PERSONAL FINANCES 101 Slide 1: Introduction of Personal Finances 101 Presenter: At Cal U, we recognize the importance of financial responsibility, and we know managing money can be tough for students. In addition, we know that you will be faced with numerous financial decisions during your college career. To help you with those decisions we have created this session titled, “Personal Finances 101.” The management of your personal finances involves the use and knowledge of a number of skill sets. Therefore, our goal today is to broaden your knowledge of the basic money management skills you should possess in order to make good financial decisions during and after your college career. Remember a student with a Bachelor’s Degree will earn nearly $2.1 million during their lifetime or nearly twice as much as a student with just a high school diploma. So the skills you learn early on in your adult life will help you maximize your earning potential to the fullest

AGENDA Creating and Managing a Budget Power of Compounding Pro’s and Con’s of Credit Cards Smart Borrowing: Student Loan Programs Credit Fitness: Why it is important! Protecting Your Identity Slide 2: Presenter : Today we will review the following six agenda items. (click and read each bullet point as it appears)

CREATING AND MANAGING A BUDGET: KNOW YOUR HABITS First, “know your habits” by tracking your expenses to fully understand how you spend your money Slide 3: Presenter: (click to advance text box) Before you sit down to create a budget, track your spending for at least a month so you can fully understand exactly how you spend your money. You might be surprised at how many things you can either eliminate or reduce. How you track your expenses is up to you. There are many budget worksheets available on the Internet as well as computer programs that you can use to keep track of your expenses. Or, you can simply carry a notebook and write down everything you spend in it. Once you’ve tracked your expenses, then it’s time develop a monthly budget.

SECOND, DO THE MATH! DETERMINE YOUR MONTHLY INCOME MINUS EXPENSES Creating and managing a budget: income v expenses Total Monthly Take-Home Income (minus taxes, health insurance, other payroll deductions, 401K) $ Household Expenses Rent or Mortgage Utilities (water, sewer, gas/electricity) Home/Cell Phone Groceries Other Household (Cable, etc.) Transportation Expenses Car Loan Payment Gas, Tolls, Parking, Other Car Insurance (set aside if paid annually or semi-annually) Other Expenses Pet (Food, Vet) Insurance/Co-pays, Prescriptions Fun (entertainment, dining out, move rental, etc.) Minus Total Expenses Total Monthly Surplus/Shortage SECOND, DO THE MATH! DETERMINE YOUR MONTHLY INCOME MINUS EXPENSES Slide 4: Presenter: (click to advance text box) Next, determine your monthly income minus your monthly expenses…and don’t forget to count that late night pizza….

LITTLE SAVINGS ADD UP… Total Annual Savings of $2,354! ITEM ANNUAL COST ALTERNATIVE One Cup of coffee daily at a Coffee shop ($3) $1,095 Gourmet coffee brewed at home $176 One CD weekly ($12.99) $ 675 Download individual songs you like ($1) $375 Pizza delivery once a week ($10) $ 520 Gourmet frozen pizza at the grocery ($5) $260 Eating lunch out 5 days a week ($5 per lunch) $1,250 Bring your lunch to work 5 days a week ($1.50 per lunch) Slide 5: Presenter: (text box will appear automatically when slide transitions)When looking at your expenses, there are thousands of little ways you can reduce spending without much compromise as you can see from this slide. Total Annual Savings of $2,354!

CREATING AND MANAGING A BUDGET: WANTS V NEEDS Wants versus Needs! Do I have to have it today? What will happen if I don’t buy it? How have I managed this long without it? Slide 6: Presenter: When determining your wants v Needs – Ask yourself these questions (click and read each bullet point as it appears)

New Car vs. Older Car Monthly difference: $176 New 2009 Honda Accord EX Cost: $24,000 Payment: $476 Insurance: $ 78 Used 2003 Honda Accord EX Cost: $14,483 Payment: $305 Insurance: $ 73 Slide 7: Presenter: (text box will appear automatically) Sometimes savings money doesn’t have to be too much of a compromise. Here is a perfect example. Buying a used Honda costs less than buying a new Honda. Because the monthly payment and insurance costs are lower, you save a total of $173 per month (over $2,000 annually). Monthly difference: $176 Annual difference: $2,112 Car Cost/Payment Source: www.edmunds.com Based on financing for 60 months. New car interest rate of 7.11%; Used car interest rate of 7.35%. Car Insurance Cost Source: www.geico.com Insurance rates for a 25-year-old single male with a clean driving record.

CREATING AND MANAGING A BUDGET: SAMPLE BUDGET FIXED EXPENSES: 60% Rent/Mortgage, Utilities, Home/Cell phone, Commuting, Car payment, Insurance, Work-related (clothes, dry-cleaning), Student Loan Payments, Credit Card Payments SAVINGS: 20% Money set aside for vacations, major repairs, new appliances, to pay down existing debt, emergencies a down-payment on a car or house, charity RETIREMENT: 10% Ideally, 10% of your gross income JUST FOR FUN: Everybody needs some fun INCOME Take-home pay minus taxes, social security, health insurance, 401K Slide 8: Presenter: (text box will appear automatically) Now that you’ve tracked your expenses for a week and done some thinking about your financial priorities, it’s time to sit down and create a monthly budget. Things to remember when creating a budget are to: Reflect your income accurately. If you’re estimating the income you think you will get with a new job, be careful not to overestimate List ALL of your fixed expenses—Don’t forget those post-college expenses like student loan payments and work-related expenses like new clothes, dry- cleaning, parking, etc. Put something aside for savings and retirement even if it is just $5, $10, or $20. Participate in your employer’s 401K plan, if available. This money will come out of your check before taxes so you probably won’t even miss it. While this may not seem that important now, it can make a big difference over time. Now is the time to start building these good habits into your financial plan. Based on 60% solution from msn.Money

