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Money TalksMoney Talks::
If you’re not careful,If you’re not careful,
It just says “Goodbye”It just says “Goodbye”
Tips to...
Is Education Worth It?Is Education Worth It?
Average Annual IncomeAverage Annual Income (2002 U.S. Census Bureau)(2002 U.S...
TheThe
GreedGreed
SpectrumSpectrum
LegalLegal
HonestHonest
FairFair
IllegalIllegal
GreedGreed
There areThere are
people ou...
What makes usWhat makes us
susceptible?susceptible?Utah has a reputation for being one of the fraud capitals of the world....
WantsWants
Even though we don’t like to think of ourselvesEven though we don’t like to think of ourselves
as greedy, greed...
Service With aService With a
SmileSmile
The best cons use them very well!The best cons use them very well!
How can we prot...
Don’t sign it -Don’t sign it -
unless you agree to it!unless you agree to it!
How can you agree to it if youHow can you ag...
Tips to help you avoid aTips to help you avoid a
lot of the problems:lot of the problems:
NOTHINGNOTHING
isis
RISKRISK-FREE-FREE
Especially nothing involving money!Especially nothing involving money!
If someone c...
The Greater theThe Greater the RateRate
TheThe
HigherHigher
thethe
RiskRiskNot only in racing, but:Not only in racing, but...
If it sounds too good to be trueIf it sounds too good to be true
It is!It is!
If you will remember this one saying, andIf ...
When big money is at stakeWhen big money is at stake
GreedGreed BrainBrain
InterestInterest
If youIf you savesave money, youmoney, you
Get itGet it
If youIf you borrowborrow money, youmoney, you
Pa...
Don’t participate inDon’t participate in
unethical deals!unethical deals!
What assurance doWhat assurance do
you have that...
Want to know an easy way toWant to know an easy way to
make a million dollars nextmake a million dollars next
year?year?
I...
Want to know another way?Want to know another way?
Put $1 intoPut $1 into
savings eachsavings each
monthmonth
-- for 168 y...
Save $100 each month at 5%Save $100 each month at 5%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,00...
Save $100 each month at 5%Save $100 each month at 5%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,00...
Save $100 each month at 5%Save $100 each month at 5%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,00...
Save $100 each month at 5%Save $100 each month at 5%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,00...
Savings Goal:Savings Goal:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Emergency For Sure Buy Stuff
Many financial experts recommend...
Start With:Start With:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Emergency For Sure Buy Stuff
Start immediately with a “For Sure” ...
Increase as you can:Increase as you can:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Emergency For Sure Buy Stuff
Keep increasing as...
Build More:Build More:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Emergency For Sure Buy Stuff
More:More:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Emergency For Sure Buy Stuff
Penalty for
withdrawal
IRA
401K
457K
Roth IRA
In...
Invest vs. SaveInvest vs. Save
0
1000
2000
3000
4000
5000
6000
7000
8000
J-93
D
-93
J-94
D
-94
J-95
D
-95
J-96
D
-96
J-97
...
Invest vs. SaveInvest vs. Save
0
1000
2000
3000
4000
5000
6000
7000
8000
J-93
D
-93
J-94
D
-94
J-95
D
-95
J-96
D
-96
J-97
...
Gross IncomeGross Income
0
10000
20000
30000
40000
50000
60000
70000
80000
0
3
6
9
12
15
18
21
24
27
30
33
36
39
Dropout
$...
Disposable IncomeDisposable Income
Assuming that during the next 10 years or so, you will have somewhere around $30,000Ass...
BeforeBefore you borrowyou borrow, know the APR!!!, know the APR!!!
Unfortunately, there are still lenders outUnfortunatel...
When you borrow, always try toWhen you borrow, always try to
pay less than...pay less than...
13% A.P.R.13% A.P.R.
Conside...
Why people pay more than 13%Why people pay more than 13%
Not enough incomeNot enough income
UneducatedUneducated
Bad credi...
Interest Rate CeilingInterest Rate Ceiling
0
5
10
15
20
25
30
35
40
Banks & CUs
< 13%
Credit Cards
~ 18%
Small Loan
18-36%...
TOO EASY LOAN COMPANYTOO EASY LOAN COMPANY
Promissory Note with Security Interest Security: 1996 OldsPromissory Note with ...
PurchasePurchase HonestHonest
CheatCheat
StealSteal
MurderMurder
Where on the greed spectrum are car salesmen?Where on the...
Auto Loans:Auto Loans:
APRAPR 7%7% 12%12%
Loan Amt $10,000 $10,000Loan Amt $10,000 $10,000
TermTerm 5 years5 years 5 years...
InsuranceInsurance
Single interest ins.Single interest ins.
As the name implies, it only protects the lenderAs the name im...
How Much Can I AffordHow Much Can I Afford
to borrow?to borrow?
One tool used byOne tool used by
many of the moremany of t...
How Much Can I AffordHow Much Can I Afford
to borrow?to borrow?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mo. Inc.Mo. In...
CreditCredit
Credit Cards: Our Friends?Credit Cards: Our Friends?
Or Our Foes?
They can be either, depending on how we cho...
Credit Card PurchaseCredit Card Purchase
-400
-350
-300
-250
-200
-150
-100
-50
0
Bal
-400
-350
-300
-250
-200
-150
-100
-...
Simplified Credit Card StatementSimplified Credit Card Statement
Last Month’s BalanceLast Month’s Balance 128.42128.42
Pay...
-5000
-4000
-3000
-2000
-1000
0
1000
Minimum paymentMinimum payment (and make no other purchases):(and make no other purch...
A very costly way to use creditA very costly way to use credit
cardscards
-5000
-4000
-3000
-2000
-1000
0
1000
-5000
-4000...
The most expensive way to useThe most expensive way to use
Credit CardsCredit Cards
-1200
-1000
-800
-600
-400
-200
0
200
...
Credit CardsCredit Cards
Set up Fee?Set up Fee?
Annual Fee?Annual Fee?
WonderCardWonderCard
5224 789 003 2905224 789 003 2...
27” TV27” TV
$400.00$400.00
cashcash
If you have saved enough in your “buyIf you have saved enough in your “buy
stuff” acc...
27” TV27” TV
On SaleOn Sale
$350.00$350.00
by smart shoppingby smart shopping
If you shop around and findIf you shop aroun...
27” TV $400.0027” TV $400.00
using a credit cardusing a credit card at 18% A.P.R.at 18% A.P.R. IfIf
a person charges the $...
27” TV $400.0027” TV $400.00
Finance CompanyFinance Company
at 36% A.P.R.at 36% A.P.R.
18 mo. Pmts.18 mo. Pmts.
$29.00 per...
27” TV $400.0027” TV $400.00
Rent-to-OwnRent-to-Own
A rent-to-own company was offering theA rent-to-own company was offeri...
27” TV $400.0027” TV $400.00
TooToo Easy LoanEasy Loan ((Bad CreditBad Credit
OKOK))
300% A.P.R.300% A.P.R.
Car Title Pawn...
-110
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
27” TV $400.0027” TV $400.00
PaydayPayday LoanLoan
If a person borrows 100...
-110
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
27” TV $400.0027” TV $400.00
PaydayPayday LoanLoan
27” TV $400.0027” TV $400.00
10% (per week)10% (per week)
Payday lenders have been notorious forPayday lenders have been n...
Why?Why?Why doWhy do
people pay high interest rates?people pay high interest rates?
Desperate people do desperateDesperate...
Credit CardCredit Card 20002000 0 as agreed0 as agreed They do like to see a few paid asThey do like to see a few paid as
...
Popular Credit ScoringPopular Credit Scoring
System:System:
35% Payment history35% Payment history
– older & small items c...
Bill S. PrestonBill S. Preston 529-00-0000529-00-0000
Employer: Wylde StallionsEmployer: Wylde Stallions
CreditorCreditor ...
If you don’t pay your bills on time,If you don’t pay your bills on time,
youryour bad creditbad credit willwill inhibitinh...
What if you’ve already beenWhat if you’ve already been
smashed financially?smashed financially?
Hang on until you canHang ...
““Pre-Approved”Pre-Approved”
What Does it mean?What Does it mean?
NOTHING!NOTHING!
Beware! Don’t count onBeware! Don’t cou...
Late Payments can be extremelyLate Payments can be extremely
EXPENSIVE!EXPENSIVE!
If you pay 30 days late,If you pay 30 da...
Top Scams in UtahTop Scams in Utah~ Derived from information obtained from Utah Division Of Consumer Protection’s website....
Loan ScamLoan Scam
(STRICTLY CONFIDENTIAL)(STRICTLY CONFIDENTIAL)
We want to assist you in this UNIQUE venture.We want to ...
Loan ScamLoan Scam
(STRICTLY(STRICTLY CONFIDENTIALCONFIDENTIAL))
We want to assist you in this UNIQUE venture.We want to a...
E-mail Scam?E-mail Scam?
WORLD CURRENCY CARTEL will instruct aWORLD CURRENCY CARTEL will instruct a
LIMITED number of peop...
E-mail Scam?E-mail Scam?
WORLD CURRENCY CARTEL will instruct aWORLD CURRENCY CARTEL will instruct a
LIMITED numberLIMITED ...
URGENTURGENT
Provider: Crudcorp Inc.Provider: Crudcorp Inc.
Status: Pre-ApprovedStatus: Pre-Approved
Limit: $10,000Limit: ...
URGENTURGENT
Provider: Crudcorp Inc.Provider: Crudcorp Inc.
Status: Pre-ApprovedStatus: Pre-Approved
Limit: $10,000Limit: ...
Debit Cards?Debit Cards?
Debit CardDebit Card
5224 789 003 2905224 789 003 290
Why?Why?
““Easy access to checking”Easy acc...
Debit Card PurchaseDebit Card Purchase
0
50
100
150
200
250
300
350
400
Bal
Advantages:Advantages:
No debtNo debt (using o...
To avoid theTo avoid the
Hazards ofHazards of
Checking AccountsChecking Accounts
Keep your blankKeep your blank
checks in ...
To avoid checking acct. problems:To avoid checking acct. problems:
(1) Reconcile(1) Reconcile your records to the bank’s t...
0
500
1000
1500
2000
0
500
1000
1500
2000
Line of CreditLine of Credit CheckingChecking
To AvoidTo Avoid BouncedBounced
Ch...
0
500
1000
1500
2000
Overdraft Line of CreditOverdraft Line of Credit
0
500
1000
1500
2000
CheckingCheckingLine of CreditL...
Overdraft Line of CreditOverdraft Line of Credit
0
500
1000
1500
2000
CheckingChecking
$20$20 returned check feereturned c...
