly costs – Variable costs: choose the amount you would pay in a month – Fixed costs: for giant purchases, same process as for the house itself. For purchases you could pay for in the course of a year, divide the cost by 12 (for the 12 months). 4. Add a stjcky note & cost for the house itself – If you’re rentjng: estjmate monthly rent payments – If you’re building/buying: estjmate the total amount of the loan you would need, pick a realistjc interest rate, and use an online loan calculator to fjnd the monthly payment (google: “online loan calculator”)
Item Cost Monthly cost The The Total Monthly Total Monthly Online loan house house loan loan loan loan calculator + other + other amount pmt amount pmt constructjon constructjon Monthly Monthly Fixed Fixed Total Total budget budget ÷ 12 costs costs cost cost amt amt Variable Variable Monthly Monthly Price Price Amount per costs costs budget budget paid per member x paid per = (food & (food & amt amt # members month month utjlitjes) utjlitjes) Variable Price Monthly Variable Price Monthly costs paid per budget costs paid per = budget (other) month amt (other) month amt
Item Cost Monthly cost The The Total Monthly Total Monthly house house loan loan loan loan + other + other amount pmt amount pmt constructjon constructjon Monthly Monthly Fixed Fixed Total Total budget budget cost cost cost cost amt amt + Variable Variable Monthly Monthly Price Price cost cost budget budget paid per paid per (food & (food & amt amt + month month utjlitjes) utjlitjes) Variable Price Monthly Variable Price Monthly cost paid per budget cost paid per budget (other) month amt (other) month amt + = Total monthly costs
Monthly cost Monthly budget Total Total The The Monthly Average Monthly Average = monthly ÷ number of = monthly house house loan rent loan rent rent members rent + other + other pmt pmt pmt pmt constructjon constructjon income income + Monthly Monthly loan loan Monthly Monthly Fixed Fixed - pmt pmt budget budget cost cost amt amt Monthly Monthly + budget budget amt amt Variable - Variable Monthly Monthly cost cost budget budget Monthly Monthly (food & (food & amt amt budget utjlitjes) budget utjlitjes) - amt amt + Variable Variable Monthly Monthly Monthly Monthly cost cost budget budget budget budget (other) (other) amt - amt amt amt = Total monthly costs = net income ($0)
Activity Part 2 (cont.): Additional budget items to consider • If you get a loan: need special savings accounts – Required reserves: for long term asset (roof, water heater, etc.) replacement costs (based on industry standards) – Debt service: cash on hand to cover certain portjon of loan payments (yours to use at the end of the year), good to keep around for emergencies • Rent loss (amount set aside in case people don’t pay rent) • Accountjng and legal expenses • Property taxes (unless you can claim exemptjon!) • Property & liability insurance • Educatjon (e.g. NASCO instjtute!) • Maintenance budget (e.g. new washing machine, fridge, wall paint, etc.)
Example budget (in spreadsheet form):
Activity Part 3: Managing your dream house budget • W h o c r e a t e s t h e b u d g e t ? • How do we collectjvely decide on this budget? • Who keeps track of the budget and how? – W h o h a s a c c e s s t o t h e b a n k a c c o u n t s ? – Do we use a spreadsheet or sofuware? • Who collects and deposits rent? • Who enforces late or absent rent payments?
Activity Part 3 (cont.): Managing your dream house budget • Establish a fjnance commituee: – Elect/appoint a co-op treasurer (decide if paid/unpaid?) – Elect/appoint House treasurers – Elect/appoint House rent collectors – Elect/appoint House rent depositors • Annual drafuing of budget – Determine if done by board, treasurer, membership, or all of the above • Annual vote on budget – Determine if done by board, membership, or both
Activity Part 3 (cont.): Organizing bank accounts House House House House Rent account account account Loan pmts account Main Main Checking Checking Account Account Property Property tax/insura tax/insura nce nce Main Savings Account Main Savings Account Rent (Operatjng Reserves) (Operatjng Reserves) Auto-transfer Debt Debt service service Auto-transfer Member Deposits Deposits Deposits Required Required reserves reserves Maintenance Maintenance
Closing Discussion: Resources and Tools • Who can help us fjgure out/manage our fjnances? – NASCO: annual visits and/or sponsored internships – Consultants (e.g. Collectjve Seeds) – Outside bookkeepers (e.g. A Bookkeeping Cooperatjve) – Other co-ops: share knowledge! • What online tools are out there to help manage fjnances? – Mint.com (free), Quickbooks (not free), others?
Closing Discussion: Resources and Tools • FYI: Co-ops notoriously struggle to fjnd fjnancing, especially at interest rates comparable to personal home loans, due to the amorphous ownership/management structure • Given that, who will lend to housing co-ops? – Shared Capital, LEAF, NCLF, NCB (>$1M) – NASCO Kagawa fund – Local banks (a defjnite maybe, but worth a shot) • Things to be aware of: – Applicatjon fee, commitment fee – Don’t necessarily need fjnancial history (though it helps) – Need a business plan and/or demonstrated management/people dedicated to managing the co-op – Personal guarantees not required
Closing Discussion: Other questions?
T h a n k s ! C o n t a c t : mdevincr@gmail.com
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