Introduction to

Personal Finance
These modules are designed to give you a brief overview on how to
navigate the confusing world of finance, as well as give you some tips on
how to best manage your finances.

Why is Personal Finance Important?

Take a look at these startling statistics:
The average American carried $5,589 in credit card debt at the end of 2021
(Experian, 2022)
56% of Americans can’t cover a $1,000 emergency expense with savings (CNBC,
January 2021)
58% of Americans are living paycheck to paycheck after inflation spike (CNBC,
June 2022)

How to Use These Modules

These modules:
1. Are basic intentionally. Research the areas
you feel less confident in.
2. As a customizable guide. There is not a one
size fits all method to personal finance. Use
the information provided, research, and take
HELPFUL HINT action on what is best for you.
Look for these symbols 3. Are designed for encouragement. Use the
throughout. They give
helpful information information to take control of your financial
that is often health and protect your future.
overlooked!

Topics Covered
Income & Expenses
Budgeting
Bank Accounts
Credit Cards
Retirement Planning
Mortgages
Student Loans
Federal Income Taxation
Insurance

Key Terms
Income & Expenses Retirement Planning
Income Compound interest
Disposable Income Traditional IRA
Expense Roth IRA
Need 401 (k)
Want Tax-deferred growth
Withholdings Tax-free growth
Contribution limits
Budgeting Growth strategies
50/30/20 Budgeting
Envelope System Mortgages
Pay Yourself First Mortgage
Zero-Based Budgeting Collateral
Principal
Bank Accounts Interest
Bank Fixed rate mortgage
Credit Union Variable rate mortgage
Checking Account Preapproval
Savings Account Appraisal
Interest Rate Downpayment
Deposit
Withdrawal Student Loans
FDIC Insurance Direct Subsidized
Debit cards Direct Unsubsidized
Direct PLUS
Credit Cards FAFSA
Credit Limit Private Student Loan
Annual Percentage Rate Repayment period
(APR)
Monthly Statements
Minimum Payment Federal & State Tax Basics
Credit Scores Gross income
Creditworthiness Adjusted gross income
Taxable Income
Insurance Tax Rates
Auto insurance Tax Liability Refund
Health insurance Deduction
Homeowner's insurance Tax Credit
Premium
Deductible
Claim
 Income & Expenses
This module will explain the key concepts related to income and expenses.

Income
Income is the money earned by an
individual from any given source.

Gross income is your total pay

before taxes and fees are taken out.

Disposable income is the money

you earn after taxes and fees, also
called after-tax income. HELPFUL HINT
Try not to rely on a
single source of
Income can be earned from: income! Having
multiple sources of
Hourly wages/salary income can improve
Bonuses your financial stability
Investment dividends/distributions and overall wealth.
Rental income
Profit-sharing
Side businesses

Remember, your "take home" pay from most jobs will be different than your gross pay.
Governments typically WITHHOLD (or take out) federal/state income tax, Social Security and
Medicare taxes, while companies can withhold various amounts for retirement, benefits, and
other items.

Expenses
An expense is anything you
spend money on.

Expenses can be categorized into

needs and wants. Needs are basic
things required to live. Wants,
however, are not necessary to live,
but provide extra comfort and
HELPFUL HINT
enjoyment.
Although something
may be considered a Examples of Needs
want, it does not mean
it is not important. Rent / Mortgage
Wants play an Food
important role in your Transportation / Gasoline
quality of life. Utilities
Insurance
Phone/Internet
Needs can and have changed over the
years. Previously, phones and the internet Examples of Wants
would have been considered a luxury. Now, Gaming consoles
they are widely considered necessities. Luxury furniture
Latest model phones
Dining out regularly
New car

Key Terms to Remember

Gross Income Expenses
Disposable Income Needs
Withholdings Wants

Extra Resources to Explore

Utilize these resources to gain further insight on income & expenses!
Personal Income: https://www.investopedia.com/terms/p/personalincome.asp
Increase Income: https://www.indeed.com/career-advice/starting-new-job/how-increase-income

Benefits to Multiple Income Sources: https://www.forbes.com/sites/theyec/2020/02/25/five-benefits-of-

having-multiple-sources-of-income-as-an-entrepreneur/?sh=1c3360bd43bb
Needs vs. Wants: https://www.thebalance.com/how-to-separate-wants-and-needs-453592
 Example
This is John.

John is a 22 year old IT analyst who

just graduated from a four year
college and landed his first full-time
job at Advanced Technologies.

John accepted this position with the following

information:
$50,000 per year base salary before taxes
Retirement, Insurance packages included
Paid time off and sick leave included

john's salary will be taxed, and he will let his

employer take out money for retirement and
insurance (more on that later).

John has ordinary expenses like

any other person. He has to pay
rent, insurance, phone bills,
grocery, car payments, internet,
and utilities to survive daily life.

He also has a few hobbies. His

most expensive is golfing and his
club membership. He also has a
gym membership and a streaming
platform subscription.
 Budgeting
This module will explore the importance & key concepts of budgeting.

