Money Talks

Money TalksMoney Talks::
If you’re not careful,If you’re not careful,
It just says “Goodbye”It just says “Goodbye”
Tips to help you avoid:Tips to help you avoid:
High-cost Loans, Frauds, Scams,High-cost Loans, Frauds, Scams,
& other financial troubles& other financial troubles
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Is Education Worth It?Is Education Worth It?
Average Annual IncomeAverage Annual Income (2002 U.S. Census Bureau)(2002 U.S. Census Bureau)
High School DropoutHigh School Dropout 20,76420,764
High School GraduateHigh School Graduate 27,16027,160
College GraduateCollege Graduate 43,52943,529

TheThe
GreedGreed
SpectrumSpectrum
LegalLegal
HonestHonest
FairFair
IllegalIllegal
GreedGreed
There areThere are
people outpeople out
there whothere who
treat otherstreat others
with honesty,with honesty,
integrity, andintegrity, and
fairness.fairness.
There areThere are
also those whoalso those who
will cheat,will cheat,
steal, andsteal, and
some will evensome will even
murder formurder for
money.money.
Some find legal means of cheatingSome find legal means of cheating
from us if we aren’t careful.from us if we aren’t careful. CheatCheat
StealSteal
MurderMurder
Some act just like sharks, andSome act just like sharks, and
don’t care what is legal or not.don’t care what is legal or not.

What makes usWhat makes us
susceptible?susceptible?Utah has a reputation for being one of the fraud capitals of the world. Reasons?Utah has a reputation for being one of the fraud capitals of the world. Reasons?
HonestyHonesty→→too trustingtoo trustingMost of us try to be honest, we are used to dealing with other honest people, and too often, we areMost of us try to be honest, we are used to dealing with other honest people, and too often, we are
unprepared when a con artist comes along.unprepared when a con artist comes along.
It is sad and ironic that our personal honesty can lead us to be too trusting.It is sad and ironic that our personal honesty can lead us to be too trusting.

WantsWants
Even though we don’t like to think of ourselvesEven though we don’t like to think of ourselves
as greedy, greed is not an on-off switch. It mayas greedy, greed is not an on-off switch. It may
be said that all of us have some degree ofbe said that all of us have some degree of
greed. If we channel that greed in a positivegreed. If we channel that greed in a positive
direction, it may be called positive motivation.direction, it may be called positive motivation. IfIf
we allow our greed to take us into the negativewe allow our greed to take us into the negative
realms, vile and destructive behaviors result.realms, vile and destructive behaviors result.
PositivePositive
MotivationMotivation
NegativeNegative

Service With aService With a
SmileSmile
The best cons use them very well!The best cons use them very well!
How can we protect ourselves from smiley-faced crooks?How can we protect ourselves from smiley-faced crooks?

Don’t sign it -Don’t sign it -
unless you agree to it!unless you agree to it!
How can you agree to it if youHow can you agree to it if you
don’t understand it?don’t understand it?
How can you understand it, ifHow can you understand it, if
you don’t read it?you don’t read it?
If you still don’t understand it,If you still don’t understand it,
get some helpget some help beforebefore signing!!!signing!!!

Tips to help you avoid aTips to help you avoid a
lot of the problems:lot of the problems:

NOTHINGNOTHING
isis
RISKRISK-FREE-FREE
Especially nothing involving money!Especially nothing involving money!
If someone claims that something is “risk free” they either don’t understand, or they are lying (ifIf someone claims that something is “risk free” they either don’t understand, or they are lying (if
money is involved, there is always risk of loss, as well as opportunity loss, etc.)!money is involved, there is always risk of loss, as well as opportunity loss, etc.)!

The Greater theThe Greater the RateRate
TheThe
HigherHigher
thethe
RiskRiskNot only in racing, but:Not only in racing, but:
Especially inEspecially in
financial matters!financial matters!
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Reg. Savings CD (Time
Certificate)
Exception?Exception?
If you have money at a federally insured bank or creditIf you have money at a federally insured bank or credit
union, you can usually get a better interest rate withoutunion, you can usually get a better interest rate without
changing your risk of loss - by putting your money into timechanging your risk of loss - by putting your money into time
certificates, rather than in a regular savings account. Therecertificates, rather than in a regular savings account. There
is a timing risk, however. If you need your money now, andis a timing risk, however. If you need your money now, and
your certificate doesn’t mature for 3 months, you have ayour certificate doesn’t mature for 3 months, you have a
timing problem.timing problem.

If it sounds too good to be trueIf it sounds too good to be true
It is!It is!
If you will remember this one saying, andIf you will remember this one saying, and
use a little common sense, you’ll be able touse a little common sense, you’ll be able to
avoid most of the frauds and scams. Mostavoid most of the frauds and scams. Most
of them promise unrealistic rewards orof them promise unrealistic rewards or
benefits. The con artists depend on peoplebenefits. The con artists depend on people
whose greed exceeds their goodwhose greed exceeds their good
judgement!judgement!
Why would someone you don’t even knowWhy would someone you don’t even know
want to give you money, or teach you somewant to give you money, or teach you some
secret way to get it? Don’t fall for it!secret way to get it? Don’t fall for it!

When big money is at stakeWhen big money is at stake
GreedGreed BrainBrain

InterestInterest
If youIf you savesave money, youmoney, you
Get itGet it
If youIf you borrowborrow money, youmoney, you
Pay itPay itA very easy concept, but not enough peopleA very easy concept, but not enough people
put it to work in their lives!put it to work in their lives!
If you spend tooIf you spend too
much of your futuremuch of your future
earnings, you messearnings, you mess
up your future.up your future.

Don’t participate inDon’t participate in
unethical deals!unethical deals!
What assurance doWhat assurance do
you have that theyyou have that they
won’t also con you?won’t also con you?
If someone offers you a dealIf someone offers you a deal
that takes advantage ofthat takes advantage of
someone else...someone else...

Want to know an easy way toWant to know an easy way to
make a million dollars nextmake a million dollars next
year?year?
InvestInvest
$10,000,000$10,000,000
at 10% APRat 10% APR

Want to know another way?Want to know another way?
Put $1 intoPut $1 into
savings eachsavings each
monthmonth
-- for 168 years-- for 168 years
(at 5%).(at 5%).
These may sound silly, but somewhere in betweenThese may sound silly, but somewhere in between
$1,000,000 for 1 year, and $1 for 168 years, is a$1,000,000 for 1 year, and $1 for 168 years, is a

Save $100 each month at 5%Save $100 each month at 5%
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
Savings $1200 I nterest Earned $30
1st
year

$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
Savings $6000 I nterest Earned $830
5th
year

$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
Savings $12000 I nterest Earned
$3530
10th
year

$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
Savings $18000 I nterest Earned
$8730
15th
year
Now earning > $110+ each monthNow earning > $110+ each month

Savings Goal:Savings Goal:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Emergency For Sure Buy Stuff
Many financial experts recommend that you save 10% of what you earn. Stash it away and try toMany financial experts recommend that you save 10% of what you earn. Stash it away and try to
never, ever spend it! In order to do that, you will need at least one other account: I call it the “fornever, ever spend it! In order to do that, you will need at least one other account: I call it the “for
sure” savings account. This account is for the “for sure” expenses which come from time to time.sure” savings account. This account is for the “for sure” expenses which come from time to time.
Example: Auto repairs. If we drive a car, we will have repairs, maintenance, and insurance. WeExample: Auto repairs. If we drive a car, we will have repairs, maintenance, and insurance. We
don’t always know when, but we know that they will happen. Another example: Christmas. Thosedon’t always know when, but we know that they will happen. Another example: Christmas. Those
among us who celebrate Christmas are highly likely to spend significant amounts at Christmastime.among us who celebrate Christmas are highly likely to spend significant amounts at Christmastime.

Start With:Start With:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Start immediately with a “For Sure” savings. Estimate your for sure expenses for each year andStart immediately with a “For Sure” savings. Estimate your for sure expenses for each year and
save enough each month to cover them.save enough each month to cover them.
When you decide to do the emergency fund, you may not be able to start with 10% right away.When you decide to do the emergency fund, you may not be able to start with 10% right away.
But start with something, even if it is only 1%. Then, as your income increases, increase theBut start with something, even if it is only 1%. Then, as your income increases, increase the
amount going to your emergency fund at least until you reach 10%.amount going to your emergency fund at least until you reach 10%.

Increase as you can:Increase as you can:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Keep increasing as your income increases.Keep increasing as your income increases.

