Financial Planning and Budgeting Last Year Review

Intermediate-Term Goals Instant Gratification Vocabulary Review Financial Planning Wants Needs Values Goals Cash Flow Short-Term Goals Long-Term Goals Intermediate-Term Goals Opportunity Cost Instant Gratification Delayed Gratification Responsible Spender  

Vocabulary Review Spending Plan/Budget Cash Flow Income Fixed Expenses Variable Expenses Periodic or occasional expenses Pay Yourself 1st

Unit 4 - Good Debt, Bad Debt: Using Credit Wisely

Unit 7 - Your Career: Doing What Matters Most

Vocabulary Debt APR Term Fees Bankruptcy Credit History Credit Report Credit Score Universal Default Installment Credit Revolving Credit Employee Benefits Career Job 4 C’s of Credit

Types of Credit Installment Credit Revolving Credit Fixed payments Set period of time to repay Set or varying interest rates Car loans and home loans are typical examples. Revolving Credit No stated payoff time Limit to credit Minimum monthly payments Interest rates vary or not Finance charges Credit cards most typical example 4-D

Places to get Credit Banks Credit Unions Department Stores Automobile Dealers Oil Companies (for gas stations) Federal Government (for student loans) Others? 4-E

WHEN YOU BUY “STUFF” You bought “STUFF” with your credit card. In fact, you bought $500 worth of “STUFF” with your credit card. Your APR is 18%. You plan to pay $10 a month to pay it off. You will pay $431 in interest Final cost of your purchases = $931.40 And it will take SEVEN YEARS and NINE MONTHS 4-F 1

The Cost of Using Credit Cards $700 for a Game System And it will take over 7 years to pay off! APR = 24% Payment: 4% of current balance Finance Charge $550.04 Your Stereo REALLY cost $1,250.04 Do you think you would still want the same gaming system 7 years from now?? 4-H 1

The Cost of Borrowing Money Interest Rate = 24% Payment = 4% of Current Balance BALANCE TIME TO PAY OFF INTEREST CHARGED TOTAL COST $2,000 11 YEARS 6 MONTHS $1,850 $3,850 $6,000 16 YEARS 1 MONTH $5,850 $11,850 $10,000 18 YEARS 2 MONTHS $9,850 $19,850 4-I 1 2 3

Financial Consequences of Debt Could put you in a state of overspending and perpetual debt, where you get used to carrying a balance and paying extremely high interest rates. 4-K-1

Financial Consequences of Debt Could adversely affect your credit rating, making it harder to get loans when you really need them.

The Four “Cs” of Credit Collateral Capital Capacity Character 4-L

How Credit Scores Are Determined Your payment history Information about how you make your payments on credit cards, store accounts, car loans, finance companies, mortgages Accounts in collection or past due, and how long past due Information in public records, such as bankruptcy, judgments, liens, wage attachments or child support 4-M-1 1 2 3

How Credit Scores Are Determined Your overall debt How much you owe on all your accounts How much credit you have available to use 4-M-2

How Credit Scores Are Determined Your credit account history When you opened and used each of your accounts How recently you applied for new credit Recent good credit history following past payment problems 4-M-3

How Credit Scores Are Determined Types of Credit The different types of credit accounts you have i.e. revolving or installment The total number of accounts you have 4-M-3 1 2 3

Protect Yourself Against Inaccurate Credit Reports Get a copy of your free credit reports from all credit rating agencies. Examine it thoroughly. If you find something that is incorrect, ask the agency to investigate the information. If that doesn’t resolve the issue, you can attach a short statement to your credit report. 4-O

Rule of Thumb 70% Living Expenses 4-P 20% Save or Invest 10% Pay Off Debt 20% Save or Invest 4-P

Relationship of Career and Earning Power I Need Years to Prepare Doing what I love to do I Want a Family I Want to Make Lots of Money I Want to Be Happy 7-A

post secondary education • salary • vocational school • community college • four-year college/university • major • certification • license • associate degree • bachelor’s degree • master’s degree • doctoral degree

The Opportunity Cost of Working Take an evening shift job Decide to stay in current position… Going to college and starting work later on Give up time with family and friends Instead of relocating to take a better job And getting a better-paying job as a result Can You Think of Some Other Examples? 7-C

Average College Costs Four Year Public Institutions Sample Average Undergraduate Costs, 2005-06 Four Year Public Institutions Four Year Private Institutions Resident . . . . . . . . . . . . . . . . . . . . . . . . . . Out-of-State . . . . . . . . . . . . . . . . . . . . . . . Resident . . . . . . . . . . . . . . . . . . . . . . . . . $16,357 $26,304 $33,301 Source: College Board’s Trends in College Pricing, 2006 7-H

Career Pathway Explore Career in HS Years Internship / PT Job in Related Field Receives Formal Education/Training Takes First Job Promotes to Higher-paying Position Goes back to School to Study More in Chosen Field Takes Next Job at Higher Pay School at Night On-the-job training Promotion 7-E Takes new job

Key Employee Skills Thinking Skills Basic Skills Personal Skills Resource Management Skills Personal Skills Interpersonal Skills Information Management Skills Systems Skills Technology Skills 7-D-1

Key Employee Skills Basic Skills Able to read, write, perform basic math computations; listens well; speaks clearly 7-D-2

Interpersonal Skills Key Employee Skills Team player, able to teach and lead other employees with diverse backgrounds, meets customer expectations, negotiates well 7-D-4

Organizational Skills Key Employee Skills Organizational Skills Works well in an organization, can monitor and correct performance, suggests improvements to the organization 7-D-5

Resource Management Skills Key Employee Skills Resource Management Skills Makes good use of time, money, materials and employee resources. Thinks of more efficient ways of doing things 7-D-7

Information Management Skills Key Employee Skills Information Management Skills Obtains, processes and organizes information; has solid analytical and problem-solving skills 7-D-8

Organizational Skills Key Employee Skills Organizational Skills Works well in an organization, can monitor and correct performance, suggests improvements to the organization 7-D-5

Technology Skills Key Employee Skills Solid skills in various electronic media (computers), can operate various types of equipment with ease, can maintain and repair equipment 7-D-9

Education and Experience NEFE High School Financial Planning Program Education and Experience Unit 7 – Your Career: Doing What Matters Most Some high school, no degree High school diploma, or equivalent Associate Degree Professional Degree Doctoral Degree Master’s Degree Bachelor’s Degree Some college, no degree Millions of 2006 dollars Worklife earnings estimates by highest level of educational attainment Source, US Census Bureau, current population survey, educational attainment in the US. 2005 1 1.2 1.5 1.6 2.5 2.1 3.4 4.4 7-F

Ranking Order of Key Employee Skills 1 5 9 10 6 2 7 12 11 8 4 13 3 Source: Job Outlook 2006, National Association of Colleges and Employers 7-G

Typical Employee Benefits Medical, Dental, Vision and or Insurance Sick Leave, Paid Vacation Time and Holidays Worker’s Compensation Insurance Life Insurance Retirement Benefits Retirement Savings Plans Employee Assistance Programs 7-K-1

Factors that Can Affect Your Earning Potential Promotions Being Fired Being Laid Off Additional Training Advanced Degrees A New Job Business Downturn Relocation Changing Careers Life-Changing Situations Business Upturn What other factors can you think of? 7-L