Why Budgeting is Important

A budget is a financial tool used to
track income and expenses to better
manage your finances.
Remember, budgeting uses your after-
tax income. This can be anywhere from
60-70% of your gross income! DID YOU KNOW?
You should keep 3-6 months of
Many people view budgets as a scary, rigid tool with no
emergency expenses in "liquid"
flexibility. It doesn't have to be this way! If you fail to follow a
cash, meaning easily accessible
budget for a month, try again the next month, and the next!
in a savings account!

50/30/20 Budgeting The Envelope System

Categorizes spending into 3 buckets Use "envelopes" to separate spending into
50% of after-tax income goes to needs categories (rent, groceries, insurance, etc.)
30% of after-tax income goes to wants Cannot spend more than the allotted
20% of after-tax income goes to debt amount
repayment, savings and investments Rigid by nature
Is a type of pay yourself first budgeting, Cash is traditional; digital apps exist
just with set amounts to allocate that mimic the paper system
Be sure to use AFTER tax income

Pay Yourself First Zero-Based Budgeting

YOU decide how much to allocate to Utilize every dollar towards an expense
savings/investments, the rest is flexible Every dollar has a purpose
Start with savings/investments Spending proportions are flexible
Then go to need spending Zero dollars left at the end of each
Lastly go to want spending month

Which budget should I choose?

Ask yourself the following:
1. Am I disciplined enough to follow flexible budgets, or do I need
a rigid system?
2. How much effort am I willing to give to track spending?
3. Do I prefer tangible cash, or online/mobile budgeting?
4. Am I willing to pay to have a financial coach or planner help me
through the budgeting process?

These questions should be balanced and considered against the

variety of budget options available. Make sure you value your
personal and emotional health as well as your financial health.

You may even need to try more than one budget to see what bests
fits your lifestyle. Trying one is better than trying none!

Problems to Overcome when Budgeting

1. The All-or-Nothing Mentality: the thought of tracking EVERY
penny for months is unrealistic. Get a good idea of where your
money is going, and adjust your spending habits is the big
picture
2. Labor-Intensive Tracking: Paper receipts and physical cash is
no longer the norm; apps and other programs are available to
make modern budgeting easier
3. Paying in Cash is Better: People who spend in cash (including
debit cards), not credit, usually spend less. Keep this in mind.
4. Keep Disciplined but Flexible: Unexpected expenses will
always occur. Budget some in, but always remember that life
changes, so can your budget!

Options for "Extra" Money

If you find that you have "extra" money left over after spending it within your
budget, consider investing it, saving it, spending it, or giving it to charity!

Extra Resources for Budgeting

50/30/20 Budgeting: https://www.nerdwallet.com/article/finance/nerdwallet-budget-calculator
Envelope Budgeting: https://www.investopedia.com/envelope-budgeting-system-5208026
Pay Yourself First: https://www.thebalance.com/the-pay-yourself-first-budgeting-method-453955
Zero-Based Budget: https://www.ramseysolutions.com/budgeting/how-to-make-a-zero-based-budget
General advice on how to choose a budget and best practices:
https://www.nerdwallet.com/article/finance/how-to-choose-the-right-budget-system
https://consumer.gov/managing-your-money/making-budget#what-to-know
https://www.nerdwallet.com/article/finance/budgeting-tips
 Example
John has decided to get control of his
finances using 50/30/20 budgeting. His net
income, after taxes (just Federal), is $42,393.
Monthly income is then $3,532.75

The Needs, 50%: $1766.38 Running Total

Rent: $900 for 1 bed, 1 $900
bath
Utilities: $250 for electric, $1150
water, sewer, trash
Food: $300 groceries $1450
Car Payment: $150 (used, $1600
old Honda civic)
Car Insurance: $60 (takes $1660
advantage of discounts)
Phone/Internet: $100 $1760, at budget
(uses a package deal)
The Wants, 30%: $1059.83 Running Total
Golfing: $400 (club fees $400
and golfing supplies)
Gym Membership: $30 $430
(24 hour gym)
Streaming Services: $60 $490
(3 different platforms,
substitutes cable)
Fast Food: $100 $590
Video Games/computer
parts: $200 $790, under budget

The Finance, 20%: $706.55 Running Total

Retirement Contribution:
$300 $300
Emergency Savings: $200 $500
Student Loan Debt: $206.55 $706.55, at budget

John has roughly $276.21 "extra" in his budget.

What should he do?
1. He could pay extra on his student loans or
car, whichever is higher interest
2. He could spend it on wants, or save it!
 Bank Accounts
This module explains the basics of banks and bank accounts.

What is a bank? What is a credit union?

A bank is a for-profit financial A credit union is a non-profit financial
institution that accepts deposits, institution that is founded to serve
makes loans, and handles other its members.
financial transactions. Credit unions offer many of the
same services and products as
banks, including the accounts
mentioned below!

