card credit debt management by robertaf

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                                                                                                          A Guide to making Smart
SAVING AND INVESTING                                     o   www.360financialliteracy.org                      Financial Decisions
Saving is incredibly important to achieving financial    o   www.practicalmoneyskills.com
independence. Financial experts recommend
saving three months of income in an “Emergency
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account.” In addition, you should save for major
purchases and retirement.

Many people do not start saving early enough for        THANKS TO OUR
their retirement. You should begin saving for
retirement as soon as you start working. Money          SPONSORS:                             Date of publication

deposited in your early twenties will have more time
to grow before you begin to need it. For example,
due to the power of compounding interest, $3,500
deposited at the age of 25 will grow to $95,783 by
the age of 67 (assuming an 8% growth rate.) You
can see that it will be much easier to afford
retirement if you start saving early!
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So what are you options for retirement plans?
Well, you have plenty! The two most popular are
the 401K and the IRA. You can open up a 401K
account through your employer. A portion of your
paycheck will automatically be deducted and
invested for you. Usually, your employer will match
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your contribution up to a certain percentage.
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If you are self-employed or your employer doesn’t                                                    And Beta Alpha Psi
offer a 401K plan, then an IRA, or independent
retirement account, is right for you! An IRA allows
you to make pre-tax contributions to a retirement
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account, and any interest earned on the account is                                                 Fax (936) 468-1482
not taxed until it is withdrawn. There are five types                                       McGee Business Building, Suite 292
of IRAs, so find the one that works best for you!
                                                                                            Stephen F. Austin State University
IS ALL DEBT BAD?                                      HOW TO MAKE A                                        A credit score or FICO score is a number
                                                                                                           between 200 and 800 that potential lenders look
There are many theories about the best plan for
                                                      CREDIT CARD WORK                                     at before extending credit. It is important when
                                                                                                           you are trying to obtain financing for a house or
debt management. While some financial experts         FOR YOU!                                             car. Often, loan applicants with lower credit
say that all consumers should be completely                                                                scores are required to pay larger interest rates.
debt free, most believe that good debt                Credit cards are quickly becoming a fixture in
management is not necessarily having no debt at       modern society, but many people do not know          Calculation of your credit score combines
all.                                                  how to manage their credit card correctly. Failing   information from your payment history, the
                                                      to manage credit card debt has left many people      amount owed, the type of credit you use, the
A “good debt” would be a debt acquired to attain      in bankruptcy.                                       amount of credit you have qualified for and
an asset that will increase in value. For example,                                                         length of time you have had credit.
taking out student loans to finance your              Credit cards can be dangerous. They charge
education or purchasing a house would be a            very high interest rates, and they allow people to   How do you improve your credit score?
“good debt.” It is important to note, however, that   live beyond their means. However, credit cards       Consistently making payments on time and
debt is not “good” unless you accomplish your         offer many advantages along with these               keeping a low balance on credit cards will
goal. If you buy a house that is too expensive,       disadvantages. They are efficient and easy to        improve your score.
and you cannot make the monthly payments the          use, they help you build up a good credit score,
debt is not “good.”                                   and many offer protection from identity theft.

A “bad debt” is debt for a consumable good.
                                                      Good management will allow you to benefit from
                                                      the use of a credit card.
                                                                                                           BUDGETING: MAKE IT
This is also known as “living beyond your
means.” Credit card debt, car loans and debt on
                                                                                                           STICK!
                                                      The best way to use your credit card is to charge
other goods that decrease in value are all “bad       only what you can afford to pay off at the end of
debt.” This type of debt can be dangerous,                                                                 The most important thing you can do to take
                                                      each month. Paying off your full balance each        control of your finances is budgeting. Many
especially if it becomes habitual.                    month and paying it on time will allow you to        templates are available online free of charge to
                                                      avoid paying those sky-high interest rates.          guide you in this process.
When paying off debt, always begin with the
highest APR and work down to the lowest APR.          When searching for a credit card, do your            You must first estimate your monthly expenses
                                                      research! The most important information is          and your monthly income. Start with your
                                                      presented in the “Schumer Box.” It will tell you     income. Take out any deductions for your
                                                      the APR (the interest rate), finance charges, the    savings. List your necessary expenses first, like
                                                      minimum payment, the credit limit, any annual        rent or groceries. Next, deduct your “extras,” like
                                                      fee and more. Choose a card with a low APR           traveling or eating out.
                                                      and the fewest added fees. Also, make sure that
                                                      the APR shown is not just an introductory rate.      Now the hard part: sticking to it! Remember,
                                                      Introductory rates only apply for the first few      your budget won’t help you improve your
                                                      months; after that your rates will change!           financial status unless you are willing to make it
                                                                                                           work!


                                                      WHAT GOES INTO A
                                                      CREDIT SCORE?

								
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