Build More:Build More:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%

More:More:
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Penalty for
withdrawal
IRA
401K
457K
Roth IRA
InconvenientInconvenient
You may wish to do like some people do: put your emergency fund into accounts which penalizeYou may wish to do like some people do: put your emergency fund into accounts which penalize
withdrawal. For many of us, that thought of penalty is sufficient to prevent us from withdrawing thewithdrawal. For many of us, that thought of penalty is sufficient to prevent us from withdrawing the
money early. It is also advisable to put your “for sure” savings into an account which ismoney early. It is also advisable to put your “for sure” savings into an account which is
inconvenient to get to. If it is too easy to access, it may be gone when you need it.inconvenient to get to. If it is too easy to access, it may be gone when you need it.

Invest vs. SaveInvest vs. Save
0
1000
2000
3000
4000
5000
6000
7000
8000
J-93
D
-93
J-94
D
-94
J-95
D
-95
J-96
D
-96
J-97
D
-97
J-98
D
-98
J-99
D
-99
J-00
D
-00
J-01
D
-01
Here is a graph of the growth pattern of a particular mutual fund (group of stocks) compared to theHere is a graph of the growth pattern of a particular mutual fund (group of stocks) compared to the
same amount invested at a slow, steady pace of a 5% federally insured time certificate. Notice howsame amount invested at a slow, steady pace of a 5% federally insured time certificate. Notice how
the mutual fund has had stronger growth, but also periods of decline. What is it going to do next?the mutual fund has had stronger growth, but also periods of decline. What is it going to do next?
You may wish to keep at least some of your savings in the safer, but slower growing timeYou may wish to keep at least some of your savings in the safer, but slower growing time
certificates.certificates.

Invest vs. SaveInvest vs. Save
0
1000
2000
3000
4000
5000
6000
7000
8000
J-93
D
-93
J-94
D
-94
J-95
D
-95
J-96
D
-96
J-97
D
-97
J-98
D
-98
J-99
D
-99
J-00
D
-00
J-01
D
-01
If we look at the “growth” during years 2000, 2001, and into 2002, we see that the time certificateIf we look at the “growth” during years 2000, 2001, and into 2002, we see that the time certificate
has done much better. Remember, the greater the rate, the greater the risk. Some have describedhas done much better. Remember, the greater the rate, the greater the risk. Some have described
investing in the stock market as “legalized gambling”. With some study, you may be able toinvesting in the stock market as “legalized gambling”. With some study, you may be able to
minimize the risk, nevertheless, there is still risk involved, no matter what the investment, or howminimize the risk, nevertheless, there is still risk involved, no matter what the investment, or how
sure it sounds.sure it sounds.

Gross IncomeGross Income
0
10000
20000
30000
40000
50000
60000
70000
80000
0
3
6
9
12
15
18
21
24
27
30
33
36
39
Dropout
$600,000
HS Grad
$900,000
College
$1,600,000
FixedFixed
ExpensesExpenses
Disposable IncomeDisposable Income
This is a graphic representation of the average lifetime earnings of the high school dropout,This is a graphic representation of the average lifetime earnings of the high school dropout,
graduate, and college graduate. The red represents fixed expenses (housing, utilities, food, etc.),graduate, and college graduate. The red represents fixed expenses (housing, utilities, food, etc.),
the green represents income which a person can do with what s/he pleases.the green represents income which a person can do with what s/he pleases.

Disposable IncomeDisposable Income
Assuming that during the next 10 years or so, you will have somewhere around $30,000Assuming that during the next 10 years or so, you will have somewhere around $30,000
disposable income,disposable income,
how much of it do you want to spend on what you want?how much of it do you want to spend on what you want?
$30,000$30,000
~$25,000~$25,000 assuming 5 yr. payoutassuming 5 yr. payout
~$20,000~$20,000 assuming 5yr. payoutassuming 5yr. payout
~14,000~14,000 assuming 5 yrassuming 5 yr
7%7%18%18%36%36%SaveSave If you borrow at:If you borrow at:
If you borrow at 7% to buy a new carIf you borrow at 7% to buy a new car
every 5 years, you’ll only get to spendevery 5 years, you’ll only get to spend
$25,000 on cars$25,000 on cars
(the rest goes to interest).(the rest goes to interest).If you borrow at 18% by using a creditIf you borrow at 18% by using a credit
card and paying for each of yourcard and paying for each of your
purchases in an average of 5 years,purchases in an average of 5 years,
you’ll only get to spend ~$20,000 onyou’ll only get to spend ~$20,000 on
what you want.what you want.

BeforeBefore you borrowyou borrow, know the APR!!!, know the APR!!!
Unfortunately, there are still lenders outUnfortunately, there are still lenders out
there who state rates other than thethere who state rates other than the
APR (in violation of federal law). SomeAPR (in violation of federal law). Some
refer to an add-on rate, some to arefer to an add-on rate, some to a
weekly or monthly rate. Remember,weekly or monthly rate. Remember,
the basis of comparison is the Annualthe basis of comparison is the Annual
Percentage Rate.Percentage Rate.
9% (9% (add-on rateadd-on rate) is) is
~20% (A.P.R.)~20% (A.P.R.)
Some people only ask: “What’sSome people only ask: “What’s
my payment amount?” Don’t bemy payment amount?” Don’t be
one of them.one of them.
Annual Percentage RateAnnual Percentage Rate
(APR)(APR)
The Federal Truth in Lending Act requires lenders to disclose the APR toThe Federal Truth in Lending Act requires lenders to disclose the APR to
consumers. It is our basis of comparison. It is a great tool for us to know if we areconsumers. It is our basis of comparison. It is a great tool for us to know if we are
getting a good deal!getting a good deal!

When you borrow, always try toWhen you borrow, always try to
pay less than...pay less than...
13% A.P.R.13% A.P.R.
Consider yourselfConsider yourself
unluckyunlucky (or______)(or______) if youif you
can’t beat 13%!can’t beat 13%!

Why people pay more than 13%Why people pay more than 13%
Not enough incomeNot enough income
UneducatedUneducated
Bad creditBad credit
DeceivedDeceived

Interest Rate CeilingInterest Rate Ceiling
0
5
10
15
20
25
30
35
40
Banks & CUs
< 13%
Credit Cards
~ 18%
Small Loan
18-36%
36%36%
<<13%13%
18%18%
If you keep your creditIf you keep your credit
good and stay with thegood and stay with the
reputable lenders, youreputable lenders, you
can nearly always beatcan nearly always beat
13% APR.13% APR.
That is, unless youThat is, unless you
use your credit carduse your credit card
as a means ofas a means of
borrowing. Theborrowing. The
average credit cardaverage credit card
rate is ~18%.rate is ~18%.
Many smallMany small
loanloan
companiescompanies
chargecharge
between 18between 18
and 36%and 36%
APR.APR.
Some states have anSome states have an
interest rate ceiling ofinterest rate ceiling of
36%. Utah did at one36%. Utah did at one
time, but currentlytime, but currently
has no limit. We arehas no limit. We are
seeing some ratesseeing some rates
that are astronomical.that are astronomical.
For instance:For instance:

TOO EASY LOAN COMPANYTOO EASY LOAN COMPANY
Promissory Note with Security Interest Security: 1996 OldsPromissory Note with Security Interest Security: 1996 Olds
AnnualAnnual
PercentagePercentage
RateRate
The cost of your creditThe cost of your credit
as a yearly rate.as a yearly rate.
300%300%
FinanceFinance
ChargeCharge
The dollar amount theThe dollar amount the
credit will cost you.credit will cost you.
$4,442.80$4,442.80
Amount FinancedAmount Financed
The amount of creditThe amount of credit
provided to you or onprovided to you or on
your behalf.your behalf.
$$2000.002000.00
Total of PaymentsTotal of Payments
The amount you willThe amount you will
have paid after youhave paid after you
have made allhave made all
payments aspayments as
scheduled.scheduled.
$6,442.80$6,442.80
25% per month25% per month
Payment Schedule:Payment Schedule: 12 Payments of $536.9012 Payments of $536.90..
Beginning 2/4/99 and on the 4th of each month thereafter until final payment isBeginning 2/4/99 and on the 4th of each month thereafter until final payment is
made on January 4, 2000.made on January 4, 2000.
These are actual figures taken from a real loan which was faxed to the Department (name ofThese are actual figures taken from a real loan which was faxed to the Department (name of
lender changed). Notice the APR. Which is higher 13% or 300%? The borrower got 12 monthlylender changed). Notice the APR. Which is higher 13% or 300%? The borrower got 12 monthly
payments of $536. If he pays back everything on time, he pays a total of $6,443 in one year.payments of $536. If he pays back everything on time, he pays a total of $6,443 in one year.
He pledged a 96 Oldsmobile, which was worth about $10,000 at the time this loan was written.He pledged a 96 Oldsmobile, which was worth about $10,000 at the time this loan was written.
If he misses a payment, they take his car. What happens to his equity? Many of these “auto titleIf he misses a payment, they take his car. What happens to his equity? Many of these “auto title
lenders” have been stating a monthly rate rather than the APR.lenders” have been stating a monthly rate rather than the APR.

