Supplemental Material (Dec 15) Student

8/3/2019 Supplemental Material (Dec 15) Student

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FFIINNAANNCCIIAALLLLIITTEERRAACCYY110011

SSUUPPPPLLEEMMEENNTTAALLMMAATTEERRIIAALL


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Table of Contents

PART1EXERCISESChapter

1Financial

Literacy:

the

Introduction

Exercise11RateofReturn 1

Exercise12ChapterReview 2

Chapter2TheFinancialSystemintheU.S.

Exercise21AnnualPercentageYield 3


Chapter3FinancialPlanningandBudgeting

Exercise31Monthly

Budget

5

Exercise32TimeValueofMoney 7


Chapter4BorrowingandConsumerCredit

Exercise41CostofConsumerCredit 9


Chapter5FinancialDecisionMakinginCollege


Chapter6SavingandInvesting

Exercise61Taxation 12


Chapter7BuyingYourFirstHome

Exercise71HomeMortgages 15

Exercise

7

2

Chapter

Review

16


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Table of Contents

PART2SUMMARYOFEXPERTINTERVIEWSChapter

2The

Financial

System

in

the

U.S.

KathySmith,NeighborhoodNationalBank 17


ScottBroberg,FinancialPlanner 18


MannyEscuela,MoneyManagementInternational 20


EmmiHarward,

the

Bishop

School

23

RichDusansky,UniversityofTexasAustin 25

ShannonFaulk,InsuranceAgencyOwner 26


MarkRiedy,UniversityofSanDiego 28

ChrisSorenson,H.E.L.P. 30

JaquelineCarlisle,NID 32

MichaelSpilger,RealEstateAttorney 34

SupplementalInterviews

DionneFaulk,CaliforniaDRE 35

JeffDavi,CaliforniaDRE 35

SteveEllis,CaliforniaDRE 36

BillMoran,CaliforniaDRE 36

Tom

Poole,

California

DRE

37

WayneBell,CaliforniaDRE 38

ChrisNeri,CaliforniaDRE 38

DanSandri,CaliforniaDRE 39


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EEXXEERRCCIISSEESS


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1

Exercise11RateofReturn

1. Aninvestorboughtastockfor$35ayearagoanditisworth$42now. Whatistheinvestorsrateofreturnonthisinvestment?

2. Jasonboughtastockfor$20ayearagoanditisworth$18.4now. WhatisJasonsrateofreturn?

3. ThestockpriceofMicrosoftiscurrently$28.76. Janetpaid$24.89forthestock3monthsago. WhatisJanetsrateofreturnontheinvestment?

4. Amyjustsold500sharesofGooglestockfor$625ashareandearneda7.20%rateofreturn. WhatpricedidAmypayforeachshareofthestock?


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2

Exercise12ChapterReview

1. Financeisasubjectthatdealswith____________,_____________,____________andhowtheyareinterrelated.

2. Investmentisanassetoritemthatispurchasedwiththehopethatitwill_________________or__________________.

3. Rateofreturnisthemoneyyouearnonaninvestment,statedasa____________.4. Thedegreeofuncertaintyoftherateofreturnonaninvestmentiscalled

____________.


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Exercise21AnnualPercentageYield

(Roundyouranswerstothenearestthousandthofapercent.)1. BankAoffersasavingsaccountthatpays1.25%interestrate.

a.

If

interest

is

compounded

annually,

what

is

the

APY

on

this

account?

b. Ifinterestiscompoundedmonthly,whatistheAPYonthisaccount?2. BankBoffersamoneymarketaccountwithaninterestrateof3.0%andquarterly

compounding. WhatistheAPY?

3. Youareconsideringthreeoptionstosaveyourmoney. TheinterestrateonAccountXis8.50%andcompoundedmonthly;theinterestrateonAccountYis8.75%and

compoundedannually;theinterestrateonAccountZis8.65%andcompounded

semiannually. Whichaccountprovidesthehighestrateofreturn?


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1. _________________isthecentralbankoftheUS. Itconsistsofthe_________________ and___regionalFederalReserveBanks.

2. The_________________ isresponsibleforproducingpapercurrencywhilethe_________________ isresponsibleforproducingcoinage. Bothgovernmentagencies

arepartoftheU.S.DepartmentofTreasury.

3. About___%ofthenewlyproducednotesandcoinsareusedtoreplacethosealreadyincirculation.

4. ThechairmanoftheFederalReserveBoardisappointedbythe______________ andconfirmedbythe______________ . Thecurrentchairmanis_________________ .

5. Depositoryinstitutionsrelyondepositsfromsaversastheprimarysourceofraisingcapitalandusethefundstomakeloans. Examplesofdepositoryinstitutionsinclude

_________________,_________________,_________________and

_________________.

6. The_________________istheinterestrateactuallyearnedorpaidinoneyear,takingintoaccounttheeffectofcompounding.

7. A_________________isanotforprofitinstitutionthatoffersfinancialservicestoitsmembers.

8. A_________________isafinancialinstitutionthatacceptssavingsdepositsandinveststhebulkofthefundsinhomemortgages.

9. Whenselectingabankaccount,youshouldconsiderthefollowingfactors:1)_____________,2)_____________,_____________,and_____________,and3)

_____________.

10._________________isatypeofbankaccountthatpaysafixedinterestrateforasetperiodoftime. Youdonothaveaccesstothemoneyuntiltheendoftheperiod.

11.Theprocessofearninginterestoninterestthatwasearnedinapreviousperiodiscalled_______________.


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Exercise31MonthlyBudget

1. Jerrywouldliketoprepareamonthlybudgetandhascollectedthefollowinginformationabouthisincomeandexpenses. Hehasaparttimejobandearnsabout$520eachmonth.

His

employer

withholds

10%

of

his

wages

for

taxes.

