Seven Steps for Debt Elimination and Financial Peace

1. Seven Steps for Debt Elimination and Financial Peace Don L. Milne Zions Bank Financial Literacy Manager

2. How Do You Compare? • 77% of Americans live paycheck to paycheck. (CareerBuilder, Sept. 2010) • In 2007 the savings rate in America was minus 2%. (Federal Reserve Bank of St Louis, Nov. 2009) • The median IRA balance is $29,000. (Employee Benefit Research Institute, Jun. 2010) • The average American family (including those without debt) has over $30,000 in consumer debt. (Utah Foundation, Feb 2009) • Families with credit cards have an average of $10,000 of credit card debt. (Indexcreditcards.com, Feb. 2010) • Utah’s bankruptcy rate was #1 in the nation for much of the past decade. JumpStart Answer: Risk, Rate of Return, Liquidity.

3. Components Of Change KNOWLEDGE A habit can be defined as an intersection of knowledge, skill and desire. The Seven Habits of Highly Effective People, Steven R. Covey Change SKILLS DESIRE

4. Making the Switch • DIRECT The Rider • MOTIVATE The Elephant • SHAPE The Path Switch: How to Change Things When Change Is Hard, Chip and Dan Heath

5. 7 Steps for Financial Peace 1 Save a $1,000 emergency fund 2 Pay off all consumer debt 3 Save 3-6 months of expenses 4 Save 15% of income for retirement 5 Save for children’s college education 6 Pay off home mortgage early 7 Build wealth and give to others The Total Money Makeover, Dave Ramsey

6. 1. $1,000 Emergency Fund • Get one ASAP • Sell something • Earn more • Squeeze that budget • Decide with spouse what an emergency is. • Remember that long term this needs to equal 3-6 months of expenses (step 3)

7. 2. Snowball Debt • Debt consolidations don’t work for most people. • Pay minimum payments on all but smallest debt. • Use all money budgeted for debt elimination on smallest debt. • As each debt is paid off, use all available money on next smallest debt.

8. Can You Live Without Debt? • Don’t borrow for stuff that goes down in value. • Cash is always cheaper than credit. • Your children will do what you do, not what you say. • It is easy to overspend when using debt.

9. Envelope System • Each payday divide and place cash in envelopes for: • Food • Entertainment • Clothing • Household items • Mad money

10. Teaching Kids: Commissions, Not Allowance • Kids 20-40-40 Budget • 20% Giving • 40% Savings • 40% Spending

11. What Is Your Money Profile? Spender Mike Tyson Dave Ramsey Nerd Free Spirit Warren Buffet Saver Paul McCartney

12. Components Of Change KNOWLEDGE A habit can be defined as an intersection of knowledge, skill and desire. The Seven Habits of Highly Effective People, Steven R. Covey Change SKILLS DESIRE

13. Making the Switch • DIRECT The Rider • MOTIVATE The Elephant • SHAPE The Path Switch: How to Change Things When Change Is Hard, Chip and Dan Heath

14. What Do I Do Now? • Use Envelopes • Take the pledge: “I’m done with debt.” • Use a monthly Zero Based budget • Identify the step you should work on. When done, go to the next step.

15. Zions Bank, Your Partner for Financial Literacy • April - ABA’s National Teach Children to Save Day for K-12 • October – ABA’s Get Smart About Credit Day for high schools • Free one hour Dave Ramsey Super Saving Seminars for adults • 13 week Dave Ramsey Financial Peace University classes for adults and older children • don.milne@zionsbank.com