0
500
1000
1500
2000
Some people defeat the purposeSome people defeat the purpose
of their overdraft line of creditof thei...
0
500
1000
1500
2000
CheckingChecking
0
500
1000
1500
2000
Line of CreditLine of Credit
High rateHigh rate
But a high rate...
0
500
1000
1500
2000
0
500
1000
1500
2000
CheckingChecking SavingsSavings
Some financial institutions allowSome financial ...
0
500
1000
1500
2000
0
500
1000
1500
2000
CheckingChecking SavingsSavings
Keep your backupKeep your backup
available for when youavailable for when you
need it!need it!
0
500
1000
1500
2000
0
500
...
Dangers Lurking!Dangers Lurking!
Each time you refinance, youEach time you refinance, you
add to your debt (nearly always)...
NWFNWF
$147,000$147,000
$17,000$17,000
$164,000$164,000
10%10%
She had refinanced her home 2 years prior “because interest...
Mortgage Loans:Mortgage Loans:
Compare All CostsCompare All Costs
Before Signing AnythingBefore Signing Anything
BadguysBa...
Variable vs. Fixed RateVariable vs. Fixed Rate
In addition, they were given a variable rate loan (indexed artificially low...
Home Loans: BewareHome Loans: Beware
1. Prepayment1. Prepayment
penalties?penalties?
2. Compare Rates2. Compare Rates
3. C...
Avoid Closing TrapsAvoid Closing Trapsespecially if delayedespecially if delayed
UnderstandUnderstand
what you arewhat you...
AvoidAvoid
Advanced-Fee Loan ScamsAdvanced-Fee Loan Scams
Don’t fall for promises to get you aDon’t fall for promises to g...
Dear Sir, CONFIDENTIAL BUSINESS
PROPOSAL
FROM THE NIGERIANIGERIA CHAMBER OF
COMMERCE, I HAVE THE PRIVILEGE TO
REQUEST FOR ...
Dear Sir, CONFIDENTIAL BUSINESS
PROPOSAL
FROM THE NIGERIANIGERIA CHAMBER OF
COMMERCE, I HAVE THE PRIVILEGE TO
REQUEST FOR ...
#1 Cause of Divorce#1 Cause of Divorce
70-80% of70-80% of
divorcing couplesdivorcing couples
attribute theattribute the
ma...
BEWAREBEWARE
Tell me your credit card numberTell me your credit card number
Tell me your checking account #Tell me your ch...
BEWAREBEWARE
Tell me your credit card numberTell me your credit card number
Tell me your checking account #Tell me your ch...
RememberRemember
Understand what you sign.Understand what you sign.
Don’t sign anything you don’tDon’t sign anything you d...
Pay Off Loans EarlyPay Off Loans Early
10,000 12% 57 mo 210,000 12% 57 mo 2332 13,1672 13,167
Bal Rate Term Pmt Total Int ...
Pay Off Mortgage EarlyPay Off Mortgage Early
136,283 8% 10136,283 8% 101010 29 yr 349,05629 yr 349,056
Bal Rate Pmt Term T...
Bi-Weekly PaymentBi-Weekly Payment
Programs:Programs:
A convenient way toA convenient way to
pay off early,pay off early, ...
2626.08929.08929 half paymentshalf payments →→
1313.04464.04464 full paymentsfull payments in an average yearin an average...
About once everyAbout once every 1111 yearsyears
a person paying 1/2 of his monthly payment bi-weeklya person paying 1/2 o...
PayPay 1.091.09 x 733.77 =x 733.77 = 799.81799.81
1.09 =1.09 = 1/12 of 13.051/12 of 13.05 pmtspmts
Compare the advantage o...
Mortgage bal. $ 87,724 734 pmt 8Mortgage bal. $ 87,724 734 pmt 8% 20 yr remaining% 20 yr remaining
Car bal. 13,056 415 pmt...
After 1 year
New New New
Bal. Pmt. Term
77,554 651 21.9
8,072 250 3.1
4,126 150 2.6
6,253 120 8.5
0 0 0
794 90 .8
Getting ...
After 3.7 years
New New New
Bal. Pmt. Term
73,863 651 19.2
1,153 250 .4
0 0 0
2,745 360 .7
0 0 0
0 0 0
Getting out of debt...
Under water?Under water?
Mortgage 7% 600Mortgage 7% 600
Auto loan 10% 250Auto loan 10% 250
Cr Card 19% 100Cr Card 19% 100
...
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Money Talks

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Tips to help you avoid credit problems, high-cost loans, frauds, scams, and other financial problems.

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Money Talks

  1. 1. Money TalksMoney Talks:: If you’re not careful,If you’re not careful, It just says “Goodbye”It just says “Goodbye” Tips to help you avoid:Tips to help you avoid: High-cost Loans, Frauds, Scams,High-cost Loans, Frauds, Scams, & other financial troubles& other financial troubles To continue the slide show, press Page Down, or mouse click. To back up, press the Page Up key on your keyboard. To end the slide show, click on the Back ← command.
  2. 2. Is Education Worth It?Is Education Worth It? Average Annual IncomeAverage Annual Income (2002 U.S. Census Bureau)(2002 U.S. Census Bureau) High School DropoutHigh School Dropout 20,76420,764 High School GraduateHigh School Graduate 27,16027,160 College GraduateCollege Graduate 43,52943,529
  3. 3. TheThe GreedGreed SpectrumSpectrum LegalLegal HonestHonest FairFair IllegalIllegal GreedGreed There areThere are people outpeople out there whothere who treat otherstreat others with honesty,with honesty, integrity, andintegrity, and fairness.fairness. There areThere are also those whoalso those who will cheat,will cheat, steal, andsteal, and some will evensome will even murder formurder for money.money. Some find legal means of cheatingSome find legal means of cheating from us if we aren’t careful.from us if we aren’t careful. CheatCheat StealSteal MurderMurder Some act just like sharks, andSome act just like sharks, and don’t care what is legal or not.don’t care what is legal or not.
  4. 4. What makes usWhat makes us susceptible?susceptible?Utah has a reputation for being one of the fraud capitals of the world. Reasons?Utah has a reputation for being one of the fraud capitals of the world. Reasons? HonestyHonesty→→too trustingtoo trustingMost of us try to be honest, we are used to dealing with other honest people, and too often, we areMost of us try to be honest, we are used to dealing with other honest people, and too often, we are unprepared when a con artist comes along.unprepared when a con artist comes along. It is sad and ironic that our personal honesty can lead us to be too trusting.It is sad and ironic that our personal honesty can lead us to be too trusting.
  5. 5. WantsWants Even though we don’t like to think of ourselvesEven though we don’t like to think of ourselves as greedy, greed is not an on-off switch. It mayas greedy, greed is not an on-off switch. It may be said that all of us have some degree ofbe said that all of us have some degree of greed. If we channel that greed in a positivegreed. If we channel that greed in a positive direction, it may be called positive motivation.direction, it may be called positive motivation. IfIf we allow our greed to take us into the negativewe allow our greed to take us into the negative realms, vile and destructive behaviors result.realms, vile and destructive behaviors result. PositivePositive MotivationMotivation NegativeNegative
  6. 6. Service With aService With a SmileSmile The best cons use them very well!The best cons use them very well! How can we protect ourselves from smiley-faced crooks?How can we protect ourselves from smiley-faced crooks?
  7. 7. Don’t sign it -Don’t sign it - unless you agree to it!unless you agree to it! How can you agree to it if youHow can you agree to it if you don’t understand it?don’t understand it? How can you understand it, ifHow can you understand it, if you don’t read it?you don’t read it? If you still don’t understand it,If you still don’t understand it, get some helpget some help beforebefore signing!!!signing!!!
  8. 8. Tips to help you avoid aTips to help you avoid a lot of the problems:lot of the problems:
  9. 9. NOTHINGNOTHING isis RISKRISK-FREE-FREE Especially nothing involving money!Especially nothing involving money! If someone claims that something is “risk free” they either don’t understand, or they are lying (ifIf someone claims that something is “risk free” they either don’t understand, or they are lying (if money is involved, there is always risk of loss, as well as opportunity loss, etc.)!money is involved, there is always risk of loss, as well as opportunity loss, etc.)!
  10. 10. The Greater theThe Greater the RateRate TheThe HigherHigher thethe RiskRiskNot only in racing, but:Not only in racing, but: Especially inEspecially in financial matters!financial matters! 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 Reg. Savings CD (Time Certificate) Exception?Exception? If you have money at a federally insured bank or creditIf you have money at a federally insured bank or credit union, you can usually get a better interest rate withoutunion, you can usually get a better interest rate without changing your risk of loss - by putting your money into timechanging your risk of loss - by putting your money into time certificates, rather than in a regular savings account. Therecertificates, rather than in a regular savings account. There is a timing risk, however. If you need your money now, andis a timing risk, however. If you need your money now, and your certificate doesn’t mature for 3 months, you have ayour certificate doesn’t mature for 3 months, you have a timing problem.timing problem.
  11. 11. If it sounds too good to be trueIf it sounds too good to be true It is!It is! If you will remember this one saying, andIf you will remember this one saying, and use a little common sense, you’ll be able touse a little common sense, you’ll be able to avoid most of the frauds and scams. Mostavoid most of the frauds and scams. Most of them promise unrealistic rewards orof them promise unrealistic rewards or benefits. The con artists depend on peoplebenefits. The con artists depend on people whose greed exceeds their goodwhose greed exceeds their good judgement!judgement! Why would someone you don’t even knowWhy would someone you don’t even know want to give you money, or teach you somewant to give you money, or teach you some secret way to get it? Don’t fall for it!secret way to get it? Don’t fall for it!
  12. 12. When big money is at stakeWhen big money is at stake GreedGreed BrainBrain
  13. 13. InterestInterest If youIf you savesave money, youmoney, you Get itGet it If youIf you borrowborrow money, youmoney, you Pay itPay itA very easy concept, but not enough peopleA very easy concept, but not enough people put it to work in their lives!put it to work in their lives! If you spend tooIf you spend too much of your futuremuch of your future earnings, you messearnings, you mess up your future.up your future.
  14. 14. Don’t participate inDon’t participate in unethical deals!unethical deals! What assurance doWhat assurance do you have that theyyou have that they won’t also con you?won’t also con you? If someone offers you a dealIf someone offers you a deal that takes advantage ofthat takes advantage of someone else...someone else...
