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Making Your Money Work Where Are You Now?

Making Your Money Work Where Are You Now?. Objectives. Determine Credit Obligations Compare Income to Expenses Determine Net Worth. How Much Do I Owe?. Credit Obligations Monthly repayments for all non-mortgage consumer debts, including home-equity credit-line loans.

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Making Your Money Work Where Are You Now?

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  1. Making Your Money Work Where Are You Now?

  2. Objectives • Determine Credit Obligations • Compare Income to Expenses • Determine Net Worth

  3. How Much Do I Owe? Credit Obligations • Monthly repayments for all non-mortgage consumer debts, including home-equity credit-line loans. • Also known as Consumer Debt. *Credit Obligations should not exceed 15%-20% of take-home pay.

  4. How Much Do I Owe? Example #1: Take-Home Pay = $1,200/Month 15% = $180/Month ($1,200 x .15) 20% = $240/Month ($1,200 x .20) Example #2: Take-Home Pay = $2,000/Month 15% = $300/Month ($2,000 x .15) 20% = $400/Month ($2,000 x .20)

  5. How Much Do I Owe? Consumer Debt-Service Ratio • A formula to determine how much of your take-home pay goes toward repaying your debt each month. Formula: Consumer Debt (Monthly) Take-Home Pay (Monthly)

  6. How Much Do I Owe? Example #1: • Car Loan = $125 • Credit Card = $ 50 • Loan = $ 50 Consumer Debt = $225/Month Take-Home Pay = $1,200/Month Formula: $225/$1,200 = 18.75%

  7. How Much Do I Owe? Example #2: • Car Loan = $250 • Credit Card = $150 • Loan = $100 Consumer Debt= $550/Month Take-Home Pay= $2,000/Month Formula: $550/$2,000 = 27.5%* *Should be less than 20%.

  8. Income and Expenses Cash Flow • Money going into your pocket and out again. Regular Income • Income that is received at regular times. Irregular Income • Income that is not received at regular times.

  9. Income and Expenses Fixed Expenses • Expenses that basically stay the same each month. Flexible Expenses • Expenses that change from month to month.

  10. Regular Income Example

  11. Fixed Expenses Example

  12. Flexible Expenses Example

  13. Income and Expenses

  14. Determining Net Worth Assets • Any financial or material possessions that have monetary value. Liabilities • Financial obligations or debts. Net Worth • Total Assets – Total Liabilities

  15. Net Worth Statement Net Worth Statement • A net worth statement is the best indicator of your financial position at a particular point in time.

  16. Summary • Determined Credit Obligations. • Compared Income to Expenses. • Determined Net Worth.

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