Personal Finance

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Personal Finance

  1. 1. Personal Finance Life After School
  2. 2. Jobs <ul><li>Jobs selected are typical jobs in a typical salary range for Northern Virginia </li></ul><ul><li>On average, high school graduates make 2x more than high school dropouts </li></ul><ul><li>College graduates make 2x more than high school graduates </li></ul><ul><li>If you make $10/hr for 40 hours per week, 2 weeks off (hourly work – unpaid leave) – comes out to be $20,000/year </li></ul>
  3. 3. Taxes <ul><li>Withheld from paychecks </li></ul><ul><li>Social Security - 6.2% </li></ul><ul><li>Medicare – 1.45% </li></ul><ul><li>State taxes ~ 5% </li></ul><ul><li>Federal Taxes – after $6,500. </li></ul><ul><ul><li>$6,500 – 10, 500 – 10% </li></ul></ul><ul><ul><li>10, 501 – 36,000 – 15% </li></ul></ul><ul><ul><li>36,001 – 72,000 – 25% </li></ul></ul>
  4. 4. Living <ul><li>Rent </li></ul><ul><li>Sign a lease </li></ul><ul><ul><li>1 year </li></ul></ul><ul><ul><li>Multiple years w/ set price increases </li></ul></ul><ul><li>Give 30 days notice to terminate </li></ul><ul><li>No equity </li></ul><ul><li>Own </li></ul><ul><li>Take out a loan </li></ul><ul><li>Mortgage terms </li></ul><ul><ul><li>Be careful </li></ul></ul><ul><ul><li>30 year fixed </li></ul></ul><ul><ul><li>ARM (adj rate mortgage) </li></ul></ul><ul><li>Sell or refinance to get out </li></ul><ul><li>Real estate appreciates 8% per year on average </li></ul>
  5. 5. Housing Costs <ul><li>You should spend no more than 1/3 of your pay on your living space </li></ul><ul><li>Calculate the max you can pay per month and write it on your pay stub </li></ul>
  6. 6. Housing Choices <ul><li>Live with Mom & Dad </li></ul><ul><ul><li>$ - daily lectures and $200/mo </li></ul></ul><ul><li>Share an apartment with a friend – 2br =$900 </li></ul><ul><ul><li>$ - $450 per month </li></ul></ul><ul><li>Rent your own apartment </li></ul><ul><ul><li>$ - 700 per month </li></ul></ul><ul><li>Buy a starter townhouse - $150,000 </li></ul><ul><ul><li>$ - 1,000 per month + (includes taxes & insurance) </li></ul></ul><ul><li>Buy a fixer-upper in the country on 10 acres </li></ul><ul><ul><li>$ - 1,200 per month (includes taxes & insurance) </li></ul></ul>
  7. 7. Deposit your Paycheck <ul><li>Write in the amount of your take home pay on your register. </li></ul>
  8. 8. Cost of Living <ul><li>Pick a payment – it must be less than your max payment </li></ul><ul><li>If you buy, you cannot change it. You must pay that amount for the remainder of the game. </li></ul><ul><li>If you rent, you can change next month. </li></ul><ul><li>Enter in your register. </li></ul><ul><li>How much do you have left out of your monthly check? </li></ul><ul><li>More bills to pay </li></ul><ul><li>More choices to make </li></ul>
  9. 9. Savings <ul><li>You should set aside 5-10% of your income to save before anything else </li></ul><ul><ul><li>Retirement </li></ul></ul><ul><ul><li>Emergencies </li></ul></ul><ul><ul><li>Home purchase </li></ul></ul><ul><li>Decide 5 or 10% </li></ul><ul><li>Assume 12% Annual return so add in 1% more </li></ul><ul><li>Compounding interest movie </li></ul><ul><li>If you are a church-goer, God wants 10% </li></ul>
  10. 10. Monthly bills - July <ul><li>Electricity – its summer, its hot, run the AC </li></ul><ul><ul><li>$100 apartment ($50 if sharing w/ friend, 0 w/ Mom) </li></ul></ul><ul><ul><li>$150 town home </li></ul></ul><ul><ul><li>$75 Fixer-upper – sorry no AC </li></ul></ul><ul><li>Internet/cable/phone bill = $75 ($37.50 sharing) </li></ul><ul><li>Car insurance = $75 </li></ul><ul><li>Health Insurance = $100 females, $50 males </li></ul><ul><li>Gasoline = $200 </li></ul><ul><li>Food </li></ul><ul><ul><li>Cook at home daily - $200 </li></ul></ul><ul><ul><li>Eat out every day - $350 </li></ul></ul>
