Ms. Martin-Klein American History II & Multicultural Studies



Unit 4 Personal Financial LiteracyDue Tuesday 11/5Article 1: Why You Need to Buy Renter’s Insurance Right NowList the major arguments for purchasing renter’s insurance.Will you include renter’s insurance in your budget (for the project)? Explain your decision making.Due Wednesday 11/6Article 2: How To Buy a CarComplete a 3-2-1. List three things you have learned, 2 questions you have, and 1 most important piece of advice about buying a car.Due Friday 11/8Chapter 18 Personal Finance Key terms: Consumerism Redress Comparison shoppingWarranty Impulse buying Budget Disposable/discretionary incomeExpenses Deficit Principle (not principal)CreditFeeInterestAPRMaturityPenaltyReturnDividendMutual fundQuestions:What rights do consumers have?How can you be an informed consumer?What is a balanced budget?What are the benefits and drawbacks of credit?What are your responsibilities as a borrower?How does a bond differ from a stock?What advantage does a money market deposit account or a CD have over a savings account?Due Tuesday 11/12Article 3: In Case of EmergencyWhat is an actuary? Why do insurance companies need them? What do insurance companies do with the premiums people pay? In your own words, define coverage, premium, deductible. Why do people spend money on insurance when they rarely, if ever, use it? What are the benefits and costs of investing in insurance? Should people invest in insurance policies or is insurance just a waste of money?Insurance companies assess the amount of risk—or the likelihood of an event occurring—to determine a person’s premium for a particular insurance policy. For example, a homeowner with a fire extinguisher may pay a smaller premium for homeowner’s coverage than a homeowner without one because his/her house is less likely to burn down. Do you think it is ethical for insurance companies to determine the cost of particular insurance policies based on a person’s age, race, gender, ZiP code or credit score? Why or why not? Due Tuesday 11/18:Article 4: Retirement and SavingsArticle 1: Why You Need To Buy Renter’s Insurance Right Now? Stacey LeascaOdds are you don't have renters insurance. And, to get to the point of this article very quickly, that's a huge mistake.According to a 2016?Insurance Information Institute poll, a full 95% of homeowners had homeowners insurance, but a mere 41% of renters said they were covered by renters insurance. So what gives??"Renter’s insurance is usually inexpensive and not always required by your building/landlord, whereas homeowner’s insurance is mandatory and traditional insurers can rack up premium prices," says a spokesperson for?Lemonade, a new mobile-only insurance app. "In fact, traditional insurance companies don’t find it’s 'worth it' to go after the renter’s market since the costs involved (sending over agents, paperwork, etc) doesn’t justify the relatively low annual premium they’ll charge."?Sure, it's not required you get it, but trust us when we say you'll miss it when you need it most. You know, like if your home is burglarized, if there's a flood and your items are ruined, or if your dog happens to bite a guest in the backyard.Here's what it usually covers"Generally speaking, a?typical renters insurance policy will cover three main areas: personal property (your stuff), temporary living expenses, and personal liability (including legal fees and medical expenses)," Lemonade's spokesperson explained.?Moreover, renters insurance can actually come with?a lot of perks that most people aren’t aware of. For example, most renters insurance will cover your items even if they are stolen outside of your physical home. This means if your laptop is stolen from a coffee shop while you're working on your novel you'll be covered. If your camera is taken from your Airbnb while you're traveling abroad you'll be covered there, too.?And if someone is injured on your property, such as a friend who gets a little too overzealous while chopping carrots and accidentally slices their hand, their medical expenses could be covered by your insurance.Other?perks of renters insurance?can include the cost of a hotel if you need to vacate your home in an emergency, legal costs if you're sued, damages your kids cause and more.What it costsThe best part about renters insurance? You can actually get (very) basic coverage for just $5 a month."It really depends on how much coverage you need (aka, how much stuff you have, how much expensive stuff you want coverage for)," Lemonade explained. "But very basic renters insurance can start at just $5 a month, especially if you’re powered by technology (no brokers, no paperwork)."And if you want more coverage you're still only looking at a few hundred dollars a year. As?Dick Power, a?certified financial planner?and?founder of the?investment advisory firm Power Plans, told?CNBC, a great renters insurance?plan that costs around $300 a year could cover?upwards of $50,000 worth of property.??According to the?Insurance Information Institute, the average renter's insurance premium cost just $187 a year, or a little over $15 a month.?But do you really, really need it??Right now, are you thinking to yourself,?do I really need renters insurance? Revert back to the first sentence of this article and listen to the Lemonade spokesperson who said,?"Yes, you do! Even if your landlord doesn’t require it, you’re going to want to have peace of mind that your stuff is safe. And, since it’s generally inexpensive, it makes sense to get coverage for the myriad of things that could happen to you and your stuff." 