Personal Finance 101
Dr. Rita Littrell
Bessie B. Moore Center for Economic Education
What can you do with money?
Cosby Show Economics Lesson
Make good decisions
Use a budget
Consider the opportunity cost
Keep receipts & warranties
Return faulty items
Use credit wisely
A loan – spending money you have not earned
Closed End Credit -- Ex: Auto Loans, Mortgage
Open End Credit -- Ex: Credit Cards
Interest is the cost of credit
Make Sure You Know All The Terms and Conditions
Beware of “Store Credit Cards” & Their High Interest
Avoid Getting Too Many Credit Cards
Beware of the Minimum Monthly Payment Trap
Home Equity Line of Credit
Building Your Credit Rating
Credit Bureaus – Collect Credit Information About
Three Main Credit Bureaus in U.S.
Your Credit (FICO) Score
Building Your FICO Score
Fair Isaac Company credit score
Are your credit rating
Range from 300 – 850, higher is better
Most lenders base approval on FICO
Higher scores result in lower interest rates
Free Credit Report:
FICO Scores Based On
FICO scores are based on your rating in:
Payment history – 35%
Amount owed – 30%
Length of credit history – 15%
New credit – 10%
Types of credit used – 10%
How a Good FICO Score Can Help
36 month auto In Arkansas on For a loan of
loan Sept. 26th, 2008 $25,000
FICO score APR Monthly payment
720-850 6.0% $761
690-719 7.07% $773
660-689 8.00% $783
620-659 10.23% $809
590-619 12.95% $842
500-589 n/a $0
Fico Help Center
Credit Counseling Services
If You Are Having A Problem Paying A
Bill, You Can…
1. Contact the Creditor
2. Contact A Nonprofit Financial
3. Counseling Program
Credit Counseling of Arkansas
Credit Counseling of Arkansas
CCOA Is a Local NonProfit Org.
1. Provides Educational Services
2. Debt Counseling Services
3. Supported By Contributions From Banks,
4. Service May Be Free or There May Be a Small
Beware of Predatory Counseling Organizations
Consuming less than you earn.
Ways to save:
Certificate of Deposit
Rainy day or to invest
Contributions of philanthropic organizations
1. Walton Family Foundation
2. Wal-Mart Foundation
3. Winthrop Rockefeller Foundation
4. Winthrop Rockefeller Trust
5. Walton Family Charitable Support Foundation
6. Charles A. Frueauff Foundation,
7. Arkansas Community Foundation
8. Ross Foundation
9. Harvey and Bernice Jones Center for Families
10. Murphy Foundation
11. Windgate Charitable Foundation
Between 1997 & 2004, AR ranked among top 7 states
in individual charitable contributions while being
among the five least wealthy
National or International nonprofits groups
Heifer International – LR – eliminate starvation by
enabling low-income people to feed themselves on a
Potluck Food Rescue for Arkansas – redirects
otherwise wasted food to low-income Arkansans
AR Foodbank Network & AR Rice Depot – work to
relieve hunger and malnutrition
Options for Investing
Open a Savings Account
Invest in the Stock Market
Invest in a Mutual Fund
First step is to determine short and long term financial
Fundamentals of Investing
1. How Much Money Do You Want to Accumulate?
2. How Long Will It Take?
3. How Much Risk Are You Willing to Assume?
4. Are Your Goals Reasonable?
5. Are You Willing to Make the Necessary Sacrifices?
6. What Are the Consequences If You Don’t Reach Your
Get Your Financial House In Order
Make Sure You Have Adequate Insurance
Start an Emergency Fund
Balance Your Budget
Use These Options
1. Employer Sponsored Retirement Plans
2. Employer Savings Plans
3. Gifts, Inheritances or Windfalls
Save – Even If It Is a Small Amount!
Ownership in a company
Buy Stock for:
2. Price Appreciation
Level of Risk
Stocks in several companies
Wide variety of funds
Less risk due to diversification
But You Can Lose Money Too!!
Bonds – a loan
Corporate Bonds – not insured by
US Government Bonds – Treasury Bills,
Bonds & Notes (terms vary)
Municipal Bonds – issued by state and local
governments – Fed tax exemptions & that
Bureau of Public Debt - US Dept of Treasury
For ratings – Moody’s Investor Service -
Standard and Poor’s Corp
Use financial institutions to:
protect your money
help you manage your money – checks,
savings, checking and other accounts
to help your money work for you
for financial advice
New York Stock Exchange (NYSE)
American Stock Exchange (AMEX)
Nasdaq (Nat’l Assn of
List of up and coming
companies from Fast
Influences on the Market
• Natural Disasters
What influences the price of a stock
• Conditions in the Industry
• Changes in Technology
• Health of the Company
• Supply and Demand
The Arkansas 20
Reading a Stock Table
What Does it Mean?
Reading a Mutual Fund Table
Understanding the Mutual Fund Table
Reading a Bond Table
Understanding the Bond Table
Three Rules for Building Wealth
1. Start early.
Give money time to grow.
2. Buy and hold.
Keep you money invested.
Don’t put your eggs in one basket.
Use the Magic of Compounding
Compound Interest Calculator
Buy & Hold
1. Spend less than you receive.
Earn more by improving your formal education or job
Spend less by using a budget to keep track of where your
money is going.
2. Become connected to financial institutions?
Open and maintain accounts at mainstream financial
3. Manage your credit responsibly?
Limit the number of credit cards you have.
Limit the number of purchases to what you can pay off
Apply for loans only when you are confident you can
repay with your current income.
Stock-Market Roller Coaster
If you hold long enough, the ups are greater than the downs.
Don’t put all your
eggs in one basket!
Costs & Benefits of Saving & Investing
• Saving accounts: provide small but steady return
• Certificates of deposit: very safe, but instant
access is penalized
• Bonds: lending money to a corporation or
government, with a promise of higher returns than those
offered by bank savings accounts and CDs
• Stocks: part ownership in a company, offering higher
risks and potentially higher returns than some other
• Real estate: the risks and benefits of being a landlord