Personal Finance 101 - Final Copy

7/27/2019 Personal Finance 101 - Final Copy

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PERSONAL

FINANCES 101


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AGENDA

Creating and Managing a Budget

Power of Compounding

Pros and Cons of Credit Cards

Smart Borrowing: Student Loan Programs Credit Fitness: Why it is important!

Protecting Your Identity


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CREATING AND MANAGING

A BUDGET: KNOW YOUR

HABITSFirst, know your

habits by tracking

your expensesto fully understand

how you spend

your money


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SECOND, DO

THE MATH!

DETERMINE

YOUR

MONTHLY

INCOMEMINUS

EXPENSES

Total Monthly Take-Home Income(minus taxes, health insurance,other payroll deductions, 401K) $Household ExpensesRent or Mortgage $Utilities (water, sewer, gas/electricity) $Home/Cell Phone

$

Groceries $Other Household (Cable, etc.) $Transportation ExpensesCar Loan Payment $Gas, Tolls, Parking, Other $Car Insurance (set aside if paid annually or semi-annually) $Other ExpensesPet (Food, Vet) $Insurance/Co-pays, Prescriptions $Fun (entertainment, dining out, move rental, etc.) $Minus Total Expenses $Total Monthly Surplus/Shortage $

CREATINGANDMANAGINGABUDGET: INCOMEVEXPENSES


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LITTLE SAVINGS ADD UPITEM ANNUAL COST ALTERNATIVE ANNUAL COST

One Cup of coffee

daily at a Coffee

shop ($3)$1,095

Gourmet

coffee brewed

at home$176

One CD weekly

($12.99)$ 675 Download individual

songs you like ($1)$375

Pizza delivery once

a week ($10)$ 520 Gourmet frozen pizza

at the grocery ($5)$260

Eating lunch out 5

days a week ($5per lunch)

$1,250 Bring your lunch to

work 5 days aweek ($1.50 per

lunch)

$375

Total Annual Savings of $2,354!


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MANAGING

A BUDGET: WANTS V

NEEDS Wants versus Needs!

Do I have to have it

today?

What will happen if

I dont buy it?

How have I

managed this long

without it?


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NEWCARVS. OLDERCAR

New 2009 Honda Accord EX

Cost: $24,000

Payment: $476

Insurance: $ 78

Monthly difference: $176Annual difference: $2,112

Used 2003 Honda Accord EX

Cost: $14,483

Payment: $305

Insurance: $ 73

Car Cost/Payment Source:www.edmunds.comBased on financing for 60 months. New car interest rate of 7.11%; Used car interest rate of 7.35%.Car Insurance Cost Source: www.geico.comInsurance rates for a 25-year-old single male with a clean driving record.

CREATING AND
http://www.edmunds.com/http://www.geico.com/http://www.geico.com/http://www.edmunds.com/http://www.autotrader.com/fyc/img_popup.jsp?car_id=207391979http://www.edmunds.com/new/2007/honda/accord/100782953/photos.html


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INCOMETake-home pay minus taxes,

social security, health insurance,401K

CREATING AND

MANAGING A BUDGET:

SAMPLE BUDGET

Based on 60% solution from msn.Money

FIXED EXPENSES: 60%Rent/Mortgage, Utilities, Home/Cellphone, Commuting, Car payment,Insurance, Work-related (clothes, dry-

cleaning), Student Loan Payments,Credit Card PaymentsSAVINGS: 20%

Money set aside for vacations, majorrepairs, new appliances, to pay downexisting debt, emergenciesa down-payment on a car or house,

charity

RETIREMENT: 10%

Ideally, 10% of your gross incomeJUST FOR FUN: 10%

Everybody needs some fun


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CREATING AND MANAGING

A BUDGET: MONITOR YOUR BUDGET

Commit to your budget

Track and compare actual expenses

against monthly budget

Make choices to reduce expenses

Start saving for your short and

long-term needs


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POWER OF COMPOUNDING:

START SAVING NOW!

SAVING $1 A DAY AMOUNT YOU PUT IN ACTUAL WORTH*Year 5 $1,825 $ 2,013Year 10 $3,650 $ 4,591Year 20 $7,300 $12,069Year 30 $10,950 $24,250

*Assumes $365 is deposited at the end of each year for the # of years listed. Return is compounded annually. Above amounts are pre-tax.

Source: www.taxtips.ca

Benjamin Franklin said: "If you know how to spend less than youget, you have the philosopher's stone."


