Working With Credit PBL Presentation, 10/20/2004 By Rick Christoph

Second level What is Credit? Credit is a loan –You borrow $$! – Actually, you are buying money! Credit is not: – Prestige – Cool – Special

Second level Why do we have so much credit? We want it now! We want EVERYTHING now – No $$? No sweat – charge it. – Lets get that new car, TV, Clothes! What we are doing is to mortgage our future for today

Second level How much does it cost? Average household has $9,000 in debt! – Many have 0 – what do the others have?? Look at all the debt consolidation firms – Why are they around? – To make money from the suckers! – Take a look at this credit application Dont be a sucker!

Second level How long does it take to payoff? Take that $9,000– what would the minimum payment be? – Usually, 2.08% per month is the minimum – Assume a 21.9% interest rate.028 * 9,000 = 252 OK, how long to payoff WITH NO OTHER PURCHASES? – anner.jsp anner.jsp

Second level In Trouble? Get another card! The dumbest possible idea – How much does that cost you? – credit-credit-cards.php credit-credit-cards.php – How about a payday advance? – HOW MUCH IS THE FINANCE CHARGE? The Annual Percentage Rate (APR) on a typical 14 day loan is %, which is $30.00 per every $ borrowed. You can also refinance your loan.

Second level How to use credit Know good vs. bad debt GOOD – items last longer than debt: – used for investment – Critical items you must have BAD – debt lasts longer than item – Buying a pizza (stuff that is gone before the bills arrive)

Second level INVEST in YOU Pay off the debt! Build a cushion – Cash to cover short term problems Invest in yourself html html

Second level WOW! It will take 25 years to pay off the 9,000 and you get to pay an extra 14,000 in interest. YOU PAY – $23,000 If you invest the $252 a month for 25 years – YOU GET $225, – Lets you know why firms like the credit card business!

Second level More WOW About Tax Deferred Investments -- Your 252 a month GETS YOU $282, Invest in 401K, 401a, 403b – How do these work? – Immediate tax savings and growth!

Second level How about cars? Cars are fun – and expensive – Average payment time > 64 months! What does upside down mean How do we get upside down – Trade too fast – No down payment – Fast depreciation Should you let it be repossessed? –

Second level What is a credit score Score developed by Fair Isaac & Co. Called a FICO score Used to determine how much you pay for credit cards, car loans, mortgages How is your score? –

Second level What is a mother to do? Live BELOW your means Use debt for investments that appreciate Be an owner – not a borrower Learn from others mistakes START early

Second level Great Websites