PurchasePurchase HonestHonest
CheatCheat
StealSteal
MurderMurder
Where on the greed spectrum are car salesmen?Where on the greed spectrum are car salesmen?
They can be anywhere. Some are veryThey can be anywhere. Some are very
unscrupulous, others are very honest. Even ifunscrupulous, others are very honest. Even if
you deal with an honest one, you still have ayou deal with an honest one, you still have a
conflict of interest. He wants to make money,conflict of interest. He wants to make money,
you want avoid paying as much as you can. Whoyou want avoid paying as much as you can. Who
is to protect you? If you don’t, probably nobody.is to protect you? If you don’t, probably nobody.

Auto Loans:Auto Loans:
APRAPR 7%7% 12%12%
Loan Amt $10,000 $10,000Loan Amt $10,000 $10,000
TermTerm 5 years5 years 5 years5 years
Mo PmtMo Pmt $ 198$ 198 $ 222$ 222
InterestInterest $ 1,881$ 1,881 $ 3,347$ 3,347
Tot. Pmts $11,881Tot. Pmts $11,881 $13,347$13,347
DifferenceDifference $1,466$1,466
25%25%
10,00010,000
5 years5 years
$ 294$ 294
$ 7,610$ 7,610
$17,610$17,610
$5,729$5,729
Comparing different financing arrangements,Comparing different financing arrangements,
and the cost of borrowing $10,000 atand the cost of borrowing $10,000 at
7, 12, and 25% APR.7, 12, and 25% APR.
The individual who got theThe individual who got the
25% rate would pay a total of25% rate would pay a total of
$5729 more than the one$5729 more than the one
who got the 7% rate. Hewho got the 7% rate. He
knew about the 7% loan, butknew about the 7% loan, but
didn’t qualify because of baddidn’t qualify because of bad
credit.credit.
Notice that the individual who got the 12% rate paysNotice that the individual who got the 12% rate pays
a total of $1466 more than the one who got 7%a total of $1466 more than the one who got 7%
(assuming each pay according to the terms of the(assuming each pay according to the terms of the
contract). If he had made 5 phone calls to lenders,contract). If he had made 5 phone calls to lenders,
he would have found the 7% loan. Is it worth $1466he would have found the 7% loan. Is it worth $1466
to make 5 phone calls? Sometimes yes!to make 5 phone calls? Sometimes yes!

InsuranceInsurance
Single interest ins.Single interest ins.
As the name implies, it only protects the lenderAs the name implies, it only protects the lender
More expensive!More expensive!
Full CoverageFull Coverage
Liability & P.I.P.Liability & P.I.P.
“No-Fault”“No-Fault”
Utah State law requires No-fault insurance, the penalties forUtah State law requires No-fault insurance, the penalties for
failure to maintain are severe.failure to maintain are severe.
FailsFails toto provideprovide No-FaultNo-Fault
Penalties for failure to maintain no-fault insurance:Penalties for failure to maintain no-fault insurance:
License Revoked 1 yr+License Revoked 1 yr+
Car Impounded $200+Car Impounded $200+
TicketTicket && fine $400-1000fine $400-1000
SR 22 (high risk) Ins.SR 22 (high risk) Ins.
(very expensive)(very expensive)
CollisionCollision
ComprehensiveComprehensive
Lenders require collision andLenders require collision and
comprehensive insurance. Failure tocomprehensive insurance. Failure to
maintain insurance puts the borrower inmaintain insurance puts the borrower in
default of his/her contract. At default,default of his/her contract. At default,
the lender can repossess, but instead,the lender can repossess, but instead,
usually add:usually add:

How Much Can I AffordHow Much Can I Afford
to borrow?to borrow?
One tool used byOne tool used by
many of the moremany of the more
reputable lenders :reputable lenders :
Debt-to-IncomeDebt-to-Income
RatioRatio
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mo. Inc.Mo. Inc.
Mo. DebtMo. Debt
Pmts.Pmts.
36%36%
If your monthly debt payments (including mortgageIf your monthly debt payments (including mortgage
or rent) are less than 36% of your monthly grossor rent) are less than 36% of your monthly gross
income, and if your credit is good, you have a goodincome, and if your credit is good, you have a good
chance of getting a loan with the lower-ratechance of getting a loan with the lower-rate
lenders.lenders.
Why not 96%? Because we need to live:Why not 96%? Because we need to live:

How Much Can I AffordHow Much Can I Afford
to borrow?to borrow?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mo. Inc.Mo. Inc.
36%36%
Debt pmtsDebt pmts
TaxesTaxes
FoodFood
Misc.Misc.
UtilitiesUtilities
If you have a debt-to-income ratio ofIf you have a debt-to-income ratio of
36%, some months, you will have just36%, some months, you will have just
enough to cover expenses.enough to cover expenses.
Occasionally youOccasionally you
will have a bitwill have a bit
extra.extra.
What will you doWhat will you do whenwhen you have a high-you have a high-
expense month?expense month?
Remember the “for sure” savingsRemember the “for sure” savings
account! You will have months like this!account! You will have months like this!

CreditCredit
Credit Cards: Our Friends?Credit Cards: Our Friends?
Or Our Foes?
They can be either, depending on how we choose to use them.They can be either, depending on how we choose to use them.
CrediCredi

Credit Card PurchaseCredit Card Purchase
-400
-350
-300
-250
-200
-150
-100
-50
0
Bal
-400
-350
-300
-250
-200
-150
-100
-50
0
Purch Pmt Bal
If we pay off our credit card balance each month, we pay no interestIf we pay off our credit card balance each month, we pay no interest
(most credit cards).(most credit cards).
If we don’t pay the entire balance, interest will be charged.If we don’t pay the entire balance, interest will be charged.

Simplified Credit Card StatementSimplified Credit Card Statement
Last Month’s BalanceLast Month’s Balance 128.42128.42
Payments receivedPayments received (128.42)(128.42)
InterestInterest 00
Auto Repair CenterAuto Repair Center 289.94289.94
Joe’s Gas & GoodiesJoe’s Gas & Goodies 14.3214.32
Babe’s Apparel StoreBabe’s Apparel Store 96.2496.24
Ending balanceEnding balance 400.50400.50
Minimum Payment DueMinimum Payment Due 20.0020.00
We have theWe have the
choice ofchoice of
paying thepaying the
entire balance,entire balance,
the minimumthe minimum
requiredrequired
payment, orpayment, or
some amountsome amount
in between. Ifin between. If
we wish towe wish to
avoid payingavoid paying
interest, weinterest, we
must pay themust pay the
entire balance.entire balance.

-5000
-4000
-3000
-2000
-1000
0
1000
Minimum paymentMinimum payment (and make no other purchases):(and make no other purchases):
AtAt 18% it would take18% it would take
3434 yrs to payyrs to pay off -- $ 12,893 int.off -- $ 12,893 int.
At 21.9%At 21.9%
8888 yrs to pay off -- $ 43,729 int.yrs to pay off -- $ 43,729 int.
Paying only the minimum required payment is a veryPaying only the minimum required payment is a very
costly way to use credit cardscostly way to use credit cards

A very costly way to use creditA very costly way to use credit
cardscards
-5000
-4000
-3000
-2000
-1000
0
1000
-5000
-4000
-3000
-2000
-1000
0
1000
Some people chargeSome people charge
against their credit cards toagainst their credit cards to
the limit, then try tothe limit, then try to
consolidate. Many financialconsolidate. Many financial
institutions say:institutions say:
Yes, but onlyYes, but only
IFIF you haveyou have
good creditgood credit
enough incomeenough income
equityequity
-5000
-4000
-3000
-2000
-1000
0
1000

The most expensive way to useThe most expensive way to use
Credit CardsCredit Cards
-1200
-1000
-800
-600
-400
-200
0
200
Some people charge on their credit cards until they go slightly over their limit, then -Some people charge on their credit cards until they go slightly over their limit, then -
even if they make the minimum required payment, they get deeper into debt as theireven if they make the minimum required payment, they get deeper into debt as their
balance increases because of:balance increases because of:
Over-limit fees.Over-limit fees.

Credit CardsCredit Cards
Set up Fee?Set up Fee?
Annual Fee?Annual Fee?
WonderCardWonderCard
5224 789 003 2905224 789 003 290
Grace Period?Grace Period?
Most credit card companies do not charge setup fees or annualMost credit card companies do not charge setup fees or annual
fees.fees.
If you wish to avoid paying interest, make sure your credit cardIf you wish to avoid paying interest, make sure your credit card
plan charges no interest when you pay off the balance within theplan charges no interest when you pay off the balance within the
grace period, and do it!.grace period, and do it!.
APR?APR?
If you don’t pay your balance each month, be sure to payIf you don’t pay your balance each month, be sure to pay
attention to the Annual Percentage Rate and find a credit cardattention to the Annual Percentage Rate and find a credit card
with a low rate.with a low rate.