CREATING AND MANAGING A BUDGET: MONITOR YOUR BUDGET Commit to your budget Track and compare actual expenses against monthly budget Make choices to reduce expenses Start saving for your short and long-term needs Slide 9: Presenter: Now that you have created a budget you will need to monitor it. Here are some suggestions in how to do this: (click to advance first bullet point) Keep track of what you spend and compare it to what you’ve budgeted. This will help you stay within your monthly budget and pin point areas in which you may need to curb spending. (click to advance second bullet point) There are a number of budgeting tools available. At the end of the presentation I will share with you some of the more popular budgeting websites. Remember you should use the one with which you are most comfortable. (click to advance third bullet point) Track your expenses– write everything you spend down in a notebook so you can see how you’re spending your money. (click to advance fourth bullet point) let your money work for you by saving and investing both in the short and long term range

POWER OF COMPOUNDING: START SAVING NOW! SAVING $1 A DAY AMOUNT YOU PUT IN ACTUAL WORTH* Year 5 $1,825 $ 2,013 Year 10 $3,650 $ 4,591 Year 20 $7,300 $12,069 Year 30 $10,950 $24,250 *Assumes $365 is deposited at the end of each year for the # of years listed. Return is compounded annually. Above amounts are pre-tax. Source: www.taxtips.ca Slide 10: Presenter: (text box will appear automatically) If you are in your late teens and early 20s, now’s the time to start saving for retirement. Because the more you put away now, the harder your money can work for you by earning interest. It can be tough finding the money to save, but take a look at what a little bit every day can add up to over the years. Benjamin Franklin said: "If you know how to spend less than you get, you have the philosopher's stone."

PRO’S AND CON’S OF CREDIT CARDS Although credit cards may seem like your ticket to buying anything you want… Slide 11: Presenter: (text box will appear automatically) I am sure some of you in this room have a credit card and you use them wisely but there are pro’s and con’s of credit cards that you need to know.

PRO’S AND CON’S OF CREDIT CARDS …..but it is important to understand just how much that little piece of plastic could really cost you… Slide 12: Presenter: (text box will appear automatically) Credit cards are not good or bad. They are simply a piece of plastic…but if you use them irresponsibly, you can end up in a financial mess!

PRO’S AND CON’S OF CREDIT CARDS What you may not be aware of are ALL the potential costs associated with using a credit card Slide 13: Presenter: (click and read text box)

Did you know credit card companies… May charge late fees if you are late making a payment? Could be as much as $50! May not have grace periods? Meaning interest starts accruing as soon as you charge. May have low introductory interest rates that increase dramatically over time? That 2.9% could go to 22% just like that! May charge annual fees? Could cost you $50 just to have the card! May charge a transaction fee for cash advances and the interest starts immediately? A percentage of your cash advance amount is added to your balance. May charge a fee for going over your limit, and for every month you remain over your limit? Another $50 added to your balance! Slide 14: Presenter: Here are some things you may not know about credit card companies: (click and read each bullet point as it appears)

PRO’S AND CON’S OF CREDIT CARDS Additionally, balances on your account accrue interest when you don’t pay them off each month Slide 15: Presenter: (text box will appear automatically) There may also be a difference between the stated interest rate and the effective interest rate. Review your monthly statement to determine those rates. You may be very surprised.

PRO’S AND CON’S OF CREDIT CARDS Once you have a balance, making the minimum monthly payment won’t make much of a difference… Slide 16: Presenter: (text will automatically appear, read slide)

HOW LONG WOULD IT TAKE TO PAY OFF IF… Your credit card balance is $2,500 You pay the $50 minimum monthly payment each month The interest rate is 20% You don’t charge anything else to this card Slide 17: Presenter: (click and read each bullet point as it appears)

PRO’S AND CON’S OF CREDIT CARDS 109 months or 9 Years + 1 month! (yes, that’s right) 109 Slide 18: Presenter: (click and read text box) This is an illustration of the power of compounding being used against you.

PRO’S AND CON’S OF CREDIT CARDS PLUS…….Over those nine + years, you will have paid a total amount of $4,430 for initial charges of only $2,500 That’s $2,920 in interest alone!! Slide 19: Presenter: (text box will appear automatically) Source: www.bankrate.com

PRO’S AND CON’S OF CREDIT CARDS BENEFITS: Helps build credit history Builds financial management skills Provides emergency protection and enhanced security Makes purchases convenient Slide 20: Presenter: So what are the Pro’s of having or using a credit card: (click to advance first bullet point) Helps Build credit history 64% of college students cite “establishing a credit history” as the primary reason for obtaining their first credit card (click to advance second bullet point) Builds financial management skills 88% of students agree that it is their responsibility to keep track of credit card spending (click to advance third bullet point) Provides emergency protection and enhanced security 26% of students want credit cards for use in emergencies (Click to advance fourth bullet point) Makes purchases convenient 39% of students use a credit card for the convenience

PRO’S AND CON’S OF CREDIT CARDS Saves you money Qualifies you for better interest rates Makes it easier for you to rent an apartment Makes it easier for you to buy a car Slide 21: Presenter: Here are some other Pro’s of having a credit card (click and read each bullet point as it appears)