HELPFUL HINT
If you are unsure of
which institution to
choose, research!
Check online reviews,
There are thousands of banks in set your priorities, and
the U.S.! Many large banks offer inquire with the
online services, as do many institution itself.
regional and local banks!

Checking Accounts
A checking account is a flexible
account that is common to nearly all
financial institutions.

Checking Accounts:
Allow you to make deposits (add
money to) your account
Checking Accounts
Allow you to make withdrawals utilize DEBIT cards,
(take money out of) your account not to be confused
Spend money using debit cards, with credit cards.
electronic transfers or paper
checks
Are great for daily/weekly spending

Checking accounts are designed for ease of access to the money inside. There are
usually no transaction limits, and many institutions offer free accounts!

Savings Accounts
A savings account is a less flexible
account that is designed to hold money
that you don't plan to spend right
away.

Savings Accounts:
Typically have transaction limits
HELPFUL HINT Generate more interest than
Utilize BOTH checking and
savings accounts for their checking accounts
intended purposes! Using the Are great for emergency savings
same financial intuition allows and "nest eggs" that can still be
for easy transfer of money accessed relatively easily
between accounts, too.

How do I open a checking or savings account?

There is a lot to consider when choosing an institution. Researching the following wil
be extremely helpful!
Research: Be ready to provide:
Interest rates Name
Limited transactions number Address
Fees Phone Number
Debit card availabilty/service DOB
Customer service ratings Social Security Number (or other
Reputation identification depending on the
Minimum balance requirements situation)
Physical or online Email
FDIC Insurance Government Issued ID

What is FDIC Insurance? If an institution is FDIC insured, the Federal Deposit Insurance
Corporation will protect the depositor against loss of deposits, typically up to $250,000.

Extra Resources for Bank Accounts

Consumer Financial Protection Bureau: https://www.consumerfinance.gov/consumer-tools/bank-
accounts/
What if I don't have a SSN? https://www.consumerfinance.gov/ask-cfpb/can-i-get-a-checking-account-
without-a-social-security-number-en-
929/#:~:text=You%20are%20not%20required%20to,%2C%20address%2C%20and%20ID%20number.
Guide to checking accounts: https://www.investopedia.com/personal-finance/complete-guide-checking-
accounts/
Guide to savings accounts: https://www.forbes.com/advisor/banking/savings/what-is-a-savings-account/
How to choose a financial institution: https://www.investopedia.com/how-to-choose-a-bank-5183999
 Example
Since John graduated and joined Advanced
Technologies, he decided to switch banks for
a more convenient experience. His new bank is
Professionals Regional Bank (fictional). Here
are a few details of his accounts.

Basic Checking
FDIC Insured to $250,000
Earns 0.05% APY up to $100,000 balance,
then 0.01% on anything over
No fees if minimum balance of $300 is met
No transaction limits
Debit card provided (VISA), $5 replacement
fee, waived if due to theft
Checks: $20 for pack of 100
Can utilize ACH and other wire transfers

Basic Savings
FDIC Insured to $250,000
Earns 0.5% APY up to $50,000 balance,
then 0.01% on anything over
No fees if minimum balance of $1000 is
met
8 limited transactions per month
(withdrawals/deposits/transfers)
Can utilize ACH and other wire transfers

John has directed his employer to deposit his

entire paycheck ($3532.75) into his checking
account. John will then disperse the money,
from his budget, into savings and retirement
accounts.

Each month, John will transfer at least $200

into his savings account.
 Credit Cards
This module will explain the basics of a credit card, credit scores, and best
practices when using credit cards.

What is a credit card?

A credit card is a card that allows you
to access a line of credit offered to
you by a bank or financial institution.
Credit Cards
Have a credit limit (the amount you
can spend using that card at any given
time) HELPFUL HINT
Have the card issuer (bank, etc.) cover Credit cards are way different
the transaction total each time it is used than debit cards! While debit
Send you a monthly statement, on cards allow you to access your
own money in a checking
which is your total balance, minimum account, credit cards use other
payment due and due date people's money to cover your
Charge interest for purchases when purchase initially, which you
you don't pay in full each month. This then must repay.
interest is called APR, or the Annual
Percentage Rate
Visa, Mastercard, Discover, American Express, and many other processing companies
handle financial transactions for credit cards. Merchants (stores) are usually charged fees
for the use of cards, which is why many businesses have credit card usage fees.

Credit Card Best Practices

1. Always pay in full each month to avoid interest charges
2. At minimum, pay the minimum balance to avoid extra charges to your account
3. Avoid using more than 30% of your credit limit (this can hurt your credit score)
4. Avoid opening too many lines of credit in a short amount of time

Types of Credit Cards

Many credit cards give rewards, or something for each purchase.
Cash Back: usually either
Flat rate on all purchases (2% everywhere)
Tiered rates (grocery stores get 5% whereas gas stations get 2%)
Rotating (this month, grocery stores get a bonus, next month, auto part stores get
a bonus)
Travel cards: Typically give you "points" or miles that can be used to travel with
airlines or hotels, often specific airlines and hotels
Student Credit Cards
Designed for students with little or no credit, generally with zero fees and no credit
history requirement
Low-interest Cards
Designed for those who can't pay the full balance each month. However, they charge
less interest for longer periods of time

Credit Scores
A person's credit score is a number between 300 and 850 that explains someone's
creditworthiness. The higher the score, the more likely it is than lenders will issue a
loan or credit.

