Money Management 101. Financial Literacy Committee Victoria College

Transcription

1 Money Management 101 Financial Literacy Committee Victoria College

2 1) What counts the most in your a) Length of History FICO credit score? b) Capacity Used c) New Credit d) On-Time Payments e) Types of Credit

3 2) A lender can not report your payment history to a credit reporting agency without your permission. A. True B. False

4 3) Grants and scholarships do not typically have to be paid back but there are sometimes conditions. A. True B. False

5 4) Maria needs a loan but doesn t want to pay interest on the loan while she is in school. What type of loan should she get? A. Subsidized B. Unsubsidized C. Private loan

6 5) The average interest rate for a student credit card is. A % B. 12.5% C % D. 7.58%

7 6) What should you consider first before borrowing student loans? A. Monthly living expenses B. Interest Rate C. Future earning potential D. Payment amount

8 7) What is the best way to avoid credit card debt? A. Don t ever get one B. Pay off your balance every month C. Transfer balances to another credit card D. Increase your credit limit

9 8) Which of the following are examples of consequences of defaulting on student loans? A. Loss of financial aid eligibility B. Inability to renew professional license (teacher, nursing) C. Withholding of wages and tax refunds D. May be sued E. All of the above

10 MAKING A BUDGET KEYS know actual income Identify income Use Income Worksheet List the financial assistance each month family gifts, income, child support, other payments

11 Use Expenses Worksheet

12 income expenses BALANCE YOUR INCOME AND EXPENSES

13 Think about it How much does it add up? You Must Be Kidding! 1 Starbucks $3.50 $3.50 x 7 days = $24.50 $3.50 x 365 days = $1, Sonic $4.25 $4.25 x 7 days = $4.25 x 365 days = $1, carton of $32.00 $32.00 x 12 months = $ $32.00 x 26 weeks = $ Place CashCourse URL Here in Master Slide 1

14 Creating a spending plan Use a spending plan as a way of staying within your budget and living debt free Keep a daily spending diary until you are comfortable knowing where you are spending your money. Use a monthly payment calendar to be sure you are able to cover your expenses as they are due. Use a computer program to help you track your money and budget. You can buy one for less than $50 or use a Web-based tool for under $3 per month.

15 DEALING WITH DEBT

16 Signs of debt distress Using the overdraft protection plan on your checking account. Delaying medical and dental visits. Using credit card cash advances to pay for living expenses. Delaying one bill (or floating ) to pay another overdue bill. Paying only the minimum due on charge accounts. Being over the limit on one or more lines of credit. Using one credit card to pay another. Using payday loans.

17 Prioritizing repayments Lowest balance? Pay off as many things as you can quickly Highest interest rate? Can you consolidate debt into one payment? Highest balance? Other than your mortgage highest amount? How much interest will you pay over that time? Use power payments (ex: tax refunds) as you pay off one debt Once you've got that, the next thing is baby step 2 where you list your debts smallest to largest, pay minimum payments on everything but the little one, and every dollar you can squeeze out of the budget after your basics are met, you attack that smallest debt energetically. Dave Ramsey

18 Use these CashCourse calculators to help How Long Until My Loan is Paid Off? c/dlentry1.html What Is The Impact of Making Extra Payments? How Long Will it Take to Pay Off My Credit Card?

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21 Avoid the Quick Fix Pawnshops Payday Loans Title Loans Tax Refund Anticipation Loans You re worth it Learn from past mistakes Commit to being debt free Spend less Save more

22 Did you know? *The total amount of consumer debt today is $2.5 trillion. *78% of all undergraduate college students (ages 18-25) carry an average balance of $2,748. The average interest rate for a student credit card is 16.78%. Sources: Federal Reserve, NellieMae, and IndexCreditCards.com

23 WHAT S YOUR CREDIT IQ

24 Advantages and Disadvantages ADVANTAGES TO CREDIT Buy now, pay later. Purchase online. Don t have to carry large amounts of cash. Establish good credit history. DISADVANTAGES TO CREDIT Spend more than if you use cash. Items purchased actually cost more if you can t pay off the balance each month. Debt hinders you from saving and investing. Establish poor credit history.

25 Credit and Debt Build good credit Pay expenses on time Apply only for the credit you NEED Know your credit score and Credit Reporting Agency Website Phone Number Equifax Experian TransUnion

26 Credit IQ 1. Placing utilities in your name is a great way to build credit. False: Most utility companies do not report your payment information. 2. Missing one payment will not impact your credit score. False: Even one late payment may be indicated on your credit report.

