Presentation on theme: "Personal Finance James B. Wilcox RESOURCES PROVIDED BY:"— Presentation transcript:
1 Personal Finance James B. Wilcox RESOURCES PROVIDED BY: THE UNIVERSITY OF SOUTHERN MISSISSIPPICENTER FOR ECONOMIC AND ENTREPRENEURSHIP EDUCATION,MISSISSIPPI STATE UNIVERSITY, VIRTUAL ECONOMICS,NATIONAL COUNCIL ON ECONOMIC EDUCATION, THE MOODY’S FOUNDATION
5 Who Earns More? Bartender (Nevada) $20,430 Taxi Driver (New York) $26,800
6 Job DutiesBartender: Mixes and serves alcoholic and nonalcoholic drinks to patrons of bar, following standard recipes: Mixes ingredients, such as liquor, soda, water, sugar, and bitters, to prepare cocktails and other drinks. Serves wine and draught or bottled beer. Collects money for drinks served. Orders or requisitions liquors and supplies. Arranges bottles and glasses to make attractive display. May slice and pit fruit for garnishing drinks. May prepare appetizers, such as pickles, cheese, and cold meats. May tend service bar and be designated Service Bartender.Taxi Driver: Drives taxicab to transport passengers for fee: Picks up passengers in response to radio or telephone relayed request for service. Collects fee recorded on taximeter based on mileage or time factor and records transaction on log. Reports by radio or telephone to TAXICAB STARTER on completion of trip. May drive limousine or custom-built sedan to pick up and discharge airport passengers arriving or leaving on scheduled flights and be Designated Chauffeur, Airport Limousine.
7 Job RequirementsBartender -Bartending school -32 hours of training -Many states require bartenders to be certified in Serve Safe Alcohol program. -May require other certification.Taxi Driver -Regular automobile driver’s license -May need a taxi driver license, aka “hack” license -May require 80 hours of classroom instruction
8 Who Earns More? Round 2 Miner (West Virginia) Taxi Driver (New York) $26,800
10 Who Earns More? Miner (West Virginia) $30,680 Taxi Driver (New York) $26,800
11 Miner Job DutiesMines ore, coal, or rock in underground mine, performing any combination of following tasks in areas where high production equipment is limited by economic factors or natural formations: Cuts channel under working face to facilitate blasting, using pick, or by operating cutting machine. Operates mounted or unmounted power drill to bore blasting holes in working face. Charges and shoots (sets off) explosives or air charges to blast down materials. Shovels shattered materials into mine cars or onto conveyor. Installs timbering, roof bolts, or cribs, to support walls and roof. Lays track to accommodate mine cars or track-mounted equipment. May mine rock in coal mine at contract price per ton or footage of advance and be designated Rock Contractor (mine & quarry). May mine ore, coal, or rock, using pick and shovel, and be designated Miner, Pick (mine & quarry). When digging passageways between rooms, may be designated Entry Miner (mine & quarry). May do development work, such as opening up new passageways, air vents, auxiliary tunnels, rooms, and shafts to facilitate mining, and be designated Drift Miner (mine & quarry); Raise Miner (mine & quarry); Shaft Sinker (mine & quarry); Stope Miner (mine & quarry); Tunnel Miner (mine & quarry).
12 Who Earns More? Round 3 Miner (West Virginia) $30,680 Police Officer (New Mexico)
14 Who Earns More? Miner (West Virginia) $30,680 Police Officer (New Mexico)$36,120
15 Police Officer DutiesPatrols assigned beat on foot, on motorcycle, in patrol car, or on horseback to control traffic, prevent crime or disturbance of peace, and arrest violators: Familiarizes self with beat and with persons living in area. Notes suspicious persons and establishments and reports to superior officer. Reports hazards. Disperses unruly crowds at public gatherings. Renders first aid at accidents, and investigates causes and results of accident. Directs and reroutes traffic around fire or other disruption. Inspects public establishments requiring licenses to ensure compliance with rules and regulations. Warns or arrests persons violating animal ordinances. Issues tickets to traffic violators. Registers at police call boxes at specified interval or time. Writes and files daily activity report with superior officer. May drive patrol wagon or police ambulance. May notify public works department of location of abandoned vehicles to tow away. May accompany parking meter personnel to protect money collected. May be designated according to assigned duty as Airport Safety And Security Officer; Dance-Hall Inspector Traffic Police Officer; or according to equipment used as Ambulance Driver; Motorcycle Police Officer; Mounted Police Officer. May be designated: Emergency-Detail Driver; Patrol Driver; Pool-Hall Inspector; Radio Police Officer; Show Inspector.
16 Police Officer Job Requirements Must be able to pass a pre-employment physical and drug screen. Must be a US Citizen. Must have a valid New Mexico driver’s license or be able to obtain one. Must be able to pass a pre-employment physical and drug screen.Education: High School Diploma or G.E.D. equivalent. Experience:Prior Law Enforcement preferred (Up to one or more years of experience). Knowledge:Requires work level knowledge, skills, and abilities related to a broad range of either complex or technical functions or apprentice level knowledge of a single function area or work specialization. Certificates/Licenses:Must complete the State Accredited Basic Academy within first year. Recertification:Will certify under Certified Officer when recertification requirements are needed. Use of Tools/Equipment:Vehicle, baton, chemical sprays, handgun, shotgun, radar, computers, radio, handcuffs, breathalyzer, first aid equipment, telephone, tasers and AED machines.
