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VIEWS: 2 PAGES: 112

									Debt, Money, and
   Happiness

 Strategies for Getting Out of Debt
                 and
             Staying Out
          MONEY & HAPPINESS
                      UNHAPPY CHILDREN


M
O
                                      HAPPY
N
             Most people are about as happy as
E
             they make up their mind to be. –
Y            Abraham Lincoln
    NEEDS: food, clothing, shelter, etc.


                           UNHAPPY
                                              *
            #1 Cause of Divorce

      • 70-80% of divorcing
        couples attribute the
        marriage breakdown to
         MONEY PROBLEMS

• #1 cause of worse
                        • Major money problem:
  money problems:
                          TOO MUCH DEBT
      DIVORCE
           MONEY & HAPPINESS
              UNHAPPY CHILDREN             TOO MUCH
                                            DEBT!
M
O
                       HAPPY
N
E
Y
    NEEDS: food, clothing, shelter, etc.


                    UNHAPPY
   The Greed Spectrum
Best                          Worst


Honest       Cheat    Steal   Murder
Legal

            Illegal
     What makes us
      susceptible?

Honesty  too trusting
Service With a Smile




The best cons use them too
 Don’t sign it -
unless you agree to it!
How can you agree to it, if you
don’t read it?
If you still don’t understand it,
get some help before signing!!!
         NOTHING
               is


         RISK-FREE

Especially nothing involving money
  The Greater the Rate

The
Higher          5
              4.5


the             4
              3.5
                3
              2.5
                2


Risk          1.5
                1
              0.5
                0
                    Reg. Savings   CD (Time Certificate)

                    in financial matters!
         Especially EXCEPTION?
   There’s nothing magic about
         getting out of debt.
  If it sounds too good to be true -

And – Its
usually                  It is!
Fraudulent!
        What Makes Utah – # 1
     in Bankruptcy? (#4 in 2003 )            (Id #7)


• Families:
                             Start when earning power
  – Start younger            is at its lowest =
  – Larger                   vulnerable to financial
                             crisis.
  – Divorce rate higher(?)
• Financial responsibility   We’ve got to play
  – Start younger            smarter!
  – Home ownership
• Name brands.        PRIDE!       Law of diminishing
                                   returns:
          What Makes Utah – # 1
       in Bankruptcy? (#4 in 2003 )    (Id #7)



                              Didn’t heed the
•   Vast majority: employed. advice:
•   Cost of living – average, “Spend less than
    salaries, below average   you earn.”
•   More, and larger cars.
•   Too trusting:
    – susceptible to loss.
If you are in debt, you’ve spent
   more than you’ve earned!
     (at some point in your life - unless you have a stash)
                                         Outgo
35
30                    Income
25
20
15
10

 5
 0
 It doesn’t matter so much how much you make,
 but how much you spend!        (Dale O Zabriskie)
     SPEND LESS THAN YOU
            EARN!
           Income
25
                    Outgo
20

15

10

 5

 0
         Spending Habits
Why did I spend more than I earned?

•   Tastes exceed income. (Extravagance)
•   Money as a mood changer.
•   Giving too much to the kids.**
•   Keeping up with others.
•   Too many toys too fast.
•   Health problems.
•   No willpower.
                 **Kids always want more than is good for them!
“Be not one of them that…are sureties
     for debts.” (Proverbs 22:26)

Don’t co-sign for relatives!
  Teach them how to build
  their own credit and use
  it wisely.
Especially don’t co-sign for
  anybody else!
Wants                  RVs
                       Jewelry
                       New car
    DO A
                       Cable TV
    DETAILED
    EVALUATION         Big-screen TV
    AND DEFER
                       Cell Phone
    SOME WANTS
                       Toys
    Especially focus
    on recurring       Vacations
    expenses.
                       Clothing
                       Shelter
Needs                  Food
     SOUND Debt Reduction Plans
Include the following:
1. Extra principal payments.
     either: Bi-weekly or
             Monthly…
2. Focusing on the highest-rate
   debt first...
3. Reduction of interest rates.
4.   28 other techniques???
              Pay Off Loans Early
• Bal    Rate Term   Pmt Total        Int Pd     Savings

