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Senior Transition Series: “Future Finance Help Center”. Presented by: Rick Proctor March 5 th 2012, 7 PM Key Auditorium. Budgeting. Planning and Monitoring your income and expenses. Set up in an Excel Spreadsheet:. Establishing and Maintaining Your Credit.
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Senior Transition Series: “Future Finance Help Center” Presented by: Rick Proctor March 5th 2012, 7 PM Key Auditorium
Planning and Monitoring your income and expenses. • Set up in an Excel Spreadsheet:
Advantages of having good credit: • Able to borrow when you want/need • Get the best interest rates on loans • Get the best offers – car loans, credit cards • **Potential employers may check your credit report • Once established, you can keep it for life – just pay your bills on time.
How do you establish your initial credit? • Open a checking and savings account in your name • Get a credit card in your name – Use, pay off every month • Pay all your bills on time: cell phone, utilities
Maintaining Good Credit • Pay ALL bills on time • Don’t max out your credit cards • Monitor your credit history • Get free credit report fromwww.annualcreditreport.com • Get your FICO credit score (350-850, higher the better.) • Most important factor – credit payment history (35%) • Credit Utilization (% of total credit being used) (30%) • **Open an account at a Credit Union (non-profit)
Choosing a credit card • Rate (Annual Percentage Rate, APR) • Annual Fee, if any • Additional benefits – mileage points for airline tickets, 5% credit towards GM car (read fine print) • Use creditcards.com to find cards w/ low rates, for students, for your credit situation.
Buying and Financing a Car • To find a good price: www.TrueCar.com, www.chug.com • To compare cars: www.Edmunds.com, www.kbb.com • To find out the value of your trade-in: www.kbb.com
Buying and Financing a Car :Before going to the dealer • Determine monthly payment you can afford (Budget) • Determine total amount willing to pay. • Check on Financing Terms: • Check w/ Credit Union, your bank before going to dealer (APRs, amount, terms). • Dealer may not give you best rate • Dealers make money on financing, options, extended warranties, your trade-in.
Leasing vs. Buying: Advantages • Lower Down Payment, lower monthly payments • Don’t have to find buyer at end of lease • Drive a more expensive, newer car for same money
Leasing vs. Buying : Disadvantages • No equity (ownership value) in car (you have after 2-3 years when buying) • You are responsible for maintenance, excess mileage • Must come up w/ a down payment every 3 years for new lease.
Leasing Terminology • Capitalized Cost = Price of Car • ***Negotiate price before even discussing leasing • Consumer pays average of 92% of list price when buying, but 96% when leasing • Money Factor = interest rate • Residual Value = expected value at end of lease • Higher the residual value, lower your lease payment • Don’t Forget cost of car insurance!
Student Loans (Perkins, Stafford, etc.) • Repayment begins 9 months after graduation • Standard repayment term is 10 years • Ex: $10,000 @ 6.8% - Monthly payment = $115 $40,000 @ 6.8% - Monthly payment $460 • Income –based Repayment- IBR • Payment is 15% of “Adjusted Gross Income $40,000 @ 6.8% - Monthly payment $297 • Loan Payments: www.finaid.org/calculators/ibr.phtml
Student Loans (continued) • To apply for IBR: contact your loan servicer. • If unable to make payments: • Apply for Economic Hardship Deferment (3 year max) or Forbearance (5 year max) **Interest compounds (“accrues”) during time. **Interest is tax-deductible, up to $2500/year
Leasing an Apartment • National Websites: www.moversguide.com www.Apartments.com www.move.com
Leasing an Apartment:Moving In • Landlord will check your credit report • Read the lease before you sign it! • Put in writing what will be fixed, painted before you move in. • Your Security Deposit should earn interest – Ask!
Leasing an Apartment:Moving Out • Take pictures of cleaned, empty apartment • to document condition • Go on walkthrough with manager • to verify condition.
Insurance • Insurance – to cover potentially expensive risks that you can’t afford to pay yourself • You pay a certain, small amount (premium) instead of an uncertain, potentially large amount (the loss due to the risk) • Insurance You Need: • Renter’s Insurance
Renter’s Insurance covers: • Personal Property • Additional Living Expenses • Personal Liability • ***Landlord’s insurance doesn’t cover your property unless you can prove it was the landlord’s fault. • Inexpensive: $150-250 per year
Auto Insurance • Medical Coverage • Bodily Injury Liability – Covers people in the other car • Medical Payments – Covers people in your car, including you. • Uninsured Motorist Coverage
Property Damage • Property Damage – damage to other car, property (street sign, etc.) • Coverage is expressed as “100/300/50” • “100” Limit paid to any one person per accident • “300” Limit paid to all persons per accident • “50” Limit paid to all others’ property damage • Good, Standard Coverage is 100/300/100
Coverage for your Car and Property • “Collision” – Covers damage to your car due to an accident, regardless of fault • “Comprehensive”– Covers damage due to other events – fire, vandalism, theft…
Get quotes from several reputable companies • Rates vary widely • Consider: Do you want the convenience of a local agent, vs. online companies? • Higher Deductibles – reduce premiums • Older Car – may want to eliminate collision/comprehensive
Auto Insurance Rates depend on: • Type of Vehicle • Driving Record/accidents • Place of Residence • Annual Mileage • Credit Report • Age, sex, marital status
Health Insurance • ***Key: Make sure that you maintain coverage as you transition from college to the work world • Parents’ policy will cover you until age 23 or no longer in college • If need temporary health insurance, buy policy w/ high deductible, covers major medical/hospital expenses • “Catastrophic health coverage”
Insurance You Don’t Need! • Life Insurance – unless someone else depends on your income. • Insurance when you take out a loan • Credit Life Insurance, Credit Health Insurance • Extended Warranties
Retirement Planning • www.smartmoney.com/retirement • Responsibility of planning for your retirement falls on you! • Social Security replaces less than 40% of average income • Average SS benefit is $960/mo; $2400/mo max.
Employer-sponsored Plans • Defined Benefit – “Pension” • Employer pays you a fixed monthly retirement benefit based on average salary, time at job… • Defined Contribution • Firm will contribute a defined amount to plan. • You are expected to contribute to the plan. • Retirement benefit depends on how your investments in plan performed. • Risk lies with you!
401-K • You contribute, employer may contribute • Employers will match all/part of your contribution • $ is invested in various investments: • Stock, bond mutual funds • Key Feature- contributions are tax-deferred • $ grows tax-free, only taxed when withdrawn at retirement.
Choosing Investments: • Must be willing to take risks • Stocks for the long term; corporate bonds • Be wary of investing in your company’s stock • 403-B – Same type of plan for non-profits • SEP – Simplified Employee Plan (1-10 employees) • Keogh Plan- Self Employed
IRA – Individual Retirement Account • Contributions not taxed • $ grows tax deferred • Taxed when withdraw at retirement • Set up through investment firms • Vanguard – 60 mutual funds
Roth IRA • Contributions are taxed • Withdrawals are tax-free • Benefit to younger workers, taxed at lower rate
Keys to successful Retirement Planning: • Start saving, investing early • Ex: If start saving at 35, need $1M by age 70. • If earn 8%/year, need to save $5800/year. • If began at 25, need to save $2500/year • Take suitable level of risk • Should be rewarded w/ higher returns over long term • Can’t be too conservative • Won’t accumulate enough to retire comfortably
*Information presented will be available on the senior class website, to be posted after the presentation* Sponsored by the Class of 2012 Council “Senior Transition Series”www.siena.edu/seniorclass
