Personal Finance Unit Unit 3

Questions & Topics What is Personal Finance? Why is Personal Finance important? When is an appropriate time to start planning for your future? Can you manage money? What do you want your life to look like when you are retired?

Questions & Topics To be covered: Credit, Loans, Check Books, Checking Accounts, Savings Account, Investments, Insurance, Buying a House, Buying a Car, Mortgages, Credit Score, Credit Cards, …..

Credit What do you know about CREDIT? What do you think your credit score is? What is a Credit Score? What is considered Good/Bad/Excellent Credit Scores? How long does it take to fix Credit mistakes? Why is Credit Dangerous?

How are Credit Cards Companies making MONEY? $$$ By loaning you money, they charge you money. It is a Contract (Terms) ex: A.P.R. % (interest rate). Late Fees. Changing of the interest rate. (Small Print) They are HOPING you pay late. They are HOPING you pay the minimum payment.

What is a “Minimum Payment” on a card? EX: Borrow $5,000 at 18%. Make the min. payment of 125. It will take 62 months to repay. Total interest paid = $2,700 + original $5,000 come to a grand total of $7,700.

What is your Credit Score used for? Checking/Savings Account Credit Cards Student Loans Car Purchase House Purchase Rental Houses Job Interviews Personal/Business Loans Providing Character in Court

Loans Many types of Loans: Personal Loan, Business Loan, Student Loan, House Loan (Mortgage), Car Loan, Secured Loan/ Unsecured Loan. How does a bank make money? Loaning money and charging interest. (Mortgages and Business Loans. Also on Bank Fees)

Credit Cards/Personal Loans Similar. Advancement on money with a promise to repay on a schedule. In return you will repay the loan with INTEREST. Interest= what it cost to borrow the money Low Credit Score=HIGH interest. Excellent Credit Score= LOW interest.

Credit Dangers 18 to sign up (Without your parents) NOBODY reads the Small PRINT Start you out with a small limit. $500 They call you and ask, “Would you like us to raise your limit?” $1000+ (Hooked) Suggest making a Minimum Payment. Cash Advance.- Do NOT do this. Extreme Emergency only. Very High Interest!! Cards can be used in ATM. “Introductory Interest of 0%” / Debt Consolidation Penalty/Fees go against your Credit Score

Personal Loan Great way to build credit!!!! Get a checking account. Apply for a personal loan. (general, used for anything) (Car fix, Remodel, Paying an old debt off,....) usually about 1,000-2500 $$ Make MONTHLY payments to the bank ON TIME and According to the terms. They will send you a booklet of payments.

Dangerous places to stay away from. Pay Day Lending Title Max Rent -To- Own

How they work- Title Pawn Car must be owned (title) by individual They LOAN you a SMALL % amount based on the BOOK VALUE of the car. Sign the title as collateral and they hold it. Repay + Interest. (Very High Interest) If you default, they repo the car and auction the car. They keep what they make on the car plus what you have already paid them.

How they work- Pay day Lenders You NEED cash. You show proof of employment. (Check Stub) They lend you a SMALL amount based on your income. You leave them with a POST-DATED check for the amount of the loan AND Fee (Interest). High Interest! If you can’t repay, you pay a cash fee, plus something on the original loan and leave another check. It is a vicious cycle.

How they Work- Rent to Own Top of the line products. Name Brand. Preying on the “Needs/Wants” of under privileged. They buy it new at whole sale and stock it in their store and you may “Purchase” it and pay monthly payments. They add the interest. If you don’t pay, they repo it and clean it up and put it back out onto the store room floor……… and you don’t get your money back. After the term is up and you now “OWN” it, you have paid almost 2x - 4x the value of the item. They offer low payments because it is extended out many months. There is no credit check. They deliver for free. They offer “Gifts” if you purchase or spend a certain amount. EX: Buy these items and get a free 50$ gift card to ______.

Sears offers this on a payment plan too. (W.A.C.) High Efficiency Front Load Steam Washer & Dryer SKU: MF1 $139.99/mo | 24-mo lease Everyday low price: $2,100.98 Total Monthly Payment: $139.99 + $13.99 (for ASP) = $153.98/month (plus tax) • Total Cost of Ownership: $153.98 x 24 Months = $3,695.52 (plus tax) • Cost of Lease Services: $1,594.54 *How much could you buy this for in Sears, Lowes, Home Depot? Dryer is 900 and Washer is 809. (Sears) Sears offers this on a payment plan too. (W.A.C.)

Rental vs. Mortgage What is Rent? What is a Mortgage? Paying to stay in a house that you will never have rights and never own= Rent. Paying to live in a house and each month gain % ownership and have rights= Mortgage. Which is Better? Which is Smarter? When should you Rent? When should you buy?

Rent- Pros & Cons PROS: Not tied down to an area, Can save money, No repair fees, Easy to move in out. CONS: Throw away money, Safety?, No equity built up, Appearance may go down.

Mortgage- Pros & Cons PROS- Building Equity every month, Ownership, Likely to make money, Pride of ownership, Helps maintain credit score. CONS- Expensive/Responsible for repairs, Tied down to the area, Foreclosure (Ruin Credit), Possible to lose money with sale.

Rental vs. Mortgage *Rental is good way to save money* *Rental is throwing away money* Rent- New to area, New Job, Saving money, Won’t be in the area long. Buy- Settled, Family, When you are ready.

Insurance Insurance is a MULTIBILLION $ business. What is insurance? What types of insurance are there? Do you need insurance? Do you HAVE to have insurance? Should you get insurance? What is acceptable insurance? Can I trust my agent? Insurance is a MULTIBILLION $ business.

Types of insurance: Health Home Owners Rental Car Boat Life Specialty types

Pick Your Agent * Pick an agent you TRUST * You should KNOW your Agent * Your agent works to keep you protected. * Your should be HONEST and Hard working and returns calls