Your Financial Future

1. Your Financial Future Credit

2. Payroll deductions • Federal taxes – pays for roads, bridges, government, military, space program, disaster relief, schools • State taxes – pays for schools, roads, government, welfare • Social security –provides old-age, survivors, and disability insurance

3. Payroll deductions (cont.) • Medicare taxes – pays for medical care for elderly people and disabled workers • Retirement – a program set up by your employer • Health insurance premiums – your portion of your health insurance • 401K – an optional retirement program

4. Your paycheck • Gross income – money you make before payroll deductions are taken out • Net income – money after payroll deductions Example gross amount: $500.00 Example net income: $355.00

5. What use net income for? • Pay yourself first • Pay your bills • Treat yourself

6. What determines money deducted for taxes? • The number of exemptions you claim on your W-4 form when you start work • The amount of money that you make

7. Fixed and adjustable expenses • Fixed expenses: expenses that you pay every month that don’t vary a lot • Rent • Insurance • Car payment • Adjustable expenses: expenses that vary from month to month • Clothing, utilities, food costs

8. Checking and savings accounts • Checking account – put money in and can write checks for items instead of using cash • Savings account – put money in and usually leave for long periods at a time and money draws interest

9. What is credit???? • The amount of financial trust extended to you by a lender. • The amount you receive is based on your ability and willingness to repay.

10. What are the main costs of credit? • Interest – is payment for the use of another’s money. • Finance charge – is the cost for using credit. • Annual fee – a once-a-year fee charged by some card issuers in addition to interest • Annual percentage rate (APR) – the total amount it cost you yearly to use credit

11. Main sources of credit • Charge cards – a specific card usually limited to purchases from a specific company or retailer (JcPenney, Lazarus) • Credit cards – issued by many different institutions to pay for goods and services (Visa, Mastercard, Discover)

12. Other sources of credit • Debit cards – the amount is deducted electronically from your checking or savings account • Installment loans – purchase plans for larger purchases (car, appliances, etc..)

13. Three C’s of credit • Capacity - Can you repay the debt? Do you have a job? Do you have other debts? • Character – Will you repay the debt? • Capital – What if you don’t repay the debt? What do you own that can be used to pay the debt? Car? House?

14. Building your credit history • Have a well-managed checking account • Open a savings account and make regular deposits • Borrow money using a savings account as collateral • Use a co-signer • Always pay your bills on time or early

15. Credit affect goals by: • Credit can be useful in times of emergency • Credit is easier and more convenient than cash • Credit allows you to make major purchases, such as a car or house

16. Cause and effect of bankruptcy • Cause of bankruptcy is usually being in too much debt: too many loans, credit card bills etc. • Effect of bankruptcy is bad credit that stays on your credit report for 7 years which could keep you from getting other loans or credit