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PERSONAL FINANCES 101

PERSONAL FINANCES 101. 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.

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PERSONAL FINANCES 101

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  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

  22. CREDIT CARD TIPS • 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 easily pay off (try $250 or $500) • Know your credit limit and NEVER go over • If you can eat it, wear it, or drink it, don’t charge it! • Think before you charge

  23. ADDITIONALLY… • Limit cash advances – they come with costly fees and higher rates • Protect your identity – never lend your card to a friend

  24. Stop Unwanted Solicitors National “Do Not Call” registry 888.382.1222 www.donotcall.gov/ Curtail pre-approved credit and insurance offers 888.5OptOut

  25. SMART BORROWING: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

  26. SMART BORROWING: FEDERAL STUDENT LOAN PROGRAMS • Remember it is a loan, not free money, it must be 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

  27. STAFFORD LOAN REPAYMENT CHART * Interest rate of 5.6%, 10 year repayment period

  28. 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)

  29. Credit history can impact: Purchasing a car/home The rate you receive on a loan Renting an apartment Auto and life insurance Seeking employment CREDIT FITNESS: WHY IT IS IMPORTANT!

  30. CREDIT FITNESS: WHY IT IS IMPORTANT! • Monitor and adjust your budget as needed • Pay your bills on time • If you’re 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

  31. 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 Obtain a Free Credit Report

  32. PROTECTING YOUR IDENTITY… Identity thieves are always on the look out for your personal information…

  33. PROTECTING YOUR IDENTITY… What should be protected? • Social Security # • Credit Card #s • Bank Account #s • Driver’s License # • Date of Birth • Mother’s maiden name • Personal ID # (PINs) and passwords

  34. PROTECTING YOUR IDENTITY… 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

  35. PROTECTING YOUR IDENTITY… How is stolen information used? • Change the billing address on your existing credit card accounts and then charge 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 service in your name • Write bad checks in your name

  36. ID THEFT BY PAYMENT METHODJANUARY 1 – DECEMBER 31, 2007 Source: Consumer Fraud and Identity Theft Complaint Data, January-December 2007; Federal Trade Commission, February 2008

  37. Protect Your Identity! • 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 your PIN • 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 cards and social security numbers, etc. • Never give out any of your personal information over the phone

  38. Protect Your Identity! • 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 provide your address, telephone number, or driver's license number • Monitor all your bank and credit card statements monthly • Check your credit at least annually

  39. SIGNS THAT YOU MAY BE A VICTIM… • Failing to receive bills or other mail • Receiving cards for which you didn’t apply • Being denied credit, or being offered less favorable credit terms, like a high interest rate when you know your credit is good • Getting calls or letters from debt collectors or businesses about merchandise or services you did not buy

  40. WHAT TO DO IF YOU’RE A VICTIM… • Contact the Federal Trade Commission to report it and get guidance • Call the three major credit bureaus (Equifax, Experian, TransUnion) so they can put an alert on your credit • File a report with your local police department • Contact any businesses where the identity thief fraudulently conducted transactions 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

  41. Identity Theft Resources 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 Justice www.usdoj.gov/criminal/fraud/idtheft.html

  42. HELPFUL PERSONAL FINANCE WEB RESOURCES • Student Loan Calculators – www.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 Software – www.mint.com • Personal Money Management Resource – www.doughroller.net

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