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Week 3 Notes

by: Smccarty

Week 3 Notes FAM 251

GPA 3.0
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About this Document

Chapter 6: Building and Maintaining Good Credit
Personal Finance
Class Notes
personalfinance, finance




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This 2 page Class Notes was uploaded by Smccarty on Tuesday October 4, 2016. The Class Notes belongs to FAM 251 at University of Kentucky taught by in Fall 2016. Since its upload, it has received 2 views. For similar materials see Personal Finance in Finance at University of Kentucky.


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Date Created: 10/04/16
October 4,2016: Personal Finance Notes Chapter 6: Building and Maintaining Good Credit  Topics o Why use credit Today: Why use credit, your own o Your own debt limit o Good credit score debt limit, and good credit scores o Sources of consumer credit o Over-debited-ness and its relief Credit - Whatis credit? o Credit card, extra credit o Any arrangementin which goods, service, or money is receivedin exchange for a promise to repayat a later date  Some kind of a privilege o Lenders give you a loan  with the thoughts that you will pay backwith more - Good or Bad? o Both Reasons For andAgainst Using Credit: - Emergency - Convenience Good Reasons: - Medical Bills - You try to buy something or make a reservation - Emergencies - Reservations - Convenience Downside to Credit: - Owning expensive items sooner - No financial flexibility (money eachmonth goes to credit cardpayments) - Obtaining and - Overspending education - Finance Charge is costly o Total amount paid to use credit: Interest+any fees - BestAdvice: If you don’t have money (if your environment allows o Percentof the Annual Percentage Rate (APR) it) don’tspend it.  For example: My credit cardAPR (interest rate) is 20% of my current credit card Establish your own debtlimit: Setting Debt Limits - Debtpayment to Gross Income o 36% or less What is gross income? What you make - DebtPayments-to-Disposable income ration o Monthly debt payments excluding mortgage Disposable Income? After you pay taxes o Over-indebted if the ratio 15% or higher Discretionary Income? After you pay for the necessities Example Problem: John’s annualsalary is $26,000 after taxes. He has $23,000 left. After paying for bills and the necessities of life, John has $5,000 remaining. He spends $3,000 of that on entertainment, leaving him with $2,000. Which value is disposable income? a. $26000 b. $23000 Important to know the difference in incomes c. $5000 d. $3000 Students Debt is on the Rise!!  Consumer Finance Protection Bureau (Video) o o Taking out Student Loans has its benefits, but it also has its risks o Class Activity: Know Your Student Loan Limits o Use your annual entry level salary of your potential career (fromClass activity for Chapter 2)


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