Vocabulary• Disposable Income• Discretionary Income• Budget• Income• Expenses• Credit• Down Payment• Annual Percentage Rate (APR)• Collateral• Bankruptcy

• Interest• Principal • Return• Stock• Dividend• Bond• Mutual Funds

Consumer Rights• Federal and state

laws protect consumers from buying bad products.

Warranty: a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.

Many products undergo intense product testing, either by the producers or a third party, before coming to market.

Smart Buying Strategies • Research products.

• Consumer Reports: Service which provides reports on thousands of products.

• Reviews: look at reviews of products, the more reviews there are the better!

• Sometimes warranty's must be purchased for products. Sometimes they come with the product for free.

Planning and Budgeting • Budgeting splits up your disposable income to be able to pay your

expenses until your next paycheck or income period.

How to Make a Budget1. Calculate your disposable income.

1. Tax Brackets2. Calculate your immediate necessary expenses per pay

period (usually every two weeks, or monthly).1. Housing (rent/mortgage/utilities), food, gas, healthcare,

car insurance, car payments*.3. Determine how much you want to save.4. What’s left over is your discretionary income.

• Warren Buffet Video

Credit• Credit is money given to you without an immediate trade of work

for income.

• But always remember, this money is not free!!!

• You have to pay for this money later: that payment is called interest.

• Always add in the price of credit over time to know if you can afford it! Mortgage Calculator.

Revolving Credit • A revolving credit line is one that involves different payments each

month, depending on how much you utilize that particular line of credit. The amount you pay is subject to a monthly minimum payment and you have the option to push the rest of what you owe to the next month, subjecting yourself to additional interest in exchange for extra time.• The most common examples of revolving accounts are credit cards.

Home equity lines of credit (HELOCs), which allow you to borrow against the value of your home, also fall under this category.

Installment Credit• As opposed to a revolving credit line, an installment account has a

fixed payment due each month. The total amount borrowed with an installment account is to be paid back over a set period of time and a set amount of interest is charged over the duration of the loan.• Installment accounts include any loans on your credit report.

Mortgages, auto loans, student loans, business loans and home equity loans are all paid back as part of an installment plan and fall under this category.

Sources of Credit• Credit Cards• Banks•Merchants: installment plans.• Government • Loan Companies

How to Get Credit• Credit is given out based on the borrowers ability to pay. • Credit scores give businesses information on potential borrowers.

How to Get Credit • A credit reporting agency (CRA) is a company that collects information about

where you live and work, how you pay your bills, whether or not you have been sued, arrested, or filed for bankruptcy. All of this information is combined together in a credit report. A CRA will then sell your credit report to creditors, employers, insurers, and others. These companies will use these reports to make decisions about extending credit, jobs, and insurance policies to you.• You are entitled to order (every 12 months) a free copy of your credit report

from each of the major credit reporting agencies (Equifax, Experian, and TransUnion) through AnnualCreditReport.com. This website is the only one that is government authorized to provide you with free copies of your credit report.

How Credit Cards Work• How credit cards work?•Why use credit cards?

Pros v. Cons of Credit

Pros• Get money now.• Learn financial responsibility. • Build up credit score to get even

better credit later.

Cons• Can quickly get expensive if not

paid off correctly.• Future income never

guaranteed.

Saving and Investing• Saving is the

opposite of consumption. • Puts money away to

be used later.

Types of Savings• “Putting it under the mattress”• Bank Accounts: savings/ checking• Money Market Funds• Certificates of Deposit• Investments

Types of SavingsBank Savings Account

Accounts at a bank, saving association, or credit union.

Interest rate is relatively low.

Depositor can withdraw money at any time. Up to $250,000 insured by FDIC.

Certificates of Deposit

Bank notes for a set period of time at a fixed rate of interest.

Interest rates are usually higher than rates for bank savings accounts.

Vary, generally from 6 months to 5 years.

Money Market Account

Savings accounts offered by banks that require a high minimum balance.

Interest rates are usually higher than rates for regular bank savings accounts.

Depositor may withdraw funds at any time.

U.S. Savings Bonds

The U.S. government issues savings bonds as one of its way of borrowing money.

Interest rate is usually higher than rates on bank savings accounts.

Good for medium and long-term savings goals.

Stocks Partial ownership in a company. Worth/losses are determined by market forces.

Can be bought and sold whenever.

Investments• Stocks• Bonds• Mutual Funds• Private Businesses

Stocks• Partial ownership of a company.• Some companies pay dividends: a cash payout each quarter. This money is a

portion of the overall profit. Companies not required to pay dividends. • No guarantee stocks will make money as an investment. If business goes out of

business, stock is worthless. Stocks are not insured by government like bank accounts.

• Stocks are bought and sold as commodities. Their worth goes up or down based on how much people think they are worth, or how much that will be worth in the future. • Chipotle Stock

Stock Split• Company increases its’ shares, decreases each share price, but keeps

the overall market capitalization (worth).

• Take, for example, a company with 100 shares of stock priced at $50 per share. The market capitalization is 100 × $50, or $5000. The company splits its stock 2-for-1. There are now 200 shares of stock and each shareholder holds twice as many shares. The price of each share is adjusted to $25. The market capitalization is 200 × $25 = $5000, the same as before the split.

Bonds• A bond is a debt investment in which an investor loans money to an

entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.

• Introduction to bonds.

Mutual Funds• An investment program funded by shareholders that trades in

diversified holdings and is professionally managed.

Achieving Your Financial Goals • Most important part of achieving your financial goal is budgeting.

• Know how much things cost and how much your income is.