Financial Literacy Backpack to Briefcase Immaculata University
What would you do if you all of a sudden had $250,000?
Stock returns historically have averaged 9.86%, based on the total average annual return of the Standard & Poors 500 Composite Stock Price Index from 1970 through 2009. 30 Year Growth of $250,000 $4,500,000 $4,000,000 $3,821,979 $3,500,000 $3,000,000 $2,500,000 $2,173,956 $2,000,000 $1,500,000 $1,000,000 $1,024,552 $500,000 $530,465 $250,000 $0 0 8 15 23 29
Start Younger & End Stronger $10,000 investment at age 22 $1,101,488 by retirement (age 72) $10,000 investment at age 32 $430,114 by retirement $10,000 investment at age 42 $167,953 by retirement $10,000 investment at age 52 $65,583 by retirement
Debit Cards vs. Credit CardsDebit Card Credit Card Linked to a Bank Account Available Line of Credit Money Automatically Purchases Lower Amount of Withdrawn from Account Available Credit No Monthly Bill You are Responsible to Pay a Activity Not Reported to Bill Each Month Credit Agency Activity Reported to Credit Agency
Why Have A Credit Card? To make purchases for which you may not have cash. Insurance Protection – Identity Theft Protection Builds Your Credit History
Credit Cards - Tipsi. Know Your Objective i. Carrying Debt ii. Transactional Useii. Shop Around for the Credit Card that is Best for You i. Interest Rate & Annual Fee ii. Rewards Programsiii. Manage Your Credit Card Responsibly i. Don’t Borrow More Than You Need ii. Pay Your Bill On-Time
Know Your Student LoansWhere to find… What information… Federal Stafford Loans Amount(s) Owed www.nslds.ed.gov Interest Rate(s) Federal Perkins Loans Payment Amount Contact Your School Payment Due Date Private Loans Contact Your Individual Lender
Federal Student Loans Repayment Options Standard 10 year Graduated 10 year Extended 25 year Income Contingent/Based Repayment must financially qualify payment amount reevaluated every yearhttp://www.direct.ed.gov/calc.html
Loan Consolidation www.loanconsolidation.ed.govPros Cons One payment per month Loss of grace period Could lower your monthly Loss of control to target payments payments Can be deferred if you’re Students continuing school enrolled half-time will lose subsidized status Could end up paying more interest
Federal Student Loans – Tipsi. Only Borrow What You Needii. Know Your Loansiii. Determine Your Appropriate Repayment Optioniv. Understand Your Forbearance & Deferment Options – Communicate with your Lenderv. Pay Your Loans On-Time – Signup for Automatic Payments
FICO Scores Credit scores are used by lenders to determine your credit risk 3 Credit Reporting Agencies each with their own score Experian TransUnion Equifax Affects both how much and what terms (interest rate, etc.) lenders will offer you
FICO Score Breakdown How you pay (Payment History) 35% Capacity (Amounts Owed) 30% Length (Oldest single reported trade) 15% Accumulation (Inquiries for credit) 10% Mix (Revolving versus installment) 10%
Good vs. Bad FICO Score Auto Loan Mortgage Good Score Good Score $20,000 loan @ 3.49% for 60 $200,000 loan @ 3.125% for Months 30 Years Payment = $363.75/month Payment = $856.75/month Total Repaid = $21,825.00 Total Repaid = $308,430.00 Bad Score Bad Score $20,000 loan @ 9% for 60 $200,000 loan @ 7% for 30 months Years Payment = $415.17/month Payment = $1,330.60/month Total Repaid = $24,910.20 Total Repaid = $479,016.00
Building Your FICO Score - Tipsi. Always Check Your Credit Report i. www.annualcreditreport.com ii. www.myfico.comii. Apply and Open New Credit Only When Needediii. Keep Balances Low on Credit Cardsiv. Pay Off Debt Rather Then Shifting it Aroundv. Pay Your Bills On-Time i. Use Automated Payments ii. Setup Payment Reminders
Creating A Budget How much will be your What do you expect your starting annual salary? expenses to be? What do you expect to Will you move home, rent be your tax rate? an apartment, buy a home? How much will your Will you have cable & payroll deductions cost internet? NetFlix? you? What will be your student loan payment?
Budgeting - Tipsi. Create & Update a Budget i. Remember: Budgets are tools to help you get where you want to go, not reflections of your successii. Underestimate Income & Overestimate Expensesiii. Pay Yourself First! i. Retirement ii. Personal Savingsiv. Go Shopping! i. Can you get a better price for your expenses?v. Negotiate with Yourself i. Do I need this to be Happy or Satisfied?