The following slides were part of our study on personal finance.

The following slides were part of our study on personal finance. I am sorry they do not include the stories that support the material. I have color coordinated the slides to help you on your projects. I kept the colors pale so you can print them. Red is intro Green is investment also look at stock market sight www.howthemarketworks Blue is banking Yellow is housing/renting/insurance Purple is credit

Personal Finance

Things we will cover to help you become self supporting adults! Interest Avoiding and eliminating credit card debt Rights and responsibilities of renting or buying a home Transitioning from renting to buying Starting a small business Investments: stock and other options Planning for retirement Bankruptcy, types of bank accounts available to consumers and benefits of maintaining a bank account Balancing checkbook Types of loans Being a low-risk borrower Insurance Charitable giving

How rent to own is very costly Look up on your phone the cost for a washer/dryer top load. Now take your calculator and multiply from these flyers Which costs more? Is it much difference? But how can you get things you need?

Results of price search Washer 1200.00 dryer: 800.00 699.00 531. 500.00 Fridge 2,000 65” 2000.00 500.00 950.00

options Washer/dryer- use a laundry mat- this is also expensive Buy a used one at garage sale- it wont be pretty and might not be fancy but if you pay 100.00 for one and you were spending 15.00 a week in laundry how long would it pay for itself? Once you have saved enough to pay for it, you can start saving to buy a nicer one- still not new- just better. Keep upgrading but with cash.

What about zero interest Things like furniture row, home depot etc. You can take advantage of these IF YOU ARE CAREFUL They will set your payments for a much longer period--- you generally only have 6 months or a year to pay it off for the zero. So you have to pay more every month and have it paid off before the special ends--- If you don’t they will go back and charge you interest on the entire balance for the entire time. Do not wait until the last few days--- they will act as if they can’t post it before you are late

AVOID! AVOID! RUN! RUN! AVOID! DO NOT Pay day loans Refund anticipation loans Rent-to-own Pawn shops Car title loans Debt consolidation with most firms ALL OF THESE CHARGE EXCESSIVE INTEREST

Investments Investment is important to the economy because it causes growth and important to the individual because it allows individuals to accumulate wealth.

How can you be a wise investor in stocks and other personal investments options First Identify and distinguish ways an investment can grow over time: Interest income Dividend income Rising market price

Identify risks to money invested Risk of decline in value Risk of lost purchasing power if it doesn’t keep up with inflation then you are losing purchasing power Risk of liquidity- savings placed in an inaccessible or liquid form of investment (you might not be able to get your investment converted to cash quickly

Identify factors that will help determine an investor’s tolerance for risk, including Overall net worth Age (if far from retirement then you can take greater risk) Family responsibilities Earnings power You want to have a diversified portfolio– not all your money in one kind of savings

Some Ways to invest Stock market Savings Money market Mutual funds Bonds 401K IRA Land Capital

Also see the banking for info

Banking
http://www.youtube.com/watch?v=MTxu_IZ9Yk4 Fees banks are charging http://www.youtube.com/watch?v=rfHyQ-8eLC4 Banks vs credit union

What is the purpose of function of a bank or financial institutions Act as intermediaries between savers and borrowers Offer a convenient and safe way for people to store money and with depositors’ funds, they provide commercial loans, personal loans, mortgages, and issue credit cards Enable households and businesses to earn a return on their savings and provide funds for capital investments Provide loans so families and businesses can buy what they need.

You can forget to post an expense (check or debit or ATM withdrawal) If you wrote a check and the numbers are mis-read they can take more money out than you thought A deposit you made was returned and then taken out of your account. (a payroll check bounces and you pay your bills but there is no money in your account)

Reconciling- get an online app!!! Not all your checks, ATM’s, debits etc. will clear the bank before the end of the month Or even every day. You have to reconcile the account once a month--- many go online and check it daily At the end of the month the bank closes the account for that month and says “this is how much you had” This is not likely to match what you had on your statement. This is because the bank has not seen all the checks or ATM or debit card transactions. It may not have a deposit recorded. It may also be because you have forgotten to write down a transaction, or you miss added/subtracted You have to remember to add interest and take out any fees.