27” TV27” TV
$400.00$400.00
cashcash
If you have saved enough in your “buyIf you have saved enough in your “buy
stuff” account, you can withdraw yourstuff” account, you can withdraw your
money and buy the TV. If you use a creditmoney and buy the TV. If you use a credit
card, and pay off the balance within thecard, and pay off the balance within the
billing cycle, you pay no interest (if it is abilling cycle, you pay no interest (if it is a
credit card which has the grace period).credit card which has the grace period).
Suppose you see a TV you want to buySuppose you see a TV you want to buy
with a retail price of $400.with a retail price of $400.

27” TV27” TV
On SaleOn Sale
$350.00$350.00
by smart shoppingby smart shopping
If you shop around and findIf you shop around and find
the same TV for $350, youthe same TV for $350, you
just saved $50. But what didjust saved $50. But what did
you save in terms of youryou save in terms of your
ability to earn money? If youability to earn money? If you
are in an average tax bracketare in an average tax bracket
of about 20%, you must earnof about 20%, you must earn
$62.50 before you can spend$62.50 before you can spend
$50. So if you avoid$50. So if you avoid
spending $50, that is likespending $50, that is like
earning $62.50. If you earnearning $62.50. If you earn
$10 per hour, you just saved$10 per hour, you just saved
the equivalent of 6 1/4 hoursthe equivalent of 6 1/4 hours
of work!of work!
$50 / .80 = $62.50 earn$50 / .80 = $62.50 earn
$62.50 / 10 = ~6$62.50 / 10 = ~6 1/4 hrs1/4 hrs

27” TV $400.0027” TV $400.00
using a credit cardusing a credit card at 18% A.P.R.at 18% A.P.R. IfIf
a person charges the $400 TV and cana person charges the $400 TV and can
pay-pay-
$26.00$26.00 per monthper month
itit will takewill take
18 months18 monthsto payoff.to payoff.
During that time the buyer would payDuring that time the buyer would pay
$59.00$59.00 in interest, for ain interest, for a
total cost of $total cost of $459459
$59 shouldn’t ruin anybody’s life, but,
who wants $59 added to each of their
purchases?
$59.00 / .80 = $74 earn
$74 / 10 = ~7.4 hrs extra to pay the 59.

27” TV $400.0027” TV $400.00
Finance CompanyFinance Company
at 36% A.P.R.at 36% A.P.R.
18 mo. Pmts.18 mo. Pmts.
$29.00 per mo.$29.00 per mo.
$123.00 int.$123.00 int.
Total Cost $Total Cost $523523
$123 / .80 = $154$123 / .80 = $154
$154 / 10 = ~15.4 hrs$154 / 10 = ~15.4 hrs

27” TV $400.0027” TV $400.00
Rent-to-OwnRent-to-Own
A rent-to-own company was offering theA rent-to-own company was offering the
same TV forsame TV for
$70$70 per monthper month
How many months would be fair beforeHow many months would be fair before
ownership? When asked, they saidownership? When asked, they said
18 months18 months
(196% A.P.R.)(196% A.P.R.)
($860.00 int.)($860.00 int.)
$860.00 / .80 = $1075.00 earn$860.00 / .80 = $1075.00 earn
$1075.00 / 10 = 107 hrs$1075.00 / 10 = 107 hrs
Neither the APR nor the interest is required toNeither the APR nor the interest is required to
be disclosed on a rent-to-own contract,be disclosed on a rent-to-own contract,
because technically, they are not “loans”.because technically, they are not “loans”.

27” TV $400.0027” TV $400.00
TooToo Easy LoanEasy Loan ((Bad CreditBad Credit
OKOK))
300% A.P.R.300% A.P.R.
Car Title PawnCar Title Pawn
If 18 monthsIf 18 months
$102.00 payments$102.00 payments
$1,433 interest$1,433 interest
$1433 / .80 = $1791$1433 / .80 = $1791
1791 / 10 = 179 hrs1791 / 10 = 179 hrs

-110
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
27” TV $400.0027” TV $400.00
PaydayPayday LoanLoan
If a person borrows 100 from a payday lender for a week,If a person borrows 100 from a payday lender for a week,
not a big deal. S/he paid $10 interest. However we arenot a big deal. S/he paid $10 interest. However we are
finding that many people use payday loans over and over.finding that many people use payday loans over and over.

-110
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
27” TV $400.0027” TV $400.00
PaydayPayday LoanLoan

27” TV $400.0027” TV $400.00
10% (per week)10% (per week)
Payday lenders have been notorious forPayday lenders have been notorious for
illegally stating a weekly rate rather than theillegally stating a weekly rate rather than the
APR when asked about the cost of theirAPR when asked about the cost of their
loans. Remember, the fair basis ofloans. Remember, the fair basis of
comparison for loan costs is the APR (ascomparison for loan costs is the APR (as
well as the dollar amount).well as the dollar amount).
$2,725 interest$2,725 interest
10% per week is about10% per week is about
520% APR.520% APR. (10% x 52 wks = 520)(10% x 52 wks = 520)
18 months18 months Payday loans are notPayday loans are not
intended to be more than short-term loans,intended to be more than short-term loans,
usually less than one month. But, forusually less than one month. But, for
comparison purposes, if someone used acomparison purposes, if someone used a
series of payday loans to finance the TVseries of payday loans to finance the TV
over 18 months:over 18 months:

Why?Why?Why doWhy do
people pay high interest rates?people pay high interest rates?
Desperate people do desperateDesperate people do desperate
thingsthings
--Over-extended--Over-extended. People with excessive. People with excessive
debts do not qualify for low-rate loans.debts do not qualify for low-rate loans.
--Bad Credit--Bad Credit. People with bad credit history. People with bad credit history
usually do not qualify for low-rate loans.usually do not qualify for low-rate loans.
--Low income--Low income. People with low income relative. People with low income relative
to expenses do not qualify.to expenses do not qualify.
--Gambling--Gambling. Compulsive gambling has been the. Compulsive gambling has been the
financial downfall of many.financial downfall of many.
--Alcoholism--Alcoholism. The individual whose 300% loan. The individual whose 300% loan
was shown early in this presentation was an alcoholic.was shown early in this presentation was an alcoholic.
--Drugs--Drugs. A very high percentage of the people in. A very high percentage of the people in
jails and prisons are their because of drugs. X-consjails and prisons are their because of drugs. X-cons
have a difficult time establishing good credit.have a difficult time establishing good credit.
--Health problems--Health problems. Some health problems. Some health problems
are preventable, and health insurance helpsare preventable, and health insurance helps
immensely when we do have problems.immensely when we do have problems.

Credit CardCredit Card 20002000 0 as agreed0 as agreed They do like to see a few paid asThey do like to see a few paid as
Home Mortgage 70000Home Mortgage 70000 65000 current65000 current agreed, or current accounts.agreed, or current accounts.
Overdraft Line of CrOverdraft Line of Cr 20002000 0 as agreed0 as agreed
Even rarely used credit cards help build “good credit” (as long as a person pays on time and doesn’t have tooEven rarely used credit cards help build “good credit” (as long as a person pays on time and doesn’t have too
many credit cards). A person can establish credit without paying any interest by paying off credit card balancesmany credit cards). A person can establish credit without paying any interest by paying off credit card balances
within the billing cycle, and by maintaining an overdraft line of credit with a zero balance.within the billing cycle, and by maintaining an overdraft line of credit with a zero balance.
Bill S. PrestonBill S. Preston 529-00-0000529-00-0000
Employer: Wylde StallynsEmployer: Wylde Stallyns
Credit Bureau ReportsCredit Bureau Reports
The low-rate lenders do not want to see payments more than 30 days lateThe low-rate lenders do not want to see payments more than 30 days late
Department StoreDepartment Store 10001000 10501050 5>305>30
Credit CardCredit Card 50005000 49994999 6>30,3>60,1>906>30,3>60,1>90 especially not 60 & 90especially not 60 & 90
Dumpy BikesDumpy Bikes 500500 430 Collection agency430 Collection agency
Fast Car LotFast Car Lot 60006000 00 RepossessionRepossession
Any one of the above can disqualify a person from borrowing from the lower-rate lenders forAny one of the above can disqualify a person from borrowing from the lower-rate lenders for
quite some time. Lenders are also starting to pay attention to credit card balances relative toquite some time. Lenders are also starting to pay attention to credit card balances relative to
limits. Credit cards at their limit are often counted negatively as are cards over their limit.limits. Credit cards at their limit are often counted negatively as are cards over their limit.

