ALLIANCE CREDIT COUNSELINGALLIANCE CREDIT COUNSELING

Ed Gilliam

Community Outreach

888-995-7856, ext. 385 • 704-943-0385

How to Establish Credit

and Live Within a Budget

Things That Could Happen If You Don’t?

Why is Establishing Good Credit Important?

Utilities

Car Loans

Apartments

Certain Jobs

Credit Cards

Student Loans

Personal Loans

How to Establish CreditObtain Employment

Establish a Checking & Savings Account

Make Regular Deposits

Balance Your Check Book Daily

Reconcile Your Bank Statement Monthly

Apply for a Single Credit Card and / or Signature Loan from The Bank

Repay Loan over 6 to 9 Months

Things Not To Do

Apply for:

Gas Cards

Store Cards

“High” Interest Credit Cards

Obtain Too Many Lines of Credit

How to Manage Credit

Pay Your Bills on Time

Keep Your Creditors Informed

Have Some Credit, but Not Too Much

No More Than ONE Credit Card

Get Free Credit Report at:

https://annualcreditreport.com

How to Manage Credit

Don’t “Max” Out Credit Cards

Maximum 80% or Below

Limit Your use of the Cards

Total Monthly Payments < 20% of Income

Pay Down or Pay Off

Ex. Net Monthly Income/5 = DTI Ratio

600 Net Monthly Income/5 = $120 on Debt Payments, Other Than Housing

Financially Stressed Consumers With Outstanding Debt Were Asked:

“Do you feel your health has been affected by your financial problems? If yes, please explain.

The average American spends $1.22 for every $1.00 they make!

That means if you make $30,000 a year, you’re spending $36,600!?

Nearly 70% of Americans with credit card debt only pay the minimum monthly amount

If they charge a $12.00 pizza, it could take over $100 after months of payments

33% of Americans did not understand that prospective employers may pull their credit report

Most do not truly understand how a credit report/score can affect their lives

The average American adult receives a failing grade for their knowledge of basic economic concepts!

They don’t understand how to properly budget, save, or invest

Bottom Line? You can’t afford to be average!!You can’t afford to be average!!Source: Financial Literacy and Education Commission – Jan 07; National Council on Economic Education

America’s Financial Culture*America’s Financial Culture*

CEO

Real Stories

Farmer

Chemical Engineer

Professional Football Player

Professional Baseball Scout

$

A Sum of Money Allocated for a Particular Purpose (Spending Plan)

What is a Budget?

Telling Your Money What to Do Instead of Wondering What Happened to It

Not a Straight Jacket

To Meet Your Present Obligations

Why Set Up A Budget?

Not Having to Call Mom or Dad

Not Over Extend Yourself

Prepare For The Future

Reduce Stress

Save Money

Time

Obstacles In Budget Setting

Money

Planning

Confusion

Commitment

Procrastination

Better Spending & Saving Habits

Benefits of a Budget

Enough Money to Cover All the Daily Expenses

Lets You Feel You Are in Control of Your Financial Situation

Allows You to Enjoy Your Time in College without stressing over money

Housing (Rent or Dorms)

Food (Eat in More Than Eat Out!)

Utilities (Power, Water-NOT Both Cell & Land Phone!)

Clothing (Not Designer Brands!)

Transportation (Insurance Also)

Social Life

Budget Needs

Answer the Following Questions:

Guidelines For Setting Up A Budget

Save More

Spend Less

Make It Happen

Allocate Each Dollar for Something Appropriate toYour Needs

Budgets Change As Time Goes by

Alliance Credit Counseling

SAMPLE DEBT MANAGEMENT PROGRAMSAMPLE DEBT MANAGEMENT PROGRAM

Name of Creditors Open Bal. Old Pay New Pay Current % Interest

Program % Interest

Bank One, Delaware $3,537.29 $85.00 $82.00 20.75 6.00Fleet Credit Card Services $7,136.91 $145.00 $158.00 16.10 9.90Direct Merchants Credit Card $6,795.72 $145.00 $150.00 20.75 5.90Bank of America $3,085.06 $85.00 $68.00 24.99 9.90

Total of 4 Accounts: $20,554.98 $460.00 $458.00

Due Date: Jan. 10, 2005 Self Program

Suggested Monthly Donation: $45.00 # Payments: 478 53Suggested Enrollment Donation: $50.00 Years to Pay: 39.8 4.4

Total Interest: $38,962.00 $3,912.00

Interest Savings: $35,050.00

Alliance Credit CounselingSAMPLE DEBT MANAGEMENT PROGRAMSAMPLE DEBT MANAGEMENT PROGRAM

