Budgeting Presented By Mr. Glennon
May 15, 2015
Budgeting
Presented By Mr. Glennon
Congratulations!
You finally have a job! Time to buy stuff!
New TV!
How about that choice HDTV Only $2000.00…not much when you have a job…
….right???
Free money…?
You’re a liJle short on cash How about a CREDIT CARD?
Buy NOW…Pay LATER!
Not exactly free
Not quite free…but sUll a great deal! You’ll have to pay later, but you get the HDTV
NOW!
How it works
Put $2000.00 on the card… …pay $2000.00 back later.
Right???
Yeah…not so much
Pay back $2000.00 (If you
pay the ENTIRE $2000.00
back when the first bill
comes)
Put $2000.00 on the card…
interest
$2000.00 Principal
%
Interest +
= What you PAY
interest
$2000.00 IF YOU PAY
10 % Interest
IT OFF +
= IMMEDIATELY!
$2200.00
interest
$2000.00 NO BIG DEAL
10 % Interest
Only $200.00 extra +
= …and I sUll get the TV now!
$2200.00
NOPE! Meet your new friend!
COMPOUND INTEREST
This is Compound Interest. He is horrible and he hates you.
2 kinds of
interest SIMPLE INTEREST
Pay a percent of what you borrow. Usually on a schedule (10% for 2 years)
1
2 kinds of
interest COMPOUND INTEREST
Pay a percent of what you borrow but MORE interest compounds on top of the principal AND interest you owe.
2
example
The amount you have to pay back is $2200, no maJer how long it takes.
Simple interest
$2000.00
10 % Interest +
= $2200.00
example The amount you have to pay back is recalculated each billing period. It is a percent of the amount you
borrowed AND the original amount of interest.
Compound
interest
$2000.00
10 % Interest +
= $2200.00
+ 2.5% + 2.5%
+ 2.5%