1. Personal Finance

2. A. Personal Financial Planning-is arranging to spend, save and invest money to live comfortably, have financial security, and achieve financial goals 1. Types of Financial Goals a. ________________ -goals that take a 1 year or less to achieve b. ________________ -goals that take 2-5 years to achieve c. ________________ - takes more than 5 years to achieve

3. Personal Finance B. 2 Main Influences on Personal Financial Planning 1. Life Situtaions- as you reach adulthood, you will experience many changes (eg. Go to college, start a career, get married, etc.) a. These new life situations will affect your financial planning, and your personal values will also affect your financial decisions

4. Personal Finance 2. The second influence on Personal Financial Planning are Economic Factors/Conditions a. ________________ supply and demand affect consumer prices; during inflationary times it takes more money to buy the same amount of goods/services b. ________________ affects the economy by helping to create and maintain jobs’; when consumers buy fewer goods/services, companies have to produce less and lay off workers, which leads to an increase in unemployment making it harder for you to find a job c. ________________ are the price that is paid for the use of another’s money, and directly affect your buying power Q: Give me an example of how global economic conditions affect our finances directly

5. PERSONAL FINANCE C. Educational and Career Goals 1. Education is defined as the level of formal knowledge and training one receives, post high school 2. Most students use student loans, grants, scholarships, and money from parents, to fund their post high school education a. There are many types of federal and private education loans offered to parents and students b. Federal student loans offer many advantages private student loans do not offer such as low fixed interest rates, income based repayment options, forgiveness and postponement options c. August, 2013 President Obama signed a law that will lower interest for the upcoming school year; the interest rates for undergraduate student loans is 3.86 percent and for graduate students it’s 5.41 percent

6. Group Assignments 1. Each person in the group choose a short-term, intermediate and long term financial goal you would like to achieve: Oral Presentation 2. Research the average costs of a private/public college education in the U.S. and choose one of the following countries and compare/contrasts the costs of a private/public education of that country with the U.S.: Oral Presentation Mexico Germany Japan U.K. Canada Australia 3. Each person in the group choose 3 careers that interest you. Go to Careerbuilders.com, and find out the educational requirements and the salaries for each career PowerPoint Presentation, Oral Presentation, Individual names on slides, 5 slides minimum…. 10 points

7. Personal Finance A. ________________ -is a commitment to work in a field you find interesting and fulfilling; a job is work you do mainly to earn money 1. your choice of career will affect the money you make, the people you meet, and how much spare time you have 2. Some people work just to maintain a standard of living (measures one’s quality of life based on the amounts and types of goods and services a person can buy) 3. Having a college education does not guarantee that you will meet your financial goals, however, acquiring more education increases your potential earning power (the amount of money you earn over time)

8. Personal Finance B. Employment Search Strategies (how to look for a job) 1. Online Employment Sites- Careerbuilders.com, Monster.com, etc. 2. Job Fairs- at a job fair, recruiters from local, national and international companies set up booths where you can discuss job opportunities and submit your resume 3. Employment Agencies-match job hunters with employers 4. ________________ - Talking with people with similar career interest

9. Personal Income A. The money you earn from your chosen occupation or other sources is called income 1. Types of Income a. ________________ - paid by the hour (eg. $20.00 per hour) b. ________________ - you receive a set amount of payments (eg. $70,000 per year)

10. Personal Finance 2. Gross Income-is the total amount of income from your wages/salaries before payroll deductions 3. ________________ is the total amount of one’s income after payroll deductions are deducted (Take Home Pay) 4. Discretionary Income-money you have left after paying your essentials, such as rent, utilities, clothing, transportation,etc. 5 ________________ are money subtracted from your gross income; the biggest deduction for most people are payroll taxes

11. Personal Finance A. Payroll Taxes- taxes that are deducted from your gross income 1. ________________ -fee paid to the federal government to help support federal government programs; this money is collected by the employer each pay period and paid to the IRS (Internal Revenue Service) 2. ________________ - fee paid to the state where you reside, to pay for state government programs; this money is collected by the employer each pay period and paid to the Treasury Department in the state you reside in

