uccessful Start and the Office of Student Services Present:MONEY MANAGEMENT
SESSION OBJECTIVESyyou in a pg budgetinggg andposition to beginsaving money even while you are in school Know the basics of credit reportspand creditscores and put into practice simple habits thatwill save you thousands of dollars over yourlifetime Give you easy tips to help decrease the overallcost of your educational borrowing Understand loan repayment options Put
WHY BUDGET? Tracking your expenses gives you a strongsense of where your money goes and can helpyou reach your financial goals
OBSTACLES TO BUDGETING DisciplineThinking that it doesn’t matterPProcrastinatingti ti gFamily or other will send me more moneyMy birthday/holiday money will arrive soonMy student loan check will take care of myexpenses
SUCCESSFUL BUDGETING 5 Quick and Easy Steps: DetermineDti bbudgetdg t categoriest g iIdentify all sources and amounts of incomeIdentify how dollars are spent todayCalculate budget amountsSet goals and make adjustments
DETERMINE BUDGET CATEGORIES Commonmistake: Fit your spending intosomebody else’s categories Successfulbudgeting includes categories thatreflectfl t theth way you spendd money
IDENTIFY INCOME Reviewall sources and amounts of income(after-tax) for past three months to determinemonthly income Examples:p« Employment« StudentLoans« Checking Account« Savings Account
IDENTIFY EXPENSES Reviewall bills and expenses for the last threemonths to determine monthly expenses Examples:« RecurringRec rringEExpensespenses« Variable Expenses« Yearly Expenses
FIXED VS.VS DISCRETIONARY EXPENSES Rent Cell phones Groceries Restaurants Utilities Cable TV Car Insurance HaircutsVacations Takeouta eout Designer Clothes Laundry
SET GOALS AND MAKE ADJUSTMENTS Setgoals that reflect your true financial picture TwoTtypestoff financialfii l ggoals:l«managing your money«spending your money Monitorbudgeting process for two months toidentify areas where you can save
EMERGENCY FUNDS Emergency funds are an absolute necessity!! Emergency funds 3 – 6 months of basic livingexpenses Emergency funds should be kept separate froma savings account that is used primarily forlarge, planned purchases
SAMPLE MONTHLY BUDGETSample Monthly Student BudgetFood18%Miscellaneous15%RentCredit Obligations9%Car Loan tation5%FoodMiscellaneousCredit ObligationsLoan PaymentsClothingEntertainmentTransportation
MONEY LEAKAGE Dinner out every Saturday night: 1920 per year One tall Starbucks coffee per weekday: 780 per year Wendy’s #2 Combo tax twice a week:#2 Classic Double with Cheese Combo 364 per year
YOUR TIPS ON SAVING MONEY? Housing? Groceries? Phone? Transportation? Banking and Taxes?
NOW WHAT? If DeficitLook for ways of raising your incomeLook for ways of cutting costs
BENEFITS OF BUDGETINGLess reliance on credit More buying power BetterB tt creditdit scores Ability to obtain credit any time Lower credit costs (prime rate)
LOAN EXAMPLEEXAMPLE- MINIMIZE BORROWING Loan Balance: 30,000.00Monthly LoanPayment: 345.24Cumulative Payments: 41 428 91 41,428.91Total Interest Paid: 11 428 91 11,428.91 Loan Balance: 28,000.00Monthly LoanPayment: 322.22Cumulative Payments: 38,666.99Total Interest Paid: 10,666.99If you borrow only 2 2,000.00000 00 less during your education,educationyou will save 2,761.92 and 23.02 per month inpayments.
LOAN EXAMPLEEXAMPLE- EARLY REPAYMENTLoan Balance: 22,000.00 Loan Interest Rate: 6.80% LoanLTTerm: 15 yearsMonthly Loan Payment: 195.29 Number of Payments: 180Cumulative Payments: 35,152.34 Total Interest Paid: 13,152.34
LOAN EXAMPLEEXAMPLE- EARLY REPAYMENT Loan Balance: 22,000.00Loan Interest Rate: 6.80%Loan Term: 10 yearsMonthly Loan Payment: 253.18Payment: 253 18Number of Payments: 120Cumulative Payments: 30,381.04Total Interest Paid: 8,381.04You save 4 4,771.13771 13 in real moneymoney. This savingstranslates into a guaranteed, tax-free, average annualreturn of 6%.
