Build Wealth, Not Debt

1
Build Wealth, Not Debt

• Strategies for helping clients out of poverty

2
How wealthy are you?

• Lets calculate your net worth
• (Total the value of your assets)
• - (Total your liabilities)
• ___________________________
• Your Net Worth

3
Asset Poverty

• Asset poverty is defined as a household without a
  sufficient net worth to subsist at the poverty
  level for 3 months.
• A crisis pushes these households into poverty or
  homelessness.

4
If your clients income was disrupted, would
your client be able to live at poverty level for
three months?
5
If your income was disrupted, would you be able
to live at poverty level for three months?
6
How do we build wealth?

• Five steps
• 1. Write down your goal.
• 2. Pay bills on time.
• 3. Pay necessary living expenses first.
• 4. Set aside money for emergencies.
• 5. Save for your goal.

7
How do we build wealth?

• Five steps
• 1. Write down your goal.
• 2. Pay bills on time.
• 3. Pay necessary living expenses first.
• 4. Set aside money for emergencies.
• 5. Save for your goal.

8
Write down your goal.

• My goal is
• The cost will be
• I will complete my goal by
• I will save ______ each week (or month) to reach
  my goal.

9
Study of Harvard MBA students

• Students were asked
• Have you set clear, written goals for the
  future and made plans to accomplish them?
• Only 3 had written goals and plans. Ten years
  later, the class members were interviewed again.
  The 3 that had clear, written goals were
  earning, on average, ten times as much as the
  other 97 put together.
• From What They Dont Teach You in the Harvard
  Business School by Mark McCormack.

10
How do we build wealth?

• Five steps
• 1. Write down your goal.
• 2. Pay bills on time.
• 3. Pay necessary living expenses first.
• 4. Set aside money for emergencies.
• 5. Save for your goal.

11
Pay bills on time.

• One-third of your credit score is based on your
  bill payment history.
• Your credit report affects your employment,
  housing, utilities, insurance, transportation,
  and loans.

12
Understand your credit report.
13
What happens if you fail to pay on time?
14
What does poor credit cost me?

• FICO credit score
• A 900-720 Banks will lend at best rate.
• B 719-660 Banks will lend at good rate.
• C 659-600 Banks will not lend.
• D 599-500 Banks will not lend.
• F lt500 Need a co-signer with good credit.

15
How many lines of credit do I need?

• Five lines of credit
• 1. Rent / mortgage
• 2. Power bills
• 3. Car insurance
• 4. Phone
• 5. Savings account

16
Should I open credit cards to improve my credit
report?

• No. Having more than two credit cards pulls down
  your credit score.
• Pay off your credit card each month, if possible.
  If you have to pay over time, pay off the card
  within 2-4 months of a purchase.

17
How do we build wealth?

• Five steps
• 1. Write down your goal.
• 2. Pay bills on time.
• 3. Pay necessary living expenses first.
• 4. Set aside money for emergencies.
• 5. Save for your goal.

18
Pay these items first

• Rent or mortgage
• Utilities
• Food
• Medication
• Car related expenses if necessary for work.
• Daycare expenses if necessary for work.
• Everything else is a luxury.

19
Do not pay lower priority creditors in a
particular month if it will jeopardize your
ability to pay necessary living expenses.
20
What if I have money left over to pay lower
priority creditors?

• Pay your creditors.
• Consider a debt management plan or
  self-administer a debt management plan (see Power
  Pay at httpspowerpay.org).
• Consider settling the debt, if appropriate.

21
How do we build wealth?

• Five steps
• 1. Write down your goal.
• 2. Pay bills on time.
• 3. Pay necessary living expenses first.
• 4. Set aside money for emergencies.
• 5. Save for your goal.

22
If you pay your bills on time and are on your way
to building a good credit record, then what
should you do?

• Save money.

23
Reflect on your goal.

• For example
• My goal is to save 3 months living expenses in
  an emergency savings fund.
• or
• My goal is to save at least 500,000 for
  retirement.

24
The Impact of Saving 20 a Week
25
The Impact of Time of Money
26
Easy ways to save

• 1. Pay yourself first.
• 2. Get your family on board with saving.
• 3. Use payroll deductions to automatically
  transfer money into savings.
• 4. When you finish paying off an installment
  loan, continue to make payments into your
  savings account.
• 5. Participate in an employer-sponsored
  retirement plan or a tax-deferred retirement plan.

27
How do we build wealth?

• Five steps
• 1. Write down your goal.
• 2. Pay bills on time.
• 3. Pay necessary living expenses first.
• 4. Set aside money for emergencies.
• 5. Save for your goal.

28
Save for your goal.

• Does your goal have a firm cost?
• Do you have a goal completion date?
• How much do you have to save each month to get to
  your goal?
• Who will you share your goal with to make it
  happen?

29
Lets apply the concepts.

• Observe role-play of client John Lafonds
  counseling intake.
• See handouts for John Lafonds file.

30
Look at your goal.

• Start saving today.
• Show your clients how to build wealth.
• Bring them out of poverty.
• Itll make your life richer for it.
• Thank you!