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PROS AND CONS OF

CREDIT CARDS

Although credit cards

may seem like your ticket

to buying anything you

want


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..but it is important to

understand just how much

that little piece of plastic

could really cost you

PROS AND CONS OF

CREDIT CARDS


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What you may not be

aware of are ALLthe

potential costs associated

with

using a credit card

PROS AND CONS OF

CREDIT CARDS


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May charge late fees if you are late making a payment? Could be as much as$50!

May not have grace periods? Meaning interest starts accruing as soon as youcharge.

May have low introductory interest rates that increase dramatically over time?That 2.9% could go to 22% just like that!

May charge annual fees? Could cost you $50 just to have the card!

May charge a transaction fee for cash advances and the interest starts

immediately?A percentage of your cash advance amount is added to yourbalance.

May charge a fee for going over your limit, and for every month you remain

over your limit?Another $50 added to your balance!

Did you know credit cardcompanies


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Additionally, balances

on your account

accrue interest when

you dont pay them

off each month

PROS AND CONS OF

CREDIT CARDS


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Once you have a balance,

making the minimum

monthly payment wont

make much of a difference

PROS AND CONS OF

CREDIT CARDS


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HOW LONG WOULD IT

TAKE TO PAY OFF IF

Your credit card balance is$2,500

You pay the $50 minimum

monthly payment each month

The interest rate is 20%

You dont charge anything else

to this card


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109 months or 9 Years + 1

month!(yes, thats right)

PROS AND CONS OF

CREDIT CARDS


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PLUS.Over those nine + years, youwill have paid a total amountof $4,430 for initial charges of only

$2,500

Thats $2,920 in interest alone!!

Source: www.bankrate.com

PROS AND CONS OF

CREDIT CARDS


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PROS AND CONS OF

CREDIT CARDS

BENEFITS:

Helps build credit history

Builds financial managementskills

Provides emergency protection

and enhanced security

Makes purchases convenient


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Saves you money

Qualifies you for better

interest rates

Makes it easier for you to

rent an apartment

Makes it easier for you to

buy a car

PROS AND CONS OF

CREDIT CARDS


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Limit yourself to one card

Read the fine print regarding rates, fees and introductory offers

Make your payments on time, and try to pay more than the

minimum

Begin with and keep a low credit limit one you can easilypay off (try $250 or $500)

Know your credit limit and NEVER go over

If you can eat it, wear it, or drink it, dont charge it!

Think before you charge

CREDIT CARD TIPS


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ADDITIONALLY

Limit cash advancesthey come

with costly fees and higher rates

Protect your identitynever lend

your card to a friend


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STOPUNWANTEDSOLICITORS

National Do Not Call registry

888.382.1222

www.donotcall.gov/

Curtail pre-approved

credit and insurance offers

888.5OptOut

:


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:FEDERAL STUDENT LOAN

PROGRAMS SMART debt, good investment

option if used wisely

Easy access to funds

No credit check involved

Interest paid by the Federal government

for neediest students

Many borrow benefits not

available to average consumer


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SMART BORROWING:

FEDERAL STUDENT LOAN

PROGRAMS Remember it is a loan, not free money, it mustbe repaid back at some point in time

Borrow wisely, only what you need

It is a loan to pay educationally related expenses,

not a spring-break trip

Understand the total cost of the

loan, (principal and interest)

Defaulting on a student loan will

make you ineligible for additional financial aid


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STAFFORD LOAN

REPAYMENT CHART

LOAN

AMOUNT *

MONTHLY

PAYMENT

INTEREST

PAID

TOTAL

PAYMENTS

$10,000 $110.68 $3,283 $13,282

$15,000 $163.53 $4,624 $19,624

$19,000 $207.14 $5,857 $24,857

$27,000 $294.36 $8,323 $35,323

$30,000 $327.07 $9,247 $39,247

$35,000 $381.58 $10,789 $45,789

$40,000 $436.09 $12,330 $52,330

* Interest rate of 5.6%, 10 year repayment period

SMART BORROWING:


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SMART BORROWING:PRIVATE LOAN

PROGRAMS Should be a last resort loan option after federal loan

programs

Usually requires a co-signer, credit check involved,

loans can be denied based on no or poor credit history

Higher cost loans, variable interest rate loans, not

fixed rates like federal loans

Tier-pricing based on credit history of borrower or co-borrower, good credit gets lowest fees and best

interest rate

Principal and interest can be deferred but interest is

being added to principal, (interest on interest)


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CREDIT FITNESS: WHY IT IS IMPORTANT!

Credit history can impact:

Purchasing a car/home

The rate you receive on a loan

Renting an apartment

Auto and life insurance

Seeking employment


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CREDIT FITNESS: WHY IT IS

IMPORTANT!

