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Money Potholes

Money Potholes. 10 Things to Avoid Along the Way to Becoming Financially Independent.

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Money Potholes

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  1. Money Potholes 10 Things to Avoid Along the Way to Becoming Financially Independent Use limitations: These materials may be used only for nonprofit, noncommercial educational purposes. These materials may not be used in connection with any sale, advertisement, endorsement, or promotion of any service, product, person, or business and may not be sold or offered for sale.

  2. After This Workshop You will be able to • Recognize the 10 most common money traps • Determine wants versus needs • Create a financial plan • Understand the value of budgeting • Access online money management tips and tools

  3. How much $ Is Enough? • College costs • Cell Phone • Cable TV • Entertainment • Clothes • Food • Transportation • ??

  4. Uncle Sam is Everyone’s Relative • Big refund versus money in hand • Tax refund anticipation loans (RAL)

  5. Things to Know • No Such Thing As A Free Check • Chumlee Is Not Your Bud

  6. Pawn Shop Example • Your grandmother’s wedding ring: $300 • Pawn Shop’s offer: $30 • Pawn Shop’s fees: $6.00 fee + $.60 interest = $6.60 • To get ring back in 30 days: $36.60 • To extend loan for additional 30 days: either $6.60 or $8.05 (22% of $36.60)

  7. Out of $ a Week Before Payday Payday Loan Terms • Minimum $100 Maximum $500 • Average loan term: 2 weeks • Finance charge: $15 to $30 to borrow $100 Typically 400% annual interest (APR) or more (for 2 week loan)

  8. Payday Loan Example • Paying $300 to get YOUR income early is not the best financial strategy. • Interest rate in this case: 124%

  9. Cash it Now! Why use a bank when you can cash your paycheck at a check cashing outlet? Because it all adds up… • Weekly pay check: $250 • Check cashing fee: 5% = $12.50 • Cash in hand: $237.50 • Annual: $250 x 50 weeks = $12,500 • Fees: $12.50 x 50 weeks = $625.00

  10. Get Rich Quick? • Weight Loss Miracle: Refer Your Roommates and Make $$$$ • Work from Dorm Room: Easy and Fa$t Money • Self Publish and Make $$ • Get Paid $$$ to Shop Til U Drop! • All U Need is a Lap Top and We’ll Pay U! $$$$$$

  11. Rent to Own? Really?? New TV: $400.00 • Weekly rental (56 weeks) $15 x 65 weeks = $975.00 • 5% sales tax  75¢ x 65 weeks =  $48.75 • Possible delivery fee $10 (one-time) = $10.00 Total cost of rent-to-own TV = $1,033.75

  12. Danger! Sharks! Loan amount: $1,000 • Repayment Terms: $130 a week for 10 weeks—a 30% interest rate! • Total repayment = $1300 • Miss a payment? Still owe $30 interest for that week • No default: you must continue payments until the $1,000 is repaid. FBI advises loan sharks come in all sizes and shapes—their only goal is to make money, usually using a no-default loan.

  13. Nice Wheels…For a While Your car is worth $5,000. • Loan amount: $1,000 (Pawnshop keeps the car title) • Interest charged: $600 (10% a month for six months) • Total cost: $1,600 • Additional costs: Storage fees, non-payment = repo fees and/or car gone forever Fast Cash... Is It Worth It?

  14. Aw, Come On… Please?! Stuff I have the money for Stuff I want Stuff I need

  15. Needs versus Wants Look carefully at what you’ve written down • Are the needs really needs? • Are some needs really wants? Life is about choices… • Identifying needs and wants is a major step! • Without a clear sense of needs and wants, it is easier to fall into many money potholes

  16. Make a Plan Financial Goals • Consider short-term goals • Consider long-term goals Monthly Budgets • Do you use one?

  17. What Comes In, What Goes Out Next Step to Financial Independence: • Budget • Best protection against money traps Income and Expense Worksheets • Questions?

  18. Don’t Have Time? • Worried that budgeting takes too much time? • Think you’ll get around to it another day?

  19. Recap • Money potholes are easy to fall into if you are unprepared • Needs and wants are choices • A financial plan is important • Budgeting is the best way to avoid potholes • There are many free resources for money management tools

  20. Now What? • Identify wants versus needs • Set financial goals • Create a budget and track your spending • Avoid money traps and tell your friends what you now know

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