• 100,000 6% 30 yr   600    215,838    115,838

• 100,000 6% 28.6 yr 610    209,840    109,840     5,998
• 100,000 6% 24.5 yr 650    191,100     91,100    24,738
• 100,000 5.75% 15 yr 830   149,474    49,474     66,364
     Bi-Weekly Payment Programs:
     A great way to
     pay off early, if:
Your paydays are Bi-weekly
Your lender accepts extra principal
Reputable money handler (some have skipped)
Low or no fees
WARNING: many charge a monthly service fee & set-up fee!
•           $ 150 setup fee     $ 5 bw service fee
            $ 4,000 setup fee   $25 bw service fee
The Advantage of
Bi-Weekly Payments:




13 full payments
    most years
    (26 half payments)
Every   ~11 years:
equivalent of      13 1/2
             mo.   payments

(by making 27 half pmts bi-weekly)



 ALMOST PAINLESS

                                     365 1/4  14 = 26.08929 biweekly periods in an av. yr
                                     26.08929  2 = 13.0446 full pmts in an av. Yr
                                     Every ~11 years 3 months have 3 paydays
                                     3 extra paydays -> 1 ½ extra full payments
                                     (1 ÷ .08929 = 11.19946 years)
                            Extra Principal:
                         Bi-Weekly or Monthly
• Loan                 Rate    Pmt             Term             Total Paid
                                                                                                  Save
100,000 8% 733.77 mo. 30 yr. 264,157
Bi-weekly:                      733.77
                                x ½
26.09 times per year          = 366.89 22.6 yrs 216,832                                      47,325
                                       (by paying 17,000 early, you avoid paying $47,325 of interest)




Extra Principal, mo. 733.77

x 13.05÷12= 790.81                     22.5 yrs 215,948                                      48,209
   Getting out of debt quicker, by focusing
          first on highest rate debts
                                                          After 1 year
Existing       Balance    Payment    Rate   Remaining     New            New    New
Obligations     (p & i)                     Term (yrs.)   Bal.           Pmt.   Term


1st Mort       78,721      651       8.5% 22.9 yrs. 77,554 651 21.9
Auto Loan      10,239      250      9.0%      4.1 yrs. 8,072 250                 3.1
Trailer        5,451       150      9.8%     3.6 yrs.       4,126 150            2.6
Credit Card    6,539       120      18.0%    9.5 yrs.       6,253 120            8.5
Doctor           400        40      21.0%      .9 yrs.           0          0      0
Dentist        1,200        50      19.0%    2.5 yrs.         794         90      .8
Totals        102,550      1261
   Getting out of debt quicker, by focusing
          first on highest rate debts
                                                          After .8 year (1.8 yrs total)
Existing       Balance    Payment    Rate   Remaining     New          New     New
Obligations     (p & i)                     Term (yrs.)   Bal.         Pmt.    Term


1st Mort       78,721      651       8.5% 22.9 yrs. 76,547 651 21.1
Auto Loan      10,239      250      9.0%      4.1 yrs.      6,194 250 2.3
Trailer        5,451       150      9.8%     3.6 yrs.       2,970 150 1.8
Credit Card    6,539       120      18.0%    9.5 yrs.       5,984 210 3.1
Doctor           400        40      21.0%      .9 yrs.           0        0        0
Dentist        1,200        50      19.0%    2.5 yrs.            0        0        0
Totals        102,550      1261
  Getting out of debt quicker, by focusing
         first on highest rate debts
                                                        After 1.8 more (3.7 yrs tot)
Existing      Balance   Payment    Rate    Remaining     New        New      New
Obligations              (p & i)            Term         Bal.       Pmt.     Term


