Grade 12 Unit 9

Grade 12 Unit 9

HISTORY & GEOGRAPHY 1209 BUDGET AND FINANCE CONTENTS I. CASH, CREDIT, AND CHECKING FINANCES ....

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Your Personal Finances ............................................

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Spend Your Money Wisely ........................................

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Credit Cards ................................................................ 12 Checking Accounts..................................................... 17 Buying a Car................................................................ 21 II. GRANTS, IRAs, LOANS, AND CREDIT UNIONS... 27 College Grants and Loans ........................................ 27 IRA Accounts ............................................................... 32 Bank Loans .................................................................. 35 Credit Unions .............................................................. 39 III. SAVINGS, E-CASH, AND TRAVELER’S CHECKS... 45 Deposits and Savings................................................. 45 Using the ATM and E-Cash ...................................... 49 Savings and Loans ..................................................... 53 Travelers Checks ........................................................ 57 Author: Editor: Illustrations:

Brad Zockoll Brian Ring Alpha Omega Staff

804 N. 2nd Ave. E., Rock Rapids, IA 51246-1759 © MM by Alpha Omega Publications, Inc. All rights reserved. LIFEPAC is a registered trademark of Alpha Omega Publications, Inc.

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HISTORY 1209 BUDGET AND FINANCE Money can be a real struggle in our walk with God. Many Christians make the false assumption that finance is a part of life that doesn’t need to be under God’s control. The Bible, however, deals with the challenge of honoring God in every financial decision we make. The book of Ecclesiastes gives a very pointed lesson when it tells us that a man strives for a meaningless life if all he cares about is accumulating wealth–he will never be satisfied. While it is not wrong to want to be able to have a little money stored away in the bank, if the desire to build riches overcomes a sincere walk with the Lord, the Christian is headed away from God. While financial freedom is not evil in itself, it cannot be a substitute for God’s security and happiness. God promises to provide for us if we put Him first. This promise is found in Proverbs 3:9-10: “Honour the LORD with thy substance, and with the first fruits of all thine increase: So shall thy barns be filled with plenty, and thy presses shall burst out with new wine.” Honoring God first, above our bank account and any desire for riches, will bring blessing from Him. As we study personal finances, we must remember this “honor God” principle.

OBJECTIVES Read these objectives. The objectives tell you what you will be able to do when you have successfully completed this LIFEPAC®. When you have finished this LIFEPAC, you should be able to: 1. Explain the importance of a budget and be able to plan one for your monthly expenses. 2. Explain how a person should watch and spend their money wisely. 3. Explain the seriousness of debt, its use, and consequences. 4. Explain the use of a checking account. 5. Explain the practical precautions and steps to buying a car. 6. Explain the different means by which a college student can pay for college. 7. Explain how an IRA account works. 8. Explain what loans are and how banks distribute them. 9. Explain how a credit union works. 10. Explain the process of deposits and savings. 11. Explain how an ATM and E-cash works. 12. Explain the advantages and disadvantages of a savings and loan. 13. Explain what traveler’s checks are and how they work.

Survey the LIFEPAC. Ask yourself some questions about this study. Write your questions here. ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ ________________________________________________________________________________________________ 1

I. CASH, CREDIT, AND CHECKING FINANCES SECTION OBJECTIVES Review these objectives. When you have completed this section, you should be able to: 1. Explain the importance of a budget and be able to plan one for your monthly expenses. 2. Explain how a person should watch and spend their money wisely. 3. Explain the seriousness of debt, its use, and consequences. 4. Explain the use of a checking account. 5. Explain the practical precautions and steps to buying a car.

VOCABULARY Study these words to enhance your learning success in this section. bank savings book

A small journal which is a continually updated account of the money available in one’s savings account

budget

An itemized account of the possible income and expenditures over a given period of time

debt

Money owed to a person or a business

expense

Something on which money is spent

gross income

Total money earned, excluding all deductions

income

Money received as earnings from work or the selling of goods

monthly budget

Planned income and expenditures for a calendar month

savings account

A bank service in which the depositor puts his money in the bank for the purpose of drawing interest

tithe

10% return back to the Lord from income you received; derived from O.T. passages such as Deuteronomy 2:11

YOUR PERSONAL FINANCES Even Christians have financial problems. You have been working hard at your job and trying to save the money you earn. Sure, you spend a little here and there during the course of the week, but you have been keeping a tight rein on your spending so you can save up enough for the Christmas presents you want to get for the family. You take a peek into your bank savings book and—WHAT? You find out that you do not have near as much money you thought you had saved. But how did you spend it so fast? This happens as a reality to many people everywhere. The best way to keep yourself from last-minute surprises is to make a budget. Do not be scared—making a simple budget is easy and can save you quite a bit of money in the long run. Before you arrange a budget, commit yourself to start saving some of your income. Proverbs 21:20 tells us, “[There is] treasure... and oil in the dwelling of the wise; but a foolish man spendeth it up.” The writer is telling us that the wise man saves reserves, but a foolish man spends everything. Commit to saving a portion of your income. A budget is a personal tool that can give you two great advantages. First, it will let you know where you may have problems when it comes to spending. Many people are surprised when they see how much money slips through their fingers when they spend a little here 2

and there on soft drinks, knick-knacks, and late-night snacks. Even though the purchases are each small, they quickly add up. Secondly, you can figure out where you can save a bit here and there—sort of like streamlining your money’s direction. You could find that putting an extra $5 a week into your savings account will help you double your savings over the course of the summer, depending on how much you now have. Many times when a teen simply writes down what he has been doing with his money, he learns a great lesson right away! Like each person, each budget is unique. As you step out into your career, you will discover the need to be aware of expenses that did not concern you when you were living with Mom and Dad. However, that should not discourage you from making a plan of action for controlling your spending. We can work together on a budget that is simple and unimposing. Let’s say that you work for Beta Industries and are renting an apartment while you take night courses in college. You are responsible for your car’s upkeep, the food in your cupboard, and little things called insurance and school bills. How do you keep from going broke? Here are a few steps to remember when setting up your own personal budget: 1. A monthly budget is usually the best framework to use. Keep an eye on future needs. Most people prefer to use a budget that breaks down into months. Figure out what you can spend and expect to receive every month. But wait! You might get paid on an irregular basis for odd jobs along with your regular employment. Some bills need to be paid every three months instead of every month. What do you do? Figure what the expenses would cost over the course of a year and then divide by 12. We are trying to estimate what is coming down the road, not calculate penny-by-penny just yet. If you have been working and going to school for a while, you could use past figures of income and expenses to estimate your monthly budget for the year to come. Let’s say it is your fourth month with Beta and your third month at school. You can go by past income and expenses from the months you have been working and studying. 2. Take your time, be thorough, and list all of your income and expenses. Be careful not to overlook a “small” expense. If you spend $2 a week on shampoo, remember to write it down. If you join the church group for a weekly meal, note it. 3. Get out your calculator and follow this guideline to get an idea of how costs break down by percentages. Here is an idea of percentages per general expense. This would be a good guideline to follow and will help you realize that this is where your money goes (or should go) each paycheck. The average % of gross income is usually spent this way: (1) Housing + Utilities (water, electricity) 25 to 40%, (2) Taxes (actual percent) 20%, (3) Transportation + Maintenance 10%, (4) Food 10%, (5) Clothing 5%, (6) Savings 5% or more, (7) Entertainment 5%, (8) Debt (credit cards, personal loans, school loans) 5%, (9) Other Expenses 5% or more, (10) Tithe to the Lord 10%. 4. Make it a habit to put money into a savings account. This is known as “paying yourself.” Note in #3 that one of the monthly expenses is putting money into savings. Aim for saving at least 5% what you make in gross income. It is important that you save a little from each paycheck. This percentage can vary; perhaps you are able to put away 10% each month—great! You take a giant step towards financial freedom when you learn to save. If that means cutting out the extra bag of potato chips and a night out at the fast-food restaurant, consider it an investment.