  15. 15. Want to know an easy way toWant to know an easy way to make a million dollars nextmake a million dollars next year?year? InvestInvest $10,000,000$10,000,000 at 10% APRat 10% APR
  16. 16. Want to know another way?Want to know another way? Put $1 intoPut $1 into savings eachsavings each monthmonth -- for 168 years-- for 168 years (at 5%).(at 5%). These may sound silly, but somewhere in betweenThese may sound silly, but somewhere in between $1,000,000 for 1 year, and $1 for 168 years, is a$1,000,000 for 1 year, and $1 for 168 years, is a
  17. 17. Save $100 each month at 5%Save $100 each month at 5% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Savings $1200 I nterest Earned $30 1st year
  18. 18. Save $100 each month at 5%Save $100 each month at 5% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Savings $6000 I nterest Earned $830 5th year
  19. 19. Save $100 each month at 5%Save $100 each month at 5% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Savings $12000 I nterest Earned $3530 10th year
  20. 20. Save $100 each month at 5%Save $100 each month at 5% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Savings $18000 I nterest Earned $8730 15th year Now earning > $110+ each monthNow earning > $110+ each month
  21. 21. Savings Goal:Savings Goal: 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Emergency For Sure Buy Stuff Many financial experts recommend that you save 10% of what you earn. Stash it away and try toMany financial experts recommend that you save 10% of what you earn. Stash it away and try to never, ever spend it! In order to do that, you will need at least one other account: I call it the “fornever, ever spend it! In order to do that, you will need at least one other account: I call it the “for sure” savings account. This account is for the “for sure” expenses which come from time to time.sure” savings account. This account is for the “for sure” expenses which come from time to time. Example: Auto repairs. If we drive a car, we will have repairs, maintenance, and insurance. WeExample: Auto repairs. If we drive a car, we will have repairs, maintenance, and insurance. We don’t always know when, but we know that they will happen. Another example: Christmas. Thosedon’t always know when, but we know that they will happen. Another example: Christmas. Those among us who celebrate Christmas are highly likely to spend significant amounts at Christmastime.among us who celebrate Christmas are highly likely to spend significant amounts at Christmastime.
  22. 22. Start With:Start With: 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Emergency For Sure Buy Stuff Start immediately with a “For Sure” savings. Estimate your for sure expenses for each year andStart immediately with a “For Sure” savings. Estimate your for sure expenses for each year and save enough each month to cover them.save enough each month to cover them. When you decide to do the emergency fund, you may not be able to start with 10% right away.When you decide to do the emergency fund, you may not be able to start with 10% right away. But start with something, even if it is only 1%. Then, as your income increases, increase theBut start with something, even if it is only 1%. Then, as your income increases, increase the amount going to your emergency fund at least until you reach 10%.amount going to your emergency fund at least until you reach 10%.
  23. 23. Increase as you can:Increase as you can: 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Emergency For Sure Buy Stuff Keep increasing as your income increases.Keep increasing as your income increases.
  24. 24. Build More:Build More: 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Emergency For Sure Buy Stuff
  25. 25. More:More: 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Emergency For Sure Buy Stuff Penalty for withdrawal IRA 401K 457K Roth IRA InconvenientInconvenient You may wish to do like some people do: put your emergency fund into accounts which penalizeYou may wish to do like some people do: put your emergency fund into accounts which penalize withdrawal. For many of us, that thought of penalty is sufficient to prevent us from withdrawing thewithdrawal. For many of us, that thought of penalty is sufficient to prevent us from withdrawing the money early. It is also advisable to put your “for sure” savings into an account which ismoney early. It is also advisable to put your “for sure” savings into an account which is inconvenient to get to. If it is too easy to access, it may be gone when you need it.inconvenient to get to. If it is too easy to access, it may be gone when you need it.
  26. 26. Invest vs. SaveInvest vs. Save 0 1000 2000 3000 4000 5000 6000 7000 8000 J-93 D -93 J-94 D -94 J-95 D -95 J-96 D -96 J-97 D -97 J-98 D -98 J-99 D -99 J-00 D -00 J-01 D -01 Here is a graph of the growth pattern of a particular mutual fund (group of stocks) compared to theHere is a graph of the growth pattern of a particular mutual fund (group of stocks) compared to the same amount invested at a slow, steady pace of a 5% federally insured time certificate. Notice howsame amount invested at a slow, steady pace of a 5% federally insured time certificate. Notice how the mutual fund has had stronger growth, but also periods of decline. What is it going to do next?the mutual fund has had stronger growth, but also periods of decline. What is it going to do next? You may wish to keep at least some of your savings in the safer, but slower growing timeYou may wish to keep at least some of your savings in the safer, but slower growing time certificates.certificates.
  27. 27. Invest vs. SaveInvest vs. Save 0 1000 2000 3000 4000 5000 6000 7000 8000 J-93 D -93 J-94 D -94 J-95 D -95 J-96 D -96 J-97 D -97 J-98 D -98 J-99 D -99 J-00 D -00 J-01 D -01 If we look at the “growth” during years 2000, 2001, and into 2002, we see that the time certificateIf we look at the “growth” during years 2000, 2001, and into 2002, we see that the time certificate has done much better. Remember, the greater the rate, the greater the risk. Some have describedhas done much better. Remember, the greater the rate, the greater the risk. Some have described investing in the stock market as “legalized gambling”. With some study, you may be able toinvesting in the stock market as “legalized gambling”. With some study, you may be able to minimize the risk, nevertheless, there is still risk involved, no matter what the investment, or howminimize the risk, nevertheless, there is still risk involved, no matter what the investment, or how sure it sounds.sure it sounds.
  28. 28. Gross IncomeGross Income 0 10000 20000 30000 40000 50000 60000 70000 80000 0 3 6 9 12 15 18 21 24 27 30 33 36 39 Dropout $600,000 HS Grad $900,000 College $1,600,000 FixedFixed ExpensesExpenses Disposable IncomeDisposable Income This is a graphic representation of the average lifetime earnings of the high school dropout,This is a graphic representation of the average lifetime earnings of the high school dropout, graduate, and college graduate. The red represents fixed expenses (housing, utilities, food, etc.),graduate, and college graduate. The red represents fixed expenses (housing, utilities, food, etc.), the green represents income which a person can do with what s/he pleases.the green represents income which a person can do with what s/he pleases.
  29. 29. Disposable IncomeDisposable Income Assuming that during the next 10 years or so, you will have somewhere around $30,000Assuming that during the next 10 years or so, you will have somewhere around $30,000 disposable income,disposable income, how much of it do you want to spend on what you want?how much of it do you want to spend on what you want? $30,000$30,000 ~$25,000~$25,000 assuming 5 yr. payoutassuming 5 yr. payout ~$20,000~$20,000 assuming 5yr. payoutassuming 5yr. payout ~14,000~14,000 assuming 5 yrassuming 5 yr 7%7%18%18%36%36%SaveSave If you borrow at:If you borrow at: If you borrow at 7% to buy a new carIf you borrow at 7% to buy a new car every 5 years, you’ll only get to spendevery 5 years, you’ll only get to spend $25,000 on cars$25,000 on cars (the rest goes to interest).(the rest goes to interest).If you borrow at 18% by using a creditIf you borrow at 18% by using a credit card and paying for each of yourcard and paying for each of your purchases in an average of 5 years,purchases in an average of 5 years, you’ll only get to spend ~$20,000 onyou’ll only get to spend ~$20,000 on what you want.what you want.
  30. 30. BeforeBefore you borrowyou borrow, know the APR!!!, know the APR!!! Unfortunately, there are still lenders outUnfortunately, there are still lenders out there who state rates other than thethere who state rates other than the APR (in violation of federal law). SomeAPR (in violation of federal law). Some refer to an add-on rate, some to arefer to an add-on rate, some to a weekly or monthly rate. Remember,weekly or monthly rate. Remember, the basis of comparison is the Annualthe basis of comparison is the Annual Percentage Rate.Percentage Rate. 9% (9% (add-on rateadd-on rate) is) is ~20% (A.P.R.)~20% (A.P.R.) Some people only ask: “What’sSome people only ask: “What’s my payment amount?” Don’t bemy payment amount?” Don’t be one of them.one of them. Annual Percentage RateAnnual Percentage Rate (APR)(APR) The Federal Truth in Lending Act requires lenders to disclose the APR toThe Federal Truth in Lending Act requires lenders to disclose the APR to consumers. It is our basis of comparison. It is a great tool for us to know if we areconsumers. It is our basis of comparison. It is a great tool for us to know if we are getting a good deal!getting a good deal!
  31. 31. When you borrow, always try toWhen you borrow, always try to pay less than...pay less than... 13% A.P.R.13% A.P.R. Consider yourselfConsider yourself unluckyunlucky (or______)(or______) if youif you can’t beat 13%!can’t beat 13%!
  32. 32. Why people pay more than 13%Why people pay more than 13% Not enough incomeNot enough income UneducatedUneducated Bad creditBad credit DeceivedDeceived
  33. 33. Interest Rate CeilingInterest Rate Ceiling 0 5 10 15 20 25 30 35 40 Banks & CUs < 13% Credit Cards ~ 18% Small Loan 18-36% 36%36% <<13%13% 18%18% If you keep your creditIf you keep your credit good and stay with thegood and stay with the reputable lenders, youreputable lenders, you can nearly always beatcan nearly always beat 13% APR.13% APR. That is, unless youThat is, unless you use your credit carduse your credit card as a means ofas a means of borrowing. Theborrowing. The average credit cardaverage credit card rate is ~18%.rate is ~18%. Many smallMany small loanloan companiescompanies chargecharge between 18between 18 and 36%and 36% APR.APR. Some states have anSome states have an interest rate ceiling ofinterest rate ceiling of 36%. Utah did at one36%. Utah did at one time, but currentlytime, but currently has no limit. We arehas no limit. We are seeing some ratesseeing some rates that are astronomical.that are astronomical. For instance:For instance:
  34. 34. TOO EASY LOAN COMPANYTOO EASY LOAN COMPANY Promissory Note with Security Interest Security: 1996 OldsPromissory Note with Security Interest Security: 1996 Olds AnnualAnnual PercentagePercentage RateRate The cost of your creditThe cost of your credit as a yearly rate.as a yearly rate. 300%300% FinanceFinance ChargeCharge The dollar amount theThe dollar amount the credit will cost you.credit will cost you. $4,442.80$4,442.80 Amount FinancedAmount Financed The amount of creditThe amount of credit provided to you or onprovided to you or on your behalf.your behalf. $$2000.002000.00 Total of PaymentsTotal of Payments The amount you willThe amount you will have paid after youhave paid after you have made allhave made all payments aspayments as scheduled.scheduled. $6,442.80$6,442.80 25% per month25% per month Payment Schedule:Payment Schedule: 12 Payments of $536.9012 Payments of $536.90.. Beginning 2/4/99 and on the 4th of each month thereafter until final payment isBeginning 2/4/99 and on the 4th of each month thereafter until final payment is made on January 4, 2000.made on January 4, 2000. These are actual figures taken from a real loan which was faxed to the Department (name ofThese are actual figures taken from a real loan which was faxed to the Department (name of lender changed). Notice the APR. Which is higher 13% or 300%? The borrower got 12 monthlylender changed). Notice the APR. Which is higher 13% or 300%? The borrower got 12 monthly payments of $536. If he pays back everything on time, he pays a total of $6,443 in one year.payments of $536. If he pays back everything on time, he pays a total of $6,443 in one year. He pledged a 96 Oldsmobile, which was worth about $10,000 at the time this loan was written.He pledged a 96 Oldsmobile, which was worth about $10,000 at the time this loan was written. If he misses a payment, they take his car. What happens to his equity? Many of these “auto titleIf he misses a payment, they take his car. What happens to his equity? Many of these “auto title lenders” have been stating a monthly rate rather than the APR.lenders” have been stating a monthly rate rather than the APR.