So what do I do first?1st- go through the statement and look at every transaction compared to what you have recorded. Did you write in one for a different amount? Forget one? Put a check mark beside each one that clears in your register. .

2nd- take the balance they provide and subtract any transactions that have not cleared and add any deposits that have not been posted. That should balance.If it still doesn’t balance you have something recorded wrong. Look very carefully!

Why do I need to do that?Because every transaction does not record immediately and trusting the ATM can get you in trouble.You need to record each transactionyou need to verify them with the bank statement

Why is savings important The more money in savings provides more money for loans to businesses. The businesses borrow to buy capital (man made goods) More money in savings reduces the amount of money individuals have to use for consumption (purchasing goods and services)

How to begin a savings program Start off with a goal I recommend you have $1000.00 in emergency cash Then have 3-6 months of your monthly expenses in a form that is safe and easy to access Then begin to save for retirement Save for long term goals Home Your wants

Role of interest Banks pay savers interest for putting money into various kinds of savings accounts. The higher the interest paid the more likely people are to save. The lower the interest rates are the less money people will save, reducing the amount of money available for loans.

Types of accounts Checking- has fees keeps you from carrying lots of cash Savings- your money less accessible, earns interest Certificates of deposits (CD) ties up money for a specific amount of time, penalty for early withdrawal, earns higher interest Money market funds- lower interest than CD but higher than savings. No time frame IRA- Individual retirement account, rules and penalties for early withdrawal has tax benefits Mutual funds (not insured) fees, can lose money, safer than stocks, experts chose the companies

Functions of financial institutions Are intermediaries between savers and borrowers Provide a safe and convenient way for people to store money Provide commercial loans, personal loans and mortgages and issue credit cards Pay interest on savings (savings provide money to loan to businesses)

The money people save is used to provide loans for both individuals and businesses to purchase goods and services People generally want to earn a high interest rate on their savings, if the interest goes low then people may not save.

Types of accounts Checking Savings Certificates of deposits Money market funds IRA accounts Mutual funds

Checking accounts--- often charge $5.00-15.00 per month Savings do not usually charge you a fee to save your money. Certificates of Deposit are a time savings account– you commit your money to that account for 6 months, 1 yr, 2 yrs, 10 yrs. The longer you commit the higher the rates. You are not able to take the money out during that time without penalties. Money Market funds are a type of savings account that you can write a few checks on. It generally has a higher min. balance and pays higher interest IRA accounts- Individual Retirement Accounts are accounts you open to put money into for your retirement. There is a limit on the amount of money you can deposit per yr and it varies based on your age. You cannot take the money out without penalties. Mutual funds is like a group of people pulling their money together to invest in stocks. It is managed by a broker firm. You do not select the individual stocks. You are able to select % and types. There are fees, and you can lose your money but it is safer than buying your own stocks because professionals manage.

Having a checking account is a responsibility You are guaranteeing that the piece of paper or your debit card swipe is good for the amount you bought. It is very important that you monitor your checking account– even if you do not write checks. There are ways for your account to be wrong

Thursday 4/24 Do NOW: Write out the steps to reconcile a check book. Objective: Today be able to explain the pros and cons of buying a house and the cost of interest.

Buying vs. Rentinghttps://www.youtube.com/user/wahomeowners?feature=watch

Friday 4-25-14 Do Now: What will you need in paperwork/records to get prequalified? Objective: be able to explain the pros and cons of buying a house and the impact of interest.

6 top benefits of owning a home Tax deductions-interest and property taxes are deductible on income tax. You may also be able to deduct the closing costs and fees for loans Appreciation- typically the value grows at the rate of inflation plus 1-2 percent. Sometimes you buy in the right market and the value goes up significantly so that it really is an investment. Equity- this is the part you actually own (not still mortgaged) You are increasing your equity with every payment. You are not building equity if you rent. (say you rent for 10 years at 800.00 per month- $9,600 per year at ten years you will have spent $96,000 and own nothing.