Credit Scores are usually dependent on the following:

Payment history (10% weight)
Paying on time is preferred
Total amount owed (30%)
Credit utilization: total % of available credit being used
Length of credit history (15%)
Longer credit history = less risky
Types of credit open (10%) HELPFUL HINT
Car loans, mortgage, credit cards, etc. ·Excellent: 800 to 850
New credit (10%) ·Very Good: 740 to 799
·Good: 670 to 739
Number of new accounts applied for, called inquires ·Fair: 580 to 669
(more inquires usually hurts your score) ·Poor: 300 to 579
Other factors (dependent on the company)
Improve your credit by doing the following:
·Pay bills on time
·Use less than 30% of your limit on any given credit card (lower is better)
·Pay down high balances before the billing cycle ends
·Ask for higher credit limits (lowers your credit utilization)
·Add to your credit mix
·Limit the number of new accounts applied for (reduce inquiries)
·Keep old accounts open, even if no longer used

Extra Resources
Consumer Financial Protection Bureau on credit cards and credit reports:
https://www.consumerfinance.gov/consumer-tools/credit-cards/
https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/
Credit Card Debt Resources https://consumer.ftc.gov/articles/settling-credit-card-debt
Common Credit Card Terms https://www.cnbc.com/select/common-credit-card-terms/
Types of Credit Cards https://www.experian.com/blogs/ask-experian/what-are-the-different-types-of-
credit-cards/
Fraud: The Case for Credit Cards and which card to use: https://money.usnews.com/credit-
cards/articles/credit-cards-vs-debit-cards-what-should-i-use
 Example
John avoided credit cards throughout college.
Now, he is ready to look at some offerings
from a major credit card provider and his
bank (all fictional).
Option 1: Option 2: Credit Source
Professionals Regional Silver Cash Back Card
Bank Starter Card
APR: 17.5% APR: 16%

Annual Fees: $75 Annual Fees: $100

Credit Limit: $1500 Credit Limit: $2500

Rewards: 1% cash back Rewards: 2% cash back

on all purchases on gas and restaurants,
1% on all other
purchases
Late Penalties: $0 on Late Penalties: Extra
missed payments for 1 2% added to next
year statement plus $20 fee

Special Features: Cash Special Features: Earn

back is matched for the triple cash back in the
first year, free fraud first year if paid on time,
protection, 24 hour card free fraud protection, 24
replacement, more hour card replacement,
lenient on approval for online card payment
low/no credit applicants services available

John has a tough decision on which card to

choose for daily purchases. He is concerned
about missing a payment, and was only going to
use the card for small purchases to get cash
back and build credit.

He chooses to stick with Professionals

Regional Bank and get their starter card.
Retirement Planning
This module will explain the power of compound interest, the most
common retirement accounts, and growth strategies to fit your needs.

The Power of Compound Interest

While simple interest is earned at the same rate over
time in a savings account, retirement accounts earn
compound interest, which allows you to earn interest
on the interest earned over the life of the investment.

Example: You invest $6,500 for 10 years in a savings

account that pays 6% simple interest. After the tenth
year, you would have $10,400 (earned interest of $3,900 HELPFUL HINT
($6,500*6%*10 years) plus the principal of $6,500). Most financial experts
However, if the interest was compounded, you would suggest that you save
have $11,640.51, which is a difference of $1,240.51. between one and two
This may not seem like much, but because the future million dollars for
value depends on the rate and the time factors, it will retirement, due to rising
be a game changer when planning for retirement. costs of living and
increasing life expectancy.

Three Common Retirement Accounts

Traditional IRA
Contributions are tax deductible
Tax-deferred growth
Taxed as ordinary income at time of withdrawal based on current tax bracket
10% penalty for funds withdrawn before age 59 ¹/²
Contributions limited to $6,000/year, but those age 50+ can contribute up to
$7,000/year
Must start removing funds at age 72

Roth IRA
Contributions are not tax deductible
Tax-free growth
Withdrawals during retirement are tax-free
Tax penalty based on tax bracket on gains earned if withdrawn before age 59 ¹/²
Contributions limited to $6,000/year, but those age 50+ can contribute up to
$7,000/year
Contributions are not allowed if income exceeds $137,000 as a single taxpayer or
$203,000 as a married taxpayer.

