THE BASICS OF MANAGING (YOUR) MONEY Planning Wisely with Your Present Resources.

Transcription

1 THE BASICS OF MANAGING (YOUR) MONEY Planning Wisely with Your Present Resources. University of New Mexico Health Sciences Center School of Medicine September 12, 2011 and September

2 An INVESTMENT IN EDUCATION always pays the highest returns. Benjamin Franklin Economy does not lie in SPARING money, but in SPENDING it wisely... Thomas Huxley If you can t afford it, don t buy it!!.. Warren Buffett Every action has a consequence so think before you act. for heaven s sake!!!.. Frank & Anna Wagner

3 GOAL & OBJECTIVES GOAL: Identify the basics of personal financial planning Realize need for setting goals & writing them down so you don t get side-tracked Identify variables of your personal budget to identify needs vs wants Understand that a student loan is NOT income but something you OWE and that it will (most likely) become much larger before you pay it off Clarify value of a good credit history/score so you are aware of its impact on your life Identify rationale & elements of financial order in order to realize financial health/wealth

4 YOUR FINANCIAL PLAN YOU RETIREMENT ESTATE PLAN INCOME PROTECTION FINANCIAL PLANNING/ INVESTING HOME BUYING (POSSIBLE) IDENTITY THEFT CREDIT/DEBT SERVICE BUDGET, BUDGET, BUDGET

5 GOAL(s) WORKSHEET TODAY S DATE GOAL GOAL DATE WHAT ($$$) IS NECESSARY TO REACH GOAL???

6 ABRAHAM MASLOW S NEEDS Physiological breathing, eating, etc. Safety personal security, financial security, health/well-being, safety net against accidents/illness & adverse impacts Social friendship, intimacy, supportive & communicative family Esteem to be respected, self-respect Self-Actualization realize one s own maximum potential & possibilities Self-Transcendence (level of Being) source: wikipedia

7 MANAGING YOUR (SCHOOL) FINANCES only borrow that which is a basic necessity (remember, Abraham Maslow) be careful to not rob Peter to pay Paul do not write bad checks consider bringing your lunch grocery shop from a LIST & don t feel funny about coupons do not have multiple credit cards don t carry them all with you have pot-luck parties versus going out (to restaurants), every weekend don t buy mocha lattes, every day if it doesn t make you a better human being, do without it, at least, for now

8 STRESSORS OF MONEY sleeplessness unable to focus on school eviction marital/partner problems relationship problems (in general) repossession depression AP-AOL study reveals that debt-related stress is 14% higher in 2008 than in source: (web-md accessed 7/27/11)

9 PARTICIPANTS IN STUDENT LOAN(S) School FAO Student Loan Clearinghouse Lender(s) BECOMING OBSOLETE!! NSLDS YOU Guarantors BECOMING OBSOLETE!! US Department of Education as a Lender and/or Ombudsperson Servicers

10 CONTROLLABLE COSTS Can Make A Big Difference In Your Future!! The (REAL) Cost of Coffee 1 cup = $4 1 CUP every weekday = $20 1 CUP every weekday for year = $1,040 could actually wind up costing you 2-3x s that, if you borrowed that on student loans and/or credit cards.

11 CONTROLLABLE COSTS $1,040 per year X 4 years in medical school (interest accruing) $4,160 X 10 years in repayment (interest accrusing) $6,461 OR $6+/per (mocha) latte

12 UNM-SOM Cost of Attendance SOM (allopathic) tuition did not increase from to Expenses UNM Cost of Attendance ACTUAL 11.5 months Your expenses Tuition/fees $21,461* $21,461 Books and supplies $1,758 $??? Housing (rent and utilities) $11,236 $??? Computer $2,136 $??? Personal $3,209 $??? Transportation $2,151 $??? Total $41,951 $??? *includes cost of Plan A health insurance plan ($1,428)

13 ESTIMATED COST OF ATTENDANCE Tuition* 51% $21,461 (fixed) Books & Supplies Housing Computer 49% = $20,490 Personal/miscellaneous* Transportation $1,758 (discretionary) $11,236 (discretionary) $2,136 (discretionary) $3,209 (discretionary) $2,151 (discretionary) Total $41,951 *includes cost of Plan A health insurance plan ($1,428) *Typically, individuals report spending 20% LESS when using cash only or mostly cash. source: bankrate.com

14 AVERAGE DISCRETIONARY EXPENSES (4 YEARS) $81,960 What part of this can you save? 20% = $16,392

15 WHAT 20% REALLY COSTs/SAVEs YOU $16,392 X 6.8% (Stafford) OVER 14 YEARS = *$6,245 in interest *$22,637 total cost *approximate source: bankrate.com

16 UNM SOM Class of 2015 Average total student loan borrowing in med school Estimated accrued interest Estimated total debt when repaid Estimated monthly loan payment: 10 yrs Assumptions: HOW MUCH YOU BORROW WHAT IT CAN COST TO REPAY End of Grace 12/1/2015 Subsidized $8,500 Unsub $152,964 TOTAL $161,464 N.A 10 Year (Standard) Repayment N.A. $61,511 (interest) N.A. $222,975 N.A. $1, Year (Graduated) Repayment N.A. $174,740 (interest) (fixed) $202,703 (interest) (graduated) $336,204 (fixed) $364,167 (graduated) $1,121 (fixed) $915 (graduated) Subsidized Federal Stafford Loan (FSSL) = $8,500 (FOR 1 MORE YEAR) Unsubsidized Federal Stafford Loan (FUSL) = $152,964