  35. 35. PurchasePurchase HonestHonest CheatCheat StealSteal MurderMurder Where on the greed spectrum are car salesmen?Where on the greed spectrum are car salesmen? They can be anywhere. Some are veryThey can be anywhere. Some are very unscrupulous, others are very honest. Even ifunscrupulous, others are very honest. Even if you deal with an honest one, you still have ayou deal with an honest one, you still have a conflict of interest. He wants to make money,conflict of interest. He wants to make money, you want avoid paying as much as you can. Whoyou want avoid paying as much as you can. Who is to protect you? If you don’t, probably nobody.is to protect you? If you don’t, probably nobody.
  36. 36. Auto Loans:Auto Loans: APRAPR 7%7% 12%12% Loan Amt $10,000 $10,000Loan Amt $10,000 $10,000 TermTerm 5 years5 years 5 years5 years Mo PmtMo Pmt $ 198$ 198 $ 222$ 222 InterestInterest $ 1,881$ 1,881 $ 3,347$ 3,347 Tot. Pmts $11,881Tot. Pmts $11,881 $13,347$13,347 DifferenceDifference $1,466$1,466 25%25% 10,00010,000 5 years5 years $ 294$ 294 $ 7,610$ 7,610 $17,610$17,610 $5,729$5,729 Comparing different financing arrangements,Comparing different financing arrangements, and the cost of borrowing $10,000 atand the cost of borrowing $10,000 at 7, 12, and 25% APR.7, 12, and 25% APR. The individual who got theThe individual who got the 25% rate would pay a total of25% rate would pay a total of $5729 more than the one$5729 more than the one who got the 7% rate. Hewho got the 7% rate. He knew about the 7% loan, butknew about the 7% loan, but didn’t qualify because of baddidn’t qualify because of bad credit.credit. Notice that the individual who got the 12% rate paysNotice that the individual who got the 12% rate pays a total of $1466 more than the one who got 7%a total of $1466 more than the one who got 7% (assuming each pay according to the terms of the(assuming each pay according to the terms of the contract). If he had made 5 phone calls to lenders,contract). If he had made 5 phone calls to lenders, he would have found the 7% loan. Is it worth $1466he would have found the 7% loan. Is it worth $1466 to make 5 phone calls? Sometimes yes!to make 5 phone calls? Sometimes yes!
  37. 37. InsuranceInsurance Single interest ins.Single interest ins. As the name implies, it only protects the lenderAs the name implies, it only protects the lender More expensive!More expensive! Full CoverageFull Coverage Liability & P.I.P.Liability & P.I.P. “No-Fault”“No-Fault” Utah State law requires No-fault insurance, the penalties forUtah State law requires No-fault insurance, the penalties for failure to maintain are severe.failure to maintain are severe. FailsFails toto provideprovide No-FaultNo-Fault Penalties for failure to maintain no-fault insurance:Penalties for failure to maintain no-fault insurance: License Revoked 1 yr+License Revoked 1 yr+ Car Impounded $200+Car Impounded $200+ TicketTicket && fine $400-1000fine $400-1000 SR 22 (high risk) Ins.SR 22 (high risk) Ins. (very expensive)(very expensive) CollisionCollision ComprehensiveComprehensive Lenders require collision andLenders require collision and comprehensive insurance. Failure tocomprehensive insurance. Failure to maintain insurance puts the borrower inmaintain insurance puts the borrower in default of his/her contract. At default,default of his/her contract. At default, the lender can repossess, but instead,the lender can repossess, but instead, usually add:usually add:
  38. 38. How Much Can I AffordHow Much Can I Afford to borrow?to borrow? One tool used byOne tool used by many of the moremany of the more reputable lenders :reputable lenders : Debt-to-IncomeDebt-to-Income RatioRatio 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mo. Inc.Mo. Inc. Mo. DebtMo. Debt Pmts.Pmts. 36%36% If your monthly debt payments (including mortgageIf your monthly debt payments (including mortgage or rent) are less than 36% of your monthly grossor rent) are less than 36% of your monthly gross income, and if your credit is good, you have a goodincome, and if your credit is good, you have a good chance of getting a loan with the lower-ratechance of getting a loan with the lower-rate lenders.lenders. Why not 96%? Because we need to live:Why not 96%? Because we need to live:
  39. 39. How Much Can I AffordHow Much Can I Afford to borrow?to borrow? 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mo. Inc.Mo. Inc. 36%36% Debt pmtsDebt pmts TaxesTaxes FoodFood Misc.Misc. UtilitiesUtilities If you have a debt-to-income ratio ofIf you have a debt-to-income ratio of 36%, some months, you will have just36%, some months, you will have just enough to cover expenses.enough to cover expenses. Occasionally youOccasionally you will have a bitwill have a bit extra.extra. What will you doWhat will you do whenwhen you have a high-you have a high- expense month?expense month? Remember the “for sure” savingsRemember the “for sure” savings account! You will have months like this!account! You will have months like this!
  40. 40. CreditCredit Credit Cards: Our Friends?Credit Cards: Our Friends? Or Our Foes? They can be either, depending on how we choose to use them.They can be either, depending on how we choose to use them. CrediCredi
  41. 41. Credit Card PurchaseCredit Card Purchase -400 -350 -300 -250 -200 -150 -100 -50 0 Bal -400 -350 -300 -250 -200 -150 -100 -50 0 Purch Pmt Bal If we pay off our credit card balance each month, we pay no interestIf we pay off our credit card balance each month, we pay no interest (most credit cards).(most credit cards). If we don’t pay the entire balance, interest will be charged.If we don’t pay the entire balance, interest will be charged.
  42. 42. Simplified Credit Card StatementSimplified Credit Card Statement Last Month’s BalanceLast Month’s Balance 128.42128.42 Payments receivedPayments received (128.42)(128.42) InterestInterest 00 Auto Repair CenterAuto Repair Center 289.94289.94 Joe’s Gas & GoodiesJoe’s Gas & Goodies 14.3214.32 Babe’s Apparel StoreBabe’s Apparel Store 96.2496.24 Ending balanceEnding balance 400.50400.50 Minimum Payment DueMinimum Payment Due 20.0020.00 We have theWe have the choice ofchoice of paying thepaying the entire balance,entire balance, the minimumthe minimum requiredrequired payment, orpayment, or some amountsome amount in between. Ifin between. If we wish towe wish to avoid payingavoid paying interest, weinterest, we must pay themust pay the entire balance.entire balance.
  43. 43. -5000 -4000 -3000 -2000 -1000 0 1000 Minimum paymentMinimum payment (and make no other purchases):(and make no other purchases): AtAt 18% it would take18% it would take 3434 yrs to payyrs to pay off -- $ 12,893 int.off -- $ 12,893 int. At 21.9%At 21.9% 8888 yrs to pay off -- $ 43,729 int.yrs to pay off -- $ 43,729 int. Paying only the minimum required payment is a veryPaying only the minimum required payment is a very costly way to use credit cardscostly way to use credit cards
  44. 44. A very costly way to use creditA very costly way to use credit cardscards -5000 -4000 -3000 -2000 -1000 0 1000 -5000 -4000 -3000 -2000 -1000 0 1000 Some people chargeSome people charge against their credit cards toagainst their credit cards to the limit, then try tothe limit, then try to consolidate. Many financialconsolidate. Many financial institutions say:institutions say: Yes, but onlyYes, but only IFIF you haveyou have good creditgood credit enough incomeenough income equityequity -5000 -4000 -3000 -2000 -1000 0 1000
  45. 45. The most expensive way to useThe most expensive way to use Credit CardsCredit Cards -1200 -1000 -800 -600 -400 -200 0 200 Some people charge on their credit cards until they go slightly over their limit, then -Some people charge on their credit cards until they go slightly over their limit, then - even if they make the minimum required payment, they get deeper into debt as theireven if they make the minimum required payment, they get deeper into debt as their balance increases because of:balance increases because of: Over-limit fees.Over-limit fees.
  46. 46. Credit CardsCredit Cards Set up Fee?Set up Fee? Annual Fee?Annual Fee? WonderCardWonderCard 5224 789 003 2905224 789 003 290 Grace Period?Grace Period? Most credit card companies do not charge setup fees or annualMost credit card companies do not charge setup fees or annual fees.fees. If you wish to avoid paying interest, make sure your credit cardIf you wish to avoid paying interest, make sure your credit card plan charges no interest when you pay off the balance within theplan charges no interest when you pay off the balance within the grace period, and do it!.grace period, and do it!. APR?APR? If you don’t pay your balance each month, be sure to payIf you don’t pay your balance each month, be sure to pay attention to the Annual Percentage Rate and find a credit cardattention to the Annual Percentage Rate and find a credit card with a low rate.with a low rate.
  47. 47. 27” TV27” TV $400.00$400.00 cashcash If you have saved enough in your “buyIf you have saved enough in your “buy stuff” account, you can withdraw yourstuff” account, you can withdraw your money and buy the TV. If you use a creditmoney and buy the TV. If you use a credit card, and pay off the balance within thecard, and pay off the balance within the billing cycle, you pay no interest (if it is abilling cycle, you pay no interest (if it is a credit card which has the grace period).credit card which has the grace period). Suppose you see a TV you want to buySuppose you see a TV you want to buy with a retail price of $400.with a retail price of $400.