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5. Not all of the expenses (food, for example) are easy to calculate. The college cafeteria may give you a great deal on a daily lunch, which cuts your expenses for food by a third. You never know what deals you could run into. Write down what you think you need, and as the months continue, you can adjust it. 6. As a Christian, you should be ready and willing to give to the Lord. Usually this is 10%, which is called a “tithe.” Calculated into your budget is the fact that as a believer in Jesus Christ, you should honor the Lord with a gift from your income. People have different ideas about how much, but the general idea is 10%, an idea found in the Scriptures in passages like Malachi 3:10: “Bring ye all the tithes into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the LORD of hosts, if I will not open you the windows of heaven, and pour you out a blessing, that [there shall] not [be room] enough [to receive it].” God promises blessings for the Christian who gives to Him. Other passages such as Hebrews 7:5, Deuteronomy 2:11 and Nehemiah 10:37 also give us the tithing principle. It is interesting to note that out of gratitude for the resources that God has given them, many Christians give according to the New Testament verse found in 1 Corinthians 16:2, “Upon the first [day] of the week let every one of you lay by him in store, as [God] hath prospered him….” They might actually exceed the 10 percent of the Old Testament as they set aside part of their income at the beginning of the week! Remember, giving that comes from a grateful heart will be rewarded by God. 7. When you have listed all your income and expenses, subtract the expenses from income and see what comes out on the “bottom line.” Your result should be positive; this is “cushion” for emergencies and unknown expenses that may pop up. If you end up with a negative number on your bottom line, you can see that you need to start reducing your expenses. You do not have to suffer in order to start saving. Our next lesson will help you learn how to use your money more wisely. Proverbs 3:5-10 could be titled, “God’s Plan for Financial Prosperity.” The keys for a Christian to have a stable and strong financial life is to follow the principles found in this passage: “Trust in the LORD with all thine heart; and lean not unto thine own understanding. In all thy ways acknowledge him, and he shall direct thy paths. Be not wise in thine own eyes: fear the LORD, and depart from evil. It shall be health to thy navel, and marrow to thy bones. Honour the LORD with thy substance, and with the firstfruits of all thine increase: So shall thy barns be filled with plenty, and thy presses shall burst out with new wine.” We are wisest when we give the Lord the control of our budget. The Lord has much to say about money. There are over 2,300 verses in the Scriptures that directly refer to money! Though the Bible is not mainly a financial book, it is interesting to note that right after the subject of God Himself, the second-most referred-to subject in the Bible is money. The Lord does not merely receive a portion of our income—He gets first priority over it! Whether it is in giving to missions or in relying upon the Lord in using wise judgment before we make a big purchase, it’s good to remember the right of ownership principle: “God owns it all.” Psalm 24:1 – “The earth is the Lord’s and the fullness, the world and they that dwell therein.” Since all of our income is the Lord’s rightful property, we ought to allow Him to direct us so that we may be able to use our money wisely.

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Are you going to be able to stay financially stable? Here are some questions any young person should ask himself as he makes a budget, saves money and spends money: 1. Are my checking and savings accounts smaller than they were six months ago? (Every six months this question should be asked.) 2. Am I tempted to use a credit card for a charge when I do not know whether or not I can pay the bill? 3. Am I falling behind on my bills to my creditors? 4. Are my creditors charging me with late fees? Here is a way to keep yourself financially strong. Follow these steps and you can help keep yourself from falling into the “debt trap” that plagues so many people. 1. Locate the “missing money!” Are you frustrated from trying to figure out where your money goes? Make a list of all the money spent each day for one month to see where your “missing money” is actually being spent. You might find that you are spending enough for “small” items to make a serious dent in your wallet! 2. Do not let your spending habits get out of hand. Never charge more on your credit cards than you can afford to pay off in one month. 3. Plan your spending ahead of time. Before you go to the store, list what you need to buy and then stick to the list. Many people lose lots of money by making impulse purchases at the store. 4. Do not let finance charges eat up your budget. Pay bills on time—or ahead of time —to keep the finance charges as low as possible. 5. Keep track of your spending. Retain all copies of sales slips, and promptly compare charges when your bills arrive. Not only will you have a good idea of your spending habits, you can double-check against anyone who might be trying to use your card or your number. 6. Do not allow room for anyone to abuse your purchase. Sometimes a dishonest employee may try to add a charge or tip onto your receipt. Prevent this by drawing a line through blank spaces above the total when you sign receipts. 7. Prevent any opportunity for a thief to get away. Keep a list of your credit card account numbers, checking account information, and the telephone numbers of each credit card issuer in a safe place in case your cards or checks are lost or stolen.

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Match each category with its budget guideline. 1.1

______ Clothing

a. 25 to 40%

1.2

______ Housing + Utilities

b. 5% or more

(water, electricity) 1.3

______ Food

c. 10%

1.4

______ Taxes (actual percent)

d. 20%

1.5

______ Savings

e. 5%

Choose the correct word from the list. tithe savings account gross income 1.6

firstfruit IRA book expenses

Proverbs percentages

__________________________ is the total money you earned, if you don’t subtract the deductions. tithe savings account gross income

1.7

debt budget bank savings

debt budget bank savings

firstfruit IRA book expenses

Proverbs percentages

Deuteronomy 2:11 is one of many Bible passages that tell us of the principle of the ____________________________ .

Complete the following statements. 1.8

The passage in proverbs 3:5-10 tells us: “Honour the LORD with thy substance, and with the _________________________ of all thine increase: So shall thy barns be filled with plenty…”

1.9

____________________ 3:5-10 could be titled, “God’s Plan for Financial Prosperity.”

1.10

Total income, exclusive of any deductions is called _________________________ .

1.11

Proverbs 21:20 tells us, “[There is] treasure…and oil in the ________________________ of the wise; but a foolish man spendeth it up.” The writer is telling us that the wise man will save _______________________ .

1.12

Many Christians give according to the New Testament verse found in 1 Corinthians 16:2 which is actually ________________ than a 10% tithe.

1.13

When you have listed all your income and expenses, subtract the ____________________ from _____________________ and see what comes out on the “bottom line.”

1.14

Make it a habit to put money into a savings account. This is known as ____________________ ________________________ .

1.15

Never charge more on your credit cards than you can afford to pay in one ________________ .

