Debt Management. Budgeting 101 The first step is to know how much money is coming in so you know how...
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Transcript of Debt Management. Budgeting 101 The first step is to know how much money is coming in so you know how...
Debt Management
Budgeting 101
• The first step is to know how much money is coming in so you know how much money you can spend.
BRING HOME PAY $772.75
Budgeting Basics:
• Determine wants vs needs
• Determine your short term and long term goals
• Do the math
• Are you tough enough to make the decisions that will get you where you want to be?
Needs vs Wants
Needs are things you must have to survive:
Clothes Food Housing Medicine
Wants are things you would like to have:
Car Jewelry Music TV
ATM Fees Computerware Home PartiesCosmetics
Online Services Clothes Over the limit feesCDs
Pagers Dating Insurance Parking Fees Shoes
Gifts Overage Fees Bottled Water Tanning Bounced Checks Greeting Cards Haircuts Videos
Cable TV Late Payment Fees Dinners OutGames
Books Fast Food Dry Cleaning Car Wash
Electronics Magazines Movie Rentals Sports
Lunches Out Film Development Prescriptions
Household Items Pet Costs Licenses Speeding Tickets
Cash Advance Fees Snacks Vending MachinesSouvenirs
Debt vs Income
• Debt – something you have to pay
• Income – money you earn
• Debts are subtracted from your income.
Good Vs Bad Debt
• Good debt is debt that returns something of long term value such as a college education or home.
• Bad debt is “feel good” debt and may be unwise purchases that you can’t afford and don’t really need like an expensive television or a fancy watch
Budget
A budget is a list of expenses (debts) that you pay each month.
Budgets help you pay for your needs and decide what wants you can afford.
Sample Budget• Bring Home Pay: $772.75
Rent $400
Food $100
Insurance $ 75
Utilities $100
Savings $ 25
Medicine $ 20
Clothes $ 20
Amount Left
$32.75
Other types of money…
• Your income is your biggest source of money to spend.
• People can also use other sources of money:
Credit/Loans, Debit, Charge Cards and Credit Cards
What is Credit?
Credit is a loan, allowing you to receive goods and services now and pay for them later
It is an agreement that the money borrowed will be paid back
It is a debt, it is NOT income
It comes with fees - interest and other charges
Why use Credit?• Credit could be used to pay for:
Furniture Clothes Electronics Jewelry
• Places that offer financing (credit):
Furniture stores (Rooms to Go, Ashley, etc)
Clothing stores (Martin’s, Wakefield’s, etc)
Jewelry stores (Griffin’s, Friedman’s, etc)
Electronic stores (Bust Buy, Circuit City, etc)
Paying for credit• Credit purchases must be paid back over a
set length of time.• They include fees. • The fees can change if the payment is not
made on time or if the company decides to change them.
• All your credit purchases go on your credit report / credit record.
Build your Credit Record• Information about your credit stays
on your credit report for seven years.
Employers, insurers, creditors, and leasing agents check your credit report. It can affect jobs, ability to get loans at lower interest rates, ability to buy a house or other large items, ability to rent an apartment and cost for insurance!
Debit Cards: The BasicsDebit cards allow access to checking
account through ATMs and point of sale (POS) terminals (Wal-Mart, K Mart, etc)
Amount is deducted from checking account
Not a charge card, must have the funds available
Pre-Paid Cards: The Basics
Pre-paid cards may be “loaded” with a certain dollar value that can then be spent at POS terminals.
Not a charge card, must have money available.
Charge Cards: The BasicsMust be paid in full every month
(AMEX)
Provides convenience of not having to pay for purchases with cash, but balance may not be carried over month-to-month
Credit Cards: The Basics
Credit cards operate on a credit limit and revolving basis
If not paid-in-full within set length of time, interest is charged on the remaining balance
Credit Cards: Fees, fees, fees Interest rate fees--what you pay for
using the $$ usually 17% - 21% for students (after intro rate)
Annual fee for just having the credit card
Over the limit fees, charged whenever you exceed your credit limit
Late payment fees
Transaction fees
Other fees….Read the fine print!!!
Sample Budget with Credit• Bring Home Pay: $772.75
Rent $400
Food $100
Insurance $ 75
Utilities $100
Savings $ 25
Medicine $ 20
Clothes $ 20
Credit $ 30
Amount Left $2.75