In

terms

of

spending,

Jerry

needs

to

pay

forlunchesatschoolandgasolineforhiscar,whichaverageabout$135and$60each

month,respectively. Jerryplaysmanysportsandtypicallypays$80eachmonthforthose

activities. Heestimatesthathepays$40forhiscellphoneandspendsapproximately$70

onactivitiessuchasgoingtomovies,rentingvideogamesandhangingoutwithfriends.

Jerrysetsaside5%ofhismonthlyincomeforunanticipatedexpensesandplanstosaveat

least$50eachmonth.

HelpJerrypreparethebudgetusingthefollowingworksheet.MMoonntthhllyyBBuuddggeett

Category BudgetedAmount ActualAmount Difference

Income

Wages

OtherIncome

TotalIncome

Expenses

Taxes

Food

Gasoline

Sports

Entertainment

CellPhone

OtherExpenses

TotalExpenses

Contingencies

Savings

Surplus/Deficit


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2. Afterfinishingthebudget,Jerrydecidestotrackhisactualexpensesandcomparethemwiththebudgetedamounts. Hestartsaspendinglogandrecordseverypaymenthemakes.

Attheendofthemonth,Jerrysummarizeshisspendinginthefollowingcategories:

a. Food:$128b. Gasoline:$72c. Sports:$80d. Entertainment:$85e. CellPhone:$40f. SchoolFieldTrip(notbudgeted):$30

Jerrysincomefromhisparttimejobisthesameasheexpected;additionally,hereceives

$25forhisbirthdayinthemonth.

DoesJerryhaveasurplusoradeficitinthemonth? Whatisthedifferencebetweenthebudgetedandtheactualamount?


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Exercise32TimeValueofMoney

1. Howmuchmoneywillyouhavein3yearsifyousave$20inanaccountthatpaysa4.5%annualinterestrate?

2. Howmuchwill$1,000becomein50yearsifitiscompoundedat3.0%annually?3. Howmuchdoyouneedtodepositintoanaccountwitha7.5%interestrateinorderto

accumulate$200intenyears?

4. Yourbankaccountpaysa2.5%interestrate. Inordertohave$1,000infiveyearsintheaccount,howmuchdoyouneedtodeposittoday?

5. Ifyousave$1,000eachyearandtheinterestrateonyourbankaccountis5%,howmuchmoneywillyouhavein20years?

6. Iftheinterestrateonyourbankaccountis6%andyoustartsaving$500eachyearattheageof18,howmuchmoneywillyouhaveattheageof30?

7. Givenaninterestrateof4%,whatisthepresentvalueofaseriesofpaymentsof$100thatwillbereceivedeveryyearoverthenext15years?


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1. A_______________isadetailedplanoffinancialactivitythatpertainstoincomeandexpensesexpectedduringaspecificperiodinthefuture.

2. Whenyourincomeexceedsyourspending,youhavea_______________;ontheotherhand,whenyourexpensesexceedtheincome,youhavea_______________.

3. Preparingadetailedplanforfuturefinancialactivitiesmayhelpyou:a. _______________________________________________________________.b. _______________________________________________________________.c. _______________________________________________________________.d. _______________________________________________________________.

4. Listthreepossiblesourcesofincomeforteenagers:_______________,_______________,and_______________.

5. Listfivetypicalexpensesforteenagers:_______________,_______________,_______________,_______________,and_______________.

6. _______________arethingsyoumusthaveinordertosurviveormeettheminimumlivingstandards;_______________arediscretionaryexpensesthatmaybedelayedor

substitutedwithoutaffectingyourabilitytosurvive.

7. Amajordifferencebetweenshorttermandlongtermbudgetingisthatyoushouldtakeintoaccountthe______________________whenplanningforthelongrun. The

conceptbasicallymeansthatadollartodayisworthmorethanadollarinthefuture.


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Exercise41CostofConsumerCredit

1. Jackwouldliketoborrow$8,000forthepurchaseofacar. TheAPRona5yearautoloanis6.0%. WhatisJacksmonthlyloanpayment? Whentheloanispaidoffatthe

end

of

Year

5,

how

much

total

interest

will

Jack

have

paid?

2. Sharonisplanningtobuyanewcarandneedstoborrow$13,000witha5yearloan.Thebanktellsherthattheinterestratedependsonhercredit. Thefollowingtable

showstherelationshipbetweentheinterestrateandaborrowersFICOscore.

FICOScore InterestRate MonthlyPayment

720850 4.20%

690719 6.00%

660689 7.80%

620659 10.80%

Below620 18.00%

CalculateSharonsmonthlyloanpaymentgiveneachinterestrate. SharonfindsoutthatherFICOscoreis650. Comparetsomeonewithexcellent

credit(FICO>720),howmuchadditionalinterestdoesSharonneedtopayoverthe

lifeoftheloan?


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1. __________________istheuseofcreditforpersonalneedsbyindividualsandfamilies,incontrasttocreditusedbybusinessesandgovernments. Thetwobasictypesare:

a.__________________,

which

is

a

one

time

borrowing

that

has

a

specified

loan

amountandisforaspecificpurpose. Itisusuallyrepaidwithequalperiodic

paymentsovertime.

b. __________________,whichisaloanwhosemaximumamountisapprovedbythecreditorbutnotdeliveredtotheborroweratonce. Overtime,theborrower

cangetmoneyfromthelender(uptothemaximumamount),orpaybacka

portionortheentireamountoftheprincipal.

2. Thesituationwhereaborrowerfailstomaketimelypaymentofinterestand/orprincipalonaloaniscalled______________.

3. __________________isthemaximumamountyoucanborrowusingaspecificopenendcredit.

4. 4Csarethefourkeyfactorslendersofconsumercreditconsiderwhentheyassesstheriskinessofaloan:_______________,_______________,_______________,and

_______________.

5. The__________________isanumberthatsummarizesanindividualshistoryofusingcredit. ItwasdevelopedbyFairIsaacCorporationandhasarangeof____to____.

