Personal Finance

1
PersonalFinance

• James B. Wilcox
• RESOURCES PROVIDED BY
• THE UNIVERSITY OF SOUTHERN MISSISSIPPI
• CENTER FOR ECONOMIC AND ENTREPRENEURSHIP
  EDUCATION,
• MISSISSIPPI STATE UNIVERSITY, VIRTUAL ECONOMICS,
• NATIONAL COUNCIL ON ECONOMIC EDUCATION, THE
  MOODYS FOUNDATION

2
Who Earns More Money?
3
Who Earns More? Round 1

• Bartender
• (Nevada)

• Taxi Driver
• (New York)

4
Bartender or Taxi Driver?

1. Bartender
2. Taxi Driver

5
Who Earns More?

• Bartender
• (Nevada)
• 20,430

• Taxi Driver
• (New York)
• 26,800

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Job Duties

• Bartender
• Mixes and serves alcoholic and
• nonalcoholic drinks to patrons of bar,
• following standard recipes Mixes
• ingredients, such as liquor, soda,
• water, sugar, and bitters, to prepare
• cocktails and other drinks. Serves
• wine and draught or bottled beer.
• Collects money for drinks served.
• Orders or requisitions liquors and
• supplies. Arranges bottles and
• glasses to make attractive display.
• May slice and pit fruit for garnishing
• drinks. May prepare appetizers, such
• as pickles, cheese, and cold meats. May
• tend service bar and be designated
• Service Bartender.

• Taxi Driver
• Drives taxicab to transport passengers for
• fee Picks up passengers in response to
• radio or telephone relayed request for
• service. Collects fee recorded on taximeter
• based on mileage or time factor and
• records transaction on log. Reports by
• radio or telephone to TAXICAB STARTER
• on completion of trip. May drive limousine
• or custom-built sedan to pick up and
• discharge airport passengers arriving or
• leaving on scheduled flights and be
• Designated Chauffeur, Airport Limousine.

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Job Requirements

• Bartender
• -Bartending school
• -32 hours of training
• -Many states require bartenders to be certified
  in Serve Safe Alcohol program.
• -May require other certification.

• Taxi Driver
• -Regular automobile drivers license
• -May need a taxi driver license, aka hack
  license
• -May require 80 hours of classroom instruction

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Who Earns More? Round 2

• Miner
• (West Virginia)

• Taxi Driver
• (New York)
• 26,800

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Miner or Taxi Driver?

1. Miner
2. Taxi Driver

10
Who Earns More?

• Miner
• (West Virginia)
• 30,680

• Taxi Driver
• (New York)
• 26,800

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Miner Job Duties

• Mines ore, coal, or rock in underground mine,
  performing any combination of
• following tasks in areas where high production
  equipment is limited by
• economic factors or natural formations Cuts
  channel under working face to
• facilitate blasting, using pick, or by operating
  cutting machine. Operates
• mounted or unmounted power drill to bore blasting
  holes in working face.
• Charges and shoots (sets off) explosives or air
  charges to blast down
• materials. Shovels shattered materials into mine
  cars or onto conveyor. Installs
• timbering, roof bolts, or cribs, to support walls
  and roof. Lays track to
• accommodate mine cars or track-mounted equipment.
  May mine rock in coal
• mine at contract price per ton or footage of
  advance and be designated Rock Contractor
• (mine quarry). May mine ore, coal, or rock,
  using pick and shovel, and be designated
• Miner, Pick (mine quarry). When digging
  passageways between rooms, may be
• designated Entry Miner (mine quarry). May do
  development work, such as opening up
• new passageways, air vents, auxiliary tunnels,
  rooms, and shafts to facilitate mining, and
• be designated Drift Miner (mine quarry) Raise
  Miner (mine quarry) Shaft Sinker
• (mine quarry) Stope Miner (mine quarry)
  Tunnel Miner (mine quarry).

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Who Earns More? Round 3

• Miner
• (West Virginia)
• 30,680

• Police Officer
• (New Mexico)

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Miner or Police Officer?

1. Miner
2. Police Officer

14
Who Earns More?

• Miner
• (West Virginia)
• 30,680

• Police Officer
• (New Mexico)
• 36,120

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Police Officer Duties

• Patrols assigned beat on foot, on motorcycle, in
  patrol car, or on horseback to control
• traffic, prevent crime or disturbance of peace,
  and arrest violators Familiarizes self with
• beat and with persons living in area. Notes
  suspicious persons and establishments and
• reports to superior officer. Reports hazards.
  Disperses unruly crowds at public
• gatherings. Renders first aid at accidents, and
  investigates causes and results of
• accident. Directs and reroutes traffic around
  fire or other disruption. Inspects public
• establishments requiring licenses to ensure
  compliance with rules and regulations. Warns
• or arrests persons violating animal ordinances.
  Issues tickets to traffic violators. Registers
• at police call boxes at specified interval or
  time. Writes and files daily activity report with
  
• superior officer. May drive patrol wagon or
  police ambulance. May notify public works
• department of location of abandoned vehicles to
  tow away. May accompany parking
• meter personnel to protect money collected. May
  be designated according to assigned
• duty as Airport Safety And Security Officer
  Dance-Hall Inspector Traffic Police Officer or
• according to equipment used as Ambulance Driver
  Motorcycle Police Officer Mounted
• Police Officer. May be designated
  Emergency-Detail Driver Patrol Driver Pool-Hall
  Inspector Radio Police Officer Show Inspector.