1st Mort      78,721      651      8.5% 22.9 yrs. 73,863 651 19.2
Auto Loan     10,239      250      9.0%      4.1 yrs.     1,153 250             .4
Trailer        5,451      150      9.8%     3.6 yrs.            0       0       0
Credit Card    6,539      120      18.0%     9.5 yrs.     2,745 360             .7
Doctor           400        40     21.0%      .9 yrs.           0       0        0
Dentist        1,200        50     19.0%     2.5 yrs.           0       0        0
Totals      102,550      1261
  Getting out of debt quicker, by focusing
         first on highest rate debts
                        Assuming you can avoid incurring new debt!
                                                         After .7 more (4.4 years tot)
Existing      Balance    Payment    Rate    Remaining     New         New      New
Obligations               (p & i)            Term         Bal.        Pmt.     Term


1st Mort      78,721       651      8.5% 22.9 yrs. 72,760 1,261 6.2
Auto Loan     10,239       250      9.0%      4.1 yrs.           0       0       0
Trailer        5,451       150      9.8%     3.6 yrs.            0       0       0
Credit Card    6,539       120      18.0%     9.5 yrs.           0       0       0
Doctor           400         40     21.0%      .9 yrs.           0       0       0
Dentist        1,200         50     19.0%     2.5 yrs.           0       0       0
Totals      102,550       1261 ~$54,000 less int. Out of debt in 10.6 yrs
      HOW CAN I POSSIBLY DO
      SOMETHING LIKE THAT?

•Postpone
 some
 wants!
• (and some “needs”)
                               There are many who claim that you can

                    Re-finance and “save”                                      .

             Balance pmt                          rate       remaining
Mortgage    $ 87,724 $734                         8%         20 yrs
Car loan      13,056  415                         9%          3 yrs                      50,756
                                                                                         if keep paying
Other debts    8,000  203                        18%          5 yrs                      1352 no refi

Total debt  108,780 1,352                                  If you just keep paying
                                                           the old debts as above:       95,000
 Some refinance, then use the “saved”
 money to go deeper into debt.

New loan 111,780                782 new pmt 7.5% new rate 30 yrs.                    Interest &
                                                                                     new term fees
you “save”      delay paying      493 each month, but do you?                        173,000
                + interest

 If you refinance, but keep paying: 1,352 payoff in   9.75 yrs.                         50,000
                                   TEST
                                              If they’d
                                   WFF Refi      kept OLD
Rate            6%     10%
        (30 y 150k, after 2 yrs)                      6%
Balance 146,202 151,000                        146,202
Mo. Pmt       900   1,623                         1,234
Remaining      28y     15y                           15y
Total Int 155,971 141,078                       75,871
        Save       10,095                       80,100
    Tax Advantage of Mortgage


• How about if you give
  me $10,000 this year...


• ...and I’ll have my Uncle
  Sam give you $4,500 on
  April 15th next year?
 How Much Can I Afford to
        borrow?
• One tool used by
  many of the more                 Mo. Inc.
  reputable lenders :   100%
                         90%
• Debt-to-Income         80%
                         70%
                         60%                  Mo. Debt
  Ratio                  50%                  Pmts.*
                         40%
                         30%
                         20%             36%
                         10%
                          0%

                        *Including mortgage (or rent)
How Much Can I Afford to
       borrow?                      *


                      Mo.
                      Inc.
               100%                     Misc.
                90%
                80%
                                        Food
                70%
                                        Utilities
                60%
                50%                     Taxes
                40%
                30%
                20%                Debt pmts
                10%          36%
                 0%
How Much Can I Afford to
       borrow?
                      Mo. Inc.
                                   Misc.
               100%
                90%                Food
                80%
                                   Utilities
                70%
                60%                Taxes
                50%
                                   10%
                40%
                30%
                20%              Debt pmts
                10%
                 0%
How Much Can I Afford to
       borrow?
                                              Misc.
                           Mo. Inc.
                 100%                         Food
                  90%
                                              Utilities
                  80%
                  70%                         Taxes
                  60%
                                              10%
                  50%
                  40%
                  30%                 45%   Housing
                  20%
                  10%
                   0%

             ~½ of the BK in the Tribune study:
             housing cost > 45% of their income
How Much Will the High-
  Rate Lenders Loan?
                     Mo. Inc.
              100%
               90%
               80%
               70%
               60%
               50%
               40%
               30%
               20%
               10%
                0%
           Interest
Them that understands it,

    Gets it
Them that don’t
                     If you spend too
     Pays it        much of your future
                    earnings, you mess
                    up your future.
 Want to know an easy way to
make a million dollars next year?