Thisscoretakesintoaccountfivecategoriesofinformation:_______________,

_______________,_______________,

_______________,

and

_______________.

6. __________________isthecostofcreditexpressedinayearlyrate;itincludestheinterestrateaswellasotherlenderfeestheborrowerisrequiredtopay.

7. Thegradualrepaymentofloanprincipalovertimeiscalled__________________.


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1. Whenmakingfinancialdecisions,youoftenneedtoconsidervarioustypesofcost. Forexample,__________________isthecostassociatedwithoneadditionalunitof

production,

or

with

a

specific

decision;

__________________is

the

cost

of

an

activity

thatismeasuredintermsofthevalueofthebestalternativethatisnotchosen.

2. Whenselectingacreditcard,thereareseveralfeaturesyoushouldconsider,including:_______________,_______________,_______________,and_______________.

3. __________________isthesituationwhereapersonsidentification(includingname,socialsecuritynumberand/oranyaccountnumber)isusedortransferredbysomeone

elseforunlawfulactivities.

4. Listfivefactorsyouwouldconsiderwhenchoosinganapartment:_______________,_______________,

_______________,

_______________,

and

_______________.

5. A______________isawrittenagreementunderwhichapropertyowner(calledthe______________)allowssomeoneelse(calledthe______________)tousethe

propertyforaspecifiedperiodoftimeinexchangeforamonetarybenefit(whichisthe

______________).

6. __________________isatypeofhomeinsurancethatprotectstheholderagainstaccidents,damagesandlossesthatoccurinarentedresidence.


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Exercise61Taxation

1. Supposeyouaresubjecttoa33%taxrateandyourinvestmentinstocksearnsa15.00%returnintheyear. Whatisyouraftertaxrateofreturn?

2. Youaresubjecttoa20%taxrateandyourgoalistoearna6.40%rateofreturnafterpayingtaxes. Howmuchbeforetaxreturndoesyourinvestmentneedtoproduceso

youcanreachyourgoal?

3. Yourinvestmentgeneratesan8.50%beforetaxreturn,butafterpayingtaxes,youactualreturnis7.14%. Whatistaxrate?


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1. ______________isanassetoritemthatispurchasedwiththehopethatitwillgenerateincomeorincreaseinvalue.__________________isthemoneyyouearnfromit,

stated

as

a

percentage.

2. Thefourstagesinthelifecycleofinvestinginclude:_______________,_______________,_______________,and_______________.

3. Abondisacontractthroughwhichagovernmentoracorporation(the______________)borrowsmoneyfrominvestors(the______________). Thesystem

thatevaluatesthepossibilityofdefaultbytheborroweriscalled_________________.

4. __________________arethosewhoseratingsarebelowinvestmentgrade(typicallyBBandbelow). Theyhavemuchhigherriskthaninvestmentgradebonds.

5. ______________isatypeofinvestmentthatreflectsownershipofacorporationrepresentedbysharesthatareaclaimonthecorporationsearningsandassets.

Investorswhoownsharesofacorporationarecalled__________________.

6. Wheninvestinginastock,yourreturnmaycomefromtwosources:1)______________aretheperiodicpaymentsthecompanymakestodistributeitsearningstoowners;2)

_________________istheamountbywhichthesalepriceofthestockexceedsitsinitial

purchaseprice.

7. Manyindexeshavebeencreatedtomeasuretheperformanceofthestockmarket. Themostrecognizedexamplesare:a. __________________,whichisbasedonthepricesof30largecompanies. Itis

theoldestandmostquotedstockmarketindicator.

b. __________________,whichisbasedonthepricesofallstockstradedontheNASDAQsystem.

c. __________________,whichisconstructedbyStandard&Poorsandbasedonthepricesof500largecorporations.

8. __________________isdefinedaslandandimprovementsontheland(suchasbuildingsandlandscaping).Examplesincludehouses,condominiumsandothertypesof

properties.Properties

that

are

purchased

for

income

producing

purposes

are

called

__________________.

9. A__________________ isanentitythatpoolsmoneyfrommanyinvestorsandinvestsinavarietyofinvestmentopportunities. Itprovidesinvestorsthebenefitof

_______________,whichmeanscombiningalargenumberofinvestmentstoreduce

risk.


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10.A__________________isacollectionofinvestmentsownedbythesameindividualororganization.

11.Listfourtypesoftaxthatindividualsandfamiliesmayneedtopay:_______________,_______________,_______________,and_______________.

12.An__________________isaspecialinvestmentaccountthatallowstheownertodeferpayingtaxesonmoneysavedforretirement.

13.Rankbankaccounts,stocks,realestateandbondsbasedonthelevelofriskinvolvedineachinvestment(fromthehighesttothelowest):1)_______________,2)

_______________,3)_______________,and4)_______________.


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Exercise71HomeMortgages

1. Considera$320,000,30yearmortgagewitha7.20%interestrate. Whatisthemonthlypayment?

2. Katieisplanningtobuyahomefor$260,000. Shehassavedsomemoneysocanaffordtopay$50,000fordownpayment. Iftheinterestrateona30yearmortgageis6.00%,

howmuchisKatiesmonthlymortgagepayment?

3. Jamesneedstoborrow$450,000forthepurchaseofanewhome. Heisconsideringtwooptions:a15yearmortgagewitha3.60%interestrateanda30yearmortgage

witha4.20%interestrate.

a. Whatisthedifferenceintermsofmonthlymortgagepayments?b. WhatisthedifferenceintermsoftotalinterestJamesneedstopayoverthelife

ofeachloan?

4. Kellyneedstoborrow$240,000withamortgageandthelendercharges2.50discountpoints. Inordertogettheloan,shealsohastopayadditionalfeesof$3,600. Whatis

Kellystotalclosingcost?


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1. The__________________isthemidpointofanorderedarrayofactualtransactionpricesofhomes. Itisacommonlyusedmarketindicatorofhousingvalue.

2. Listthreeexpensesthatusuallyneedtobepaidbyhomeowners,butnotbyapartmentrenters:_______________,_______________,and_______________.

