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Lets Talk Money!

Lets Talk Money!. Part Two: Debt Reduction and Savings. Week 1 Recap. Financial Principles Plan (Luke 14:28-30) Protect/Stewardship (Proverbs 27:23) Provide (1 Timothy 5:8) Budget Goals (50/20/10/20) Income ≥ Expenses Reduce/Eliminate Debt Increase Savings Include Dreams. DEBT.

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Lets Talk Money!

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  1. Lets Talk Money! Part Two: Debt Reduction and Savings

  2. Week 1 Recap • Financial Principles • Plan (Luke 14:28-30) • Protect/Stewardship (Proverbs 27:23) • Provide (1 Timothy 5:8) • Budget Goals (50/20/10/20) • Income ≥ Expenses • Reduce/Eliminate Debt • Increase Savings • Include Dreams

  3. DEBT • Dave Ramsey Talks About Debt • https://youtu.be/w73GeE1w_n0

  4. Debt • Debt = Something owed by one party to another • Lender = Master, Debtor = Slave • Debt payments reduce buying power • Debt causes missed opportunities • Debt kills/stalls dreams

  5. Reducing Debt • Cash Over Card- Use a finite amount of cash to keep spending under control. • Want Versus Need- Prioritize; If you’re not willing to wait and save, it’s not that important. • Reduce Impulse Buys- Shop with your eyes not your card. Stores are designed to make you buy impulsively. • Avoid Interest- Make credit card payments in FULL each month.

  6. Reducing Debt • Snowball Method- Pay off the smallest loan first and add the previous payment to the next smallest loan. • • $9,000 car loan at 3.00% • • $10,000 credit card debt at 18.99% • • $15,000 student loan at 4.50% • Avalanche Method- Pay as much as possible on the loan with the highest interest rate first, while making minimum payments on the rest. • • $10,000 credit card debt at 18.99% • • $15,000 student loan at 4.50% • • $9,000 car loan at 3.00%

  7. Reducing Debt • Car • 20% down/ 4 year term/ payment < 10% monthly income • Continue making payments to yourself after payoff • Buy the next car with the cash saved • Home • Save for a down payment (Instant equity/lower payment) • Fixed rate mortgage • Payments+HOA+Insurance+Taxes< 28% of monthly income • Student Loans • Apply for ALL applicable scholarships/FAFSA • Total loans < Starting salary

  8. Saving • Why Should I Save? • Life Happens- Protect yourself from unplanned expenses and debt • Be Prepared for Opportunities- new job; college; investments; vacation • Enjoy the Fruits- Retire on your terms • Be a Blessing to Others

  9. Saving • How Can I Save? • Out of Sight/Out of Mind- Automate savings • Set Goals- Start small and reward yourself • Set Aside “Extra” Money- Tax Return/Gift/Bonus • Save on purpose • How Much Should I Save? • Start with a $1000 EMERGENCY fund • 6-8 months of expenses • Accomplished in 20 months following 50/20/30

  10. Saving • Savings Vehicles • Savings Account- Easy access to money, low interest rate • Money Market Account- Check writing ability, minimums/fees may apply, higher interest rates than typical savings accounts. • Bank CDs- Fixed rate and maturity date, early withdrawal penalty, longer terms have higher interest rates • FDIC Insures $250k per bank, per depositor.

  11. Saving • Savings Account • Brick and Mortar Banks- Very low rates ~.02% APY • $1000 for 5 years = 1,010.50 • Online Banks- Higher Rates/No In-Person Transactions • Ally Bank 2.2% APY • Marcus by Goldman Sachs 2.25% APY • Synchrony 2.25% APY • $1000 for 5 years = 1,118.95 • “Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t, pays it.” – Albert Einstein

  12. Saving • Money Market Account • Interest rates vary: 1% - 2.5% • Check writing/debit card ability • Number of transactions limited • Max of 6 (not including deposits and in-person transfers) • Minimum balances may apply. • FDIC insured

  13. Saving • Certificate of Deposit (CDs) • Interest rates vary based on length • 1yr (2%)/ 2 yr (2.5%)/ 5 yr (3%) • Early withdrawal penalties • Only use what you can afford to do without • If rates are equal use savings account • Ladder CDs • Lock in higher rates with longer terms • Maintain liquidity with shorter terms

  14. IT’S TIME TO LEVEL UP OUR FINANCES!!!

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