budgeting and debt reduction responsible stewardship of god’s great gifts
TRANSCRIPT
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Budgeting and Debt Reduction
Responsible Stewardship of
God’s Great Gifts
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Personal Finance Workshops
A. Budgeting and Debt
Reduction
B. Saving and Investing
C. Personal Financial
Management
D. Stewardship
E. 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: 1980’s =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 provides4. We can’t take it with us5. Good stewardship
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Reversing the trend
6. Live within our means – use debt wisely
7. Prioritize our life decisions
8. Limit borrowing to appreciating assets
9. Understand risks
10.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 God’s great gifts
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Budgeting Myths
1. Budgeting is painful
2. You only need to budget if you are in financial crisis
3. 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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Actual RecommendedBudget % of budget % of budget
Gross monthly income 6,979 Less: Tithe 697
Taxes and deductibles 1,276 Net spending income 5,006
Housing 2,102 42% 39%Food 700 14% 14%Transportation 754 15% 13%Insurance 125 2% 5%Debts 470 9% 3%Entertainment/Leisure 570 11% 6%Clothing 100 2% 3%Savings - 0% 4%Medical - 0% 1%Miscellaneous 179 4% 5%Investments 150 3% 7%Child Care/School 90 2% 5%
Total Expenses 5,240 Income vs Expenses (234)
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
AmountOwed
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
ItemAmount
OwedInterest
RateMonths 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 God’s 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 22:7
“You are bought at a price, do not become slaves of men”
1 Corinthians 7:23
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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