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Police Officer Job Requirements

• Must be able to pass a pre-employment physical
  and drug screen.
• Must be a US Citizen.
• Must have a valid New Mexico drivers license or
  be able to obtain one.
• Must be able to pass a pre-employment physical
  and drug screen.Education High School Diploma or
  G.E.D.  equivalent.
• ExperiencePrior Law Enforcement preferred (Up to
  one or more years of experience).
• KnowledgeRequires work level knowledge, skills,
  and abilities related to a broad range of either
  complex or  technical functions or apprentice
  level knowledge of a single function area or work
  specialization.
• Certificates/LicensesMust complete the State
  Accredited Basic Academy within first year.
• RecertificationWill certify under Certified
  Officer when recertification requirements are
  needed.
• Use of Tools/EquipmentVehicle, baton, chemical
  sprays, handgun, shotgun, radar, computers,
  radio, handcuffs, breathalyzer, first aid
  equipment, telephone, tasers and AED machines.

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Who Earns More? Round 4

• Truck Driver OTR
• (Indiana)

• Police Officer
• (New Mexico)
• 36,120

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Truck Driver or Police Officer?

1. Truck Driver
2. Police Officer

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Who Earns More?

• Truck Driver OTR
• (Indiana)
• 36,940

• Police Officer
• (New Mexico)
• 36,120

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Truck Driver Job Duties

• Drives truck with capacity of more than 3 tons,
  to transport materials to
• and from specified destinations Drives truck to
  destination, applying
• knowledge of commercial driving regulations and
  area roads. Prepares
• receipts for load picked up. Collects payment for
  goods delivered and
• for delivery charges. May maintain truck log,
  according to state and
• federal regulations. May maintain telephone or
  radio contact with
• supervisor to receive delivery instructions. May
  load and unload truck.
• May inspect truck equipment and supplies, such as
  tires, lights, brakes,
• gas, oil, and water. May perform emergency
  roadside repairs,
• such as changing tires, installing light bulbs,
  tire chains, and spark
• plugs. May position blocks and tie rope around
  items to secure cargo
• during transit.

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Truck Driver Job Requirements

• -Commercial Drivers license (CDL) (Federal Law)
• -U.S. DOT regulations 21 years old, pass
  physical once a year, at least 20/40 eyesight
  (with glasses), good hearing, cannot be
  colorblind, have epilepsy, have diabetes, or high
  blood pressure, cannot take controlled
  substances, no felony charges, DUIs, and speak
  and read English well enough to read road signs

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Who Earns More? Round 5

• Truck Driver
• (Indiana)
• 36,940

• Electrical Repairer
• (Kansas)

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Truck Driver or Electrical Repairer?

1. Truck Driver
2. Electrical Repairer

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Electrical Repairer Job Duties

• Installs and repairs electrical systems,
  apparatus, and electrical and
• electronic components of industrial machinery and
  equipment, following
• electrical code, manuals, schematic diagrams,
  blueprints, and other
• specifications, using handtools, power tools, and
  electrical and
• electronic test equipment Installs power supply
  wiring and conduit for
• newly installed machines and equipment, such as
  robots, conveyors,
• and programmable controllers, following
  electrical code and blueprints,
• using handtools and voltage tester. Connects
  power supply wires to
• machines and equipment, and connects cables and
  wires between
• machines and equipment, following manuals,
  schematic diagrams, and
• blueprints, using handtools and test equipment.
  Diagnoses malfunctioning
• apparatus, such as transformers, motors, and
  lighting fixtures, using test
• equipment, and replaces damaged or broken wires
  and cables, using
• handtools. Tests malfunctioning machinery, using
  test equipment, and
• discusses malfunction with other maintenance
  workers,

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Electrical Repairer Job Requirements

• -Knowledge of electrical equipment necessary.
• -May require degree from vocational technical
  school (1 to 2 years of training).
• -Good eyesight, color perception.
• -May need to be certified.

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Who Earns More?

• Truck Driver
• (Indiana)
• 36,940

• Electrical Repairer
• (Kansas)
• 57,930

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Who Earns More? Round 6

• Funeral Director
• (Florida)

• Electrical Repairer
• (Kansas)
• 57,930

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Funeral Director or Electrical Repairer?

1. Funeral Director
2. Electrical Repairer

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Who Earns More?

• Funeral Director
• (Florida)
• 48,440

• Electrical Repairer
• (Kansas)
• 57,930

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Funeral Home Job Duties

• Undertaker. Arranges and directs funeral
  services Coordinates activities of
• workers to remove body to mortuary for embalming.
  Interviews family or other
• authorized person to arrange details, such as
  preparation of obituary notice,
• selection of urn or casket, determination of
  location and time of cremation or
• burial, selection of pallbearers, procurement of
  official for religious rites, and
• transportation of mourners. Plans placement of
  casket in parlor or chapel and
• adjusts lights, fixtures, and floral displays.
  Directs pallbearers in placement and
• removal of casket from hearse. Closes casket and
  leads funeral cortege to
• church or burial site. Directs preparations and
  shipment of body for out-of-state
• burial. May prepare body for interment.

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Funeral Home Director Job Requirements

• -Must be licensed 21 years old, 2 years of
  formal education including mortuary science,
  serve one year apprenticeship, pass qualifying
  exam. To embalm requires its own license.
• -College programs in Mortuary Science include
  anatomy, pathology, restorative art, business
  management, grief counseling, business law, and
  ethics

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Who Earns More? Round 7

• Faller
• (Washington)

• Electrical Repairer
• (Kansas)
• 57,930

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Faller or Electrical Repairer?

1. Faller
2. Electrical Repairer

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Who Earns More?

