1. Your Financial Future Credit

2. Payroll deductions  Federal taxes – pays for roads, bridges, government, military, space program, disaster relief, schools  State taxes – pays for schools, roads, government, welfare  Social security –provides old-age, survivors, and disability insurance

3. Payroll deductions (cont.)  Medicare taxes – pays for medical care for elderly people and disabled workers  Retirement – a program set up by your employer  Health insurance premiums – your portion of your health insurance  401K – an optional retirement program

4. Your paycheck  Gross income – money you make before payroll deductions are taken out  Net income – money after payroll deductions Example gross amount: $500.00 Example gross amount: $500.00 Example net income: $355.00 Example net income: $355.00

5. What use net income for?  Pay yourself first  Pay your bills  Treat yourself

6. What determines money deducted for taxes?  The number of exemptions you claim on your W-4 form when you start work  The amount of money that you make

7. Fixed and adjustable expenses  Fixed expenses: expenses that you pay every month that don’t vary a lot –Rent –Insurance –Car payment  Adjustable expenses: expenses that vary from month to month –Clothing, utilities, food costs

8. Checking and savings accounts  Checking account – put money in and can write checks for items instead of using cash  Savings account – put money in and usually leave for long periods at a time and money draws interest

9. What is credit????  The amount of financial trust extended to you by a lender.  The amount you receive is based on your ability and willingness to repay.

10. What are the main costs of credit?  Interest – is payment for the use of another’s money.  Finance charge – is the cost for using credit.  Annual fee – a once-a-year fee charged by some card issuers in addition to interest  Annual percentage rate (APR) – the total amount it cost you yearly to use credit

11. Main sources of credit  Charge cards – a specific card usually limited to purchases from a specific company or retailer (JcPenney, Lazarus)  Credit cards – issued by many different institutions to pay for goods and services (Visa, Mastercard, Discover)

12. Other sources of credit  Debit cards – the amount is deducted electronically from your checking or savings account  Installment loans – purchase plans for larger purchases (car, appliances, etc..)

13. Three C’s of credit  Capacity - Can you repay the debt? Do you have a job? Do you have other debts?  Character – Will you repay the debt?  Capital – What if you don’t repay the debt? What do you own that can be used to pay the debt? Car? House?

14. Building your credit history  Have a well-managed checking account  Open a savings account and make regular deposits  Borrow money using a savings account as collateral  Use a co-signer  Always pay your bills on time or early

15. Credit affect goals by:  Credit can be useful in times of emergency  Credit is easier and more convenient than cash  Credit allows you to make major purchases, such as a car or house

16. Cause and effect of bankruptcy  Cause of bankruptcy is usually being in too much debt: too many loans, credit card bills etc.  Effect of bankruptcy is bad credit that stays on your credit report for 7 years which could keep you from getting other loans or credit