2: How to Buy a New Car by PHILIP REED July 14, 2016At NerdWallet, we strive to help you make financial decisions with confidence. To do this, many or all of the products featured here are from our partners. However, this doesn’t influence our evaluations. Our opinions are our own.Buying a new car is a little like a game show. Choose the right door and you win your prize — a sweet deal on a good car. Choose the wrong door and you’ll lose money and hate the shopping experience.?Navigating the car-buying process?has never been easier, thanks to the transparency created by the internet.Set your budgetStart by deciding if you want to pay cash, take out a loan, or lease your new car. Paying cash makes your budgeting process pretty simple, but don’t spend all your savings. And remember that you will also have to pay sales tax, registration and insurance. Use the NerdWallet?auto loan calculator?to figure out the?right monthly payment?and down payment.Most people take out a car loan or, increasingly, opt for?leasing?a vehicle. It’s?smart to get preapproved for a car loan?because it simplifies the buying process and puts you in a stronger position at the dealership. Later, you’ll see how having a preapproved?loan fits into the process.Choose the right carNow the fun begins —?picking the right car?for you. Think about how you plan to use this car. For example, if you have a family, you’ll want enough room for everyone plus ample cargo space. If safety is a top priority, check out the?Insurance Institute for Highway Safety?for crash tests.Narrow the field by making a list of must-have features. Then, search for models with the?car finder?tool found on some?automotive sites. Filter your search according to your budget and desired features. As you move forward, list three target models to?research in more detail.Check reliability and ownership costsYou want to make sure to?choose models not only for their dependability but also for their?low?cost of ownership. Consumer Reports and J.D. Power collect maintenance reports from owners and rate all cars for reliability.A closely related issue is the total cost of ownership. Some cars are cheap to buy, but will cost a lot in the long run because of insurance, maintenance, repairs and depreciation. Several automotive websites —?such as Kelley Blue Book’s?Five-Year Cost to Own?or Consumer Reports’?Cost of Vehicle Ownership?—?show estimates of these expenses. It may be wiser to shell out a bit more money upfront when buying a?car.?Test-drive the carIdeally, you want to?test-drive?all the cars you’re interested in buying in quick succession so that the?impressions will be fresh in your mind for comparison. Consider setting aside a morning or afternoon for the process, and, if possible, do it mid-week when the dealership?isn’t too busy.Rather than just walking on to the car lot, call ahead and schedule an appointment with?the internet sales manager. That way, the right model will be pulled out and ready to go.Select a test-drive route that has a bit of everything: hills, rough pavements,?curves and even a stretch of highway.Locate your carMaybe one of the cars you tested meets your needs and is the right color. If not, you will have to search local dealerships until you find the right car.Nearly all dealerships list?their entire inventory online. But if you’re searching for an unusual color or option combination, you can use sites that cover an entire region —?or even the whole country. Many new cars are listed on sites such as or . Manufacturer websites might also allow you to search a broader area rather than individual dealerships. Keep widening your search area until you find?exactly the car you want.Find?the right pricePricing guides, such as?Kelley Blue Book, allow you to cut to the chase and find out what other people in your area are paying for the car you want. On the website,?accurately input all the options you want and, in some cases, even the color, since all those factors affect the car’s price.Make sure to see what, if any,?incentives and rebates?are available for the car you want. Most manufacturer websites list current offers,?which usually change each month.Get dealer quotesRequesting dealer quotes by email can?take the stress out of negotiating. You can?ask for a price quote by emailing the dealership?through its website. Or, to save time, use a third-party site such as ?to request quotes from multiple dealerships simultaneously. Compare the seller’s asking price to the average market price you determined through?the pricing guides. Chances are, the seller is asking more than the market average.If you negotiate in person, here are a few tips to use on the car lot:Don’t be a monthly payment buyer.?If you have a preapproved loan, you’re a cash buyer and you should negotiate the price of the car, not the size of the monthly payment.Be unpredictable.?Don’t let a salesman leave you trapped in a sales office while he “goes to talk with his boss.” Instead, roam around the showroom or go get a cup of coffee.Negotiate slowly and repeat the numbers you hear.?It’s easy to get confused, so go slow and?even write down the numbers thrown