3. Duringthehomebuyingprocess,youmayworkwithvariousrealestateprofessionals.Oneexampleisa__________________,whoislicensedtoprovideservicessuchas

showinghomes,makingoffersandcounteroffers,negotiatingprices,andassistinginthe

closing. Anotherexampleisa__________________,whotakesamortgageapplication,

processesandreviewscredit,andpreparesdocumentsforthelender.

4. Aloanthatusesrealestateascollateralforitsrepaymentiscalleda_______________.5. Therearemanydifferenttypesofmortgages. Forexample:

a. __________________:amortgagewhoseinterestrateremainsconstantovertheentirelifeoftheloan.

b. __________________:amortgagewhoseinterestratechangesperiodicallybasedonapredeterminedformula.

c. __________________:amortgagewhosemonthlypaymentsdonotincludeprincipalrepayment.

6. A__________________isaonetimefeepaidbytheborrowertoreducetheinterestrateonamortgageandisequaltoonepercentoftheamountborrowed.

7. Considerafixedratemortgagethatisamortizedover30years:a. Themonthlypayment__________________ (increases/decreases/staysthe

same)overtime.

b. Theinterestpayment__________________ (increases/decreases/staysthesame)overtime.

c. Theprincipalrepayment__________________ (increases/decreases/staysthesame)overtime.

8. AccordingtotheU.S.taxcode,onlythe__________________ portionofamortgagepaymentistaxdeductible.

9. Expensesthatarerelatedtocompletingarealestatetransactionbutseparatefromtheactualpriceofthepropertyarecalled__________________.

10.__________________ isthecostofcreditexpressedinayearlyrate;foramortgageitincludestheinterestrateaswellasotherlenderfeestheborrowerisrequiredtopay,

suchasdiscountpoints,originationfee,brokerfee,etc.


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Chapter2TheFinancialSystemintheU.S.

KathySmith,BankBranchManager

NeighborhoodNationalBank

Whataresomeoftheproductsandservicesofferedbyabank?

Checkingaccounts,savingaccounts,bankCDs,moneymarketsaccounts,businessaccounts,

loans,debitcards,andonlinebillpay.

Whyisitimportantforahighschoolstudenttoopenabankaccount?

Tolearnfinancialresponsibilities Toknowhowtobalanceoutaccountwithmoneytheyearned Toearnmoneyonsavingaccount Togrowupinafinancialsoundworld

Whatshouldsomeoneconsiderwhenchoosingabank?

Thelocationofthebank Willhe/shebecomfortablewiththebank Thebanksproducts&services

Howsafeisthemoneyyoudepositinabank?

Itssafeandsecured. TheFDICinsuresupto$250,000. Additionalbenefits:interest;notheftorrobbery!

(FormoreinformationaboutFDIC,gotohttp://www.fdic.gov/deposit/.)Whatsthebiggestmistakeyouseeclientsmakeintheiraccounts?

Balancingcheckingaccounts Clientsneededucationandthehelpofthefinancialinstitution.


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ScottBroberg,Financial planner

Whatdoes

afinancial

planner

do?

He/shehelpspeopleestablishgoals(savemoneyforretirement,buyinghouse,gotocollege)

andcreate/developtheplantogettotheirgoal. Thereisnoguaranteethatitwillworkoutas

planned. However,planningaheadhelpsyoualongthewaywhenlifechanges.

Whocanbenefitfromtheservicesofafinancialplanner?

Everybodycanusefinancialadviceinsomeshapeorform.

Practicalityissue:Howmuchwouldyoupayfortheadvice?

Youmaygetadvicefromotherplaceswhenyoufirststartoutyourcareertheneventuallywork

yourway

into

afinancial

planner

office

once

you

have

more

complexity

to

your

financial

situation.

Atwhatpointshouldsomeoneseektheservicesofafinancialplanner?

Today,assoonaspossible,becausetimeisshortandweneedtomakethemostofthetimewe

haveandthelimitedassetswehaveinourlife. Youngpeoplebeginningtosavemoneymaygo

toafinancialplannerandpayaonetimefeetogetguidancetomoveahead. Onceyoustartto

accumulateassets,thenitmakemoresensetohaveanongoingrelationshipwithafinancial

plannerthatyoupayonaregularbasis.

Whatshouldonelookforinafinancialplanner?

1. Goodfit!(comfortablewith,trustthathe/shecanhelpyou)2. Comfortabletosharefinancialinformationtotheindividual3. Howmuchareyoupaying? Areyougettingagoodvalueforwhatyouarepaying

him/her?

Whatsthebestfinancialadviceforhighschoolstudents?

Spendlessthanyouearn! Thisalsoappliestoallincomelevels!

Whatsthebestagetostartworkingwithafinancialplanner?

Today! Thinkaboutwhereyouareatthispresentsituationandstarttoplanoutforyour

future. Planthenextstep!


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Whenyouareinhighschool,thinkaboutwhereyouaregoingtocollege,howyouaregoingto

payforcollege,andwhetherornotyouhavetoworkthroughoutcollege. Whenyouarein

collegethinkaboutwhatkindofcaryoucanafford,whereyouwanttolive,whereyoushop.

Whats

the

biggest

mistake

you

see

people

make

with

their

money?

Overspendingoncarsforyoungpeople.

Advice:Saveupmoneyandbuyacaronyourown. Donotgooutfinancingavehicle.

Whataresomegoodfinancialhabitstobegincultivating?

Decidewhatthemostimportantfinancialgoalisforyou. Setthegoal,andsavemoneytoget

there. Savemoneyupforthatinliquid,andgoouttomakethatpurchase.


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MannyEscuela, Regional Director, Education, CommunityRelations &Development

MoneyManagementInternational

Whatdoesyourorganizationdo?

Itisthelargestconsumercreditcounseling&serviceeducationcompanyinthecountry.

Whatsortsofservices?