17 Who Earns More? Round 4 Truck Driver – OTR (Indiana) Police Officer (New Mexico)$36,120
19 Who Earns More? Truck Driver – OTR (Indiana) $36,940 Police Officer (New Mexico)$36,120
20 Truck Driver Job Duties Drives truck with capacity of more than 3 tons, to transport materials to and from specified destinations: Drives truck to destination, applying knowledge of commercial driving regulations and area roads. Prepares receipts for load picked up. Collects payment for goods delivered and for delivery charges. May maintain truck log, according to state and federal regulations. May maintain telephone or radio contact with supervisor to receive delivery instructions. May load and unload truck. May inspect truck equipment and supplies, such as tires, lights, brakes, gas, oil, and water. May perform emergency roadside repairs, such as changing tires, installing light bulbs, tire chains, and spark plugs. May position blocks and tie rope around items to secure cargo during transit.
21 Truck Driver Job Requirements -Commercial Driver’s license (CDL) (Federal Law) -U.S. DOT regulations: 21 years old, pass physical once a year, at least 20/40 eyesight (with glasses), good hearing, cannot be colorblind, have epilepsy, have diabetes, or high blood pressure, cannot take controlled substances, no felony charges, DUIs, and speak and read English well enough to read road signs
24 Electrical Repairer Job Duties Installs and repairs electrical systems, apparatus, and electrical and electronic components of industrial machinery and equipment, following electrical code, manuals, schematic diagrams, blueprints, and other specifications, using handtools, power tools, and electrical and electronic test equipment: Installs power supply wiring and conduit for newly installed machines and equipment, such as robots, conveyors, and programmable controllers, following electrical code and blueprints, using handtools and voltage tester. Connects power supply wires to machines and equipment, and connects cables and wires between machines and equipment, following manuals, schematic diagrams, and blueprints, using handtools and test equipment. Diagnoses malfunctioning apparatus, such as transformers, motors, and lighting fixtures, using test equipment, and replaces damaged or broken wires and cables, using handtools. Tests malfunctioning machinery, using test equipment, and discusses malfunction with other maintenance workers,
25 Electrical Repairer Job Requirements -Knowledge of electrical equipment necessary. -May require degree from vocational technical school (1 to 2 years of training). -Good eyesight, color perception. -May need to be certified.
29 Who Earns More? Funeral Director (Florida) $48,440 Electrical Repairer (Kansas)$57,930
30 Funeral Home Job Duties Undertaker. Arranges and directs funeral services: Coordinates activities of workers to remove body to mortuary for embalming. Interviews family or other authorized person to arrange details, such as preparation of obituary notice, selection of urn or casket, determination of location and time of cremation or burial, selection of pallbearers, procurement of official for religious rites, and transportation of mourners. Plans placement of casket in parlor or chapel and adjusts lights, fixtures, and floral displays. Directs pallbearers in placement and removal of casket from hearse. Closes casket and leads funeral cortege to church or burial site. Directs preparations and shipment of body for out-of-state burial. May prepare body for interment.
31 Funeral Home Director Job Requirements -Must be licensed: 21 years old, 2 years of formal education including mortuary science, serve one year apprenticeship, pass qualifying exam. To embalm requires its own license. -College programs in Mortuary Science include: anatomy, pathology, restorative art, business management, grief counseling, business law, and ethics
34 Who Earns More? Faller (Washington) $64,110 Electrical repairer (Kansas)$57,930
35 Job DutiesFells timber trees, applying knowledge of tree characteristics and cutting techniques to Control direction of fall and minimize tree damage: Appraises tree for characteristics,such as twists, rot, and heavy limb growth, and gauges amount and direction of lean, using ax as plumb bob. Determines position, direction, and depth of cuts to be made and placement of wedges or jacks. Clears brush and debris from work area and escape route,and cuts saplings and other trees from falling path, using ax and chain saw. Scores cutting lines with ax, saws undercut along scored lines with chain saw, and knocks slabs from cuts with ax. Saws back-cuts, leaving sufficient sound wood to control direction of fall. Inserts jack or drives wedges behind saw to prevent binding of saw and start tree falling. Stops saw engine as tree tips, pulls cutting bar from cut, and runs to predetermined location to avoid injury from falling limbs and flying debris. May work on piecework basis and be designated Busheler (logging). May cut trees into log lengths [BUCKER (logging)]. Fallers of small timber (generally under 18 inches in diameter) are classified as FALLER (logging) II.
36 Faller Job Requirements -Generally, there are no educational requirements for forest worker jobs. -On-the-job training from the logging company -State logging or forestry associations provide training sessions for fallers, lead to certification. -Generally advance from occupations involving primarily manual labor to those involving the operation of expensive, sometimes complicated logging equipment.
40 Sales Engineer Job Duties Sells electronic products and systems and provides technical services to clients, performing other duties
41 Sales Engineer Job Requirements -A bachelor’s degree in engineering is typically required. -A business, chemistry, or other science degree may be acceptable. -May have work experience in an engineering specialty. -May need training in sales.