12. PAYROLL TAXES CONTINUED 3. ________________(FICA)- is a federal program that collects taxes from most employees to fund federal programs for the elderly, the blind and low income families/individuals 4. ________________– are taxes collected from most employees to fund medical benefits for individuals 65 years of age or over

13. Personal Finance A. Benefits- non-cash compensation paid to employees 1. Many occupations have employee benefits 2. Benefits include the following a. Health Insurance b. Life Insurance c. Paid Vacation d. Pension (retirement plan)

14. SECTION 1: PERSONAL FINANCIAL PLAN A. Scenario: You are 25 years of age, and have been working at your current job or profession for the last 3 years. You are single, no children and have been living at home with your family, since completing your formal education (2-4 college education, Technical school, or Trade School) and have saved $10,000. You’re ready to move on. You have found an apartment, buying new furniture and a new car. In addition to your savings account you just got paid and your current pay check has just been deposited into your checking account. B. You are putting together a financial plan to achieve your short term goals/objectives Section 1: Education: Research the college, technical school or vocational school you plan on attending after graduating from GCIT 1. Research the total costs of your education (tuition, fee’s, dorm room, meal plan, books ) 2. Assume you are taking out a student loan to pay for your education; go to student loan calculator.com, plug in the total amount of your student loans, and calculate your monthly student loan payments after you graduate

15. Section 1: Personal Financial Plan 3. Employment-Research an occupation you are interested in, what is the starting salary/wages, what is your monthly take home pay (www.primepay.calculators.com)www.primepay.calculators.com a. You can also use salary.com to calculate your New Jersey Income Tax Rate, go to salary.com Due Date 2/21/14

16. PERSONAL FINANCIAL PLAN A.________________ -is classified as land and anything attached to it, such as buildings and natural resources 1.One major factor people make when considering housing decisions is lifestyle (how you choose to spend your time and money) 2. One basic consideration, about housing is whether to rent or buy 3. Renting is a good choice for young adults who are beginning their careers 4. Renting also appeals to people who want mobility, and do not want to devote time and money for property maintenance

17. Personal Financial Plan 5. When you rent the place where you live, you become a ________________ 6. The ________________ is the person who owns the property you are renting 7. When you rent a rental unit you sign a legal document called a lease, which defines the condition of the rental agreement between the tenant and the landlord 8. Most people who rent live in apartments a. These units may be located in a two-story house, high-rise building or an apartment complex

18. Advantages of Renting 1. ________________ – You can vacate/leave the property when your lease ends, or if you find a job in another city, you can give notice to your landlord and move quickly and simply 2.Fewer Responsibilities – Tenants are not responsible for making major repairs or maintaining the property, that’s the landlord’s responsibility 3. Low initial Costs- when you sign a lease, you normally pay a security deposit, which is paid to the owner of the property to guard against any financial loss or damage that the tenant may cause a. When the tenant moves out, the landlord may return the security deposit, minus any charges for damages the tenant may have caused or for any unpaid rent

19. Factors that affect the cost of renting 1. ________________ - The amount of your monthly rent will depend on the location, or neighborhood in which you choose to live 2. Living Space- The size of the rental unit will also affect the cost of a rental unit 3.Utilities- In some rental units, the tenant may have to pay for utilities, such as electricity, gas, water and trash 4. Renters Insurance- A type of insurance that covers the loss of a tenant’s personal property as a result of damage or theft

20. PERSONAL FINANCE A. Buying a Home 1. Few people have enough money to pay for a house in full, so they have to finance it with a home mortgage loan (long term property loan) 2. To buy a house also requires a ________________, which is usually 20 percent of the purchase price 3. Homebuyers often use a real estate agent (person who is licensed to facilitate the buying/selling of real estate) to help them find a home 4. The Real Estate agents fee is normally paid by the seller, not the buyer 5. You must 18 years of age to but real estate on your own in the U.S.

