1. Personal Finance

2. Within the free enterprise system, individuals have certain rights
The right to: enter most any profession you wish
The right to: buy the products you want and reject those you do not want.
Consumer Bill of Rights
Right to a safe product
Right to be informed
Right to choose (competition)
Right to be heard
Right to redress (payment for damages)

3. Government Protections
Food, Drug, and Cosmetic Act
Requires packages to list their ingredients according to the amount of each
Pure Food and Drug Act
Manufacturers must prove that their product is safe
Fair Packaging and Labeling Act
Every package must have a label identifying its contents and weight
Better Business Bureau
Provide information about businesses
Warn consumers about dishonest business practices

4. What responsibilities do consumers have?
Make smart buying decisions
Stay informed about businesses
Report faulty products
Make fair complaints
Seek help for unsettled claims
Caveat emptor
“let the buyer beware”

5. Creating a plan for how money is earned and spent
1. Budgeting
Creating a plan for how money is earned and spent

6. Income versus Expenses
Income – money you earn
Expenses – money you spend

7. Types of income
Disposable Income – money left after paying for taxes; used to pay for necessities such as food, clothing, shelter.
Discretionary Income – money left after paying necessities; used to satisfy wants

8. Why should people save money?
To make big purchases
Emergencies
Luxuries

9. 2. Banking Basics

10. Checking Accounts
Let you deposit and withdraw money and write checks to pay for purchases and bills.
Debit/Check Card: allows you to withdraw cash, make deposits at ATM’s, and pay for purchases
PIN: Personal Identification
Number

11. Overdraft Protection Bouncing A Check or Over drafting: making a
purchase that exceeds what you have in your account
You will pay a fee to the business ($30+), as well as a fee to your bank ($20+)
Hurts your credit with the bank
Overdraft Protection: banks will honor your check or check card purchases even if they exceed your account balance
You pay a fee to the bank for each overdraft ($10 - $20)

12. Savings Accounts
Your money earns interest, which is a return on your money.
Types of Interest
Simple Interest: determined by initial deposit only.
Compound Interest: you earn interest on your initial deposit as well as on the interest you earn.
Compound interest is better!
Annual Percentage Rate (APR) is the amount your money would earn if left on deposit for one year.
Savings accounts usually carry an average APR of .08%
an APR of .08%,
$1,000 would earn $8 in a year

13. 3. What is credit?
Borrowing money to pay for something now while promising to repay it later

14. Where do people go to borrow money?
Banks
Credit unions
Finance companies
Credit Cards

15. Types of Consumer Credit
Revolving credit—a line of credit that may be used repeatedly, with a prearranged borrowing limit; periodic finance charges are computed on the unpaid balance; minimum payment is usually a percentage of the balance due.
• Credit cards (bank or department store)
• Home equity lines of credit
Term credit—a loan for a predetermined amount that requires specified payments at regular intervals over the life of the loan; finance charges are agreed upon at the start of the loan.
• Mortgage loans
• Student loans
• Vehicle loans
• Loans for other major purchases

16. Applying for Credit
The Equal Credit Opportunity Act requires that all credit applicants be considered on the basis of their actual qualifications for credit and not be rejected because of:
Age
Sex
Race
Martial Status
Color
Religion
National Origin
Receiving Public Income
Age limit???
Credit CARD act of 2009 states that if under the age of 21, parents must co-sign. To help college students from being targeted.

17. What Creditors Look For: the 3 C’s

18. Those fools never read the fine print! Mwahahahaha.

19. Credit Card Disclosure

22. Credit Reports
Credit reporting company: an organization that compiles credit information on individuals and businesses and makes it available for a fee. (Three major credit reporting companies are Equifax, Experian and TransUnion.)
Credit report: a loan and bill payment history, kept by a credit reporting company and used by financial institutions and other potential creditors to determine the likelihood a future debt will be repaid.
Credit score: a number generated by a statistical model that objectively predicts the likelihood that a debt will be repaid on time.

23. The Scores 720 and up: Excellent 680-719: Good 620-679: Average
You can get the best interest rates and repayment terms
: Good
You can still get good lending terms from, although not as nice as those offered to borrowers with truly excellent credit scores. If you're shopping for a home, a score in this range is considered to be a good credit score.
: Average
Absolute minimum credit score you can carry and still get fair mortgage terms. Smaller-ticket items that require financing are still attainable.
: Poor
Be ready for higher interest rates, and finance charges. t
: Bad
Financing will cost you, big-time!! On long-term loans (30-year mortgage), interest rates may be three percent higher than interest rates awarded to borrowers with good credit if you can get approved.
500 and below: Miserable
Any type of financing is almost impossible

24. Credit Terms
Lender – any person or group that loans money to another person or group
Borrower – the person who borrows money from the lender and must pay back the amount owed plus interest
Interest – fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets
Annual Percentage Rate (APR) - describe the interest rate for a whole year rather than a monthly interest rate on a loan.
Credit Rating - evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government
Collateral - borrower's pledge of specific property to a lender, to secure repayment of a loan
Bankruptcy – person or business that can not pay back its loans and debts

25. 4. Bankruptcy
A legal process to get out of debt when you can no longer make all your required payment.
Reasons for Bankruptcy
Medical Expenses
Job Loss
Business Losses
Natural Disaster
Credit Card Debt

26. Consequences of Bankruptcy
A bankruptcy filing could determine whether or not you get a job.
Your insurance rates could rise.
You may find it difficult to rent an apartment or qualify for a home loan.
Bankruptcies stay on your credit report for 10 years causing you to pay more for credit.
Bankruptcy can lower your credit score.

27. In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection, sell it, and distribute the proceeds to your creditors.
Exemptions = Insurance, Retirement plans, Personal Property that does not exceed a set value, Social Security, Disability, Welfare, Unemployment
In Chapter 13 bankruptcy, you file a repayment plan with the bankruptcy court to pay back all or a portion of your debts over time. You lose no property in Chapter 13 bankruptcy, because you fund your repayment plan through your income.

28. Changes to Bankruptcy Law
New law Bankruptcy Abuse Prevention and Consumer Protection Actin effect October 17, 2005.
Makes it harder to file for Chapter 7 bankruptcy and steers more people toward repaying a portion of their debts through Chapter 13.
Instead of wiping out debts under Chapter 7, many debtors will have to establish up to five-year repayment plans under Chapter 13
Requires those filing to meet with a credit counselor in the six months prior to applying for bankruptcy. Before debts are discharged, you must attend money management classes at your own expense.
Prevents filers with above-average income from filing Chapter 7 (liquidation).
New debt (within the last 70 days) may
not be discharged.
Quicker collections process