                  • Invest
                    $10,000,000
                    at 10% APR
Want to know another way?

         • Put $1 into savings
           each month
         • -- for 168 years
          (at 5%).
    In order to stay out of debt:
• We must have savings.
• If we don’t, sooner than later, we’ll have to
  borrow again.




                       *
    Save $100 each month at 5%
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000                                         1st
 $8,000                                         year
 $6,000
 $4,000
 $2,000
     $0
          Savings $1200   Interest Earned $30
    Save $100 each month at 5%
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000                                          5th
 $8,000                                          year
 $6,000
 $4,000
 $2,000
     $0
          Savings $6000   Interest Earned $830
    Save $100 each month at 5%
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000                                            10th
 $8,000                                            year
 $6,000
 $4,000
 $2,000
     $0
          Savings $12000   Interest Earned $3530
     Save $100 each month at 5%

  $20,000
  $18,000
  $16,000
  $14,000
  $12,000
  $10,000
                                               15th
   $8,000
                                               year
   $6,000
   $4,000
   $2,000
       $0
            Savings $18000   Interest Earned
                                 $8730

Now earning > $110+ each month
            Savings Goal:
10%
 9%
 8%
 7%
 6%
 5%
 4%
 3%
 2%
 1%
 0%
      Emergency   For Sure   Buy Stuff
             Savings Goal:
10%
 9%
 8%
 7%
 6%
 5%
 4%
 3%
 2%
 1%
 0%
      Emergency   For Sure   Buy Stuff
             Savings Goal:
10%
 9%
 8%
 7%
 6%
 5%
 4%
 3%
 2%
 1%
 0%
      Emergency   For Sure   Buy Stuff
             Savings Goal:
10%
 9%
 8%
 7%
 6%
 5%
 4%
 3%
 2%
 1%
 0%
      Emergency   For Sure   Buy Stuff
       Penalty for
       withdrawal
10%
       IRA
 9%
 8%    401K
 7%
 6%    457K
 5%                  Inconvenient
 4%    Roth IRA      Location
 3%
 2%
 1%
 0%
      Emergency       For Sure      Buy Stuff
              MAKE IT
              AUTOMATIC!
  If you have high-rate debt:

10%
 9%
 8%
       High-
 7%    rate
 6%    debt
 5%
 4%
 3%
 2%
 1%
 0%
      Emergency   For Sure   Buy Stuff
                     Borrowing
• Each time you borrow, you
  get something…
• But you eliminate future
  options.
• Suggestions:
  –   Give
  –   Save
  –   Invest
  –   Only borrow for…
 Before you borrow, what?
Annual Percentage Rate A.P.R.
               • 9%
               •   (add-on rate)

                      APR?
               • ~20%
               • Some people only ask: “What’s my
                 payment?”
        Try to pay less than...


    13% A.P.R.
Slap yourself really
hard if you have
any debt > 13%!
  Why people pay more than 13%


Uneducated        BEAT 13%

Deceived      BEAT GET APR
                   13%
                   EDUCATION/TRAINING
Not enough income  Good paying job.
Bad credit   PAY EARLY
         Interest Rate Ceiling
40                                               36%
35
30
25
20                            18%
15            <13%
10
5
0
     Banks & CUs   Credit Cards     Small Loan
       <13%           ~18%           18-36%
                              TOO EASY LOAN COMPANY
                      Promissory Note with Security Interest
                            Security: 1996 Olds Ciera

 Annual                    Finance                Amount Financed         Total of Payments
Percentage                Charge                  The amount of credit
                                                  provided to you or on
                                                                          The amount you will
                                                                          have paid after you
Rate                                              your behalf.            have made all
                          The dollar amount the                           payments as
The cost of your credit   credit will cost you.                           scheduled.
as a yearly rate.