  48. 48. 27” TV27” TV On SaleOn Sale $350.00$350.00 by smart shoppingby smart shopping If you shop around and findIf you shop around and find the same TV for $350, youthe same TV for $350, you just saved $50. But what didjust saved $50. But what did you save in terms of youryou save in terms of your ability to earn money? If youability to earn money? If you are in an average tax bracketare in an average tax bracket of about 20%, you must earnof about 20%, you must earn $62.50 before you can spend$62.50 before you can spend $50. So if you avoid$50. So if you avoid spending $50, that is likespending $50, that is like earning $62.50. If you earnearning $62.50. If you earn $10 per hour, you just saved$10 per hour, you just saved the equivalent of 6 1/4 hoursthe equivalent of 6 1/4 hours of work!of work! $50 / .80 = $62.50 earn$50 / .80 = $62.50 earn $62.50 / 10 = ~6$62.50 / 10 = ~6 1/4 hrs1/4 hrs
  49. 49. 27” TV $400.0027” TV $400.00 using a credit cardusing a credit card at 18% A.P.R.at 18% A.P.R. IfIf a person charges the $400 TV and cana person charges the $400 TV and can pay-pay- $26.00$26.00 per monthper month itit will takewill take 18 months18 monthsto payoff.to payoff. During that time the buyer would payDuring that time the buyer would pay $59.00$59.00 in interest, for ain interest, for a total cost of $total cost of $459459 $59 shouldn’t ruin anybody’s life, but, who wants $59 added to each of their purchases? $59.00 / .80 = $74 earn $74 / 10 = ~7.4 hrs extra to pay the 59.
  50. 50. 27” TV $400.0027” TV $400.00 Finance CompanyFinance Company at 36% A.P.R.at 36% A.P.R. 18 mo. Pmts.18 mo. Pmts. $29.00 per mo.$29.00 per mo. $123.00 int.$123.00 int. Total Cost $Total Cost $523523 $123 / .80 = $154$123 / .80 = $154 $154 / 10 = ~15.4 hrs$154 / 10 = ~15.4 hrs
  51. 51. 27” TV $400.0027” TV $400.00 Rent-to-OwnRent-to-Own A rent-to-own company was offering theA rent-to-own company was offering the same TV forsame TV for $70$70 per monthper month How many months would be fair beforeHow many months would be fair before ownership? When asked, they saidownership? When asked, they said 18 months18 months (196% A.P.R.)(196% A.P.R.) ($860.00 int.)($860.00 int.) Total Cost $Total Cost $12601260 $860.00 / .80 = $1075.00 earn$860.00 / .80 = $1075.00 earn $1075.00 / 10 = 107 hrs$1075.00 / 10 = 107 hrs Neither the APR nor the interest is required toNeither the APR nor the interest is required to be disclosed on a rent-to-own contract,be disclosed on a rent-to-own contract, because technically, they are not “loans”.because technically, they are not “loans”.
  52. 52. 27” TV $400.0027” TV $400.00 TooToo Easy LoanEasy Loan ((Bad CreditBad Credit OKOK)) 300% A.P.R.300% A.P.R. Car Title PawnCar Title Pawn If 18 monthsIf 18 months $102.00 payments$102.00 payments $1,433 interest$1,433 interest Total Cost $Total Cost $18331833 $1433 / .80 = $1791$1433 / .80 = $1791 1791 / 10 = 179 hrs1791 / 10 = 179 hrs
  53. 53. -110 -100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 27” TV $400.0027” TV $400.00 PaydayPayday LoanLoan If a person borrows 100 from a payday lender for a week,If a person borrows 100 from a payday lender for a week, not a big deal. S/he paid $10 interest. However we arenot a big deal. S/he paid $10 interest. However we are finding that many people use payday loans over and over.finding that many people use payday loans over and over.
  54. 54. -110 -100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 27” TV $400.0027” TV $400.00 PaydayPayday LoanLoan
  55. 55. 27” TV $400.0027” TV $400.00 10% (per week)10% (per week) Payday lenders have been notorious forPayday lenders have been notorious for illegally stating a weekly rate rather than theillegally stating a weekly rate rather than the APR when asked about the cost of theirAPR when asked about the cost of their loans. Remember, the fair basis ofloans. Remember, the fair basis of comparison for loan costs is the APR (ascomparison for loan costs is the APR (as well as the dollar amount).well as the dollar amount). $2,725 interest$2,725 interest Total Cost $Total Cost $31253125 10% per week is about10% per week is about 520% APR.520% APR. (10% x 52 wks = 520)(10% x 52 wks = 520) 18 months18 months Payday loans are notPayday loans are not intended to be more than short-term loans,intended to be more than short-term loans, usually less than one month. But, forusually less than one month. But, for comparison purposes, if someone used acomparison purposes, if someone used a series of payday loans to finance the TVseries of payday loans to finance the TV over 18 months:over 18 months:
  56. 56. Why?Why?Why doWhy do people pay high interest rates?people pay high interest rates? Desperate people do desperateDesperate people do desperate thingsthings --Over-extended--Over-extended. People with excessive. People with excessive debts do not qualify for low-rate loans.debts do not qualify for low-rate loans. --Bad Credit--Bad Credit. People with bad credit history. People with bad credit history usually do not qualify for low-rate loans.usually do not qualify for low-rate loans. --Low income--Low income. People with low income relative. People with low income relative to expenses do not qualify.to expenses do not qualify. --Gambling--Gambling. Compulsive gambling has been the. Compulsive gambling has been the financial downfall of many.financial downfall of many. --Alcoholism--Alcoholism. The individual whose 300% loan. The individual whose 300% loan was shown early in this presentation was an alcoholic.was shown early in this presentation was an alcoholic. --Drugs--Drugs. A very high percentage of the people in. A very high percentage of the people in jails and prisons are their because of drugs. X-consjails and prisons are their because of drugs. X-cons have a difficult time establishing good credit.have a difficult time establishing good credit. --Health problems--Health problems. Some health problems. Some health problems are preventable, and health insurance helpsare preventable, and health insurance helps immensely when we do have problems.immensely when we do have problems.
  57. 57. Credit CardCredit Card 20002000 0 as agreed0 as agreed They do like to see a few paid asThey do like to see a few paid as Home Mortgage 70000Home Mortgage 70000 65000 current65000 current agreed, or current accounts.agreed, or current accounts. Overdraft Line of CrOverdraft Line of Cr 20002000 0 as agreed0 as agreed Even rarely used credit cards help build “good credit” (as long as a person pays on time and doesn’t have tooEven rarely used credit cards help build “good credit” (as long as a person pays on time and doesn’t have too many credit cards). A person can establish credit without paying any interest by paying off credit card balancesmany credit cards). A person can establish credit without paying any interest by paying off credit card balances within the billing cycle, and by maintaining an overdraft line of credit with a zero balance.within the billing cycle, and by maintaining an overdraft line of credit with a zero balance. Bill S. PrestonBill S. Preston 529-00-0000529-00-0000 Employer: Wylde StallynsEmployer: Wylde Stallyns Credit Bureau ReportsCredit Bureau Reports The low-rate lenders do not want to see payments more than 30 days lateThe low-rate lenders do not want to see payments more than 30 days late Department StoreDepartment Store 10001000 10501050 5>305>30 Credit CardCredit Card 50005000 49994999 6>30,3>60,1>906>30,3>60,1>90 especially not 60 & 90especially not 60 & 90 Dumpy BikesDumpy Bikes 500500 430 Collection agency430 Collection agency Fast Car LotFast Car Lot 60006000 00 RepossessionRepossession Any one of the above can disqualify a person from borrowing from the lower-rate lenders forAny one of the above can disqualify a person from borrowing from the lower-rate lenders for quite some time. Lenders are also starting to pay attention to credit card balances relative toquite some time. Lenders are also starting to pay attention to credit card balances relative to limits. Credit cards at their limit are often counted negatively as are cards over their limit.limits. Credit cards at their limit are often counted negatively as are cards over their limit.
  58. 58. Popular Credit ScoringPopular Credit Scoring System:System: 35% Payment history35% Payment history – older & small items count lessolder & small items count less 30% Amount of debt30% Amount of debt – overextended?overextended? 15% Length of credit history15% Length of credit history 10% New credit10% New credit – amount accumulated within theamount accumulated within the past 12-18 monthspast 12-18 months 10% Types of credit10% Types of credit – too many credit cardstoo many credit cards
  59. 59. Bill S. PrestonBill S. Preston 529-00-0000529-00-0000 Employer: Wylde StallionsEmployer: Wylde Stallions CreditorCreditor LimitLimit BalBal CommentsComments Department StoreDepartment Store 10001000 10501050 5>30, 3>605>30, 3>60 Credit CardCredit Card 50005000 49994999 6>30,3>60,1>906>30,3>60,1>90 Dumpy BikesDumpy Bikes 500500 430 Collection agency430 Collection agency Fast Car LotFast Car Lot 60006000 00 RepossessionRepossession Credit CardCredit Card 20002000 0 as agreed0 as agreed Home Mortgage 70000 65000 currentHome Mortgage 70000 65000 current Overdraft Line of CrOverdraft Line of Cr 20002000 0 as agreed0 as agreed Some companies claim to be able to remove legitimate debts from credit reports. They areSome companies claim to be able to remove legitimate debts from credit reports. They are fraudulent! Do not participate in a fraud. If you find errors on your credit report, you mayfraudulent! Do not participate in a fraud. If you find errors on your credit report, you may correct them yourself by contacting the credit bureau directly.correct them yourself by contacting the credit bureau directly. Credit Repair ScamsCredit Repair Scams Equifax: 800 685-1111, Trans Union: 800 916-8800, Experian: 888 397-3742
  60. 60. If you don’t pay your bills on time,If you don’t pay your bills on time, youryour bad creditbad credit willwill inhibitinhibit you:you: BorrowingBorrowing Buying a homeBuying a home RentingRenting Many landlords are looking at credit histories.Many landlords are looking at credit histories. Increasing insurance ratesIncreasing insurance rates ManyMany insurance companies charge higher rates to people withinsurance companies charge higher rates to people with poor credit.poor credit. Credit Card CompaniesCredit Card Companies Many credit cardMany credit card companies are routinely pulling credit reports on theircompanies are routinely pulling credit reports on their existing customers. When those customers have negativeexisting customers. When those customers have negative credit with other debtors, their interest rates are increased.credit with other debtors, their interest rates are increased. Getting a good jobGetting a good job Many employers areMany employers are looking at credit reports in their employee selection process.looking at credit reports in their employee selection process.
  61. 61. What if you’ve already beenWhat if you’ve already been smashed financially?smashed financially? Hang on until you canHang on until you can bounce back!bounce back! Satisfy your obligationsSatisfy your obligations asap (high rates 1st)!*asap (high rates 1st)!* Keep everythingKeep everything current for 2+ years.current for 2+ years. *If you can’t, get some*If you can’t, get some help.help.
