Budgeting and Debt Reduction

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Budgeting and Debt Reduction

• Responsible Stewardship of
• Gods Great Gifts

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Personal Finance Workshops

1. Budgeting and Debt Reduction
2. Saving and Investing
3. Personal Financial Management
4. Stewardship
5. Charitable Giving

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Our time today

• Consumer Trends
• The debt crisis
• Causes of debt
• Budgeting
• Budgeting and debt reduction tips

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Consumer Trends Today

• 10 years general prosperity up to Sept. 2008
• 70,000 full time jobs disappeared in Dec. alone
• Canadians are awash in debt
• Canadian household debt at all-time high at 1
  trillion in 2006
• Interest on debt 1984 6 billion
• 2003 22 billion
• Average total household debt 127 of household
  income
• Savings 1980s 20.2 at highest point
  2005 1.2

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How has Debt gotten so out of control?

• Confusion between our needs and wants
• Driven by fear
• Generosity
• Circumstances beyond our control

Toronto Star Canadians starting to save cash,
shun debt Jan. 9/09
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Reversing the trend

1. Recognize it is not how much you make
2. Philosophy of all is a gift from God
3. Trust in God that HE provides
4. We cant take it with us
5. Good stewardship

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Reversing the trend

1. Live within our means use debt wisely
2. Prioritize our life decisions
3. Limit borrowing to appreciating assets
4. Understand risks
5. Develop a financial plan and use a budget

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What is a Budget?

• Budget Spending plan
• It helps you
• see where money comes from and where it goes
• communicate with loved ones
• set and achieve your goals
• take advantage of opportunities
• be a good steward of Gods great gifts

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Budgeting Myths

• Budgeting is painful
• You only need to budget if you are in financial
  crisis
• Budgeting requires long hours and lots of
  paperwork
• Source http//www.tuliptreepress.com/myths.htm

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The Three Steps of Budgeting

1. List available monthly income
2. List monthly expenses
3. Compare income vs expenses

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Tracking is key
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Budget Example
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Some budgeting tips

• Jar principle
• Use credit cards with caution - freezer
• Pay mortgage bi-weekly and pay more towards the
  principal
• Car pool/eliminate 1 car
• Pack a lunch
• Start cooking/plan meals
• Buy bulk

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Efficient steps for Debt Reduction
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Debt Elimination Worksheet Conventional
Item Amount Owed Interest Rate Months to Pay Off
Car Loan 6,000 9.2 22
Credit Card 3 1,000 28.8 25
Credit Card 1 2,000 11.5 26
Credit Card 2 1,600 18.5 27
Family 900 0.0 27
Line of Credit 9,550 8.9 95
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Debt Elimination Worksheet Snowball Effect
Item Amount Owed Interest Rate Months to Pay Off Months to Pay Off Months to Pay Off Months to Pay Off Months to Pay Off Months to Pay Off
Family 900 0.0 5          
Credit Card 3 1,000 28.8   9        
Credit Card 2 1,600 18.5     13      
Credit Card 1 2,000 11.5       17    
Car Loan 6,000 9.2         20  
Line of Credit 9,550 8.9           33
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Make the Commitment

• To yourself, in Gods presence
• As a family state your goals
• Consult a trusted advisor
• Create a plan a commitment to action

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What the Bible says about debt

• The rich rule over the poor, the borrower is
  servant to the lender
• Proverbs 227

You are bought at a price, do not become slaves
of men 1 Corinthians 723
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Want to go deeper?

• To review or start your plan
• consider FaithLife Financial
• Go Green - www.faithlifefinancial.ca
• download financial tools
• view seminars
• calculators
• great financial articles