1.16

Keep a list of your credit card ___________________________________________ , checking account information and the telephone numbers of each credit card issuer in a safe place in case your cards or checks are lost or stolen.

1.17

Are my creditors charging me with ______________________________ ?

1.18

Are my checking and savings accounts smaller than they were ____________ months ago?

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Match the letter of the correct answer on each blank. 1.19

God should receive honor in our handling of finances. “Honour the LORD with thy substance, and with the firstfruits of all thine increase: So shall thy barns be filled with plenty, and thy presses shall burst out with new wine.” Where is this passage found? ____________ a. Proverbs 21:20 b. Proverbs 3:5,6 c.

Proverbs 3:9-10

d. Malachi 3:8-10 e. 1 Corinthians 16:2

Answer true or false. 1.20

__________ Nehemiah 10:37 is one of the Bible passages that mentions the tithing principle.

1.21

__________ Biblical tithing basically means you will give 10 percent of your income to the Lord.

1.22

__________ It is OK to overlook a “small” expense because it is not much of your overall budget.

1.23

__________ Pay bills two weeks after due date to keep the finance charges as low as possible.

1.24

__________ When you sign receipts, draw a line through blank spaces above the total so that nobody may add extra charges to your credit card receipt.

Adult Check

___________________ Initial Date

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VOCABULARY Study these words to enhance your learning success in this section. consignment shop The store that sells an individual’s goods in an agreement where both parties split the profit factory direct

Another name for manufacturer-to-consumer selling

frivolous

Trivial, not requiring serious thought; considered silly

impulse buying

Making a purchase on the spur of the moment without careful planning

middle-man

Money will not only go to the manufacturer, but also to the store that stocks and sells the product

name-brand

A famous-name product that may be more expensive due solely to its highrecognition

steward

One who manages money or the affairs of a household

wholesale club

Type of business that eliminates the retail part of the transaction

SPEND YOUR MONEY WISELY People need to make a decision to get a firm handle their finances. Proverbs 13:11 contains a simple but profound truth: “Wealth [gotten] by vanity shall be diminished: but he that gathereth by labour shall increase.” In other words, a person who tries to get money by fraudulent means will not profit in the long run, but the steady worker will add to his savings. Simple, isn’t it? By regular work and honest savings, a person can see his savings grow. That is simple common sense. Steady work and smart spending with an eye towards saving—that is the way you will stay financially secure. It’s important to bring the money in but it is just as important to regulate how it goes out. The Nesmith family’s financial outlook wasn’t good: school loans and other living expenses had put them $50,000 in debt with no relief in sight. A usual shopping trip was a ride to the mall and a bill for over $300—further dropping them down the financial well. However, Mr. and Mrs. Nesmith knew that a change was needed, so they buckled down and set the minds to controlling their finances. Now they are happier, having shaved $12,000 off of their debt and purchased a house for a fraction of what they would have normally paid. What did they do? Nothing magical; they just made a simple decision to spend more wisely and avoid some foolish spending. The Lord wants Christians to be good financial stewards. A steward is one who manages money or affairs of another person. As a follower of the Lord you do exactly that. You are to manage your money and your household and be responsible for how you use God’s money that He has allowed you to use. As you embark on your career, whether it be in accounting, construction or the ministry, it is important to make a wise start and begin to make a “plan of action” so that you will be able to have a strong financial base. A

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Christian leader is described in Titus 1:7 as one who is a good steward and is not given over to a greedy desire for money. In learning how to spend and save wisely, you may have to learn and even unlearn some important points. The first thing a good Christian steward should remember is that the world should not dictate your spending decisions. A lot of television commercials would lead you to believe that you absolutely MUST buy the $125 top-of-the-line sneakers this week! However, more clear-headed thinking reveals to you that a shoe outlet down the road can get you virtually the same shoe for less than half the price. If you are not a slave to namebrand clothes, you will find that your savings could exceed 50% in almost every purchase. Why must you always buy the newest thing that comes along? Always remember that a new item becomes “used” as soon as you take it out of the store. You can buy high-quality items at consignment shops for a fraction of the cost of new items. A consignment shop is where people may take their used clothes or other items and sign an agreement to have the store sell the clothes on consignment, meaning that the store will pick up a percentage of the money and give a percentage to the individual who brought it in for sale. Many consignment stores have a quality standard so you can get good quality clothes. Like-new clothes such as jeans can be bought for $5, while tennis shoes might be a couple of dollars. For a college student on a tight budget, this is a brilliant way to save money. Christmas is a time when the world would have you believe that breaking your budget is the way to prove that you love your family. Gift giving has become an incredible financial burden to families, and even Christians have been highly irresponsible in their spending habits during the holiday season. Start early in your shopping and save money. Look for special bargains as early as October or even September, and you will see some great products that have not yet been hit by the holiday price increase. Review the extra expenses that hit your budget. Do you really NEED to have a “surround sound” stereo or cable TV? Must you get a new car every three years? Establish the difference between a want and a need. You might need to get a newer vehicle but you want to get a Hummer® when a second-hand Nissan® will do just fine. What are your needs—and what are your wants? The Christian teen should also get a wider view of the things around him. Look around and see what different stores offer. Don’t assume that the lowest price will always be at the bulk-wholesale club. One highly-regarded men’s clothing store in a mall was trying to clear out their spring suits in order to get ready for the fall. The line of suits were over 70% off of their regular price—and they were a retail store! Keep an eye out for double coupons and sales at the grocery stores. Don’t assume that bookstores are always the way to go, either. Even though the best bookstores offer discounts almost every week, why not try the library? The price of one book would probably be more than all expenses (including gas needed to get to the library, fines paid for late returns, etc.) incurred with a library. Get a wider view of your talents as well. Sometimes a little effort on your part can save you money. A simple example is in washing the car yourself instead of plopping down a couple of dollars for a hands-free car wash. Be creative and see other ways to save. Doing your own gift-wrapping saves at Christmas time and birthdays. Cooking your own meals cuts the price of meals in half when compared to eating out. These are just a few examples of looking around and seeing how you can use God’s money as wisely as possible. A Christian teen should slow down and think before he or she spends money. Don’t fall for impulse buying. It’s obvious that the department store display of clothing is quite attractive, but is it worth the extra $10 they charge for the product? Slow down and keep the end result in mind before you buy. Even though the advertisement may tell you that the “bargain” you are seeing may only last for the next few hours, be careful not to make an impulse decision. You might spend money that could be better used for a wiser and more valuable purchase. Is spending that money now as great as the joy you would get from 9