27 3. Using your debit card wisely will help you establish good credit. False: A debit card withdraws money from your checking account and does not impact your credit even though the card may have a MC or Visa logo. 4. A credit card comes with a credit limit. True: Credit limits are determined largely by your FICO score. Not all credit cards are created equal.

28 5. You may pay the full amount on credit cards any time. True: If you do not pay the full amount each month, you will incur fees. 6. People spend more money when they use credit. True: Research indicates that credit users make larger purchasers with credit than they would with cash. 7. Everyone is entitled to as much credit as they want. False: The ability to repay is the deciding factor.

29 8. Your car insurance rate is tied to your FICO score. True: Insurance companies consider a low FICO score to be indicative of poor driving. 9. Having no credit history is the way to go! False: Before you can make a major purchase (car, house) you must have a credit history.

30 Now What? Review your credit load. Set a realistic goal for paying off any credit cards. Set up a savings account. Consider paying cash or going without. Request a copy of your credit report.

31 What counts in your FICO score? On-time Payments Capacity Used Length of History New Credit Types of Credit FICO Fair Isaac Corportation

32 Important Financial Aid Information Understand your financial aid Loans, grants, scholarships What do I have to pay back? Return to Title IV Funds Keep looking for financial aid Reapply, remember important dates, talk to financial aid officers, Use internet sites & Watch out for scholarship scams Never pay a fee for scholarship money!

33 Subsidized vs Unsubsidized Subsidized and unsubsidized Direct Stafford Loans Direct Subsidized Loan need-based loan; government pays interest while student is enrolled Direct Unsubsidized Loan non-need-based loan; student responsible for all interest

34 Avoid Financial Aid suspension 1) GPA - Cumulative GPA above 2.0 2) PACE - completing at least 67% of the cumulative hours attempted Example: Student has attempted 58 hours and passed 36 of these hours. (36/58=62.06%) 3) MAX - Completing student program of study within 15 of the length of the program. Example: 62 hour program (62 * 15 = 93 hours max) 44 hour program (44 * 15 = 66 hours max)

35 Borrow conservatively Student loans are for educational expenses ONLY. Don t borrow the full amount offered to you. Consider first your earning potential when borrowing. Student loan debt < 8% of potential income Potential Income $20,000 $1,600 $25,000 $2,000 $30,000 $2,400 Student Loan Balance Take advantage of the federal student loan programs BEFORE you borrow alternative loans. More borrower benefits and lower interest rates

36 Consequences of Defaulting on Student Loans Loss of federal financial aid eligibility Withholding of federal income tax refunds Inability to renew professional license Negative credit history Wage withholding May be sued Collection fees and attorney s fees assessed Enforcement of delinquent debt collection procedures

37 Borrow conservatively continued Let your parents borrow on your behalf. Be aware of repayment plans, deferment, and forbearance options. There is NO reason to be placed in default.

38 Career Choice and Potential Income Vocational Nurse Firefighting Business Management Respiratory Care Registered Nurse Process Technology $34,650 $37,703 $42,656 $48,503 $52,241 $63,709 Source: VC s Viewbook & Career Planner

39 The more you learn the more you earn 2009 Median U.S. Earnings by Educational Attainment (for workers age 25 and older)

40 Education Pays in higher earnings and lower unemployment rates

41 These materials are for non-commercial educational use only. Portions of the content 2010 National Endowment for Financial Education. All rights reserved. CashCourse is a trademark of the National Endowment for Financial Education

42 1) What counts the most in your a) Length of History FICO credit score? b) Capacity Used c) New Credit d) On-Time Payments e) Types of Credit

43 2) A lender can not report your payment history to a credit reporting agency without your permission. A. True B. False

44 3) Grants and scholarships do not typically have to be paid back but there are sometimes conditions. A. True B. False

45 4) Maria needs a loan but doesn t want to pay interest on the loan while she is in school. What type of loan should she get? A. Subsidized B. Unsubsidized C. Private loan

46 5) The average interest rate for a student credit card is. A % B. 12.5% C % D. 7.58%

47 6) What should you consider first before borrowing student loans? A. Monthly living expenses B. Interest Rate C. Future earning potential D. Payment amount

48 7) What is the best way to avoid credit card debt? A. Don t ever get one B. Pay off your balance every month C. Transfer balances to another credit card D. Increase your credit limit

49 8) Which of the following are examples of consequences of defaulting on student loans? A. Loss of financial aid eligibility B. Inability to renew professional license(teacher, nursing) C. Withholding of wages and tax refunds D. May be sued E. All of the above