YOUR FINANCIAL FUTURE

REVIEW

CREDIT & DEBTCOSTS OF USING CREDITInterest can be costly when the balance is revolvedAdditional penalty or feesTempting to overspendRisk of identity theftApplying for multiple accounts in a short period of time can lower your credit score

GOOD USES OF CREDIT

Student loansBuying a homeBuying a car

ADVANTAGES TO USING CREDITConvenient payment toolUseful for emergenciesOften required to hold a reservationAble to purchase “big ticket” items and spread out payments

Protection against fraudOpportunity to establish a positive credit ratingOnline shopping is safer than using a debit cardPossibility of receiving bonuses

FACTORS THAT INFLUENCE ESTABLISHING AND MAINTAINING A GOOD CREDIT RATING Acquire a small loan for an item that you already have the money available to pay for, then make the paymentsObtain a secured credit cardPay bills consistently and on timeMaintain reasonable amounts of unused creditApply for credit sparingly, thus keeping credit inquiries to a minimumCheck credit reports annually and search for errors

NEGATIVE CREDIT USAGE

Routinely paying late on credit cards, utility and cell phone billsMaxing our limits on credit cardsNumerous credit applications in a short period of time

2009 CARD ACCOUNTABILITY AND DISCLOSURE ACT (CARD)Changed how young adults can receive certain types of creditConsumers must be generally 21 years of age or older Under 21 needs to have a co-signer or show documentation of sufficient income to make payments

1971 FAIR CREDIT REPORTING ACTEnacted to protect the consumerStates consumers have the right to know what information is in their credit report and to correct any errorsUnder the act, if you are denied credit, they must give you the name and address of the credit bureau that your information came fromIf an error is found on a credit report, it is important to IMMEDIATELY contact the credit bureau by phone AND in writing

INSURANCE RISKS

Car accidentsHouse firesAccidental death

TYPES OF INSURANCE

Auto InsuranceHomeowner’s InsuranceRenter’s InsuranceFlood InsuranceLife Insurance

COSTS OF INSURANCE

Premium – The amount paid to the insurance company every month in order to maintain insurance coverageCo-Pay – Mainly for health insurance, it’s the amount owed each time you visit the doctorDeductible – Refers to the amount you must pay before your insurance provider begins to cover costs; the higher the deductible, the lower your monthly payments

FINANCIAL RISK

SAVINGS

Amount of income not spent on consumptionEmergency savings should equal 3-6 months of expensesIf your expenses are $2,000 per month, you should save (for emergencies only) $12,000

PYF – pay yourself first, make your savings just like an expense and pay that money into your account just like you would a bill, then don’t touch it.

INTEREST RATES ON SAVINGSWhen you are looking at interest rates for your savings, the HIGHER the BETTERThis is money you are EARNING on your savingsCompounding interest is earning interest on your interest

TYPES OF SAVINGS

Checking AccountStandard Savings AccountsMoney Market AccountsCD’s (Certificates of Deposit)Savings Bonds

CHECKING ACCOUNT

Account that provides an easy method for withdrawing or depositing moneyMost liquid of all accounts

STANDARD SAVINGS ACCOUNTAccount at a depository institution that is designed to hold money not spent on current consumptionSome interest, but lower rates compared to other savings toolsMore liquid than other savings tools

MONEY MARKET DEPOSIT ACCOUNTAccount at a depository institution Usually has minimum balance requirementLess liquid than standard savings accountsYou may pay a penalty for early withdrawal

Tiered interest rates The more you put in the higher rate you will get

CERTIFICATE OF DEPOSIT (CD)Account that is used for a fixed period of timeAllows restricted access to the fundsInterest rates vary depending on the length of timeThe longer the time frame of the deposit, the higher the interest rate

PAYROLL DEDUCTIONS

AUTOMATIC SAVINGS OPTIONS

REFLECTIVE SPENDING PRACTICES ON FINANCIAL WELLBEING

INVESTING You shouldn’t use investments for savings or short‐term goals/expenses because of two primary reasons:1. Unlike insured savings tools, investments are not secure. There is a chance that some or all of your money invested could be lost. 2. Investments are less liquid than savings tools. That is, investments may not be easily converted to cash or you may have to pay a penalty to access the money. In fact, with some investments you may have to wait a long time, even years, to access the funds.

INVESTING

Long term goals

Less liquid

Higher Risk

Higher Returns (8-12%)

Contributes to Net Worth

RATE OF RETURN

Total Return

Amount of

Money Invested

Rate of

Return

STOCKS

Stock is a share of ownership in a company

Owner of the stock is called the Stock Holder

If a company makes a profit, they may share that with the stockholders – this is called a dividend

If you sell a stock for more than you bought it for you earn a capital gain

REAL ESTATE

Can also be considered an investment

Ways to earn money:RentSelling for more than your purchase price

Real Estate is more time consuming than other investments

MUTUAL FUNDS

A mutual fund is created when a company combines the funds of many different investors and then invests that money into a diversified portfolio

Mutual funds may include stocks, bonds, real estate and/or capital gains

RISK VS. RETURN

The higher risk you are willing to take, the higher return you could potentially earn

HOW DO YOU PURCHASE INVESTMENTS? Stock Exchange – provides an organized, central service to buy and sell stocks, bonds, and other investments that are traded

Brokerage Firm – facilitates the buying and selling of investments from a stock exchange; they offer investment advice; they act as a intermediary between stock exchange and investor; you must pay them a fee

Discount Brokerage Firms – provides limited services; only completes orders you give them to buy and sell investments; they do not provide you with advice; they usually charge lower fees and/or commissions than full-service brokerage firms

401K – EMPLOYER SPONSORED RETIREMENT PLAN