Get Out of the Debt Rat Race

1
Get Out of the Debt Rat Race

• Aim for Financial Freedom
• First Community Credit Union

2
Proverbs 227

• Just as the rich rule the poor, so the borrower
  is servant to the lender

3
What is the American Dream
Education for your children
4
American Dream
To some A Secure Job until you can Retire Own
your Own Home Retire Comfortably Visit Your
Children and Family Have a Summer Home by the Lake
5
What People Want

• 56 want a house by the beach
• 66 expect to become millionaires
• Only 8 have made it so far
• 46 of all millionaires own investment real
  estate
• 26 of millionaires own their own business
• 56 of Americans dream of owning their own
  business
• 4.2 are in the process of starting a business
• 1 in 3 will actually launch a company
• 56 of those will fail within 4 years

6
How about this Dream!Financial Freedom
Being able to do what you want, when you want,
and not having to worry about how much time it
takes or how much it costs.
Being financially dependent on NO ONE
7
What is Reality
A US Department of Health and Human Services
study saysOut of every 100 people reaching age
65
8
Snap Shot of American Finances

• According to the Wall Street Journal 70 of all
  consumers live paycheck to paycheck
• According to the American Bankruptcy Institute
  1,3million file every year. 97 are personal not
  business bks.
• 70 are Chapter 7s (Total Bankruptcy)
• 95 of those are declared No Assets
• In 1929 only 2 of homes had a mortgage
• 1962 only 2 did not have a mortgage

9
Typical Household

• Christian Financial Concepts says that the
  typical American household has 38,000 in debt
  and the total consumer debt has tripled since
  1980
• A poll published in USA Today stated that 55 of
  Americans worry about their money
• 46 of all Americans have less than 10,000 saved
  for retirement.
• According to Automatic Data Processing Inc. 20
  of workers would not be able to make a mortgage,
  utility, or credit card payment if
• they missed a paycheck.

10
Proverbs 2712

• A prudent person foresees the danger ahead and
  takes precautions. The simpleton goes blindly on
  and suffers the consequences.

11
Monthly Savings Required to Reach Your Financial
Freedom Goal
12
Did you Know You Are Already a Millionaire

• If you average 25K annually over 40 years, you
  will have earned 1 million dollars in your
  lifetime.
• Where does it all go?
• 37 - 50 to taxes
• 20 to home mortgage interest
• 10 to other credit interest
• Only 20- 33 for you!
• Thats 8,250/yr687 per month159/wk for you
  to live on.

13
Psalms 3721

• The wicked borrow and never repay, but the godly
  are generous givers.

14
Must have a Plan

• People do not plan to Fail
• They Fail to Plan
• The plans of the diligent lead surely to plenty,
  but those of everyone who is hasty, surely to
  poverty.
• Proverbs215 (NKJV)

15
Emergency Fund

• Must put away some money to prepare for the
  unexpected events that cost you money.
• Car problems (Battery, Tires, etc)
• Washing Machine goes out
• Minor Medical issues
• Have money set aside so you can pay cash for
  these minor setbacks!

16
Stop using Credit

• Cut the credit cards up
• If you must keep one, keep the FCCU credit card.
• The only way to pay these off is to stop using
  them first.

17
Start Paying Debt

• Debt Snowball (Dave Ramsey)
• Systematic way to eliminate debt
• Start with the easiest
• Be consistent
• Reward yourself when you pay one of the suckers
  off!

18
Calculating Your Debt Pay-Off PriorityMy
personal debt elimination worksheet
19
Calculating Your Debt Pay-off Priority
My personal debt elimination worksheet
20
Where does the Monthly Accelerator come from?
21
A Built In Accelerator
22
When will I be Debt-Free?
Out of Debt in about Seven Years
DebtElimination Time Calculator
Total Debt 108,080
Total accelerated Monthly Payments 1620
23
Proverbs 2120

• The wise have wealth and luxury, but fools spend
  whatever they get.

