COA 4131 1st Edition Lecture 21 Outline of Last Lecture I Finding a Financially Secure Insurer II Investment Defined III Preparations for Investing IV Four Steps in Investing Outline of Current Lecture II Review a Test is 50 questions multiple choice b Cost of housing and cars c Insurance Current Lecture A Review a Test is 50 questions multiple choice b Cost of housing and cars i Know what a mortgage is 1 Monthly payment on house or condominium 2 They are low around 3 5 or 4 5 percent used to be 18 percent 3 When you rent you sign a contract and have to usually pay first months lease up front and apparently they will give it back to you when you move out ii If living there less than 4 years better off renting versus buying iii People want houses 1 40 of housing is first time home buyers iv Condos versus co ops versus single family home v Need a lot of info when buying a house 1 How much you can afford a 2 and a half times rule vi Closing 1 Previous owner and new owner get together and exchange keys 2 About 1 to 2 hour meeting 3 Realtor and other people are there too vii Down payment 1 Typically 20 a Used to be 10 viii Tax benefits to owning a home 1 Not very good benefits to owning a second home ix Make an offer 1 Contingency fee 2 Holding a check 3 Binder a Give a check as a hold on a house but have to be sure on it x Mortgage 1 Fixed rate a 3 and half percent b Most people pick fixed conventional 30 year loan 2 Adjustable rate 3 Monthly payments a PITI i Principle interest taxes insurance ii Know how much this is going to cost to see if you can afford it 4 Budget utilities a Electric water and so on b Can get records from previous owner 5 Buying a car a Lease i 3 years ii 12 000 miles iii Not an asset can t resell it iv Temporary place b Prices of car i Can go on the internet now 1 Nationally and internationally ii Depreciation 1 Brand new car depreciates the fastest and then levels off 6 Most home owners try to sell themselves and then get help form realtor a Realtor usually takes 6 but can be negotiated c Insurance i Cost of housing and cars 1 Most expensive thing in budget is housing 2 Next is transportation a 18 of budget 3 Children is drive for people to buy house 4 Insurance is under transportation a Age of the driver records sex of driver ii Care 1 Wedding a Around 30 000 in US b Prenups i Signed before the wedding ii Good idea if children high incomes or business is involved c Postnups i After the wedding d Reception i Most expensive part of the wedding e Destination i Instead of having it in home town or college town they go somewhere exotic ii Expensive but it s a trend 2 Divorce a Everything the couple brought to the marriage is divided b Things are fought over usually i Car pets kids house ect c People think short range and not long range i Want a good lawyer especially for women d Men i Ages 30 34 is highest divorce rate e Women i Ages 25 29 is highest divorce rate 3 Medicare a For elderly people b 65 years and older c From the government 4 Medicaid a Low income people b From the government 5 Children a 300 000 for one child middle class b Girls are more expensive than boys c Suburban is more expensive than rural d Age of Majority i Financial independence ii 18 or 21 years depending on the state e Biggest cost is housing i Most people expand where they live f Child birth is expensive i Hospital stay is usually 24 hours after birth g If child is making a lot of money then they can be on their own taxes h Child is dependent in school they can be on parents income tax a long time i 24 or 26 years old and rising iii Insurance 1 Policy a Contract or agreement with company 2 Exclusions a Things they won t reimburse for 3 Property insurance a Replacement cost i If house is blown away from hurricane how much will they replace 1 80 usually b Auto insurance i Collision 1 Won t buy if your car is an old clunker that will be replaced anyways 2 Most expensive on auto 4 Health insurance a Different types of insurance and different types b HMO i Health maintenance organization ii Most people are a part of this iii Group plan to give people lower rates c PPO i Preferred provider org 1 Smaller list of doctors you can see d POS i Not as popular 1 Even smaller list e Long term coverage i For older people most likely f Some people have no insurance i Most adults do have life insurance g The least expensive and probably the best is to get insurance through employer 5 Life Insurance a Term i Short period of time b Whole life i For your entire life more expensive ii Has savings feature c Universal life d Variable life e Employer can give this out for free f Can offer annuities i Give them a set amount of money and they pay you a set amount for the rest of your life ii Variable annuities 1 Go up and down with stock market 2 Get a different amount each month 3 Most people do this when older g About 25 goes uncollected 6 Home insurance a Things in house you want to insure i Collection jewelry etc b House is illiquid i Hard to sell real fast and get money for it 7 Review policies regularly to make sure right people are on it and what you want to do iv Art Insurance 1 In Florida we have a lot of art museums and art collections 2 Every 3 to 5 years is when insurance should be updated on art
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