• Faller
• (Washington)
• 64,110

• Electrical repairer
• (Kansas)
• 57,930

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Job Duties

• Fells timber trees, applying knowledge of tree
  characteristics and cutting techniques to
• Control direction of fall and minimize tree
  damage Appraises tree for characteristics,such
• as twists, rot, and heavy limb growth, and gauges
  amount and direction of lean, using ax
• as plumb bob. Determines position, direction, and
  depth of cuts to be made and
• placement of wedges or jacks. Clears brush and
  debris from work area and escape
• route,and cuts saplings and other trees from
  falling path, using ax and chain saw. Scores
• cutting lines with ax, saws undercut along scored
  lines with chain saw, and knocks slabs
• from cuts with ax. Saws back-cuts, leaving
  sufficient sound wood to control
• direction of fall. Inserts jack or drives wedges
  behind saw to prevent binding of saw and
• start tree falling. Stops saw engine as tree
  tips, pulls cutting bar from cut, and runs to
• predetermined location to avoid injury from
  falling limbs and flying debris. May work on
• piecework basis and be designated Busheler
  (logging). May cut trees into log lengths
• BUCKER (logging). Fallers of small timber
  (generally under 18 inches in diameter) are
• classified as FALLER (logging) II.

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Faller Job Requirements

• -Generally, there are no educational requirements
  for forest worker jobs.
• -On-the-job training from the logging company
• -State logging or forestry associations provide
  training sessions for fallers, lead to
  certification.
• -Generally advance from occupations involving
  primarily manual labor to those involving the
  operation of expensive, sometimes complicated
  logging equipment.

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Who Earns More? Round 8

• Faller
• (Washington)
• 64,110

• Sales Engineer
• (Illinois)

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Faller or Sales Engineer?

1. Faller
2. Sales Engineer

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Who Earns More?

• Faller
• (Washington)
• 64,110

• Sales Engineer
• (Illinois)
• 73,120

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Sales Engineer Job Duties

• Sells electronic products and systems and
  provides technical services to clients,
  performing other duties

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Sales Engineer Job Requirements

• -A bachelors degree in engineering is typically
  required.
• -A business, chemistry, or other science degree
  may be acceptable.
• -May have work experience in an engineering
  specialty.
• -May need training in sales.

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Who Earns More? Round 9

• Fashion Designer
• (New York)

• Sales Engineer
• (Illinois)
• 73,120

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Fashion Designer or Sales Engineer?

1. Fashion Designer
2. Sales Engineer

44
Who Earns More?

• Fashion Designer
• (New York)
• 73,390

• Sales Engineer
• (Illinois)
• 73,120

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Fashion Designer Job Duties

• Designs men's, women's, and children's clothing
  and accessories Analyzes fashion trends and
• predictions, confers with sales and management
  executives, compares leather, fabrics, and other
• apparel materials, and integrates findings with
  personal interests, tastes, and knowledge of
  design to
• create new designs for clothing, shoes, handbags,
  and other accessories. Sketches rough and
• detailed drawings of apparel and writes
  specifications describing factors, such as color
  scheme,
• construction, and type of material to be used.
  Confers with and coordinates activities of
  workers who
• draw and cut patterns and construct garments to
  fabricate sample garment. Examines sample garment
  
• on and off model and modifies design as necessary
  to achieve desired effect. May draw pattern for
• sample, using sewing equipment. May arrange for
  showing of sample garments at sales meetings or
• fashion shows. May attend fashion and fabric
  shows to observe new fashions and materials. May
  be
• identified according to specific group designed
  for, such as men, women, or children or areas of
• specialization, such as sportswear, coats,
  dresses, suits, lingerie, or swimwear. May design
  custom
• garments for clients and be designated Custom
  Garment Designer (retail trade). May conduct
• research and design authentic period, country, or
  social class costumes to be worn by film,
  television,
• concert, stage, and other performers and be
  designated Costume Designer. May design,
  fabricate,
• repair, and sell leather articles and be
  designated Leather Crafter (leather prod.).
• May design, copy, or modify clothing accessories
  and be designated according to article designed
  as
• Handbag Designer (leather prod.) Hat Designer
  (hat cap) or Shoe Designer (boot shoe).

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Fashion Designer Job Requirements

• -2 year or 4 year degree
• -knowledgeable about fabrics, textiles,
  ornamentation, fashion trends, eye for color and
  detail, sketching ability, good portfolio.
• -Coursework may include anatomy, mathematics,
  CAD, textiles, pattern making, sewing and
  tailoring and fashion history.

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Who Earns More? Round 10

• Fashion Designer
• (New York)
• 73,390

• Psychiatrist
• (Mississippi)

48
Fashion Designer or Psychiatrist?

1. Fashion Designer
2. Psychiatrist

49
Who Earns More?

• Fashion Designer
• (New York)
• 73,390

• Psychiatrist
• (Mississippi)
• 136,610

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Psychiatrist Job Duties

• Diagnoses and treats patients with mental,
  emotional, and
• behavioral disorders Organizes data concerning
  patient's
• family, medical history, and onset of symptoms
  obtained
• from patient, relatives, and other sources, such
  as nurse,
• and social worker. Examines patient to determine
  general
• physical condition, following standard medical
  procedures.
• Orders laboratory and other special diagnostic
  tests and
• evaluates data obtained. Determines nature and
  extent of
• mental disorder, and formulates treatment
  program. Treats
• or directs treatment of patient, utilizing
  variety of
• psychotherapeutic methods and medications.

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Psychiatrist Job Requirements

• -4 year undergraduate degree
• -4 years of medical school
• -3-8 years of internship and residency
• -Must be licensed pass exam
• -May be board certified
• -Course work includes anatomy, physics,
  biology, mathematics, organic chemistry,
  pathology, pharmacology, medical ethics

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Who Earns More? Round 11

• Secretary of State
• Hillary Clinton

• Psychiatrist
• (Mississippi)
• 136,610

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Secretary of State or Psychiatrist?

