4. Business Officer magazine
“84% of undergraduates arrived on campus
last fall with at least one credit card.”
“One in three students graduates with $10,000
or more in credit-card debt.”
“National average undergraduate debt --
$18,000 to $25,000.”
4
6. To graduate with honors in credit-card
management:
Don't be lured in by free T-shirts
Know your (credit) limits
Remember, promotional rates are
temporary
Watch out for penalties and unnecessary
fees
SWITCH to 100% Debit cards!!
6
7. “11 Dumb Ways to Get in Debt”
(college student style)
Purse and Shoes obsessions
Financing latest gadgets
Giving family and friends a loan or co-
signing for a loan
Upgrading stuff
Playing the lottery or gambling
Rent-to-own furniture and appliances
7
8. Three requirements
for a personal budget
a technique to plan for monthly expenses
a pattern to manage disbursement of each
paycheck
a device to stay “on track” between paychecks
8
9. Effective Credit Management
How Do You Get Money from a Lender?
The Five Cs of Credit
Character
Capacity
Capital
Collateral GETTING A REPORT
Conditions
Log on to
www.annualcreditreport.com
9
10. Proverbs 22:7 -- “the borrower is servant to
the lender”
-- a fact of life!
10
13. Payday
“Secure, C
onfidentia
Loans Instant Ca l,
sh Loans.
$9.31 per Onl y
$100. Act
(www.MyC
.
ashNow.c
Now”
om)
“You simp
ly write a
check to g post-dated
et the cas
need on th h you
e sp o t ”
. (www.cas
hstore .com)
The Cash Store and EZ Money
have 70 WI locations. The
closest Check ‘N Go store to
Maranatha is 1.6 miles away
Source: State of Wisconsin, Department of Financial Institutions
where you’ll be charged
573.57% for a 14-day loan.13
Source: www.checkngo.com/statedisclosures/Wisconsin
14. Retirement savings
Start saving $50 per month at age 25. Retire at
age 65 and withdraw over $34,000 per year for
20 years.
Start saving at age 45 -- it will require $381 per
month to retire at age 65!
However, the “early worm” only deposited
$24,600 versus $96,042 by the “late starter”
14
15. How should you invest your
retirement savings?
For most people—mutual funds
Principles of Investment
Growth
Income
Liquidity
Safety
15
16. Insurance
Auto
Liability
Collision
Comprehensive
Renter’s
Life
Health
16
17. Visit us at www.ministrycpa.com for more presentations
or to connect with a tax professional.
Visit our Q&A blog at www.ministrycpa.blogspot.com
611 O’Connell Street
Watertown, WI 53094
(920) 261-7012
Member: American and Wisconsin Institutes of Certified Public Accountants
17
Editor's Notes
Looking for help? go to SmartMoney.com; look under Personal Finance...Debt Management CNNMoney.com; look under Personal Finance...Money 101...Controlling Debt Crown.org; look under Articles...[select key word] debt
I’ve been surveying my Introduction to Business class students at Maranatha Baptist Bible College in Watertown, WI for several years. I share some results here. Fall 2010 survey: 75% receive personal financial training from their parents (per an Intro. to Business textbook, “71% of teens learn about finances from their parents”) 25% learned at school 17% learned at church According to Business Officer (Oct. 2009), only about 10 percent of university students attending a University of Hawaii lecture each semester indicated that they had any formal training or coursework in personal finance. But when polled by that school’s Department of Family and Consumer Sciences, 400 students indicated that they would rather learn about investing than about budgeting and credit (a topic favored by 25 faculty and staff who were surveyed). Lesson: churches must be challenged to train their people about finances
23% of the students felt either poorly or very poorly prepared to manage their own finances 7% felt very well prepared Lesson: this is probably reflective of the lack of training received. Survey items. Rate the home of your upbringing on a scale from 0 to 10 with 0 Consistently in debt beyond their means 10 Consistently put money aside in savings Average response: 7.48 in 2009, 7.39 in 2010 From 0 to 10 which statement most closely represents your beliefs. 0 U.S. households will never reverse their current financial decline. 10 U.S. Households will enjoy financial prosperity soon Average response: 4.76 in 2009, 5.03 in 2010
On slide: Business Officer magazine (Oct. 2009) 38% of Fall 2010 class members said that they have their own credit card. The past 4 years of Introduction to Business students said 48, 42, 21, 35% respectively. 51% of Fall 2010 class members said planned to pay part of their education with debt—a realistic group, in my opinion (last three years percentages: 40, 43, 49 and 67, respectively). crown.org (accessed 11/27/07) “ The United States General Accounting Office reports that 64 percent of college students have at least one credit card. Among those, 42 percent do not pay their bill in full each month and carry an average balance of $577. Considering about half of the country’s college students graduate with $19,400 in student loan debt, credit card payments can be an added burden.”