a greater goal? In other words, you might find it okay to eat out tonight, but if that money were saved, it would be just a little bit more for that car you are saving for. It’s easy to tell yourself, “It’s only ten dollars,” but you will find yourself saying that again and again until you wonder where your money has been going. A little saving adds up to a lot in the long run. Saving even a dollar a week leads to $52 extra dollars at the end of the year, and that is a good help in your budget planning. The Christian teen should look at the options in all financial decisions. Do not pay for expensive meals out when you can make them at home. What is the option to eating out? Save yourself money and cook at home. Take advantage of free festivals, town concerts, and other events. Let your standard of living be low but enjoyable. Do not buy “quick-cook” convenience foods which may be a dollar or two more than a comparable item. Do not be afraid to prepare meals at home or to take leftovers to work for lunch. Do a little comparative shopping. A quick look on the Internet can tell you that the $40 football jersey you were going to buy at the mall is less than $30 when you buy it factory-direct. If you buy items at a retail store, there is a bit of middle-man money that gets added on, meaning that money will not only go to the manufacturer, but also to the store that stocks and sells the product. They must pay for their employees, lighting, and advertisement, and the money to pay for that comes from you. The extra cost you pay for your football jersey goes to the middle-man. Buying from a factory or from a wholesaler means you avoid the “middle-man” costs. The Christian should remember to keep a balance in his attitude toward wealth. The accumulation of items does not guarantee happiness. Many Christians fall under the deception that they will be a success in life if they make wealth their goal. Sadly, they forfeit a great relationship with God when they fall into the pursuit of riches. Proverbs 23:4-5 warns us against this type of thinking: “Labour not to be rich: cease from thine own wisdom. Wilt thou set thine eyes upon that which is not? for [riches] certainly make themselves wings; they fly away as an eagle toward heaven.” Another way to say this is: “Don’t overwork yourself in order to become wealthy. Stop trying to come up with your own understanding on this outside of God’s teaching! You are chasing things that will not stay with you!” Be neither frivolous in spending nor overworked in a chase for riches. An imbalanced approach to saving and spending will only lead you to a life of frustration. Slow down and think. Get a wider view; look at the options. Do not let the world tell you what to do.

Match each word with its correct definition. 1.25

_______

factory direct

a. an alternative to a bookstore

1.26

_______

frivolous

b. one who manages money or the affairs of a household

1.27

_______

impulse buying

c. trivial, not requiring serious thought; considered silly

1.28

_______

library

d. making a purchase on the super of the moment without careful planning

1.29

_______

steward

e. manufacture-to-consumer selling

Complete the following statements. 1.30

Proverbs 13.11 – “Wealth [gotten] by vanity shall be diminished; but he that gathereth by labour shall __________________ .” In other words, a person who tries to get money by fraudulent means will not get more, but the steady worker will add to his savings.

1.31

If you buy items at a retail store, there is a bit of ________________________ money that gets added on, meaning that money will not only go to the manufacturer but also to the store that stocks and sells the product. 10

1.32

Proverbs 23:4-5 warns us against an unhealthy desire for wealth: “Labour not to be rich: cease from thine own _________________________ . Wilt thou set thine eyes upon that which is ________ ?”

1.33

A _______________________________ is another type of business that eliminates the retail part of the transaction. Many times a consumer can buy products in bulk, or larger quantities than is available in retail stores.

Circle the letter of the correct answer. 1.34

You might find bargains at a place where people may take their used clothes or other items and sign an agreement to have the store sell the clothes on consignment, meaning that the store will pick up a percentage and give a percentage of the money to the individual who brought it in for sale. This place is called a ___________________________ . a. warehouse club b. wholesale club c.

factory outlet

d. manufacturer e. consignment shop

Answer true or false. 1.35

__________

It is easy to tell yourself, “It’s only ten dollars,” but you will find yourself saying that again and again until you wonder where your money has gone.

1.36

__________

“Quick-cook” convenience foods are a better financial decision that home-cooking.

1.37

__________

A famous-name product that may be more expensive due solely to its high-recognition logo or slogan is known as a name-band product.

Adult Check

___________________ Initial Date

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VOCABULARY Study these words to enhance your learning success in this section. adjusted balance

Subtracting credits received during present billing period from balance owed the previous billing period

affinity cards

Transfers a portion of the annual fees or charges to the sponsoring organization of the card

annual fees

Yearly membership or other participation fees ranging from $25 to $50 for most cards

annual percentage rate A measure of the yearly cost of credit credit limit

The amount of spending that the credit card company will allow yo

free period

Allows you to avoid the finance charge by paying your current balance in full before “due date” shown

solicitation

Enticing a person to purchase a product or service

transaction fees

Other types of costs; might include a fee when you use the card to obtain a cash advance

CREDIT CARDS “Dad! Guess what!” shouted Jeremy, “I got approved for a credit card. Pre-approved, as a matter of fact! And look, Dad! It says I have a credit limit of $1000!” “Hmmmm, I’d better take a look at that a minute, son,” replied Jeremy’s father. “We have to hurry. The letter says that we only have 10 days to respond!” said Jeremy. “Before you get too excited, let me tell you a little bit about the proper way to use this. Then we will talk about whether you’ll accept it.” His father sat down at the kitchen table with Jeremy. “So how hard is it to use a credit card?” wondered Jeremy as his father tried to explain the various facts about credit cards. “All I need to do is figure out what I want to buy, use the card, and eventually pay off what I owe. Simple!” Five months later, however, as a store manager cut up his card, Jeremy realized credit is not as simple as that. It is a serious responsibility to have control of a credit card. One of the first dangers you will face is the mere idea that you have an established credit limit which may be more than you have ever had in your life. However, you must ask yourself: is this money really yours? A good fact to remember is that you are not paying on credit, you are actually paying on a debt. You see, if you were actually buying on credit, you would be required to pay off the complete price of the item before you could take it home. With a credit card, you have bought the item and taken it home. Your payments go towards what you owe. Let’s give you an example: Jeremy sees a television he would like to buy. The price is $300 for the set. If it was an actual credit program, Jeremy might approach the store manager and make a down payment for $50 on the TV and then leave the store. For the next five months, he would often put $50 towards the TV until he has paid the complete $300. His receipts would give him proof of making payments. When his receipts total $300, he would then go to the store and pick up the TV. He paid on credit and now he owns the TV. 12

If it were a debt (credit card) program, Jeremy might give his card number to the manager who would take $300 (plus taxes) off Jeremy’s credit card and give Jeremy the TV. Jeremy takes the TV home, and for the coming months Jeremy is paying on his debt. From the minute he leaves the store he is paying off a debt. A better name for a credit card might be a “debt card.” That is what the card is: an arrangement for you to “go into debt” in order to get the item that you want. The book of Proverbs warns us many times about borrowing and going into debt. Probably the most profound statement is found in Proverbs 22:7 – “The rich ruleth over the poor, and the borrower is servant to the lender.” The verse is simply saying that those who borrow money are controlled by those who lend it. Whether or not you have the ability to repay, this verse is true for you. You have an obligation to pay back the lender. It is sad to hear of Christians who will try to run from their financial obligations and refuse to pay debts they have! The Lord wants us to pay promptly and maintain an honest testimony. The passage in Proverbs 3:27-28 gives this advice: “Withhold not good from them to whom it is due, when it is in the power of thine hand to do [it]. Say not unto thy neighbor, Go, and come again, and to morrow I will give; when thou hast it by thee.” In other words, if you have the ability to pay the debt, as a Christian you are bound to do it. You are dealing with debt when you use a credit card. If you are able to pay off the debts as you incur them, that is a good sign that you are responsible enough to use a credit card. When you use a credit card, you are borrowing money, and you run into the reality of paying a “finance charge.” A finance charge is a cost for the convenience of borrowing money. Before selecting a credit card, you may want to be aware of the different credit terms that might apply to your card, because any term that applies to your card means an added-on charge to you. Under the Fair Credit and Charge Card Disclosure Act, you have the right to compare different cards’ conditions. Compare terms and fees before you agree to open a credit card. Direct-mail applications and pre-approved solicitations must reveal the following terms and conditions: Annual Percentage Rate. The “APR” is a measure of the yearly cost of credit. A “periodic rate” breaks down the yearly cost into the billing periods, so you know how much you are charged each billing period. Some credit card plans have a “variable rate” plan, which means that the rate you pay will be based upon a financial indicator they will explain in the agreement. Your interest payments may rise or fall based upon this plan. Free Period. A free period—also called a “grace period”—allows you to avoid the finance charge by paying your current balance in full before the “due date” shown on your statement. You can save a good bit of money if you pay your bills in full each month and your credit card plan gives you a free period. If the card does not offer a free period, the card issuer will impose a finance charge from the day you use your credit card or from the date each transaction is posted on your account. THINK ABOUT IT… “He that goes a borrowing goes a sorrowing.” —Benjamin Franklin How would Franklin’s quote be applied to today’s lesson? Discuss your views with your parents.

