1. Financial Fitness Senior Seminar - 2009

2. Agenda Student Loans Credit Cards Credit Report/Score Budgeting Insurance Saving and Investing

3. Student Loan Debt Average debt load: in 2007 was $19,464 in 2009 was $23,186 Try to utilize government loans first, such as: ◦Stafford loans, PLUS loans and Perkins Loans ◦10-year repayment program begins 6 months after graduation ◦Can defer (postpone) payments if you are facing financial hardship AVOID private student loans ◦Interest rates can be upwards of 18% with no deferment allowed.

4. Student Loan Debt (cont.) The average debt load is about $23,000 What would be the monthly payment of this loan? ◦Student Loan Rate CalculatorStudent Loan Rate Calculator ◦Monthly payment of $265.00 for 10 years What if you have to take $60,000 in loans to finance your college education? ◦Without expanding your loan term your monthly payment would be $690.00

5. Credit Cards How does a credit card work? ◦When you use a credit card, you're paying for a good or service on credit. This means that you are able to receive the product without paying any money immediately, but you agree to pay back the credit card company at a later time. What will it cost me? ◦The credit card issuer charges interest for this convenience. Interest (APR) is expressed as a %. ◦If you are late on payments, the interest rate will be increased and you will owe more money. ◦Credit card companies only require that you pay a minimum payment each month. Do your best to pay off all of your balances each month. The interest charges for carrying a balance add up quickly. Let’s take a look!

6. Credit Cards (cont.) Suppose you have a $5,000 balance on a credit card. ◦The minimum monthly payment is $125.00. ◦You are being charged interest of 18%. (Also know as APR) ◦By only making the minimum monthly payments, it will take you 23 years to pay off this debt! You will also pay $7,000 in interest. ◦Your $5,000 balance just became $12,000 and took you 23 years to pay off. ◦Use bankrate.com to see different financial calculatorsbankrate.com

7. Credit Cards (cont.) Tips to avoid credit card problems: ◦In college, try to get a credit card with a $500 credit line. You will most likely need a cosigner now. ◦Make small purchases that you know you will pay off in full each month. This will avoid interest accumulation and help develop a good credit history. ◦Pay off your balances in full each month. If not possible to pay in full, at least pay more than the minimum payment.

8. Credit Report/Score What is a credit report? ◦Contains all of your past and current credit history ◦Shows any late payments or defaults ◦Potential creditors will use this information to determine if they will extend you a loan ◦Late payments remain on your report for 7 years! ◦Bankruptcy remains for 10 years Only use annualcreditreport.com to view your free credit reportannualcreditreport.com ◦You are legally allowed 1 free report from each credit bureau every 12 months. ◦Avoid using the credit sites you may see in commercials. Freecreditreport.com is only free if you pay for their monthly monitoring service.

9. Credit Score What is a credit score? ◦A 3-digit number representing the likelihood that a person will pay back a debt. Scores range from 300 to 850, the higher the better. A good score is above 700. ◦Your credit score is calculated from the amount of debt and your repayment history. ◦Who will look at your credit score?  Potential landlord  Potential employers  Other creditors

10. Credit Scores (cont.) Benefits of having a good credit score: ◦Ease of obtaining credit ◦Better scores can result in lower interest rates on loans Consequences of having a poor credit score: ◦Inability to obtain loans ◦Higher interest rates ◦For example, lets look at a typical car loan:  With good credit: $20,000 purchase price 5% APR for 5 years Monthly payment of $378  With poor credit: $20,000 purchase price 15% APR for 5 years Monthly payment of $475

11. Credit Scores (cont.) Important things to remember: ◦Pay your bills on time! Any late payment will affect your credit score for 7 years. ◦Don’t go over your credit limit! Higher interest rates will result and fees will be assessed, costing you more money. ◦Avoid cash advances. These usually result in higher interest rates than purchases.

12. Budgeting What is a budget? ◦A summary of probable expenses and income for a period of time Why should you budget? ◦It is important to be organized in your spending. You need to know that you will have enough money to survive the month. Lets look at a typical budget assuming a starting salary of $40,000 per year

13. A Typical Budget – based on $40k yearly salary

14. Budgeting Tips Shop with a calculator. Start with $100 on the screen and subtract each purchase. This will help keep control of your purchases. Only shop with cash. Credit cards hide the reality that you are spending money. Re-evaluate your budget every couple of months. Your needs may change. Don’t be caught by surprise with unexpected expenses. Do your best to foresee everything.

15. Insurance Health Insurance ◦Typically, if your parents have health coverage, you will be covered while being a full-time student. ◦If your parents do not have health insurance, colleges offer lower cost plans. ◦Once you graduate, you are on your own. Finding a job that offers health insurance is very important. ◦It only takes 1 trip to the emergency room to face medical bills in the thousands of dollars. ◦If you had to purchase your own insurance plan:  Individual: $200 - $500 per month  Family: $1500 - $2000 per month

16. Insurance (cont.) Renter’s Insurance ◦This insurance will cover personal property that you own while you are living in a building that someone else owns (dorm, apartment, etc.). ◦Can cover everything you bring to college, including the contents in your car. ◦Create an inventory including all the personal property that you have. Keep this inventory, along with pictures and receipts of the items in a separate, safe location. (i.e. your parent’s house)

17. Saving and Investing Your 1 st bill to pay each month should be to yourself to save. 10% of your income is a good place to start. Start establishing an emergency fund ◦It is smart to have 6-12 months of living expenses saved in case you find yourself unemployed. Pay off any credit card debt. Start an online savings account. These will pay you interest on your deposited funds. Establish a checking account at a bank near your college. This will help you avoid excessive ATM fees.

18. Saving and Investing (cont.) Investing tips: ◦Start early ◦Diversify your investments ◦Use index funds with low fees  It costs money to invest, finding low fees will allow your money to grow faster. ◦Avoid buying stocks in individual companies  This is very risky and can lead to losses. ◦Compound interest  You can actually gain interest on the interest you are accumulating.  Compound interest calculator Compound interest calculator

19. Any Questions?