42 Who Earns More? Round 9 Fashion Designer (New York) Sales Engineer (Illinois)$73,120
44 Who Earns More? Fashion Designer (New York) $73,390 Sales Engineer (Illinois)$73,120
45 Fashion Designer Job Duties Designs men's, women's, and children's clothing and accessories: Analyzes fashion trends and predictions, confers with sales and management executives, compares leather, fabrics, and other apparel materials, and integrates findings with personal interests, tastes, and knowledge of design to create new designs for clothing, shoes, handbags, and other accessories. Sketches rough and detailed drawings of apparel and writes specifications describing factors, such as color scheme, construction, and type of material to be used. Confers with and coordinates activities of workers who draw and cut patterns and construct garments to fabricate sample garment. Examines sample garment on and off model and modifies design as necessary to achieve desired effect. May draw pattern for sample, using sewing equipment. May arrange for showing of sample garments at sales meetings or fashion shows. May attend fashion and fabric shows to observe new fashions and materials. May be identified according to specific group designed for, such as men, women, or children or areas of specialization, such as sportswear, coats, dresses, suits, lingerie, or swimwear. May design custom garments for clients and be designated Custom Garment Designer (retail trade). May conduct research and design authentic period, country, or social class costumes to be worn by film, television, concert, stage, and other performers and be designated Costume Designer. May design, fabricate, repair, and sell leather articles and be designated Leather Crafter (leather prod.). May design, copy, or modify clothing accessories and be designated according to article designed as Handbag Designer (leather prod.); Hat Designer (hat & cap); or Shoe Designer (boot & shoe).
46 Fashion Designer Job Requirements -2 year or 4 year degree -knowledgeable about fabrics, textiles, ornamentation, fashion trends, eye for color and detail, sketching ability, good portfolio. -Coursework may include: anatomy, mathematics, CAD, textiles, pattern making, sewing and tailoring and fashion history.
47 Who Earns More? Round 10 Fashion Designer (New York) $73,390 Psychiatrist(Mississippi)
49 Who Earns More? Fashion Designer (New York) $73,390 Psychiatrist (Mississippi)$136,610
50 Psychiatrist Job Duties Diagnoses and treats patients with mental, emotional, and behavioral disorders: Organizes data concerning patient's family, medical history, and onset of symptoms obtained from patient, relatives, and other sources, such as nurse, and social worker. Examines patient to determine general physical condition, following standard medical procedures. Orders laboratory and other special diagnostic tests and evaluates data obtained. Determines nature and extent of mental disorder, and formulates treatment program. Treats or directs treatment of patient, utilizing variety of psychotherapeutic methods and medications.
51 Psychiatrist Job Requirements -4 year undergraduate degree -4 years of medical school -3-8 years of internship and residency -Must be licensed – pass exam -May be board certified -Course work includes: anatomy, physics, biology, mathematics, organic chemistry, pathology, pharmacology, medical ethics
52 Who Earns More? Round 11 Secretary of State Hillary Clinton Psychiatrist(Mississippi)$136,610
54 Who Earns More? Secretary of State Hillary Clinton $186,600 Psychiatrist(Mississippi)$136,610
55 Secretary of State Job Duties The Secretary of State is responsible for the overall direction, coordination, and supervision of U.S. foreign relations and for the interdepartmental activities of the U.S. Government abroad. The Secretary is the first-ranking member of the Cabinet, is a member of the National Security Council, and is in charge of the operations of the Department, including the Foreign Service.
56 Secretary of State Job Requirements -Nominated by the President -Confirmed or rejected by the United States Senate by a majority vote.
57 Who Earns More? Round 12 Secretary of State Hillary Clinton $186,600 Anesthesiologist(Kentucky)
59 Who Earns More? Secretary of State Hillary Clinton $186,600 Anesthesiologist(Kentucky)$197,000
60 Anesthesiologist Job Duties Administers anesthetics to render patients insensible to pain during surgical, obstetrical, and other medical procedures: Examines patient to determine degree of surgical risk, and type of anesthetic and sedation to administer, and discusses findings with medical practitioner concerned with case. Positions patient on operating table and administers local, intravenous, spinal, caudal, or other anesthetic according to prescribed medical standards. Institutes remedial measures to counteract adverse reactions or complications. Records type and amount of anesthetic and sedation administered and condition of patient before, during, and after anesthesia. May instruct medical students and other personnel in characteristics and methods of administering various types of anesthetics, signs and symptoms of reactions and complications, and emergency measures to employ.
61 Anesthesiologist Job Requirements -4 year undergraduate degree -4 years of medical school -3-8 years of internship and residency -Must be licensed – pass exam -May be board certified -Course work includes: anatomy, physics, biology, mathematics, organic chemistry, pathology, pharmacology, medical ethics
62 Hillary Clinton B.A. Wellesley College J.D. Yale Law School Professor – School of Law at the University of ArkansasLawyer – Rose LawfirmFirst lady of ArkansasFirst lady of the United StatesUnited States Senator (New York)Secretary of State
63 Who Earns More: Bonus Round LeBron JamesProBasketball playerAngelina JolieActress
66 LeBron JamesHigh School -Attended St. Vincent – St. Mary High School, Akron, Ohio -”Mr. Basketball” Ohio 3 times -USA Today All-USA First Team -Gatorade National Boys’ Basketball Player of the year NBA Basketball -First overall pick in the NBA draft by the Cleveland Cavaliers -All Rookie First Team time NBA All-Star ( ) -3 time first team All-NBA (2006, 2008, 2009) NBA MVP
67 Angelina Jolie-Father is actor Jon Voight, Mother was actress Marcheline Betrand. -Studied at the Lee Strasberg Theatre Institute at 11. -Began modeling at 16. -Won Oscar for Best Supporting Actress in Girl, Interruputed -Won 3 Golden Globes, 2 SAG awards -Goodwill Ambassador for the U.N. High Commissioner for Refugees (UNHCR)
68 SDHow do these incomes relate to Supply and Demand?
70 The Risky Behavior Mystery People usually know what is good for them, but they often act as if they don’t know.Some people:Drive too fast.Fail to take medications.Go surfing!Why would people do things that don’t seem to be in their interest?
