Transcript Basics of Managing Your Finances and Debt

Basics of Managing Your
Finances and Debt
At the conclusion of this presentation, the
participants will have received information in the
following areas:
How to set financial goals for yourself and your
family.
What information to consider when developing
your “family’s basic financial plan”.
How to talk to your partner about financial
objectives.
Learn how to achieve your financial objectives.
Learn the basics of budgeting.
Seminar Objectives 2
Learn to overcome the fears of living within a
budget.
How to create more money to achieve your
financial goals.
How to reduce your debt loads.
What to do when your cash flow does not
match your expenses.
What resources are available to help when
your financial situation gets out of control.
Basis for Managing Your
Finances
The outflow of cash can not be
exceeded by the amount of income that
you receive.
Avoid spending more money than you
actually earn.
Simple concept that is difficult for many
of us to actually achieve.
Importance of Developing a
Budget
Knowledge is power
Having a budget allows you the
freedom to know how you are spending
your money
Able to change spending patterns
Will be able to achieve the financial
goals that we have for ourselves and
our families.
Importance of developing a
budget
Budgets are a necessary evil.
Beware of luxuries that are dressed up as
necessities.
Do not count on windfalls.
Beware of spending creep.
Use income increases as a chance to save
Spending beyond your limits.
Most households spend more than they take in
Recognize signs of cash leakage.
ATM withdrawals
Basic Reasons for a Budget
A necessary tool for managing your finances.
Allows you to know where your money is
going.
Allows you to change your cash flow to better
meet your needs and goals.
Prevents waste.
A budget can improve your marriage.
A budget can get you out of debt
How to set up a successful budget
Start with a budget worksheet
Go through your check book or bills to
determine categories
Be sure to consider hobbies and your habits
Go through your pay stubs to calculate your
average monthly gross income
For each category, determine a budget
amount that reflects your actual spending
Track cash expenditures throughout the
month and place in each category
How to set up a successful budget
2
Subtotal the income and expense
categories
Subtract the total expenses from total
income
Moment of truth
Determine what to do with extra money
Determine areas that can be cut
Biggest budget busters
Negative attitude
Budget can be a means to an end
Lack of motivation
Why are you doing it?
Debt repayment or bk court agreement
Unrealistic expectations
What do you expect to gain?
Discover large amounts of lost cash
Identifying your financial goals
Most people struggle to meet day-to-day
expenses.
Importance of choosing the financial goals
that matter most to you.
Often financial goals can collide with one
another
Paying for your child’s braces takes money for
house down payment or college education
Financial Goals:
Buying a home
Send children to college
Save for retirement
Buy a boat/RV
Buy a vacation home/property for retirement
Take a vacation
Start own business
Return to school to finish degree/earn degree
Saving for an emergency
Getting out of debt
Importance of knowing your
financial goals:
Goals provide you with a direction
Can I achieve these goals or are they
just a dream
What changes are necessary to achieve
my goals?
What are the obstacles that prevent me
from meeting my financial goals?
Setting financial objectives:
Short-term and long-term goals
It is not possible to achieve all of your
goals
Important to narrow your objectives
Focus on the goals that matter
Time can either be your friend or your
enemy
Choose objectives carefully
Setting financial objectives 2
Include family members in this process
Be prepared for conflicts
Start now
Sweat the big stuff
Don’t sweat the small stuff
Most important, be prepared to change
Work towards the lesser goals after the
important ones have been achieved
Family basic financial plan
Housing
Health insurance
Retirement
College education
Disability insurance
Life insurance
Emergency fund
Resolving conflicts
Talk to your partner about the financial
priorities
Communicate!!!!!!!!!! You want their buy-in.
No single best way
If two goals offer similar rewards, which one
causes the least harm.
How many people will benefit?
Decide when more people will benefit from a goal.
Is someone’s health involved?
Money should be used to make life better. Illness
is a rainy day
Debt: What is it and how does it
grow?
Debt consists of the following expenses:
Housing
Utilities
Credit card debt
Car payments
Child support
Secured debts
Food/clothing
taxes
Compound Interest
When you owe money, you pay interest on
the debt. Each month you will pay interest
on the debt and all of the previous month’s
accumulated interest.
Rule of 72. Divide 72 by the interest rate to
see how quickly the debt will grow.
72/19.99=3.6 years
Effect of Interest Rate on the Cost
of Debt
Good Debt versus Bad Debt
Not all debt is created equal.
Some debt is an inescapable part of life
Good debts include home mortgages and
student loans
low interest rate, tax advantages
Be wary of double digit debt
Balances snowball quickly
Get Out of Debt1
Set the foundation
Where do you stand?
List all of your different debts.
Divide them into “good” or “bad” category.
Do you have too much “bad” debt?
How much are your total interest
payments?
How is your cash flow?
Get Out of Debt2
Steps to Eliminating Credit Card Debt
Planning the order of payoff
Reducing your interest rates with a phone
call.
Stop using your cards
Stop the flood of credit card offers
Always pay more than the minimum
Consolidate your debts
Importance of Making Payments
on Time
Fail to make payment by the due date
$29 late charge
Late payment twice in any six month
period
Interest rate can increase to 24.6%
Late payment three times in 12 months
Default rate of 28.9%
When your financial hole gets too
deep
CCCS: Consumer Credit Counseling
Services
Debt Management Plans
Bankruptcy
Contact your EAP for Assistance