401(k)
Offered as a benefit through employer
Contributions are tax deductible
Taxed-deferred growth
Taxed as ordinary income at time of withdrawal based on current tax bracket
10% penalty for funds withdrawn before age 59 ¹/²
Contributions limited to $20,500/year, but those age 50+ can contribute up to
$26,000/year
Employers may choose to match employee contributions. If so, it is highly
recommended that employees max out their employer's matching policy.
According to 2019 data from the Vanguard investment firm, the average employee
contribution is 7%, while the average employer contribution is 3.7%.

Growth Strategies
Aggressive
High risk with potentially large returns
Recommended for young investors

Moderate
Medium risk with average returns
Recommended for middle-aged investors

Conservative
Low risk with potentially lower returns
Recommended for elderly investors

If you invest $1,000 at age 20,

HELPFUL HINT
expect to retire at age 67, and
Set up automatic
assume a 10% growth rate, you
transfers from your
would have approximately one
checking account to
million dollars upon retirement.
your retirement
account so you don't
miss out on growing
your nest egg.
 Example
As mentioned in the Budgeting portion of this
handout, John plans to contribute $300 a month
to retirement. Which route should he go?
John's Employer, Advanced Technologies
Does not offer matching contributions. It
does, however, offer a package where the
employer pays fees associated with
Traditional and Roth IRAs.
If John's employer offered a match, he
would instead choose a 401(k)
Basic Information for John
John will retire at 65, he is currently 22
43 year investment period
Assume $300 contribution never
increases/decreases monthly
Chooses a moderate investing strategy
(about a 4.92% rate of return)
John stays in the same tax bracket now and
at retirement

ROTH IRA
Total of $954,435 saved for retirement
Using the 4% rule of withdrawal:
First year of retirement: $38,177.40
Tax free
Traditional IRA
Total of $886,239 saved for retirement
Using the 4% rule of withdrawal:
First year of retirement: $35,449.56
Minus 22% Federal Taxes: leaves
$27,650.66 (John has no state income
tax)
 Mortgages
This module will explain the four parts of a mortgage, common types of
mortgages, the preapproval process, and extra advice on mortgage strategy.

What is a mortgage?
A mortgage is a loan acquired from a lender, typically a
bank, that is used to fund the purchase of a property.
It is an agreement between the homebuyer and the
lender to pay back the amount borrowed plus interest.

The Four Parts of a Mortgage

1) Collateral
The financial institution will require your home to be offered as collateral in case
you default on the loan. This protects the lender and holds the homebuyer
accountable.

2) Principal
Initially, this is the amount borrowed from the financial institution and
represents the remaining balance throughout the life of the loan.

3) Interest
Based on the interest rate and the principal amount, the interest represents the
cost of borrowing money from the lender.

4) Taxes & Insurance

Property taxes and home insurance will be included in the monthly mortgage
payment, which will accumulate in an escrow account until the time comes for
the lender to transfer those funds to pay the property taxes and insurance
premiums due.

Common Types of Mortgages

Initially, monthly
mortgage payments 30 or 15 year Fixed-Rate Mortgage:
will apply largely to Same interest rate over the life of the loan
the interest; Predictable monthly payments
however, over the
life of the loan,
payments will
30 year Adjustable-Rate Mortgage (ARM):
increasingly apply to Same interest rate to start out (usually 5-10 years)
the principal, thus After the teaser period, the interest rate will vary
increasing your depending on current economic conditions.
equity in the home. Subject to changes in inflation, which could lead to
drastic increases in mortgage payments.

HELPFUL HINT
Approval Process Save time by
getting
Mortgage Preapproval preapproved prior
The lender will review the to home shopping.
prospective homebuyer's income, This will ensure
that you are
assets, and credit to determine shopping within
the amount of money the your budget.
homebuyer qualifies to borrow.
The lender will issue a mortgage
preapproval letter to the Final Mortgage Approval
homebuyer. An appraisal to check the
The homebuyer can attach the value of the home
preapproval letter to their offer on An inspection to make sure
a house. This will notify the seller the home is safe to occupy
of their ability to go through with A title company will verify
the sale. the title of the home

Mortgage Tips & Tricks

Putting down at least 20% of the purchase
price will result in a more competitive rate
and you will avoid paying private mortgage
HELPFUL HINT insurance (PMI), which is a monthly fee to
In today's seller's protect the lender against defaults on loans
market real estate arranged with a small down payment.
market, getting
preapproved prior to Presenting yourself to the lender as a
submitting an offer on trustworthy borrower (i.e., strong credit
a house has never score, stable income, and minimal debt) that
been more important will repay the amount borrowed may allow
since sellers may not you to obtain a lower rate, since your
consider offers without personal circumstance is considered when
a preapproval letter. determining the interest rate on a mortgage.
 Example
Fast forward 10 years, John is tired of
apartment living. He has saved around $30,000
for a house down payment and closing costs.

What can John afford?

