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Will Work for Food Candy

Will Work for Food Candy. Make sure your wrappers get in the garbage!!! Honor System 1. p.1 If you brought back the packet 2. p.2 If you wrote a plan… Discuss with family… 3. p.4 If you did the 1 st week of 13-week Budget. 4. p.12 If you completed the five stocks.

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Will Work for Food Candy

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  1. Will Work for Food Candy Make sure your wrappers get in the garbage!!! Honor System 1. p.1 If you brought back the packet 2. p.2 If you wrote a plan… Discuss with family… 3. p.4 If you did the 1st week of 13-week Budget. 4. p.12 If you completed the five stocks.

  2. p.12 , Req. 6e*Pretend you have $1,000 to save/invest, and help prepare yourself for the future.Explain to your merit badge counselor the advantages or disadvantages of saving or investing for each of the following: (e)*. Savings account at a bank or credit union: Advantages: They pay us _________ Very ____ risk of loss (if insured by _____ or _____) interest low FDICNCUA Disadvantages: The interest they pay ____ isn’t

  3. p. 12, Requirement 6 (d)Certificate of Deposit (CD) at a Bank or Credit Union • Advantages: • They pay us ______ (usually ______ rate than savings) • Very _____ risk of loss:(insured by _____ or ______) interest higher low FDICNCUA • Disadvantages: • Timing risk: I may need my money _____ the CD matures. before • U.S. Savings Bonds • Similar, but ____ convenient. less

  4. p. 12, Req. (6a)Common Stocks. • If I invest in a company that is very profitable and if the stock market does well, I could ____ ____ of money, earnlots • Advantages: • The value of the stock could ___ ___ and I could get _________. goup dividends • Disadvantages: • Compared to bank or cu savings, the risk of loss is ______. higher • If the company I invested in loses money, I probably ___ _____ losemoney • If the stock market in general goes down, I probably ____ _____ losemoney • Timing risk: If I buy when the price is high and sell when it is low, I ____ ______. losemoney

  5. p. 12Req. (6b)Mutual Funds (invest in stocks of _________ companies) different • Advantages: • Compared to stock in a particular company, the risk of loss is supposed to be _____ lower (but some have lost $ in scandals) • The return on the investment is often ______ than at a bank. higher • If the stocks in the fund do well, I am likely to earn ____ _____ more money • Disadvantages: • Compared to bank or cu savings, the risk of loss is ______. higher • If the stocks in the fund do poorly, I am likely to ____ ______ losemoney • If the fund mgr blows it or takes off, I ____ lose • If the stock market in general goes down, I probably ____ ________ losemoney

  6. ExampleMutual Fund vs. 5-yr CDs

  7. p. 12Req. (6c)Life Insurance • Advantages: • Life insurance pays money to my ___________ when I die. beneficiaries • Some policies invest part of the premium so people don’t have to ___ to get some money (but they cost ______.) die more • Disadvantages: • Both the insurance and inv portions cost ______. money • The investment portion is not _______ by the US Government insured • If I don’t die while I have the life insurance, I wasted _________, but what if…? money

  8. p. 13 Req. 7 Explain to your merit badge counselor the following: Explain what a loan is: money things A loan is ________ or ________ owned by someone who allows another person to _____ ___ use it

  9. p. 13Req. 7(a) Explain what interest is: interest Interest is the amount of money paid to a lender in ________ of what was borrowed. excess principal The amount earned as _____ passes. time

  10. 1. The APR isthe ________ ____ established by the U.S. Government standard rate p. 13Req. 7(a) Explain how the Annual Percentage Rate (APR) measures the true cost of a loan. MPH (just as _____ is for highway speed) 2. So we can _______ the cost of borrowing. (MPH or MPM? APR or MPR?) compare 3. It includes ______ and _____ interest fees 4. It is expressed as a _______ rate. yearly

