wise money & budgeting review part 2

Emergency Fund:

Budget to include savings with the first goal of having an EMERGENCY ACCOUNT with 6-19 months of income

have an emergency fund b4 investing.

Zero base Budget:

when income and expenses equal zero

Car: Total monthly expense should be 15% of your take-home pay. A budgeting rule to stop ur car from taking all ur money.

What "Monthly Expense" Means: It's NOT just the car payment. It's the total of all these things added together:

• The car loan payment

• monthly car insurance cost

• The average amount spent on gas

• Money set aside for maintenance (like oil changes, new tires, and repairs)

look at ur paycheck after all the taxes are taken out (your "take-home" pay). Your total car costs (all four items above) should be about 15% of that number.

House: Total monthly expense should be no more than 25% of your gross pay/income
a lending rule that banks use to decide if you can afford a house.

What "Monthly Expense" Means: This refers to your total housing payment, often called "PITI":

P = Principal (paying back the loan amount)

I = Interest (the fee for borrowing the money)

T = Taxes (your monthly share of the property taxes)

I = Insurance (your monthly share of homeowner's insurance)

Simple Explanation:

A bank looks at your total monthly pay (your "gross" pay, before taxes are taken out). They want to see that your total housing payment (PITI) is no more than 28% of that number.

Student Loans: Total debt less than 1st year's expected salary. a borrowing rule to help u figure out if a college degree is worth the cost.

What It Means: Look at the job you want after you graduate. Find out the average starting salary (e.g., $50,000).

Simple Explanation:

Your TOTAL student loan debt for all four years of college should be less than that one-year salary. If you borrow $80,000 for a job that pays $50,000, your monthly payments will be so high that you'll struggle to pay your other bills.

Car Down Payment: 15% down. a buying rule to protect you from losing money.

What It Means: A "down payment" is the cash you pay upfront when you buy the car.

Simple Explanation:
Cars lose value very fast. This is called depreciation. Paying at least 15% in cash helps you stay "right-side up."

• Bad Situation: You pay $0 down on a $30,000 car. A year later, you owe $28,000, but the car is only worth $22,000. You are "$6,000 upside down."

• Good Situation: You pay 20% down ($6,000). You owe $24,000. A year later, you owe $22,500, and the car is worth $22,000. You are not in debt on a car you don't even own anymore.

House Down Payment: 20% down(whatspaidupfront) This is a mortgage rule that saves you money every month.

Simple Explanation:20% is the magic number. If you pay 20% or more, the bank considers you a safe bet.

If you pay less than 20%, the bank sees you as a higher risk. To protect itself, the bank forces you to pay an extra monthly fee called PMI (Private Mortgage Insurance).

PMI is an extra $100-$300+ on top of your regular house payment, and it doesnt help you pay off your loan. You must keep paying it until your loan balance is down to 80% of the home's value (which is the same as having 20% paid off).

Renting (What you are responsible for):

security deposit, renters insurance, & utilities

Benefits of Renting: easier to move & short-term

Cons of Renting: cost customize

Owning (What you are responsible for):

Down payment, mortgage, & homeowner’s insurance.

benefit: house builds equity
Cons: cost of repairs

The higher the down payment, the lower

the monthly mortgage payment

Fixed expenses:

stay the same each month, such as rent & car payments

Variable expenses:

change from month to month, such as food, utility bills, new clothes.

Budget deficit:

when you spend more money than you have coming in....this creates debt

Budget surplus:

when you spend less than you make.
- This is called "living within your means" 

Opportunity cost:

next best alternative - it is what is given up when a choice is made

Keeping Records: (having a system):

to manage money effectively. 

"Keeping up with the Jones'" mentality: Avoid the "Keeping up with the Jones'" mentality. 

Trying to act rich / when you try to buy something to impress someone but you don't have the money

Money Order or Check or Cashier Check:

Ask for a Money Order or Check or Cashier Check when selling expensive items

Money in the US is Flat Currency - it is not backed by

gold. It is backed by confidence in the US government.

Department of Treasury -

collects taxes, prints money, issue Treasury bonds (collected by or paid to the Internal Revenue Service)

Federal Reserve System is the central bank system of the United States. The fed uses

monetary policies to regulate the money supply.

SMART goals:

Specific, measurable, attainable, Relevant, timeframe

Short-term goals:

1 yr less

Mid-term goals:

Around 5 years

long-term goals: 

15 years

Factors that influence college choice:

[1] career goals [2] Cost [3] location

FAFSA -

Free application for student aid

Inflation (Most hurt): -

Most hurt by inflation lenders (banks) and people living on Fixed income are hurt by inflation

Inflation (Least hurt): -

Least hurt by inflation are those earning large amounts of money

he purpose and importance of a Will -

make sure your assets/final expenses taken care of

beneficiaries

(people who get your assets)

Federal Deposit Insurance Corporation (FDIC) -

insures deposits and can take over failed banks

Securities Exchange Commission (SEC) -

is a board with five members. They regulate the offer of and sale of securities among the public (stock shares from corporations).

Truth & Lending Act

The lender must state the finance charge in terms of annual % rate

If your credit card is stolen, you are only liable for $50 of the charges made by someone else.

Fair Credit Billing Act

i. Creditors must send the borrower a bill at least 14 days before payment is due
i. Gives the borrowers time to dispute any wrong information

Fair Credit Reporting Act

a. Your credit report must be accurately reported

i. If any information is wrong, you can dispute it

b. If you are denied a loan or line of credit you are entitled to a copy of the report to know why.

i. Must receive the report within 60 days