at you. Make sure you know whether?you’re talking about the “out-the-door” price, which includes all taxes and fees, or just the sale price of the car.Ask about fees before saying yes to a deal.?Some dealers may include bogus fees to recoup the?profit they lose while?negotiating. Ask for a breakdown of additional fees before you agree to any deal.Be ready to walk.?If you aren’t making progress toward a deal, or you don’t like the way you’re being treated, just walk out.?No goodbyes are necessary.Maximize trade-in valueA lot of people like to trade in their old car so they can resolve all their car-buying hassles at the same time. But this could be a costly choice. While trading in a vehicle is convenient, dealers usually may try to low-ball customers and only pay the wholesale price. To see how much that is, go online to a pricing guide, look up your car and compare the trade-in price (what you would receive) to dealer-retail (what the dealer will try to sell it for).Often, the difference can be $3,000.?For example, ’s True Market Value used-car pricing shows that for a 2013 Honda Accord EX, the difference between trade-in and dealer-retail is $3,100.New trade-in options?are available, such as selling the vehicle to CarMax. Or, you can sell it?to a private party. ?At the very least, look up the?trade-in price of your car?and?negotiate the highest possible price for it.Seal the dealIf you are negotiating via email or phone, ask to have the car delivered to you rather than picking it up at the dealership. It’s quick and stress-free.But most people go to the dealership to sign papers in person. Even if you have a?preapproved loan to pay for the car, the dealership’s finance manager may?offer to beat the terms of the loan. It doesn’t hurt to see if he or she can get a better interest rate. Just make sure all the other terms of the loan are the same.Before the contract is drawn up, the finance manager may also try to sell you additional products and services. Buying an?extended car warranty?at the right price can provide peace of mind. But check first to see how much warranty is included with the price of your new car. Most new cars have a bumper-to-bumper warranty covering?at least three years and 36,000 miles, along with a powertrain warranty that typically lasts up to 75,000 miles. The powertrain warranty covers all the parts that make the car driveable, such as the engine, transmission and suspension.Take your time reviewing the contract and don’t let yourself be pressured into signing just to get it over with. The contract will include the agreed-on sales price and these additional figures:State sales tax.?This is a percentage of the cost of the car.Documentation fee.?As crazy as it sounds, the dealership actually charges you for filling out the contract. This “doc fee” is capped in some states. In states such as Florida, some dealerships charge as much as $700 for doc fees.Registration fees.?A dealer has the ability to register the car for you, which is convenient.Some dealerships might include additional fees, of which some may be?bogus. It’s tricky to know what’s legit and what’s included just to boost their profit. If the dealer’s finance manager can’t explain a fee in the contract to your satisfaction, ask to have it removed.Philip Reed is a staff writer at NerdWallet, a personal finance website. Email:?preed@.This post was updated July 14, 2016. It was originally published Oct. 5, 2015.Article 3: IN CASE OF EMERGENCYInsurance Can Keep a Bad Day From Getting Worse Insurance gets no respect.While just about every other aspect of personal finance centers on accumulating wealth, insurance is all about spending money for a product that, if you need it, you know you’ve had a bad day. You’ve either been robbed, you’ve wrecked your car, your house has been damaged in a disaster, you’ve seriously injured yourself, you have an illness that has flared up, or, in the worst of all possible bad days, you have died.For that reason, people typically hate shelling out for an insurance policy, often grumbling about spending money year in and year out for something they rarely, maybe even never, use. That’s understandable. But how often do you call on the police department because of an emergency? How often do you call on the fire department to save your burning home? You may not need either for decades, but when you do, you’re relieved they’re around. Insurance is exactly the same. Without it, all the personal wealth you manage to amass is at risk when bad things happen to you or your property, or to others injured by you or your property. In those situations, all the money you’ve paid to own insurance through the years—the premiums—pays off, allowing you to replace your property, pay for expensive medical care, or cover the damages you inflicted on someone else.PROTECTING ONE ANOTHERAll insurance is fairly similar in the way it works. When you buy an insurance policy, the insurer groups you with people similar to you in age, health status, sex, lifestyle, home location, and a variety of other factors. Then actuaries—vital statisticians who compute risk—calculate how many deaths, car accidents, heart transplants, hurricanes or whatever are likely to occur over a period of time to your particular group of people. Insurers use that risk assessment to determine the premiums you must pay to insure whatever risk