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
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
ANNUAL COST
One Cup of coffee
daily at a Coffee
shop ($3)
$1,095
ALTERNATIVE
Gourmet
coffee brewed
at home
ANNUAL COST
$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 ($5
per lunch)
$1,250
Bring your lunch to
work 5 days a
week ($1.50 per
lunch)
$375
Total Annual Savings of $2,354!

CREATING AND
MANAGING
A 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?
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
60%
Rent/Mortgage, Utilities, Home/Cell
phone, Commuting, Car payment,
Insurance, Work-related (clothes, drycleaning), Student Loan Payments,
Credit Card Payments
SAVINGS:
20%
Money set aside for vacations, major
repairs, new appliances, to pay down
existing debt, emergencies
a down-payment on a car or house,
charity
RETIREMENT:
10%
Ideally, 10% of your gross income
Based on 60% solution from msn.Money
JUST FOR FUN:
Everybody needs some fun
10%
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
$1,825
$ 2,013
Year 10
$3,650
$ 4,591
Year 20
$7,300
$12,069
Year 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 you
get, you have the philosopher's stone."
PRO’S AND CON’S OF
CREDIT CARDS
Although credit cards
may seem like your ticket
to buying anything you
want…
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…
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
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!
PRO’S AND CON’S OF
CREDIT CARDS
Additionally, balances
on your account
accrue interest when
you don’t pay them
off each month
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…
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 don’t charge anything else
to this card
PRO’S AND CON’S OF
CREDIT CARDS
109 months or 9 Years + 1
month!
(yes, that’s right)
PRO’S AND CON’S 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
That’s $2,920 in interest alone!!
Source: www.bankrate.com
PRO’S AND CON’S OF
CREDIT CARDS
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

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, don’t 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 *
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:
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 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
O BTAIN
A
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

Driver’s License #

Date of Birth

Mother’s 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 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
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
I DENTITY T HEFT R ESOURCES
The Federal Trade Commission
www.consumer.gov/idtheft
Identity Theft Prevention and Survival
www.identitytheft.org
FDIC
www.fdic.gov/consumers/consumer/guard/index.html
The Department of Justice
www.usdoj.gov/criminal/fraud/idtheft.html
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