Personal Finance (Bryan Sudweeks) Part 4

Debt Free Living
Getting into debt is easy, getting out is hard.
We run into debt and crawl out of it.
We buy things we don't need, with money we don't have, to impress people who don't care.
Live like most people won't so you can live like most people won't.

Principles of Personal Finance:
1.  Ownership  2.  Accountability  3.  Stewardship  4.  Agency

Leader's Counsel on Debt:

• Interest is with you day and night... it just keeps growing
• Debt is okay for a modest home or to pay for an education
• Be organized with money

Debt Cycle:

1. Start going into a little debt
2. Take on more debt to keep up lifestyle
3. Continue taking on debt until balances are so high that they...
4. Get into trouble

Why People Go Into Debt:

1. Ignorance- don't understand interest and true costs of things
2. Carelessness- understand costs but are lazy about spending
3. Compulsiveness- lack of self control with spending
4. Pride- want to look good to others
5. Necessity- when you truly can't feed your family

Stopping the Debt Cycle:

1. Ignorance gives way to wisdom
• Understand interest and costs
• Understand you have to change (not easy)
2. Carelessness gives way to exactness
• Understand the dangers of the debt cycle
• Realize the danger we put ourselves in
3. Compulsiveness gives way to diligence
• Develop self control in financial situations
• Get on a budget and spend only on your goals
4. Pride gives way to humility
• How we look to God is more important than how others look to us
5. Necessity gives way to self-reliance
• We gain skills to become self reliant and use those skills to help others

Debt Reduction Strategies:

1. Accept you have a debt problem
2. Stop incurring debt (If you find yourself in the bottom of a hole... stop digging!)
3. Make a list of all your bills
4. Look for one-shot ways of reducing debt (sell unnecessary items)
5. Organize a debt reduction or elimination plan and follow it

Debt Reduction/Elimination Plans:

1. Personal Strategies:
• Pay off most expensive (highest interest rate) debt first
• List all debts and order with highest interest rates first
• Once the most expensive debt is paid first, keep paying the same amount towards the next highest debt and Power Down your debt.  (see personalfinance.byu.edu TT20)
• Another way is to pay the smallest amount of debt first and then go to the next smallest (TT31)
• Do not use Home Equity Loans to pay off debt.  80% of people who take out a HEL are back where they were in 3 years.  You have to address your spending behaviors.
2. Counseling Strategies:
• Credit counseling agencies
• Help with debt negotiation
• Use if very far into debt
3. Declare Bankruptcy

Audrey's blah blah:

I really enjoyed this class.  It gave me some good ideas and strategies to better manage our money.  I went to mint.com and set up an account.  It's a pretty cool website and it's free to use.  I like the charts the best.  I haven't been over to the byu personal finance website yet, but I want to and I want to explore more about personal finance.  My next area of interest is investing.  

This was the final class in this series.  Next up: Finding Joy in Fulfilling your Greatest Responsibilities with Your Family by Joy and Gary Lundberg.