1. Secretary of State
2. Psychiatrist

54
Who Earns More?

• Secretary of State
• Hillary Clinton
• 186,600

• Psychiatrist
• (Mississippi)
• 136,610

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Secretary of State Job Duties

• The Secretary of State is responsible for the
• overall direction, coordination, and supervision
  of
• U.S. foreign relations and for the
  interdepartmental
• activities of the U.S. Government abroad. The
• Secretary is the first-ranking member of the
• Cabinet, is a member of the National Security
• Council, and is in charge of the operations of
  the
• Department, including the Foreign Service.

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Secretary of State Job Requirements

• -Nominated by the President
• -Confirmed or rejected by the United States
  Senate by a majority vote.

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Who Earns More? Round 12

• Secretary of State
• Hillary Clinton
• 186,600

• Anesthesiologist
• (Kentucky)

58
Secretary of State or Anesthesiologist

1. Secretary of State
2. Anesthesiologist

59
Who Earns More?

• Secretary of State
• Hillary Clinton
• 186,600

• Anesthesiologist
• (Kentucky)
• 197,000

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Anesthesiologist Job Duties

• Administers anesthetics to render patients
  insensible to pain during
• surgical, obstetrical, and other medical
  procedures Examines patient to
• determine degree of surgical risk, and type of
  anesthetic and sedation
• to administer, and discusses findings with
  medical practitioner
• concerned with case. Positions patient on
  operating table and
• administers local, intravenous, spinal, caudal,
  or other anesthetic
• according to prescribed medical standards.
  Institutes remedial
• measures to counteract adverse reactions or
  complications. Records
• type and amount of anesthetic and sedation
  administered and condition
• of patient before, during, and after anesthesia.
  May instruct medical
• students and other personnel in characteristics
  and methods of
• administering various types of anesthetics, signs
  and symptoms of
• reactions and complications, and emergency
  measures to employ.

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Anesthesiologist Job Requirements

• -4 year undergraduate degree
• -4 years of medical school
• -3-8 years of internship and residency
• -Must be licensed pass exam
• -May be board certified
• -Course work includes anatomy, physics,
  biology, mathematics, organic chemistry,
  pathology, pharmacology, medical ethics

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Hillary Clinton

• B.A. Wellesley College
• J.D. Yale Law School
• Professor School of Law at the University of
  Arkansas
• Lawyer Rose Lawfirm
• First lady of Arkansas
• First lady of the United States
• United States Senator (New York)
• Secretary of State

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Who Earns More Bonus Round

• LeBron James
• ProBasketball player

• Angelina Jolie
• Actress

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LeBron James or Angelina Jolie?

1. LeBron James
2. Angelina Jolie

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Who Earns More Bonus Round

• LeBron James
• Pro Basketball player
• 27,000,000

• Angelina Jolie
• Actress
• 27,000,000

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LeBron James

• High School
• -Attended St. Vincent St. Mary High School,
  Akron, Ohio
• -Mr. Basketball Ohio 3 times
• -USA Today All-USA First Team
• -Gatorade National Boys Basketball Player of the
  year
• NBA Basketball
• -First overall pick in the NBA draft by the
  Cleveland Cavaliers
• -All Rookie First Team 2004
• -6 time NBA All-Star (2005-2010)
• -3 time first team All-NBA (2006, 2008, 2009)
• -2009 NBA MVP

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Angelina Jolie

• -Father is actor Jon Voight, Mother was actress
  Marcheline Betrand.
• -Studied at the Lee Strasberg Theatre Institute
  at 11.
• -Began modeling at 16.
• -Won Oscar for Best Supporting Actress in Girl,
  Interruputed
• -Won 3 Golden Globes, 2 SAG awards
• -Goodwill Ambassador for the U.N. High
  Commissioner for Refugees (UNHCR)

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S
D
How do these incomes relate to Supply and Demand?
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Why Dont People Save? Lesson 15
70
The Risky Behavior Mystery

• People usually know what is good for them, but
  they often act as if they dont know.
• Some people
• Drive too fast.
• Fail to take medications.
• Go surfing!
• Why would people do things that dont seem to be
  in their interest?

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Lesson 15 Visual 1Why Dont People Do What They
Should Do?
Question Number of Yes Responses
How many of you know that smoking is unhealthy?
How many of you know people--even people your age--who smoke?
How many of you know that eating foods that are high in transfats, such as packaged cookies, margarine and peanut butter, isnt healthy?
How many of you know people who eat foods that are high in transfats?
How many of you know that regular exercise provides many health benefits?
How many of you know people who dont exercise regularly?
72
Perhaps the answer lies in identifying the costs
and benefits.

• Costs All the things that have to be given up
  when a choice is made.
• Benefits Gains or favorable outcomes that make
  people more satisfied when a choice is made.

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An analogy

• Saving is like smoking, diet and exercise.

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What are the benefits of a eating a healthy diet
and exercising regularly?

• Feel better
• Look better
• Reduce your risk of heart disease
• Reduce your risk of cancer
• Boost your life expectancy

75
Do the benefits of diet and exercise occur now or
in the future?

• Although people may start to feel better right
  away, most of the benefits occur in the future.

76
If people choose a healthful diet and exercise
regularly, are they guaranteed these benefits?

• No.
• Some people may still get heart disease or
  cancer, no matter what they eat or how well they
  exercise.
• Also, a person engaged in a diet-and-exercise
  program could die prematurely from any number of
  causes other than heart disease or cancer.

77
What are the costs of choosing a healthful diet
and exercising regularly?

• Possibilities include
• Giving up food that tastes really good.
• Paying dues for membership at a fitness club.
• Spending time on exercise that you could spend in
  other ways--napping, reading, gardening, watching
  television, playing video games.

78
Saving

• Saving is income not spent on consumption or
  taxes.
• Most people know that starting to save money at
  an early age and saving regularly are good habits
  that lead to financial well being.
• Yet many people fail to save early and regularly.
  
• Why?

79
What are the benefits of saving?

• Ability to attain your goals for the future.
• A feeling of security and satisfaction.