21. Personal Finance B. Types of Homes 1. Residential Property is property in which an individual or family lives in; there are 3 types of residential property: a. Single Family Homes- the most popular type of residential property, is usually on its own lot, with it’s own yard b. Multi Unit Housing- usually single buildings, divided into individual units (eg. Condo’s, townhouses, duplex, lofts, etc. c. Manufactured Homes- There are 2 types of Manufactured Homes, Mobile Homes and Prefabricated Homes

22. Personal Finance A. Home Values- several factors affect the value of a house including its size, condition, quality and location 1. Location is extremely important 2. The distance between your home/work, available public transportation, the quality of the local school system and public services also affect a home’s value 3. ________________ -is the value of the property minus the amount still owed for the mortgage loan

23. Personal Finance B. ________________ - property used to generate income 1. With income property the owner generate income 2 ways, they can collect rent or sell the property for a profit a. Rental Property- is any type of dwelling unit or property rented for a length of time b. Undeveloped Property- is unused land intended only for investment purposes; with undeveloped land no rent is paid to the owner; the financial gain on this type of property comes from the sale of the property after it has risen in value

24. Presentation I. Groups: Each group choose 1 of the following states and 1 of the following countries and compare and contrasts the average costs of residential properties in both countries 1. Compare similar features such as no. of bedrooms, garage/no garage, type of unit (Single family home, condominium, etc.) 2. PowerPoint Presentation, oral presentation, individual names on slides, 5 slides minimum…10 points 3. Go online and research different domestic and real estate agencies and research different properties that are listed States-Florida, California, New York, Washington State, Michigan, Texas Countries- Spain, Brazil, Germany, Ireland, Mexico, Greece

25. Paper II. Individual Paper: Prepare a 2 page paper on the global housing market (including the U.S.) within the last 10 years; include any specific changes in the market, new technologies in the industry, current status, etc. 1. 2 page minimum, APA format, reference page, 20 points, all late assignments will be deducted 5 points per day

26. Section 2 Personal Financial Plan 1. Research apartment rentals in the State of New Jersey and choose an apartment that’s within your budget (.30 of your Gross Income) include the following: 1. Name/location of apartment 2. Security Deposit 3. Monthly rent 4. What utilities are included 2. Research the costs of any utilities that you as a tenant would be responsible for that’s not covered in the monthly rent (include Cable Television Providers, Cell Phone Providers and Internet Providers) 3. Research Rental Insurance and choose a policy that fits you needs (how much down payment, monthly payments) 3. NO Roommates Allowed Due Date 2/28/2014

27. Personal Finance A. Credit- is an arrangement to receive cash, goods or services now and pay for them in the future 1. ________________ -is the use of credit for personal use 2. A common form of consumer credit is a credit card account issued by a Financial Institution a. ________________ - are a type of consumer credit issued by financial institutions,known as creditors (eg. Banks, Credit Unions, Merchants, etc.) 3. Consumer credit is a major force in the U.S. economy- (Consumers in the United States have racked up $850 billion in credit card debt in 2013) 4. Credit Cards enable consumers to make purchases they may not be able to afford at the moment

28. Personal Finance A. Types of Credit- 2 basic types of credit 1. ________________ -is a one time loan that is paid back over a specified period of time in payments of equal amounts (eg. Vehicle loans, mortgage loans, furniture loans, etc.) 2. ________________ -is a loan with a certain limit on the amount of money you can borrow for goods/services (eg. Department store (Macy’s) and bank credit cards (Visa, MasterCard, etc.)

29. Alternative Types of Consumer Credit Cards 1. Debit Cards- Let’s the consumer electronically withdraw money from their checking/savings accounts 2. Store – Value Cards (Pre-paid cards)- Cards that are prepaid, providing the card holder with immediate money 3. Travel and Entertainment Cards- (eg. American Express) are not really credit cards, used primarily for business, entertainment and travel; the balance is due in full each month

30. Costs of Obtaining Credit A. ________________ - Determines the costs of credit on a yearly basis (eg. To calculate your monthly payment on a credit card that has $100.00 balance and an APR of 18%): 1..18/12=.015 (18%)APR /12 months 2. take 1 +.015= 1.015 3. take the $100.00 (balance) x 1.015= $101.50 B. Annual Fee’s- Some credit cards charge an annual fee for miscellaneous expenses, however most companies have eliminated these fee’s (eg. Processing fees, etc.)