17 INTERACTIVE BUDGET WORKSHEET Household (monthly) Income Income 1 (after taxes) Other income/gifts, etc. TOTAL MONTHLY INCOME $0 Household (monthly) Income Income 2 (after taxes) Other income/gifts, etc. TOTAL MONTHLY INCOME $0 Total Financial Aid Financial Aid MINUS Tuition & Fees Total REFUND $0 Total MONTHLY Financial Aid $0 MONTHLY INCOME & FIN. AID $0

18 INTERACTIVE BUDGET WORKSHEET HOUSING Cost # days Weekly MONTHLY Mortgage or rent XXX XXX XXX Phone XXX XXX XXX Electricity XXX XXX XXX Gas XXX XXX XXX Water and sewer XXX XXX XXX Cable XXX XXX XXX Internet XXX XXX XXX Waste removal/garbage XXX XXX XXX Subtotals XXX XXX XXX $0

19 INTERACTIVE BUDGET WORKSHEET TOTAL DAILY COST $0 TOTAL WEEKLY COST $0 TOTAL MONTHLY $0 Combined Incomes & Financial Aid TOTAL: $0 Combined Expenses TOTAL: $0 SURPLUS or DEFICIT: $0

20 BORROW THE MINIMUM TRY TO BORROW LESS THAN WHAT YOUR AWARD LETTER INDICATES YOU ARE ELIGIBLE FOR every dollar you don t borrow, NOW, will save you 3-4 times over the life of repaying your loans. estimate your actual in-school budget to determine how much you (really) need to borrow estimate how far your future paycheck will go to determine if you can afford your planned borrowing make adjustments, now, to your lifestyle so you can afford a different lifestyle, later

21 WHAT S NEXT? THIS is the time to focus on your financial HEALTH/WEALTH by minimizing educational debt wealth is a marathon (Dave Ramsey) lifestyle = live moderately, now.. try to live on less than (standard) student budget try to live a cash only life FOCUS on your financial goals

22 UNDERSTAND YOUR LOANS be able to identify all the partners in your loan process don t throw anything away that you receive from DOE, servicers, etc. know the terms and conditions of loans and understand that they can change have a sense of your future monthly loan payments

23 FEDERAL (DIRECT) STUDENT LOAN REPAYMENT PLANS Standard (Fixed) Repayment Graduated Repayment Extended Repayment Income-Contingent Repayment (ICR) Income-Based Repayment (IBR)

24 PRIVATE LOANS exhaust federal student loans first consider borrower protections on federal student loans research potential lenders These are not able to be consolidated!! borrow minimum amount possible

25 MANAGING YOUR LOANS RESPONSIBLY don t ignore mail from your lender/servicer promptly report changes in address, etc., to your lender/servicer understand terms and conditions of your loans meet all other borrower responsibilities request deferments/forbearance (only as needed) repay all you borrow keep accurate, well-organized records

26 KEEP ACCURATE RECORDS (Create A Master Listing of Your Loans) National Student Loan Data System (NSLDS) You can access NSLDS with your SSN, first 2 letters of your last name, birth date and Dept. of Education PIN # AAMC s MEDLOANS Organizer & Calculator records to retain: applications promissory notes disclosure statements correspondence/contact log

27 WHEN YOU OVERSPEND probably rely on credit increases your long-term debt risks your future ability to borrow reduces the chances of achieving your goals lose financial flexibility jeopardizes your future financial opportunities

28 YOUR CREDIT REPORT HISTORICAL summary of financial payment activity: ANY contractual financial arrangement!! including: current balances amount of available credit bankruptcies, liens, any judgments, etc. hard inquiries about credit public record, collection items, liens, bankruptcies, etc. CREDIT REPORT translates to your

29 (FICO) CREDIT SCORE? Fair Isaac Corporation specializes in predictive analytics multi-variate, multi-equation model which calculates a number based on your personal credit BEHAVIOR Credit GRADE how well you handle money!! indicates the likelihood someone will repay a loan (and/or handles other people s money) FICO score is calculated BASED ON PAYMENT INFORMATION ON YOUR CREDIT REPORT real-time Dave Ramsey = measures your ability to go into debt!

30 CREDIT SCORE IMPACT will affect whether or not you are qualified to receive a Grad- Plus and/or alternative loan will affect the interest rate you receive on private student loans if affecting the cost of borrowing isn t bad enough.. it affects employment opportunities!! it affects the cost of insurance!! it can/will affect licensure ( neglect of financial responsibilities )

31 HELPFUL WEBSITES MEDLOANS Organizer & Calculator (free) (for a fee) (in cyber-space)

32 THANK YOU!! Mary B. W. Fenton, M.A. Director of Student Financial Aid Services The University of New Mexico Health Sciences Center HSSB mbfenton@salud.unm.edu