Adult Check

_______________________ Initial Date 13

Annual Fees. Most credit card issuers charge annual membership or other participation fees. These fees range from $25 to $50 for most cards and from $75 up for premium “gold” or “platinum” cards. Transaction Fees and Other Charges. A credit card also may involve other types of costs. For example, some card issuers charge a fee when you use the card to obtain a cash advance, when you fail to make a payment on time, or when you go over your credit limit. Some charge a flat monthly fee whether or not you use the card. Adjusted Balance. This balance is computed by subtracting the payments you made and any credits you received during the present billing period from the balance you owed at the end of the previous billing period. New purchases that you made during the billing period are not included. Under the adjusted balance method, you have until the end of the billing cycle to pay part of your balance and you avoid the interest charges on that portion. Some creditors exclude prior, unpaid finance charges from the previous balance. The adjusted balance method usually is the most advantageous to card users. Previous Balance. As the name suggests, this balance is simply the amount that you owed at the end of the previous billing period. Payments, credits, or new purchases made during the current billing period are not taken into account. An explanation of how the card’s balances are determined is required to appear on billing statements, applications, and pre-approved solicitations the card issuer may send you. Credit terms differ among card issuers, so be selective in choosing the card that is best for you. Depending on how you use it, one card may carry a much greater advantage than another. If you pay bills in full each month, then look at the size of the annual fee or other fees, since there is no balance to incur finance charges. If you expect to use credit cards to pay for purchases over time, the APR is a more important factor, since you will want to know how much you will pay on the balance you have. You’ll also want to know how widely the card is accepted and what services and features are available under the credit card’s plan. You may be interested, for example, in “affinity cards”—all-purpose credit cards that are sponsored by professional organizations, college alumni associations, and some members of the travel industry. Frequently, an affinity card issuer donates a portion of the annual fees or transaction charges to the sponsoring organization, or allows you to qualify for free travel or other bonuses. The government has laid out some rules governing the business of credit cards. Federal law prohibits card issuers from sending you a credit card that you did not request. (The issuer may, however, send you a renewed or substitute card without asking.) Card issuers are allowed to send or phone you a solicitation for a credit card. There are federal laws which protect cardholders. Some of these protections include: Prompt Credit for Payment. A card issuer is required to credit your account on the day the issuer receives your payment-that is the law. The exception would be if the payment is not made in accordance with the issuer’s requirements. Simply following the card issuer’s instructions in sending payments will help you avoid finance charges for late payments. Send your payments to the address on the payment envelope. If you have misplaced the envelope, look on the billing statement for the address. Refunds of Credit Balances. If you should need to return merchandise or pay more than you owe, you are allowed to have the option of keeping the credit balance on your account or asking for a refund by writing the card issuer. The card issuer is required to send you the refund within seven business days of receiving your notice. Errors on Your Bill. Keep your credit card receipts and compare them promptly when your bills arrive—you might find an error. Federal law provides specific rules that the card issuer must follow in order to efficiently correct billing errors. If you want the issuer to set things right, you must notify them in writing at the address specified for 14

billing errors about the mistake on your bill and you must do so within 60 days after the first bill containing the error was sent to you. Unauthorized charges. If you report the loss or theft of your credit card before it is used, federal law says you are not responsible for any unauthorized charges. Generally, the most you will owe for unauthorized charges is $50, but it is important that you report your card loss immediately. To minimize your liability, report the loss of your card as soon as possible, perhaps by using the toll-free numbers printed on the billing statements. Disputes about Merchandise or Services. If you have a problem with charged merchandise or services, and you attempted in good faith effort to work out the problem with the seller, the law gives you the right to withhold from the card issuer payment for the merchandise or services. You can withhold payment up to the amount of credit outstanding for the purchase, plus any finance or related charges. Be wise when you select a credit card. Shop around for credit card terms that are best for your budget, and be familiar with the terms of a credit card plan before you accept the card.

Complete the following statements. 1.38

The amount of spending that the credit card company will allow you is known as the __________________________ .

1.39

A good fact to remember is that you are not paying on credit, you are actually paying on a ________________ .

1.40

A _______________________ is also called a “grace period.”

1.41

The passage in Proverbs 3:27-28 gives this advice: “Withhold not good from them to whom it is ___________ , when it is in the power of thine hand to do [it]. Say not unto thy neighbor, Go, and come again, and tomorrow I will ___________ ; when thou hast it by thee.”

1.42

A card issuer is required to credit your account on the day the issuer receives your paymentthat is known as __________________ credit for payment. Mark the statements that are TRUE.

1.43

a. ______ A “periodic rate” breaks down the yearly cost into the billing periods.

b. ______ Proverbs 22:7 says, in effect, that if you borrow money you are the lender’s slave.

c. ______ Card issuers are not allowed to charge a fee when you use the card to obtain a cash advance. d. ______ A finance charge is a cost for the convenience of borrowing money.

1.44

a. ______ If you want the issuer to set things right, you must notify them in writing at the address specified for billing errors about the mistake you discovered and you must do so within 6 days after the first bill containing the error was sent to you. b. ______ A card issuer is required to credit your account on the day the issuer receives your payment. c. ______ An affinity card issuer donates a portion of the annual fees or transaction charges to the sponsoring organization. 15

d. ______ Keep your credit card receipts and promptly compare them when your bills arrive.

e. ______ A debit card allows you to qualify for free travel or other bonuses.

Mark the statements that are NOT true. 1.45

a. ______ Transaction fees might include a fee when you use the card to obtain a cash advance, when you fail to make a payment on time, or when you go over your credit limit. b. ______ A “variable rate” plan means that the rate you pay will be based upon a political indicator they will explain in the agreement. c. ______ A credit card is an arrangement for you to “go into credit” in order to get their time that you want. d. ______ Under the Fair Credit and Charge Card Disclosure Act, you have the right to comparison shop different card’s conditions.

Circle the letter of the correct answer. 1.46

An adjusted balance is computed by subtracting the payments you made and any credits you received during the present billing period from the balance you owed at the _________ of the previous billing period. a. beginning b. end c.