  11. If you borrow $100, and pay back $110: What is the interest cost? $____ 10 p. 13Req. 7(a) Explain how the Annual Percentage Rate (APR) measures the true cost of a loan. 10 What is the percentage rate? ____ % What is the Annual Percentage Rate (APR)? That depends on when you are to pay the $110. What is the APR if you borrow 100 and are scheduled to pay back $110 one year* later? _____% APR 10 120 What is the APR if you pay back $110 one month later? _____% APR If you paid $110, re-borrowed $100, 12 times, 12 x $10 = $120 cost for 1y, thus 120% APR 520 What is the APR if you pay back $110 one week later? _____% APR 520 What is the cost if you pay $10 interest each week? $_____ p/yr

  12. p. 13, Req. 7(b) Explain the different ways to borrow money: free I can borrow from myself for very ___ ____. low cost I might be able to borrow from a relative for ____. I can borrow from bank or cu at a ______ ___. higher cost I can borrow by charging things using a _____ ____. credit card I can borrow by ________ a purchase (usually higher rate) financing If I am really stupid or really desperate: I can borrow from ultra-high-cost lenders at outrageous interest ____. rates

  13. BEST BORROWING TIPS: unnecessary • Avoid _____________ borrowing! increase 2. Only borrow for things that _________ in value. early 3. Pay off loans ______ (when no penalty). don’t buy 4. If you don’t have the money, _____ ____ _________. anything 5. When you do borrow, always pay less than _______ APR. 13%

  14. Example: TOO EASY LOAN COMPANY Promissory Note with Security Interest Security: 1996 Olds Ciera Annual Percentage Rate The cost of your credit as a yearly rate. 300% Finance Charge The dollar amount the credit will cost you. $4,442.80 Amount Financed The amount of credit provided to you or on your behalf. $2000.00 Total of Payments The amount you will have paid after you have made all payments as scheduled. $6,442.80 25% per month Payment Schedule: 12 Payments of $536.90. Beginning 2/4/99 and on the 4th of each month thereafter until final payment is made on January 4, 2000. Default Charge: If the payment is late 10 days, you will be charged 5% of the payment amount.

  15. ExampleTV Purchase • $400.00 • cash

  16. ExampleTV $400.00Using a Credit Card • $26.00 per mo. • 18% A.P.R. • 18 mo. pmts • $59.00 interest • Total Cost $459

  17. ExampleTV $400.00Finance Company • 36% A.P.R. • 18 mo. Pmts. • $29.00 per mo. • $123.00 int. • Total Cost $523

  18. ExampleTV $400.00Rent-to-Own • $70.00 mo. pmt • 18 months • Total Cost $1260 • (196% APR) (int.) • $860.00

  19. ExampleTV $400.00Too Easy Loan(Bad Credit OK) • 300% A.P.R. • Car Title Pawn • If 18 months • $102.00 payments • $1,433 interest • Total Cost $1833

  20. ExampleTV $400.00Payday Loan 10% x 52 =520%

  21. ExampleTV $400.00Payday Loan 10% per week 520% APR $174 payments $2,725 interest 18 months (12 weeks max) Total Cost $3125

  22. p.13 Req. 7(c) Explain the differences between: • A Credit Card • A Debit Card • A Charge Card

  23. Credit Cards: Our Friends? Or Our Foes?

  24. p.13 Req. 7(c) A CREDIT CARD is used to make purchases using the ____ ____ _________ money. credit card company’s • It may be paid off ____ _____ (without interest -most cards), each month • or it may be paid ____ ____ (plus interest charges) over time • Advantages: • One way to start building a good ______ ______ for free (if you pay it off each month—on time!) credit rating convenient! • Very ___________

  25. p.13 Req. 7(c) A CREDIT CARD • Pitfalls: • Too easy to spend money, especially if its money I _____ _____ don’t have • Costs: interest • If I don’t payoff each month, I pay ________ • Always at a rate _______ than I want to pay. higher

  26. p. 13, Req. 7(c) • A CHARGE CARD is a type of credit card, where a person is using the company’s money, but no periodic interest rate is charged, and the person is usually required to pay off the balance ____ ______ each month. • Pitfalls: Too easy to spend money, especially money you _____ _____ don’t have. • Costs: ______ fees. annual

