CHAPTER 5Buying the Necessities

CHAPTER 5 SECTION 1

Shopping for Food

Comparison Shopping

Involves making comparisons to help decide what to shop for and where to shop.

Only comparison shop as necessary by weighing time and transportation costs.

Advertisements and coupons can help save time and money.

The Trade-offs in Food Stores

Club warehouse stores generally offer the lowest prices, but their items are only sold in large quantities. Club warehouse store: store that carries a

limited number of brands and items in large quantities and is less expensive than supermarkets.

Convenience stores carry few items, have highest prices, but are open more hours. Convenience store: store open 16 to 24 hours

a day, carrying a limited selection of relatively higher-priced items.

The Trade-offs in Food Stores

Brand names are well known nationally or regionally.

Some supermarkets or wholesale stores have their own brand names known as private labels or store brands.

Generic products have no brand name.

CHAPTER 5 SECTION 2

Clothing Choices

Comparing Clothing Value

Style Buying current styles, which tend to change

each year, can be expensive because new clothes must be bought annually.

Buying classic styles, which are more basic and do not change as much, will help your clothes last longer, saving money.

Comparing Clothing Value

Durability Durability: ability of an item to last a long time Service Flow: amount of use a person gets

from an item over time and the value a person places on this use Way to measure durability of a clothing item.

Cost of Care Factor in the cost of care involved in clothing

that must be hand washed or dry cleaned versus machine washable.

More for Less

Clothing costs have decreased significantly over time.

70 years ago, a good suit cost about $40 and it took the average consumer 80 hours of work to make enough to buy the suit.

Today, a good suit sells for around $500 but it take the average worker 40 hours to afford the suit.

More for Less

Clothing sales generally happen at the end of the season.

Bargain fanatics buy items just because they are on sale.

If you buy an unnecessary item because it’s on sale, you may not be saving money at all.

CHAPTER 5 SECTION 3To Rent or to Buy

How Much Should You Spend?

Avoid spending more than you can afford.

You will need the cash down payment and closing costs. Closing costs: fees involved in arranging for a

mortgage or in transferring ownership of property

Be aware of points or fees paid to the lender. Points: fees paid to a lender and computed as

a percentage of a loan

Purchasing a House

Many different types of mortgages and financing packages are available.

Mortgages involve down payments and interest.

Mortgages are paid in monthly installments.

Property tax, homeowners insurance, and mortgage insurance are often included.

Types of Mortgages

Standard Fixed-Rate Mortgage Interest rate and monthly payments remain the

same over the term of the mortgage- usually 15 to 30 years.

Flexible Rate Mortgage Interest rate and monthly payments float up of

down along with interest rates in general. Rates can increase by no more than a few

percentage points over the life of the mortgage. There is often no limit on the amount of

decrease.

Types of Mortgages

Federal Housing Administration Mortgage The FHA will insure the entire amount of its

mortgages.

This added security makes it possible for borrowers to obtain a larger loan than they would with an uninsured mortgage.

Types of Mortgages

Graduated Payment Mortgage Interest rate is usually fixed for the life of the

mortgage.

Monthly payments are small at the beginning and increase gradually over the years.

For people who expect their income to increase steadily

Types of Mortgages

Veterans Administration Mortgage These loans can be obtained only by qualified

veterans or their surviving spouses.

The interest rate is generally lower than for other mortgages.

The VA guarantees a large percentage of the loan.

Loans with now down payment are possible under the VA program.

Renter Rights and Responsibilities

Renters usually sign a lease. Lease: long-term agreement describing the

terms under which property is rented

Be aware of the clauses in your lease; read it carefully.

Tenants have a right to use the property for the purpose stated in the lease, and a right to privacy.

Renter Rights and Responsibilities

Tenants must pay rent on time, take care of property, and notify landlord if major repairs are needed.

Some tenants must place refundable security deposit in case of damaged property or unpaid rent. Security deposit: money a renter lets an

owner hold in case the rent is not paid or an apartment is damaged.

Renter Rights and Responsibilities

Tenants must give written notice if leaving prior to lease’s end, which can result in fees and fines for breaking the lease.

Landlords must provide minimum services and obey building and safety laws.

Rent-control laws limit the amount a landlord can charge in rent.

CHAPTER 5 SECTION 4

Buying and Operating a Vehicle

Buying and Operating a Vehicle

Registration Fee Registration fee: licensing fee, usually annual,

paid to a state for the right to use a car

Normal Maintenance and Repairs The amount of normal maintenance- oil and

filter changes and minor tune-ups- depends on the amount the car is driven and how carefully the owner maintains the car.

Major repairs are not normally expected and are often expensive.

Buying and Operating a Vehicle

Extended Warranty One way to guard against paying for major

repairs is to buy an extended warranty. New-car warranties generally protect owners

for all major repairs except damage caused by improper use.

Depreciation Depreciation is a decrease in value of the car

as it ages. A car loses value every year even if it not

driven.

Buying and Operating a Vehicle

Most states require liability insurance be purchased before an automobile can be licensed. Liability insurance: insurance that pays for

bodily injury and property damage Rates cannot vary too widely because states

set limits on the rates that companies can charge within state borders.

Buying an Operating a Vehicle

Cost of insurance varies based on age, sex, and driving history. Young people almost always pay higher rates.

Single males in the 16-25 age group have the highest accident rate of all drivers and pay the highest rates.

Married women aged 25-45 have the fewest accidents and the lowest rates.