80
What are the costs of saving?

• Things you could obtain now if you werent saving.

81
When do the benefits of saving occur?

• In the future.

82
When do the costs of saving occur?

• In the present.
• Psychology cookie experiment
• Instant vs. Delayed gratification

83
Cookie Experiment

• Training in self-control has been useful in
  helping children interact more effectively with
  their peers and perform higher quality
  schoolwork. These children also report higher
  self-esteem
• Longer self-imposed delay of gratification
  durations in childhood have been linked to later
  social, cognitive, and academic competence.
• Children with longer delay of gratification
  durations at age four were found better able to
  plan, think ahead, use reason, and cope with
  stress in adolescence, and they had higher SAT
  scores in high school.

84
The Costs and Benefits of Saving

• The costs of saving are immediate and certain.
• People have to give up things they could buy now.
• The benefits of saving occur in the future and
  are uncertain.
• Events might prevent people from reaping the
  benefits of saving.

85
Opportunity Cost and Incentives

• Considering the opportunity cost of spending
  might change how people analyze the costs and
  benefits of saving.
• Setting goals is an important factor related to
  saving.
• Goals act as incentives to save.
• Interest provides another incentive to save.

86
Opportunity Cost and Incentives

• What are some things for which you would like to
  save?

87
Setting Savings Goals
Short-Term Savings Goals (One year or less) Medium-Term Savings Goals (One to five years) Long-Term Savings Goals (Over five years)

88
Review

• What is saving?
• How is failing to save like failing to eat right
  and exercise?
• What are incentives to save?
• What are short-term, medium-term and long-term
  saving goals?

89
Credit Cards
90
Legal Disclaimer

• The information contained in this presentation
  is provided for informational and educational
  purposes only, and should not be construed as
  financial or legal advice on any matter. The
  University of Southern Mississippi, Mississippi
  Council on Economic Education, Southern Miss
  Center for Economic and Entrepreneurship
  Education disclaim all liability in respect to
  actions taken or not taken based on any or all
  the content presented here. Before acting on any
  information or material obtained through this
  presentation, we strongly recommend you to seek
  advice from a personal financial advisor or
  professional legal counsel, as appropriate.

91
Sound Advice

• 1. Charge only what you KNOW you can afford to
  repay
• 2.You pay more when you use your credit card and
  keep a revolving balance b/c you pay interest on
  your outstanding balance
• 3. Pay your credit card bill in full each month.
  If you cant pay in full, ALWAYS pay more than
  the minimum monthly payment
• 4. Dont spend over your credit limit and wind up
  paying special fees

92
Sound Advice

• 5. Pay your bills on time
• If not you will have late fees, higher APR, lower
  credit score
• 6. Learn how to protect your credit rating, it is
  your financial report card
• 7. Never use one credit card to pay another
  (i.e., take out a cash advance on one card to pay
  another
• 8. Only have one credit card

93
Definition of Credit

• Credit is a system of doing business where you
  promise to pay at a later date for goods and
  services received today
• Credit cards function as a loan
• Using a credit cards means that you are borrowing
  money from the issuer
• The charges are unsecured loans that must be
  repaid

94
Card Types

• Credit Card
• A credit card allows you make purchases for which
  you are billed later.
• Most allow you to carry a balance from one
  billing cycle to the next with interest.
• Typically include a minimum payment each billing
  period.
• A Charge Card is a special type of Credit Card
• The balance on a charge card account is payable
  in full when the statement is received.
• The balance cannot be rolled over from one
  billing to the next.
• Debit Cards are not Credit Cards.
• Debt cards allow payment and purchase to happen
  simultaneously.

95
Its a Fact

• The U.S. has the lowest personal savings rate of
  any major industrialized nation.
• 40 of Americans say they live beyond their means
• Current debt-to-income ratio is 135
• Americans have record credit-card debt
• 874 billion in U.S. credit card debt as of Nov
  2009
• Source www.federalreserve.gov/releases/G19/Curren
  t/
• The US has recently seen an over 50 increase in
  bankruptcies among people under age 25
• Fastest growing age range for bankruptcies

96
College Student Credit Card Statistics

• Over 75 of college students admit to having made
  mistakes with their money when they arrived on
  campus
• Biggest mistakes were overspending on food,
  entertainment, and credit card purchases.
• University Administrators state that they loose
  more students due to credit card debt than they
  do to academic failure
• Drop-Out Rates
• Academic Failure 6
• Debt / Financial Pressure 8.5

97
Budgeting

• We can all benefit from having a clear
  understanding of financial needs/wants and
  spending habits.
• Create a realistic budget gives a personal plan
  for spending a saving money, gives a sense of
  comfort and guidance
• Take the time to use the guide on page 2

98
College Student Credit Card Statistics

• Credit Card Availability
• Over 92 of college students have a credit card
  by their sophomore year
• Only 55 pay off their balance monthly.
• The average balance for college students is 885.
• Over 21 of undergrads owed 3,0007,000 on
  credit cards
• The average student has 2.8 credit cards.
• Recent Sallie Mae Survey
• Over 50 of college students surveyed
  accumulated 5,000 in credit card debt
  while in school
• Over 33 of college students surveyed accumulated
  10,000 in credit card debt while in school

99
How Does this Happen?

• College Students are a Privileged Class
• College students are able to obtain credit cards
  without a prior credit history, employment, or a
  parents co-signature.
• Credit card companies are betting on the
  students future earnings potential.

100
Why You Should Use Credit Cards?

• Creates Opportunities
• Imposes self-discipline
• Proper use helps establish a good credit rating
• Beneficial for a future house or car purchase
• Free line of credit if you pay your balance
  monthly
• Convenience and Security
• Accepted across United States and abroad
• Often required to hold a reservation
• Emergency buying power
• Additional form of identification
• Record of purchases on bill statement

101
Handout 4.2
102
A Schumer Box

• The Schumer Box was introduced by Senator Chuck
  Schumer to make it easier to compare credit card
  offers.