Name of Creditors Open Bal. Old Pay New Pay Current % Interest

Program % Interest

Citibank Bankcard $31,863.06 $663.00 $733.00 14.90 9.90Greenwood Trust Company $15,072.82 $321.00 $302.00 19.24 17.00MBNA America $28,666.63 $501.00 $645.00 18.99 15.00MBNA America $54,150.04 $306.00 $1,219.00 6.75 15.00MBNA America $20,011.23 $369.00 $451.00 21.99 15.00MBNA America $6,860.76 $150.00 $155.00 22.99 15.00RMA/America Express $20,377.41 $408.00 $428.00 13.50 0.00

Total of 7 Accounts: $177,001.95 $2,718.00 $3,933.00

Due Date: Jan. 24, 2005 Self Program

Suggested Monthly Donation: $45.00 # Payments: 489 62Suggested Enrollment Donation: $75.00 Years to Pay: 40.7 5.1

Total Interest: $162,894.00 $68,385.00

Interest Savings: $94,509.00

Time Value of MoneySave $1.67/day, $50/mo, $600/year

Age

Invest

Value

20 $600

$630

21 $600

$1,292

22 $600

$1,986

23 $600

$2,715

24 $600

$3,481

25 $600

$4,285

26 $600

$5,129

27 $600

$6,016

28 $600

$6,947

29 $600

$7,924

65 $6,000

$45,895

Based on earning a 5% return

Age

Invest

Value

20 $600

$660

21 $600

$1,386

22 $600

$2,185

23 $600

$3,063

24 $600

$4,029

25 $600

$5,092

26 $600

$6,262

27 $600

$7,548

28 $600

$8,962

29 $600

$10,519

65 $6,000

$325,161

Based on earning a 10% return

Time Value of Money

Age Invest

Value

18 $3,0

00.00

$3,300

19 $3,0

00.00

$6,930

20 $3,0

00.00

$10,923

21 $3,0

00.00

$15,315

22 $3,0

00.00

$20,147

65 $1,213,646

Based on earning a 10% return

Age

Invest

Value

18 $3,000.0

0

$3,150

19 $3,000.0

0

$6,458

20 $3,000.0

0

$9,930

21 $3,000.0

0

$13,577

22 $3,000.0

0

$17,406

65 $141,851

Based on earning a 5% return

23

Time Value of Money

Age Invest

Value

18 $2,000

$2,200

19 $2,000

$4,620

20 $2,000

$7,882

21 $2,000

$10,210

22 $2,000

$13,431

65 $10,000

$809,098

Based on earning a 10% return

Age Invest

Value

18 $2,000

$2,100

19 $2,000

$4,305

20 $2,000

$6,620

21 $2,000

$9,051

22 $2,000

$11,604

65 $10,000

$94,567

Based on earning a 5% return

24

Age Invest

Value

18 $1,200

$1,320

19 $1,200

$2,772

20 $1,200

$4,369

21 $1,200

$6,126

22 $1,200

$8,059

65 $6,000

$441,326

Based on earning a 10% return

Age Invest

Value

18 $1,200

$1,260

19 $1,200

$2,583

20 $1,200

$3,972

21 $1,200

$5,431

22 $1,200

$6,962

65 $6,000

$54,038

Based on earning a 5% return

Time Value of Money

Doubling Your Money Every Day

Day Amount

1 $0.01

2 $0.02

3 $0.04

4 $0.08

5 $0.16

6 $0.32

7 $0.64

8 $1.28

9 $2.56

10 $5.12

11 $10.24

12 $20.48

13 $40.96

14 $81.92

15 $163.84

Day Amount

16 $327.68

17 $655.36

18 $1,310.72

19 $2,621.44

20 $5,242.88

21 $10,485.76

22 $20,971.52

23 $41,943.04

24 $83,866.08

25 $167,772.16

26 $335,544.32

27 $671,088.64

28 $1,342,177.28

29 $2,684,354.56

30 $5,368,709.12

The Effect of Compound Interest

Start at age: 20 30 40 50 60

At age 30 you will have $31,874.00

At age 40 you will have $114,549.00 $31,874.00

At age 50 you will have $328,988.00 $114,549.00 $31,874.00

At age 60 you will have $885,185.00 $328,988.00 $114,549.00 $31,874.00

At age 70 you will have $2,327,817.00 $885,185.00 $328,988.00 $114,549.00 $31,874.00

