Post on 24-Dec-2015
Smart Spending: Credit and Budgeting
Glow Foundation2010
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Icebreaker!
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What We Will Discuss Today
Credit
Credit Score
Credit Cards
Building a Spending Plan
Budgeting
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Credit __ Annual Fee a) A company that gathers information on
consumers who use credit.
__ Annual Percentage b) A document issued by an independent credit Rate (APR) agency that contains information concerning a
loan applicant’s credit history and current credit standing.
__ Credit Bureau c) An amount a credit card company charges a credit card holder to use the card for a year. __ Credit Report d) A rating system that indicates a person’s
creditworthiness based on a number of criteria. __ Credit Score e) The total amount of money borrowed not
including interest of service charges.
__ Principal f) A measurement used to compare different loans which takes into account the loan’s interest rate, term, and fees.
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Credit
DISCUSSION:
Answer question 1 and question 2 OR 3
1. What is credit?
2. What are the benefits of having credit?
3. What are the risks of having credit?
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Credit
Credit is the ability to BORROW money.
Benefits: Easier to rent an apartment/purchase a home Get a lower interest rate from lenders Financial flexibility – you can buy now and pay
later
Risks: Easy to overspend You can hurt your credit score/history if you
can’t make payments With bad credit, it can be hard to get a loan or a
good interest rate in the future
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Credit
How can you start to build good credit?
Good Credit Signs
Paying at least the minimum balance
Paying on time
Making all payments
Staying within your credit limit
Bad Credit Signs
Paying less than the minimum balance
Paying late
Missing payments
Exceeding your credit limit
What are signs of bad credit?
Establishing credit is important for borrowing money later. No credit is not the same as good credit!
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Credit
How do lenders decide whether to lend you money?
5 C’s of Credit:
1. Character
2. Capacity
3. Capital
4. Collateral
5. Conditions
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Credit Score
Having good/bad credit affects your ability to:
Get a credit card Purchase/rent a home or apartment Get a lower interest rate from lenders Borrow money
A credit score numerically indicates how strong your credit is.
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Credit Score
Credit Score: A number between 300-900 that indicates your creditworthiness.
• The higher the number, the stronger your
score.
• Points are earned based on factors like your payment history, the length of your credit history, and account balances.
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Credit Report
What is a credit report?
A document issued by an independent credit agency that contains information concerning a loan applicant’s credit history and current credit standing.
How are credit reports like report cards?
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Credit Cards
Credit cards allow you to purchase something TODAY and pay it off over time.
Credit cards are not the same as debit cards
Credit Cards Debit Cards
Payment Pay Later Pay NOW
Interest Charges Yes, if there is a remaining balance
No
Pros Potential to get freebies / points
Prevent major debt
Cons Additional fees Fees if you overdraw
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Credit Cards
Before getting a credit card, shop around. Know:
Are there annual fees or other regular charges? What is the credit limit? What is the interest rate? Is it fixed or variable? What is the APR?
ANNUAL PERCENTAGE RATE: Measurement
that takes into account the interest rate, term, and fees
Are there benefits to getting this card (points, freebies, etc)?
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Credit Cards
Original Balance
APR Monthly Payments
Number of
Monthly
Payments
Term (Years)
Total Amount
Paid
$1000 18% Minimum 87 7 $1,516
$1000 18% Minimum + $25
26 2 $1,187
$1000 18% Minimum +50
16 1 $1,119
Pay as much of the balance as possible to reduce the term and amount of interest paid
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Credit Cards
Activity:
Reading a Credit Card Statement
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Credit Cards
Credit Card Tips:
Use cash or debit cards to daily expenses Know how you are going to pay for your credit card
purchases before you start spending Get a card with low interest and pay as much of the
balance as possible Pay on time Don’t spend more than you have. Stay within your
budget. Don’t exceed your credit limit Others?
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Spending Plans / Budgeting
What should you pay FIRST to make your monthly income last?
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Spending Plans / Budgeting
Pay your monthly bills
Set aside money you’ll need for your weekly and day-to-day expenses
Put money into savings
Set aside money for larger expenses
If you can begin to earn more, increase the amount you save as much as you can
Set aside money for your major future goals
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Spending Plans / Budgeting
Breakout:
What is a Spending Plan?
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Spending Plans / Budgeting
Breakout:
Creating a Daily Spending Diary
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Spending Plans / Budgeting
Breakout:
Bean Budget
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Recap
Credit
Credit Score
Credit Cards
Building a Spending Plan
Budgeting
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Homework:
Start working on the FAFSA
worksheet and spend 15
minutes exploring the FAFSA
website (www.fafsa.ed.gov)
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www.fafsa.ed.gov
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www.fafsa.com
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Questions?
(Type presenter name)
(Email)