31. Personal Finance B. ________________ - To calculate simple interest on a loan for $25,000.00, with an interest rate of 7%, for a period of 10 years: 1. Take the interest rate of 7/100=0.07 2. Multiply the principle $25,000 x 0.07 x 10 (years)= $17,500.00 in interest over a ten year period

32. Personal Finance A. Creditworthiness- Before financial institutions extend credit to consumer they consider the applicant’s ________________, ________________ and ________________ known as the “3 Cs of credit” 1 ________________ is the applicant’s ability to repay the loan a. To determine capacity lenders will verify the applicant’s employment and income 2. ________________ shows whether he/she has proven to be trustworthy in repaying debts a. To determine character they will check the applicants credit report and ask for credit references 3. ________________ is the amount of money the applicant has beyond debts a. To determine the amount of capital the applicant has, they will look at the applicants savings account, checking accounts and investments

33. Personal Finance B. Credit Laws 1. Most states have set a maximum on the interest rates that may charged for certain types of credit, these laws are called usury laws 2. Federal Credit Laws a. ________________, also known as the Truth in Lending Act- requires creditors to inform consumers about the costs and terms of credit they are applying for

34. Personal Finance b. The 2 nd federal credit law is the ________________ this law states that people cannot be denied credit based upon ethnicity, marital status, age, gender, religion or receipt of public assistance 1. The law allows only 3 reasons for denying credit; low income, large debts and poor payment record

35. Personal Finance c. 3 rd federal credit law is the ________________ which enables individuals to examine their credit report (which is a record of an individuals past credit activities) and correct information d. ________________ requires creditors to correct billing mistakes that are brought to their attention e. ________________ regulates collection agencies (is a person or business that collects payments for overdue bills)

36. Section 3 : Personal Financial Plan 1. Section 3: Assume you have excellent credit and are applying for an auto loan a. Choose a brand new vehicle b. Research auto loans for people with excellent credit (Name lender and interest rate) c. Your down payment will be 10% of the list price d. You will finance the car for 5 years go to cars.com calculators to determine your monthly car payments

37. Assignments Groups: Each group will research credit lines and interest rates for multipurpose credit cards (eg. Visa) and compare /contrasts the following: 1. Interest Rates 2. Repayment terms 3. Application process for each card 4. Annual Fees 5. Penalties for being over the credit limit or late payments 6. Rank cards in order of good to bad PowerPoint presentation, Oral presentation, 5 slide minimum, names on slides….. 10 points Group: Find the current annual interest rate offered on a 30 year fixed rate mortgage for $100,000. What is the monthly payment? What is the total amount of interest that will be paid over 30 years?

38. Personal Finance A. Banking 1. One of the most important components of a personal financial plan is managing your finances 2. Today, there are more than ◦a. 11,000 banks ◦B. 2,000 savings and loan associations ◦c. 12,000 credit unions in the U.S. 3. Banks make money by lending money

39. Personal Finance B. Types of Financial Services financial services are divided into four categories 1. 1 st category Savings Accounts (Time Deposits) 2. Types of Savings Accounts ◦a. Regular Savings Accounts ◦Most common type of savings account ◦Good if you make frequent deposits and withdrawls ◦Require little or no minimum balance ◦Downside: Earns little interest in comparison to other types of savings accounts ◦b. _________________________(CDs) ◦ Money is deposited for a specific period of time for a specific rate of interest ◦ Offers a higher rate of interest than a regular savings account

40. Personal Finance ◦c. Money Market Accounts ◦Offered by banks and credit unions ◦ Have higher minimum balances than regular savings accounts ◦Minimum balance is $1000-2500 ◦ Only allow 3-6 withdrawls a month d.U.S. Savings Bonds (Patriot Bonds) ◦ Purchased for half their face value ◦ Increase in value monthly (interest) ◦ Are guaranteed to reach maturity (face value) on 20th year anniversary ◦ 3 month interest penalty if bond is redeemed before 5 yrs

41. Personal Finance 2. The 2 nd category of financial services are Payment Services ◦the most common type of payment services are checking accounts 3. Types of Checking Accounts a. _____________________________- ◦Most common type of checking account ◦Do not require a minimum balance b. _________________________________ ◦Combination of checking and savings account ◦ these accounts pay interest if you maintain a specific minimum balance

42. Personal Finance 4. The 3 rd category is Borrowing- If you need to borrow money, financial institutions have many options for borrowing ◦Auto Loans ◦Mortgage Loans ◦Personal Loans ◦Student Loans 5. The last category of financial services are other financial services such as financial planning services, income tax assistance, bond and mutual fund investment assistance, etc. ◦Financial Planning Services ◦Income Tax Assistance ◦Bond/Mutual Fund investment Assistance, etc.