Popular Credit ScoringPopular Credit Scoring
System:System:
35% Payment history35% Payment history
– older & small items count lessolder & small items count less
30% Amount of debt30% Amount of debt
– overextended?overextended?
15% Length of credit history15% Length of credit history
10% New credit10% New credit
– amount accumulated within theamount accumulated within the
past 12-18 monthspast 12-18 months
10% Types of credit10% Types of credit
– too many credit cardstoo many credit cards

Bill S. PrestonBill S. Preston 529-00-0000529-00-0000
Employer: Wylde StallionsEmployer: Wylde Stallions
CreditorCreditor LimitLimit BalBal CommentsComments
Department StoreDepartment Store 10001000 10501050 5>30, 3>605>30, 3>60
Credit CardCredit Card 50005000 49994999 6>30,3>60,1>906>30,3>60,1>90
Dumpy BikesDumpy Bikes 500500 430 Collection agency430 Collection agency
Fast Car LotFast Car Lot 60006000 00 RepossessionRepossession
Credit CardCredit Card 20002000 0 as agreed0 as agreed
Home Mortgage 70000 65000 currentHome Mortgage 70000 65000 current
Overdraft Line of CrOverdraft Line of Cr 20002000 0 as agreed0 as agreed
Some companies claim to be able to remove legitimate debts from credit reports. They areSome companies claim to be able to remove legitimate debts from credit reports. They are
fraudulent! Do not participate in a fraud. If you find errors on your credit report, you mayfraudulent! Do not participate in a fraud. If you find errors on your credit report, you may
correct them yourself by contacting the credit bureau directly.correct them yourself by contacting the credit bureau directly.
Credit Repair ScamsCredit Repair Scams
Equifax: 800 685-1111, Trans Union: 800 916-8800, Experian: 888 397-3742

If you don’t pay your bills on time,If you don’t pay your bills on time,
youryour bad creditbad credit willwill inhibitinhibit you:you:
BorrowingBorrowing
Buying a homeBuying a home
RentingRenting Many landlords are looking at credit histories.Many landlords are looking at credit histories.
Increasing insurance ratesIncreasing insurance rates ManyMany
insurance companies charge higher rates to people withinsurance companies charge higher rates to people with
poor credit.poor credit.
Credit Card CompaniesCredit Card Companies Many credit cardMany credit card
companies are routinely pulling credit reports on theircompanies are routinely pulling credit reports on their
existing customers. When those customers have negativeexisting customers. When those customers have negative
credit with other debtors, their interest rates are increased.credit with other debtors, their interest rates are increased.
Getting a good jobGetting a good job Many employers areMany employers are
looking at credit reports in their employee selection process.looking at credit reports in their employee selection process.

What if you’ve already beenWhat if you’ve already been
smashed financially?smashed financially?
Hang on until you canHang on until you can
bounce back!bounce back!
Satisfy your obligationsSatisfy your obligations
asap (high rates 1st)!*asap (high rates 1st)!*
Keep everythingKeep everything
current for 2+ years.current for 2+ years.
*If you can’t, get some*If you can’t, get some
help.help.

““Pre-Approved”Pre-Approved”
What Does it mean?What Does it mean?
NOTHING!NOTHING!
Beware! Don’t count onBeware! Don’t count on
“pre-approved” financing“pre-approved” financing
arrangements. Too oftenarrangements. Too often
“pre-approved” simply“pre-approved” simply
means you name wasmeans you name was
obtained from aobtained from a
solicitation list.solicitation list.

Late Payments can be extremelyLate Payments can be extremely
EXPENSIVE!EXPENSIVE!
If you pay 30 days late,If you pay 30 days late,
– your credit report is negatively affectedyour credit report is negatively affected
which results in increased future costs.which results in increased future costs.
If you are 1 minute late on some contractsIf you are 1 minute late on some contracts
– you get late feesyou get late fees
late fees can change a debt from a reasonable interestlate fees can change a debt from a reasonable interest
rate to an outrageous effective rate.rate to an outrageous effective rate.
RepossessionsRepossessions Contrary to popularContrary to popular
belief, lenders do not need to notify a person before repossessing.belief, lenders do not need to notify a person before repossessing.
Legal & other feesLegal & other fees Fees can bring financial death!Fees can bring financial death!

Top Scams in UtahTop Scams in Utah~ Derived from information obtained from Utah Division Of Consumer Protection’s website.~ Derived from information obtained from Utah Division Of Consumer Protection’s website.
1.1. Identity TheftIdentity Theft
2. Deceptive Business Training Seminars.2. Deceptive Business Training Seminars.
3. Fraudulent Telemarketing Schemes.3. Fraudulent Telemarketing Schemes.
4. Fraudulent Charities.4. Fraudulent Charities.
5. Travel Scams.5. Travel Scams.
6. Nigerian Money Frauds.6. Nigerian Money Frauds.
7. Deceptive Car Repair Practices.7. Deceptive Car Repair Practices.
8. Prize Promotion Scams.8. Prize Promotion Scams.
9.9. Telephone Slamming & Cramming.Telephone Slamming & Cramming.
10. Advance Fee Loan & Credit Card Scams.10. Advance Fee Loan & Credit Card Scams.
11. Credit Repair Scams.11. Credit Repair Scams.

Loan ScamLoan Scam
(STRICTLY CONFIDENTIAL)(STRICTLY CONFIDENTIAL)
We want to assist you in this UNIQUE venture.We want to assist you in this UNIQUE venture.
These European transactions are Legal,These European transactions are Legal,
allowing you to borrow hundreds of thousandsallowing you to borrow hundreds of thousands
of dollars and NEVER have to repay a cent!!of dollars and NEVER have to repay a cent!!
How? The lender (Offshore Bank) deducts aHow? The lender (Offshore Bank) deducts a
compensating balance from the proceeds ofcompensating balance from the proceeds of
your loan, your loan is SELF-LIQUIDATING oryour loan, your loan is SELF-LIQUIDATING or
PAID OFF by the compensating balance.PAID OFF by the compensating balance.
EVERYONE QUALIFIES. No risk what soEVERYONE QUALIFIES. No risk what so
ever!!ever!!

Loan ScamLoan Scam
(STRICTLY(STRICTLY CONFIDENTIALCONFIDENTIAL))
We want to assist you in this UNIQUE venture.We want to assist you in this UNIQUE venture.
TheseThese EuropeanEuropean transactions are Legal,transactions are Legal,
allowing you to borrowallowing you to borrow hundreds of thousandshundreds of thousands
of dollars andof dollars and NEVER have to repayNEVER have to repay a cent!!a cent!!
How? The lender (How? The lender (OffshoreOffshore Bank) deducts aBank) deducts a
compensating balancecompensating balance from the proceeds offrom the proceeds of
your loan, your loan isyour loan, your loan is SELF-LIQUIDATINGSELF-LIQUIDATING oror
PAID OFF by the compensating balance.PAID OFF by the compensating balance.
EVERYONE QUALIFIESEVERYONE QUALIFIES.. No riskNo risk what sowhat so
ever!!ever!! Nonsense!Nonsense!

E-mail Scam?E-mail Scam?
WORLD CURRENCY CARTEL will instruct aWORLD CURRENCY CARTEL will instruct a
LIMITED number of people on ‘HOW TOLIMITED number of people on ‘HOW TO
CONVERT $25 INTO $100 OF LEGALCONVERT $25 INTO $100 OF LEGAL
CURRENCY’. We will transact the firstCURRENCY’. We will transact the first
conversion for you, after that you can easilyconversion for you, after that you can easily
and quickly do this on your own, hundreds orand quickly do this on your own, hundreds or
even thousands of times every month. TAKEeven thousands of times every month. TAKE
ADVANTAGE OF THIS “SECRET FLAW”!…ADVANTAGE OF THIS “SECRET FLAW”!…
There is a one time membership fee of onlyThere is a one time membership fee of only
$35… Your important instructions will be$35… Your important instructions will be
mailed… We are only accepting CHECK-BY-mailed… We are only accepting CHECK-BY-
FAX payable to NDML. Fax it to 212-000-0000.FAX payable to NDML. Fax it to 212-000-0000.

E-mail Scam?E-mail Scam?
WORLD CURRENCY CARTEL will instruct aWORLD CURRENCY CARTEL will instruct a
LIMITED numberLIMITED number of people on ‘HOW TOof people on ‘HOW TO
CONVERTCONVERT $25 INTO $100$25 INTO $100 OF LEGALOF LEGAL
CURRENCY’. We will transact the firstCURRENCY’. We will transact the first
conversion for you, after that you can easilyconversion for you, after that you can easily
and quickly do this on your own, hundreds orand quickly do this on your own, hundreds or
eveneven thousands of times every monththousands of times every month. TAKE. TAKE
ADVANTAGE OF THIS “ADVANTAGE OF THIS “SECRET FLAWSECRET FLAW”!…”!…
There is a one time membership fee of onlyThere is a one time membership fee of only
$35$35… Your important instructions will be… Your important instructions will be
mailed… We are only acceptingmailed… We are only accepting CHECK-BY-CHECK-BY-
FAXFAX payable to NDML. Fax it to 212-000-0000.payable to NDML. Fax it to 212-000-0000.Nonsense!Nonsense!