WSJ, 10/10/09 Karen King owes nearly $36,000, more than she's ever earned in a year. All day long, bill collectors call. She hunts for a second job, sometimes skips meals, and stays with other family members at a grandfather's crowded apartment, trying to get out of debt and turn her life around. She largely holds herself at fault. "Years ago, I lived for now. It was so stupid," the 28-year-old says. "It's depressing, but I can't live that life anymore." Now, she says, "I basically want to live for the future."
8/21/08, WSJ; Avoiding College's Plastic Hangover Despite their lack of a credit history and sizable student loans, most college students can get their hands on credit cards with as much ease as a swipe. ... More than three-quarters of undergraduates hold credit cards, according to student-loan provider Nellie Mae. Their average debt load: $2,169. That amount is nothing compared to the 10% of students who graduate with more than $10,000 in credit-card debt. College students "don't realize that anything they do now will stay on their credit report for the next seven to 10 years," .... Don't be lured in by free T-shirts. TrueCredit.com's survey found that four out of 10 consumers sign up for a credit card to receive a free gift or special offer, such as a T-shirt or baseball cap featuring the school's logo. ...compare a credit card's terms to other offers by going to Web sites like CreditCards.com and LowerMyBills.com. Know your (credit) limits. Because students lack established credit histories, they often receive fairly low ones -- typically no more than $3,000. By carrying a balance of, say, less than half of the available credit, a student can maintain a solid credit score. Remember, promotional rates are temporary. That 0% introductory rate ...(For most college students, the average APR is 15%.) Watch out for penalties and unnecessary fees. ...if you make a late payment, it should come as no surprise when you're hit with a late fee or when the interest rate skyrockets. Another thing to look out for: "universal default," a clause that allows a creditor to penalize a cardholder for making a late payment on another lender's card, says Mr. Fox.
BE PATIENT. It took your parents a number of years to accumulate what they have now. When you establish your own home, be patient regarding acquiring home appliances and furnishings. Be flexible; you’ll end up modifying your newly-formed budget almost immediately and you’ll need to change it regularly afterwards Want access to more books about personal finances by Christians to Christians? Go to ministrycpa.org book reviews under Personal Finance .
Do not use the “napkin” approach. Be prepared. Five C’s: The lender must determine if you’re willing and able to repay the loan. 1. Character: “willingness to pay” -- references, credit history, bankruptcy; home ownership, job tenure 2. Capacity: Make enough to make monthly payments when due: net income or W-2s 3. Capital: Net worth: assets > liabilities -- the debtor “has something to lose” by not repaying the loan. 4. Collateral: Security if the debtor does NOT pay -- Fair Market Value must be greater than loan amount. When you buy your first home you’ll sign lots of paperwork but especially a promissory note AND a mortgage (a “lien”). 5. Conditions: Economic conditions nationally and locally
Learn as much as you can about credit. In some ways a student loan is much smarter than a car loan. Hopefully, your education will enhance your personal market value. 9/25/03 WSJ article – Question: “How will student loans affect my ability to get a loan on my first home?” Answer: “Student loans can help or hurt your credit rating, depending on how much you borrow and how well you manage the repayment. Make payments on time and you’ll boost your chances of getting a better interest rate. However, if you income is on the low side, a sizable student-loan debt could push down your credit score.”
