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Personal Finance

Budgeting and future expenses. Personal Finance. I. Location, location, location. After college hopefully your job will allow you the independence you will need However, it may force you to move to another state or city

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Personal Finance

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  1. Budgeting and future expenses Personal Finance

  2. I. Location, location, location • After college hopefully your job will allow you the independence you will need • However, it may force you to move to another state or city • A. Generally, northern & western states cost anywhere from 2 to 5 times more (NY, LA, Chic., Bos., Philly, SF, SD, Sea, DC) • B. Southern, plains to mid western states are cheaper (Dal, atl, jax, tampa, New Orl., Charlo, birm., etc…) • C. Generally, suburbs are cheaper than most inner city living (especially in typical big cities) • D. Certain things unnecessary in big cities, car, car ins., paying for gas, looking for & paying for parking, car repair etc…

  3. II. How to read my pay stub! • A. Your future paycheck will have many twist and turns before it lands in your hand: • 1. Gross pay: the amount your are paid by your employer • 2. Net pay: your actual pay after taxes • a. Federal income tax: by federal government (16th amendment) 10%-35% • b. FICA: Soc. Sec. & Medicare (FDR & LBJ) 7.65% tax • c. State tax: varies from state to state; GA = 1-6%

  4. III. Savings • A. Terms: • Risk: how safe of an investment it is • Return: the increase in the value of the original sum over time • B. Savings account: a deposit account for funds that are expected to stay in for a short term. Very low risk (FDIC), and very low return great for over-draft protection! • C. Money Market Account: a savings account for larger deposits than savings account, low risk (FDIC), low return, bit larger interest, but limited access • D. Certificate of Deposit (CD): Loans investors/people make to financial institutions such as banks for set amount of time (maturity) decided by investor/person; There is a penalty for cashing in early, Considered low return, very little risk due to (FDIC) • E. avOtherlong term investments (more for retirement): Mutual funds, IRA, 401 K, stocks, bonds

  5. IV. Housing: Owning vs. Renting • A. Ownership: • 2 things necessary for a good home loan: • Good credit history • 20% down payment (recommended) • B. Until then Renting allows you: flexibility, short lease, mobility, no liability for physical up-keep of place • C. Ownership: ownership/pride, building equity, investment, asset, credit history, tax credit/deduction: • D. Types: • 1. Apartment: rental units, usually 1-3 bedrooms, two baths, pool, amenities, no water, trash fees, outside parking, location! • 2. Condo/townhome: no outside maintenance, less privacy, extra fees, amenities, ownership, investment • 3. House: ownership, investment, no amenities (sub.), landscape work, lots of upkeep, equity

  6. V. Housing: Mortgage & car • A. Traditional mortgage: money borrowed which would be paid back until loan paid off: principal + interest • 1. Usually 30/15 years, 20% down • 2. Also added and paid as escrow account: • a. Property taxes: county & city tax • b. Home insurance: property & personal protection • B. Rent for leasing: • 1. Apartment or townhome/condo or house: • a. Can include partial utilities, amenities • C. Car loan: usually for 5 years, down payment, paid back=principal + interest • 1. Car insurance: • a. Full coverage: covers your car & other person; recommended for cars bought on loans • b. Liability: only covers other car; recommended for older cars bought in full without payments

  7. VI. Interest • A. Price of borrowing money: • 1. What we are paid when we make investments such as savings, money market account, checking,etc… • 2. two types: • a. Simple interest: borrowing fee which is a % multiplied by principal and added to principal when loan paid back • b. Compound interest: when the interest is rolled into principal (monthly, annually), and increases principal for the length of the (maturity) loan • B. Also, what we pay when we borrow money (mortgages, car loans, student loans etc…)

  8. VII. Credit: • A. What is it? A way to obtain money you do not have • B. How do you get it? To get it, one must convince financial institutions to provide a loan with the promise form you to pay back borrowed money plus additional charge called interest • C. Can it help? Yes, used in a smart way can be help to you now and future, no, used in stupid way can result in harassment from creditors, broken relationships & bankruptcy • D. How do financial inst. decide who gets it? 3 Cs of credit: • 1.Character: are you worthy? (based on credit report), your history • 2. Capacity: income from job covering the bill month to month • 3. Collateral: loan be secured with collateral to repay the debt

  9. VIII. Insurance • A. Used to manage risk in different areas of life: • 1. Health: for doctor visits; includes premium, co-pay, deductible • 2. Car: see previous slide • 3. Disability: AFLAC! Helps pay for things for a period of time while you are physically disable and unable to attend work • 4. Life Insurance: money for remaining members of your family (spouse) in case of early death ($100,000, 250,000, 500,000 etc..) • 5. Property (home/renters): insurance for all property inside of a residential structure (fire, flood, storm, theft, etc…)

  10. Smaller items • Wanna talk about utilities, entertainment, personal, other debt, transportation?

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