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Welcome. 4 th of 16 Sessions No cost to participate. Financial Support: FINRA Foundation & United Way Worldwide Solid Finances Webpage: www.msuextension.org/solidfinances. 2. Text Your Questions. Do you have a Question? Do you want to comment? Type in the Q & A pod:.
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Welcome • 4th of 16 Sessions • No cost to participate. • Financial Support: • FINRA Foundation & United Way Worldwide • Solid Finances Webpage: • www.msuextension.org/solidfinances 2
Text Your Questions • Do you have a Question? • Do you want to comment? • Type in the Q & A pod:
Send Your Questions Click this after typing question in Q & A Pod
Schedule Investments November 30Investment Risks December 7Personal Risk Tolerance & Asset Allocation December 14Mutual Funds December 21Mortgages (Refinancing & Reverse) 5
Solid Finances Sponsors • MSU Extension • MSU Human Resources • This program is made possible by a grant from the FINRA Investor Education Foundation through a partnership with United Way Worldwide. 6
Saving Money by Paying Down Debt Joel Schumacher 7
Question A: Have you attended a previous Solid Finances Webinar? • Yes • No 8
What is your goal? • Be debt free earlier • Save on interest • Reduce your monthly payments • Improve your credit so you can make a large purchase (house, car, etc.) • Less creditors to deal with 9
Question B: What is your top goal? • Be Debt Free • Save on Interest • Reduce Monthly Payments • Improve your Credit Application • Other Goal 10
Understand your current debt • List each debt and terms • Balance • Interest rate • Payment amount • Is the interest tax deductible? • Repayment method • Automatic Payment, Check, etc. • Non-Money issues 11
Example • Lisa is expecting a tax refund of $1,500 • Wants to know to do with the $1,500 • Income: $25,000 • Income Tax Rates: 15% Federal 6.9% Montana 12
Question C: Lisa will get the best financial return by applying the $1,500 to which loan? • Student Loan • Car Loan • Credit Card • Mom & Dad Loan 14
Interest Saved If the $1,500 is applied to: Mom & Dad Loan: $3.75 next month Student Loan: $6.25 next month Car Loan: $6.25 next month Credit Card: $16.25 next month To get the Best Financial Return: Pay down the highest interest rate loan 15
Which Goals are Achieved by Paying down different loans? What will Lisa do with her extra $60 each month? 16
What if Lisa paid off her student loan? What will she do with the extra $95 each month? 17
Question D: What is a better financial option? • Student Loan (5%) • Car Loan (5%) • Student Loan & Car Loan are the same 18
Tax Deducible Interest • Car and Student loans: • Both 5% Interest • Interest paid on the student loan is tax deductible Car LoanStudent Loan Interest Payment $100 $100 Fed. Tax Savings $ 0 $ 15 MT Tax Savings $ 0 $ 7 After Tax Cost $100 $ 78 19
Tax Example • Another way to look at this: • 5% Interest Rate • 22% Tax Rate (15% Federal & 6.9% State) • 1 - 22% = 78% • 5% x 78% = 3.9% • Effective rate is 3.9% 20
Mortgage Interest • Interest on a mortgage can be tax deductible • Only deductible if you itemize your deductions on your tax return • If you itemize use the method on the previous slide • If you don’t itemize assume your interest isn’t deductible • Not sure if you itemize: • Check last year’s tax return 21
Question E: Is your mortgage interest deductible? • Yes • No • Not Sure • I don’t have a mortgage 22
Other Factors • Family/Personal Reasons • Relations with Mom & Dad will improve when that loan is paid off • Ease of Access • Some loans are paid “automatically” • Other loans you write a check (or electronic payment) 23
Creating Your Debt Repayment Plan • Step 1: Create a list of your debts • Amount, payments, interest rates, tax deducible, late fees • Step 2: List your goal (s) • Lower monthly payments, lower interest, improve credit application • Step 3: Create Your Plan • PowerPay.org 24
Do you have “extra” money? • Will you make “extra” payments each month? • If so how much? • Will you make a one time extra payment? • Tax Refund, Inheritance, other source • Are you about to pay off a loan? • Those dollars could go toward another debt. 25
Debt Repayment Tool: PowerPay • What is it? • Repayment Plan • Equal payments for the entire repayment plan • Tool to help track loan repayments • Calculate Interest Savings • Determine pay off date • Create Amortization Schedules • Compare payment strategies 26
How to use Power Pay • www.powerpay.org • Run by Utah State University Extension • Free Service • No email sales pitches, etc. 27
User Login 28
Question F: Is the PowerPay system useful? • Yes • No • Maybe 35
Question G: Is the PowerPay website useful? • Yes • No • Maybe 36
Questions? 37