Living Wi$ely Session Four Session Four Living Wi$ely

Following Rule One Spend Less than You Earn  Have a balanced personal cash flow plan  Manage your paycheck  Manage budget busters  Change habits  Take time over major expenditures

Needs vs. Wants  What is the purpose of a car  What car accessories do you NEED  How large a house does your family NEED  What is the primary goal of a family vacation

Following Rule Two Save Now … Buy Later How Do We Know We are Following Rule Two?  Emergency account funded  A plan for short and long term expenses  10% of income dedicated to savings

Following Rule Two Save Now … Buy Later  Emergency Savings 5% of annual income 5% of annual income  Short Term Savings enough to pay cash on big ticket items purchased in the next 5 years  Long Term Savings set aside enough money to meet planned needs… retirement, college, wedding

Following Rule Three Know Debt  Know how much debt we have  Credit card debt is “0”  Consumer debt payments take less than 10 % of our income  Student loans take less than 5 % of our income  Mortgage debt takes less than 25 % of our income

Consequences of Debt  Reduces the standard of living  Reduces savings  Reduces giving  Causes frustration and stress  Causes relationship problems leading cause of divorce

Types of Debt  Credit Card – NONE  Consumer Debt – 10% of income  Mortgage Debt – 25% of income  Student Debt – 5% of income

Borrowing Test Am I …  Seeking contentment  Making an impulsive purchase  Making a purchase driven by pride/ego  Buying because everyone is doing it  Is this item likely to depreciate  Is the loan longer than necessary  Can I make the payments

More Borrowing Test  Is repayment a threat to:  Ability to save  Ability to give  Ability to care for my family  Is this loan is a good decision  Does spouse/partner have concerns

How to Get Out of Debt  Stop borrowing  Start with the smallest debt and pay it off as quickly as possible  Add the amount you have been paying on loan #1 to the amount you pay on loan #2  Continue the process until all debts are paid

Why Do People Have Financial Problems? They spend money they do not have

Why We Spend Money We Don’t Have  Lack of Discipline  Lack of Contentment  Lack of Goals

Credit Card Rules  One general purpose credit card  Don’t use credit cards to buy things impulsively  Pay off credit card bills each month  If you don’t pay off a credit card at the end of the month, cut it up

The Four “Ds”  Desire  Discipline  Decision  Delight

Useful Resources        

What We Have Learned  Understand our financial practices  Understand the three rules  A financial physical  Diagnose our financial situation  Develop a more secure financial position

Go in Peace And enjoy Living Wi$ely!