                          $4,442.80
300%                                              $2000.00 $6,442.80
 25% per month
Payment Schedule:                 12 Payments of $536.90                  .
Beginning 2/4/99 and on the 4th of each month thereafter until final payment is
made on January 4, 2000.
Default Charge: If the payment is late 10 days, you will be charged 5% of the
payment amount.
Credit Cards: Our Friends?




       Or Our Foes?
      Greatest
    threat to your
      finances?

• So easy to spend
  money you don’t
  have!
  If you are an impulsive buyer:




Hide your
credit card!          Or freeze it.
            Credit Card Purchase
400                   400

350                   350

300                   300

250                   250

200                   200
150                   150
100                   100
50                     50
 0                     0
      Bal                   Purch   Pmt   Bal
Simplified Credit Card Statement
Last Month’s Balance       128.42
 Payments received        (128.42)
               Interest      0
 Auto Repair Center        289.94
 Joe’s Gas & Goodies        14.32
 Babe’s Apparel Store       96.24


Ending balance            400.50
  Minimum Payment Due      20.00
  A very costly way to use credit cards
5000
4500
4000
3500
3000
2500
2000
1500
1000
 500
   0
 A very costly way to use credit cards
5000
4500
4000
3500
3000
2500
2000
1500
1000
 500
   0



       Minimum payment (and make no other purchases):
       At 18%
       34 yrs to pay off -- $ 12,893 int.
       At 21.9%
        88 yrs to pay off -- $ 43,729 int.
        A most expensive way to use
               Credit Cards
1200

1000

800

600

400

200

  0




       Over-limit fees
       Closed account fees
         If you are a cardaholic
• Do something drastic:
   – like cut up your credit
     cards. (AM: DOLP)
• For some, carrying a
  credit card is
   – like a reforming
     alcoholic carrying a
     bottle of whisky.
             Credit Cards:
If used well,
a great tool,
if used poorly,
financial ruin!
(If you have credit card debt, pay it off asap)!
    The Old Guy’s Advice:



•PAY OFF
YOUR CREDIT
  EACH
CARD
MONTH!!!!
                 Credit Cards
 • Set up Fee?

• Annual Fee?????               WonderCard

                                5224 789 003 290

• Grace Period!

• Rebate?

• APR?
27” TV
   •$400.00
   • cash
27” TV
On Sale
    •$350.00
    •by smart
        shopping
    •   $50 / 80% = $62.50 earn
    •   $62.50 / 20 = ~3 hrs
27” TV $400.00
  Credit Card
        •   $26.00 per mo.
        •   18% A.P.R.
        •   18 mo. pmts
        •   $59.00 interest

        • Total Cost $        459
        •   $59.00 / .80 = $74 earn
        • $74 / 20 = ~3.7 hrs
27” TV $400.00
  Finance Company
          •   36% A.P.R.
          •   18 mo. Pmts.
          •   $29.00 per mo.
          •   $123.00 int.

          • Total Cost $   523
          • $123 / 80% = $154
          • $154 / 20 = ~7.7 hrs
27” TV $400.00
   Rent-to-Own
        • $70.00 mo. pmt
        • 18 months
        • (196% A.P.R.)
        • ($860.00 int.)
        • Total Cost $   1260
  27” TV $400.00
Too Easy Loan (Bad Credit OK)
               •   300% A.P.R.
               •   Car Title Pawn
               •   If 18 months
               •   $102.00 payments
               •   $1,433 interest


               • Total Cost $   1833
               • $1433 / 80% = $1791
               • 1791 / 20 = 89 hrs
27” TV $400.00
Payday Loan
                 110
                 100
           10%    90
                  80
                  70
                  60
                  50
                  40
                  30
                  20
                  10
                   0
TV $400.00                  110
                            100

Payday Loan                  90
                             80
                             70
                             60
          10% per week       50
                             40
          520% APR           30
                             20
                             10
          $174 payments       0

          $2,725 interest
          18 months (12 weeks max)


