The Most Important Grade Youll Ever Earn. Rules of the Game 1. Choose one person to hold up the correct True or False card when the emcee says Cards UP!

The Most The Most Important Important

Grade You’ll Grade You’ll Ever EarnEver Earn

Rules of the GameRules of the Game

1. Choose one 1. Choose one person to hold up person to hold up the correct True or the correct True or

False card when the False card when the emcee says “Cards emcee says “Cards

UP!”UP!”

Rules of the GameRules of the Game

2. Your team will 2. Your team will lose points if your lose points if your

cardholder’s cardholder’s response is slow.response is slow.

1. Your credit score 1. Your credit score helps determine helps determine

whether or not you whether or not you get credit, the amount get credit, the amount

you you can borrow, and can borrow, and

what interest rate you what interest rate you have to pay for the have to pay for the use of the money.use of the money.

True True

or or

False?False?

2. Using a credit card, 2. Using a credit card, Caitlyn buys an $800 Caitlyn buys an $800

stereo. She pays $10 a stereo. She pays $10 a month, the minimum month, the minimum

payment the bank payment the bank requires. She will have requires. She will have the stereo paid off in 6 the stereo paid off in 6

years, 8 months.years, 8 months.

True True

or or

False?False?

3. Credit should not 3. Credit should not be used to purchase be used to purchase

furniture and furniture and appliances. appliances. True

True

or or

False?False?

4. The following 4. The following criteria are used in criteria are used in determining one’s determining one’s

credit score: credit score: payment history, new payment history, new credit issued, length credit issued, length

of credit history, of credit history, income, and types of income, and types of

credit.credit.

True True

or or

False?False?

5. Using a credit 5. Using a credit card on impulse card on impulse

doesn’t affect your doesn’t affect your budget.budget.True

True

or or

False?False?

6. Financial planners 6. Financial planners recommend that total recommend that total debt not exceed 20%, debt not exceed 20%, excluding mortgage, of excluding mortgage, of

your yearly after-tax your yearly after-tax income, and monthly income, and monthly

payments not exceed 10 payments not exceed 10 – 15% of your monthly – 15% of your monthly

net income. net income.

True True

or or

False?False?

7.7. If a person has 8 If a person has 8 credit cards and three credit cards and three are at their limits, he are at their limits, he should close all of his should close all of his other credit cards other credit cards immediately.immediately.

True or True or False?False?

8. A year ago Caitlyn 8. A year ago Caitlyn missed a payment on missed a payment on

her stereo, but she her stereo, but she caught up and paid caught up and paid

the bill off. Her the bill off. Her missed payment missed payment

does not affect her does not affect her credit score.credit score.

True True

or or

False?False?

9. The indicator of 9. The indicator of how much credit will how much credit will

cost you for any cost you for any loan or credit card loan or credit card

purchase is the purchase is the annual percentage annual percentage

rate.rate.

True True

or or

False?False?

10. Managing your 10. Managing your credit wisely will credit wisely will

increase the choices increase the choices you have in the future you have in the future related to the type of related to the type of

housing, transportation, housing, transportation, recreation, and recreation, and

education available to education available to you.you.

True True

or or

False?False?

11. By declaring 11. By declaring bankruptcy, your debts bankruptcy, your debts

are forgiven and you are forgiven and you begin again with no begin again with no

negative consequences negative consequences to you.to you.True

True

or or

False?False?

12. Many employers in 12. Many employers in government, financial government, financial services, and criminal services, and criminal justice use credit scores justice use credit scores to determine whom to determine whom they will hire.they will hire.True

True

or or

False?False?

Now, the moment of Now, the moment of truth…truth…

Correct answers Correct answers earn your team 5 earn your team 5

points.points.

Deduct 5 points for Deduct 5 points for incorrect answers. incorrect answers.

1. Your credit score 1. Your credit score helps determine helps determine

whether or not you whether or not you get credit, the amount get credit, the amount

you you can borrow, and can borrow, and

what interest rate you what interest rate you have to pay for the have to pay for the use of the money.use of the money.

True!True!