103
A Schumer Box
104
Annual Fees

• An issuer may charge an annual fee for the
  privilege of using their card.
• There are many without such a fee
• If your current card has one and you are a good
  customer, your issuer will likely waive it if you
  ask them

105
Interest Rates

• Every credit card has at least 4 different
  interest rates depending on the types of
  transactions
• Purchase
• Balance transfer
• Cash advance
• Default

106
A Schumer Box
107
A Schumer Box
108
A Schumer Box
109
APR

• Annual Percentage Rate
• The monthly interest on unpaid credit card
  balances
• The higher the APR, the more money is paid in
  interest
• Look for a card with a low APR!
• APRs can be fixed or variable
• Variable APR is based on a published index, like
  the prime rate plus a few percentage points
• Can change without written notice
• Fixed APRs can be changed with 15 days written
  notice

110
U.S. Prime Rate
111
Grace Period

• Grace period
• If the balance is not paid off each month,
  interest is applied to new purchases when they
  are made
• If the balance is paid off monthly, a grace
  period is allowed before interest is charged
  Free Credit
• No grace Period
• Regardless of the previous months balance,
  interest is applied to new purchases as they are
  made

112
A Schumer Box
113
Balance Calculation Methods

• Average Daily Balance
• You pay interest on the average balance owed
  during the billing cycle
• Creditor figures the balance in your account on
  each day and then adds together these amounts and
  divides by the number of days in the billing
  cycle
• See the handout and answer the questions

114
Example

• Assume that you received this credit card with a
  credit limit of 2,000.
• Assume that you bought a LG 32 LCD HDTV/DVD
  Combo at Best Buy as shown below for 1,049
  (Ignore sales tax and 49 HDMI cables).
• How long will it take to pay off at the minimum
  payment of 35 per month?
• Time 41.86 Months
• Time 3.49 Years
• What was the total amount paid?
• Total 1,465.36
• TV 1,049.00
• Interest 416.36 (39.69)
• Any late payments would add 39.00 in interest.

1 Year Warranty
115
Balance Calculation Methods

• Adjusted Balance
• You pay interest on the opening balance after
  subtracting the payment or returns
• Previous Balance Method
• Interest is only paid on the previous (opening)
  balance, regardless of payments made during the
  month.
• Two-cycle Average Daily Balance
• The interest is paid on the current balance as
  well as the previous months balance, this leads
  to double finance charges
• A zero-balance must be held for two months in
  order to avoid charges
• This method should be avoided by consumers!

116
Cash Advances

• Cash advances are cash loans one can get with a
  credit card
• Expensiveonly use in a true emergency
• Usually requires an up front fee plus 3 of the
  advance or a minimum fee
• Higher APR
• No grace period
• Dont always get to pay it off entirely if you
  have revolving credit

117
Convenience Checks

• Pre-printed checks linked to a credit card
  account that are mailed to ones home
• Act like cash advances
• Shred them before you put them in the trash!

118
Default Rates

• A default rate has a high APR
• Most issuers apply a default rate if one
• Makes a late payment
• Misses a payment
• Exceeds a credit limit
• Bounces a payment check
• Some default rates escalate according to the
  number of payments missed

119
Balance Transfers

• Issuers try to get new customers by offering low
  introductory rates to individuals who transfer
  their balance from another card to theirs
• Find out..
• Is there a fee?
• How long does the teaser rate apply?
• What is the APR that will replace the teaser
  rate?
• Does the teaser rate apply to both the
  transferred balance and new purchases?
• Choose a balance transfer offer only when there
  is no fee, has a long-term APR that applies to
  both the transferred balance and new purchases

120
Late Fees

• If a payment is received after the due date, a
  late fee will be added to your bill
• Fees often escalate depending on the amount of
  the outstanding balance
• Typically range from 15 to 39
• Negatively affects your credit rating b/c the
  late payment is reported to the three major
  credit reporting agencies
• After one or two late payments

121
Over-Credit Limit Fees

• Issuers will allow an individual to spend over
  their credit limit but a fee will be assessed
  every month until the balance is brought below
  the credit limit
• 29 to 39 or a tiered fee depending on the
  balance
• Default APR may be applied and it might be
  reported to the credit agencies

122
Bounced Check Fees

• If the check you write to pay off your credit
  card bounces, you will likely pay a fee of 29 to
  39
• Default APR maybe applied and credit reporting
  agencies advised

123
Currency Conversion Fees

• 3 to convert currency on foreign purchases

124
Pay by Phone Fee

• Some issuers charge 10-15 to make a payment by
  phone

125

• How to
• Wisely Choose and Responsibly Use
• a Credit Card

126
Knowing is Half the Battle!

• Understanding how credit cards work will help you
  use them effectively. Credit cards can either be
• Short-term high interest loan (Revolvers), or
• Short-term interest-free loans (Convenience
  Users)
• Revolvers
• Keep a balance on their account and pay interest
  on all their purchases
• Low APR is most important
• Convenience Users
• Pay balances off in full each month
• Long grace period is most important
• Most cost effective

127
Pay More than the MMP!

• Assuming discontinued use of the card, a MMP
  based on 1 of the outstanding balance plus
  accrued monthly interest or payment of 20
  whichever is greater, and timely payments
• How long and what is the payoff for the
  following?
• 1000 debt, 18 APR, MMP
• 1000 debt, 18 APR, MMP 10

128
Look for

• A low APR
• No annual fee
• A long grace period (at least 20 days)
• Average Daily Balance Method
• Low Penalty Fees