BudgetandDebtCounseling DebtManagement ForeclosurePrevention BankruptcyCounseling BankruptcyEducation FinancialWorkshops

Whatshouldhighschoolstudentsbethinkingaboutintermsoftheirfinances?

Studentsshouldhavearolemodeltoemulateandseehowresponsiblehe/she(therolemodel)

bothearnandspendhis/hermoney.

Howcanstudentsprotectthemselvesfromaggressivecreditcardmarketing?

Parentsshouldknowtheirkidsneedsandeducatethekids. Teachersororganizations(likeDRE)shouldbringfinancialliteracyintoschooland

educatekidssotheyunderstand.

(Interestingfact: Therewasalawpassedonrestrictingaggressivecreditcardmarketingon

campus. However,theaveragestudentdebtincreases. Thelawonlylimitedoncampus,but

thecreditcardcompaniesarenowusingsocialmedia.)

Whatsthedifferencebetweenacreditcard,debitcard,&securedcreditcard?

Adebitcardallowseasieraccesstothemoneythatsalreadyinyourchecking/savingaccount,

anditsonlygoodforthemoneythatyouhaveinyouraccounteventhoughithasVisa/Master

logoon

your

card.

Acreditcardgivesyouaccesstoasetamountofmoneybasedonacertaincreditlimitfor

whichyouhavequalified. Youhavetopaythemoneybackplusinterest. Highschool/college

studentinterestrateis1625percent.

Securedcreditcardisonlygooduptothelimitforwhichyouhavemadethedeposit.


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Howcanahighschoolstudentestablishgoodcredit?

Donotexceed30%oftheavailablecredit. Itwillaffectyourcreditscore.

Howcanpeopleavoidbecomingoverwhelmedwithdebt?

Saveforitasmuchasyoucanorearnit.

Howimportantisapersonscreditscore?

Itsonlyimportantifyouaregoingtouseit. Everybodyeventuallyneedstousecredit. Four

areascreditorarelookingintoare:

character(repaytimely), collateral(assetstobuy:car,home), actualcredit,and capacity(howyoucanpayitpayback).

Whatkindsofresourcesareavailabletohelppeoplekeeptrackoftheircreditscore?

Theonlyplaceyoucangetafreecreditreportis:

https://www.annualcreditreport.com/cra/index.jsp

NoFICOscore,butyouwillgetyourcredithistory. Getcreditreportatleastonceayear.

Whatsthebiggestmistakeyouseepeoplemakewiththeircreditchoices?

KeepingupwiththeJoneses,fallingformarketingmessages

Whats

the

best

sign

of

credit

success?

Peoplewhorealizedtheycantaffordtheircreditcardsbecausetheyoverextendeditand

enrolledinthedebtmanagementplan. Withminimumcost,theywillrepaytheirdebtinfull

withlow/nointerestrate.

Howdoesbankruptcyaffectapersonscreditscore?

Itaffectsacreditscoreforatleast710years. 7yearsifitisreorganizeddebtpaidinfull.10

yearsifitisdischargedatbankruptcycourtwhichallowsthepersonstohavethedebt

dischargedwithoutpayingitback.

Whataresomethingspeoplecandotosetthemselvesupforagoodfinancialfuture?

Parentsshouldsetgoodexampleonspendingmoney. Getkidsinvolveinfamilybudgeting(moneyyouhave,theamountofbillsyoupay).

Howcankidsplayaroleinhelpingmaintainthefamilysfinances?

Notbuyingbrandnames,buyinguseditems.


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Referparentsto:

http://www.crediteducation.org/

http://www.moneymanagement.org/

Are

all

credit

cards

bad?

Lookonvarieswebsitetowhatisavailableintermofinterestrate.

http://www.cardtrak.com/

http://www.bankrate.com/

Getlowrate,noannualfee

Arepaydayloansagoodidea?

Stayawayasmuchaspossible. Highinterestrate!

Whatareyourguidelinesonsavings?

Utilizeemployermatching. Saveatleast10%ofyourincomeforanemergencyfundandyourfinancialgoals.

Howisyourcreditscorecalculated?

Twoareashavethemostimpactonthescore:

Theamountofmoneytheyowed(30%) Theirhistoryofrepayingtheirdebt(35%)


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EmmiHarward,HeadofCollege Counseling

The BishopSchool

Whatsortsofthingsshouldcollegeboundstudentsconsiderintermsofpayingfortheir

collegeeducation?

Whattheywanttostudy Whattheywanttogetoutofthecollegeexperience Figureouttheirfundingsources(private/publicschooltuition,scholarship,outside

sourcesoffunding,financing)

Whatcollegefinancingresourcesareavailabletostudents?

Highschool/collegecounselor Websites(aboutstateaids/fedaids) Parents Internet

http://scholar.dlhjr.com/

Whenstudentsarelookingatpayingforcollege,whatshouldtheyconsider?

Valuevs.costofeducation

Isacollegeeducationworththeinvestment?

Fouryearcollegebecomesbasicrequirementformanyprofessionalorganizations. Itmakes

sensetostartlookingforfundingandfinancingearly.

Whatcanstudentdotoplanaheadforpayingfortheircollegetuition?

Talktofamilytoseeifthereisfinancialresourcefamilycanoffer Federal/stateaid Resourcefromhighschool Collegewebsite Community Savemoney


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TaliAbramson,PropertyManagementDirector

Whatqualitiesdoyoulookforinatenant?

Fairhousing(nodiscriminationbasedonrace,color,nationalorigin,religion,sex,familial

status)

Payrentontime Greatcredithistory

Howcanprospectivetenantsbestpreparethemselvestorentanapartment?

Atleast18 Withcredithistory Renterswithoutcredit/rentalhistoryrequireextramonthof

depositorneedtogetacosigner.

What

sort

of

things

should

first

time

renters

be

thinking

about

when

they

look

for

a

place?

Cleanness,people(friendlystaffs),andlocation

Whattypesofquestionsshouldprospectivetenantsaskthelandlordorpropertymanager?

