Debt Consumer Math

To Buy or not to buy? What are things you want to buy right now? Are they wants or needs? What is Debt? When someone owes more money than they have. Questions to Ask your self before spending Can I afford it? How will I pay for it? What will the consequences of my purchase be?

Good Debt? Impulsive financial decisions or using credit to buy wants can lead to bad debt Good debt is when credit is used to purchase something that is needed but may be difficult to pay for in cash. Good debt may include items such as financing college tuition or taking out a mortgage to buy a home. Good debt can help build our credit history and demonstrate to lenders that we are financially responsible. Good debt helps show our “creditworthiness.”

Good Debt? $86,528 $90,740 $71,760 $60,112 $42,588 $39,312 $35,984 $26,208

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Debt snowball What happens when payments are late or a check bounces? Debt can snowball, “grow”, if only minimum payments are made. Bad Debt will negatively effect your credit score. $10,000 in credit card— 12% interest— 2% minimum payment (pretty much standard) If you pay the minimum 2% of the balance (starts at $200/month, but goes down each month as the balance goes down), it will take 424 months (35 years) to pay off your debt of $10,000.  You will pay $9,544.72 in interest alone! On the other hand, if you pay a fixed payment of $300/month, it will take you 44 months (under 4 years) to pay off your debt of $10,000.  You will pay just over $3,000 in interest.

Debt Snowball

Results of Bad Debt Decreasing credit scores Continual calls from creditors seeking payments. Some may consider filing for bankruptcy as a last resort. While bankruptcy can help eliminate or reduce money that is owed, it damages a credit score and can prevent us from being able to buy a house, open new credit card accounts or obtain any kind of loan.

debt What would students do if they were in debt? If debt begins to snowball, there are options such as debt counselors who help develop a plan for paying back money owed, and debt consolidation, which can simplify repayments and lower interest rates Debt can have serious implications on our credit scores and severely limit opportunities, such as the ability to go to college, afford a new apartment or even purchase a gift for a friend’s birthday. Making a budget and cutting unnecessary expenses are not only ways to alleviate debt, but also ways to save for the things we want to buy. How does good debt help our credit and how does bad debt damage our credit?

references https://www.practicalmoneyskills.com/foreducators/lesson_plans/highschool.ph p https://www.practicalmoneyskills.com/foreducators/lesson_plans/lev9- 12/SA_Lesson15.pdf https://trends.collegeboard.org/sites/default/files/education-pays-2016-full- report.pdf https://cew.georgetown.edu/cew-reports/whats-it-worth-the-economic-value-of- college-majors/#full-report