6 benefits cont.Borrowing power- you can use your equity to borrow money for other things. ( I would never recommend you borrow against your home)Stability- if you own then you do not have to worry about your rent going up, or your apartment being sold out from under youFreedom- you do not have to worry about what color to paint your walls (homeowner associations will dictate the outside) downstairs neighbors, etc

Other benefitseven though you are paying interest the average value of home goes up so you are forced to save and that earnings is higher than sitting in a savings account.Rent goes up faster than the returns you would get in the stock market- on average

When you buy your own home you pay interest. Take a moment to look at what time does to the cost of owning a home.

Amortizationhttp://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx?ec_id=m1082526&ef_id=Uh@orgAAATiWLBEP:20131204210439:shttp://www.youtube.com/watch?v=PNQr0QXN8G0buy or rent

Look at your personal finances and spending habits Also consider if you move a great deal for your job or because you want to. Renting might be better- however, you could still buy investment property and have someone manage it as rental.

You could buy a duplex and rent out one half to help pay your payment. You could buy some land and add onto it as you can afford--- maybe live in an RV or trailer while you build. If you pay as you go it may take a few years but it would be all paid for. Things to consider: you could buy a house while you are in college and rent out the other rooms to pay the payments.

Disclaimer– there are always risks in buying property. The market might fall and you are stuck with a house that you cannot sale. Ask Detroit. You do not have to start with a mansion- look at the bones of the house, neighborhood etc and buy the cheapest house in a great neighborhood then fix it up and resale for a profit

Objective: Be able to explain responsibilities of ownership and renting. Monday 4/28/14 Do Now: how can you save on interest? WITHOUT HOMEOWNERS ASSOCIATION OR ORDIANINCES.

You may buy and own the home, but do not be deceived there are people who will tell you what you can and cannot do. Look at easements, restrictions, requirements before you buy. You might not be able to put in that circle drive or build a fence . . . Have chickens, shoot your BB gun, . . . Homeowner associations charge a fee to live in that subdivision, it is paid monthly and never ends. Each is different- what they pay for and what they restrict. Read the material carefully. The purpose is that everyone in the subdivision will maintain the house and your property values will stay solid. Homeowners association and cities, counties

Complications of buying The cost to get into one- down payment, closing cost Property tax Maintenance Can’t just pack up and move

Property Rights Lets look at your responsibilities and rights with a rental, when you own your own home, and vehicles.

You are responsible to have insurance. Liability Entrance Eminent domain- (watch the short video)

To cover your personal property in the apartment Also liability- if someone falls on your property or gets hurt in some way then your homeowners insurance will pay for their medical and damage. Auto- add un-insured and underinsured insurance to your auto policy--- it will pay for your car when the person at fault does not have insurance. Underinsured covers for those people who do not have enough to pay for your injuries or your expensive vehicle. Maybe they only carry $25,000 liability and your truck cost $35,000. Insurance: whether you rent or own you need to have insurance on your home/apt.

Living in an apartment or other rental YOU STILL NEED TO BUY INSURANCE! When you live in an apartment or other rental your belongings are not covered by insurance in the event of a fire, burglary, flood etc. The owners have insurance that cover the building but not your personal belongings. BUY RENTAL INSURANCE, this can be added to your auto insurance and is very cheap: less than 20.00 a month.

If you rent or own you are paying taxes- it is a responsibility Homeowners pay property taxes either every month in their mortgage payment or once a year in October. These taxes include: city, county, hospital, school and there can be others. If you rent the owners of the property figure the cost of taxes into your payment. In essence your monthly payment is paying a portion of tax debt.

Renting You have a lease, that lease is in the names of the person(s) that signed and were approved Anyone else that starts living there is not responsible for paying the rent. The management and their authorized people have the right to enter into your apartment anytime they need to. to spray for bugs to check on plumbing, heating, a/c, painting While in the apartment they are looking for evidence of illegal activities, pets, damage, too many people living there, anything that seems odd.

To rent For many even most places that you rent you will need to fill out a credit application– they will check your credit history. You will need a deposit- sometimes as much as first and last month. You will have to pay for any pets that you have The government has restrictions on how many people can live in a specific size apartment/bedrooms.

What does renting costs If you are paying 900.00 a month for 10 years how much have you paid? Do you own any part of that place? If you want to have something to show for your money then you invest in property.

