09Saving, Banking, Debt and Credit Issues

8/9/2019 09Saving, Banking, Debt and Credit Issues

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April 20, 2009


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Being able to buy

Making choices based on what you wantversus what you have to do

Mind is used to what we call nexting


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Personal Finance is an umbrella term thatcovers

Spending

Saving Investing

Protecting your financial resources

Lifelong process

Start asearly as possible!


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Saving $20.00 a week = 52*20 = $1040 a year

At theend of 4 years of college you have inyour savings account about $4250

Making smart decisions

Informed choices

Not getting into debt


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Goals are based on

Values (Principles that guide behavior)

Attitudes (Likes anddislikes)

Resources (Source of wealth) Decision Making (Process of making a choice

between two or more alternatives)


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Short term (less than 2 months)

Example: Save money for a mothersday gift

Intermediate

Example: Save money for a trip to theBahamas

Long term

Example: Save money to buy house


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Setting Financial Goals and Creating Plans

Activating Plans

Evaluating and Revising Plans:Going Forward


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Emergency Fund: 3-6 months of salary setaside in a liquid interest bearing account

Money market fund

Short Term Certificate of Deposit Savings Account

Cushion for bad times

How much do Americanssave on average of

their disposable income per year?


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Did my plan fail?

Did it succeed?

Where can I improve?

A profit and lossstatement every birthday.


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Is a financial plan based on income andexpenditure in a month.

Organized paperwork

Fixed Expenses

Variable Expenses

Net worth = Assets Liabilities


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A savings account is money kept in a bank orsavings and loan association for safekeeping.Savings accountsearn interest on all money

kept in the account.


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Secure

Stable

High Liquidity

Better than a checking account because youget interest on your money

Very low interest rate


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A money market fund is a type of mutualfund that is required by law to invest in low-risk securities.

Relatively low risks Pay dividends that generally reflect short-

term interest rates.

Money market funds typically invest in

government securities, certificates ofdeposit, commercial paper of companies, orother highly liquid and low-risk securities.


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Security

Stability

Diversification

Liquidity

Tax Advantage

NOT INSURED WITH FDIC


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A savings certificateentitling the bearer toreceive interest.

Time Deposit / Maturity Date.

Specific Interest rate

CDs are generally issued by commercialbanks and are insured by the FDIC.

Restricts holders from withdrawing funds on

demand. Although it isstill possible towithdraw the money, this action willoften incur a penalty.


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Federal Deposit Insurance Corporation is agovernment insurance of bank or saving andloan accounts (up to $100,000 per account).

Credit Unions are insured by theNationalCredit Union Administration.


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Comparison between:

Money Market Fund,

CD,

Savings account


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Buy now Pay later

Student Loans

The cost of using money is called interest.

Interest rates areexpressed as a percentageper year.

Annual percentage rate (APR) is thesimplified counterpart to theeffective

interest rate that the borrower will pay on aloan.


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You cant bedenied a credit card becauseyoure a woman

You can limit your risk if a credit card is lost

or stolen You can resolveerrors in your monthly bill

without damage to your credit rating

You cant have your credit shut just because

youve reached the age of 62


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FICO (Fair Isaac and Company)

720 and over

Payment History

Amounts Owed

Length of Credit History

New Credit

Types of credit used


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Pay your bills on time

Keep balances low

Dont close unused credit cards

Dont open a bunch of new credit cards ifyou dont need them

Dont open too many accounts rapidly

CHECKYOUR OWN CREDIT REPORT


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A financial planner looks at a persons or afamilys total financial picture, helps thatperson or family define and prioritize goals

and then works out a plan to achieve thesegoals.

Tax returns

Investments

Insurance


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Unregulated industry

Makesure to look for certification

Certified Financial Planner (CFP)

CertifiedPublic Accountant (CPA) Chartered Financial Consultant (ChFC)

Personal Financial Specialist (PFS)

Certified DivorcePlanner


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Beware of freeseminars/ offers

Beware of free ANYTHING


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Loans are a sum of money lent at interest

Car Loans

Mortgage

Education Loans UnsecuredLoans

SecuredLoans

Co-signer is the one agrees to repay the loan

if the borrower defaults on it


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Collateral is property or any asset that isused to secure a loan

Starting a business collateral

Car House

Merchandise


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Taxes

Fines

Freezing your assets

Jail time Loans

Higher interest

Hurts your credit score

Hurts your co-signer Social Security


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Consumer Reporting Agencies

FCRA (Fair Credit Reporting Act)

ECOA (Equal Credit Opportunity Act)

FCBA (Fair Credit Billing Act)


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Freshmen, 36

Sophomores,55

Juniors, 51

Seniors, 64

CreditCards

Freshmen

Sophomores

Juniors

Seniors


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Federal student loans have 6.8% interest rate the highest ever.

Averagestudent debt in 2006 was $19,000

Graduate Students: $40,000 - $100,000Cant take modest paying jobs

Will thedream remain a dream


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The average American household:

Mortgagedebt of $84,911,

Car and tuition loans of $14,414,

Homeequity loans of $10,062 Credit carddebt of $8,565

Totaling: $117,952.

According to Federal Reservestatistics, the

average householdsavings this year will beonly $392.


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Debt and Savings

Documents

09Saving, Banking, Debt and Credit Issues