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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”.

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Basics of Managing Your Finances and Debt

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  1. Basics of Managing Your Finances and Debt

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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?

  14. 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

  15. 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

  16. Family basic financial plan • Housing • Health insurance • Retirement • College education • Disability insurance • Life insurance • Emergency fund

  17. 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

  18. 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

  19. 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

  20. Effect of Interest Rate on the Cost of Debt

  21. 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

  22. 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?

  23. 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

  24. 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%

  25. When your financial hole gets too deep • CCCS: Consumer Credit Counseling Services • Debt Management Plans • Bankruptcy • Contact your EAP for Assistance

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