71 Lesson 15 Visual 1 Why Don’t People Do What They Should Do? QuestionNumber of Yes ResponsesHow many of you know that smoking is unhealthy?How many of you know people--even people your age--who smoke?How many of you know that eating foods that are high in transfats, such as packaged cookies, margarine and peanut butter, isn’t healthy?How many of you know people who eat foods that are high in transfats?How many of you know that regular exercise provides many health benefits?How many of you know people who don’t exercise regularly?
72 Perhaps the answer lies in identifying the costs and benefits. Costs: All the things that have to be given up when a choice is made.Benefits: Gains or favorable outcomes that make people more satisfied when a choice is made.
73 An analogySaving is like smoking, diet and exercise.
74 What are the benefits of a eating a healthy diet and exercising regularly? Feel betterLook betterReduce your risk of heart diseaseReduce your risk of cancerBoost your life expectancy
75 Do the benefits of diet and exercise occur now or in the future? Although people may start to feel better right away, most of the benefits occur in the future.
76 If people choose a healthful diet and exercise regularly, are they guaranteed these benefits? No.Some people may still get heart disease or cancer, no matter what they eat or how well they exercise.Also, a person engaged in a diet-and-exercise program could die prematurely from any number of causes other than heart disease or cancer.
77 Possibilities include: What are the costs of choosing a healthful diet and exercising regularly?Possibilities include:Giving up food that tastes really good.Paying dues for membership at a fitness club.Spending time on exercise that you could spend in other ways--napping, reading, gardening, watching television, playing video games.
78 Saving Saving is income not spent on consumption or taxes. Most people know that starting to save money at an early age and saving regularly are good habits that lead to financial well being.Yet many people fail to save early and regularly.Why?
79 What are the benefits of saving? Ability to attain your goals for the future.A feeling of security and satisfaction.
80 What are the costs of saving? Things you could obtain now if you weren’t saving.
81 When do the benefits of saving occur? In the future.
82 When do the costs of saving occur? In the present.Psychology – cookie experimentInstant vs. Delayed gratification
83 Cookie Experiment“Training in self-control has been useful in helping children interact more effectively with their peers and perform higher quality schoolwork. These children also report higher self-esteem”Longer self-imposed delay of gratification durations in childhood have been linked to later social, cognitive, and academic competence.Children with longer delay of gratification durations at age four were found better able to plan, think ahead, use reason, and cope with stress in adolescence, and they had higher SAT scores in high school.
84 The Costs and Benefits of Saving The costs of saving are immediate and certain.People have to give up things they could buy now.The benefits of saving occur in the future and are uncertain.Events might prevent people from reaping the benefits of saving.
85 Opportunity Cost and Incentives Considering the opportunity cost of spending might change how people analyze the costs and benefits of saving.Setting goals is an important factor related to saving.Goals act as incentives to save.Interest provides another incentive to save.
86 Opportunity Cost and Incentives What are some things for which you would like to save?
87 Short-Term Savings Goals Medium-Term Savings Goals Setting Savings GoalsShort-Term Savings Goals(One year or less)Medium-Term Savings Goals(One to five years)Long-Term Savings Goals (Over five years)
88 ReviewWhat is saving?How is failing to save like failing to eat right and exercise?What are incentives to save?What are short-term, medium-term and long-term saving goals?
90 Legal DisclaimerThe information contained in this presentation is provided for informational and educational purposes only, and should not be construed as financial or legal advice on any matter. The University of Southern Mississippi, Mississippi Council on Economic Education, Southern Miss Center for Economic and Entrepreneurship Education disclaim all liability in respect to actions taken or not taken based on any or all the content presented here. Before acting on any information or material obtained through this presentation, we strongly recommend you to seek advice from a personal financial advisor or professional legal counsel, as appropriate.90
91 Sound Advice 1. Charge only what you KNOW you can afford to repay 2.You pay more when you use your credit card and keep a revolving balance b/c you pay interest on your outstanding balance3. Pay your credit card bill in full each month. If you can’t pay in full, ALWAYS pay more than the minimum monthly payment4. Don’t spend over your credit limit and wind up paying special fees
92 Sound Advice 5. Pay your bills on time If not you will have late fees, higher APR, lower credit score6. Learn how to protect your credit rating, it is your “financial report card”7. Never use one credit card to pay another (i.e., take out a cash advance on one card to pay another8. Only have one credit card
93 Definition of CreditCredit is a system of doing business where you promise to pay at a later date for goods and services received todayCredit cards function as a loanUsing a credit cards means that you are borrowing money from the issuerThe charges are unsecured loans that must be repaid
94 Card TypesCredit CardA credit card allows you make purchases for which you are billed later.Most allow you to carry a balance from one billing cycle to the next with interest.Typically include a minimum payment each billing period.A Charge Card is a special type of Credit CardThe balance on a charge card account is payable in full when the statement is received.The balance cannot be rolled over from one billing to the next.Debit Cards are not Credit Cards.Debt cards allow payment and purchase to happen simultaneously.