1.47

middle

In most cases the most you will owe for unauthorized charges is ________ . a. $10 b. $75 c.

$25

d. $100 e. $50

Answer true or false. 1.48

__________

1.49

__________ An explanation of how the card’s balances are determined is required to appear on billing statements.

1.50

__________ If you attempted in good faith effort to work out the problem with the seller about a charged item or service, the law gives you the right to withhold from the card issuer payment for the merchandise or services.

Adult Check

Proverbs 22:7 says, in effect, that if you borrow money you are the lender’s slave.

___________________ Initial Date 16

VOCABULARY Study these words to enhance your learning success in this section. bank balance

The current money available in the depositor’s account

cashless society

A society where consumers rely solely on credit cards, debit cards, electronic accounts and checks

check date

Tells the bank the length of time used in the processing of the check as well as the day of purchase

checking account

Type of bank account that uses written orders to direct payment from a bank based upon the funds available from a depositor’s account

memo/signature

Your personal autograph attesting to the validity of the checking account; the memo tells of the purchase

minimum balance

The smallest amount allowed in an account without a financial penalty

non-sufficient funds

Notice sent to the customer if his deposits are not enough to cover the costs of the check he has written

on-line information

Phone system allows you to call in to a service center and find out your balance up to the minute

overdraw

Writing a check for more money than is available in your account.

payee

The person who will receive the check as payment

process

Actions which take the check from the merchant to the accounting centers of the bank

CHECKING ACCOUNTS Every Christian should realize that he has the ability to combine the activities of honoring God and establishing a strong financial base. These two activities are not mutually exclusive of one another! The book of Proverbs tells of God’s approval of the hard worker in Proverbs 12:11 – “He that tilleth his land shall be satisfied with bread: but he that followeth vain [persons is] void of understanding.” Earning money in a responsible way is honorable to God; spending and saving it wisely is just as honorable. One way of keeping a responsible account of your spending habits is by using a checking account. Records are kept with the built-in accounting system that checkbooks use check-by-check. Unlike cash, there is little chance that a person will wonder how he lost track of his hardearned money! Over 75 percent of the country’s money in circulation is in checking accounts. One of the steps towards what many people call a “cashless society” was when checking accounts were established. With a signature, a customer can authorize a merchant to receive a specified amount from the customer’s cash reserve in a financial institution, usually a bank. A check is simply a written order that instructs a bank to pay a certain amount to the bearer. Checks are safer than cash, and the convenience makes them more popular than carrying around a wad of dollar bills in a purse or wallet. How do I get a checking account? If you were to stop by your local bank and ask to open a checking account, they would probably require a minimum balance. In many banks this is around $100, but some institutions will want a higher amount. If you have the sufficient amount, the account can be opened and you will be given a checkbook. These checks are blank, but they have specific numbers and codes on them both for accounting and safety procedures by the bank. 17

The Lord is my strength and my song. Exodus 15:2

John Doe 123 N. Coyote Dr. New River, AZ 85027

5/19/04

d an

The name of the payee ---------------------------25 Fifteen /100 My bank’s name My bank’s address For

$

15.25 Dollars

John Doe

wallet

1213211321 321321321 121321 2132132132

It is a simple procedure to write a check. Say you go to the local discount store and purchase a great-looking wallet which is on sale, including tax, for $15.25. As you present your purchase, the cashier repeats the total amount, and you draw out your checkbook. You fill out the check in four areas: 1. You write in the date—the bank needs this information for time of purchase and speed of transaction purposes. In other words, if that check does not get processed for some reason, the bank will want to know how long the check has been held up. The date also helps coordinate both your and your bank’s agreement as to the time and amount of money in your account so you are not charged for overdrawing the account. 2. You write in the name of the payee—the payee is the designated recipient of the check. You must print or write it legibly! The payee may even volunteer to rubber-stamp his business name on the check’s payee line. 3. In two places, you write in the amount of the money involved. In the first area it is written in numbers. In the second area, the amount is actually spelled out in words. One of the reasons for this procedure is to double-check the amount so that there would be no confusion or cheating as to the dollar cost. 4. You fill in the “memo” and sign the check—the memo is a personal reminder to yourself as to the shopping item. Did you spend $15.25 on a wallet or a sweatshirt? Or was it a couple of goldfish? Using the memo can give you the reasons and/or items you purchased. You may write something as simple as “gas station” or “grocery shopping” or “church tithe” in the memo page. Your signature is needed on the check for personal verification. Many times a merchant will ask you for some other identification. It is important to carry your driver’s license with you if you wish to write a check. Stores often want to match signatures and take a good look at you so they can make sure that this check is not stolen or being forged. It is important to remember the basic rule of a checking account: don’t spend what you don’t have! Many people have received a very unhappy note from the bank which tells them of a NSF notice. NSF stands for “non-sufficient funds,” and you can be hit hard financially twice if you have been charged with an NSF. Both the bank and the merchant may charge you a penalty. In some cases, banks charge anywhere from $18 to $25 for an overdraft. Some businesses may charge around the same amount, so you may be charged a total of $40 for a $20 purchase. You can begin to see the danger of writing checks for more money than you actually have.

18

Keeping a bank balance means you keep a current total of what you have deposited into your account as well as what you have spent out of your account. It is wise to keep a current update on the balance of your checking account. Many banks now offer a phone on-line information system. This phone system allows you to call in to a service center and find out your balance up to the minute. The information system will also tell you of the checks that have just been processed and which checks have still not been passed on to the bank. There are many different kinds of checking accounts. Some banks offer interest on the money that is in the checking account, while others may give you other benefits that can meet your particular financial needs. If you write a lot of checks, you might want free checking so you do not have to pay for each check you write. When you talk with a customer service representative, tell them of your particular needs in a checking account.

Match each word with its correct definition. 1.51

______ checking account

a. writing a check for more money than is available in your account

1.52

______ cashless society

b. the person who will receive the check as payment

1.53

______ minimum balance

c. written orders that direct payment from a bank based upon the funds available from a depositor’s account

1.54

______ check date

d. a society where consumers rely solely on credit cards, debit cards, electronic accounts and checks

1.55

______ overdrawing

e. the smallest amount allowed in an account without a financial penalty

1.56

______ payee

f. tells the bank the length of time used in the processing of the check as well as the day of purchase

1.57

______ non-sufficient funds

g. the current money available in the depositor’s account

1.58

______ processed

h. a notice sent to the customer if his deposits are not enough to cover the costs of the check he has written

1.59

______ bank balance

i. actions which take the check from the merchant to the accounting centers of the bank

Complete the following sentences. 1.60

“He that tilleth his land shall be satisfied with bread.” This verse about a diligent worker comes from __________________________ .

1.61

Earning money in a responsible way is ____________________ to God; spending and saving it wisely is just as _____________________ .

1.62

Keeping a _____________________________ means you keep a current total of what you have deposited into your account as well as what you have spent out of your account.