School?Library?Acceptpets?Funiture?Whataretheoptionswhenyouneedtobreakupthe

lease?

Whatstheadvantageofrentingfromapropertymanagementcompanyoveranindividual

landlord?

Less

maintenance

issues,

landlord

might

have

financial

problems

and

you

end

up

paying

the

rentandgettingevicted!

Whatsthebiggestmistakeyouseetenantsmake?

Tenantsdidntmanagetheirexpectationsrightatthebeginningandendedupbreakingthe

lease.


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25

RichDusansky,Economics Professor

UniversityofTexas Austin

Whatdidyoudiscoverwhenyourecentlywenttobuyahouse?

Myidentitywasstolen!

Howwasyouridentitystolen?

Someonegotmysocialsecuritynumberandmyname,createdfalseW2,electronicallysentto

IRS,andgotahugerefund.

Whowasresponsibleforstealingyouridentity?

AringinBrooklyn,NewYork

Whatlessonhaveyoulearnerfromyourexperience?

Takepreventivemeasurement(creditmonitoring). Becarefullywhengettingphonecallsaskingyoursocialsecurity,gettingemailinquiries

foryourSSN,bankaccountnumber.

Getcreditfreezesonoonecangetyourcreditreport.Didtheidentitytheftaffectyourhomepurchase?

Withhelp,thedealwasclosedtimely. Ifnot,Imightlosethedeposit($10,000)Iputdownfor

purchasingthehouse.


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26

Shannon Faulk,InsuranceAgencyOwner

Whoneedsinsuranceandwhy?

Peoplewhohaveacquiredpersonalbelongingsintheirlife Itwillprotectthemfromdisasters,

accidentsandnotcausefinancialruinfortheirfamily.

IsrentersInsuranceagoodidea?

Renterinsuranceisagoodcoveragetohave.Itcoversindividual&personalbelongs,theftand

liabilities. Itisforpeoplewhodonotowntheirhome.

Whatarethelegalrequirementsforhomeownerinsurance?

Purchasinghomeownersinsuranceisalegalrequirementwhenyouveborrowedmoneyfrom

alender,suchasabank,topayforyourhome.Whenyouborrowmoneyfromalender,youare

enteringintoacontractwiththatlender. Purchasingahomeownersinsurancepolicymore

oftenthannotcanbefoundinthetermsandconditions.Ifyourlendermakesitarequirement

foryoutopurchasehomeownersinsurance,andtheyusuallydo,thenyoumustpurchase

homeownersinsurance.

HowdoesPMIinsuranceaffectthecostofyourmonthlymortgage?

PMIisextrainsurancethatlendersrequirefrommosthomebuyerswhoobtainloansthataremorethan80percentoftheirnewhome'svalue.Inotherwords,buyerswith

lessthana20percentdownpaymentarenormallyrequiredtopayPMItoprotectthe

lenderifthehomebuyersgointodefault.

Itsadditionalinsurancecoverageonthemortgage. Itaddsadditionalcostonthemortgage.PMIchargesvarydependingonthesizeofthedownpaymentandtheloan,

buttheytypicallyamounttoaboutonehalfof1percentoftheloan.

Keeptrackofyourpaymentsontheprincipalofthemortgage.Whenyoureachthepointwheretheloantovalueratiohits80percent,notifythelenderthatitistimeto

discontinuethePMIpremiums.

Whatshouldsomeonelookforinaninsuranceagent?

Knowledge Integrity Expertise

Whatisyourbestadviceonpurchasingcarinsurance?

Doresearchfirst. Lookforbestproduct.


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27

Findinsuranceagentwithexpertise.Someothernotesoncarinsurance

Newdriverusuallypaysmoresincenoexperience. Thecostwillbedifferentbasedontypeofvehicle,typeofpolicy(individualorfamily). Youshouldconsiderifliabilityinsuranceistherighttypeforyou.


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28


MarkRiedy, ProfessorUniversity ofSanDiego Whyaremortgagesimportant?

Aninstrumenttiesyoutothehouseandforcesyoutomakepaymentsontime. Ifyoudont

payitontime,youmayloseyourhouse.

Howimportantaremortgagestothestateofthehousingmarkets?

Thestateofmortgageschangeddramaticallyoverthelast20years. Nowpeoplegetcana

mortgagebetterfittedtotheirneeds.

Whatare

some

of

the

different

types

of

mortgages

available?

StandardMortgage:30yearfixedrate,interestrateontheloanneverchanged Nowwehavedifferentduration,variableratesformortgages.

Whyshouldahighschoolstudentcareaboutwhatsgoingoninthehousingmarket?

Thinkaheadabouthowtoqualifyforbuyingahouseandprepareearly. Takegoodcareofyourcreditscore.

WhatmakestheCaliforniahousingmarketunique?

TheCaliforniahousingmarketisthemostcreativeonesincethehousedemandsaremorediverse.

Thehousingmarketwentdownin2008duetohighpricesanddecreasinghousingdemand. Thehomepricewentdown,andhomeownercouldntpaythemortgage.

Housingmarketwillhavecycles. Since2008,thehousingpriceswentdowndramatically,especiallyinCalifornia. Thehousingmarketwillbemoreaffordablefor

highschoolstudentswhentheyarereadytobuyahouseinthefuture.

Whatlessonscanbelearnedfromthehousingmarketcrash?

Makesureyouhaveajob,agoodpayingjob. Studymortgagemarket,workwithlender,andfindthebestmortgagetofityourneeds. Dontbemisledthatthehousingpriceswillalwaysgoup! Itwillcomedown. Thatbeingsaid,buyinghouses,especiallyinCalifornia,isagoodinvestmentoveryour

lifetime,butkeeprisksinmind.


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29

Howhavethehousingandmortgagemarketschangedovertime?

Housingmarketdemonstratescycles. Differentpartsofcountryreacttoeconomicsituationdifferently.

Whats

the

impact

of

the

credit

score

on

the

mortgage

payment?