          Total Cost $   3125
 Hopelessly buried in debt
                                     Payday Loans at
• Take home pay $900
                                      ~520% APR:
• Rent      $380 ~35% gross       1     $500 50
                                  2       578 58
• Credit cards:                   3       450 45
       Balance Min Pmt
                                  4       595 59
                                  5       425 42
• 1 $5,100 $150                   6       500 50
                                  7       800 80
• 2    4,200 75                   8     1000 100
• 3    3,000    50                9       125 13
                                  10      500 50
• 4    9,100 150                  11      350 35
• 5    2,500 50                   12      120 12
                                  13      120 12
Total 23,500 475                  14      575 57
                              *
    Disposable inc. 45            Total 6,638 651 wk
Why?
       •   Hobbies > income
       •   Low income
       •   Bad Credit
       •   High-cost lenders
Money Wasters:

        Gambling
        Alcoholism
        Drugs
             Mortgage Loans:
            Compare All Costs
          Before Signing Anything
•                  Typical    NWFin        Diff
• Re-financed      $147,000   $147,000
•   “Closing Costs” $4,000     $17,000    $13,000
•   New Loan       $151,000   $164,000
•   Rate                8%      10%        $3,000
•   Prepay Penalty     $0        $7,000     7,000
•                                         $23,000
90 Days Same as Cash
     Good Idea?


          •   Spending future earnings
          •   Details, details, details!
          •   Source of repayment?
          •   Pay early.
   Where can I find the money to
  Get out of debt, and build wealth?
       (say $5 to $10 per day)
• Increase income?
  – Extra job?
  – Better paying job?
     • Usually by means of better education or skills
     • Usually means you spend the increase.
• Decrease expenses?
  – PMI Insurance?
  – Eliminate some SUCKER MONEY
  How can I earn more money?
• 2nd Job?            • Then you may not
                        have time for your
                        treasures.
• Better education?   • Sacrifice now or
                        sacrifice later, for
                        sacrifice you will.
                    Sucker Money
   Instead, fund your future wealth!
                                     $3 p/day x 365 = $1095 p/yr.
• Sucking smoke.
                                     ($91 p/m @ 5%    $76,000 30y )
  $40 per pack
                                     $2 p/day x 365 = $720 p/yr.
• Sucking coffee (AM Latte factor)
                                     ($60 p/m @5%    $50,000 30y )
                                     $15 p/wk x 52 = $780 p/yr.
• Sucking spirits.
                                     ($65 p/m @5%    $50,612 30y )
                                     (accidents, fights, crimes, etc. very expensive.)

• Sucking drugs.                     $???, not to mention…
               More Sucker Money
                             $10 p/wk x 52 = $520 p/yr.
• Sucking sumptuous food.
                                      $35,000 30y )
                             ($43 p/m @5%

                             $5 p/wk x 52 = $260 p/yr.
• Sucking drink & dessert.
                             ($22 p/m @5%   $18,000 30y )
                             $1 p/day x 365 = $365 p/yr.
• Sucking sparkling soda.
                             ($30 p/m @5%   $25,000 30y)
• Sucking junk food.         $1 p/day x 365 = $365 p/yr.
                             ($30 p/m @5%   $25,000 30y )
       More Sucker Money:
          Utility habits
                         $
• Sucking electricity.

                         $
• Sucking gas.

                         $
• Sucking gasoline.


• Sucking ____________
       Top Scams in Utah
             ~ Utah Div. Of Consumer Prot.


1.   Identity Theft
2.   Deceptive Training Seminars.
3.   Fraudulent Telemarketing.
4.   Travel Scams.
5.   Nigerian Money Frauds.
6.   Deceptive Car Repairs.
7.   Lottery & Prize Scams.
8.   Telephone Slamming & Cramming.
9.   Advance Fee Loan & Credit Card Scams.
What if you’ve been financially
          smashed?

• Hang on until you can
  bounce back!
• Satisfy your obligations
  asap (high rates 1st)!*
• Keep everything current
  for 2+ years.

