This program will take about 10 minutes to complete.
NOTE: Financial education content for the program was taken from Cash Course, an interactive financial education program created by The National Endowment for Financial Education ® (NEFE ®) - an independent, nonprofit foundation committed to educating Americans on a broad range of financial topics and empowering them to make positive and sound decisions to reach their financial goals.
Question 1 of 8
Worth an estimated $2 billion dollars now, Donald Trump is living large. But at one time he was on the brink of bankruptcy with $900 million in personal debt.
Question: Everyone has to live within their means in order to stay out of debt and get what they want out of life. One way to do this is to create a personalized budget. What do experts suggest is the budget category you should spend the largest percentage of your income on?Food
Recommended Budgeting Categories & Percentages:
- Saving/Investing - 5-10%
- Housing - 20-30%
- Utilities - 4-7%
- Food - 15-20%
- Transportation - 6-20%
- Clothing - 2-4%
- Medical/Health - 2-8%
- Personal - 2-5%
- Recreation - 2-5%
- Debts - 15-20%
LESSON FOR YOUR LIFE: Creating a Spending Plan
Defining your personal budget can lend structure to your spending habits. It is a way of organizing your use of money by thinking in terms of spending categories and setting priorities. A budget helps you establish boundaries and helps you recognize spending limits before you exceed them.
Just as a blueprint guides the building of a house, a personal budget acts as a guidance system to steer you away from costly impulses and money-burning behaviors.
Creating a budget while in college can help you:
- Meet personal goals such as studying abroad
- Remain better prepared for emergencies
- Stay out of debt
- Keep accurate and up-to-date records
- Prepare to begin thinking about longer-term financial planning
Question 2 of 8
Tori Spelling admitted to once owing hundreds of thousands of dollars to credit card companies because of what she called “bad shopping habits.”
Question: We all indulge in bad shopping habits every once in a while. What do experts suggest is the best way to curb impulse buying?Think about unnecessary purchases at least a week before buying
Become a master coupon user
Only shop the sales
ANSWER: Think about unnecessary purchases at least a week before buying
LESSON FOR YOUR LIFE: Avoid Impulse Buying
Just because something is on sale, doesn’t mean it’s a good buy. And coupons sometimes aren’t worth it. Once you’re thinking about buying an item, ask three questions:
- Will you survive without it?
- Are other things more important?
- Will making this purchase set you back financially?
Question 3 of 8
According to Forbes.com, Britney has a net worth of over $100 million. This doesn’t mean that she knows how to save and spend it wisely, however. Court papers showed that Britney earns $737,000 each month, but doesn’t put any money into savings or education funds for her two sons.
Question: What do experts suggest is a good way to make saving money an everyday habit? ?Putting your change into a jar
Paying yourself first - Making savings part of your budget
Saving your tax refund
ANSWER: Paying yourself first
LESSON FOR YOUR LIFE: Building Savings Habits
Saving money is important, even in college!
Reasons for saving:
- Emergency fund for unexpected expenses - About 3 to 6 months living expenses
- Financial goals
Every month, you may tell yourself you’re going to save the money you have left over from your work-study or other job after you pay for things you need and spend a little on entertainment. But have you noticed that there is usually nothing left over? It's not just you; most everyone experiences the same thing.
The best way to get around this—and a proven way to build wealth-is to pay yourself first. To do this, you put some amount of money into savings every month, no matter how small to start. Because you put the money away first, you're not tempted to spend it on something else.
If you think that paying yourself first is easier said than done, here are some ideas to get started:
- Include “savings” as part of your spending plan. Make it a priority above spending for things like movies or eating out.
- If possible, have your employer automatically deduct money from your paycheck and deposit it into a savings account. What you don't see, you won't miss.
- Another option is to have your financial institution automatically deduct a set amount from your checking account each month and deposit it into your savings account.
- Put any tax refund, raise, or bonus you receive into savings rather than spending it.
- When looking for a better job, give preference to employers who offer good benefits, such as health coverage and life insurance. If your employer provides these benefits, you won't have to pay for your own coverage.
- When you purchase a product, send in any rebate forms. Most people fail to take advantage of this savings tool.
- Break costly habits, such as excessive clothes-buying and smoking, and save the difference.
- After paying off a loan, put the same amount each month into savings-if the money isn't already going to paying off another loan.
Question 4 of 8
Kyra Sedgwick and Kevin Bacon once invested millions of dollars with now famous financier Bernie Madoff. After Madoff’s Ponzi scheme was uncovered, the two stars lost their entire investment. Since then, the two have been working hard to rebuild the savings that they lost.
Question: Before you start investing, you need to know about the risks involved with investing. What investment option is considered the riskiest?Money market funds
LESSON FOR YOUR LIFE: Risk & Reward
In general, investments (stocks, bonds, mutual funds) earn a higher rate of return than savings accounts. However, there is a trade-off for that return - the possibility that the value of your investments may not increase, and may actually decrease.
Here's an example of the risk-reward relationship. If you save $1 every day from the time you turn 18 until you are 65 years old, and your money earns 5% interest, you will have nearly $69,232 when you are 65. Since this investment has a relatively low rate of interest, it's probably pretty low risk.