Creditscoredoesacouplethings:

Ifyourcreditscoreislow,youmaynotbeabletoborrowatall. Ifyouhavealowcreditscore,lendersmaychargehigherinterestratesormakeyoupay

points.


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30

Chris Sorenson,Founder

HomeownershipEducation LearningProgram (H.E.L.P).

Whatquestionsshouldaprospectivehomebuyeraskarealtor?

Who

are

your

team

members?

How

do

you

choose

your

team

member

(loan

officers,

loanoriginators)? Arethereanybenefitstoyoudirectlyorindirectlybyreferringmeto

them?

WhatcanIexpectfromyoufromtheprequalificationphase,thehomesearchphase,theescrowphase,thepostclosingphase?

Whatdoyouexpectfrommeasabuyer?Gettheanswersinwritingtomitigatetheexpectationsbeingletdown.

Whatsthemostimportantqualityforarealestateprofessionaltohave?

Integrity

(put

clients

interest

above

their

own)

Whatoptionsdobuyershaveiftheyreunhappywiththeiragent?

Ifbuyerentersintocontractualagreementwiththeagentthatrepresentsthem(enlisted

agent),itwillbeverydifficulttobreak. Youshouldonlyentertheagreementafteryoureviewit

verycarefullyanddecidethisistherightpersonforyou. Youalsoneedtomakesureyouand

youragentmatchpersonalities.

Stepsyoucantake:

Contactthebrokerofrecordthatthesalespersonisworkingforandrepresenting.

Make

sure

that

the

Board

of

Realtors

that

these

individuals

belong

to

are

made

aware

of

thechallenges.

ContactDepartmentofRealEstate,andfileacomplaint.Whoistheidealprospectivehomebuyer?

Buyerswhospendextensivetimegoingovertheirindividualbudget Buyerswhounderstandtheborrowingprocess Buyerswhoaredecisiveaboutwhatkindofhometheywanttobuy

Isit

always

better

to

buy

than

rent

ahome?

Buyinghomeisalargecommitment. Thereareawholelotofissuesinrespecttomaintenance,

tax,andinsurance. Buyershouldconsideritasaverylongtermstrategyandseeifitisrightfor

them.

Whatadvicewouldyougiveahighschoolstudentwhowantstobuyahomeoneday?

Withcompoundinterest,puttingalittlemoneyawayeveryweekwilladduptoahugeamount.


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31

Decidewhatyouwant. Decidewhatyouarewillingtogiveup. Deicidewhatyourprioritiesare. Gotowork.

Howcanpeoplereachyouiftheyhavequestionsorneedhelp?

Course:

http://www.dre.ca.gov/pdf_docs/re18.pdf

Website

http://www.freehomeownershiphelp.org/

Email

[email protected]


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32

Jaqueline Carlisle, Executive Director

NIDHousingCounselingAgency

Whatarethebiggestobstaclestobuyingahome?

Intimidation

factors:

intimidated

by

the

process,

by

engaging

something

new,

by

too

muchinformation

Credit Downpayment&closingcost

Whatisthemostimportantthingapersoncandotobecomefinanciallyliterate?

Availingthemselvestoeducationopportunitiesthatareavailable Knowing&understandingthetruecostofhomeownership

What

are

the

steps

to

home

ownership?

Educateyourselfabouttheprocess. Maintainstableemployment,atleast2years. Knowyourcredithistory;knowwhatisonyourcreditreport. Correctthemistakeson

thecreditreport.

Haveabudget. Doapersonalbudgetanddeterminehowlargeamonthlypaymentyoucanaffordandcomfortablypay.

Researchasmuchinformationasyoucan. Preapproval Knowwhatyourprioritiesare.(Isitclosetoyouremployment? Isitclosetoyourchilds

school?) Itcannarrowyoursearchforthehouse.

Searchforarealestateprofessionalthatcanhelpyou.Lookupthelicensehistory.Makesureyouarecomfortablesharingyourinformationwithhim/her.

Signcontracts. Makesureyoudoresearchandunderstanditbeforeyousignit.Howcansomeonegetthemostoutofhomeownership?

Buywhatyoucanafford. Affordabilityisoneofthebiggestobstaclespeopleexperiencedinnotgettingthemostoutofhomeownership.

Propertymaintenanceandrepair. Knowingitsimportantforongoingmaintenanceofyourpropertysoyouwonthavebigchunksofunexpectedexpenses.

Budgetingisthekey. Budgetformaintenance,repairandlongtermthingsthathavetobedonetokeepitwellmaintained.

Energyefficiencyupgrades


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33

Yourhomeshouldbetheplaceyoufeelcomfortableandyoucanenjoy. Itshouldnotbea

causeofstressinyourlife. Withproperplanningandequippingyourselfbasedonthe

affordabilityandoverallcostofthehomeownership,yourhousecanbeabeautifulhomethat

youcanenjoy!

Whyishomeownershipcounselingmoreimportantthanever?

Thereisalotofinformationoutthere. Somearecorrect;someareincorrect. Itcanbereally

confusing.Withcounseling,itcanhelpyounavigatethebulkinformationoutthere.

Whatdoesyourorganizationdo?

TheNationalInvestmentDivisionHousingCounselingAgency(NIDHCA)isaHUDapproved

nonprofitorganizationwith25yearsofexperienceinhousingcounselingandcommunity

building. NIDHCAhastakenaleadingroleinadvocatingforourdevelopingpoliciesthatwould

effectivelyaddressthehousingandcommunitydevelopmentneedsofunderserved

communitiesinneedoftraditionalresources,productsandservices.

http://nidonline.org/index.html

Whatsortofresourcescanyousuggestforthoseinterestedinpurchasingahome?

HUD(Housingand UrbanDevelopment)http://portal.hud.gov/hudportal/HUD


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34

Michael Spilger, Real EstateAttorney

Whatdoesarealestateattorneydo?