URGENTURGENT
Provider: Crudcorp Inc.Provider: Crudcorp Inc.
Status: Pre-ApprovedStatus: Pre-Approved
Limit: $10,000Limit: $10,000
Rate: 12% APRRate: 12% APR
Yordas UccerYordas Uccer
1 F St.1 F St.
U-Falls Forthis, UT 84666U-Falls Forthis, UT 84666
Congratulations Ms. Uccer,Congratulations Ms. Uccer,
You have been pre-approvedYou have been pre-approved
for a gold card with afor a gold card with a
$10,000 limit valid$10,000 limit valid
exclusively toward allexclusively toward all
purchases from provider.purchases from provider.
Mail your $29.95 annual feeMail your $29.95 annual fee
along with this notice.along with this notice.
Full details of yourFull details of your
membership will bemembership will be
included with your card.included with your card.

URGENTURGENT
Provider: Crudcorp Inc.Provider: Crudcorp Inc.
Status: Pre-ApprovedStatus: Pre-Approved
Limit: $10,000Limit: $10,000
Rate: 12% APRRate: 12% APR
Yordas UccerYordas Uccer
1 F St.1 F St.
U-Falls Forthis, UT 84666U-Falls Forthis, UT 84666
Congratulations Ms. Uccer,Congratulations Ms. Uccer,
You have been pre-approvedYou have been pre-approved
for a gold card with afor a gold card with a
$10,000 limit valid$10,000 limit valid
exclusively toward allexclusively toward all
purchases from providerpurchases from provider..
Mail yourMail your $29.95$29.95 annual feeannual fee
along with this notice.along with this notice.
Full details of yourFull details of your
membership will bemembership will be
included with your card.included with your card.

Debit Cards?Debit Cards?
Debit CardDebit Card
5224 789 003 2905224 789 003 290
Why?Why?
““Easy access to checking”Easy access to checking”
DangersDangers
HoldsHolds on your accounton your account
Can causeCan cause bounced checksbounced checks
Mail orderMail order - dissatisfied?- dissatisfied?
Lost or stolen?Lost or stolen? Money goneMoney gone..

Debit Card PurchaseDebit Card Purchase
0
50
100
150
200
250
300
350
400
Bal
Advantages:Advantages:
No debtNo debt (using own money)(using own money)
Easy access toEasy access to
checkingchecking
Disadvantages:Disadvantages:
Money goneMoney gone
HoldsHolds
Bounced checksBounced checks

To avoid theTo avoid the
Hazards ofHazards of
Checking AccountsChecking Accounts
Keep your blankKeep your blank
checks in a safe placechecks in a safe place
If someone steals your checks and forges your name, technically,If someone steals your checks and forges your name, technically,
since you didn’t sign the checks, you did not authorize the money tosince you didn’t sign the checks, you did not authorize the money to
be deducted from your account, and are therefore not responsible.be deducted from your account, and are therefore not responsible.
However, once the money is gone from you account, you may notHowever, once the money is gone from you account, you may not
be able to get it back. The financial institution may claim that yoube able to get it back. The financial institution may claim that you
were negligent...were negligent...

To avoid checking acct. problems:To avoid checking acct. problems:
(1) Reconcile(1) Reconcile your records to the bank’s the day your get your bankyour records to the bank’s the day your get your bank
statement. The sooner you reconcile, the easier it is. If you fail to notify the bank withinstatement. The sooner you reconcile, the easier it is. If you fail to notify the bank within
60 days errors they may have made, you are unlikely to get your money back.60 days errors they may have made, you are unlikely to get your money back.
First BankFirst Bank StatementStatement
BalanceBalance 100.00100.00
DepositsDeposits
9/10/009/10/00 200.00200.00
9/14/009/14/00 535.29535.29
Checks ClearedChecks Cleared
9/9/009/9/00 20.0020.00
9/14/009/14/00 120.39120.39
Ending BalanceEnding Balance 694.90694.90
BalanceBalance 123.00123.00
1422 Joe’s grocery 120.391422 Joe’s grocery 120.39
1423 SLC Utilities 68.001423 SLC Utilities 68.00
PaycheckPaycheck 535.29 635.27535.29 635.27
1424 Dumpy Bikes 25.001424 Dumpy Bikes 25.00 605.27605.27

0
500
1000
1500
2000
0
500
1000
1500
2000
Line of CreditLine of Credit CheckingChecking
To AvoidTo Avoid BouncedBounced
ChecksChecks::
Have aHave a backupbackup arrangement for whenarrangement for when
you make a mistake.you make a mistake.
By setting up an overdraftBy setting up an overdraft
line of credit (an emptyline of credit (an empty
loan tied to your checkingloan tied to your checking
account), when you make aaccount), when you make a
mistake and write a checkmistake and write a check
for more than the balancefor more than the balance
in your account, you canin your account, you can
avoid bounced checks.avoid bounced checks.

0
500
1000
1500
2000
Overdraft Line of CreditOverdraft Line of Credit
0
500
1000
1500
2000
CheckingCheckingLine of CreditLine of Credit
A loan advance is madeA loan advance is made
to cover your check. If youto cover your check. If you
pay off the loan balance aspay off the loan balance as
soon as you learn of it, thesoon as you learn of it, the
interest and fees areinterest and fees are
minimal (at most financialminimal (at most financial
institutions).institutions).

Overdraft Line of CreditOverdraft Line of Credit
0
500
1000
1500
2000
CheckingChecking
$20$20 returned check feereturned check fee
$60$60
100100
300…300…
$600 Fees$600 Fees
A lady made a simpleA lady made a simple
mistake on her checkmistake on her check
register, which caused oneregister, which caused one
check to bounce. Thecheck to bounce. The
bank deducted a $20bank deducted a $20
returned check fee. Thatreturned check fee. That
caused 3 other checks tocaused 3 other checks to
bounce… Within onebounce… Within one
month, she had incurredmonth, she had incurred
$600 of returned check$600 of returned check
fees. If she had set up andfees. If she had set up and
properly maintained anproperly maintained an
overdraft line of credit, sheoverdraft line of credit, she
would likely have incurredwould likely have incurred
less than $5 of interest andless than $5 of interest and
fees.fees.
If you don’t set up aIf you don’t set up a
backup system, you couldbackup system, you could
run into a situation like this:run into a situation like this:

0
500
1000
1500
2000
Some people defeat the purposeSome people defeat the purpose
of their overdraft line of creditof their overdraft line of credit
VCRVCRStereoStereoBike RackBike RackMountain BikeMountain BikeTVTV
Line of CreditLine of Credit
0
500
1000
1500
2000
High rateHigh rate They use their overdraftThey use their overdraft
line of credit as a commonline of credit as a common
loan or charge account,loan or charge account,
and thus defeat theand thus defeat the
purpose of having it. Then,purpose of having it. Then,
if they make a mistake,if they make a mistake,
their check not onlytheir check not only
bounces, but they arebounces, but they are
paying interest at a higherpaying interest at a higher
rate than is available onrate than is available on
other types of loans.other types of loans.
And returnedAnd returned
check fees!check fees!

0
500
1000
1500
2000
CheckingChecking
0
500
1000
1500
2000
Line of CreditLine of Credit
High rateHigh rate
But a high rate times zeroBut a high rate times zero
is zero. If you keep the lineis zero. If you keep the line
of credit empty (zeroof credit empty (zero
balance), you pay nobalance), you pay no
interest, you have a backupinterest, you have a backup
system for your checkingsystem for your checking
account, and you build aaccount, and you build a
credit rating without payingcredit rating without paying
interest.interest.

0
500
1000
1500
2000
0
500
1000
1500
2000
CheckingChecking SavingsSavings
Some financial institutions allowSome financial institutions allow
their checking accounts to be tiedtheir checking accounts to be tied
to savings accounts. Then if theto savings accounts. Then if the
customer makes a mistake on theircustomer makes a mistake on their
checking account, the money ischecking account, the money is
automatically transferred from aautomatically transferred from a
savings account. This can worksavings account. This can work
well if sufficient is maintained inwell if sufficient is maintained in
savings, if it is not used too often,savings, if it is not used too often,
and if the financial institutionand if the financial institution
doesn’t charge large fees.doesn’t charge large fees.

