PERSONAL FINANCES 101

1. PERSONAL FINANCES 101

2. AGENDA • Creating and Managing a Budget • Power of Compounding • Pro’s and Con’s of Credit Cards • Smart Borrowing: Student Loan Programs • Credit Fitness: Why it is important! • Protecting Your Identity

3. First, “know your habits” by tracking your expenses to fully understand how you spend your money CREATING AND MANAGING A BUDGET: KNOW YOUR HABITS

4. Creating and managing a budget: income v expenses SECOND, DO THE MATH! DETERMINE YOUR MONTHLY INCOME MINUSEXPENSES

5. LITTLE SAVINGS ADD UP… Total Annual Savings of $2,354!

6. CREATING AND MANAGINGA BUDGET: WANTS V NEEDS • Wants versus Needs! • Do I have to have it today? • What will happen if I don’t buy it? • How have I managed this long without it?

7. New Car vs. Older Car • New 2009 Honda Accord EX • Cost: $24,000 • Payment: $476 • Insurance: $ 78 • Used 2003 Honda Accord EX • Cost: $14,483 • Payment: $305 • Insurance: $ 73 Monthly difference: $176 Annual difference: $2,112 Car Cost/Payment Source:www.edmunds.com Based 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.com Insurance rates for a 25-year-old single male with a clean driving record.

8. CREATING AND MANAGING A BUDGET: SAMPLE BUDGET Based on 60% solution from msn.Money

9. 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

10. POWER OF COMPOUNDING:START SAVING NOW! *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 you get, you have the philosopher's stone."

11. Although credit cards may seem like your ticket to buying anything you want… PRO’S AND CON’S OF CREDIT CARDS

12. PRO’S AND CON’S OF CREDIT CARDS …..but it is important to understand just how much that little piece of plastic could really cost you…

13. PRO’S AND CON’S OF CREDIT CARDS What you may not be aware of are ALL the potential costs associated with using a credit card

14. Did you know credit cardcompanies… • 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 you charge. • 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 your balance. • May charge a fee for going over your limit, and for every month you remain over your limit? Another $50 added to your balance!

15. PRO’S AND CON’S OF CREDIT CARDS Additionally, balances on your account accrue interest when you don’t pay them off each month

16. PRO’S AND CON’S OF CREDIT CARDS Once you have a balance, making the minimum monthly payment won’t make much of a difference…

17. Your credit card balance is $2,500 You pay the $50 minimum monthly payment each month The interest rate is 20% You don’t charge anything else to this card HOW LONG WOULD IT TAKE TO PAY OFF IF…

18. 109 months or 9 Years + 1 month! (yes, that’s right) PRO’S AND CON’S OF CREDIT CARDS 109

19. PLUS…….Over those nine + years, you will have paid a total amount of $4,430 for initial charges of only $2,500 That’s $2,920 in interest alone!! PRO’S AND CON’S OF CREDIT CARDS Source: www.bankrate.com

20. BENEFITS: Helps build credit history Builds financial management skills Provides emergency protection and enhanced security Makes purchases convenient PRO’S AND CON’S OF CREDIT CARDS

21. PRO’S AND CON’S OF CREDIT CARDS • 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