  62. 62. ““Pre-Approved”Pre-Approved” What Does it mean?What Does it mean? NOTHING!NOTHING! Beware! Don’t count onBeware! Don’t count on “pre-approved” financing“pre-approved” financing arrangements. Too oftenarrangements. Too often “pre-approved” simply“pre-approved” simply means you name wasmeans you name was obtained from aobtained from a solicitation list.solicitation list.
  63. 63. Late Payments can be extremelyLate Payments can be extremely EXPENSIVE!EXPENSIVE! If you pay 30 days late,If you pay 30 days late, – your credit report is negatively affectedyour credit report is negatively affected which results in increased future costs.which results in increased future costs. If you are 1 minute late on some contractsIf you are 1 minute late on some contracts – you get late feesyou get late fees late fees can change a debt from a reasonable interestlate fees can change a debt from a reasonable interest rate to an outrageous effective rate.rate to an outrageous effective rate. RepossessionsRepossessions Contrary to popularContrary to popular belief, lenders do not need to notify a person before repossessing.belief, lenders do not need to notify a person before repossessing. Legal & other feesLegal & other fees Fees can bring financial death!Fees can bring financial death!
  64. 64. Top Scams in UtahTop Scams in Utah~ Derived from information obtained from Utah Division Of Consumer Protection’s website.~ Derived from information obtained from Utah Division Of Consumer Protection’s website. 1.1. Identity TheftIdentity Theft 2. Deceptive Business Training Seminars.2. Deceptive Business Training Seminars. 3. Fraudulent Telemarketing Schemes.3. Fraudulent Telemarketing Schemes. 4. Fraudulent Charities.4. Fraudulent Charities. 5. Travel Scams.5. Travel Scams. 6. Nigerian Money Frauds.6. Nigerian Money Frauds. 7. Deceptive Car Repair Practices.7. Deceptive Car Repair Practices. 8. Prize Promotion Scams.8. Prize Promotion Scams. 9.9. Telephone Slamming & Cramming.Telephone Slamming & Cramming. 10. Advance Fee Loan & Credit Card Scams.10. Advance Fee Loan & Credit Card Scams. 11. Credit Repair Scams.11. Credit Repair Scams.
  65. 65. Loan ScamLoan Scam (STRICTLY CONFIDENTIAL)(STRICTLY CONFIDENTIAL) We want to assist you in this UNIQUE venture.We want to assist you in this UNIQUE venture. These European transactions are Legal,These European transactions are Legal, allowing you to borrow hundreds of thousandsallowing you to borrow hundreds of thousands of dollars and NEVER have to repay a cent!!of dollars and NEVER have to repay a cent!! How? The lender (Offshore Bank) deducts aHow? The lender (Offshore Bank) deducts a compensating balance from the proceeds ofcompensating balance from the proceeds of your loan, your loan is SELF-LIQUIDATING oryour loan, your loan is SELF-LIQUIDATING or PAID OFF by the compensating balance.PAID OFF by the compensating balance. EVERYONE QUALIFIES. No risk what soEVERYONE QUALIFIES. No risk what so ever!!ever!!
  66. 66. Loan ScamLoan Scam (STRICTLY(STRICTLY CONFIDENTIALCONFIDENTIAL)) We want to assist you in this UNIQUE venture.We want to assist you in this UNIQUE venture. TheseThese EuropeanEuropean transactions are Legal,transactions are Legal, allowing you to borrowallowing you to borrow hundreds of thousandshundreds of thousands of dollars andof dollars and NEVER have to repayNEVER have to repay a cent!!a cent!! How? The lender (How? The lender (OffshoreOffshore Bank) deducts aBank) deducts a compensating balancecompensating balance from the proceeds offrom the proceeds of your loan, your loan isyour loan, your loan is SELF-LIQUIDATINGSELF-LIQUIDATING oror PAID OFF by the compensating balance.PAID OFF by the compensating balance. EVERYONE QUALIFIESEVERYONE QUALIFIES.. No riskNo risk what sowhat so ever!!ever!! Nonsense!Nonsense!
  67. 67. E-mail Scam?E-mail Scam? WORLD CURRENCY CARTEL will instruct aWORLD CURRENCY CARTEL will instruct a LIMITED number of people on ‘HOW TOLIMITED number of people on ‘HOW TO CONVERT $25 INTO $100 OF LEGALCONVERT $25 INTO $100 OF LEGAL CURRENCY’. We will transact the firstCURRENCY’. We will transact the first conversion for you, after that you can easilyconversion for you, after that you can easily and quickly do this on your own, hundreds orand quickly do this on your own, hundreds or even thousands of times every month. TAKEeven thousands of times every month. TAKE ADVANTAGE OF THIS “SECRET FLAW”!…ADVANTAGE OF THIS “SECRET FLAW”!… There is a one time membership fee of onlyThere is a one time membership fee of only $35… Your important instructions will be$35… Your important instructions will be mailed… We are only accepting CHECK-BY-mailed… We are only accepting CHECK-BY- FAX payable to NDML. Fax it to 212-000-0000.FAX payable to NDML. Fax it to 212-000-0000.
  68. 68. E-mail Scam?E-mail Scam? WORLD CURRENCY CARTEL will instruct aWORLD CURRENCY CARTEL will instruct a LIMITED numberLIMITED number of people on ‘HOW TOof people on ‘HOW TO CONVERTCONVERT $25 INTO $100$25 INTO $100 OF LEGALOF LEGAL CURRENCY’. We will transact the firstCURRENCY’. We will transact the first conversion for you, after that you can easilyconversion for you, after that you can easily and quickly do this on your own, hundreds orand quickly do this on your own, hundreds or eveneven thousands of times every monththousands of times every month. TAKE. TAKE ADVANTAGE OF THIS “ADVANTAGE OF THIS “SECRET FLAWSECRET FLAW”!…”!… There is a one time membership fee of onlyThere is a one time membership fee of only $35$35… Your important instructions will be… Your important instructions will be mailed… We are only acceptingmailed… We are only accepting CHECK-BY-CHECK-BY- FAXFAX payable to NDML. Fax it to 212-000-0000.payable to NDML. Fax it to 212-000-0000.Nonsense!Nonsense!
  69. 69. URGENTURGENT Provider: Crudcorp Inc.Provider: Crudcorp Inc. Status: Pre-ApprovedStatus: Pre-Approved Limit: $10,000Limit: $10,000 Rate: 12% APRRate: 12% APR Yordas UccerYordas Uccer 1 F St.1 F St. U-Falls Forthis, UT 84666U-Falls Forthis, UT 84666 Congratulations Ms. Uccer,Congratulations Ms. Uccer, You have been pre-approvedYou have been pre-approved for a gold card with afor a gold card with a $10,000 limit valid$10,000 limit valid exclusively toward allexclusively toward all purchases from provider.purchases from provider. Mail your $29.95 annual feeMail your $29.95 annual fee along with this notice.along with this notice. Full details of yourFull details of your membership will bemembership will be included with your card.included with your card.
  70. 70. URGENTURGENT Provider: Crudcorp Inc.Provider: Crudcorp Inc. Status: Pre-ApprovedStatus: Pre-Approved Limit: $10,000Limit: $10,000 Rate: 12% APRRate: 12% APR Yordas UccerYordas Uccer 1 F St.1 F St. U-Falls Forthis, UT 84666U-Falls Forthis, UT 84666 Congratulations Ms. Uccer,Congratulations Ms. Uccer, You have been pre-approvedYou have been pre-approved for a gold card with afor a gold card with a $10,000 limit valid$10,000 limit valid exclusively toward allexclusively toward all purchases from providerpurchases from provider.. Mail yourMail your $29.95$29.95 annual feeannual fee along with this notice.along with this notice. Full details of yourFull details of your membership will bemembership will be included with your card.included with your card.
  71. 71. Debit Cards?Debit Cards? Debit CardDebit Card 5224 789 003 2905224 789 003 290 Why?Why? ““Easy access to checking”Easy access to checking” DangersDangers HoldsHolds on your accounton your account Can causeCan cause bounced checksbounced checks Mail orderMail order - dissatisfied?- dissatisfied? Lost or stolen?Lost or stolen? Money goneMoney gone..
  72. 72. Debit Card PurchaseDebit Card Purchase 0 50 100 150 200 250 300 350 400 Bal Advantages:Advantages: No debtNo debt (using own money)(using own money) Easy access toEasy access to checkingchecking Disadvantages:Disadvantages: Money goneMoney gone HoldsHolds Bounced checksBounced checks
  73. 73. To avoid theTo avoid the Hazards ofHazards of Checking AccountsChecking Accounts Keep your blankKeep your blank checks in a safe placechecks in a safe place If someone steals your checks and forges your name, technically,If someone steals your checks and forges your name, technically, since you didn’t sign the checks, you did not authorize the money tosince you didn’t sign the checks, you did not authorize the money to be deducted from your account, and are therefore not responsible.be deducted from your account, and are therefore not responsible. However, once the money is gone from you account, you may notHowever, once the money is gone from you account, you may not be able to get it back. The financial institution may claim that yoube able to get it back. The financial institution may claim that you were negligent...were negligent...
  74. 74. To avoid checking acct. problems:To avoid checking acct. problems: (1) Reconcile(1) Reconcile your records to the bank’s the day your get your bankyour records to the bank’s the day your get your bank statement. The sooner you reconcile, the easier it is. If you fail to notify the bank withinstatement. The sooner you reconcile, the easier it is. If you fail to notify the bank within 60 days errors they may have made, you are unlikely to get your money back.60 days errors they may have made, you are unlikely to get your money back. First BankFirst Bank StatementStatement BalanceBalance 100.00100.00 DepositsDeposits 9/10/009/10/00 200.00200.00 9/14/009/14/00 535.29535.29 Checks ClearedChecks Cleared 9/9/009/9/00 20.0020.00 9/14/009/14/00 120.39120.39 Ending BalanceEnding Balance 694.90694.90 BalanceBalance 123.00123.00 1422 Joe’s grocery 120.391422 Joe’s grocery 120.39 1423 SLC Utilities 68.001423 SLC Utilities 68.00 PaycheckPaycheck 535.29 635.27535.29 635.27 1424 Dumpy Bikes 25.001424 Dumpy Bikes 25.00 605.27605.27
  75. 75. 0 500 1000 1500 2000 0 500 1000 1500 2000 Line of CreditLine of Credit CheckingChecking To AvoidTo Avoid BouncedBounced ChecksChecks:: Have aHave a backupbackup arrangement for whenarrangement for when you make a mistake.you make a mistake. By setting up an overdraftBy setting up an overdraft line of credit (an emptyline of credit (an empty loan tied to your checkingloan tied to your checking account), when you make aaccount), when you make a mistake and write a checkmistake and write a check for more than the balancefor more than the balance in your account, you canin your account, you can avoid bounced checks.avoid bounced checks.