2. Using a credit card, 2. Using a credit card, Caitlyn buys an $800 Caitlyn buys an $800

stereo. She pays $10 a stereo. She pays $10 a month, the minimum month, the minimum

payment the bank payment the bank requires. She will have requires. She will have the stereo paid off in 6 the stereo paid off in 6

years, 8 months.years, 8 months.False!False!

3. Credit should not 3. Credit should not be used to purchase be used to purchase

furniture and furniture and appliances. appliances.

False!False!

What is good debt?What is good debt?

Purchasing an item that is Purchasing an item that is expensive and can continue expensive and can continue to be used while paying off to be used while paying off

the bill the bill ((durables: like cars, furniture, durables: like cars, furniture, and appliances, or investing in and appliances, or investing in

education, which increases education, which increases one’s knowledge and skills base, one’s knowledge and skills base, and cannot be taken away from and cannot be taken away from

you)you)..

4. The following 4. The following criteria are used in criteria are used in determining one’s determining one’s

credit score: credit score: payment history, new payment history, new credit issued, length credit issued, length

of credit history, of credit history, income, and types of income, and types of

credit.credit.

False!False!

5. Using a credit 5. Using a credit card on impulse card on impulse

doesn’t affect your doesn’t affect your budget.budget.

False!False!

What is bad What is bad debt?debt?

Quick Guide Quick Guide for Credit Usefor Credit Use

If you:If you:

eat it,eat it,wear it,wear it,drink it,drink it,or drive it,or drive it,DON’T use a credit DON’T use a credit card to buy it.card to buy it.

6. Financial planners 6. Financial planners recommend that total recommend that total debt not exceed 20%, debt not exceed 20%, excluding mortgage, of excluding mortgage, of

your yearly after-tax your yearly after-tax income, and monthly income, and monthly

payments not exceed 10 payments not exceed 10 – 15% of your monthly – 15% of your monthly

net income. net income. True!True!

20-10 Guideline

TRY NOT TO BORROW MORE THAN 20%

OF YOUR YEARLY NET INCOME (Housing debt is NOT part of this 20%)

•If your net income (money after taxes) is $3000 a month, then your net income for the year is

$36,000

•Your safe debt load is $7200 (not including housing) •So, for the year in which your net income is $36,000 you should not have more than $7200 of outstanding

debt.

Monthly payments should NOT exceed 10-15% of your monthly net income

•If your net income (money after taxes) is $3000 a month, then monthly debt payments should

NOT exceed $300 per month

Housing affordability•Rent should be equal or less than 25-28% of monthly take home.

•The maximum price one can comfortably afford to pay for a house is 2.5 times your gross yearly income.$54,000 X 2.5 = $135,000

•Monthly mortgage payments, including taxes and insurance, should not be more than 30-33% of monthly net.

7. 7. If a person has 8 If a person has 8 credit cards and credit cards and three are at their three are at their limits, he should limits, he should close all of his close all of his

other credit cards other credit cards immediately.immediately.

False!False!

8. A year ago Caitlyn 8. A year ago Caitlyn missed a payment on missed a payment on

her stereo, but she her stereo, but she caught up and paid caught up and paid

the bill off. Her the bill off. Her missed payment missed payment

does not affect her does not affect her credit score.credit score.

False!False!

9. The indicator of 9. The indicator of how much credit will how much credit will

cost you for any cost you for any loan or credit card loan or credit card

purchase is the purchase is the annual percentage annual percentage

rate.rate.True!True!

10. Managing your 10. Managing your credit wisely will credit wisely will

increase the choices increase the choices you have in the future you have in the future related to the type of related to the type of

housing, transportation, housing, transportation, recreation, and recreation, and

education available to education available to you.you.

True!True!

11. 11. By declaring By declaring bankruptcy, your debts bankruptcy, your debts

are forgiven and you are forgiven and you begin again with no begin again with no

negative consequences negative consequences to you.to you.False!

False!

