Banking and money management Planning 10 – 2017/18

Budgeting What is your income? Gross income Net income Gross minus taxes and dues What are your expenses? General guideline… 30% shelter 10% fixed expenses 10% loan payments 10% personal spending 10% savings The difference is… Positive or negative? Track, trim and target… Negative… where can you trim expenses? Positive… what will you do with the extra?

What expenses will you have??? Rent Bills, insurance, groceries Shelter / Fixed expenses Loans Credit cards Payments Clothes, hair cuts, entertainment Electronics, hobbies, gifts Personal Spending Vacations Emergency fund Saving Set SMART goals… Specific, Measurable, Attainable, Relevant, Time-related

Your Banking Types of accounts Chequing Savings How do I Access Branch ATM On-line POS Do you know… Fees? Access limits? Who has access? How to protect your $?

To Keep your money safe don’t… Share your PIN and passwords Text or email personal info Instagram your credit card or debit card Fall victim to e-mail scams Remember, if something it too good to be true, check it out and get some advice!

Saving money and the interest you earn Simple Interest Compound Interest $100 paid 2% per year in simple interest will give you $2 per year in interest $100 x .02 x 1 = $2.00 $100 paid 2% compounded annually for 3 years… $100 x .02 x 1=$2 $102 x .02 x 1=$2.04 $104.04 x .02 x 1=$2.08 Your $100 became $106.12 in 3 years So what’s the big deal about that…

The Rule of 72 If you want to know how long it will take to double your money, there is a fairly simple calculation… divide 72 by the rate of interest you are earning on your investment. Example: If you are earning 5% on your money… 72 divided by 5 = 14.4 years to double your money If you are earning 7% on your money… 72 divided by 7 = 10.3 years to double your money

What are the different types of CREDIT? Installment loan Student loan Credit card Credit line Overdraft Mortgage

What is considered when applying for credit? Character Do you pay your bills on time Do you have a good credit history How long have you lived in your residence How long have you held your job Capitol What do you have in savings What do you own Capacity Do you have a steady job How much do you earn Can you afford the payment Collateral Do you have anything you can use as security on a loan

Most common ways to hurt credit Fail to pay bills on time Not making minimum payments on credit cards Outstanding fines with ICBC Not paying phone bills and walking away from contracts Getting joint credit and assuming the other person will pay Over drawing an account Bouncing cheques

How much can you afford to borrow First of all, residents of BC must be 19 to borrow money When you apply for a loan, the 30/40 rule comes into play… 30% of gross income for shelter cost (mortgage/rent/heat) 40% of gross income for all total payments combined Let’s assume you are making $45,000 per year ($23 per hour full time) Max payment for mortgage or rent and heat = $13500 ($1125 per month) Max total payments = $18000 ($1500 per month)

Know what bank accounts you have Know where your money goes So now what… Make a plan Know what bank accounts you have Save early Know where your money goes

Something to think about… Considering the average cost of a “special coffee” or tea is about $2.50 If you purchase: 1 per week = $2.50 x 52 = $130 per year 3 per week = $2.50 x 3 x 52 = $390 per year Think back to the $1000 saving example. If you could save $20 per week, you have your $1000 saved for the year. Hmmm, $20 per week = $4. per week day Yes, saving over 14 years really get you $119,187.26