  11. 11. College Graduates <ul><li>Engineers, Teachers, Forester, RNs & Accountants </li></ul><ul><li>Pay $300 = Monthly payment on student loan (every month for the next 10 years) </li></ul><ul><li>Average student graduates from college with almost $30,000 in debt </li></ul><ul><li>Add your loan in the debt side </li></ul><ul><li>Subtract your payment from your checking acct </li></ul><ul><li>Deduct $ 7.00 from your loan balance </li></ul>
  12. 12. Driving <ul><li>New car? – Loan for 5 years at 0% Interest </li></ul><ul><ul><li>Toyota Camry - $20,000 - $330/mo </li></ul></ul><ul><ul><li>Ford F150 4WD - $27,000 - $450/mo </li></ul></ul><ul><ul><li>Mini-cooper - $19,000 - $320/mo </li></ul></ul><ul><ul><li>Ford Focus - $12,000 - $200/mo </li></ul></ul><ul><li>Used? </li></ul><ul><ul><li>Used Chevy Cobalt - $6,000 - $100/mo </li></ul></ul><ul><ul><li>Used Toyota Tacoma 4WD - $16,000 - $270/mo </li></ul></ul><ul><li>Nevermind – I’ll take the bus or keep driving ‘Ol Rusty </li></ul><ul><li>Add the loan amount to your debt balance </li></ul>
  13. 13. Entertainment <ul><li>Friends are going to the movies. $20 each time </li></ul><ul><li>How many times in a month will you go? </li></ul>
  14. 14. Miscellaneous <ul><li>Oops – you dropped your cell phone in the sink. </li></ul><ul><li>New phone - $100 </li></ul>
  15. 15. Hurray <ul><li>August Payday!!!!!!!!!!! </li></ul><ul><li>Add in your monthly salary </li></ul><ul><li>Pay your rent/mortgage </li></ul><ul><li>Set aside money for saving &/or giving </li></ul>
  16. 16. August bills <ul><li>Electricity – its summer, its hot, run the AC </li></ul><ul><ul><li>$100 apartment ($50 if sharing w/ friend, 0 w/ Mom) </li></ul></ul><ul><ul><li>$150 town home </li></ul></ul><ul><ul><li>$75 Fixer-upper – sorry no AC </li></ul></ul><ul><li>Internet/cable/phone bill = $75 ($37.50 sharing) </li></ul><ul><li>Car insurance = $75 </li></ul><ul><li>Health Insurance = $100 female, $50 males </li></ul><ul><li>Gasoline = $200 </li></ul><ul><li>Food </li></ul><ul><ul><li>Cook at home daily - $200 Eat out every day - $350 </li></ul></ul>
  17. 17. Debt payments <ul><li>Student Loan </li></ul><ul><li>Car Loan </li></ul><ul><li>Adjust your debt balance </li></ul>
  18. 18. Entertainment <ul><li>Friends are going to the beach. Need $100 for gas/spending money </li></ul><ul><li>Do you want to go? </li></ul><ul><li>Any movies this month? </li></ul>
  19. 19. Other expenses <ul><li>You ripped your best jeans – need to buy a new pair $45 </li></ul><ul><li>Oops – speeding ticket $125.00 </li></ul>
  20. 20. Hurray <ul><li>September Payday!!!!!!!!!!! </li></ul><ul><li>Add in your monthly salary </li></ul><ul><li>Pay your rent/mortgage </li></ul><ul><li>Set aside money for saving &/or giving </li></ul>
  21. 21. September bills <ul><li>Electricity – it’s still hot, run the AC </li></ul><ul><ul><li>$100 apartment ($50 if sharing w/ friend, 0 w/ Mom) </li></ul></ul><ul><ul><li>$150 town home </li></ul></ul><ul><ul><li>$75 Fixer-upper – sorry no AC </li></ul></ul><ul><li>Internet/cable/phone bill = $75 ($37.50 sharing) </li></ul><ul><li>Car insurance = $75 </li></ul><ul><li>Health Insurance = $100 females, $50 males </li></ul><ul><li>Gasoline = $200 </li></ul><ul><li>Food </li></ul><ul><ul><li>Cook at home daily - $200 </li></ul></ul><ul><ul><li>Eat out every day - $350 </li></ul></ul>
  22. 22. Debt payments <ul><li>Student Loan </li></ul><ul><li>Car Loan </li></ul><ul><li>Adjust your debt balance </li></ul>