Therearealotofdifferentareasinrealestatelaw. Itcoverslanduse,landlord,tenant,

commercialleasing. Mypracticefocusesonbuyers/sellers,borrowers/lenders,onrealestate

saletransactions.

Whenshouldsomeoneseekouttheservicesofarealestateattorney?

Youusuallydontneedarealestateattorneywhenbuyingahouse.Itonlyhappenswhen

somethinggoeswrongandthedealgoesbad.

Whatsthedifferencebetweenshortsaleandaforeclosure?

Ashortsaleoccurswhenapropertyissoldatlessvaluethanitowesandthelenderagreesto

acceptadiscountedpayoff. Foreclosureistheprocessofthelendertakingpossessionofa

mortgagedpropertyasaresultofsomeone'sfailuretokeepupmortgagepayments.

ExampleofShortSale:

Iftheunpaidbalanceofaloanis,say,$100,000andapropertysellsfor$90,000,underashort

salethelendermightaccept$90,000aspaymentinfull.

Howdoesaforeclosureorshortsaleaffectthecreditscore?

Foreclosurewillaffectyourcreditscorefrom200to250points. Ashortsalewillaffectyour

creditscorefrom150to200. Youareintroubleanyway.Thewaitingperiodtogetaloanfora

personwhohasshortsalerecordissomewherebetween2to3years. Forpeoplewitha

foreclosurerecord,thewaitingperiodwilladdanotheryearortwo.

Whenisitimportanttoreadoverthetermsofarealestatedocument?

Youshouldhaveanattorneylookingovertheselfcreatedforms.Thebiggestblunderisnot

havingalloftheinspectionsbeforeyouclosethedeal. Thestandardcontractallowscontingent

onthebuyersapprovalofphysicalinspection,buyercheckingoutonschoolsystem,and

zoning. Thatisthehomeworkbuyersneedtodo. Hirephysicalinspectortocheckonthe

property. Ifinspectorredflagsanissue,youshouldhaveitcheckoutbylicensedrepairmen

beforeyouclosethedeal.


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35

SupplementalInterviews

Dionne Faulk,ManagingDeputyCommissioner

California DepartmentofReal Estate

WhatisthepurposeoftheCaliforniaDepartmentofRealEstate?

Tosafeguardandtopromotethepublicinterestinallrealestatematters. Weprotect

consumersandsafeguardalltheirrealestateinterest,issuelicensesforrealestate

corporations,realestatebrokers,realestateagents. Wealsoinvestigaterealestatefrauds.

Wealsoverydynamicfinancialliteracyoutreachprogram. Weimplementtheprograma

coupleyearsagoandyoucanfinditavailableatallCaliforniacommunitycolleges. Thenameof

theprogramis FinancialSensetoWhitePicketFence. Iteducatesthecollegestudentson

financialliteracymatters. Wealsoarecurrentlyimplementingafinancialliteracyprogramin

allof

the

high

schools.

The

goal

is

to

educate

high

school

students

on

financial

literacy

matter

beforetheygraduate.

YoucancheckoutofalltheinformationonDREswebsite.

http://www.dre.ca.gov/

JeffDavi,FormerCommissioner


Whatisyourbestadviceforafirsttimehomebuyer?

FindarealestateagentwhoislicensedbystateofCaliforniaandwithwhomyouenjoyworking.

Getpreapprovedforyouloan. Buyapropertythatmeetsyourbudget. Learnthemarketinwhichyouarebuying. Relyonyourrealestateagentandusetheirexpertisetomakeinformeddecisions.


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36

Steve Ellis,AssistantCommissioner


Whatarethefirststepssomeoneshouldtakewhentheydecidetheywanttopurchasea

home?

Getprequalified!Prequalifiedmeansaloanofficerhasdeterminedaborroweriscreditworthy

andfinanciallyabletoqualifyforacertainloan.

Bill Moran,Assistant Commissioner,Enforcement


Whatsortsofresourcesareavailabletoconsumerswhowanttoknowtheyredealingwith

reputablepeopleduringthehomebuyingprocess?

CheckDepartmentofRealEstatewebsite(http://www.dre.ca.gov). ChecklocalBetterBusinessBureau. CheckinternetserviceproviderssuchasYelp,Angieslist. Checkinternetsearchengines.


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38

Wayne Bell,ChiefCounsel


Whatquestionsshouldsomeoneuseininterviewingarealestateprofessional?

How

long

have

you

been

in

the

residential

real

estate

business?

Areyouexperiencedintheneighborhood/neighborhoodsthatIaminterestedinpurchasingthehome?

Doyouhaveanyexpertise? Doyouhaveanyprofessionalaffiliations? AreyouamemberofaBoardofRealtors,a

memberofalocalboard?

HowmanyhomeshaveyousoldorassistedinpurchasingintheareathatIaminterestedinbuying?

Whatareyougoingtodotohelpmelocateahome?Openhouse?Internet? Howmuchtimeareyougoingtospendwithmeeachweek? Howareyougoingtohelpmetodeterminethevalueofthehome? Whentheofferisreadytobemade,areyougoingtohelpmeputtogetheranoffer?

Howareyougoingtoaligntheofferwiththetruevalueofthehome?

Doyouhavealistofsatisfiedcustomers,alistofpersonalreferences? Getphonenumbersandcallthem.Makesurewhatyouaretoldistrue.

Chris Neri,AssistantCommissioner


Whatarethemostcommonmistakespeoplemakewhentheygotobuyahome?

Nothiringrealestateprofessionals Notgettingprequalified,preapproved Overbuying Rushingintobuying


44/44

Dan Sandri,ChiefAuditor,


Whatsortsofthingsshouldconsumersconsiderwhendecidingonahomeloan?

What

payment

amount

does

your

budget

allowed?

Whichfitsbetter?A30yearor15yearloan? Adjustablerateorfixedrate? Whatarethepoint&feecharged? Whatistheinterestrate? Aretherespecialprogramsavailabletoyou?

Documents

Supplemental Material (Dec 15) Student