Credit Cards Avoid the Minimum Payments Trap! 3% examples

PowerPay
PowerPay
Calculators &
Education Center
Calculators
July 2009
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PowerPay Calculators
Web site
Marsha A. Goetting
Ph.D., CFP®, CFCS
(Utah State University-Extension)
Professor & Extension Family Economics Specialist
Department of Agricultural Economics & Economics
Keri D. Hayes
Publications Assistant
Department of Agricultural Economics & Economics
https://powerpay.org
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ScreenInformation,
that Appears
Enter New User
Click Submit
User Login
• If new member, click [New? Sign
up now]
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Click Calculators Tab
Calculator Options
1. Housing Expenses
2. Loan Qualifier
3. Mortgage Comparison
4. Transportation Expenses
5. Additional Payment
6. Emergency Savings
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Housing Expense
Calculator
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Click on Housing Expenses Calculator
Housing Expense
Calculator
• Percentage of
income going
towards home
costs per month
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Example 1: Housing Expenses
Calculator
Monthly Take-Home Pay
5500
Monthly Mortgage (principal &
interest) Payment/Rent
Monthly Property Taxes
1200
95
Monthly Home
Owner’s/Renter’s Insurance
Monthly Maintenance
100
Monthly Utilities
300
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Results (Example 1): Housing
Expenses Calculator
Total Housing
Expenses
% of your total
income:
Recommended % of
income
$1745.00
31.727%
33-35%
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Calculate
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Example 2: Housing Expenses
Calculator
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Monthly Take-Home Pay
4000
Monthly Mortgage (principal &
interest) Payment/Rent
Monthly Home/Property Taxes
1400
150
Monthly Home Owner’s/
Renter’s Insurance
Monthly Maintenance
100
Monthly Utilities
300
Calculate
50
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Results (Example 2): Housing
Expenses Calculator
Total Housing
Expenses
% of your total
income:
Recommended % of
income
$2000.00
50%
33-35%
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Loan Qualifier
Calculator
Loan Qualifier
Calculator
• How much to
reduce monthly
debt obligations to
qualify for a loan
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Scroll to Top, Click Loan
Qualifier
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Lender
requirement
• Borrowers debt must
be less than given
percentage of income
to qualify for loan
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Example 1: Loan Qualifier
Calculator
Example
• 30% debt/income
ratio
• No more than 30% of
income is being used
to pay creditors
Debt to Income Ratio
Monthly Take-Home
Pay
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5500
Calculate
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Loan Qualifier Calculator Screen
Results (Example 1): Loan
Qualifier Calculator
• Monthly Debt
payment must be
$1,375 or less
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Example 2: Loan Qualifier
Calculator
Debt to Income Ratio
Monthly Take-Home
Pay
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Results (Example 2): Loan
Qualifier Calculator
30
4000
Calculate
• Monthly Debt
payment must be
$1,200 or less
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Loan Qualifier Calculator Screen
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Mortgage Comparison
Calculator
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Scroll to Top, Click Mortgage
Mortgage Comparison
Calculator
• Compares
paying off a
mortgage:
Biweekly
Monthly
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Results (Example 1): Mortgage
Comparison Calculator
Example 1: Mortgage
Comparison Calculator
Loan Amount
Loan Term
(years)
Interest rate
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155000
30
6.5
Monthly payment
Total Interest paid
Loan Term
Biweekly payment
Total Interest paid
Loan Term
Calculate
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$979.71
$197,693.96
29 years 11 months
$489.85
$152,164.37
24 years 2 months
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Results (Example 1): Mortgage
Comparison Calculator
Savings from biweekly
payments
Repayment time
reduction from making
biweekly payments
$45,529.59
5 years
9 months
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Results (Example 2): Mortgage
Comparison Calculator
Results (Example 2): Mortgage
Comparison Calculator
Monthly payment
Loan Amount
Loan Term
(years)
Interest rate
200000
30
Total Interest paid
Loan Term
Biweekly payment
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Total Interest paid
Loan Term
Calculate
$1,073.64
$186,511.57
29 years 11 months
$536.82
$152,183.63
25 years 3 months
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Results (Example 2): Mortgage
Comparison Calculator
Savings from biweekly
payments
Repayment time
reduction from making
biweekly payments
$34,327.94
4 years
8 months
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Transportation
Expenses Calculator
Transportation
Expenses Calculator
• Percentage of income
spent on overall
transportation costs
per month
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Example: Transportation
Expenses Calculator
Scroll to Top, Click
Transportation
Monthly Take-Home Pay
Monthly Vehicle Payment
385
Monthly Public
Transportation/Taxies
Average Monthly Gasoline
300
Monthly State Vehicle Tax
40
Monthly Automobile Insurance
Monthly Maintenance
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5000
Calculate
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135
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Results: Transportation
Expense Calculator
Total Transportation
Expense
% of Total Income
Recommended % of
Total Income
$905.00
18.1%
18-20%
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Scroll to Top, Click
Additional Payment
Additional Payment
Calculator
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Example: Additional
Payment Calculator
Additional Payment
Calculator
Loan Amount
Loan Term
Interest Rate
Additional Monthly
Payment
• Decreased payoff
time
• Net effective
interest rate
• Interest savings
155000
30
5.0
150
Calculate
4949
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Results: Additional Payment
Calculator
Monthly
Payment
Loan Paid Off
in
Net effective
interest rate
Savings
$832.07 + $150.00
= $982.07
21 years 6 months
3.4%
$46,389.61
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Emergency Savings
Calculator
Emergency Savings
Calculator
• How much to save for
emergencies:
 Unemployment
 Furloughs
• Allow to pay expenses for
3 months
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Example: Emergency
Savings Calculator
Scroll to Top, Click
Savings
Monthly Expenses
2900
Calculate
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Results: Emergency
Savings Calculator
Monthly Expenses x 3 =
$8700
Monthly Expenses x 6 =
$17,400
Monthly Expenses x 8 =
$23,200
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Scroll to Top, Click Education Ctr.
PowerPay
Education
Center
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Education Center
Topics
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Budgeting
Credit
Debt Management
Financial Binder
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Education Center
Topics, con’d.
Education Center
Topics, con’d.
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• Finance Books
• Financial
Resources
• Identity Theft
• Insurance
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Live Within Your Means
Living the American Dream
Money Attitudes
Saving & Investing
Teaching Children About
Money
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PowerPay
Calculators &
Education Center
July 2009
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