How to keep them healthy and maintain them for life Your Money Barometers How to keep them healthy and maintain them for life © Crystal Clear Profits, Inc. 2018 All Rights Reserved

About Me Nancy Lee Ma, CEO and Founder of Crystal Clear Profits, Inc. 30 years as a CPA. Mother of 3 children, involved with schools before my first child was born. Sole owner with a traditional accounting practice as well as teaching entrepreneurs how to manage their finances, and teaching students financial literacy. © Crystal Clear Profits, Inc. 2018 All Rights Reserved

© Crystal Clear Profits, Inc. 2018 All Rights Reserved What Is Credit/Debt? Credit is a loan where you promised to pay back the money you borrowed plus interest charged. Most familiar type of credit is a credit card. Credit cards work a little differently than a regular loan. The most common example of using credit is: Go to the store and swipe your credit card and then sign your name for the purchase. 28 days later or even sooner, depending upon when you charge your purchase, you will receive a statement that says you charged $xxx.xx to purchase an item. If you don’t pay the money back within the time allotted such as the 28 day period, you will need to pay interest on the amount that you borrowed. Credit refers to borrowing. Debt refers to how much you owe. © Crystal Clear Profits, Inc. 2018 All Rights Reserved

© Crystal Clear Profits, Inc. 2018 All Rights Reserved How Does It Work? In order to get credit, you need to build up your credit by building up a credit history and a credit score. You must apply for a loan or fill out a credit card application. The amount of credit and the interest rate the companies charge depends upon your credit score and history. Student credit cards help build up credit. Most major banks offer student credit cards and will usually be $500. Start establishing your credit by making sure that whatever you charge, you pay within three weeks. A credit card statement usually has a billing cycle of 28 days. For example if you have a statement and it has a cutoff date of February 10 and you charged my senior class photos on January 24, that charge would show up on the February 10th statement. You would then have approximately 28 days to pay off the balance. If you don’t pay the balance by the due date, then you will be charged interest on the balance. In some special cases, there are promotions where there is no interest charged for 12 months. © Crystal Clear Profits, Inc. 2018 All Rights Reserved

How Your Budget Affects Your Credit? Credit it used by banks and credit card companies to determine how trustworthy and responsible you are. You must have credit in order rent an apartment, buy a car, or open an account with some businesses. Your credit score will determine how much money banks will loan you or how much you can have for a credit limit. If you have excellent credit, your interest rate is the lowest that banks and credit card companies charge their best customers. If you have good credit, your interest rate is still good but will be slightly higher. If you have average credit, your interest rates are higher. If you have bad credit, you will have difficulty getting banks and credit card companies to loan you any money. © Crystal Clear Profits, Inc. 2018 All Rights Reserved

How Is The Credit Determined? FICO –a standard scoring model for financial institutions to use and was based on your credit history. Factors – payment history, amount owed, length of credit history, types of credit, new credit (Your ability to repay the credit card balance each month will keep your score high) Scores Excellent 750 and above Good 700 to 749 Fair 650 to 699 Poor 550 to 649 (below 640 is considered sub-prime) where the interest rates are higher Bad 550 and below (most likely will not be able to borrow) © Crystal Clear Profits, Inc. 2018 All Rights Reserved

Why Budgeting is Important Spending plan = budget = financial roadmap to achieving goals. Allows you to see how much income you receive so you don’t spend more than you earn. Four elements to a spending plan: Money coming in (income) Money going out (expenses) Income minus expenses Adjusting so income exceeds expenses Spending plans change throughout life. © Crystal Clear Profits, Inc. 2018 All Rights Reserved

Building Your Budget with Credit Total Income Total Expenses/Taxes Net Income Balance for Spending and Future Saving Wages 150.00 -35.00 115.00 Baby Sitting 50.00 0.00 165.00 Recycling 10.00 175.00 Side Business Income 100.00 -10.00 90.00 265.00 Sub-Total 310.00 -45.00 Food/Dining Out -30.00 235.00 Movies -24.00 211.00 Gasoline -75.00 136.00 Cell Phone -60.00 32.00 Clothing -100.00 -68.00 *using a credit card to cover the shortage © Crystal Clear Profits, Inc. 2018 All Rights Reserved

