Name: Caitlin McDonnell Date: 10/5/2017

Chapter 8
Building Your Own Financial Plan - Your Personal Life Map
Your Goals for Chapter 8
1. Establish a credit limit that will enable you to pay credit card balances in full each month.
2. Select credit cards that will provide the most favorable terms at the lowest cost.

Analysis
1. Referring to your personal cash flow statement, determine how much excess cash inflows
you have each month. Based on this amount, set a self-imposed credit limit each month so
that you can pay off your balance in full. If you have existing credit card debt, use the
template below to determine how many months it will take you to pay off your balance
at three different monthly payment amounts. (The Excel template will perform the
calculations for you.) Revise your cash flow statement based on your decisions.

Alternative 1 Alternative 2 Alternative 3

If you have existing credit card debt, use th
Credit Card Debt $200 $175 $500 take you to pay off your balance at three dif
Monthly Payment $200 $200 $300 perform the calculations for you.) NOTE: d
Interest Rate per Year 7.000% 1.000% 6.700% loan information, but feel free to use the wo
current credit card balances.
Months to Pay off Debt 1.01 0.88 1.68

2. Use the following worksheet to select a credit card with favorable terms.
Rate the cards from "5" being the best in a category to "1" being the worst.

Bank Credit Card Scorecard

CREDIT CARD ISSUER

QUESTION 1 2 3 4 5
1. Annual fee 1 2 1 3 3
2. Interest rate on purchases 2 3 2 2 2
3. Interest rate on cash
advances 5 5 5 5 3
4. Transaction fee for cash
advances 3 5 2 3 4
5. Insurance on purchases 4 3 3 3 4
6. Credit earned toward
purchases at selected
businesses 3 2 5 4 2
7. Frequent flyer miles 2 4 2 4 1
8. Credit limit available 4 5 1 3 5
TOTAL 24 29 21 27 24

Personal Finance by Jeff Madura

Decisions
1. What is your self-imposed credit limit each month for future credit card purchases? How much of your cash
inflows do you need to allot each month to paying off any existing credit card debt?
My self imposed credit limit is about $200. I want to allot about $50 a month just to be sure that I can pay off my
credit card if I ever get over my limit.

2. What credit cards offer the most favorable terms for your needs?
My parents and I use our credit union's credit card and I will also look into American Express to get good
benefits.

Personal Finance by Jeff Madura