95 It’s a FactThe U.S. has the lowest personal savings rate of any major industrialized nation.40% of Americans say they live beyond their meansCurrent debt-to-income ratio is 135%Americans have record credit-card debt$874 billion in U.S. credit card debt as of Nov 2009Source:The US has recently seen an over 50% increase in bankruptcies among people under age 25Fastest growing age range for bankruptcies
96 College Student Credit Card Statistics Over 75% of college students admit to having made mistakes with their money when they arrived on campusBiggest mistakes were overspending on food, entertainment, and credit card purchases.University Administrators state that they loose more students due to credit card debt than they do to academic failureDrop-Out RatesAcademic Failure – 6%Debt / Financial Pressure – 8.5%
97 BudgetingWe can all benefit from having a clear understanding of financial needs/wants and spending habits.Create a realistic budget gives a personal plan for spending a saving money, gives a sense of comfort and guidanceTake the time to use the guide on page 2
98 College Student Credit Card Statistics Credit Card AvailabilityOver 92% of college students have a credit card by their sophomore yearOnly 55% pay off their balance monthly.The average balance for college students is $885.Over 21% of undergrads owed $3,000–$7,000 on credit cardsThe average student has 2.8 credit cards.Recent Sallie Mae Survey:Over 50% of college students surveyed accumulated $5,000+ in credit card debt while in schoolOver 33% of college students surveyed accumulated $10,000+ in credit card debt while in school
99 How Does this Happen? College Students are a Privileged Class College students are able to obtain credit cards without a prior credit history, employment, or a parent’s co-signature.Credit card companies are betting on the student’s future earnings potential.
100 Why You Should Use Credit Cards? Creates OpportunitiesImposes self-disciplineProper use helps establish a good credit ratingBeneficial for a future house or car purchaseFree line of credit if you pay your balance monthlyConvenience and SecurityAccepted across United States and abroadOften required to hold a reservationEmergency buying powerAdditional form of identificationRecord of purchases on bill statementDiscussion Topic:What other reasons can the students come up with for having a credit card, or ask them for their ideas before presenting the ones on the slide.
104 Annual FeesAn issuer may charge an annual fee for the privilege of using their card.There are many without such a feeIf your current card has one and you are a good customer, your issuer will likely waive it if you ask them
105 Interest RatesEvery credit card has at least 4 different interest rates depending on the types of transactionsPurchaseBalance transferCash advanceDefault
109 APR Annual Percentage Rate APRs can be fixed or variable The monthly interest on unpaid credit card balancesThe higher the APR, the more money is paid in interestLook for a card with a low APR!APRs can be fixed or variableVariable APR is based on a published index, like the “prime rate” plus a few percentage pointsCan change without written noticeFixed APRs can be changed with 15 days written notice
111 Grace Period Grace period No grace Period If the balance is not paid off each month, interest is applied to new purchases when they are madeIf the balance is paid off monthly, a grace period is allowed before interest is charged = Free CreditNo grace PeriodRegardless of the previous month’s balance, interest is applied to new purchases as they are made
113 Balance Calculation Methods “Average Daily Balance”You pay interest on the average balance owed during the billing cycleCreditor figures the balance in your account on each day and then adds together these amounts and divides by the number of days in the billing cycleSee the handout and answer the questions
114 ExampleAssume that you received this credit card with a credit limit of $2,000.Assume that you bought a LG 32” LCD HDTV/DVD Combo at Best Buy as shown below for $1,049 (Ignore sales tax and $49 HDMI cables).How long will it take to pay off at the minimum payment of $35 per month?Time = MonthsTime = 3.49 YearsWhat was the total amount paid?Total = $1,465.36TV = $1,049.00Interest = $ (39.69%)Any late payments would add $ in interest.1 Year Warranty114
115 Balance Calculation Methods “Adjusted Balance”You pay interest on the opening balance after subtracting the payment or returns“Previous Balance Method”Interest is only paid on the previous (opening) balance, regardless of payments made during the month.“Two-cycle Average Daily Balance”The interest is paid on the current balance as well as the previous month’s balance, this leads to double finance chargesA zero-balance must be held for two months in order to avoid chargesThis method should be avoided by consumers!
116 Cash AdvancesCash advances are cash loans one can get with a credit cardExpensive—only use in a true emergencyUsually requires an up front fee plus 3% of the advance or a minimum feeHigher APRNo grace periodDon’t always get to pay it off entirely if you have revolving credit
117 Convenience ChecksPre-printed checks linked to a credit card account that are mailed to one’s homeAct like cash advancesShred them before you put them in the trash!