Eminent Domain:Watch this short video and be prepared to discuss the following points: What is eminent domain? What are the 2 conditions must be met for the government to exercise ED? Under the traditional interpretation, what types of projects were considered proper uses? How and why did the concept of eminent domain begin to change in the 50’s Why are some local governments and politicians in favor of using ED for economic development? What has been the most important and controversial eminent domain case in US history? Who won? What was the case about? What has been the impact of the 2005 Supreme Court decision concerning ED?

Under the current interpretation, what is to prevent any developer from using ED to avoid paying fair market price for someone else’s property? Did the founders intend for ED to be used to benefit private interests? Why or Why not? Who should make decisions about how property is used: the people who own the property or the government? Explain.

Credit cards Friday 4/30/14 Do Now: Explain what the current interpretation of ED is and how they defend that. Objective be able to explain the difference between a charge card and a credit card and how they determine your balance for interest.

http://debtwave.com/ Click on calculator to put in figures

Charge cards vs credit cards Originally it was charge cards--- gas cards to be precise. These allowed people to charge their months gas on a card while traveling. You had to pay them off at the end of each month. Hence charge not credit. Today gas cards and American Express are still like that. Some other accounts like florist, expect payment in full

Credit cards actually extend you credit You are allowed to pay only a portion of the balance each month. http://www.youtube.com/watch?v=OWwOJlOI1nU This is extremely dangerous

Triggers that can raise your interest If you are late even one time they can raise the interest Go over your limit and they can raise the interest Be late on other items so that they feel your credit worthiness is bad they will raise the interest

Credit cards are very risky--- it is like inviting a cobra snake to live in your home. If you chose to get one proceed with caution. Fees– banks can charge you not only interest on CC’s but also fees– annual fees, late charges, over the limit charges Texas laws set limits on the interest the bank can charge- but that is only if the bank’s headquarters are in Texas. If your CC is from a bank out of state then they can charge much higher interest.--- guess where most credit cards are at?

Fees They can also raise the fees– be late and pay 35 to 75.00 late fee Go over your limit and they will charge you a fee.

What is all that fine print Credit cards charge you a finance charge– you will see it as something like 1% or 12.58%apr or higher. It often has rules, if you are late on a payment then they charge you a late fee and can up your interest rate.

WYour interest rate is also known as your annual percentage rate (APR), which for most people falls between 12.99% and 29.99%. That percentage, known as a nominal rate, usually works out to a figure that's a bit higher (an "effective interest rate") once the interest is factored into your balance. The majority of credit card companies use an average daily balance method to calculate interest charges, which means that your interest is compounded based on your daily balance. Tool: APR Calculator The first step is to determine the average daily balance. For example, let's say that in a 30-day period you have a $1,000 balance carried over from the previous month. You don't use your credit card at all during this month, but on the 11th day, you make a payment of $300. So, the balance for days 1-10 is $1,000, and the balance for days 11-30 is $700. Add up the total daily balance for the month, and then divide that number by the number of days in the period to get your average daily balance. (10 x 1,000) + (20 x 700) = 24,000 24,000 / 30 = 800 The second step is to calculate your periodic interest rate. If your APR is 14%, divide that by 365: 0.14 / 365 = 0.00038 Your periodic (or daily) interest rate comes out to 0.038%. Next, multiply your periodic interest rate by your average daily balance, then multiply that number by the number of days in the period: 800 x 0.00038 = 0.304 0.304 x 30 = 9.12 Thus, your interest charge for that month is $9.12. Now that you understand how interest charge is calculated, there are two things to keep in mind. First of all, your interest is charged from the date of purchase, not from the beginning of the next month. There is no grace period unless you pay off your balance in full at the end of the period, in which case the interest charges are waived. Second, the CARD Act of 2009 stipulated that credit card statements include a section that clearly outlines how long it will take you to pay off your card if you only pay the minimum balance. If you make a habit of only paying the minimum each month, it would benefit you to pay attention to that section and make plans to pay off your balance within a reasonable amount of time. hat is that

