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

Week 1 Recap Financial Principles Budget Goals (50/20/10/20) 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 Dave Ramsey Talks About Debt https://youtu.be/w73GeE1w_n0

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

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.

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.

Reducing Debt Car Home Student Loans 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

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

Saving How Can I Save? How Much Should 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

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.

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

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

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

IT’S TIME TO LEVEL UP OUR FINANCES!!!