118 Default Rates A default rate has a high APR Most issuers apply a default rate if one:Makes a late paymentMisses a paymentExceeds a credit limitBounces a payment checkSome default rates escalate according to the number of payments missed
119 Balance TransfersIssuers try to get new customers by offering low introductory rates to individuals who transfer their balance from another card to theirsFind out..Is there a fee?How long does the “teaser rate” apply?What is the APR that will replace the teaser rate?Does the teaser rate apply to both the transferred balance and new purchases?Choose a balance transfer offer only when there is no fee, has a long-term APR that applies to both the transferred balance and new purchases
120 Late FeesIf a payment is received after the due date, a late fee will be added to your billFees often escalate depending on the amount of the outstanding balanceTypically range from $15 to $39Negatively affects your credit rating b/c the late payment is reported to the three major credit reporting agenciesAfter one or two late payments
121 Over-Credit Limit Fees Issuers will allow an individual to spend over their credit limit but a fee will be assessed every month until the balance is brought below the credit limit$29 to $39 or a tiered fee depending on the balanceDefault APR may be applied and it might be reported to the credit agencies
122 Bounced Check FeesIf the check you write to pay off your credit card bounces, you will likely pay a fee of $29 to $39Default APR maybe applied and credit reporting agencies advised
123 Currency Conversion Fees 3% to convert currency on foreign purchases
124 Pay by Phone FeeSome issuers charge $10-$15 to make a payment by phone
125 How to Wisely Choose and Responsibly Use a Credit Card
126 Knowing is Half the Battle! Understanding how credit cards work will help you use them effectively. Credit cards can either beShort-term high interest loan (“Revolvers”), orShort-term interest-free loans (Convenience Users)“Revolvers”Keep a balance on their account and pay interest on all their purchasesLow APR is most importantConvenience UsersPay balances off in full each monthLong grace period is most importantMost cost effective
127 Pay More than the MMP!Assuming discontinued use of the card, a MMP based on 1% of the outstanding balance plus accrued monthly interest or payment of $20 whichever is greater, and timely paymentsHow long and what is the payoff for the following?$1000 debt, 18% APR, MMP$1000 debt, 18% APR, MMP + $10
128 Look for… A low APR No annual fee A long grace period (at least 20 days)Average Daily Balance MethodLow Penalty Fees
129 Using a Credit Card Properly Limit yourself to only one card until you know you can trust your manage it properlyStudent loans should be used for tuition, not credit cardsWants do not equal needs“Can I do without this purchase?”Credit cards do not change our socioeconomic statusBuy only what you can afford to repay each monthAlways pay off the entire balance….on timeIf you cannot pay the entire balance in a month, stop using the card until it is paid offMake sure you pay more than the minimum balancePay more than the MMP asap, don’t wait for the due dateManage a credit card account like a checking accountAvoid cash advances, convenience checks, and going over your limitDon’t skip payments…even if your bank says you canKeep a low credit limit…even if your bank says you can have moreRecord all expenses and keep receiptsCheck credit statement for errorsNotify issuers of change of address
130 Handling Disputes Two Types of Disputes: In the case of any unauthorized use:Liability Limited to $50Notify Bank ASAP – Phone and Written NoticeIn the case of a billing error…Notify Bank Within 60 DaysInclude Form on Back of Bank Statement and a LetterLetter and Form must includeName and Account NumberDollar Amount InvolvedReason for DisputeAny Other Clarifying Information
131 Credit Card Safety Tips Secure Your CardsSign card with Signature and “Please See ID”Do not leave cards lying aroundDo not give out account number unless making purchase with a reputable sourceReport Lost or Stolen Cards PromptlyKeep a list of account numbers and bank phone numbers in a safe place separate from cardsClose unused accounts by phone, then in writing, and then cut up the cardNote: Closing a card may hurt your credit score
132 Always a SolutionIf you have an overwhelming debt, it is better to deal with the problem rather than deny itDo not skip a paymentPay down higher APRs firstStop using the cardCall the issuer and tell them the problemIf they offer a more manageable payment plan, get it in writingIncrease your monthly income and reduce monthly expensesContact the National Foundation for Credit Counseling or to enter a debt consolidation program
134 Credit Reports Can be obtained for free Financial report card reflecting the extent of an individual’s credit and payment historyNegative information can stay on for 7 years while bankruptcies remain for 10 yearsLenders buy the reports to determine whether they will grant an individual credit and at what rateThree U.S. Credit Reporting AgenciesEquifax, Experian, and Trans-UnionCan be obtained for freeOnce per year and after denial of creditor
135 Credit Scores Numeric value obtained from a credit report Defines you by a single numberQuick Screening Mechanism for LendersLow Credit Score = No Credit or High Interest RatesMany employers check credit reportsMost common scoring system is Fair Isaac Corporation (FICO)Scores range fromNational Average = 678Payment history: 35%Total amount owed: 30%Length of credit history: 15%New credit: 10%Types of credit: 10%
140 Irresponsible Credit Card Usage Leads to… Denial of creditHigh APR b/c of the higher riskUniversal Default ClauseAllows an issuer to increase an individual’s APR if they fail to make a payment to another lenderDifficulty renting an apartmentDenied employmentDenied financial aidHigher automobile insurance premiumsHigh security deposits, e.g., Cell phone, gas, electronic
141 Make Good Choices!Students should clearly understand that while credit cards are a great financial tool, they are also a big responsibility, which require maturity, consistency and sound financial management skills so that they can enjoy the benefits of credit while avoiding the pitfalls.