  76. 76. 0 500 1000 1500 2000 Overdraft Line of CreditOverdraft Line of Credit 0 500 1000 1500 2000 CheckingCheckingLine of CreditLine of Credit A loan advance is madeA loan advance is made to cover your check. If youto cover your check. If you pay off the loan balance aspay off the loan balance as soon as you learn of it, thesoon as you learn of it, the interest and fees areinterest and fees are minimal (at most financialminimal (at most financial institutions).institutions).
  77. 77. Overdraft Line of CreditOverdraft Line of Credit 0 500 1000 1500 2000 CheckingChecking $20$20 returned check feereturned check fee $60$60 100100 300…300… $600 Fees$600 Fees A lady made a simpleA lady made a simple mistake on her checkmistake on her check register, which caused oneregister, which caused one check to bounce. Thecheck to bounce. The bank deducted a $20bank deducted a $20 returned check fee. Thatreturned check fee. That caused 3 other checks tocaused 3 other checks to bounce… Within onebounce… Within one month, she had incurredmonth, she had incurred $600 of returned check$600 of returned check fees. If she had set up andfees. If she had set up and properly maintained anproperly maintained an overdraft line of credit, sheoverdraft line of credit, she would likely have incurredwould likely have incurred less than $5 of interest andless than $5 of interest and fees.fees. If you don’t set up aIf you don’t set up a backup system, you couldbackup system, you could run into a situation like this:run into a situation like this:
  78. 78. 0 500 1000 1500 2000 Some people defeat the purposeSome people defeat the purpose of their overdraft line of creditof their overdraft line of credit VCRVCRStereoStereoBike RackBike RackMountain BikeMountain BikeTVTV Line of CreditLine of Credit 0 500 1000 1500 2000 High rateHigh rate They use their overdraftThey use their overdraft line of credit as a commonline of credit as a common loan or charge account,loan or charge account, and thus defeat theand thus defeat the purpose of having it. Then,purpose of having it. Then, if they make a mistake,if they make a mistake, their check not onlytheir check not only bounces, but they arebounces, but they are paying interest at a higherpaying interest at a higher rate than is available onrate than is available on other types of loans.other types of loans. And returnedAnd returned check fees!check fees!
  79. 79. 0 500 1000 1500 2000 CheckingChecking 0 500 1000 1500 2000 Line of CreditLine of Credit High rateHigh rate But a high rate times zeroBut a high rate times zero is zero. If you keep the lineis zero. If you keep the line of credit empty (zeroof credit empty (zero balance), you pay nobalance), you pay no interest, you have a backupinterest, you have a backup system for your checkingsystem for your checking account, and you build aaccount, and you build a credit rating without payingcredit rating without paying interest.interest.
  80. 80. 0 500 1000 1500 2000 0 500 1000 1500 2000 CheckingChecking SavingsSavings Some financial institutions allowSome financial institutions allow their checking accounts to be tiedtheir checking accounts to be tied to savings accounts. Then if theto savings accounts. Then if the customer makes a mistake on theircustomer makes a mistake on their checking account, the money ischecking account, the money is automatically transferred from aautomatically transferred from a savings account. This can worksavings account. This can work well if sufficient is maintained inwell if sufficient is maintained in savings, if it is not used too often,savings, if it is not used too often, and if the financial institutionand if the financial institution doesn’t charge large fees.doesn’t charge large fees.
  81. 81. 0 500 1000 1500 2000 0 500 1000 1500 2000 CheckingChecking SavingsSavings
  82. 82. Keep your backupKeep your backup available for when youavailable for when you need it!need it! 0 500 1000 1500 2000 0 500 1000 1500 2000 CheckingCheckingLine of CreditLine of Credit 0 500 1000 1500 2000 SavingsSavings
  83. 83. Dangers Lurking!Dangers Lurking! Each time you refinance, youEach time you refinance, you add to your debt (nearly always).add to your debt (nearly always). If you are considering refinancing or consolidating loans, beware.If you are considering refinancing or consolidating loans, beware. Consolidations and refinances can be very useful, but they can also causeConsolidations and refinances can be very useful, but they can also cause problems such as much more interest paid over the life o f the loan. Be carefulproblems such as much more interest paid over the life o f the loan. Be careful that you don’t defeat your intent. There are monsters out there who are morethat you don’t defeat your intent. There are monsters out there who are more than willing to take as much money as you are willing to give them.than willing to take as much money as you are willing to give them. In 2002 lady called the Department of Financial Institutions. She had wanted toIn 2002 lady called the Department of Financial Institutions. She had wanted to get a better rate on her mortgage loan. She found out that she’d gotten a veryget a better rate on her mortgage loan. She found out that she’d gotten a very bad deal the last time she refinanced.bad deal the last time she refinanced.
  84. 84. NWFNWF $147,000$147,000 $17,000$17,000 $164,000$164,000 10%10% She had refinanced her home 2 years prior “because interest rates had goneShe had refinanced her home 2 years prior “because interest rates had gone down.” She thought she was getting the loan terms shown in the left columndown.” She thought she was getting the loan terms shown in the left column below. When she went to refinance again, 2 years later “because rates hadbelow. When she went to refinance again, 2 years later “because rates had gone down again,” she found out she actually had the loan in the middlegone down again,” she found out she actually had the loan in the middle column below. I asked why she signed such a loan, she said she was in acolumn below. I asked why she signed such a loan, she said she was in a hurry and didn’t read the documents. A very costly mistake! According tohurry and didn’t read the documents. A very costly mistake! According to my calculations she lost about $24,000 by not paying attention.my calculations she lost about $24,000 by not paying attention. TypicalTypical Re-financedRe-financed $147,000$147,000 ““Closing Costs”Closing Costs” $3,000$3,000 New LoanNew Loan $150,000$150,000 RateRate 8%8% DiffDiff $14,000$14,000 $3,000$3,000 Prepay PenaltyPrepay Penalty $0$0 $7,000$7,000 7,0007,000 $24,000$24,000
  85. 85. Mortgage Loans:Mortgage Loans: Compare All CostsCompare All Costs Before Signing AnythingBefore Signing Anything BadguysBadguys DifferenceDifference 13,46613,466 (10,432)(10,432) ““Closing Costs”Closing Costs” FeesFees TypicalTypical Total Closing Costs $3,034Total Closing Costs $3,034 Another mortgage company charged a family about $10,000 more in closing costs than mostAnother mortgage company charged a family about $10,000 more in closing costs than most other mortgage companies would have charged.other mortgage companies would have charged.
  86. 86. Variable vs. Fixed RateVariable vs. Fixed Rate In addition, they were given a variable rate loan (indexed artificially low) and paymentsIn addition, they were given a variable rate loan (indexed artificially low) and payments increased every 6 months. The borrowers thought they were getting a fixed rate loan (whereincreased every 6 months. The borrowers thought they were getting a fixed rate loan (where payments stay the same).payments stay the same).
  87. 87. Home Loans: BewareHome Loans: Beware 1. Prepayment1. Prepayment penalties?penalties? 2. Compare Rates2. Compare Rates 3. Compare Fees3. Compare Fees 4. Fixed vs. Variable?4. Fixed vs. Variable?
  88. 88. Avoid Closing TrapsAvoid Closing Trapsespecially if delayedespecially if delayed UnderstandUnderstand what you arewhat you are signing andsigning and why.why. Take your timeTake your time Don’t just (sign, sign, sign)Don’t just (sign, sign, sign) Expect delays, and keep all yourExpect delays, and keep all your other obligations current.other obligations current. Could be one of the most important 3Could be one of the most important 3 hours of your financial life.hours of your financial life.
  89. 89. AvoidAvoid Advanced-Fee Loan ScamsAdvanced-Fee Loan Scams Don’t fall for promises to get you aDon’t fall for promises to get you a loan or a credit card regardless ofloan or a credit card regardless of credit problems!credit problems! Don’t wireDon’t wire $49$49 to New York…to New York… Don’t give solicitors your accountDon’t give solicitors your account numbers!numbers! Who do they prey on?Who do they prey on? The most vulnerable - those who can leastThe most vulnerable - those who can least afford the loss.afford the loss.
  90. 90. Dear Sir, CONFIDENTIAL BUSINESS PROPOSAL FROM THE NIGERIANIGERIA CHAMBER OF COMMERCE, I HAVE THE PRIVILEGE TO REQUEST FOR YOUR ASSISTANCE TO TRANSFER THE SUM OF $45.5 MILLION U.S. DOLLARS INTO YOUR ACCOUNT. THE ABOVE SUM RESULTED FROM AN OVER-INVOICED CONTRACT, PAID BY A FOREIGN CONTRACTOR. WE REQUIRE YOUR ASSISTANCE. THE TOTAL SUM WILL BE SHARED AS FOLLOWS: 70% FOR US, 25% FOR YOU AND 5% FOR LOCAL AND INTERNATIONAL EXPENSES INCIDENTAL TO THE TRANSFER. THIS ACTION WAS HOWEVER INTENTIONAL. WE ARE
  91. 91. Dear Sir, CONFIDENTIAL BUSINESS PROPOSAL FROM THE NIGERIANIGERIA CHAMBER OF COMMERCE, I HAVE THE PRIVILEGE TO REQUEST FOR YOUR ASSISTANCE TO TRANSFER THE SUM OF $45.5 MILLION U.S. DOLLARS INTO YOUR ACCOUNT. THE ABOVE SUM RESULTED FROM AN OVER-INVOICED CONTRACT, PAID BY A FOREIGN CONTRACTOR. WE REQUIRE YOUR ASSISTANCE. THE TOTAL SUM WILL BE SHARED AS FOLLOWS: 70% FOR US, 25% FOR YOU AND 5% FOR LOCAL AND INTERNATIONAL EXPENSES INCIDENTAL TO THE TRANSFER. THIS ACTION WAS HOWEVER INTENTIONAL. WE AREAmericans have been flooded by numerous versions of theAmericans have been flooded by numerous versions of the Nigerian money scam, don’t fall prey to their too-good-to-be-trueNigerian money scam, don’t fall prey to their too-good-to-be-true
  92. 92. #1 Cause of Divorce#1 Cause of Divorce 70-80% of70-80% of divorcing couplesdivorcing couples attribute theattribute the marriagemarriage breakdown tobreakdown to money problemsmoney problems
  93. 93. BEWAREBEWARE Tell me your credit card numberTell me your credit card number Tell me your checking account #Tell me your checking account # Tell me your Social Security #Tell me your Social Security # Wire fees out of stateWire fees out of state
  94. 94. BEWAREBEWARE Tell me your credit card numberTell me your credit card number Tell me your checking account #Tell me your checking account # Tell me your Social Security #Tell me your Social Security # Wire fees out of stateWire fees out of state
  95. 95. RememberRemember Understand what you sign.Understand what you sign. Don’t sign anything you don’tDon’t sign anything you don’t agree to.*agree to.* Shop for the best dealShop for the best deal available to you.available to you. Keep your greed underKeep your greed under control.control.
