MONEY MANAGEMENT 101: GET YOUR DEBT & CREDIT IN CHECK

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1 MONEY MANAGEMENT 101: GET YOUR DEBT & CREDIT IN CHECK ROGER PASCHKE HEARST CHIEF INVESTMENT OFFICER OCTOBER 18, 2018 HEARSTTOWER *The information being presented at this event is for general information, education and reference purposes only. It is not meant to provide, or take the place of, specific legal, tax or investment advice.

2 HEARST INVESTMENT TEAM Roger Paschke Chief Investment Officer Karen Alsup Officer & Managing Director, Institutional Investments Lilian Mei Director, Investment Research & Analysis Marta Matos Executive Assistant

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4 WHY IS CREDIT CARD DEBT SO FINANCIALLY DAMAGING? Exceptionally high interest rates: 14% to >25% median rate at nearly 21% High rates can mean years to pay off credit card loans Cards easy to get even with sub-averagecredit scores Debt is unsecured i.e. no collateral behind the loan, such as a home collateralizing a mortgage Too much credit card debt can impact credit score, making it difficult to access other forms of credit like a home mortgage Money spent on credit card payments can t be used for other priorities

5 WHAT CAN I DO ABOUT IT? Stop the financial bleeding don t take on any more credit card debt Set aside more of your budget to pay off your debts Pay off the cards with the highest rates first Pay more than the minimum every month Consolidate the debt into the card with the lowest rates If you can t make progress, negotiate a manageable payment plan Consider this case study...(lili s experience)

6 HOW CAN I MANAGE MY STUDENT LOANS MORE EFFECTIVELY? Determine the date your loan is paid off so you can focus on shortening the term; check the National Student Loan Data System for Students for information on federal loans and grants. Like credit card debt, make more than the minimum monthly payment. Apply a portion of salary increases or bonuses to repayment of your loans. Avoid falling behind on your payments, which may add to the total cost of the loan and damage your credit score. Be cautious of income-based repayment plans, which may lower monthly payments but extend the life of the loan and increase total interest. Consolidating loans can simplify repayment via a single loan, but also eliminates any opportunity to pay off higher interest loans first.

7 TIPS FOR MANAGING A HOME MORTGAGE Try to make a down payment of at least 20% to avoid costly private mortgage insurance. Shop around for the best interest rates, rather than automatically taking the rate from your existing bank. Do the math on paying points to buy down the rate. It s essentially upfront interest, which may not be recouped before you resell your house. Make an additional annual payment against the principal (or anything you can afford), which can reduce a 30-year mortgage to under 20 years.

8 TIPS FOR MANAGING A HOME MORTGAGE Check out refinancing opportunities if mortgage rates drop to determine the payback period for upfront refinancing costs. Put your mortgage payments on auto-pay to avoid missing payment dates and added fees. Be cautious with home equity loans, which may have attractive rates but will add costs over time and extend the period before you own your home outright.

9 WHAT DO I GET FOR A HIGH CREDIT SCORE? Lower rates on loans, mortgages & credit cards Higher credit limits Easier approval on loans Lower insurance rates Negotiating power on loans Financial peace of mind What score should I shoot for? The higher FICO score, the better: Exceptional: 800 & higher Very good: Good: Fair: Poor: 579 & lower

10 KNOW WHERE YOUR MONEY IS GOING (AKA: A BUDGET) GOING ONLINE TO GET ON BUDGET

11 TOP 10 TIPS FOR MANAGING YOUR DEBT 1. Know how your money is spent maintain an electronic or worksheet budget 2. Beef up your credit score & don t let it slide 3. Know what debts you have & what they cost you 4. Knock out the most expensive debts first 5. Always pay more than the minimum (whether it s credit card debt, student loans or mortgages) 6. Consolidate your credit card debt into the card with the lowest rates 7. Once your credit card debt is gone, pay your balances in full each month 8. Know your debt-to-income ratio (under 35% is best) 9. Don t live paycheck to paycheck build a cash cushion to fall back on in emergencies 10. Treat debt like a four-letter word

12 FOR FURTHER INFORMATION: Credit Scores & Reports TransUnion: transunion.com Experian: experian.com Equifax: equifax.com/personal Credit Card Comparisons Nerdwallet: nerdwallet.com/credit-cards Bankrate: bankrate.com/credit-cards

13 FOR FURTHER INFORMATION: Rates for Home Mortgages & Auto Loans Bankrate: bankrate.com Realtor.com: realtor.com/mortgage/rates Student Loan Information StudentLoans.gov: studentloans.gov/mydirectloan/index.action National Student Loan Data System: nslds.ed.gov/nslds/nslds_sa/ U.S. Dept. of Education / Federal Student Aid: studentaid.ed.gov/sa/types/loans

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15 STILL HAVE QUESTIONS? Visit hearst.com/hearst-wealth Lilian Mei at