24
Credit Cardsthe balance that wont go away

• According to RAM Research (2004), 64 of
  Americans carry a balance on their credit cards.
• The average household now has six credit cards
  with total balances around 10,192, up from four
  cards and 6,400 in balances five years ago (RAM
  Research 2004)
• According to CardTrak of America, most credit
  card companies set their minimum payments at 2
  of the outstanding balance or 10 per month.
• Making the minimum payment on a 4,800 balance
  (average total balance of US card holders) at the
  average annual 17 interest rate would take you
  39 years and seven months to pay off.
• You would pay 10,818.63 in interest alone, and a
  total of 15,619 for the privilege of charging
  the 4,800
• On average, youll spend 112 more on a credit
  card purchase than when using cash.

25
Credit Card Voodoo

• A 2,000 dollar Furniture Purchase!
• Boy are we excited, except that it will take 31
  years, 2 months to pay off the balance (paying
  minimum required) and you will pay 8,202 in
  interest alone! (19.8)
• What do you think the sofa will look like when
  you finally pay it off?

26
Romans 138

• Pay all your debts, except the debt of love for
  others.

27
If you make a 300 monthly payment for half your
working life

• You give up 1,898.42 in your future so you can
  spend 300/mo now on credit!
• Invest your 300 a month in a mutual fund with a
  10 return, you could draw a monthly income of
  1,898.42
• FOR THE REST OF YOUR LIFE!!!!!!!!

28
Case Study Joe Susan LuckyOur average
American Family

• Total Household Income 47,211 (3,935/month
  gross net 2,951 approx)
• Accelerator Margin 390 (10 of gross monthly
  income)

29
Debt Free in 7 Years and 7 Months!

• 20 years and 9 months faster than normal!
• They saved 105,407 in interest by following this
  debt elimination plan!
• Interest saved Equals Interest Earned A 31.32
  Guaranteed Return!
• Six Month Cash Reserve They can now live on 58
  of their Income!
• 58 of their income because they have no debts!
• Build 1,278,260 in Real Wealth using the same
  money they were paying bills with! After building
  a 6 months cash reserve Joe and Susan put their
  1,620 into a Mutual Fund paying 10 annual rate
  of return, for the remaining 20 years and nine
  months that they would have been paying off their
  mortgage!

30
What Do I Do?

• Two Simple Steps
• Stop the Credit Spending (Plastic Surgery)
• Make the Plan to get out of Debt!

31
Debit Cards

• You cant Spend More Than You Have

You Have The Convenience of a Credit Card
32
What Should I Do First?

• 1st- Pay off Debt
• 2nd- Invest

33
But Shouldnt I Save First?Would Joe and Susan
be better off to save their money instead of
paying off debts
34
In both strategies Joe and Susan pay out 550,800

• During 28 years in the previous chart we see that
  by paying debt first, they will come out 783,729
  ahead!

The reason the Lucky family came out ahead by
paying off their debt first is because more of
the money they wouldve wasted, paying interest
to others (they saved 105,407 in interest
payments), went to work building wealth FOR them,
instead!
35
Comparing Debt Free Income to Income with Various
Debt Loads
36
What you should do when you are debt free

• Build a Ready Cash Reserve
• Use a FCCU Money Management Account
• Build Your Wealth
• Maximize Employer Matching Programs
• Open a Roth IRA
• Operate on Cash!!!!!!!!!!!!!!!!

37
Lets Summarize The System is stacked against
you Credit Cards Auto Loans Mortgages Taxes Suck
the financial life out of you
38
Get out of Debt Build your accelerator Do what
needs to be done to get out of debt Cut back
spending Brown Bag to Lunch Cut back on
Entertainment Car Pool Cut Taxes Work a 2nd
job Plan how you are going to accomplish this
Mission!
39
Start Investing
Mutual Funds Real Estate What you know
about! Educate Yourself Get sound Advice!