  27. p.14 req. #7 (c) cont’d • A DEBIT CARD • Is one way to withdraw money from a person’s ______________ account. checking • Advantages: • Using _____ ______ money, so if you don’t have it, you don’t spend it. your own

  28. p.14 req. #7 (c) cont’dDebit Card • Pitfalls: • If somebody else uses your debit card, or a mistake is made, your money may be gone when you _____ _. need it • Some places (like gas stations & motels) place a _____ on your acct. hold

  29. p.14, req. #7 (c) cont’dDebit Cards • Costs: • If you don’t have enough money in your checking account to cover the withdrawal, your transaction(s) may _______ (get returned – unpaid). bounce fees • Causing returned item ____

  30. p.14 req. 7(c)Costs of debit cards (checking accounts) • If you don’t have a backup plan, like an overdraft ____ __ _____ (an empty loan), line of credit • you’ll probably get ________ _____ fees. returned item fees • Some checking accounts have monthly ____

  31. ExampleSo, the differences between: Money from your checking account. Charge Card Debit Card Credit Card Borrowed money. No interest charge (Reg. Z 226.2(15)) Must pay off each month. Borrowed money. May pay off each month (no int) or pay over time (high interest).

  32. Borrowing money Too easy to spend money Builds your credit rating Very convenient Protections Using your own money Charge Card Debit Card Credit Card Your money gone…

  33. p. 14 Req. 7(c)Explain why it is unwise to make only the minimum payment on your credit card. A person who only pays the minimum stays in debt a ____ ____ time. very long And pays ___ and ____ of interest. lots lots 34 At typical terms, it would take about _____ years to pay off a $5,000 balance (if no other charges were made).

  34. ExampleSimplified Credit Card Statement Last Month’s Balance 128.42 Payments received (128.42) Interest 0 Auto Repair Center 289.94 Joe’s Gas & Goodies 14.32 Babe’s Apparel Store 96.24 Ending balance 400.50 Required (min) Payment Due 20.00 *

  35. Credit Card Summary: If used well, a great tool, if used poorly, financial ruin!

  36. p. 14, Req. 7(d). Explain Credit Reports Credit Reports or Credit Records: A credit report is a report of a person’s credit ______ history And it usually includes a credit _____ or credit _____ ratingscore Credit reports show what ______ and _____ _____ a person has had. loans credit cards And if he made his payments ___ _____ on time If he was late, it shows how late he was and how _____ _____ he was late. many times

  37. ExampleCredit Report (simplified) Bill S. Preston 529-00-0000 Score 380 Creditor Limit Bal Comments • Department Store 1000 1050 5>30, 3>60 • Credit Card 5000 4999 6>30,3>60,1>90 • Dumpy Bikes 500 430 Collection agency • Fast Car Lot 6000 0 Repossession • Credit Card 2000 0 as agreed • Home Mortgage 70000 65000 current • Overdraft Line of Cr 2000 0 as agreed

  38. p. 14 Req. 7(d) Explain how your personal responsibilitycan affect your credit record: history • If I pay my bills on time, I will have a good credit ______. • And if I don’t borrow too much, I’ll have a good credit ______ or _______ rating score • If I am irresponsible, and pay my bills late: I’ll have a ____ credit history & ______ or ______ bad ratingscore late fees I will also be required to pay ____ ____, and next time I borrow I’ll pay interest at a __________. higher rate bad If I have too much debt, I’ll have a ___ credit rating, or a ____ credit score low

  39. Is it possible • To have a good credit history while having • A bad credit score? ______ YES! • If I have too much debt (even if I’ve paid on time) a problem waiting to happen.