19

Check the statements which are TRUE. 1.63

a. ______

NSF stands for “non-sufficient funds.”

b. ______

Over 75 percent of the country’s money in circulation is in checking accounts.

c. ______

In some cases banks have charged anywhere from $18 to $250 for an overdraft.

d. ______

Some banks offer interest on the money that is in the checking account.

e. ______

The payee is your personal autograph attesting to the validity of the checking account.

f. ______

When you talk with a customer service representative, you can tell them of your particular needs in opening a checking account.

g. ______

One of the steps towards what many people call “cashless society” was when the postal currency was introduced.

Choose the correct answer for the following question. 1.64

Which has the best system for keeping track of your spending? a. _____ Using cash b. _____ Using I.O.U.’s c.

_____ Using checks

Answer true or false. 1.65

__________ A check date is necessary so the bank will know the amount of money used in the processing of the check as well as the day of purchase.

1.66

__________ A service that is used by a bank customer in which he uses pay stubs which are written orders that direct payment form a bank based upon the funds available from a trustee’s account is called a bank balance.

Adult Check

___________________ Initial Date

20

VOCABULARY Study these words to enhance your learning success in this section. add-ons

Extras that are above the standard components of a car

as-is

The car is purchased with no improvements to be added.

Better Business Bureau

Consumer “watchdog”; assists the buyer by reporting unfair business practices

down payment

A partial payment given in order to show intent of purchase

no haggle dealership

A car market where the price sticker is the final sale price. There is no discussion over a final price

option

A feature that may or may not be included in the overall package of the car

standard

Regular features that do not cost the car-buyer above the listed cost

warranty

A guarantee that is legally binding to hold the dealership to what it has promised

BUYING A CAR Tim walks onto the car lot. He has $6500 saved up in his bank account and is a little nervous at having to spend that type of money. He is not really sure about how to make payments on a car or how much to give on a down payment. He is, quite frankly, scared of car salesmen, and he does not really know that much about cars. As he hesitates on the lot, the salesman approaches and picks up on Tim’s insecurity. As they get talking, the salesman gets more self-confident, sure he can work a deal favorable to the company. As he shows Tim around to the side of the lot with run-down cars, he asks Tim, “You really don’t know too much about cars, do you?” Tim meekly replies, “No, sir, I sure don’t. That’s why I asked James, my dad’s mechanic, to come along.” James comes strolling around the corner, and the salesman’s face sags. After a half an hour, James steers Tim to another car lot altogether where Tim buys a low-mileage car at half the price he expected to pay. In thanks to James, Tim gives him a check for $50—after all, James just saved him $3000!

Buying a car can be one of the most challenging things a young adult can do. If you approach the sale without doing your homework, you could get add-ons which could end up creating unnecessary expense. Sally went into a dealership intending to buy a particular model for $6000. After she agreed to “extras” such as a stereo, air-conditioning. and power windows, her car totaled more than $10,000. Had she done a little research, she would have realized that the $6000 was the price for a car that was stripped down to its bare essentials. It is important to check the car sticker and find out what is standard and what is an option. A standard item means it comes with the car at no extra cost. An option will cost you above the price of the car. 21

Realize that not all car dealers are dishonest. Many fine people have car dealerships and want very much to do honest business with you. If you are prepared, you can have a very satisfactory experience in purchasing a vehicle, whether it is new or used. Here are some tips as you prepare to make your purchase: 1. Consider visiting a “no haggle” dealership first. Many of these dealers give good deals, and you do not have to argue. It’s like the old saying, “What you see is what you get.” The price on the car is the price you will pay. You do not have to worry about someone trying to slip in an extra expense. Before you walk in, though, look up the price of the car and have in mind what you expect to pay. 2. Plan on visiting an area that has a lot of dealerships and where the competition is sharp. In places like Houston, Phoenix, and even Knoxville, Tennessee, there are scores of dealerships all over the city—they will fight to give you a good deal because they not only want to sell you your first car, but also your second and third car. Some places such as Greenville, South Carolina and Burlingame, California have “motor miles” with a number of dealerships in one section of the city. You can go right from one dealership to another. You get a better deal when you can shop around. Good salespeople do not mind when a person has done his homework and knows what kind of car he wants and what he is willing to pay for it. Sales managers do not mind car shoppers who are well informed. They know that the customer is willing to be bold and yet be open to a fair deal. Look at the price stickers—is this car “as-is,” or are there warranties and other protections you would receive? Being in an area that has high competition will give you a better chance of the dealership going the extra mile to make you satisfied. 3. Do a little Internet homework before you go. Look up www.autoweb.com and find out the price of the car you want. See what the dealer has paid for the car you are interested in. If you want to know how much your payments would be, you can look that information up online also. By spending a little time in front of the computer, you may find lots of helpful tips on savings, dealerships, and financing. Check the Better Business Bureau. Ask them if there are any complaints about the dealership with which you want to do business. 4. Consider whether you want to buy a new car or a used car. Bill buys a $3000 car and sinks $2000 worth of repairs into it. Sam purchases a $12,000 car and has had no repairs to make. Look carefully, now. Who has spent more money? If appearance is top priority to you, you might not care about the financial end of buying a car as much as someone who really wants to save in the long run. There are many people who have driven cars for 20 years or more and have never purchased a new car. They feel as if they still come out ahead even with repairs, since their initial purchase price was so low. If you don’t mind not having the newest car on the block with all the little extras, you might consider getting a used car. 5. Whether you buy a new or used car from a dealership or an individual, bring along a knowledgeable friend. Take along someone who is well-versed in auto mechanics. Let them look at the car you are deciding to buy. Be on the lookout for telltale paint differences which may tell you that the car has been in a serious accident. Look at the odometer—has the car been under a lot of wear and tear? Drive the car. Remember to take the car for a spin and let your mechanic friend feel how the car responds to accelerating up hills. Does the engine knock? Does the car accelerate, or does it stay at the same speed? Your mechanic may also check the braking on the car. He may be able to point out small mechanical flaws you could not see. If you are a bit shy, bring a friend who is good at negotiations. Buy them a dinner or give them a check—they could save you hundreds and even thousands of dollars! The foundational truth to remember in car buying is that knowledge is power. If you have been able to prepare yourself before you actually arrive at the point of the sale, you increase your chances of purchasing the car you want at the price you want. 22

Finally, remember that buying a car should be objective, not subjective. The car may be your favorite color, but is that worth paying an extra thousand dollars? Just because a car has a softer interior does not necessarily justify a higher expense. Keep an objective, non-emotional approach to car shopping, and you will have a good purchasing experience. Match each word with its correct definition. 1.67

_______ “no haggle” dealership

a. will cost you above the price of the car

1.68

_______ warranty

b. a car market where the price sticker is the final sale price

1.69

_______ Better Business Bureau

c. you may find tips on savings, dealerships and financing that you may have not known before

1.70

_______ using the Internet

d. a guarantee that is legally binding to hold the dealership to what it has promised

1.71

_______ option

e. consumer “watchdog” assists the car buyer by reporting unfair business practices

Complete the following statements. 1.72

A partial payment given in order to show intent of purchase is called a ____________________ .

1.73

One of the basic things to remember when purchasing a car is that “knowledge is _______________ .”

1.74

A (an) _________________________ item means it comes with the car at no extra cost.