Monitor and adjust your budget as needed

Pay your bills on time

If youre having trouble, evaluate why

Lower your credit card balances

Pay off the higher interest rates first

Be realistic about how much debt you can afford


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OBTAINAFREECREDITREPORT

Under the FACT Act, you can request a free credit report every

12 months from either Equifax, Experian, or TransUnion

Go to www.annualcreditreport.com

Call 1.877.322.8228

Complete the Annual Credit Report Request Form and mail

it to:

Annual Credit Report Request Service

PO Box 105281

Atlanta, GA 30348-5281

PROTECTING YOUR


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Identity thieves arealways on the look

out for your personalinformation

PROTECTING YOUR

IDENTITY

PROTECTING YOUR


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PROTECTING YOUR

IDENTITY

What should be protected?

Social Security #

Credit Card #s

Bank Account #s

Drivers License #

Date of Birth

Mothers maiden name

Personal ID # (PINs) and passwords


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How do they get your information?

Dumpster diving

Skimming, Phishing

Changing your address

Old-fashioned stealing

Wallet/purse

Mail, New Checks or Tax Info

New checks or tax info

PROTECTING YOUR

IDENTITY


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How is stolen information used?

Change the billing address on your existing credit card accounts and thencharge on them

Open new credit card accounts in your name

Access your bank accounts

Take out loans in your name(i.e., auto loans, student loans)

Establish phone or wireless servicein your name

Write bad checks in your name

PROTECTING YOUR

IDENTITY


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Source: Consumer Fraud and Identity Theft Complaint Data, January-December 2007; Federal Trade Commission, February 2008

ID THEFT BY PAYMENT METHOD

JANUARY 1 DECEMBER 31, 2007


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PROTECTYOURIDENTITY!

Shred documents before trashingPre-approved credit offers, bank/credit card statements, credit card receipts

Be careful at ATMs, or when using your debit card that others do not see yourPIN

Have checks delivered to your bank rather than your home

Do not put checks in the mail from your home mailbox--drop them off at a U.S.Mailbox or the U.S. Post Office

Empty your wallet of all extra credit cardsand social security numbers, etc.

Never give out any of your personalinformation over the phone


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PROTECTYOURIDENTITY!

Do not put your social security number on your checks

Do not put your telephone number on your checks

Do not put your credit card account number on the Internet (unless it is encrypted on a

secured site)

Don't put account numbers on the outside of envelopes, or on your checks

In conjunction with a credit card sale do not provideyour address, telephone number, or driver's licensenumber

Monitor all your bank and credit card statementsmonthly

Check your credit at least annually


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SIGNS THAT YOU MAY BE A

VICTIM Failing to receive bills or other mail

Receiving cards for which you didnt apply

Being denied credit, or being offered less favorable

credit terms, like a high interest rate when you knowyour credit is good

Getting calls or letters from debt collectors orbusinesses about merchandise or services you didnot buy


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WHAT TO DO IF YOURE A

VICTIM

Contact the Federal Trade Commission to report it andget guidance

Call the three major credit bureaus (Equifax, Experian, TransUnion) so theycan put an alert on your credit

File a report with your local police department

Contact any businesses where the identity thief fraudulently conductedtransactions in your name

Contact your banks and credit card companies

Keep notes on every phone call, meeting, and conversation

Follow-up any phone conversations with an e-mail or letter


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IDENTITYTHEFTRESOURCES

The Federal Trade Commissionwww.consumer.gov/idtheft

Identity Theft Prevention and Survivalwww.identitytheft.org

FDICwww.fdic.gov/consumers/consumer/guard/index.html

The Department of Justicewww.usdoj.gov/criminal/fraud/idtheft.html

HELPFUL PERSONAL


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HELPFUL PERSONALFINANCE WEB

RESOURCES Student Loan Calculatorswww.finaid.org

Debt Management Resource - www.salliemae.com/bedebtsavvy

Investment Planner - www.salliemae.com/plan

Project C.A.S.H.- http://www.projectcash.unh.edu/index2.htm

Free Personal Money Management/Budgeting Softwarewww.mint.com

Personal Money Management Resourcewww.doughroller.net
http://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/planhttp://www.projectcash.unh.edu/index2.htmhttp://www.mint.com/http://www.doughroller.net/http://www.doughroller.net/http://www.mint.com/http://www.projectcash.unh.edu/index2.htmhttp://www.projectcash.unh.edu/index2.htmhttp://www.projectcash.unh.edu/index2.htmhttp://www.projectcash.unh.edu/index2.htmhttp://www.salliemae.com/planhttp://www.salliemae.com/planhttp://www.salliemae.com/planhttp://www.salliemae.com/planhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvyhttp://www.salliemae.com/bedebtsavvy

Personal Finance 101 - Final Copy

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