0
500
1000
1500
2000
0
500
1000
1500
2000
CheckingChecking SavingsSavings

Keep your backupKeep your backup
available for when youavailable for when you
need it!need it!
0
500
1000
1500
2000
0
500
1000
1500
2000
CheckingCheckingLine of CreditLine of Credit
0
500
1000
1500
2000
SavingsSavings

Dangers Lurking!Dangers Lurking!
Each time you refinance, youEach time you refinance, you
add to your debt (nearly always).add to your debt (nearly always).
If you are considering refinancing or consolidating loans, beware.If you are considering refinancing or consolidating loans, beware.
Consolidations and refinances can be very useful, but they can also causeConsolidations and refinances can be very useful, but they can also cause
problems such as much more interest paid over the life o f the loan. Be carefulproblems such as much more interest paid over the life o f the loan. Be careful
that you don’t defeat your intent. There are monsters out there who are morethat you don’t defeat your intent. There are monsters out there who are more
than willing to take as much money as you are willing to give them.than willing to take as much money as you are willing to give them.
In 2002 lady called the Department of Financial Institutions. She had wanted toIn 2002 lady called the Department of Financial Institutions. She had wanted to
get a better rate on her mortgage loan. She found out that she’d gotten a veryget a better rate on her mortgage loan. She found out that she’d gotten a very
bad deal the last time she refinanced.bad deal the last time she refinanced.

NWFNWF
$147,000$147,000
$17,000$17,000
$164,000$164,000
10%10%
She had refinanced her home 2 years prior “because interest rates had goneShe had refinanced her home 2 years prior “because interest rates had gone
down.” She thought she was getting the loan terms shown in the left columndown.” She thought she was getting the loan terms shown in the left column
below. When she went to refinance again, 2 years later “because rates hadbelow. When she went to refinance again, 2 years later “because rates had
gone down again,” she found out she actually had the loan in the middlegone down again,” she found out she actually had the loan in the middle
column below. I asked why she signed such a loan, she said she was in acolumn below. I asked why she signed such a loan, she said she was in a
hurry and didn’t read the documents. A very costly mistake! According tohurry and didn’t read the documents. A very costly mistake! According to
my calculations she lost about $24,000 by not paying attention.my calculations she lost about $24,000 by not paying attention.
TypicalTypical
Re-financedRe-financed $147,000$147,000
““Closing Costs”Closing Costs” $3,000$3,000
New LoanNew Loan $150,000$150,000
RateRate 8%8%
DiffDiff
$14,000$14,000
$3,000$3,000
Prepay PenaltyPrepay Penalty $0$0 $7,000$7,000 7,0007,000
$24,000$24,000

Mortgage Loans:Mortgage Loans:
Compare All CostsCompare All Costs
Before Signing AnythingBefore Signing Anything
BadguysBadguys DifferenceDifference
13,46613,466 (10,432)(10,432)
““Closing Costs”Closing Costs”
FeesFees TypicalTypical
Total Closing Costs $3,034Total Closing Costs $3,034
Another mortgage company charged a family about $10,000 more in closing costs than mostAnother mortgage company charged a family about $10,000 more in closing costs than most
other mortgage companies would have charged.other mortgage companies would have charged.

Variable vs. Fixed RateVariable vs. Fixed Rate
In addition, they were given a variable rate loan (indexed artificially low) and paymentsIn addition, they were given a variable rate loan (indexed artificially low) and payments
increased every 6 months. The borrowers thought they were getting a fixed rate loan (whereincreased every 6 months. The borrowers thought they were getting a fixed rate loan (where
payments stay the same).payments stay the same).

Home Loans: BewareHome Loans: Beware
1. Prepayment1. Prepayment
penalties?penalties?
2. Compare Rates2. Compare Rates
3. Compare Fees3. Compare Fees
4. Fixed vs. Variable?4. Fixed vs. Variable?

Avoid Closing TrapsAvoid Closing Trapsespecially if delayedespecially if delayed
UnderstandUnderstand
what you arewhat you are
signing andsigning and
why.why.
Take your timeTake your time
Don’t just (sign, sign, sign)Don’t just (sign, sign, sign)
Expect delays, and keep all yourExpect delays, and keep all your
other obligations current.other obligations current.
Could be one of the most important 3Could be one of the most important 3
hours of your financial life.hours of your financial life.

AvoidAvoid
Advanced-Fee Loan ScamsAdvanced-Fee Loan Scams
Don’t fall for promises to get you aDon’t fall for promises to get you a
loan or a credit card regardless ofloan or a credit card regardless of
credit problems!credit problems!
Don’t wireDon’t wire $49$49 to New York…to New York…
Don’t give solicitors your accountDon’t give solicitors your account
numbers!numbers!
Who do they prey on?Who do they prey on?
The most vulnerable - those who can leastThe most vulnerable - those who can least
afford the loss.afford the loss.

Dear Sir, CONFIDENTIAL BUSINESS
PROPOSAL
FROM THE NIGERIANIGERIA CHAMBER OF
COMMERCE, I HAVE THE PRIVILEGE TO
REQUEST FOR YOUR ASSISTANCE TO
TRANSFER THE SUM OF $45.5 MILLION U.S.
DOLLARS INTO YOUR ACCOUNT. THE ABOVE
SUM RESULTED FROM AN OVER-INVOICED
CONTRACT, PAID BY A FOREIGN
CONTRACTOR. WE REQUIRE YOUR
ASSISTANCE. THE TOTAL SUM WILL BE
SHARED AS FOLLOWS: 70% FOR US, 25%
FOR YOU AND 5% FOR LOCAL AND
INTERNATIONAL EXPENSES INCIDENTAL TO
THE TRANSFER. THIS ACTION WAS
HOWEVER INTENTIONAL. WE ARE

Dear Sir, CONFIDENTIAL BUSINESS
PROPOSAL
FROM THE NIGERIANIGERIA CHAMBER OF
COMMERCE, I HAVE THE PRIVILEGE TO
REQUEST FOR YOUR ASSISTANCE TO
TRANSFER THE SUM OF $45.5 MILLION U.S.
DOLLARS INTO YOUR ACCOUNT. THE ABOVE
SUM RESULTED FROM AN OVER-INVOICED
CONTRACT, PAID BY A FOREIGN
CONTRACTOR. WE REQUIRE YOUR
ASSISTANCE. THE TOTAL SUM WILL BE
SHARED AS FOLLOWS: 70% FOR US, 25%
FOR YOU AND 5% FOR LOCAL AND
INTERNATIONAL EXPENSES INCIDENTAL TO
THE TRANSFER. THIS ACTION WAS
HOWEVER INTENTIONAL. WE AREAmericans have been flooded by numerous versions of theAmericans have been flooded by numerous versions of the
Nigerian money scam, don’t fall prey to their too-good-to-be-trueNigerian money scam, don’t fall prey to their too-good-to-be-true

#1 Cause of Divorce#1 Cause of Divorce
70-80% of70-80% of
divorcing couplesdivorcing couples
attribute theattribute the
marriagemarriage
breakdown tobreakdown to
money problemsmoney problems

BEWAREBEWARE
Tell me your credit card numberTell me your credit card number
Tell me your checking account #Tell me your checking account #
Tell me your Social Security #Tell me your Social Security #
Wire fees out of stateWire fees out of state

RememberRemember
Understand what you sign.Understand what you sign.
Don’t sign anything you don’tDon’t sign anything you don’t
agree to.*agree to.*
Shop for the best dealShop for the best deal
available to you.available to you.
Keep your greed underKeep your greed under
control.control.

Pay Off Loans EarlyPay Off Loans Early
10,000 12% 57 mo 210,000 12% 57 mo 2332 13,1672 13,167
Bal Rate Term Pmt Total Int Pd SavingsBal Rate Term Pmt Total Int Pd Savings
(If simple interest)(If simple interest)
10,000 12% 60 mo 222 13,346 3,34610,000 12% 60 mo 222 13,346 3,346
10,000 12% 47 mo 210,000 12% 47 mo 2772 12,5822 12,582
10,000 1210,000 12%% 38 mo38 mo 3322 12,069 2,069 1,27722 12,069 2,069 1,277
3,167 1793,167 179
2,582 7642,582 764
If you pay as little as $10 extra principal each month, on such a loan as this, you can avoidIf you pay as little as $10 extra principal each month, on such a loan as this, you can avoid
paying the lender $179 (less interest). The more you pay, the quicker you pay them off, andpaying the lender $179 (less interest). The more you pay, the quicker you pay them off, and
the less money you pay them. Make sure you make your extra principal payments in thethe less money you pay them. Make sure you make your extra principal payments in the
manner your lender prescribes.manner your lender prescribes.

