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The Most Important Grade You’ll Ever Earn. Rules of the Game 1. Choose one person to hold up the correct True or False card when the emcee says “Cards UP!”. Rules of the Game 2. Your team will lose points if your cardholder’s response is slow.
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Rules of the Game1. Choose one person to hold up the correct True or False card when the emcee says “Cards UP!”
Rules of the Game2. Your team will lose points if your cardholder’s response is slow.
1. Your credit score helps determine whether or not you get credit, the amount you can borrow, and what interest rate you have to pay for the use of the money. True or False?
2. Using a credit card, Caitlyn buys an $800 stereo. She pays $10 a month, the minimum payment the bank requires. She will have the stereo paid off in 6 years, 8 months. True or False?
3. Credit should not be used to purchase furniture and appliances. True or False?
4. The following criteria are used in determining one’s credit score: payment history, new credit issued, length of credit history, income, and types of credit. True or False?
5. Using a credit card on impulse doesn’t affect your budget. True or False?
6. Financial planners recommend that total debt not exceed 20%, excluding mortgage, of your yearly after-tax income, and monthly payments not exceed 10 – 15% of your monthly net income. True or False?
If a person has 8 credit cards and three are at their limits, he should close all of his other credit cards immediately. True or False?
8. A year ago Caitlyn missed a payment on her stereo, but she caught up and paid the bill off. Her missed payment does not affect her credit score. True or False?
9. The indicator of how much credit will cost you for any loan or credit card purchase is the annual percentage rate. True or False?
10. Managing your credit wisely will increase the choices you have in the future related to the type of housing, transportation, recreation, and education available to you. True or False?
11. By declaring bankruptcy, your debts are forgiven and you begin again with no negative consequences to you. True or False?
12. Many employers in government, financial services, and criminal justice use credit scores to determine whom they will hire. True or False?
Now, the moment of truth…Correct answers earn your team 5 points.Deduct 5 points for incorrect answers.
1. Your credit score helps determine whether or not you get credit, the amount you can borrow, and what interest rate you have to pay for the use of the money. True!
2. Using a credit card, Caitlyn buys an $800 stereo. She pays $10 a month, the minimum payment the bank requires. She will have the stereo paid off in 6 years, 8 months. False!
3. Credit should not be used to purchase furniture and appliances. False!
What is good debt?Purchasing an item that is expensive and can continue to be used while paying off the bill (durables: like cars, furniture, and appliances, or investing in education, which increases one’s knowledge and skills base, and cannot be taken away from you).
4. The following criteria are used in determining one’s credit score: payment history, new credit issued, length of credit history, income, and types of credit. False!
5. Using a credit card on impulse doesn’t affect your budget. False!
If you:eat it,wear it,drink it,or drive it,DON’T use a credit card to buy it.
6. Financial planners recommend that total debt not exceed 20%, excluding mortgage, of your yearly after-tax income, and monthly payments not exceed 10 – 15% of your monthly net income. True!
20-10 Guideline • TRY NOT TO BORROW MORE THAN • 20% • OF YOUR YEARLY NET INCOME • (Housing debt is NOT part of this 20%) • If your net income (money after taxes) is • $3000 a month, then your net income for the year is • $36,000 • Your safe debt load is $7200 (not including housing) • So, for the year in which your net income is $36,000 you should not have more than $7200 of outstanding debt. • Monthly payments should NOT exceed 10-15% of your monthly net income • If your net income (money after taxes) is • $3000 a month, then monthly debt payments should • NOT exceed $300 per month • Housing affordability • Rent should be equal or less than 25-28% of monthly take home. • The maximum price one can comfortably afford to pay for a house is 2.5 times your gross yearly income. • $54,000 X 2.5 = $135,000 • Monthly mortgage payments, including taxes and insurance, should not be more than 30-33% of monthly net.
7. If a person has 8 credit cards and three are at their limits, he should close all of his other credit cards immediately. False!
8. A year ago Caitlyn missed a payment on her stereo, but she caught up and paid the bill off. Her missed payment does not affect her credit score. False!
9. The indicator of how much credit will cost you for any loan or credit card purchase is the annual percentage rate. True!
10. Managing your credit wisely will increase the choices you have in the future related to the type of housing, transportation, recreation, and education available to you. True!
11. By declaring bankruptcy, your debts are forgiven and you begin again with no negative consequences to you. False!
Bankruptcy Consequences: Purchasing a $20,000 vehicle Without BankruptcyBankruptcy 60 months at 7%60 monthsat 30% Monthly payment: $396.02Monthly payment: $647.07 Total Interest: $3,761.44Total interest:$18, 824 Total Cost:$23, 761.44Total Cost: $38,824.08 Difference: $15,626.64
12. Many employers in government, financial services, and criminal justice use credit scores to determine whom they will hire. True!
Internet Sites for Money Management(Use for construction of your own financial road map) www.bls.gov/oco: this site contains all the information necessary to research careers including the nature of the work, working conditions, training, advancement and promotion, number of openings and growth, earnings, related occupations and additional information sources www.myfico.com: provides information about credit scoring, click on credit education on the top bar www.annualcreditreport.com: This site allows you to access the 3 free credit reports required by law from Experian, TransUnion, and Equifax. Do NOT go to www.freeannualcreditreport.com because it is NOT FREE. www.bankrate.com: information site that collects the interest rates for all types of financial services and products from savings accounts to insurance, also includes calculators http://www.cccs-inc.org: Consumer Credit Counseling Service of Maryland and Delaware is a nonprofit entity that helps consumers with budgeting and debt management. www.practicalmoneyskills.com: has calculators for all types of personal finance use http://studentmoneyskills.bankofamerica.com/start/default.asp: loaded with information about personal finance topics http://www.cfp.net/learn/knowledgebase.asp?id=6: questions to ask when hiring a certified financial planner, what can they do, what can’t they do http://www.tcalc.com/tvwww.dll?CalcLoan?Tmplt=CarAfford.htm&Cstm=cccssf&PmntAmt=300.00: a card affordability calculator that starts with what you can afford to pay and gives you the maximum amount you should spend on a car www.kbb.com: Kelly’s Blue Book for all things automotive www.edmunds.com: also good for automotive information
Typical Budget Categories (A budget is a plan for spending, saving, and giving that tracks your income.) After tax income (net pay): Fixed expenses: Housing (rent or mortgage) 30% Savings (pay yourself first)* 5% Car payments/Auto Insurance 12% Taxes (property) 10% Loans/credit (No more total debt than 20% of yearly net; and monthly bills no more than 10% of monthly net) Regular but variable Other housing costs 8% (utilities, furnishings, maintenance, insurance) Food (includes dining out) 7% (prices change so this adjusts, has been as high as 12-15%) Clothing 10% Gasoline, repair, and maintenance (**prices change 8% so this has to be adjusted)** Discretionary (variable) 10% entertainment, recreation, personal care, movies, magazines, hobbies, vacations, gifts, electronics, pets etc. Total: 100% If food, gasoline, heating oil, medical prices rise, what categories will you adjust? How much will you adjust them? What trade-offs do you have to make to meet your goals?
