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Working With Credit PBL presentation

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									Working With Credit

         PBL Presentation,
         10/20/2004
         By
         Rick Christoph
         What is Credit?

   Credit is a loan –You borrow $$!
    –   Actually, you are buying money!
   Credit is not:
    –   Prestige
    –   Cool
    –   Special
Why do we have so much credit?

   We want it now!
   We want EVERYTHING now
    –   No $$? No sweat – charge it.
    –   Let’s get that new car, TV, Clothes!
   What we are doing is to mortgage our future
    for today
How much does it cost?

   Average household has $9,000 in debt!
    –   Many have 0 – what do the others have??
   Look at all the debt consolidation firms
    –   Why are they around?
    –   To make money from the suckers!
    –   Take a look at this credit application
   Don’t be a sucker!
How long does it take to payoff?

   Take that $9,000– what would the minimum
    payment be?
    –   Usually, 2.08% per month is the minimum
    –   Assume a 21.9% interest rate
   .028 * 9,000 = 252 OK, how long to
    payoff WITH NO OTHER PURCHASES?
    –   http://cgi.money.cnn.com/tools/debtplanner/debtpl
        anner.jsp
In Trouble? Get another card!

   The dumbest possible idea
    –   How much does that cost you?
               –   http://www.credit-card-applications-center.com/1/bad-
                   credit-credit-cards.php
    –   How about a payday advance?
               –   http://www.loan-till-payday.com/faqs.asp

            HOW MUCH IS THE FINANCE CHARGE?
             The Annual Percentage Rate (APR) on a typical 14 day loan is
             782.14%, which is $30.00 per every $100.00 borrowed. You can also
             refinance your loan.
How to use credit

   Know good vs. bad debt
   GOOD – items last longer than debt:
    –   used for investment
    –   Critical items you must have
   BAD – debt lasts longer than item
    –   Buying a pizza (stuff that is gone before the bills
        arrive)
INVEST in YOU

   Pay off the debt!
            http://money.cnn.com/pf/101/lessons/9/
   Build a cushion
    –   Cash to cover short term problems
   Invest in yourself
            http://cgi.money.cnn.com/tools/savingscalc/savingscalc.
             html
WOW!

   It will take 25 years to pay off the 9,000 and
    you get to pay an extra 14,000 in interest.
   YOU PAY – $23,000
   If you invest the $252 a month for 25 years –
   YOU GET $225,724.36
    –   Let’s you know why firms like the credit card
        business!
More WOW

   About Tax Deferred Investments -- Your 252
    a month
   GETS YOU $282,522.73
   Invest in 401K, 401a, 403b
    –   How do these work?
    –   Immediate tax savings and growth!
How about cars?

   Cars are fun – and expensive
    –   Average payment time > 64 months!
   What does “upside down mean”
   How do we get upside down
    –   Trade too fast
    –   No down payment
    –   Fast depreciation
   Should you let it be repossessed?
    –   http://money.cnn.com/2004/09/23/pf/debt/chatzky_intronew/index.htm
What is a “credit score”

   Score developed by Fair Isaac & Co.
   Called a FICO score
   Used to determine how much you pay for
    credit cards, car loans, mortgages
   How is your score?
    –   http://www.bankrate.com/brm/fico/calc.asp
What is a mother to do?

 Live BELOW your means
 Use debt for investments that
  appreciate
 Be an owner – not a borrower
 Learn from other’s mistakes
 START early
Great Websites

      http://www.bankrate.com/dls/rate/calc_home.asp

      http://www.stretcher.com/index.cfm

      http://www.schwab.com/

      http://flagship.vanguard.com/VGApp/hnw/PersonalHome

      http://money.cnn.com/

								
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