2. The Good The Bad And The Ugly

3. Debt Analysts Tim Sabelko Jason Gilbert Ryan Erickson Matt Bach Jeff Mathes

4. What is Debt? The idea of owing money to someone else.

5. Is Debt Good or Bad? How many have a debt? Consider good or bad?

6. Concepts Of Debt Good Debt Bad Debt Opportunity Costs

7. Good Debt vs. Bad Debt Good Debt Appreciates Bad Debt Depreciates

8. Good Debt Taking Out A Loan To Start A Business Taking Out A Loan For School Taking Out A Loan To Buy A House

9. Bad Debt Holding A Balance On A Credit Card Taking Out A Loan To Buy A New Car Taking Out A Loan To Go On A Trip

10. Opportunity Cost Time Spent In School Starting A Business Employee Training

11. Bad Debt: Credit Card Dynamics Model for Paying Credit Card Debt Analytic Solution Simulation Total Interest Paid

12. Analytic Solution General Formula where: P = payment R = Interest rate x(n) = balance at month n

13. Compartmental Diagram

14. Analytic Solution

17. Notice a pattern

18. Analytic Solution This equation forms a Geometric Series This series can be simplified

19. Geometric Series

20. Analytic Solution Therefore our equation: can be written as

21. Simulation We ran simulations to show how long it would take to pay off your credit card bill

24. Multiple Credit Cards Optimizing Payments Within A Budget

25. Two Typical Credit Cards CardBalanceInterest Rate Funds VISA300018%X Discover500012%Y Total Funds 300 How do we pay off both cards?

26. The Equation

27. Minimizing the Interest Question: What is the most effective way to pay of the two credit card balances? Answer : Pay the card with the highest interest rate.

28. Two Typical Credit Cards CardBalanceInterest Rate Funds VISA b 1 r 1 X Discover b 2 r 2 Y Total Funds F

29. Assumptions Your credit card company will not charge late fees. There will be no further charges made on your card.

30. Minimum Interest Equations

31. Finding Minimum Interest

32. Warning Do not attempt this in the real world. Your credit card company will charge you late fees in the real world. Consolidate your credit cards with a home equity loan or low interest credit card. Why? Alternative:

33. Good Debt We will use is taking a loan out for an Applied Math degree. Examples of Good Debt Education House Land Example:

34. Assumptions

36. After 108 months ( 5 years after you graduate)

37. Till retirement at age of 65

38. Your Math Degree Pays And 758,648 ahead of the associate degree grad. Well worth your 26,000 in loans. As you can see you come out 911,616 of the high school grad

39. Conclusions There is a right time to go into debt. Just think before you act. Do the Math. And make you good investments.

40. Summary Good Debt Bad Debt Opportunity Costs

41. References Bureau of the Census Bureau of Labor Statistics Dr. Deckelman Bill Kryshak CPA