• *If you can’t, get some help.
   How to Build Good Credit
Bill S. Preston
Employer: Wylde Stallyns
               Date    Loan/   High Current
  Creditor   Opened    Limit   Balance Balance   Late Pmts
Dept Store      6/99   1000    500       50      0000000
Gasoline Card   5/01   5000    3000       0      0010000
Round Tires     6/01    500     200       0      0000000
Fast Car Lot    3/04   6000    6000     100      0000000
Credit Card     4/02   2000    1500       0      0000000
OD Line of Cr   5/99   2000      25       0      0000000
                                 NOT TOO MANY!
      Credit Repair Scams?
• Bill S. Preston         529-00-0000
• Employer: Wylde Stallions
•     Creditor          Limit   Bal   Comments
•   Department Store      1000 1050 5>30, 3>60
•   Credit Card           5000 4999 6>30,3>60,1>90
•   Dumpy Bikes            500 430 Collection agency
•   Fast Car Lot          6000    0 Repossession
•   Credit Card           2000    0 as agreed
•   Home Mortgage        70000 65000 current
•   Overdraft Line of Cr 2000     0 as agreed
  Beware of Advertisers’ Bear Stories:
                          What does it really mean?

“Cash out your equity” Get deeper in debt, risk…
“Put your equity to work” Get deeper in debt, risk…
“Make the most of your
  home’s equity”          Get deeper in debt, risk…
“Pay off high-rate credit Jeopardize your home
  card debt – refinance” because you goofed up
    Beware Advertisers’ Bear Stories:
                        What does it really mean?



“Lower your payment”    Pay us lots more
                        interest
“Unlock your home equity Get deeper in debt &
  with our credit card”  risk losing your home
                        with a an incredibly
                        easy way to spend
                        money!
    Beware Advertisers’ Bear Stories:


• Eliminate your debt!   • Yes! But beware, some
                           really mean:
                           – Be a party to a fraud.
                           – Give all your money to
                             me by using my scam.
                           – Shift your debt from them
                             to pay me.
Popular Credit Scoring System:
            • 35% Payment history
               – older & small items count less
            • 30% Amount of debt
               – overextended?
            • 15% Length of credit history
            • 10% New credit
               – amount accumulated within the
                 past 12-18 months
            • 10% Types of credit
               – too many credit cards
         Put Your Equity to Work?
160000
                   $150,000 value of home
140000
120000             New mortgage                           Invest
            Low                                   Higher Equity
100000
                     Equity                       rate
 80000      rate                                         (proceeds
 60000                Interest to make payments
                                                           of loan)
 40000
 20000             Existing mortgage
     0


1. The greater the rate, the higher the risk!
2. If you can’t afford to lose it, don’t invest it!
            Equity Investments
160000
                    $150,000 value of home
140000
120000              New mortgage
100000
80000
60000
40000
20000               Old mortgage
     0
 Remember:
 1. The greater the rate, the higher the risk!
 2. If you can’t afford to lose it, don’t invest it!
 3. Don’t borrow it if you don’t want to pay it back!
         Under water?
                         • New    • New
•             Rate Pmt     Rate   • Pmt
•   Mortgage 7% 600      • 7%     • 600
•   Auto loan 10% 250    • 10%    • 250
•   Cr Card 19% 100      • 10%    •   80
•   Cr Card 25% 150      • 25%    • 150
•   Doctor    18% 200    • 10%    • 120
•   Dentist   18% 100    • 18%    • 100
•                1,400            • 1,300
     The Balance-Transfer Game
      Watch out for the strings!
                        How can the credit card co.
                        make money on a 0%
                        balance transfer?
                        For 3-12 months?
                        They hopeQuestions: after.
                        Important to make $
                        What will the rate be at the
                        end of the introductory
 0%             18%     period?
C Card         C Card
                        What will the rate be for
                        any new charges?
     The Balance-Transfer Game
          Watch out for the strings!

                         How can the credit card co. make
                         money on a 0% balance transfer?


 18%     New charges     If you are going to play the game
C Card                   to win:
                         Don’t make new charges!

 0%      All payments
C Card   applied to 0%
The Balance-Transfer Game
Watch out for unscrupulous strings!



         0%
        C Card




         10%           6%
        C Card       S Loan        18%
                                  C Card
   The Balance-Transfer Game
  Watch out for unscrupulous strings!