Thursday May 1,2014 Objective: be able to explain how to protect your credit. Do Now: figure out what your interest will be You have a balance of 5000.00 on the 1st, you pay 1000.00 on 10th. Your APR is 20% #of days at 5000.00 (multiply) + # of days at lower bal. Take that number and divide by number of days in month (31) Divide 20% by 365 days then multiply your daily rate by your daily avg. That gives you your daily interest rate. Multiply that by number of days in month (31)

THINGS YOU CAN DO If you are late for some reason, but always pay on time--- call and ask them to remove the fee---- but often they will still up your interest rate Ask to change your due date if your paydays change or other circumstances change

How to protect yourself Read the fine print Check your statements every month Pay on time- early Pay more than the minimum due Protect your numbers- know where your cards are Do not let it out of your sight--- wait staff has been known to duplicate your card info and then make themselves cards Look at receipts- people sometimes add a little and you do not realize it

Draw lines through empty fields on a receipt (tips) Only give out your number over the phone if you made the call— Never give out the number to unsolicited mail– we need you to verify your cc number--- no they do not they are scamming you Make sure the website says https:// rather than http:// the “s” means secured line ATM loses are your responsibility if you do not report at the end of the month when statement comes in MAKE A LIST OF ALL CARDS, NUMBERS, PHONE NUMBERS AND PUT IT IN A SAFE SPOT--- SAFTY DEPOSIT BOX. IT IS A GOOD IDEA TO MAKE A PHOTO COPY OF ALL OF THEM AND KEEP IT AWAY FROM YOUR HOME– IF YOUR HOUSE IS LOST IN FIRE OR YOUR CARDS STOLEN YOU NEED THE NUMBERS TO CONTACT THEM.

That being said, it is very dangerous to have all the information written down. If someone has the number, name on card, expiration date and the code on the back they can use your card. Companies are not suppose to print out your entire card number– last 4 digits only. If someone hands you a receipt that has all the numbers they can be fined up to $500.00

Theft- You must report theft right away. Most only hold you responsible for $50.00 per card If you have disputes over the credit card billing it must be in writing You only have 2 days after you receive the statement to report ATM losses--- if you wait longer you are liable up to $500.00. if you wait over 60 days you can be liable for the full amount.

DON’T GO CREDIT CARD CRAZY EVERY TIME YOU APPLY FOR ONE YOU LOWER YOUR SCORE. YOU GET LABELED “CREDIT SEEKER” SPACE OUT YOUR APPLICATIONS

Objective: Today know what the 3 C’s are, 3 agencies and how to maintain your credit worthiness.

3 C’s of credit Capacity- can you repay the loan? Looking at your wages, as well as your other financial obligations Character: look at your credit history, how much you owe, how often you borrow, whether you pay on time and consistently, how stable your life is (how long at that residence, job….) Collateral- want to know what assets you have (stocks, savings, property etc.) that could be used to repay

What did you learn about $10,000?

To have or not to have that is the question Advantages disadvantages Costly if you carry a balance commits future earnings Discourages comparison shopping Encourages impulsive and over spending Items wear out before paid for Perks provide incentive to overspend. Buy not pay later Widely accepted Carry less cash Rewards programs No need to show ID or give personal info Monthly statement records expenses Can be an interest free loan if paid in full each month

I personally would recommend you If you are going to get a card get one from your bank and have it at only $500 or $1000.00 Pay it off every month Use it for the advantages but do not pay them any interest You will find it helpful to rent hotel rooms, cars, buy airline tickets, and to use traveling for safety You will hate yourself if you get into debt on credit cards- it is a hole that is nearly impossible to climb out of without extreme measures

How to make yourself more credit worthy Pay bills on time Keep credit card balances low Keep unused accounts open Only apply for credit when needed Shop around for best rates Correct inaccuracies on credit report Avoid excess credit inquires Avoid bankruptcy Avoid consolidating balances Negotiate with creditors Buy only what you can afford Pay more than the min. Do the math, play smarter

Friday 5/2 What are the 3 C’s? How long to pay off 1800 @20% with min? Objective Credit worthiness and credit scores

Credit agencies There are 3 credit reporting agencies that people/businesses etc pull from to get data on your credit worthiness. Understand that not every business reports to an agency, not all report every month and not all report to all 3. You might have good credit at a place but they never report so it seems you have none You might have all your credit at one place so you do not get the benefit of having it reported to all 3--- no credit on one or more is counted as negative--- they average.