43. Personal Finance C. Other Banking Terms/Services 1.Many checking accounts offer overdraft protection, which is an automatic loan to cover checks that the balance in the account won’t cover 2. ________________________(ATM) is a computer terminal that allows you to withdraw cash from your account 3. ____________________-a request that a bank or other financial institution not cash a specific check ◦ fees for this service range from $10.00 and up

44. Personal Finance D. Problematic Financial Institutions 1. Pawnshops ◦Make loans based on the value of tangible possessions such as jewelry or other valuable items ◦Many low and moderate income families utilize these organizations to obtain cash loans quickly ◦They charge higher fees than other financial institutions (interest) ◦They have become the “neighborhood bankers” and the “local shopping malls” because they provide both lending services and retail shopping services, by selling items that the owners do not redeem ◦While most states regulate Pawnshop rates, 3% or more a month is common

45. Problematic Financial Institutions Cont’d 2. Check Cashing Outlets ◦There are more than 6,000 check cashing outlets in the U.S. ◦You are not required to have an account with these organizations ◦They charge anywhere from 1-20% of the face value of a check, however the average is 2-3% ◦For low income families these rates can be a significant portion of their household budget ◦They also offer other services such as utility bill payments, money orders, private postal boxes, etc.

46. Problematic Financial Institutions 3. Payday Loans ◦Also known as ______________, check advance loans, and delayed deposits ◦Interest rates range from 659-1300% ◦These type of financial institutions have increased in recent years due to the economy ◦The most frequent user of these types of institutions are workers who are trapped by debt, or people who have been driven into debt by misfortune

47. Section 4 Personal Financial Plan 1. Remember, you have saved $10,000.00 while living with your parents for the past 3 years. 2. Deduct from the $10,000 the amount of the security deposit for your new apartment the amount of the down payment for your new car, and cost of furniture for your new apartment 3. Calculate your savings account balance, so far 4. Remember to “Pay Yourself First”, save at least 10% of your disposable income monthly; Calculate how much of your disposable income you can save annually 5. Research and choose a financial institution and choose a checking account and a savings account that they offer a. What is the name of financial institution b. What type of savings account is it c. What type of checking account (interest bearing, non interest bearing) c. What is the annual interest rate on this savings/checking account 6. Your paycheck will be directly deposited into your checking account for living expenses and 10% of your monthly income will be deposited in your savings

48. Group Assignments Groups: Each group will choose two of the following countries and compare/contrasts their financial institutions and the services they provide to those of the U.S., include the following: 1. Types of Savings and Checking Accounts 2. Types of Consumer Loans 3. Types of Financial Institutions 4. Alternative Financial Institutions 5. Related bank fees and charges PowerPoint Presentations, Oral Presentations, 7 slide minimum, individual names on slides… due date Monday, March 17, 2014

49. Countries 1. Japan 8. Greece 2. Ireland 9. Switzerland 3. Mexico 10. China 3. Colombia 4. Germany 5. Brazil 6. France 7. Italy

50. Personal Finance A. Consumer Choices 1. When consumers purchase goods/services, they usually decide what is a priority for them, and then they will choose a brand name or generic product 2. Brand Name- is the trade name for a product or service produced by a particular company (eg. Kellogg’s, Nike and Pepsi, etc. ) a. Buyers often associate quality with brand names 3. Generic Product- plainly labeled, unadvertised products that are sold at lower prices than brand name products

51. Personal Finance B. Deciding when to buy 1. Prices for many items change during different times of the year, therefore postponing or planning a purchase can sometimes save you money (eg. You would save money if you bought an air conditioner in the winter – there’s less demand for them during that time of the year) 2. Stores often run special promotions during and after holiday’s, just before the school year begins, and at the end of a season

52. Personal Finance 3. There are 3 factors that affect a consumer’s decision on where to shop: types of goods and services sold, prices and convenience 4. Types of Stores a. Department Stores- sell a wide variety of goods, (furniture, clothing, jewelry, etc.); brand name products; prices may be higher than other types of stores (eg. Macy’s, JC Penney’s, etc.), because of some of the services they offer, (eg. gift wrapping, personal shoppers, etc.

