PERSONAL FINANCES 101

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

CREATING AND MANAGING A BUDGET: KNOW YOUR HABITS

First, know your habits by tracking your expenses to fully understand how you spend your money

C REATING AND MANAGING A BUDGET: INCOME V EXPENSES

Total Monthly Take-Home Income (minus taxes, health insurance,
other payroll deductions, 401K)

SECOND, DO THE MATH! DETERMINE YOUR MONTHLY INCOME MINUS EXPENSES

Household Expenses
Rent or Mortgage Utilities (water, sewer, gas/electricity) Home/Cell Phone

$ $ $

Groceries
Other Household (Cable, etc.)

$
$

Transportation Expenses
Car Loan Payment Gas, Tolls, Parking, Other Car Insurance (set aside if paid annually or semi-annually)

$ $ $

Other Expenses
Pet (Food, Vet) Insurance/Co-pays, Prescriptions Fun (entertainment, dining out, move rental, etc.)

$ $ $ $ $

Minus Total Expenses Total Monthly Surplus/Shortage

LITTLE SAVINGS ADD UP

ITEM One Cup of coffee daily at a Coffee shop ($3) One CD weekly ($12.99) ANNUAL COST $1,095 ALTERNATIVE Gourmet coffee brewed at home Download individual songs you like ($1) ANNUAL COST $176

$ 675

$375

Pizza delivery once a week ($10)

Eating lunch out 5 days a week ($5 per lunch)

$ 520
$1,250

Gourmet frozen pizza at the grocery ($5)

Bring your lunch to work 5 days a week ($1.50 per lunch)

$260
$375

Total Annual Savings of $2,354!

Wants versus Needs!

CREATING AND MANAGING A BUDGET: WANTS V NEEDS

Do I have to have it today? What will happen if I dont buy it?

How have I managed this long without it?

N EW C AR VS . O LDER C AR

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.

CREATING AND MANAGING A BUDGET: SAMPLE BUDGET

FIXED EXPENSES: INCOME
Take-home pay minus taxes, social security, health insurance, 401K Rent/Mortgage, Utilities, Home/Cell phone, Commuting, Car payment, Insurance, Work-related (clothes, drycleaning), Student Loan Payments, Credit Card Payments

60%

SAVINGS:
Money set aside for vacations, major repairs, new appliances, to pay down existing debt, emergencies a down-payment on a car or house, charity

20%

RETIREMENT:
Ideally, 10% of your gross income
Based on 60% solution from msn.Money

10% 10%

JUST FOR FUN:

Everybody needs some fun

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

POWER OF COMPOUNDING: START SAVING NOW!

SAVING $1 A DAY AMOUNT YOU PUT IN ACTUAL WORTH*

Year 5
Year 10 Year 20 Year 30
Source: www.taxtips.ca

$1,825
$3,650 $7,300 $10,950

$ 2,013
$ 4,591 $12,069 $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.

Benjamin Franklin said: "If you know how to spend less than you get, you have the philosopher's stone."

PROS AND CONS OF CREDIT CARDS

Although credit cards may seem like your ticket to buying anything you want

PROS AND CONS OF CREDIT CARDS

..but it is important to understand just how much that little piece of plastic could really cost you

PROS AND CONS OF CREDIT CARDS

What you may not be aware of are ALL the potential costs associated with using a credit card

Did you know credit card companies

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!

PROS AND CONS OF CREDIT CARDS

Additionally, balances on your account accrue interest when you dont pay them off each month

PROS AND CONS OF CREDIT CARDS

Once you have a balance, making the minimum monthly payment wont make much of a difference

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

PROS AND CONS OF CREDIT CARDS

109 months or 9 Years + 1 month!

(yes, thats right)

PROS AND CONS OF CREDIT CARDS

PLUS.Over those nine + years, you will have paid a total amount of $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

BENEFITS:

Helps build credit history Builds financial management skills Provides emergency protection and enhanced security Makes purchases convenient

PROS AND CONS 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

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, dont charge it! Think before you charge

ADDITIONALLY

Limit cash advances they come with costly fees and higher rates Protect your identity never lend your card to a friend

S TOP U NWANTED S OLICITORS

National Do Not Call registry 888.382.1222

www.donotcall.gov/
Curtail pre-approved credit and insurance offers 888.5OptOut

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

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

STAFFORD LOAN REPAYMENT CHART

LOAN AMOUNT * $10,000 $15,000 $19,000 $27,000 $30,000 $35,000 $40,000 MONTHLY PAYMENT $110.68 $163.53 $207.14 $294.36 $327.07 $381.58 $436.09 INTEREST PAID $3,283 $4,624 $5,857 $8,323 $9,247 $10,789 $12,330 TOTAL PAYMENTS $13,282 $19,624 $24,857 $35,323 $39,247 $45,789 $52,330

* Interest rate of 5.6%, 10 year repayment period

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 coborrower, 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)

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

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

O BTAIN

F REE C REDIT R EPORT

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 IDENTITY

Identity thieves are always on the look out for your personal information

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

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

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

ID THEFT BY PAYMENT METHOD

JANUARY 1 DECEMBER 31, 2007

Source: Consumer Fraud and Identity Theft Complaint Data, January-December 2007; Federal Trade Commission, February 2008

P ROTECT Y OUR I DENTITY !

Shred documents before trashing

Pre-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

P ROTECT Y OUR I DENTITY !

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

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 know your credit is good
Getting calls or letters from debt collectors or businesses about merchandise or services you did not buy

WHAT TO DO IF YOURE 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

I DENTITY T HEFT R ESOURCES

The Federal Trade Commission
www.consumer.gov/idtheft
www.identitytheft.org

Identity Theft Prevention and Survival FDIC

www.fdic.gov/consumers/consumer/guard/index.html www.usdoj.gov/criminal/fraud/idtheft.html

The Department of Justice

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