Lesson 1: Personal Finance

Agenda  Budgeting  Video  Review  Credit Cards and Credit Scores  Scholarships

Personal Budgeting budgeting/managing-my-personal-budget/set- budget-stick-to-it.html budgeting/managing-my-personal-budget/set- budget-stick-to-it.html

6 Steps of Budgeting 1.Know your income 1.Gross income vs. Net Income 2.Determine basic fixed expenses 1.Reoccurring/predictable 2.Nondiscretionary expense (need to have expenses) 3.Determine basic variable expenses 1.Vary/unpredictable 2.Discretionary expenses (want to have expenses)

6 Steps of Budgeting 4.Determine what is important 5.Follow and review budget 1.Applications, websites, or budget templates 2.Examples: Mint.com, Bank Account websites 6.Keep track of expenses 4.Regularly check bank account balances

Budget Scenario Yearly Income = $48,000 yearly (Monthly = $4,000) (After Tax = $3000) Expenses: Housing = Transportation = Clothing = Food = Entertainment = Savings =

How to minimize everyday expenses Always make a shopping list prior to going to the store Never shop hungry Take drinks from home (BYOD) Eat at home Turn off the lights when you leave Go to a matinee movie rather than night movie

Credit Scores Similar to a Report Card Scores range from “Good” Credit scores are usually above 700 Credit monitored by an Agency (FICO) Grades are monitored by school, teachers, and parents The Importance of a Credit Score Determines what loans you qualify for and the interest rate you pay Cars, homes, loans, job applications, etc. Bad Credit = Consequences

FICO Credit Score FICO Credit Scores are the standard credit score in the U.S. Used in 90% of lending decisions.

Breakdown of Credit Score 1.Payment History (35%) 1.Credit payment history (credit cards and department store cards), installment loans (car loans), mortgage loans, and public records (bankruptcy, foreclosures) 2.Amounts Owed (30%) 1.Implications of “maxing out” on a credit card, amount of installment loans paid, and number of accounts with balances 3.Length of credit history (15%) 1.Typically, a longer credit history will increase your FIFO score

FICO Credit Score Cont. 4.Types of credit used (10%) 1.A closed credit account will still show on your credit history 5.New Credit (10%) 1.Must check your credit report through credit agency (myFICO) 2.Don’t open credit accounts too rapidly 3.Impact of Credit Score Inquiries

What to look for when choosing a credit card? 1.Watch the interest rate. 1.Introductory rates often jump significantly after a few months. 2.Take a look at the annual fees 1.Ex: Visa Black Card ($495 annual fee) 3.Know and set your credit limit. 4.Consider Rewards 1.Gas, Groceries, Online purchases, etc. 5.Read the fine print 1.Transaction fees, cash advance fees, etc.

What to look forward to… Types of Taxes Personal Income Tax Mortgages

Works Cited for-when-choosing-a-credit-card/ for-when-choosing-a-credit-card/ education/understanding-credit-scores.html education/understanding-credit-scores.html