If you save the same amount in a mutual fund that earns 10% interest, you'll have $397,398 when you turn 65. However, because this investment pays twice as much interest, it's likely more risky and volatile, and you could lose more money in this higher-risk investment.
Question 5 of 8
Known for their E! reality TV show, the Kardashian sisters make, spend, save, and invest millions of dollars each year. Many girls want to be Kim. In fact, one stole Kim’s identity and accumulated $120,000 in shopping charges.
Question: What do experts suggest is the best way to prevent identity theft?Avoid using ATMs
Copy the front & back of all your credit and debit cards
Avoid shopping online
ANSWER: Copy the front & back of all your credit and debit cards
Copy the front & back of all your credit and debit cards and keep in a safe location. You'll have all the customer care numbers handy in case you lose your card (or it's stolen) and have to report it lost.
LESSON FOR YOUR LIFE: Reviewing Your Credit Report
The best way to make sure you haven't become a victim of identity theft is to review your credit report 3 times per year at www.annualcreditreport.com. You get 1 free report from each of the 3 credit reporting bureaus. Once you get your credit report, review it carefully. Look for inquiries from companies you haven't contacted, accounts you didn't open, and debts on your accounts that you can't explain.
Check that your Social Security number, name, address, and employers listed on the credit report are correct. If you find fraudulent or inaccurate information, get it removed. Continue to check your credit reports periodically, especially for the first year after you discover the identity theft, to make sure no new fraudulent activity has occurred.
Question 6 of 8
Six-time Grammy award winner Toni Braxton has earned and spent a lot of money. However, after buying everything from Gucci silverware, a Fabergé caviar service, and a Porsche, Toni Braxton had to file for bankruptcy in 1998 after one large and final bill. In 1997, she had garnered over $500,000 in overdraft fees alone.
Question: What can you can do today to insure you don’t get hit with large overdraft fees?Set up a personalized budget so you can easily keep track of your spending
Review your account contract and know what you need to do to avoid racking up fees
LESSON FOR YOUR LIFE: Reviewing Your Account Contracts
Following are some fees you can rack up that many people don't realize:
- Overdraft fees (Ex. $35 per day for up to 4 items)
- Fees if you don’t transfer from checking to savings
- Fees if you transfer from savings to checking too often
- Fees for using another bank’s ATM
- Charges for Cashiers’ checks and money orders
- Fees for International transactions (usually around 3%)
Question 7 of 8
Late TV icon Ed McMahon was sued by Citibank for $180,000, a $275,00 debt to his daughter's divorce lawyer, and $644,000 he owed on the $4.8 million mortgage on his Beverly Hills home.
Question: Mismanaging credit greatly affects your financial future. Before you start using credit cards, you should make sure you can:Make the minimum payments
Can discipline yourself to only use credit to buy what you can actually afford
Pay the bill around the due date - Credit companies aren't picky about when you pay
ANSWER: Can discipline yourself to only use credit to buy what you can actually afford
If you are using credit you want to make sure you can pay the ENTIRE bill by the due date to avoid paying interest AND pay on time. Making payments on time is the most important thing you can do to build your credit score.
LESSON FOR YOUR LIFE: Recognizing Credit Trouble
Following are some signs that you may be in credit trouble:
- If your credit card payments are more than 20% of your monthly gross income - Ex. If you earn $1,000 per month, your debt payments shouldn't be more than $200.
- You have to pay your regular bills with your credit card
- You’re using one credit card to pay off another credit card
Some possible solutions:
- Stop using credit
- Cut back on expenses
- Really consider your wants vs. needs
- Adhere to a "barebones" budget
- Get a second job
- Sell items you don't need
Question 8 of 8
Talk about living beyond your means - The actor is reported to have 15 homes around the world, four yachts, a Gulfstream jet and millions of dollars in jewelry and art. Nicholas Cage claims that his former financial manager was incompetent and that is the reason why Cage owes more than $13 million in taxes.
Question: Cage's situation brings up a good question - If you know nothing about taxes, what should you do come tax season?Research tax credits & deductions and know what you qualify for
Have your taxes done for free through the UNL Volunteer Income Tax Assistance program
Even if someone else is going to do your taxes, you need to make sure you understand what credits & deductions you qualify for to make sure you get the refund you deserve.
LESSON FOR YOUR LIFE: Basic Taxes
Reviewing Paycheck Deductions
When you receive a paycheck, some funds are usually deducted for taxes. Most people pay three basic kinds of taxes:
- FICA. These taxes are paid because of a law called the Federal Insurance Contributions Act. FICA taxes are contributions you make to Social Security and Medicare. You pay 6.2% of your income to Social Security and 1.45% to Medicare.
- Federal income tax. These taxes are paid to the federal government. They are calculated as a percentage of your income. For federal taxes, the more you earn, the higher the percentage you pay. Currently federal tax rates range from 10% to 35%.
- State income tax. These taxes are paid to your state government.
Common Tax Deductions:Include:
- Tuition and fees
- Student loan interest
- Mortgage interest
- Charitable donations
- Medical expenses (if they are more than 7.5 percent of your adjusted gross income)