Using this calculator:
https://www.wellsfargo.com/mortgage/home-
affordability-calculator/
At $50,000 per year salary, $350 in debt
per month, $30,000 saved for a down
payment
At 20% down, John could afford a house
worth $149,320 based in Fort Wayne, IN
His monthly payment would be $900, the
same as his rent!

Should John continue renting, or buy a house?

It depends!
Buying a house builds equity over time. It also
comes with greater maintenance expenses
and responsibilities. It is also generally more
long-term in nature than renting.
Renting allows people more flexibility and less
worry regarding maintenance and
responsibilities.
John could get a 3 bed 2 bath home that
needs a little work for $900 per month, or a 1
bed 1 bath apartment that is ready to go for
$900 per month
 Student Loans
This module will explain important information about student loans, such
as the differences between federal student loans and private student loans,
how to get a student loan, and crucial pieces of information to remember.

What is a student loan?

A student loan represents an amount borrowed from
either the federal government or a private lender to
fund the completion of higher education requirements.

Types of Federal Student Loans

Financial Need
Federal Based? Amount you
Student Loan: Offered to: can borrow:
Builds interest
while in school?

Direct Yes $5,500 to

Subsidized Loan Undergraduate students $12,500 per year
No if undergrad
$5,500 to
Direct No $12,500 per year
Unsubsidized Undergraduate or graduate if undergrad, up
Loan students Yes to $20,500 per
year if grad
student
Remainder of
Graduate students and parents of No, but requires college costs if
Direct PLUS dependent, undergraduate a credit audit grad student or
Loan students parent of
Yes dependent
undergrad

A Direct Consolidation Loan will incorporate all of your federal student loans into
one, single loan from one lender, making it easier to monitor and pay your debt.
Also, know that the loan fee for undergraduate federal student loans is 1.057%.

Benefits of a Federal Student Loan

Fixed interest rate that is lower than other loans
Repayment period begins 6 months after leaving college
Flexible options for repayment
May be eligible for loan forgiveness if working in a certain field
Government will pay interest on select loans if you have financial need

Keep in mind that you can only use the

loaned funds for expenses related to
education, which include, but is not
limited to, off-campus housing,
groceries, and transportation.

To obtain a federal student loan:

HELPFUL HINT
Complete the FAFSA To take advantage
Work with your financial aid office to apply any aid of lower interest
rates, maximize
Verify your understanding of the loan's terms and your federal
conditions through entrance counseling student loan aid
prior to taking out
Sign the promissory note private loans.

Private Student Loans

Issued by a private organization or a bank
Higher interest rates compared to federal loans
May have to start repayment process while attending
school
Most build interest while enrolled in school
May contain annual caps, which restrict the aid available
HELPFUL HINT
Only borrow money Interest rate may vary depending on your credit history
that you need to as well as your cosigner's credit history
avoid paying interest
on funds that were
not necessary to Though federal student loans offer a grace period
borrow. Remember, of up to 9 missed monthly payments, private
you can always student loans may only allow up to 1 missed
borrow more later as
needed. monthly payment before defaulting on the loan,
which could wreak havoc on your credit history.
 Example
John graduated recently with a bachelor's
degree in IT. Unfortunately, due to income limits,
John did not qualify for any federal student
loans; therefore, he got private ones. Here is
some information regarding financing his
education:
John attended a four year, in-state college.
Total loan amount: $30,000
Fixed interest rate: 4.25%
Interest builds during school
Interest payments required during school;
principal payments required starting 6
months after graduation
1 missed payment grace period; 2 missed
payments incurs fees & late penalties
15 year payback period

John's Estimated Monthly Payment: $226,

according to lender Sallie Mae

Here is what helped John with student loans:

John's total cost of attending school was
$45,000. He got $15,000 covered with
scholarships!
John plans to use the "extra" $276 per month
(in his budget) to meet the $226 monthly
payment required by his lender. He currently
only budgeted $206.55!
He paid interest during school. This means he
has less to pay overall through the life of the
loan.
 Federal Income Taxation
This module will explain the basic tax formula, elucidating topics such as gross income,
deductions, taxable income, tax credits, and prepayments.

Basic Tax Formula

Gross Income
- Deductions for Adjusted Gross Income (AGI)

Adjusted Gross Income (AGI)

- Greater of Standard Deduction or Itemized Deductions

- Deduction for Qualified Business Income

Taxable Income

* Tax Rates

Income Tax Liability

- Tax Credits
- Prepayments

Net Tax Due (or Refund)

Example: You are a single taxpayer

with $50,000 in salary, $3,000 of Gross Income
ordinary dividend income, and $1,000
of child support. How much revenue Includes all revenue, such as wages, interest,
will be included in your gross capital gains from selling stock, and business
income? income, unless a certain tax law states otherwise.
Includes long-term capital gains and qualified
$50,000 + $3,000 = $53,000
dividends, even though these items are taxed at
Assuming you take the standard preferential tax rates.
deduction since you have no other Tax-exempt interest, child support, welfare, and
deductions, what is your tax liability? gifts are examples of items excluded from gross
income.
53,000 - 12,950 = 40,050 = Taxable Gross income is not the same as taxable income;
Income
gross income will be greater than taxable income.
Tax Liability = $1,027.50 + ($40,050 - Taxable income is used to compute your tax
$10,225) * 12% = $4,600.50 due/refund, as depicted by the tax rate chart above.

