Presentation on theme: "Overcoming Debt. 2 06/29/2007 2:30pm eSlide - P4065 - WorkLife4You Some statistics to consider Average credit card debt per household - $15,788 (May 2010)"— Presentation transcript:
2 06/29/2007 2:30pm eSlide - P WorkLife4You Some statistics to consider Average credit card debt per household - $15,788 (May 2010) College loans alone now total almost $830 billion (said another way, $830,000,000,000!) Credit card penalties estimated at $20.5 billion in 2009 National default rate on credit cards almost 28 percent Home foreclosure rate worst since Great Depression
3 06/29/2007 2:30pm eSlide - P WorkLife4You Objectives How did we get here? Good debt or bad Cost of credit Trouble signs Managing debt problems Managing your spending and savings Strategies to reduce or eliminate debt
4 06/29/2007 2:30pm eSlide - P WorkLife4You How Did We Get Here? Credit card offers were easy to come by Great stock market run during 80s and 90s Home values appreciated Education expenses Medical expenses Putting off the inevitable
5 06/29/2007 2:30pm eSlide - P WorkLife4You Good Debt or Bad Debt? Long-Term Benefits Mortgage Education Automobile Secured, lower rates Short-Term Benefits (but long time to payoff) Credit Cards Store Cards Unsecured, higher rates
6 06/29/2007 2:30pm eSlide - P WorkLife4You The Cost of Credit The most powerful force in the universe is compound interest – Albert Einstein Principal:$3000 Rate:15% Payments:$100 Total Payments:$3,784 It cost you $3,784 to spend $3,000!
7 06/29/2007 2:30pm eSlide - P WorkLife4You Trouble Signs? You can only make the minimum payment each month You have late payment penalties You are using your credit card to pay regular expenses (groceries, gas, etc.) Your total debt payments exceeds 35% of your take home pay (not including your home mortgage)
8 06/29/2007 2:30pm eSlide - P WorkLife4You Managing Debt Problems Contact your creditors first Try to work out a repayment plan you can handle Follow up in writing Consider a qualified Credit Counseling Agency (www.nfcc.org)www.nfcc.org - Debt Management Plan (DMP)
9 06/29/2007 2:30pm eSlide - P WorkLife4You Managing Spending – Create a Spending Plan Fixed Expenses Housing Utilities Car payment Insurance Groceries Discretionary Expenses Travel Dining Out Entertainment Shopping Sports/hobbies Club fees Cable/phone services
10 06/29/2007 2:30pm eSlide - P WorkLife4You Manage Your Savings Pay yourself first Create Emergency fund - determine appropriate size of fund - set aside as savings, not investment Set aside money to reduce debt
11 06/29/2007 2:30pm eSlide - P WorkLife4You Get Out of Debt! Freeze credit card spending Reduce discretionary spending Re-direct that spending to increase monthly payments Payoff one card Parlay increased payments to next card
12 06/29/2007 2:30pm eSlide - P WorkLife4You Can You Reduce Spending by $50? Credit card #1 - $1000 balance, 10% $50 payment Credit card #2 - $3000 balance, 15% $100 payment Credit card #3 - $5000 balance, 18% $100 payment Cutting back on discretionary spending allows us to save an additional $50 a month that will be used to pay credit card #2
13 06/29/2007 2:30pm eSlide - P WorkLife4You Impact on Credit Card #1 Original $50 monthly payment on $1000 balance 22 months, $98 interest Add additional $50 from reduced discretionary spending ($100) 11 months, $48 interest Payoff time cut in half!
14 06/29/2007 2:30pm eSlide - P WorkLife4You Parlay Your Payments! Credit Card #2 - $3000 balance was lowered to $2269 over 11 months it took to repay Card #1 Add the amount of Card #1 payment to this monthly payment ($100 + $100 = $200) Payoff in 13 months, interest expense reduced to by $220!
15 06/29/2007 2:30pm eSlide - P WorkLife4You Finish it up! Roll $200 from previous payments towards card #3, total of $300 Current balance - $4284 Card paid off 17 months later In 3 ½ years, you have eliminated $9000 of credit card debt!
16 06/29/2007 2:30pm eSlide - P WorkLife4You And the winner is... You! Reduced interest payments by $2,327 Cut payoff period in more than half (from 94 months to 41 months) And, most importantly, you are now debt free! What if you could save more than $50?!
17 06/29/2007 2:30pm eSlide - P WorkLife4You Getting Out of Debt Review The economy will change for better and for worse – adopt good habit for any season Credit costs money – minimize your interest expenses Dont wait too long before getting help if you are experiencing problems dealing with your debt payments (www.NFCC.org)www.NFCC.org Take time to understand your spending and savings habits and goals. Are they in sync? Find a strategy to get out of debt!
18 06/29/2007 2:30pmeSlide - P WorkLife4You WorkLife4You Resources Finance Web Service –Credit & Debt Library –Personal Finance Library Interactive Calculators Savings Amount, Amount Saved, Savings Rate, Spending Rate, How Much Can I Borrow? HTML Articles Related Web Sites Audio Tips and Podcasts Budgeting Basics, Money Management: Goals and Action Plans On Demand Webinars Save $5000 This Year, Make Money Not Excuses, How to Improve Your Credit Score WorkLife4You Guides Personal Budgeting Worksheet, 66 Ways to Save Money, Knee Deep in Debt WorkLife4You web site
19 Let WorkLife4You Make Your Life a Little Easier ! Contact WorkLife4You 24/7: WL4-NOAA ( ) (TTY ) Look for the Member Login box Not a registered member yet? Follow the Start Now link and enter Registration Code: noaa