53. Personal Finance b. Discount Stores – also sell a variety of goods, but at lower prices; sell goods at lower costs because they offer fewer services and keep a large quantity of goods in their inventory ( eg. Wal-Mart, Kmart, Target, etc.) c. Off-Price and Outlet Stores- carry well known brand names at a bargain prices; they offer big discounts because the items may have flaws, out of season or discontinued (eg. T.J. Maxx, Stein Mart, etc.)

54. Personal Finance d. Limited Line Retailers (Specialty Stores) sell an assortment of goods in 1 product line (eg. Foot Locker, Kay’s Jewelry Store, etc.) e. Superstores-are like supermarkets but sell items such clothes, books, sporting goods etc. (eg. Wal-Mart, etc.) f. Convenience Stores provide easy access to products that consumers buy often or as a necessity; the world’s largest chain of convenience stores are run by 7-Eleven

55. Personal Financial Plan Choose an investment tool for your personal financial project 1. What type of investment did you purchase? 2. If applies, how many shares, etc. 3. What is the current value of the investment today 4. The day before your presentation, check the current value of your investment

56. Personal Financial Plan Expenses 1. Research the costs of miscellaneous monthly expenses (eg. Toilet tissue, soap, detergent, shampoo, etc.) a. Clothes B. Dry cleaning 2. On your budget sheet fill out the Entertainment Section

57. Automobile Insurance A. Insurance- Is a protection against risk 1. Auto Insurance policies can protect your car as well as the cars and properties of others 2. Types of Auto Insurance ◦a. Collision- Covers damage caused by an auto accident ◦b. Comprehensive-Covers damage/loss due to theft, vandalism, etc. ◦c. No-fault- Type of arrangement where drivers involved in accidents collect money from their own insurance carriers 3. Auto Insurers use the following criteria to set their rates:

58. Auto Insurance Cont’d ◦a. Age/Gender of the driver ◦b. Driving Record of the insured – accidents/tickets ◦c. Value/Type of car being covered ◦d. Area where the driver lives/works ◦e. Amount of driving done each year

59. Section 5 Personal Financial Plan 1.Section 5: Assuming you have an excellent driving record, and are age 25, go online and research auto insurance quotes and choose an Automobile Insurance Policy that fits your needs a. What is the annual premium (costs) b. What is the monthly payment c. What is the deductible (How much you have to pay upfront, before your insurance covers an accident) d. Name of insurance company

60. Section 5 Continued 2. Go shopping online and purchase groceries for a month (Meal Planner Handout) go to Netgrocer.com 3. Go to Superdrug.com and shop for toiletries for a month 4. Go online and purchase furniture and living essentials for you new apartment 5. List how much money you need for entertainment, clothes, hobbies, beauty maintenance, dry cleaning, laundry, etc. you also need per moth

61. Banking Cont’d B. Types of Banks- Banks operate on a state, national and international level ◦1. Commercial Banks (Full Service Banks); most of the banks in the U.S. are commercial banks ◦a. They are businesses that operate to make a profit ◦b. They offer checking and savings accounts, credit cards, investment tools, etc.

62. Banking Cont’d 2. Credit Unions-Non-profit organizations set up by organizations for their own members to use a. Many companies, labor unions and professional groups have their own credit unions b. Most credit unions offer a full range of services such as credit cards, checking accounts and loans C. They offer low interest loans, pay high interest rates on savings accounts

63. Banking Cont’d 3. Savings and Loans- were originally established to offer savings accounts and home mortgages (they charged lower interest rates on loans, and paid higher interest rates on savings accounts) ◦a. In the late 1980’s, 20% of Savings and Loans failed, so the government passed new regulations that allowed them to charge higher interest rates and offer more services like credit cards.

64. Retirement