Deductions/Tax Credits/Prepayments
Deduction - Dollar-for-dollar reduction of taxable income. Example: You are a MFJ
Only allowed if a certain tax law approves the deduction. taxpayer with $100,000 in
Two classifications of deductions — for AGI or from AGI. salary, $5,000 of ordinary
dividend income, and no
For AGI Deductions: qualified business income.
Business expenses (if owner and if expenses are You paid $2,000 in student
directly related to business) loan interest, $8,000 in
Student loan interest (up to $2,500) state income taxes, $4,000
½ self-employment taxes in mortgage interest, and
$10,000 in charitable
From AGI Deductions: contributions. You and
Standardized Deduction your partner also have 2
Every taxpayer is entitled to the standard qualifying children under
deduction, which is as follows for 2022: age 17 and $4,000 in
$12,950 for single taxpayers withholdings from
$25,900 for married filing joint (MFJ) and employee wages. What is
qualified widow(er) taxpayers your tax due?
$19,400 for head of household (HH) taxpayers
Additional standard deduction for age (+65) and/or Gross income = $105,000
blindness - For AGI deductions
$1,750 for single or HH taxpayers ($2,000)
$1,400 for MFJ or qualifying widow(er) taxpayers AGI = $103,000
Itemized Deductions include, but are not limited to: - MFJ standard deduction
Medical expenses (in excess of 7.5% of AGI) ($25,900)
State or local income taxes (limited to $10,000 for Taxable income = $77,100
MFJ)
Mortgage interest and charitable contributions Tax Liability = $2,055 +
Gambling losses (to extent of winnings) ($77,100 - $20,550) *
Deduction for Qualified Business Income 12% = $8,841
Applies to taxpayers with qualifying business - Child tax credit ($4,000)
income from most flow-through businesses - Prepayments ($4,000)
Tax Due = $841
Tax Credits - Dollar-for-dollar reduction of tax liability.
Tax credits include, but are not limited to:
Child Tax Credit (max. = $2,000/qualifying child, but
reduced by $50 for each $1,000 of AGI above $200,000 if
single or HH taxpayer, $400,000 if MFJ)
American Opportunity Tax Credit (max. =
$2,500/student)
Lifetime Learning Credit (max. = $2,000/tax return)
Earned Income Credit helps low-income workers offset HELPFUL HINT
employment taxes Tax credits are more
Business Tax Credit encourages the hiring of specific helpful than tax
people (i.e., previously unemployed) and research and deductions in reducing
development your tax liability because
Foreign Tax Credit reduces the tax liability for US tax credits reduce your
citizens taxed on worldwide income to avoid double tax liability dollar-for-
dollar, while tax
taxation
deductions only reduce
your tax liability by the
Prepayments - Dollar-for-dollar reduction of tax liability. rate your taxable income
Examples include withholdings, estimated tax is taxed at for each dollar
prepayments, and prior year overpayment of taxes applied in deductions.
to the current year's tax liability.
 Insurance
This module will explain the idea behind insurance as well as the most
common types of insurance, such as automobile insurance, health
insurance, and homeowners insurance.

Why do we have insurance?

Life is full of risks — something that we can never escape. For instance, no one
plans for a house fire, a car accident, or the diagnosis of a critical illness. These
risks, and the financial consequences attached, affect everyone and are simply
a part of life. Insurance attempts to mitigate those risks by collectively pooling
together the risks each person carries and spreading them out among
policyholders that pay cyclical premiums for their insurance policy. This way,
when an incident does occur, the insurer is able to tap into the funds
previously paid by the insured to cover the financial losses of a policyholder.
In addition, a deductible payment (amount varies) may be required by the
insured to claim funds for losses covered by the insurance provider.

Automobile Insurance
Required by law in every state except NH
Required extent of car insurance, and thus cost,
differs by state
Indiana requires at least PLPD (bodily injury There are a multitude of
factors that insurance
liability coverage and property damage liability companies use to determine
coverage) as part of the state-mandated car the cost of car insurance
premiums including, but not
insurance, protecting both parties in an accident limited to, infrastructure
National average cost of car insurance conditions, weather, traffic,
crime, minimum state
premiums is $1,682 annually coverage required, and the
The average cost of car insurance premiums in rate of insured drivers.
IN is $1,256 annually (sixth lowest in the nation)

Health Insurance
Most people are covered under an
employer-sponsored plan
May be purchased privately as well
HELPFUL HINT U.S. government offers healthcare to
When evaluating insurance policies,
choosing a higher deductible will lower the elderly (Medicare), low-income
your recurring premium payments. A (Medicaid), and the military
higher deductible may be better for
those on a tight budget who may not Adding supplemental insurance (at
be able to afford pricey premium additional cost), such as dental
payments. However, a lower premium
payment may lower your policy limit insurance, will increase your health
that will be assured by the insurance care coverage
company if you suffer a loss.