it is you’re trying to protect against—whether it’s your premature death or the risk that an uninsured motorist will total your car. With life insurance, for instance, if you’re young and healthy, your premiums are low because, statistically, the chances are low that you will die soon and force the insurer to pay a benefit. On the other hand, if you’re old and ailing, your premiums will be very high because the risk that you will die soon is substantially greater. This pool of similar consumers essentially shares the risk of protecting one another from financial hardship in the event of death or some other insured event. This shared risk works because of the law of large numbers, a scientific principle that holds that the actions of one will not have a tremendous effect on the group as a whole at any given moment. Thus, a relatively small number of events each year that require an insurer to pay claims will not hurt the overall pool much. Insurance companies don’t just sit on the premiums you pay; they invest them. Since statistically you’re not likely to claim the money for years, if ever, the insurer can generate an investment return on those dollars to increase the asset base available to pay claims with. Because of the investment return, and because only a small portion of the insured population will file a claim in any given year, insurers have the ability to pay your claim for, say, $40,000 even though you might have paid the insurance company only $7,000 in premiums through the years. THREE MAIN FIGURESFor the insurance carrier, there are hundreds of statistics that are taken into account in setting rates and assigning policyholders to risk pools. From the point of view of you, the average insurance buyer, there are just three key figures to keep track of: coverage, premium, and deductible. Coverage is how much money the policy will pay out for whatever event you are insuring, whether it’s your life or the cost of rebuilding a beachfront home after a hurricane blows through. With life insurance, for instance, the coverage might be $100,000, meaning that when you die your beneficiary will receive a check for that amount.Premium represents the cost of the coverage, or how much you have to pay to own the insurance policy. Though the coverage might be $100,000, your premium will be just a sliver of that because of the way insurance companies spread your individual risk across millions of customers. Insurance companies place people in one of four risk groups: preferred, standard, substandard and uninsurable. Preferred customers are charged the lowest premiums; the uninsurable are, well, uninsurable for whatever reason. But remember this: A customer whom one insurer labels “preferred” might be labeled standard by another insurer, which would adjust the customer’s rates accordingly. Insurers routinely tighten and loosen their underwriting standards—the standards they use to determine who falls into what category—depending on a variety of business factors. Those standards can and do change regularly. The message is to shop around to find a less-expensive premium for the same coverage. Deductible is how much money you have to come up with to help cover the cost of an insurable event. If you have a $250 deductible on your auto insurance and you wreck your car, causing $1,000 in damages to the car, you’re responsible for the first $250; the insurance company covers the rest. Many consumers often want the lowest deductible because they loathe the notion of digging up a big chunk of money in the event something happens that causes them to file a claim. It is better, they feel, to pay as small an amount as possible and let the insurer do the heavy lifting. That is a more expensive proposition in the long run. Here’s why: If you double a $500 deductible to $1,000, you might save $150 a year on your premiums. Sure, you’re on the hook now for an extra $500, but you’ll come out ahead financially because every 3.3 years you will have saved $500 in premiums (500 ÷ 150 = 3.3) you’d otherwise have to pay with a lower deductible. That makes it a pretty simple equation: If you’re not filing claims very often, why pay the higher premiums for no reason? And if you are filing claims often, then it’s a moot point: Your insurance company is going to jack up your premiums anyway or cancel your coverage because you obviously present a greater risk to the company. Article 4: Retirement: How Much Should I Put in My 401(k)? BY?PAULA PANT??Updated September 10, 2019You may wonder how much money you should be investing in your 401(k) or IRA retirement account. Some rules of thumb say 10% to 15%, although it also depends on how much money you need to set aside for retirement.The answer also depends on how much you'll get from your?pension, rental income, royalties, Social Security, and other forms of retirement income.This article will assume that you have no other sources of retirement?income.?This assumption will allow the focus to be solely on your contributions to a?retirement savings account.Start Earlier to Contribute Less?As a rule of thumb, the younger you start, the smaller of an amount you can get away with contributing. Following are some examples.Example 1?Let's assume you're 30, you earn $50,000 a year, and you want to retire at age 65. You have zero saved so far. You want to live on 85% of your pre-retirement