129
Using a Credit Card Properly

• Limit yourself to only one card until you know
  you can trust your manage it properly
• Student loans should be used for tuition, not
  credit cards
• Wants do not equal needs
• Can I do without this purchase?
• Credit cards do not change our socioeconomic
  status
• Buy only what you can afford to repay each month
• Always pay off the entire balance.on time
• If you cannot pay the entire balance in a month,
  stop using the card until it is paid off
• Make sure you pay more than the minimum balance
• Pay more than the MMP asap, dont wait for the
  due date
• Manage a credit card account like a checking
  account
• Avoid cash advances, convenience checks, and
  going over your limit
• Dont skip paymentseven if your bank says you
  can
• Keep a low credit limiteven if your bank says
  you can have more
• Record all expenses and keep receipts
• Check credit statement for errors
• Notify issuers of change of address

130
Handling Disputes

• Two Types of Disputes
• In the case of any unauthorized use
• Liability Limited to 50
• Notify Bank ASAP Phone and Written Notice
• In the case of a billing error
• Notify Bank Within 60 Days
• Include Form on Back of Bank Statement and a
  Letter
• Letter and Form must include
• Name and Account Number
• Dollar Amount Involved
• Reason for Dispute
• Any Other Clarifying Information

131
Credit Card Safety Tips

• Secure Your Cards
• Sign card with Signature and Please See ID
• Do not leave cards lying around
• Do not give out account number unless making
  purchase with a reputable source
• Report Lost or Stolen Cards Promptly
• Keep a list of account numbers and bank phone
  numbers in a safe place separate from cards
• Close unused accounts by phone, then in writing,
  and then cut up the card
• Note Closing a card may hurt your credit score

132
Always a Solution

• If you have an overwhelming debt, it is better to
  deal with the problem rather than deny it
• Do not skip a payment
• Pay down higher APRs first
• Stop using the card
• Call the issuer and tell them the problem
• If they offer a more manageable payment plan, get
  it in writing
• Increase your monthly income and reduce monthly
  expenses
• Contact the National Foundation for Credit
  Counseling 800-388-2227 or www.nfcc.org to enter
  a debt consolidation program

133

• Credit Reports
• and
• Credit Scores

134
Credit Reports

• Financial report card reflecting the extent of an
  individuals credit and payment history
• Negative information can stay on for 7 years
  while bankruptcies remain for 10 years
• Lenders buy the reports to determine whether they
  will grant an individual credit and at what rate
• Three U.S. Credit Reporting Agencies
• Equifax, Experian, and Trans-Union
• Can be obtained for free
• Once per year and after denial of credit
• 877-322-8228 or www.annualcreditreport.com

135
Credit Scores

• Numeric value obtained from a credit report
• Defines you by a single number
• Quick Screening Mechanism for Lenders
• Low Credit Score No Credit or High Interest
  Rates
• Many employers check credit reports
• Most common scoring system is Fair Isaac
  Corporation (FICO)
• Scores range from 300-850
• National Average 678
• Payment history 35
• Total amount owed 30
• Length of credit history 15
• New credit 10
• Types of credit 10

136
FICO Scores by Age Group
137
Your Credit Reflects You
138
The Impact of Credit Scores
139

• Consequences of
• Irresponsible
• Credit Card Use

140
Irresponsible Credit Card Usage Leads to

• Denial of credit
• High APR b/c of the higher risk
• Universal Default Clause
• Allows an issuer to increase an individuals APR
  if they fail to make a payment to another lender
• Difficulty renting an apartment
• Denied employment
• Denied financial aid
• Higher automobile insurance premiums
• High security deposits, e.g., Cell phone, gas,
  electronic

141
Make Good Choices!

• Students should clearly understand that while
  credit cards are a great financial tool, they are
  also a big responsibility, which require
  maturity, consistency and sound financial
  management skills so that they can enjoy the
  benefits of credit while avoiding the pitfalls.

142

• Identity Theft

143
Identity Theft

• Occurs when an impostor steals personal
  information such as a social security card,
  drivers license, bank account or credit card
  number in order to impersonate someone else
• The information is then used to obtain credit,
  merchandize, and services using the victims
  identity

144
Signs

• A credit card or statement for an account that
  was not requested
• A missing statement
• Unauthorized change of address
• Unauthorized changes on the credit card statement
• Denied credit for no apparent reason
• Debt collectors call and write regarding
  purchases you did not initiate

145
Avoiding Identity Theft and Other Financial
Trouble

• Guard your Social Security Number and other
  personal information
• Shred old documents and credit card offers
• Do not carry unnecessary documents/cards
• Do not mail payments from home
• Monitor your Credit Report
• Remove your name from the marketing lists of the
  three major credit reporting agencies
• Subscribe to a credit monitoring service
• Avoid business with or loans to friends / family
• Never cosign a loan for anyone

146
Avoiding Identity Theft and Other Financial
Trouble

• Become familiar with the billing cycles and when
  statements should arrive in the mail
• Dont leave mail in the mailbox and use the Post
  Office for outgoing mail
• Use creative passwordsavoid the last 4 digits of
  your SSN or your moms maiden name
• Only make on-line purchases if the website is
  secure and protected by an encryption system
• Place virus protection software on your computer

147
If you are a victim of identity theft

• Contact the three major credit-reporting agencies
  and ask them to place a fraud alert on your
  file
• Order a free credit report from each of the
  agencies and review the reports
• Contact the fraud departments for creditors
• Close the accounts and follow up in writing
• File a police report and ask for a hard copy
• Federal Trade Commission maintains an identity
  theft clearinghouse that provides information for
  victims
• 877-IDTHEFT or www.consumer.gov/idtheft

148
Auto Insurance Coverage Types
149
Time to Pick a Car and Get on the Road

• Closest to the MSRP
• (Manufacturers Suggested Retail Price)
• Without going over wins!