Your health care plan will most likely have a list of

exclusions and limits, so it is important to understand
the terms and conditions of your policy. For example,
you might only be able to receive a referral to a
specialist within your permanent state of residence.

Homeowners Insurance
Covers the house and its contents
from damage and theft, liability if
an injury occurs on the premises,
and moving expenses, if necessary.
Two different types of coverage If renting, you may want to
consider purchasing Renters
provided include "replacement Insurance, which covers your
cost" or "actual cash value". belongings from damage
and theft, liability if an
Replacement cost provides used injury occurs on the
goods to replace the lost items. premises, and moving
expenses, if necessary.
Actual cash value provides a Typically, the landlord pays
replacement up to the entire for the insurance of the
physical property, since it is
cost of the items. not in your possession.
 Example
Unfortunately, John hit a deer with his vehicle
while traveling on a major highway. John did the
following:

Immediately pulled over and turned on

hazard lights. He was not injured.
Contacted local authorities to file an accident
report and an officer en route
Took pictures of the accident, called roadside
assistance, and got his vehicle towed to the
nearest body shop

John paid $60 per month in car insurance and

he did not have full coverage. Instead, he only
had "PLPD" or bodily injury and property
damage. Therefore, hitting a deer is NOT
covered by insurance!
John had to pay $500 for towing
$3500 estimate for body shop repairs
John decides to total the car and instead get a
new one (the old Honda Civic was only worth
$4000, making it not worth the $3500 repair
bill in his opinion)

If John had full coverage, his costs may have

been the following:
Instead of $60 payment, a $100 monthly
payment
Towing is covered
$300 deductible, all other costs covered
Monthly premiums not increased due to no
fault

Important question from this example: Is the

extra $40 per month worth full coverage? You be
the judge! Each type of coverage has a purpose.
 Reference Page (APA 7)

Module 1
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Reinicke, C. (2022, January 20). 56% of Americans can't cover a $1,000 emergency expense with savings. CNBC. Retrieved September 17, 2022, from
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Dickler, J. (2022, June 27). 58% of Americans are living paycheck to paycheck after inflation spike - including 30% of those earning $250,000 or more.
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Module 2
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Module 4
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Module 5

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Sekar, A. (2022, April 11). 3 major types of credit cards. NerdWallet. Retrieved September 17, 2022, from https://www.nerdwallet.com/article/credit-
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Brock, T. (Ed.). (2022, August 1). Credit score: Definition, factors, and improving it. Investopedia. Retrieved September 17, 2022, from
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Module 6
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Epstein, L. (2022, May 17). How Are Dividends on IRAs Taxed? Investopedia. https://www.investopedia.com/articles/personal-finance/060915/how-are-
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Investment Calculator. (n.d.). Ramsey Solutions. https://www.ramseysolutions.com/retirement/investment-calculator

Merrill, T. (2022, April 8). Top 10 Retirement Investment Strategies. FortuneBuilders. https://www.fortunebuilders.com/retirement-investment-
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Module 7
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Module 8
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https://www.nerdwallet.com/article/loans/student-loans/6-things-to-know-about-student-loans-before-freshman-year

Lane, R. (2020, October 13). How Much Student Loan Fees Could Cost You. NerdWallet. https://www.nerdwallet.com/article/loans/student-
loans/student-loan-fees#:~:text=Origination%20fees%20are%20currently%201.057

Sartore, M. (2016, January 28). What To Know About Student Loans | Benefits & Importance of Student Loans. TheBestSchools.org.
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Stobierski, T. (2022, August 29). Everything You Need to Know About Paying Down Student Loans. Northwestern Mutual.
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What is a Direct PLUS loan? (2021, June 23). Consumer Financial Protection Bureau. https://www.consumerfinance.gov/ask-cfpb/what-is-a-direct-plus-
loan-en-553/#:~:text=Direct%20PLUS%20loans%20have%20a

Module 9
Spilker, B. (2022). McGraw-Hill’s Taxation of Individuals and Business Entities 2023 Edition. McGraw-Hill US Higher Ed USE.

Module 10
Araujo, M. (2022, May 3). How Insurance Works. The Balance. https://www.thebalancemoney.com/basics-to-help-you-understand-how-insurance-works-
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McMaken, L. (2019). 4 Types Of Insurance Everyone Needs. Investopedia. https://www.investopedia.com/financial-edge/0212/4-types-of-insurance-

everyone-needs.aspx

Megna, M. (2022, August 1). Average Car Insurance Rates By State [Updated]. Carinsurance.com. https://www.carinsurance.com/state-car-insurance-
rates

Minimum Car Insurance Requirements by State. (n.d.). The Balance. Retrieved October 12, 2022, from
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