http://online.wsj.com/public/resources/documents/JOBSMAP09.html http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html How are you going to avoid becoming an unemployment statistic? graduate from college!!! source of graph: DECEMBER 2, 2009 WSJ, When Combined Data Reveal the Flaw of Averages, By CARI TUNA
Source of pie chart: 9/8/09, WSJ, Credit Scores: What You Need to Know Now; Tighter Lending Makes Cracking the System Vital; Benefits of Paying on Time OCTOBER 8, 2009, WSJ, Credit Scores: Can You Get Them Free? “ Now, a handful of companies are launching services that give consumers at least a glimpse at their credit scores free of charge. The sites—Credit.com Inc., Credit Karma Inc.'s CreditKarma.com and Quizzle.com—also offer a window into the key factors that go into calculating your score, what you can do to improve them and how your credit stacks up against others. Last week, for example, Credit.com launched a free Credit Report Card that shows consumers how they're likely to rate across five credit-scoring models.” A chart within the article seemed to rate Quizzle.com the best for a free credit score. The most important way to raise a credit score is a no-brainer: Pay bills in full and on time. The second biggest priority for anyone looking to bump up their score is to maintain a low "credit utilization" level. ...maxing out credit cards will send a score plummeting. ... simply using 50% or more of a limit can cause problems. The third -most-important strategy ... is to build up a lengthy credit-using history. This means it's usually better not to close out all those old cards, as keeping them open adds to the credit record. .... The final 20% of the score is divided equally between two categories : new accounts and diversification. ...taking out new lines of credit raises red flags because it makes the consumer look riskier. Source: How to Boost Your Credit Score: Increasingly, Employers, Others Check Your Ranking; Do You Really Need That Store Card? By CHRISTOPHER CONKEY, WSJ, 11/19/05
I doubt that the first step down the path of imprudent use of debt starts with a payday loan, but it may be near the end of the trail. Once you get to the mycashnow.com web-site... “ Fees Slashed 50% for New Customers! Only $9.31 per $100!” Loan Amount Loan Term(Days) Loan Fee(Finance charge) Check Amount $100.00 7-14 $18.62 $118.62 2 week loan cost $18.62 = 484.12 per year of finance charges A 15-day loan is $19.95 (485.45 per year) Testimonials: “ Low rates and easy extensions.” — Kenneth, MO “ The customer representatives I spoke with were great help getting me through to the next payday.” - Donna, PA “ The people at this company treat you like family not like you owe them money.” - Tim, TX “ ...very willing to help me get back on our feet when no one else would.” – Darlene https://www.checkngo.com/stateDisclosures/Wisconsin/Finance_Charge_Schedule.pdf
1. start saving $50 per month at age 25 and earn 10 percent interest per year. Retire at age 65 and withdraw over $34,000 per year for 20 years. 2. start saving at age 45 -- it will require $381 per month to retire at age 65! Both individuals will eventually withdraw $687,634 from their savings account. However, the “early worm” only deposited $24,600 versus $96,042 by the “late starter”
Principles of Investment Growth—increase in value of investment (good choices: stock and home (real estate) ownership) Income—cash received each year (good choices: savings accounts, CDs) Liquidity—quick conversion to cash (good choices: savings accounts) Safety—risk of losing money on the investment (good choices with low risk: savings accounts, CDs, home ownership)
Auto Liability—for damages you do to people (including yourself) or property in an accident Collision—for damages you do to your car in an accident Comprehensive—for damages to your car NOT in an accident (hit & run, hail, etc.) Renter’s—for your contents in an apartment Life—term insurance only Health—don’t go without it! Ask when interviewing for a permanent job if insurance is provided