Building Your Budget without Credit Total Income Total Expenses/Taxes Net Income Balance for Spending and Future Saving Wages 150.00 -35.00 115.00 Baby Sitting 50.00 0.00 165.00 Recycling 10.00 175.00 Side Business Income 100.00 -10.00 90.00 265.00 Sub-Total 310.00 -45.00 Food/Dining Out -50.00 215.00 Movies -18.00 197.00 Gasoline -75.00 122.00 Cell Phone -60.00 62.00 Clothing 12.00 © Crystal Clear Profits, Inc. 2018 All Rights Reserved

Sample Credit Card Statement A- Account Number B – Account Summary – Previous Balance + current month charges – payments made = New Balance C- Credit Line D – Remaining Credit Line Available E – New Balance F- Minimum Payment G- Due Date of Payment H – FICO Score I- Rewards J-Payment Coupon © Crystal Clear Profits, Inc. 2018 All Rights Reserved

How Does It Work? K – Transactions Payments and Credits Merchandise Purchased Any Fees Interest Charged L – Interest Calculation Purchases 19.99% Cash Advances 23.99% © Crystal Clear Profits, Inc. 2018 All Rights Reserved

© Crystal Clear Profits, Inc. 2018 All Rights Reserved Good Credit Score range Excellent 750 and above Good 700 to 749 You pay your bill every month by the due date. Very few if any late payments You have your credit for more than a few years. You don’t use all of your available credit. For example, if you have a credit limit of $5,000 and you keep your credit at $1,500 or 30% then © Crystal Clear Profits, Inc. 2018 All Rights Reserved

© Crystal Clear Profits, Inc. 2018 All Rights Reserved Bad Credit Score range Fair 650 to 699 Poor 550 to 649 (below 640 is considered sub-prime) where the interest rates are higher Difficulty in getting a loan to purchase a car, and renting an apartment How good credit became bad- Using credit to purchase items that won’t provide you with future income, or go up in value and spending for instant gratification. Examples: clothing, going out to eat, going to the movies, purchasing music, playing video games, etc. Bad credit serves an instant gratification and something that you didn’t plan to spend and is generally for smaller items. And, most likely, you haven’t planned on how to repay the loan or credit card. © Crystal Clear Profits, Inc. 2018 All Rights Reserved

© Crystal Clear Profits, Inc. 2018 All Rights Reserved

Best Practices for Managing My Credit Develop habits of saving up first before you purchase an item so that you can immediately pay off the credit card without having to pay the interest on the credit card balance. Watch the due dates of the credit card balance. A late payment will make your credit score go down. Check your FICO score at least monthly. Maybe more often if you are trying to establish credit to purchase a large item in the future. Review your statements monthly for the charges. There is an increase in identity theft and credit card theft. Protect your credit card number and do not let other people use your credit card. Do not charge more than your means of repayment. The outstanding balances on your credit card will have you paying interest on the amount that you borrowed and could mean reducing your credit score. © Crystal Clear Profits, Inc. 2018 All Rights Reserved

© Crystal Clear Profits, Inc. 2018 All Rights Reserved Summary and Review Key takeaways Maintain a good to excellent credit score so that when the time comes for you to need to borrow money to purchase a home or car, you have an very good credit score. Never charge more than you have the means to repay. Think carefully about charging purchases for instant gratification. Establish a practice of only charging on the credit card when absolutely necessary or when cash cannot be used. Do’s Apply for a student credit card with no more than $500 with the approval of your parents. Payoff your entire credit card balance every month on time. Don’ts Charge more than you can afford to repay unless it’s an major emergency and you have a plan to repay with 3-6 months. Open multiple credit cards just because the credit card companies send you a credit card invitation. Research to find the best one by looking at the interest rate and rewards offered. © Crystal Clear Profits, Inc. 2018 All Rights Reserved