 4.3%      0%
C Card    C Card




 16%       10%
          C Card
C Card
    Auto Loans:

•   APR               7%     12%      •      25%
•   Loan Amt    $10,000    $10,000    •   10,000
•   Mo Pmt      $ 198       $ 222     •   $ 294
•   Term         5 years    5 years   •   5 years
•   Interest     $ 1,881    $ 3,347   •   $ 7,610
•   Tot. Pmts   $11,881    $13,347    •   $17,610
    Difference      $1,466       $4,263
                          $5,729
                      Goal:
• Get out of debt before
  you retire!
• Do these things,
  pending no unforeseen
  financial disasters, you
  can plan on it an do it!
Variable vs. Fixed Rate
           Home Loans: Beware

•   1. Prepayment penalties?
•   2. Compare Rates
•   3. Compare Fees
•   4. Fixed vs. Variable?
Avoid Closing Traps                       especially if delayed




           Take your time
          Don’t just (sign, sign, sign)


         • Understand
           what you are
           signing and
           why.
         • Expect delays, and keep all your
           other obligations current.
         • Could be the most important 3
           hours of your financial life.
Dear Sir, CONFIDENTIAL BUSINESS PROPOSAL
FROM THE NIGERIA CHAMBER OF COMMERCE, I
HAVE THE PRIVILEGE TO REQUEST FOR YOUR
ASSISTANCE TO TRANSFER THE SUM OF $45.5
MILLION U.S. DOLLARS INTO YOUR ACCOUNT.
THE ABOVE SUM RESULTED FROM AN OVER-
INVOICED CONTRACT, PAID BY A FOREIGN
CONTRACTOR. WE REQUIRE YOUR ASSISTANCE.
THE TOTAL SUM WILL BE SHARED AS FOLLOWS:
70% FOR US, 25% FOR YOU AND 5% FOR
LOCAL AND INTERNATIONAL EXPENSES
INCIDENTAL TO THE TRANSFER. THIS ACTION
WAS HOWEVER INTENTIONAL. WE ARE
FORBIDDEN TO OPERATE A FOREIGN ACCOUNT
THE TRANSFER IS RISK FREE. REPLY URGENTLY,
ALBERT KATUKA
Dear Sir, CONFIDENTIAL BUSINESS PROPOSAL
FROM THE NIGERIA CHAMBER OF COMMERCE, I
HAVE THE PRIVILEGE TO REQUEST FOR YOUR
ASSISTANCE TO TRANSFER THE SUM OF $45.5
MILLION U.S. DOLLARS INTO YOUR ACCOUNT.
THE ABOVE SUM RESULTED FROM AN OVER-
INVOICED CONTRACT, PAID BY A FOREIGN
CONTRACTOR. WE REQUIRE YOUR ASSISTANCE.
THE TOTAL SUM WILL BE SHARED AS FOLLOWS:
70% FOR US, 25% FOR YOU AND 5% FOR
LOCAL AND INTERNATIONAL EXPENSES
INCIDENTAL TO THE TRANSFER. THIS ACTION
WAS HOWEVER INTENTIONAL. WE ARE
FORBIDDEN TO OPERATE A FOREIGN ACCOUNT
THE TRANSFER IS RISK FREE. REPLY URGENTLY,
ALBERT KATUKA
                 REMEMBER
1. Fix it (if your spending still exceeds your income)!
2. Make extra principal payments!
3. Only refinance if it is clearly to your advantage!
4. Focus on the highest rate debt first!
5. Don’t borrow for wants!
6. Reduce interest rates if possible.
  Important contacts:
• Free credit report each year:
  –AnnualCreditReport.com
  –or phone: 877 322-8228
• Opt out of solicitations lists:
  –800 567-8688
• ID Theft (FTC hotline):
  –877 438-4338
                 Some Parting Words
                  From: Lowell Bennion

• Learn to like what doesn’t cost much.
• Learn to like reading, conversation and music.
• Learn to like fields, trees, brooks, hiking, rowing, and
  climbing hills.
• Learn to like gardening, puttering around the house and
  fixing things.
• Learn to like the sunrise and sunset, the beating of rain on
  the roof and windows, and the gentle fall of snow on a
  winter day.
• Learn to keep your wants simple…

								
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