  40. p. 14Req. 7(e).Describe ways to reduce or eliminate debt: ***Pay ____ ________ (more $ than required—if no prepayment penalty). extra principal

  41. Example of Paying Extra Principal • Bal Rate Term Pmt Total Int Pd • (If simple interest) • 10,000 12% 60 mo 222 13,346 3,346 Savings 179 • 10,000 12% 57 mo 232 13,167 3,167 • 10,000 12% 47 mo 272 12,582 2,582 764 • 10,000 12% 38 mo 322 12,069 2,069 1,277

  42. p. 14Req. 7(e).Describe ways to reduce or eliminate debt: ***Pay ____ ________ (more $ than required). extra principal ***Pay off highest rate debt _____ first Then, when it is paid off, add what you were paying on that debt to the amount you were paying on your next _______ ____ debt. highestrate

  43. Example: of paying highest rate debts first. After 1 year New New New Bal. Pmt. Term 77,554 651 21.9 8,072 250 3.1 4,126 150 2.6 6,253 120 8.5 0 0 0 794 90.8 Existing Balance Payment Rate Remaining Obligations (p & i) Term (yrs.) 1st Mort 78,721 651 8.5% 22.9 yrs. Auto Loan 10,239 250 9.0% 4.1 yrs. Trailer 5,451 150 9.8% 3.6 yrs. Credit Card 6,539 120 18.0% 9.5 yrs. Doctor 400 40 21.0% .9 yrs. Dentist 1,200 50 19.0% 2.5 yrs. Totals 102,550 1331

  44. Reduce or eliminate debt quicker, by paying highest rate debts first. After .8 year (1.8 yrs total) New New New Bal. Pmt. Term 76,547 651 21.1 6,194 250 2.3 2,970 150 1.8 5,984 2103.1 0 0 0 0 0 0 Existing Balance Payment Rate Remaining Obligations (p & i) Term (yrs.) 1st Mort 78,721 651 8.5% 22.9 yrs. Auto Loan 10,239 250 9.0% 4.1 yrs. Trailer 5,451 150 9.8% 3.6 yrs. Credit Card 6,539 120 18.0% 9.5 yrs. Doctor 400 40 21.0% .9 yrs. Dentist 1,200 50 19.0% 2.5 yrs. Totals 102,550 1331

  45. Reduce or eliminate debt quicker, by paying highest rate debts first. After 1.8 more (3.7 yrs tot) New New New Bal. Pmt. Term 73,863 651 19.2 1,153 250 .4 0 0 0 2,745 360 .7 0 0 0 0 0 0 Existing Balance Payment Rate Remaining Obligations (p & i) Term 1st Mort 78,721 651 8.5% 22.9 yrs. Auto Loan 10,239 250 9.0% 4.1 yrs. Trailer 5,451 150 9.8% 3.6 yrs. Credit Card 6,539 120 18.0% 9.5 yrs. Doctor 400 40 21.0% .9 yrs. Dentist 1,200 50 19.0% 2.5 yrs. Totals 102,550 1331

  46. Reduce or eliminate debt quicker, by paying highest rate debts first. After .7 more (4.4 years tot) New New New Bal. Pmt. Term 72,760 1,261 6.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Out of debt in 10.6yrs. Existing Balance Payment Rate Remaining Obligations (p & i) Term 1st Mort 78,721 651 8.5% 22.9 yrs. Auto Loan 10,239 250 9.0% 4.1 yrs. Trailer 5,451 150 9.8% 3.6 yrs. Credit Card 6,539 120 18.0% 9.5 yrs. Doctor 400 40 21.0% .9 yrs. Dentist 1,200 50 19.0% 2.5 yrs. Totals 102,550 1331

  47. p. 14Req. 7(e).Describe ways to reduce or eliminate debt: ***Pay ____ ________ (more $ than required). extra principal ***Pay _____ often than required (if allowed). ***Pay off highest rate debt _____ first Then, when it is paid off, add what you were paying on that debt to the amount you were paying on your next _______ ____ debt. highestrate more ***Bi-weekly payments can be an easy way to make extra principal payments

  48. Examplep.14 Req 7d.Describe ways to eliminate Debt. Most loans require Monthly payments

  49. ExampleSome Loans allowBi-Weekly Payments:(every other week) By paying ½ paymentevery other week…

  50. ExampleSome:Bi-Weekly Payments:(every other week) By paying ½ paymentevery other week: 13full payments A very convenient way to pay off early—if you get paid every other week.

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