150
2005 Honda Civic LX

• Automatic Transmission
• Dual Zone Air Conditioner
• Keyless Entry
• Auto Lock Brakes

151
The MSRP is

• 16,975

152
2005 Mitsubishi Spyder GT

• Automatic, 4-Spd w/Overdrive Sportronic
• V6, 3.0 Liter
• Leather Interior

153
The MSRP is

• 28,944

154
2005 Hummer H2 SUV

• 7-Spoke Aluminum
• Automatic, 4-Spd HD
• Leather Surfaced Heated Bucket Seats
• V8, 6.0 Liter Engine

155
The MSRP is

• 53,280

156
Are You Ready to Drive?

• Ask yourself
• Do I have a license?
• Is my car registered?
• Am I covered by auto insurance?

157
Why do I need auto insurance

• Its the law!
• There are risks you cant afford to take
• What happens if
• Youre involved in a crash that causes property
  damage?
• You hurt yourself or someone else?
• Your car is damaged when youre not driving it?
  (by weather, vandalism or a hit-and-run)
• Your car is stolen?
• Your car breaks down and needs to be towed?

158
Automobile Insurance The Basics
What is the likelihood you will be in an
automobile accident? There are more than 12
million motor vehicle accidents annually The
typical driver will have a near automobile
accident one or two times per month The typical
driver will be in a collision of some type on
average of every 6 years Crashes are the leading
cause of death for ages 3-33
159
Automobile Insurance The Basics

• Even a minor accident can result in thousands of
  dollars in damages
• Damage to your car
• Damage to other cars involved
• Medical Bills
• Lost wages
• Pain and suffering
• Prosecution
• Legal Fees
• Fines

160
Automobile Insurance The Basics
If you are in an accident how do you pay for
it? Bank Account? Parents? Rich Uncle? Best
Friend? Insurance?
161
Automobile Insurance The Basics

• What is Automobile Insurance?
• An auto insurance policy is a contract between
  you and an insurance company.
• You pay a premium, and in exchange, the insurance
  company promises to pay for specific car-related
  financial losses during the term of the policy.

162
Automobile Insurance The Basics
Are you a risk to the insurance company? To keep
premiums as low as possible to the insured, a
screening process is completed before an
insurance contract is completed
163
Automobile Insurance The Basics

• What is the insurance company looking for?
• Some vehicles, and some drivers, carry more risk
  than others
• Low risks will be charged a lower premium
• High risks will be charged a higher premium

164
Automobile Insurance The Basics
What determines your premium? Age Gender Vehicl
e Type Driving Record Geographic Location
165
Types of Automobile Insurance Coverages

• Three Questions
• What are third-party coverages?
• What are first-party injury coverages?
• 3. What are first-party property coverages?

166
Types of Automobile Insurance Coverages
What are third-party coverages? Bodily Injury
Liability People costs (medical expenses, lost
wages, pain and suffering) Property Damage
Liability Things (other cars and property) Both
are types of coverage required by law in most
states
167
Types of Automobile Insurance Coverages
What are first-party injury coverages? Medical
Payments (MedPay) Covers medical and funeral
expenses resulting from accidents with your
vehicle Personal Injury Protection
(PIP) Extends MedPay to include lost
wages Uninsured Motorists Covers expenses if
the at fault driver does not have
coverage Underinsured Motorists Covers expenses
when the at fault driver does not have enough
coverage
168
Types of Automobile Insurance Coverages
What are first-party property coverages? Comprehe
nsive Compensates you for physical damage to
your car, including theft, vandalism, natural
disasters Collision Pays for damage to your
vehicle in case of collision Both Coverages
require you to pay a deductible
169
What is a Deductible?
This is the amount per accident that you pay out
of pocket before insurance starts to pay Common
deductible amounts are usually 250, 500, and
1000 The higher the deductible amount you pay
the lower your premiums are
170
Automobile Insurance The Policy
A common mistake when shopping for automobile
insurance is looking only at the price between
two policies Policies differ from policy to
policy and company to company
171
Automobile Insurance The Policy
Five parts to an insurance policy Declarations C
overages Exclusions Conditions Definitions

172
Coverage Parts/Insuring Agreement
Outlines the coverage options and coverage limits
purchased In short, what your insurance company
promises to provide in return for your payment,
based on the coverages and coverage limits
selected
173
Exclusions
Details what is not covered by the
policy Examples Intentional damage to your own
vehicle Damages caused while vehicle is used as a
delivery vehicle
174
Conditions
Define the insureds and the insurers duties
that, under the terms of the policy, must be
fulfilled Includes premium payment
obligations steps to filing a claim procedures
for resolving a claim
175
Definitions
Explains specific terms used throughout the
policy Examples You or Your refers to the
Named Insured We or Us or Our refers to
the insurance company Family Member refers to
a resident of your household
176
Automobile Insurance Accidents
Chances are even if you are never in an accident
you will witness one What should you do if you
are involved in an accident?
177
Automobile Insurance Accidents
Chances are even if you are never in an accident
you will witness one What should you do if you
are involved in an accident?
178
Steps to take after an accident

• Help anyone who is injured
• You have an ethical and legal responsibility
• Notify the police
• Prevent further accidents
• Protect the accident scene
• Record information
• Exchange information with the parties involved
• Take note of time, location, weather, and road
  conditions

179
Filing a Claim
It is important that the accident is reported
promptly to the insurance agent or company The
policy will guide the insured on the correct
steps to take to report the claim The company
will guide the insured through the process
180
Filing a Claim

• When you are liable for an accident
• The insurance company covers the loss up to the
  policy limits
• Your insurer represents you if you are sued
• Your insurer has the right to settle any legal
  action without your permission
• Your premium may rise
• Insurer has the right to cancel your policy
• If the losses exceed the policy provisions, the
  insured is responsible to cover the excess