pre-tax income when you retire, which is $42,500 per year.To reach your goal, you'll need to amass a nest egg of $2 million ($2.06 million, to be exact) by the time you retire. That may sound like a lot, but remember that, 35 years from now, $2 million will be worth far less than $2 million today, thanks to inflation. Also, remember that money needs to last you for a long time—possibly as long as 35 years if you live to be 100.How do you reach $2 million? If you're a 30-year-old with $0 saved, who wants to live on today's equivalent of $42,500 per year in retirement, you'll need to save $600 per month. That assumes you invest in 70% stocks, 25% bonds, and 5% cash, and the markets perform at an average rate.Example 2?Let's assume you're 40, you earn $50,000 a year, you want to retire at age 65, you have zero saved so far, and you want to live on today's equivalent of $42,500 a year in retirement. In other words, we're assuming the same scenario as Example 1, with the only variable being age. Using the same investment assumptions as in the example above, you'll need to save $1,000 per month. In other words, waiting for a decade to start saving forces you to almost double your?savings rate?in order to reach the same goal.Using the same set of assumptions, but changing the variable so that you start saving at age 20, you'd only need to save about $375 a month. If you saved $1,000 a month starting at age 20, you'd have $8.4 million by the time you retire.Why Such Variation??This variation is due to the power of?compound interest, which Albert Einstein?called "the most powerful force in the universe."Compound interest is a term that describes the interest/gains on your investments earning more interest. In other words, the interest builds on itself.The younger you are when you start saving, the more time your investments can compound. If you wait until you're older, you need to save more in order to compensate for the lost time.How Did You Calculate That??You can calculate this using a retirement calculator such as?Fidelity Investment's?My Plan online?retirement calculator. By typing your age, your desired retirement age, your investing style, and the amount you've already saved, the calculator will compute how much you should save per month in order to reach your retirement?savings goals. As a disclaimer, this model calculator provides only a rough directional result that should not be relied upon without further due diligence.Your 401(k) Investing Rules of Thumb?Here are four guidelines to help you decide how much to?save?for retirement:Maximize Your Employer Match:?If your employer?matches your retirement contribution, take full advantage of the match—even if you have?high-interest debt.Credit card debt?might cost you 25% in interest, while the company match provides a guaranteed 50% to 100% "return."What's a company match? Let's say your boss chips in 50 cents for each dollar you contribute, up to a certain amount. This is called a company match. You'll get a 50% "return," so to speak, on your money, because every $1 you invest automatically becomes $1.50.This is why retirement saving should be your top priority, even higher than paying off credit card debt or paying for your children's college tuition.Weigh the Pros and Cons of Roth vs. Traditional IRAs:?Roth?retirement accounts?such as a Roth 401(k) and Roth IRA allow you to contribute after-tax money. You pay taxes on your income now, but you avoid taxes when you withdraw it in retirement, including taxes on capital gains.Traditional retirement?accounts, like the traditional 401(k) offered by most employers, allow you to contribute pre-tax dollars. You avoid taxes now, but you get hit with a tax bill in retirement.Your age, income, and assumptions about present vs. future tax rates will determine whether a Roth vs. a traditional setup is right for you. Read more about Roth retirement accounts, talk to a tax professional, and give it some careful thought. Your tax bill is one of the biggest expenses you'll ever have—on par with?your mortgage payment—so it pays to carefully consider your?tax strategy?when you're?planning retirement.Increase Your Percentage According to the Decade You Start:?There's no single rule regarding the percentage of your income that you should put aside for retirement. The percent varies based on the age at which you start saving.If you're 20 years old, earn $50,000 a year, and save 10% of your income—$5,000 per year—into a retirement account, you'll more than reach your retirement goals.If you're 30 when you start saving, 10% won't be enough. You'll need to save 15% of your income, or about $7,200 per year, to meet your retirement?goals.If you start at age 40, you'll need to save 24% of your income, or $12,000 per year, to reach your goal.Start at age 50, and you'll need to save nearly half your income—$2,000 a month, or $24,000 a year—to reach your goal.Don't Take Extra Risk to Compensate for Lost Time:?If you started saving for retirement later in life, you might be tempted to take on extra-risky investments in order to compensate for the lost time.Don't do this. Risk is a two-way street: you might win big, but you might lose more. And at a later age, you have less time to recover from a loss. The only way to compensate for lost time is by saving?more. ................
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