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2 Welcome  4 th of 16 Sessions No cost to participate.  Financial Support: FINRA Foundation & United Way Worldwide  Solid Finances Webpage: 

Text Your Questions  Do you have a Question?  Do you want to comment? Type in the Q & A pod: 3

Send Your Questions Click this after typing question in Q & A Pod 4

Schedule  Investments November 30 Investment Risks December 7 Personal Risk Tolerance & Asset Allocation December 14 Mutual Funds December 21 Mortgages (Refinancing & Reverse) 5

Solid Finances Sponsors  MSU Extension  MSU Human Resources  This program is made possible by a grant from the FINRA Investor Education Foundation through a partnership with United Way Worldwide. 6

Saving Money by Paying Down Debt Joel Schumacher 7

Question A: Have you attended a previous Solid Finances Webinar? 1.Yes 2.No 8

What is your goal?  Be debt free earlier  Save on interest  Reduce your monthly payments  Improve your credit so you can make a large purchase (house, car, etc.)  Less creditors to deal with 9

Question B: What is your top goal? 1.Be Debt Free 2.Save on Interest 3.Reduce Monthly Payments 4.Improve your Credit Application 5.Other Goal 10

Understand your current debt  List each debt and terms Balance Interest rate Payment amount Is the interest tax deductible? Repayment method Automatic Payment, Check, etc. Non-Money issues 11

Example  Lisa is expecting a tax refund of $1,500 Wants to know to do with the $1,500 Income: $25,000 Income Tax Rates: 15% Federal 6.9% Montana 12

Example: Lisa 13

Question C: Lisa will get the best financial return by applying the $1,500 to which loan? 1.Student Loan 2.Car Loan 3.Credit Card 4.Mom & Dad Loan 14

Interest Saved If the $1,500 is applied to: Mom & Dad Loan:$3.75 next month Student Loan: $6.25 next month Car Loan: $6.25 next month Credit Card: $16.25 next month To get the Best Financial Return: Pay down the highest interest rate loan 15

Which Goals are Achieved by Paying down different loans? What will Lisa do with her extra $60 each month? 16

What if Lisa paid off her student loan? What will she do with the extra $95 each month? 17

Question D: What is a better financial option? 1. Student Loan (5%) 2. Car Loan (5%) 3. Student Loan & Car Loan are the same 18

Tax Deducible Interest  Car and Student loans: Both 5% Interest Interest paid on the student loan is tax deductible Car Loan Student Loan Interest Payment$100 $100 Fed. Tax Savings$ 0 $15 MT Tax Savings$ 0 $ 7 After Tax Cost$100 $ 78 19

Tax Example  Another way to look at this: 5% Interest Rate 22% Tax Rate (15% Federal & 6.9% State) % = 78%  5% x 78% = 3.9%  Effective rate is 3.9% 20

Mortgage Interest  Interest on a mortgage can be tax deductible  Only deductible if you itemize your deductions on your tax return If you itemize  use the method on the previous slide If you don’t itemize  assume your interest isn’t deductible  Not sure if you itemize: Check last year’s tax return 21

Question E: Is your mortgage interest deductible? 1. Yes 2. No 3. Not Sure 4. I don’t have a mortgage 22

Other Factors  Family/Personal Reasons Relations with Mom & Dad will improve when that loan is paid off  Ease of Access Some loans are paid “automatically” Other loans you write a check (or electronic payment) 23

Creating Your Debt Repayment Plan  Step 1: Create a list of your debts Amount, payments, interest rates, tax deducible, late fees  Step 2: List your goal (s) Lower monthly payments, lower interest, improve credit application  Step 3: Create Your Plan PowerPay.org 24

Do you have “extra” money?  Will you make “extra” payments each month? If so how much?  Will you make a one time extra payment? Tax Refund, Inheritance, other source  Are you about to pay off a loan? Those dollars could go toward another debt. 25

Debt Repayment Tool: PowerPay  What is it? Repayment Plan Equal payments for the entire repayment plan Tool to help track loan repayments Calculate Interest Savings Determine pay off date Create Amortization Schedules Compare payment strategies 26

How to use Power Pay   Run by Utah State University Extension  Free Service No sales pitches, etc. 27

User Login 28

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Creditor Information 30

31 Select Highest Interest First, Then Click Calculate 31

32 Scroll down to see Detailed Calendar $82.49

Drop Down Menus 33

34 Select Consolidate 34

Question F: Is the PowerPay system useful? 1. Yes 2. No 3. Maybe 35

Question G: Is the PowerPay website useful? 1. Yes 2. No 3. Maybe 36

Questions? 37