Bankruptcy Consequences:   Purchasing a $20,000 vehicle

 Without Bankruptcy                             Bankruptcy

60 months at 7%                                   60 months at 30% Monthly payment: $396.02                      Monthly payment: $647.07 Total Interest:    $3,761.44                       Total interest:$18, 824 Total Cost:       $23, 761.44                     Total Cost: $38,824.08

Difference: $15,626.64 

12. 12. Many employers in Many employers in government, financial government, financial services, and criminal services, and criminal justice use credit scores justice use credit scores to determine whom to determine whom they will hire.they will hire.

True!True!

Now, total Now, total your team’s your team’s

score.score.

Internet Sites for Money ManagementInternet Sites for Money Management(Use for construction of your own financial road map)(Use for construction of your own financial road map)

www.bls.gov/oco: this site contains all the information necessary to research careers including the : this site contains all the information necessary to research careers including the nature of the work, working conditions, training, advancement and promotion, number of openings nature of the work, working conditions, training, advancement and promotion, number of openings and growth, and growth, earningsearnings, related occupations and additional information sources, related occupations and additional information sources

  www.myfico.com: : provides information about credit scoring, click on credit education on the top barprovides information about credit scoring, click on credit education on the top bar   www.annualcreditreport.com: This site allows you to access the 3 free credit reports required by : This site allows you to access the 3 free credit reports required by

law from Experian, TransUnion, and Equifax. Do law from Experian, TransUnion, and Equifax. Do NOTNOT go to go to www.freeannualcreditreport.com because it is because it is NOT FREENOT FREE..

www.bankrate.com: information site that collects the interest rates for all types of financial : information site that collects the interest rates for all types of financial services and products from savings accounts to insurance, also includes calculatorsservices and products from savings accounts to insurance, also includes calculators

  http://www.cccs-inc.org: Consumer Credit Counseling Service of Maryland and Delaware is a : Consumer Credit Counseling Service of Maryland and Delaware is a nonprofit entity that helps consumers with budgeting and debt management.nonprofit entity that helps consumers with budgeting and debt management.

  www.practicalmoneyskills.com: has calculators for all types of personal finance use: has calculators for all types of personal finance use   http://studentmoneyskills.bankofamerica.com/start/default.asp: loaded with information about : loaded with information about

personal finance topicspersonal finance topics   http://www.cfp.net/learn/knowledgebase.asp?id=6: questions to ask when hiring a certified : questions to ask when hiring a certified

financial planner, what can they do, what can’t they dofinancial planner, what can they do, what can’t they do   http://www.tcalc.com/tvwww.dll?CalcLoan?Tmplt=CarAfford.htm&Cstm=cccssf&PmntAmt=300.00: :

a card affordability calculator that starts with what you can afford to pay and gives you the a card affordability calculator that starts with what you can afford to pay and gives you the maximum amount you should spend on a carmaximum amount you should spend on a car

  www.kbb.com: Kelly’s Blue Book for all things automotive: Kelly’s Blue Book for all things automotive   www.edmunds.com: also good for automotive information: also good for automotive information

Typical Budget Categories(A budget is a plan for spending, saving, and giving that

tracks your income.)

After tax income (net pay):Fixed expenses:

  Housing (rent or mortgage)                                              30%            Savings  (pay yourself first)*  5%            

  Car payments/Auto Insurance                                         12%     Taxes (property)                                               10%

Loans/credit (No more total debt than 20% of yearly net;                and monthly bills no more than 10% of monthly net)

Regular but variable           Other housing costs                                                           8%

        (utilities, furnishings, maintenance, insurance)            Food (includes dining out)                                                  7%

(prices change so this adjusts, has been as high as 12-15%)

            Clothing                                                                        10%Gasoline, repair, and maintenance (**prices change 8%

so this has to be adjusted)**                                      Discretionary (variable)                                                               10%

            entertainment, recreation, personal care, movies,            magazines, hobbies, vacations, gifts, electronics,

            pets etc. Total:

100%If food, gasoline, heating oil, medical prices rise, what categories will you adjust?

How much will you adjust them?What trade-offs do you have to make to meet your goals?

Questions?Questions?

Resources/SurveyResources/Survey

Thank You!Thank You!