  96. 96. Pay Off Loans EarlyPay Off Loans Early 10,000 12% 57 mo 210,000 12% 57 mo 2332 13,1672 13,167 Bal Rate Term Pmt Total Int Pd SavingsBal Rate Term Pmt Total Int Pd Savings (If simple interest)(If simple interest) 10,000 12% 60 mo 222 13,346 3,34610,000 12% 60 mo 222 13,346 3,346 10,000 12% 47 mo 210,000 12% 47 mo 2772 12,5822 12,582 10,000 1210,000 12%% 38 mo38 mo 3322 12,069 2,069 1,27722 12,069 2,069 1,277 3,167 1793,167 179 2,582 7642,582 764 If you pay as little as $10 extra principal each month, on such a loan as this, you can avoidIf you pay as little as $10 extra principal each month, on such a loan as this, you can avoid paying the lender $179 (less interest). The more you pay, the quicker you pay them off, andpaying the lender $179 (less interest). The more you pay, the quicker you pay them off, and the less money you pay them. Make sure you make your extra principal payments in thethe less money you pay them. Make sure you make your extra principal payments in the manner your lender prescribes.manner your lender prescribes.
  97. 97. Pay Off Mortgage EarlyPay Off Mortgage Early 136,283 8% 10136,283 8% 101010 29 yr 349,05629 yr 349,056 Bal Rate Pmt Term Tot Cost SavingsBal Rate Pmt Term Tot Cost Savings (360 mo)(360 mo) 136,283 8% 1000 30 yr 360,000136,283 8% 1000 30 yr 360,000 136,283 8% 10136,283 8% 105050 25 yr 317,10025 yr 317,100 136,283136,283 7.757.75%% 12831283 1515 yr 234,360 98,077 125,640yr 234,360 98,077 125,640 212,773 10,944212,773 10,944 223,717223,717 180,817 42,900180,817 42,900
  98. 98. Bi-Weekly PaymentBi-Weekly Payment Programs:Programs: A convenient way toA convenient way to pay off early,pay off early, ifif:: Your paydays are Bi-weeklyYour paydays are Bi-weekly Your lender accepts extra principalYour lender accepts extra principal (most do w/o penalty)(most do w/o penalty) Reputable money handlerReputable money handler (some have skipped)(some have skipped) Low or no feesLow or no fees WarningWarning:: many charge amany charge a monthlymonthly service fee & set-upservice fee & set-up feefee!! $ 5 bw service fee$ 5 bw service fee $ 150 setup$ 150 setup $25 bw service fee$25 bw service fee $$ 4,0004,000 setupsetup
  99. 99. 2626.08929.08929 half paymentshalf payments →→ 1313.04464.04464 full paymentsfull payments in an average yearin an average year The Advantage ofThe Advantage of Bi-WeeklyBi-Weekly PaymentsPayments:: Since there are 365 1/4 days in an average year, and 14 days in each bi-weekly period: 365365 1/41/4 ÷÷ 1414 == 26.26.0892908929 there arethere are 2626..08929 biweekly08929 biweekly periodsperiods each year.each year.
  100. 100. About once everyAbout once every 1111 yearsyears a person paying 1/2 of his monthly payment bi-weeklya person paying 1/2 of his monthly payment bi-weekly makes the equivalent ofmakes the equivalent of 13 1/213 1/2 monthly paymentsmonthly payments (by making 27 half pmts bi-weekly)(by making 27 half pmts bi-weekly) Every ~11 years 3 months have 3 bw paydaysEvery ~11 years 3 months have 3 bw paydays (3 extra paydays -> 1 ½* extra full payments)(3 extra paydays -> 1 ½* extra full payments) *Since making 1/2 of the required monthly payment bi-weekly yields 26.08929 half payments in*Since making 1/2 of the required monthly payment bi-weekly yields 26.08929 half payments in an average year, every 11.19946 years (average) an third bi-weekly period would occur. 1 (bi-an average year, every 11.19946 years (average) an third bi-weekly period would occur. 1 (bi- weekly period) ÷ .08929 (average extra bw payment per yr) = 11.19946 (average years).weekly period) ÷ .08929 (average extra bw payment per yr) = 11.19946 (average years).
  101. 101. PayPay 1.091.09 x 733.77 =x 733.77 = 799.81799.81 1.09 =1.09 = 1/12 of 13.051/12 of 13.05 pmtspmts Compare the advantage of extra principal payments on a loan with these terms:Compare the advantage of extra principal payments on a loan with these terms: Loan Rate PmtLoan Rate Pmt Term Total PaidTerm Total Paid Extra Principal:Extra Principal: Bi-Weekly or MonthlyBi-Weekly or Monthly Extra Principal bi-weekly: If 1/2 of the required monthly payment is paid bi-weekly: 26.09half pmts are made each year, or 13.05full payments each year (rounded). Mo. pmt 733.77 ÷ 2 = 366.89bi-weekly 22.65 yrs22.65 yrs 22.522.5 yrsyrs 48,20948,209 216,832216,832 215,948215,948 47,32547,325 Save 66.04 additional principal66.04 additional principal 100,000 8% 733.77 mo100,000 8% 733.77 mo 30 yr 264,15730 yr 264,157 (by paying 17,000 early, you avoid paying $47,325 of interest) To gain the same advantage: Extra Principal Monthly
  102. 102. Mortgage bal. $ 87,724 734 pmt 8Mortgage bal. $ 87,724 734 pmt 8% 20 yr remaining% 20 yr remaining Car bal. 13,056 415 pmt 9Car bal. 13,056 415 pmt 9% 3 yr remaining% 3 yr remaining OtherOther 8,0008,000 203203 pmt 18pmt 18% 5 yr remaining% 5 yr remaining Total 108,780 1,352Total 108,780 1,352 Re-finance and “save” hundredsRe-finance and “save” hundreds each montheach month (100,000 30 yr 8% loan after 10 years)(100,000 30 yr 8% loan after 10 years) Many lenders encourage borrowers to refinance. If the goal is to reduce monthly payments, a refinance may work just fine. If theMany lenders encourage borrowers to refinance. If the goal is to reduce monthly payments, a refinance may work just fine. If the goal is to pay less total interest, it may be better not to refinance, unless you refinance and keep paying the old payment.goal is to pay less total interest, it may be better not to refinance, unless you refinance and keep paying the old payment. Consolidated 111,780Consolidated 111,780 782782 pmt 7.5pmt 7.5% 30 yrs% 30 yrs you “save”you “save” (avoid spending)(avoid spending) 493 per month493 per month Int.Int.if paid asif paid as agreedagreed 95,00095,000 if you keep payingif you keep paying 1,3521,352 (117 mo)(117 mo) 9.75 yrs9.75 yrs Int.Int. && feesfees 173,000173,000 Great, if you keep paying the higher payment, and don’t run up yourGreat, if you keep paying the higher payment, and don’t run up your credit cards, etc. again!credit cards, etc. again! Int.Int. && feesfees 50,00050,000 50,75650,756 if keep payingif keep paying 1352 no refi1352 no refi
  103. 103. After 1 year New New New Bal. Pmt. Term 77,554 651 21.9 8,072 250 3.1 4,126 150 2.6 6,253 120 8.5 0 0 0 794 90 .8 Getting out of debt quicker, by focusing first onGetting out of debt quicker, by focusing first on highest rate debtshighest rate debts Let’s suppose someone had the following debts. They could meet the payments, but with no money to spare: Existing Balance Payment Rate Remaining Obligations (p & i*) Term (yrs.) 1st Mort 78,721 651 8.5% 22.9 yrs. Auto Loan 10,239 250 9.0% 4.1 yrs. Trailer 5,451 150 9.8% 3.6 yrs. Credit Card 6,539 120 18.0% 9.5 yrs. Doctor 400 40 21.0% .9 yrs. Dentist 1,200 50 19.0% 2.5 yrs. Totals 102,550 1331 (*p&i stands for principal & interest) After 1 yr., start applying the amount formerly going to the doctor ($40) to the next highest rate debt (the dentist). After 1.8 years New New New Bal. Pmt. Term 76,547 651 21.1 6,194 250 2.3 2,970 150 1.8 5,984 210 3.1 0 0 0 0 0 0 After .8 yr. more, apply the amount formerly going to the doctor ($40) and to the dentist ($50) to the next highest rate debt (the credit card).
  104. 104. After 3.7 years New New New Bal. Pmt. Term 73,863 651 19.2 1,153 250 .4 0 0 0 2,745 360 .7 0 0 0 0 0 0 Getting out of debt quicker, by focusing first onGetting out of debt quicker, by focusing first on highest rate debtshighest rate debts Let’s suppose someone had the following debts. They could meet the payments, but with no money to spare: Existing Balance Payment Rate Remaining Obligations (p & i) Term 1st Mort 78,721 651 8.5% 22.9 yrs. Auto Loan 10,239 250 9.0% 4.1 yrs. Trailer 5,451 150 9.8% 3.6 yrs. Credit Card 6,539 120 18.0% 9.5 yrs. Doctor 400 40 21.0% .9 yrs. Dentist 1,200 50 19.0% 2.5 yrs. Totals 102,550 1331 After 1.9 more yrs, by applying the amounts formerly going to the doctor, dentist to the credit card, the new terms: After 4.4 years New New New Bal. Pmt. Term 72,760 1,261 6.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Out of debt in 10.2Out of debt in 10.2 yrs. After .7 yr. more, applying the amounts formerly going to the doctor, the dentist, the credit card, trailer & auto loan to the mortgage loan.
  105. 105. Under water?Under water? Mortgage 7% 600Mortgage 7% 600 Auto loan 10% 250Auto loan 10% 250 Cr Card 19% 100Cr Card 19% 100 Cr Card 25% 150Cr Card 25% 150 DoctorDoctor 18% 20018% 200 DentistDentist 18% 10018% 100 1,4001,400 7%7% 10%10% 10%10% 25%25% 10%10% 18%18% 600600 250250 8080 150150 120120 100100 1,2001,200 Some lenders will reduce their interest rates if you ask - especially if youSome lenders will reduce their interest rates if you ask - especially if you indicate that you are shopping around for better rates.indicate that you are shopping around for better rates.

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