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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.html7/27/2019 Personal Finance 101 - Final Copy
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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/bedebtsavvyRecommended