Pay Off Mortgage EarlyPay Off Mortgage Early
136,283 8% 10136,283 8% 101010 29 yr 349,05629 yr 349,056
Bal Rate Pmt Term Tot Cost SavingsBal Rate Pmt Term Tot Cost Savings
(360 mo)(360 mo)
136,283 8% 1000 30 yr 360,000136,283 8% 1000 30 yr 360,000
136,283 8% 10136,283 8% 105050 25 yr 317,10025 yr 317,100
136,283136,283 7.757.75%% 12831283 1515 yr 234,360 98,077 125,640yr 234,360 98,077 125,640
212,773 10,944212,773 10,944
223,717223,717
180,817 42,900180,817 42,900

Bi-Weekly PaymentBi-Weekly Payment
Programs:Programs:
A convenient way toA convenient way to
pay off early,pay off early, ifif::
Your paydays are Bi-weeklyYour paydays are Bi-weekly
Your lender accepts extra principalYour lender accepts extra principal (most do w/o penalty)(most do w/o penalty)
Reputable money handlerReputable money handler (some have skipped)(some have skipped)
Low or no feesLow or no fees
WarningWarning:: many charge amany charge a monthlymonthly service fee & set-upservice fee & set-up feefee!!
$ 5 bw service fee$ 5 bw service fee $ 150 setup$ 150 setup
$25 bw service fee$25 bw service fee $$ 4,0004,000 setupsetup

2626.08929.08929 half paymentshalf payments →→
1313.04464.04464 full paymentsfull payments in an average yearin an average year
The Advantage ofThe Advantage of
Bi-WeeklyBi-Weekly PaymentsPayments::
Since there are 365 1/4 days in an average
year, and 14 days in each bi-weekly period:
365365 1/41/4 ÷÷ 1414 == 26.26.0892908929
there arethere are 2626..08929 biweekly08929 biweekly
periodsperiods each year.each year.

About once everyAbout once every 1111 yearsyears
a person paying 1/2 of his monthly payment bi-weeklya person paying 1/2 of his monthly payment bi-weekly
makes the equivalent ofmakes the equivalent of
13 1/213 1/2
monthly paymentsmonthly payments
(by making 27 half pmts bi-weekly)(by making 27 half pmts bi-weekly)
Every ~11 years 3 months have 3 bw paydaysEvery ~11 years 3 months have 3 bw paydays
(3 extra paydays -> 1 ½* extra full payments)(3 extra paydays -> 1 ½* extra full payments)
*Since making 1/2 of the required monthly payment bi-weekly yields 26.08929 half payments in*Since making 1/2 of the required monthly payment bi-weekly yields 26.08929 half payments in
an average year, every 11.19946 years (average) an third bi-weekly period would occur. 1 (bi-an average year, every 11.19946 years (average) an third bi-weekly period would occur. 1 (bi-
weekly period) ÷ .08929 (average extra bw payment per yr) = 11.19946 (average years).weekly period) ÷ .08929 (average extra bw payment per yr) = 11.19946 (average years).

PayPay 1.091.09 x 733.77 =x 733.77 = 799.81799.81
1.09 =1.09 = 1/12 of 13.051/12 of 13.05 pmtspmts
Compare the advantage of extra principal payments on a loan with these terms:Compare the advantage of extra principal payments on a loan with these terms:
Loan Rate PmtLoan Rate Pmt Term Total PaidTerm Total Paid
Extra Principal:Extra Principal: Bi-Weekly or MonthlyBi-Weekly or Monthly
Extra Principal bi-weekly: If 1/2 of the
required monthly payment is paid bi-weekly:
26.09half pmts are made each year, or
13.05full payments each year (rounded).
Mo. pmt 733.77 ÷ 2 = 366.89bi-weekly
22.65 yrs22.65 yrs
22.522.5 yrsyrs 48,20948,209
216,832216,832
215,948215,948
47,32547,325
Save
66.04 additional principal66.04 additional principal
100,000 8% 733.77 mo100,000 8% 733.77 mo 30 yr 264,15730 yr 264,157
(by paying 17,000 early, you avoid paying $47,325 of interest)
To gain the same advantage:
Extra Principal Monthly

Mortgage bal. $ 87,724 734 pmt 8Mortgage bal. $ 87,724 734 pmt 8% 20 yr remaining% 20 yr remaining
Car bal. 13,056 415 pmt 9Car bal. 13,056 415 pmt 9% 3 yr remaining% 3 yr remaining
OtherOther 8,0008,000 203203 pmt 18pmt 18% 5 yr remaining% 5 yr remaining
Total 108,780 1,352Total 108,780 1,352
Re-finance and “save” hundredsRe-finance and “save” hundreds
each montheach month (100,000 30 yr 8% loan after 10 years)(100,000 30 yr 8% loan after 10 years)
Many lenders encourage borrowers to refinance. If the goal is to reduce monthly payments, a refinance may work just fine. If theMany lenders encourage borrowers to refinance. If the goal is to reduce monthly payments, a refinance may work just fine. If the
goal is to pay less total interest, it may be better not to refinance, unless you refinance and keep paying the old payment.goal is to pay less total interest, it may be better not to refinance, unless you refinance and keep paying the old payment.
Consolidated 111,780Consolidated 111,780 782782 pmt 7.5pmt 7.5% 30 yrs% 30 yrs
you “save”you “save” (avoid spending)(avoid spending) 493 per month493 per month
Int.Int.if paid asif paid as
agreedagreed
95,00095,000
if you keep payingif you keep paying 1,3521,352 (117 mo)(117 mo) 9.75 yrs9.75 yrs
Int.Int. && feesfees
173,000173,000
Great, if you keep paying the higher payment, and don’t run up yourGreat, if you keep paying the higher payment, and don’t run up your
credit cards, etc. again!credit cards, etc. again!
Int.Int. && feesfees
50,00050,000
50,75650,756
if keep payingif keep paying
1352 no refi1352 no refi

After 1 year
New New New
Bal. Pmt. Term
77,554 651 21.9
8,072 250 3.1
4,126 150 2.6
6,253 120 8.5
0 0 0
794 90 .8
Getting out of debt quicker, by focusing first onGetting out of debt quicker, by focusing first on
highest rate debtshighest rate debts
Let’s suppose someone had
the following debts. They
could meet the payments, but
with no money to spare:
Existing Balance Payment Rate Remaining
Obligations (p & i*) Term (yrs.)
1st Mort 78,721 651 8.5% 22.9 yrs.
Auto Loan 10,239 250 9.0% 4.1 yrs.
Trailer 5,451 150 9.8% 3.6 yrs.
Credit Card 6,539 120 18.0% 9.5 yrs.
Doctor 400 40 21.0% .9 yrs.
Dentist 1,200 50 19.0% 2.5 yrs.
Totals 102,550 1331 (*p&i stands for principal & interest)
After 1 yr., start
applying the amount
formerly going to the
doctor ($40) to the
next highest rate
debt (the dentist).
After 1.8 years
New New New
Bal. Pmt. Term
76,547 651 21.1
6,194 250 2.3
2,970 150 1.8
5,984 210 3.1
0 0 0
0 0 0
After .8 yr. more,
apply the amount
doctor ($40) and to
the dentist ($50) to the
next highest rate debt
(the credit card).

After 3.7 years
New New New
Bal. Pmt. Term
73,863 651 19.2
1,153 250 .4
0 0 0
2,745 360 .7
0 0 0
0 0 0
Getting out of debt quicker, by focusing first onGetting out of debt quicker, by focusing first on
highest rate debtshighest rate debts
Let’s suppose someone had
the following debts. They
could meet the payments, but
with no money to spare:
Existing Balance Payment Rate Remaining
Obligations (p & i) Term
1st Mort 78,721 651 8.5% 22.9 yrs.
Auto Loan 10,239 250 9.0% 4.1 yrs.
Trailer 5,451 150 9.8% 3.6 yrs.
Credit Card 6,539 120 18.0% 9.5 yrs.
Doctor 400 40 21.0% .9 yrs.
Dentist 1,200 50 19.0% 2.5 yrs.
Totals 102,550 1331
After 1.9 more yrs, by
applying the amounts
doctor, dentist to the
credit card, the new
terms:
After 4.4 years
New New New
Bal. Pmt. Term
72,760 1,261 6.2
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
Out of debt in 10.2Out of debt in 10.2 yrs.
After .7 yr. more,
applying the amounts
doctor, the dentist, the
credit card, trailer &
auto loan to the
mortgage loan.

Under water?Under water?
Mortgage 7% 600Mortgage 7% 600
Auto loan 10% 250Auto loan 10% 250
Cr Card 19% 100Cr Card 19% 100
Cr Card 25% 150Cr Card 25% 150
DoctorDoctor 18% 20018% 200
DentistDentist 18% 10018% 100
1,4001,400
7%7%
10%10%
10%10%
25%25%
10%10%
18%18%
600600
250250
8080
150150
120120
100100
1,2001,200
Some lenders will reduce their interest rates if you ask - especially if youSome lenders will reduce their interest rates if you ask - especially if you
indicate that you are shopping around for better rates.indicate that you are shopping around for better rates.

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