  23. 23. Entertainment <ul><li>Your old computer died and you can’t keep up with Facebook. Do you want a new one? $500. </li></ul><ul><li>Any movies this month? </li></ul>
  24. 24. Hurray <ul><li>October Payday!!!!!!!!!!! </li></ul><ul><li>Add in your monthly salary </li></ul><ul><li>Pay your rent/mortgage </li></ul><ul><li>Set aside money for saving &/or giving </li></ul>
  25. 25. October bills <ul><li>Electricity – it’s cooler, </li></ul><ul><ul><li>$50 apartment ($25 if sharing w/ friend, 0 w/ Mom) </li></ul></ul><ul><ul><li>$75 town home </li></ul></ul><ul><ul><li>$75 Fixer-upper </li></ul></ul><ul><li>Internet/cable/phone bill = $75 ($37.50 sharing) </li></ul><ul><li>Car insurance = $75 </li></ul><ul><li>Health Insurance = $100 female, $50 males </li></ul><ul><li>Gasoline = $200 </li></ul><ul><li>Food </li></ul><ul><ul><li>Cook at home daily - $200 </li></ul></ul><ul><ul><li>Eat out every day - $350 </li></ul></ul>
  26. 26. Debt payments <ul><li>Student Loan </li></ul><ul><li>Car Loan </li></ul><ul><li>Adjust your debt balance </li></ul>
  27. 27. Birthday <ul><li>Take your best friend to dinner for their Birthday - $50. </li></ul><ul><li>Need cool new shoes for Winter - $75 </li></ul>
  28. 28. Hurray <ul><li>November Payday!!!!!!!!!!! </li></ul><ul><li>Add in your monthly salary </li></ul><ul><li>Pay your rent/mortgage </li></ul><ul><li>Set aside money for saving &/or giving </li></ul>
  29. 29. November bills <ul><li>Electricity – getting cold out – turn on the heat </li></ul><ul><ul><li>$100 apartment ($50 if sharing w/ friend, 0 w/ Mom) </li></ul></ul><ul><ul><li>$150 town home </li></ul></ul><ul><ul><li>$175 Fixer-upper – drafty windows </li></ul></ul><ul><li>Internet/cable/phone bill = $75 ($37.50 sharing) </li></ul><ul><li>Car insurance = $75 </li></ul><ul><li>Health Insurance = $100 female, $50 males </li></ul><ul><li>Gasoline = $200 </li></ul><ul><li>Food </li></ul><ul><ul><li>Cook at home daily - $200 (split for sharing, 0 MD) </li></ul></ul><ul><ul><li>Eat out every day - $350 </li></ul></ul>
  30. 30. Debt payments <ul><li>Student Loan </li></ul><ul><li>Car Loan </li></ul><ul><li>Adjust your debt balance </li></ul>
  31. 31. Thanksgiving Day Sale <ul><li>Get ready for Football Bowl Season!!!! </li></ul><ul><li>$1,500, 50” Flat Panel HDTV </li></ul>
  32. 32. Ahhw, Don’t have $1,500 <ul><li>Do I have a deal for you! </li></ul>
  33. 33. Fine Print <ul><li>Annual Percentage Rate for purchases and balance transfers*2.99% APR (.00819% daily periodic rate) on purchases and balance transfers until the first day of the billing cycle that includes the six (6) month anniversary date of the opening of your account. In the absence of the introductory rate, 12.99% APR (.03559% daily periodic rate) on purchases and balance transfers. </li></ul><ul><li>** Grace period for repayment of the balance for purchases </li></ul><ul><li>You will have a minimum of 25 days without a finance charge on new purchases if the total New Balance is paid in full each month by the statement closing date. </li></ul><ul><li>Method of computing the balance used in calculating finance charges for purchases </li></ul><ul><li>Average daily balance (including new purchases) </li></ul><ul><li>Annual fee$25 </li></ul><ul><li>Minimum finance charge </li></ul><ul><li>For each Billing Period that your Account is subject to a finance charge, a minimum total Finance Charge of $0.50 will be imposed. </li></ul><ul><li>Miscellaneous fees </li></ul><ul><li>Cash advance fee: 2.5% of amount of the cash advance, but not less than $2.50. </li></ul><ul><li>Late payment fee: $25 </li></ul><ul><li>Over-the-credit-limit fee: $25 </li></ul><ul><li>Returned check fee: $25 </li></ul><ul><li>** If you fail to make any payment when due, exceed your credit limit, make a payment which fails to clear and is returned unsatisfied, otherwise default on this or any other account with us, or upon any closure of your account, by you or by us, we may immediately increase all rates on your account to a variable rate of the higher of (a) 24.99% APR (.06847% daily periodic rate) or (b) up to the three months London Interbank Offered Rate published in The Wall Street Journal on the third Wednesday of March, June, September and December (¡°LIBOR¡±) plus 18.331% (24.99% APR, .06847% daily periodic rate, today). </li></ul>
  34. 34. Example <ul><li>$1,575 on your card. </li></ul><ul><li>Every day you are charged 1/365 of the APR, usually 12-15% (.033 -.041% every day) on your balance </li></ul><ul><li>If you are late, the rate goes up to 25% </li></ul><ul><li>30 – 31 days in a month ~ $18 per month </li></ul><ul><li>May include a daily fee as well </li></ul><ul><li>Minimum payment each month = interest + a percentage of the balance. </li></ul>
  35. 35. December Credit card bill <ul><li>$1,575 balance + $18 interest = $1,593. </li></ul><ul><li>Minimum payment = $25 </li></ul><ul><li>January bill = $1568 + $18 interest = 1,586 </li></ul><ul><li>If you just pay the minimum, it will take you 12 years to pay this off and cost $1,250 additional in interest. </li></ul><ul><li>Your $1,500 TV cost $2,825 </li></ul>
  36. 36. Credit <ul><li>The best rule for credit is: </li></ul><ul><li>“Never use credit to pay for anything that does not increase in value” </li></ul><ul><li>Example </li></ul><ul><ul><li>Home </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Business </li></ul></ul><ul><li>What about cars? </li></ul>
  37. 37. So will you buy it or not?
  38. 38. Hurray <ul><li>December Payday!!!!!!!!!!! </li></ul><ul><li>Add in your monthly salary </li></ul><ul><li>Pay your rent/mortgage </li></ul><ul><li>Set aside money for saving &/or giving </li></ul>
  39. 39. Monthly bills <ul><li>Electricity – it’s cold, turn on the heat </li></ul><ul><ul><li>$100 apartment ($50 if sharing w/ friend, 0 w/ Mom) </li></ul></ul><ul><ul><li>$150 town home </li></ul></ul><ul><ul><li>$175 Fixer-upper – Need to chop more wood </li></ul></ul><ul><li>Internet/cable/phone bill = $75 ($37.50 sharing) </li></ul><ul><li>Car insurance = $75 </li></ul><ul><li>Health Insurance = $100 female, $50 males </li></ul><ul><li>Gasoline = $200 </li></ul><ul><li>Food </li></ul><ul><ul><li>Cook at home daily - $200 </li></ul></ul><ul><ul><li>Eat out every day - $350 </li></ul></ul>
  40. 40. Debt payments <ul><li>Student Loan </li></ul><ul><li>Car Loan </li></ul><ul><li>Adjust your debt balance </li></ul>
  41. 41. Entertainment <ul><li>Christmas presents: $500 </li></ul><ul><ul><li>Mom & Dad </li></ul></ul><ul><ul><li>Brothers & Sisters </li></ul></ul><ul><ul><li>Friends </li></ul></ul><ul><li>Christmas Decorations - $50 </li></ul><ul><li>New clothes for Christmas party - $100 </li></ul>
  42. 42. End of the Year <ul><li>How much did you end up with? </li></ul><ul><li>Add your checking balance + savings balance – your debt. </li></ul><ul><li>Points to remember: </li></ul><ul><ul><li>Those with the greatest income don’t always finish with the most money </li></ul></ul><ul><ul><li>Lifestyle choices and buying decisions have a greater impact on a person’s financial status than income </li></ul></ul><ul><ul><li>Debt has the most significant impact on financial status </li></ul></ul>

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