Transcript Your Financial future

YOUR FINANCIAL FUTURE
REVIEW
CREDIT & DEBT
COSTS OF USING CREDIT
Interest can be costly when the balance is revolved
Additional penalty or fees
Tempting to overspend
Risk of identity theft
Applying for multiple accounts in a short period of time
can lower your credit score
GOOD USES OF CREDIT
Student loans
Buying a home
Buying a car
ADVANTAGES TO USING CREDIT
Convenient payment tool
Useful for emergencies
Often required to hold a reservation
Able to purchase “big ticket” items and spread out payments
Protection against fraud
Opportunity to establish a positive credit rating
Online shopping is safer than using a debit card
Possibility 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 payments
Obtain a secured credit card
Pay bills consistently and on time
Maintain reasonable amounts of unused credit
Apply for credit sparingly, thus keeping credit inquiries to a
minimum
Check credit reports annually and search for errors
NEGATIVE CREDIT USAGE
Routinely paying late on credit cards, utility and cell phone bills
Maxing our limits on credit cards
Numerous credit applications in a short period of time
2009 CARD ACCOUNTABILITY AND DISCLOSURE
ACT (CARD)
Changed how young adults can receive certain types of
credit
Consumers 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 ACT
Enacted to protect the consumer
States consumers have the right to know what information is in
their credit report and to correct any errors
Under the act, if you are denied credit, they must give you the
name and address of the credit bureau that your information came
from
If 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 accidents
House fires
Accidental death
TYPES OF INSURANCE
Auto Insurance
Homeowner’s Insurance
Renter’s Insurance
Flood Insurance
Life Insurance
COSTS OF INSURANCE
Premium – The amount paid to the insurance company
every month in order to maintain insurance coverage
Co-Pay – Mainly for health insurance, it’s the amount
owed each time you visit the doctor
Deductible – 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 consumption
Emergency savings should equal 3-6 months of expenses
If 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 SAVINGS
When you are looking at interest rates for your savings,
the HIGHER the BETTER
This is money you are EARNING on your savings
Compounding interest is earning interest on your interest
TYPES OF SAVINGS
Checking Account
Standard Savings Accounts
Money Market Accounts
CD’s (Certificates of Deposit)
Savings Bonds
CHECKING ACCOUNT
Account that provides an easy method for
withdrawing or depositing money
Most liquid of all accounts
STANDARD SAVINGS ACCOUNT
Account at a depository institution that is designed to
hold money not spent on current consumption
Some interest, but lower rates compared to other savings
tools
More liquid than other savings tools
MONEY MARKET DEPOSIT ACCOUNT
Account at a depository institution
Usually has minimum balance requirement
Less liquid than standard savings accounts
You 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 time
Allows restricted access to the funds
Interest rates vary depending on the length of
time
The 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:
Rent
Selling 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