143 Identity TheftOccurs when an impostor steals personal information such as a social security card, driver’s license, bank account or credit card number in order to impersonate someone elseThe information is then used to obtain credit, merchandize, and services using the victim’s identity
144 Signs A credit card or statement for an account that was not requested A missing statementUnauthorized change of addressUnauthorized changes on the credit card statementDenied credit for no apparent reasonDebt collectors call and write regarding purchases you did not initiate
145 Avoiding Identity Theft and Other Financial Trouble Guard your Social Security Number and other personal informationShred old documents and credit card offersDo not carry unnecessary documents/cardsDo not mail payments from homeMonitor your Credit ReportRemove your name from the marketing lists of the three major credit reporting agenciesSubscribe to a credit monitoring serviceAvoid business with or loans to friends / familyNever cosign a loan for anyone
146 Avoiding Identity Theft and Other Financial Trouble Become familiar with the billing cycles and when statements should arrive in the mailDon’t leave mail in the mailbox and use the Post Office for outgoing mailUse creative passwords—avoid the last 4 digits of your SSN or your mom’s maiden nameOnly make on-line purchases if the website is secure and protected by an encryption systemPlace virus protection software on your computer
147 If you are a victim of identity theft Contact the three major credit-reporting agencies and ask them to place a “fraud alert” on your fileOrder a free credit report from each of the agencies and review the reportsContact the fraud departments for creditorsClose the accounts and follow up in writingFile a police report and ask for a hard copyFederal Trade Commission maintains an identity theft clearinghouse that provides information for victims877-IDTHEFT or
156 Are You Ready to Drive? Ask yourself… Do I have a license? Is my car registered?Am I covered by auto insurance?
157 Why do I need auto insurance It’s the law!There are risks you can’t afford to takeWhat happens if…You’re involved in a crash that causes property damage?You hurt yourself or someone else?Your car is damaged when you’re not driving it? (by weather, vandalism or a hit-and-run)Your car is stolen?Your car breaks down and needs to be towed?
158 What is the likelihood you will be in an automobile accident? Automobile Insurance: The BasicsWhat is the likelihood you will be in an automobile accident?There are more than 12 million motor vehicle accidents annuallyThe typical driver will have a near automobile accident one or two times per monthThe typical driver will be in a collision of some type on average of every 6 yearsCrashes are the leading cause of death for ages 3-33
159 Automobile Insurance: The Basics Even a minor accident can result in thousands of dollars in damagesDamage to your carDamage to other cars involvedMedical BillsLost wagesPain and sufferingProsecutionLegal FeesFines
160 Automobile Insurance: The Basics If you are in an accident how do you pay for it?Bank Account?Parents?Rich Uncle?Best Friend?Insurance?
161 Automobile Insurance: The Basics What is Automobile Insurance?An auto insurance policy is a contract between you and an insurance company.You pay a premium, and in exchange, the insurance company promises to pay for specific car-related financial losses during the term of the policy.
162 Are you a risk to the insurance company? Automobile Insurance: The BasicsAre you a risk to the insurance company?To keep premiums as low as possible to the insured, a screening process is completed before an insurance contract is completed
163 What is the insurance company looking for? Automobile Insurance: The BasicsWhat is the insurance company looking for?Some vehicles, and some drivers, carry more risk than othersLow risks will be charged a lower premiumHigh risks will be charged a higher premium
164 What determines your premium? Automobile Insurance: The BasicsWhat determines your premium?AgeGenderVehicle TypeDriving RecordGeographic Location
165 Types of Automobile Insurance Coverages Three QuestionsWhat are third-party coverages?What are first-party injury coverages?3. What are first-party property coverages?
166 Types of Automobile Insurance Coverages What are third-party coverages?Bodily Injury LiabilityPeople costs (medical expenses, lost wages, pain and suffering)Property Damage LiabilityThings (other cars and property)Both are types of coverage required by law in most states
167 Types of Automobile Insurance Coverages What are first-party injury coverages?Medical Payments (MedPay)Covers medical and funeral expenses resulting from accidents with your vehiclePersonal Injury Protection (PIP)Extends MedPay to include lost wagesUninsured MotoristsCovers expenses if the at fault driver does not have coverageUnderinsured MotoristsCovers expenses when the at fault driver does not have enough coverage
168 Types of Automobile Insurance Coverages What are first-party property coverages?ComprehensiveCompensates you for physical damage to your car, including theft, vandalism, natural disastersCollisionPays for damage to your vehicle in case of collisionBoth Coverages require you to pay a deductible
169 What is a Deductible?This is the amount per accident that you pay out of pocket before insurance starts to payCommon deductible amounts are usually $250, $500, and $1000The higher the deductible amount you pay the lower your premiums are
170 Automobile Insurance: The Policy A common mistake when shopping for automobile insurance is looking only at the price between two policiesPolicies differ from policy to policy and company to company
171 Automobile Insurance: The Policy Five parts to an insurance policyDeclarationsCoveragesExclusionsConditionsDefinitions
172 Coverage Parts/Insuring Agreement Outlines the coverage options and coverage limits purchasedIn short, what your insurance company promises to provide in return for your payment, based on the coverages and coverage limits selected
173 Exclusions Details what is not covered by the policy Examples: Intentional damage to your own vehicleDamages caused while vehicle is used as a delivery vehicle
174 ConditionsDefine the insured’s and the insurer’s duties that, under the terms of the policy, must be fulfilledIncludes:premium payment obligationssteps to filing a claimprocedures for resolving a claim
175 Explains specific terms used throughout the policy DefinitionsExplains specific terms used throughout the policyExamples:“You” or “Your” refers to the “Named Insured”“We” or “Us” or “Our” refers to the insurance company“Family Member” refers to a resident of your household
176 Automobile Insurance: Accidents Chances are even if you are never in an accident you will witness oneWhat should you do if you are involved in an accident?