This assumes a 10% rate of return on your investment

Save Per Year: $2,000.00

Save Per Month: $166.67

Save Per Day: $5.48

SAVE $2,000.00 PER YEAR STARTING AT AGE __________

The Effect of Compound Interest

% Rate of Return: 8 Save Per Year: $1,200.00

Annual Contribution: $1,200.00 Save Per Month: $100.00

Save Per Day: $3.29

Start at age: 20 30 40 50 60

At age 30 you will have: $17,383.87 $0.00 $0.00 $0.00 $0.00

At age 40 you will have: $54,914.36 $17,383.87 $0.00 $0.00 $0.00

At age 50 you will have: $135,939.85 $54,914.36 $17,383.87 $0.00 $0.00

At age 60 you will have: $310,867.82 $135,939.85 $54,914.36 $17,383.87 $0.00

At age 70 you will have: $688,524.19 $310,867.82 $135,939.85 $54,914.36 $17,383.87

Years Amount Invested

10 $12,000.00

20 $24,000.00

30 $36,000.00

40 $48,000.00

50 $60,000.00

COMPOUND INTEREST SAVINGS

Getting The Best Interest RatePurchase Price $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00

Downpayment $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00

Amount Financed $8,000.00 $8,000.00 $8,000.00 $8,000.00 $8,000.00

Interest Rate 6.00% 10% 14% 18% 22%

Loan Term (months) 36 36 36 36 36

Monthly Payment $243.00 $258.14 $273.42 $289.22 $305.52

Total Finance Charges $761.68 $1,293.04 $1,843.12 $2,411.92 $2,998.72

Excellent Finance Calculators

http://www.nolo.comhttp://www.dinkytown.nethttp://www.bankrate.com

Get Your Free Credit Report: http://annualcreditreport.com

The Effects of Compound Interest

And

Money Trivia Questions

Money Trivia Questions

3. What percent of American working families now earn wages so low that they have difficulty surviving financially?

1. On average, how much are Americans savings?-1.67% in 2004

-0.5% in 2005

-1.0% in 2006-20092. What is the total average credit card debt, eliminating house mortgage and auto load payment, per household in America? $12,000.00

25%

4. What % of Americans spends more money than they make? 40%

5. What % of consumers pay their utility bills late each month?40%

6. What is the best web site to get your credit report and score?

www.annualcreditreport.com

Money Trivia Questions

9. What % of eligible workers does not contribute ANYTHING into a 401(k) plan?

7. What are the three organization that provide a free credit report annually?

Equlfax, Experian,TransUnion8. What % of employees has financial problems severe enough to affect productivity in the workplace, and spend 20 hours per month of work time on personal financial problems?

20%

33%

10. What % of consumers lives from paycheck to paycheck with little or no savings?

98 Months11. How long will it take you to pay off a $1,000.00 balance, with 18% interest, if you make the minimum payments of $15.00 a month?

12. How long can delinquent bills or bankruptcy stay on your credit report? 7 Years

70%

Money Trivia Questions

15. If a bank repossesses your car and sells it, you may still owe them money. True or False

13. State some examples of good debt ?Student Loans, House

14. Angry creditors can harass you and tell your boss if you owe them money. True or False False

True

16. Bankruptcy wipe out debts such as student loans and child support? True or False

17. Credit Bureaus determine if you have good credit ratings. True or False False

False

Alliance Credit Counseling

Non-Profit Charitable Organization

Established in 2000

Assisted more than 170,000

Member of the Better Business Bureau

Charlotte, North Carolina

Monday-Thursday 9am-9pm

Friday 9am-8pm

Alliance Credit Counseling

Saturday 9am-5pm

704-341-1010

1-888-995-7856

Alliance Credit Counseling

Interactive Calculators

Free Educational Information

WWW.KNOWDEBT.ORG

Links to Other Helpful Websites

Budget Information

Our Mission:Our Mission:

Provide help and hope through charitable relief to the poor and distressed by personalized education, counseling, and support programs that reduce and avoid the burdens of financial crisis, debt stress, bankruptcy, and their consequences.

Provide empowerment to the public through charitable education programs of financial literacy, money management, credit management, and debt reduction to help meet life's challenges and opportunities.

Provide help and hope through charitable relief to the poor and distressed by personalized education, counseling, and support programs that reduce and avoid the burdens of financial crisis, debt stress, bankruptcy, and their consequences.

Provide empowerment to the public through charitable education programs of financial literacy, money management, credit management, and debt reduction to help meet life's challenges and opportunities.