So what can you do? Ask which firm(s) they report to How often do they report Seek credit from ones that report to all 3 or to ones you are not being reported on from your others Example--- local credit union does not report to eastern firms, it takes a business that has their headquarters in the east to get it reported to them.

3 credit agencies Experian P.O. Box 2104 Allen, TX 75013-2104 1-888-397-3742 www.Experian.com

Equifax P.O. Box 740241 Atlanta, GA 30374-0241 1-800-685-1111 (order report) 1-800-525-6285 (report fraud) www.Equifax.com

Trans Union P.O. Box 2000 Chester, PA 190222-2000 1-800-888-4213 (request report) 1-800-680-7289 (report fraud) www.transunion.com

Review your credit report on a regular basis Order a free credit report from each of the above at www.annualcreditreport.com

TWO MAJOR REPORTS (BUT THERE ARE DIFFERENT ONES EVEN IN THESE (GENERIC, BANKCARD, PERSONAL FINANCE, MORTGAGE, INSTALLMENT LOANS AND AUTO) VANTAGE (501-990) the 3 credit reporting agencies wanted to win business from the FICO scores you can get Vantage Score from Experian and Transunion websites FICO (300-850) LENDERS LOOK AT YOUR FICO (Fair Isaac Company’s) myfico.com

JUST UNDERSTAND THAT THERE ARE OTHERS AND THAT YOU DO NOT HAVE ACCESS TO ALL THINGS LIKE CREDIT KARMA ARE GIVEN TO YOU BUT NOT USED BY LENDERS

YOUR BENEFITS DO NOT INCREASE FROM 740 TO 800 FAIR OR STANDARD SCORE 620-659 PREFERRED 660-699 PRIME 700-739 ELITE 740 AND UP THESE ARE GUIDELINES---

DON’T CLOSE CREDIT ACCOUNTS MAINTAIN OLD ACCOUNTS- ZERO BALANCE IS GREAT THEY LOOK AT WHAT % YOU HAVE CHARGED SO IF YOU HAVE MORE AVAILABLE CREDIT THAN USED IT MAKES YOUR % BETTER THEY LOOK AT HOW OLD YOUR ACCOUNTS ARE--- THE PEOPLE WITH 825-850 HAVE ACCOUNTS THAT ARE 25 YRS OLD

HAVE LESS THAN 10% DEBT FOR YOUR CREDIT AVAILABLE USE YOUR CARD EVERY ONCE IN A WHILE – YOU DON’T HAVE TO MAINTAIN A BALANCE BUT YOU DO NEED TO SHOW THAT YOU ARE CREDIT WORTHY IT IS BETTER TO ASK TO HAVE YOUR CREDIT LINE EXTENDED THAN GO TO ANOTHER CARD (REMEMBER LONGER YOU HAVE IS BETTER)

Dangers of Credit Cards It is really easy to swipe a card and buy something on impulse You pay way more money for the items due to interest You end up owing more than you can pay each month and pay only the min. amount ;( If you are late the fees are horrific

CREDIT ERRORS ONE OF THE BIGGEST AREAS OF ERRORS IS FALSE INFORMATION DUE TO IDENTITY THEFT/WRONG NAME REPORTED. CHECK YOUR CREDIT REGULARLY YOU CAN CHECK YOUR CREDIT FREE AT www.annualcreditreport.com if you get one from each company spaced out every 4 months you can see errors (but remember not every company reports to all 3)

FAIR AND ACCURATE CREDIT TRANSACTIONS ACT EVERY LEGAL US RESIDENT IS ENTITLED TO A FREE COPY OF HIS OR HER CREDIT REPORT FROM EACH CREDIT REPORTING AGENCY EVERY 12 MONTHS. THEY DO NOT CONTAIN YOUR CREDIT SCORE– JUST YOUR CREDIT REPORT

The following slides were part of our study on personal finance.