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Make A Smart Start Toward Financial Success

Make A Smart Start Toward Financial Success. College Education: A Smart Investment. High School Graduate $ 30,400 Associate’s Degree $ 38,200 Bachelor’s Degree $ 52,200 Master’s Degree $ 62,300 Doctorate Degree $ 89,400 Professional Degree $109,600.

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Make A Smart Start Toward Financial Success

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  1. Make A Smart Start Toward Financial Success

  2. College Education: A Smart Investment High School Graduate $ 30,400 Associate’s Degree $ 38,200 Bachelor’s Degree $ 52,200 Master’s Degree $ 62,300 Doctorate Degree $ 89,400 Professional Degree $109,600

  3. Start Smart By Avoiding Pitfalls • Little or No Savings • No Short and Long Range Plan • Too Much Credit Card Debt

  4. The Credit Card Debt Picture • Among college students: • 84% have credit cards • 62% of final year students have four cards or more • 21% owe between $3,000 and $7,000 • Final year students carry an average credit card balance is $4,100.00

  5. Scenario #1 You charge $2,500 You pay $50 per month Yearly interest rate is 19.9% How long will it take to pay the balance? Scenario #2 You charge $2,500 You pay $100 per month Yearly interest rate is 19.9% How long will it take to pay the balance? It’s Hard to Get ‘Out from Under’ 9 years, 1 month 2 years, 9 months

  6. Six Steps for a Smart Start after College • Establish Financial Goals • Separate Needs from Wants • Create a Monthly Spending Plan • Start Saving and Bank Wisely • Stay on Top of Your Student Loan Obligations • Use Credit Wisely

  7. Short Term Buy a car Buy new furniture Be debt free Vacations Long Term Buy a home Pay off student loans Start a business Start a family College tuition for children Retirement 1. Establish Financial Goals

  8. 2. Separate Needs from Wants Wants: Variable • Entertainment • Cable • Internet Service • Magazines • Eating Out • Hobbies • Cell Phones Needs: Fixed • Rent or Mortgage • Utilities • Food • Clothing • Transportation • Taxes • Health Care • Childcare • Repairs

  9. Needs vs. Wants

  10. 3. Create a Monthly Spending Plan • Start at the beginning of each month • Pay yourself first (open a savings account) • Keep track of everything you spend: coffee, newspaper, magazines, etc. • Record all of your income • Pay your bills on time

  11. Budget Worksheet Sections • Section 1 • Yours (and your spouse’s, if you have one) • Financial Aid • Section 2 • Books, tuition, and interest on unsubsidized loans • Section 3 • Cable TV, lattes, eating out, newest cell phone

  12. 4. Start Saving and Banking Wisely • Start a savings account • Sign up for your employer’s retirement plan • Borrow only what you need • Sign up for automatic savings: what you don’t see does make a difference Today’s habits will pay off tomorrow!

  13. Banking and Savings • Due to the effect of compounding, routine saving adds up quickly … The Effect of Compounding $50/month = about $7,057 in 10 years $250/month = about $35,284 in 10 years $500/month = about $70,568 in 10 years Based on 3% interest

  14. Choose the Right Bank • When choosing a bank, seek one that offers: • Convenient Location and Hours • Types of Accounts You Need • Competitive Interest Rates • Low Service Charges • Convenient ATMs • Secure Online Services • Incentives

  15. Use Your Checking Account Wisely • Record all purchases • Balance your account monthly • Avoid overdraft fees • Take advantage of online banking • Debit cards are not credit cards

  16. 5. Stay on Top of Student Loan Obligations • Subsidized Loans • Federal government pays the interest until the student enters repayment • When the borrower has been granted a deferment, the government pays the interest during the deferment period • Unsubsidized Loans • Student is responsible for paying the interest that accrues on the loan from the date of disbursement until the loan is paid in full, regardless of enrollment status

  17. Pay Extra and Save An extra $50 a month Pay off loan 2.8 years faster Save $1,766 in interest An extra $250 a month Pay off loan 6.7 years faster Save $3,920 in interest An extra $500 a month Pay off loan 8 years faster Save $4,633 in interest Pay Down Student Loans Student Loan $15,000 borrowed 10 year term 6.8% interest rate Monthly payment: $173 Total interest paid: $5,714

  18. Advantages Build credit Rent a car Available for emergencies Frequent flyer miles Online purchases Immediate cash availability Disadvantages Negatively affect credit Debt accumulation Years to repay debt High interest rates Repayment could be 3 to 5 times original purchase price Immediate cash availability 6. Use Credit Wisely

  19. Consequences of Defaulting on Your Student Loans • Entire loan balance due at time of default • Notification to the credit bureaus • Approximately 15-18% collection cost added • Possibility of wage garnishment of 25% • Tax refunds can be withheld for payment • Ineligible for additional financial aid • Transcripts can be withheld

  20. Choose the Right Credit Card • Strive to pay off your credit card balance every month • Don’t charge more than you can afford • Examine the Interest Rate • Introductory Rates • Adjustable Rate Credit Cards • Fixed Rate Credit Cards

  21. Choose the Right Credit Card • Examine the Fees • Late fees • Over the limit fees • Annual fees • Balance transfer fees

  22. Choose the Right Credit Card • Reward Programs • Do your homework

  23. Manage Your Credit Cards • Choose a credit card with no annual fee • Use credit cards conservatively • Charge only what you can pay off at the end of the month • Make monthly payments on time • Always pay more than the minimum requested • Be wary of cards that offer free merchandise

  24. Manage Your Credit Cards • Do not purchase on impulse • Do not charge more than you can afford • Know when your credit card payment is due • Do not live a lifestyle you cannot afford • Do not use credit cards for cash advances, unless it is an emergency

  25. Protect Your Credit • Limit access to your personal data • Always take credit card receipts with you • Never permit your credit card number to be written onto your checks • Order your free credit report once a year • Remove your name from the marketing lists of the three credit reporting bureaus • Never allow anyone to use your credit card

  26. Feeling Overwhelmed? • Ask for help • Call at the first sign of trouble • Denial of credit • Credit cards that are maxed out • Borrowing money to pay bills • Paying only the minimum • Contact your student loan provider • Contact a Consumer Credit Counselor • Work out a plan to repay

  27. Protect Your Credit National Credit Bureaus Equifax www.equifax.com (800) 997-2493 Trans Union www.transunion.com (800) 888-4213 Experian www.experian.com (888) 397-3742

  28. Protect Your Credit www.annualcreditreport.com(877) 322-8228 www.optoutprescreen.com(888) 5OPTOUT

  29. Follow these guidelines and you will have a successful future! You’ll be able to take that vacation, pay off bills, and buy your new car or home!

  30. Questions

  31. Thank You!

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