The document discusses personal finance topics such as paying down high-interest debt, creating an emergency fund, saving for retirement and education. It notes that consumer debt in the US grew nearly 5 times from 1980 to 2001 and currently stands at $2.4 trillion. Credit card interest rates and amounts financed for auto loans have declined in recent years. Many college students take on significant debt, with the average debt per borrower rising to $22,700. Those seeking credit counseling typically have $43,000 in total debt, with $20,000 in consumer debt and $8,500 in revolving credit card debt.

1. Personal Finance & The Cost of Consumer Credit John M. Beckem II, PhD Ralph A. Armenta, MBA, MS Finance SUNY/ESC CDL Conference April 30, 2011

2. Where should your money go first?

3. #1 Contribute to Company Retirement Plan up to the Maximum Match Some employers offer to match a percentage of your contributions to a 401(k) or similar plan. Why go for the match? You ’re getting paid to save

5. #3 Create an emergency fund to prepare for the unexpected To keep from dipping into long-term investments or borrowing at unattractive rates when you need cash in a hurry, create an emergency fund to cover at least six to eight months of essential living expenses like rent, mortgage, utilities, food and transportation. Keep emergency money in an account that is easy to access - Savings or Checking Account - Money Market Account - Home Equity Line of Credit

6. #5 Start saving early for a child ’s education If you have children in the family, one of your goals is probably to set aside funds for their education. 529 College Savings Plan Money can be withdrawn tax-free to pay for college expenses like tuition, books, supplies and in some cases room, board and computers. Coverdell Education Savings Account - May be used for qualified elementary, secondary and college education expenses. - You can put away $2,000 each year per child (if eligible). - Potential earnings grow tax-free, and distributions for qualified expenses are free of federal income taxes. - Income limits apply.

7. #6 Saving for a house Choices to consider for down payment savings Short-term CDs Choose a CD that matures when you plan to buy your house. CDs are FDIC insured. Money Market Funds Choose these funds when you start shopping for a house and want quick access to your money. Not FDIC insured. Short-term bonds Choose bonds that come due when you ’rready to buy or funds containing high-quality bonds (“A” or better credit rating). Treasury Bills Choose a maturity that matches your plans. Values fluctuate prior to maturity. Backed by the US Treasury.

8. #7 Pay down tax-deductible, high-interest rate debt Reducing high-interest-rate debt—even if it ’s a tax-deductible mortgage, home equity line of credit or student loan—can enhance your ability to save. Refinancing considerations - If interest rates have fallen since you took out your mortgage, refinancing could lower monthly payments in the near term and save you money over time. - Be sure to factor in any transaction and closing costs that may be included in refinancing.

9. The Cost of Consumer Credit

11. Consumer Credit Costs Source: Federal Reserve Type Term 2006 2007 2008 2009 2010 Feb- ’11 New car Interest Rates 48 mnths 7.72 7.77 7.02 6.20 6.21 5.86 Personal Credit Cards 24 mnths 12.41 12.38 11.37 11.1 10.87 11.01 Loan-to-Value (%) 94 95 91 90 86 80 Amount Financed ($) 26,220 28,287 28,178 28,272 27,759 26,673

16. Epidemic Debt Roughly 2.0 to 2.5 million Americans seek the help of a credit counselor each year, mostly to avoid bankruptcy . From 1990 to 2000, the number of Americans seeking the help of a credit counselor doubled. In two thirds of the counseling cases, the individual is referred to a household budget counselor, financial advisor or a social worker . Many individuals experiencing financial difficulties have experienced a job loss, an interruption to their income due to illness, or a divorce / separation. Nearly 75% of those seeking help from a credit counselor held a credit card. The average client seeking the help of a counselor had $43,000 in debt, of which $20,000 was consumer debt and $8,500 was revolving debt.

17. QUESTIONS or COMMENTS? John M. Beckem II, PhD Ralph A. Armenta, MBA, MS Finance SUNY/ESC CDL Conference April 30, 2011