1.75

Remember that buying a car should be ________________________, not _____________________ .

Answer true or false. 1.76

___________ Drive the car. Remember to take the car for a spin and let your mechanic friend feel how the car responds to accelerating up hills.

Which statements are TRUE? 1.77

a. ______

Be on the lookout for telltale paint differences which may tell you that the car has been in a serious accident.

b. ______

“As-is” means the car will be upgraded to your specifications.

c.

It is not smart to buy a used car as your first car.

______

d. ______

Adult Check

A CD player in a car is usually considered an option.

___________________ Initial Date

Review the material in this section in preparation for the Self Test. The Self Test will check your mastery of this particular section. The items missed on this Self Test will indicate specific areas where restudy is needed for mastery. 23

SELF TEST 1 Match each word with its correct definition (each answer, 2 points). 1.01

______ 1 Corinthians 16:2

a. “Labour not to be rich: cease from thine own wisdom. Wilt thou set thine eyes upon that which is not?”

1.02

______ Nehemiah 10:37

b. a verse which could tell us of people giving more than a 10% tithe

1.03

______ Proverbs 23:4-5

c. “Wealth [gotten] by vanity shall be diminished….”

1.04

______ Proverbs 12:11

d. “He that tilleth his land shall be satisfied with bread.”

1.05

______ Proverbs 13:11

e. a tithing principle verse

1.06

______ minimum balance

f. series of actions which take the check from the merchant to the accounting centers of the bank

1.07

______ payee

g. the current money available in the depositor’s account

1.08

______ non-sufficient funds

h. the smallest amount allowed in an account without a financial penalty

1.09

______ processed

i. the person who will receive the check as payment

1.010

______ bank balance

j. notice sent to the bank customer if his deposits are not enough to cover costs of the check he has written

1.011

______ Better Business Bureau

k. will cost you above the price of the car

1.012

______ housing & utilities

l. 5% or more of a budget

1.013

______ taxes (actual %)

m. 25 to 40% of a budget

1.014

______ savings

n. consumer “watchdog” assists the car buyer by reporting unfair business practices

1.015

______ warranty

o. a guarantee that is legally binding to hold the dealership to what it has promised

1.016

______ option

p. 20% of a budget

Complete the following sentences (each answer, 3 points). 1.017

God should receive honor in our handling of finances. “Honour the LORD with thy substance, and with the firstfruits of all thine increase: So shall thy barns be filled with plenty, and thy presses shall burst out with new wine.” Where is this passage found? _________________________________ .

1.018

Making a purchase “on the spur of the moment” without careful planning is called __________ _____________________ .

1.019

Proverbs 13:11 – “Wealth [gotten] by vanity shall be diminished: but he that gathereth by labour shall __________________________ .” In other words, a person who tries to get money by fraudulent means will not get more, but the steady worker will add to his own _______________________ .

1.020

Here is a question any young person should ask themselves as they make a budget: are my creditors charging me with __________________________ ? 24

1.021

A ______________________________ is another type of business that eliminates the retail part of the transaction. Many times a consumer can buy products in bulk, or larger quantities than is available in retail stores.

1.022

Earning money in a responsible way is ___________________ to God; spending and saving it wisely is just as _____________________ .

1.023

Keeping a _________________________ means you keep a current total of what you have deposited into your account as well as what you have spent out of your account.

1.024

Total money earned, exclusive of any deductions, is called ___________________________ .

1.025

Many Christians give according to the New Testament verse found in 1 Corinthians 16:2, which is actually ___________ than a 10% tithe.

1.026

When you have listed all your income and expenses and want to find out how much you have left over, subtract the ____________________ from __________________ and see what comes out on the “bottom line.”

1.027

Make it a habit in your regular expense to include payments into a savings account. This is known as _____________________________________ .

1.028

Keep a list of your credit card __________________________ , checking account information and the telephone numbers of each credit card issuer in a safe place in case your cards or checks are lost or stolen.

1.029

When you sign receipts, draw a line through blank spaces above the ______________ so that nobody may add extra charges to your credit card receipt.

1.030

If you buy items at a retail store, there is a bit of _______________________________ money that gets added on, meaning that money will not only go to the manufacturer but also to the store that stocks and sells the product.

1.031

One of the basic things to remember when purchasing a car is that “knowledge is ___________ .”

1.032

A (an) ____________________ item means it comes with the car at no extra cost.

1.033

Remember that buying a car should be _____________________ , not ________________________ .

Mark the statement that is NOT true (each answer, 2 points). 1.034

a. b. c. d. e.

1.035

a. ______ A check date is necessary so the bank will know the amount of money used in the processing of the check as well as the day of purchase. b. ______ Over 95 percent of the country’s money in circulation is in checking accounts. c.

______ ______ ______ ______ ______

Nehemiah 10:37 is one of the Bible passages concerning the tithing principle. A bookstore is a good alternative to a library. Factory direct is manufacturer-to-consumer selling. Proverbs 23:4-5 warns us against an unhealthy desire for wealth. Biblical tithing basically means you will give 10 percent of your income to your Lord.

______ In some cases, banks have charged anywhere from $18 to $25 for an overdraft.

d. ______ It is okay to overlook a “small” expense. It is not that much of your overall budget. e. ______ The payee is your personal autograph attesting to the validity of the checking account. f. ______ When you talk with a customer service representative, you can tell them of your particular needs in opening a checking account. g. ______ One of the steps towards what many people call a “cashless society” was when the postal currency was introduced. 25

Answer true or false (each answer, 2 points). 1.036

__________ You might find bargains at a place where people may take their used clothes or other items and sign an agreement to have the store sell the clothes on consignment, meaning that the store will pick up a percentage of the money and give a percentage to the individual who brought it in for sale. This place is called a consignment shop.

1.037

__________ It is easy to tell yourself, “It’s only ten dollars,” but you will find yourself saying that again and again until you wonder where your money has been going.

1.038

__________ Frivolous means trivial, not requiring serious thought; considered silly.

1.039

__________ A famous-name product that may be more expensive due solely to its high-recognition logo or slogan is known as a bulk item.

1.040

__________ NSF stands for “non-sufficient funds.”

1.041

__________ Some banks offer interest on the money that is in the checking account.

1.042

__________ Proverbs 21:20 tells us, “[There is] treasure…and oil in the dwelling of the wise; but a foolish man spendeth it up.” The writer is telling us that the wise man will save reserves.

1.043

__________ Never charge more on your credit cards than you can afford to pay in one month

Circle the letter of the correct answer (each answer, 2 points). 1.044

One who manages money or the affairs of another person is called a ______ . a. mentor b. steward c. buyer d. manufacturer e. middle-man

1.045

Which is the best system for keeping track of your spending? ______ a. cash b. checks c. certificates of deposit

Which statements are TRUE? (each answer, 2 points) 1.046

a. ______

Be on the lookout for telltale paint differences which may tell you that the car has been in a serious accident.

b. ______

“As-is” means the car will be upgraded to our specifications.

c.

It is not smart to buy a used car as your first car.

______

d. ______

A CD player in a car is usually considered an option Score Adult Check

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_______________________ ___________________ Initial Date