LOAN EXAMPLEEXAMPLE- CAPITALIZATIONLoan Type: Unsubsidized Loan Amount: 8,900.00 InterestI ttRRate:t 6.8%6 8% Repayment Term: 10 years Capitalization Frequency: Quarterly
LOAN EXAMPLEEXAMPLE- CAPITALIZATIONAmount Borrowed: 8,900.00 Amount owed when you leave school: 10,715.60 Total Payments: 14,388.11 Total Interest Paid: 5,488.11 In-School Interest: 1,815.60 If you had paid interest while in school, youwould save 622.55.
CREDIT CARD EXAMPLECharge Interest Minimum Payment 1,000.0017.99% 20.00At this payment rate,h llong willhowill iti takek to pay theh bbalance?l? 93 months (7.75 years) How much interest was paid? 861.02 or 86% of the initial loan amount
CREDIT CARD EXAMPLE BCharge 1,000.00 Interest17.99% Minimum Payment 20.00 Monthly Payments Made 25.00 A thisAthi payment rate, hhow llong willill iti takek to paythe balance? 62 months (5.16(5 16 years) How much interest was paid? 538.07 or 54% of the initial loan amount
CREDIT REPORT FACTSRecord of your credit payment history Illustrates the amount you have borrowed incredit cards and loans and your timeliness ofpayment ContainsC t i ididentifyingtif i g iinformationfti Used to determine creditworthiness
ANATOMY OF A CREDIT REPORTSection 1:Section 2:S ti 3Section3:Section 4:Section 5:FilePersonal Identification InformationPublic Record InformationCollectionC ll ti AgencyAgAAccountt IInformationftiCredit Account InformationCompanies Requesting your Credit
HOW TO OBTAIN YOUR CREDIT REPORTCredit Agencies: Equifax Experian Trans Union ne free report from each agency every 12months: www.annualcreditreport.com** do not use www.freecreditreport.com ***
ESTABLISHING GOOD CREDITPay your bills on time Establish credit early Don’tD ’t max outt your accountt limitsli it Don't apply for too much credit in a short periodof time Fill out applications uniformly Check your credit report annually or 4 monthsbefore major purchase
CREDIT SCOREReflection of the information on your creditreport Formula developed by Fair and IsaacCorporation (FICO) ScoresSrangeg ffrom 300300-850850 Average score is 720 The lower the score, the greater the risk it is tolend you money
REQUIREMENTS FOR THE PERFECT SCORE Havingpaid all bills on time during the pastseven years Having a minimum of 30 years of credit use Having between four and six revolving creditaccountst
IMPACT ON INTEREST RATES How much can your FICO score impact theinterest you pay on a loan?A LOT!!
HOW TO BE A WISE BORROWER Consider your future salary when borrowing – check our website,www.amsa.com/borwww amsa com/bor to find out what you can expect to earn aftergraduation Use credit cards sparingly – that 5 latte could cost you 15 or moredepending on how quickly you repay your balance If you use your credit cardcard, pay “on-timeon time, in full,full as agreed”agreed Learn how to budget now – track monthly income and expenses soyyou know the “bigg ppicture” Beware living “in the future” – live like a student today, so you won’thave to later
USEFUL WEBSITES AmericanStudent Assistance:www.amsa.com/bor Repaymentand Career Information:www.journeysonline.org U.S.USDepartment of Education:www.ed.gov CareerVoyageswww.careervoyages.gov
RESOURCES AND FINAL MESSAGEp Keepall Financial Aid information in one pplace forfuture reference. Additionalwebsites for unbiased guidance:www.bankrate.comwww.consumerreports.org Don’tbe afraid to ask questions. Seek out yourFinancial Aid administrators
MORE HELP ConsumerCredit Counseling Servicewww.cccsintl.org www.moneymanagement.org Jump tart Coalition for Personal Financial Literacywww.jumpstart.org Student Loan Locatorswww.loanlocators.org ww.nslds.ed.gov A Student’sStudent s Life (click on “AfterAfter College)www.astudentslife.com www.mint.com
QUESTIONS?www.bc.edu/successfulstart [email protected] http://twitter.com/#!/SuccessfulStarthtt //t itt/#!/Sf lSt t
LOAN EXAMPLE- MINIMIZE BORROWING Loan Balance: Loan Balance: 30,000.00 Monthly Loan Loan Balance: 28,000.00 Monthly Loan Payment: 345.24 Cumulative Payments: 4142891 Payment: 322.22 41,428.