177 Automobile Insurance: Accidents Chances are even if you are never in an accident you will witness oneWhat should you do if you are involved in an accident?
178 Steps to take after an accident Help anyone who is injuredYou have an ethical and legal responsibilityNotify the policePrevent further accidentsProtect the accident sceneRecord informationExchange information with the parties involvedTake note of time, location, weather, and road conditions
179 Filing a ClaimIt is important that the accident is reported promptly to the insurance agent or companyThe policy will guide the insured on the correct steps to take to report the claimThe company will guide the insured through the process
180 Filing a Claim When you are liable for an accident The insurance company covers the loss up to the policy limitsYour insurer represents you if you are suedYour insurer has the right to settle any legal action without your permissionYour premium may riseInsurer has the right to cancel your policyIf the losses exceed the policy provisions, the insured is responsible to cover the excess
181 What can you do to reduce risk and lower premiums? Automobile Insurance: The BasicsWhat can you do to reduce risk and lower premiums?Use your seatbeltObserve Speed LimitsKnow your own limitsConcentrate on drivingBe PatientDon’t Drink and DriveGet good grades
182 Automobile Insurance: Accidents Chances are even if you are never in an accident you will witness oneWhat should you do if you are involved in an accident?
183 Steps to take after an accident Help anyone who is injuredYou have an ethical and legal responsibilityNotify the policePrevent further accidentsProtect the accident sceneRecord informationExchange information with the parties involvedTake note of time, location, weather, and road conditions
184 Filing a ClaimIt is important that the accident is reported promptly to the insurance agent or companyThe policy will guide the insured on the correct steps to take to report the claimThe company will guide the insured through the process
185 Filing a Claim When you are liable for an accident The insurance company covers the loss up to the policy limitsYour insurer represents you if you are suedYour insurer has the right to settle any legal action without your permissionYour premium may riseInsurer has the right to cancel your policyIf the losses exceed the policy provisions, the insured is responsible to cover the excess
190 Lesson 12 Visual 3 Charlayne Becomes a Millionaire-- Accidentally
191 Lesson 12 Visual 4 The Magic of Compounding When you save, you earn interest.When you take the interest out and spend it, it stops growing.But if you leave the interest in your account so it can grow, you start to earn interest on the interest you earned previously.Interest on interest is money you didn’t work for. It is money your money makes for you!Over time, interest on interest can increase your total savings greatly.
194 Lesson 12 Visual 7 Buy and Hold In order to leave money in savings or investments, you have to do these things:Spend less than you receive. How?Earn more by improving your formal education or job skills.Spend less by using a budget to keep track of where your money is going.Become connected to financial institutions.Open and maintain accounts at mainstream financial institutions--banks, credit unions and brokerages.
195 Lesson 12 Visual 7(continued) Buy and Hold Manage your credit responsibility. How?Limit the number of credit cards you have.Limit your purchases to what you can pay off each month.Apply for loans when you are confident that your current income (in the case of college loans, future income) will allow you to repay the loan.
196 Lesson 12 Visual 8 The Stock-Market Roller Coaster If you buy and sell on the ups and downs, you may lose money.But if you buy and hold on for the long term, the ups are greater than the downs.
197 Lesson 12 Visual 9 Don’t Put All Your Eggs in One Basket If you put all your money in one stock, a disaster befalling that stock will hit you hard--as if you had put all your eggs in onebasket and then dropped the basket. With your money spread out across variety of assets (stocks, bonds and cash, for example), you’re not hurt as badly when any one asset does poorly.
198 Lesson 12 Visual 10 Forms of Saving and Investing: Some Benefits and Costs Savings accounts: provide a small but steady return.Certificates of deposit: very safe, but instant access carries a penalty.Bonds: lending money to a corporation or government, with a promise of higher returns than those offered by bank savings accounts and CDs.Stocks: part ownership in a company, offering higher risks and, potentially, higher returns than some other investments.Real estate: the risks and benefits of being a landlord.
199 Lesson 12 Visual 11 Investment Situations You have $5,000 to invest. No other information is available.You have $4,000 that you’ll need six months from now.You inherited $10,000 from your great-aunt; she has suggested that you save it for use in your old age.You are just starting a career and can save $50 per month for retirement.A new baby arrives, and Mom and Dad plan to save $100 a month for the child’s college education.
200 Lesson 12 Visual 12 The Pyramid of Risks and Reward Highest Risk--Highest Potential Return or LossLowest Risk--Lowest Potential Return or Loss
201 Lesson 12 Visual 13 Mutual Funds A mutual fund pools investors’ money.The fund puts its investors’ money into the markets on their behalf.In effect, investors own small amounts of many different assets.Mutual funds enable investors to avoid the risk that comes from owning any one asset. In other words, mutual funds make it easy to diversify.
203 Personal Finance James B. Wilcox RESOURCES PROVIDED BY: THE UNIVERSITY OF SOUTHERN MISSISSIPPICENTER FOR ECONOMIC AND ENTREPRENEURSHIP EDUCATION,MISSISSIPPI STATE UNIVERSITY, VIRTUAL ECONOMICS,NATIONAL COUNCIL ON ECONOMIC EDUCATION, THE MOODY’S FOUNDATION