Youth Life Youth Future Youth Money! TUTOR WORKBOOK. Improving My Money Situation - Debt

Transcription

1 Youth Life Youth Future Youth Money! TUTOR WORKBOOK Improving My Money Situation - Debt

2 CONTENTS IMPROVING MY MONEY SITUATION - DEBT... 3 To understand ways to maximise and enhance success/freedom... 3 Aims... 3 To understand that positive budget/cash flow is the key to reducing debt... 3 To understand ways to reduce debt - from Easy ways to Serious ways... 3 To encourage participants to select an appropriate option and understand why... 3 To introduce the financial benefits of work - even part time employment... 3 Debts - When Can I Be Free Of Them?... 4 Bad Debt vs Better Debt... 5 Some ways to fix my finances... 6 Correcting budgets and cash flow- play the right "CARDS"!... 6 Reducing current Debt - give it a "SCARE"!... 6 Reducing Future Debt - Ideas Questions for group discussion and learning consolidation... 6 (Include the Bold ones)... 6 COOL WAYS TO CLEAR DEBT AND SAVE... 7 Overview Of The 2 Bank Account Method... 7 The 2 Bank Account System - Step The 2 Bank Account System - Step Goal Setting Your Debt Repayments Appendix - Useful Scripture References END OF WORKBOOK Page 1 Improving My Money Situation - Debt CBNZ 2014

3 Learning how to manage money is an awesome skill to have. It can really help people to prevent money problems. Youth Life Youth Future, Youth Money is a fun, interactive programme where you ll help students to discover some really useful tools to keep control of their money tools that they can pass on to friends and family as well! Knowing how to manage their money may also help them to fulfil goals for their future. CBNZ (Christian Budgeting New Zealand Inc) developed this special programme with funding from the Ministry of Social Development. Launched in October 2012 it was reviewed and reprinted in May Your programme is presented by Christian Assist Trust. CBNZ supports and equips budget advisors across the country with members from Auckland to Invercargill. Established in 2004 and later incorporated, it is a Not For Profit organisation. For more information about CBNZ please sarah@cbnz.org.nz or phone CBNZ Inc, c/o PO Box 33285, Incorporated Society No Charities Commission Registration No. CC22291 Page 2 Improving My Money Situation - Debt CBNZ 2014

4 Money! Improving my money situation - Debt To understand ways to maximise and enhance success/freedom Aims To understand that positive budget/cash flow is the key to reducing debt To understand ways to reduce debt - from Easy ways to Serious ways To encourage participants to select an appropriate option and understand why To introduce the financial benefits of work - even part time employment Principles The borrower is servant to the lender. Debt reduces your future choices. Hope deferred makes the heart sick (when loan consolidations occurs) i.e. The hope of getting to the dates when each individual debt would have been paid off vs a single debt repayment date which may now be 5 years into the future. Tools Powerpoint Workbook Calculators Whiteboard Post-it notes Page 3 Improving My Money Situation - Debt CBNZ 2014

5 TASK 1 Debts - When Can I Be Free Of Them? 1. In a full group review the following questions (give them time to work these out themselves). If you had a court fine of $2000 and were repaying it at $20 per week, how many weeks would it take to repay? Answer: 100 weeks (approx 2 years). You buy an item worth $2000 by putting the whole balance on your credit card. If you make the minimum monthly repayment, how long will it take to pay off the credit card? Answer: 56 Years. Discuss why the different time periods between the two examples both are $2000 purchases? 2. Follow and complete the exercise in your workbooks "Calculating My Debt Repayments". 3. Questions: As a group (or in small groups), talk about the effects of debt: How do you feel the whole time you owe money on the debt? What limitations will this debt it put on your future spending? How will you feel when you make the last payment? Further thought If you purchased the $2000 item (e.g. engagement ring) when you were 18 and if it took 56 years to pay it off, how old would you be when you made the last payment? Answer 74 years old. You would have already celebrated your golden wedding anniversary at 50 years of marriage. Page 4 Improving My Money Situation - Debt CBNZ 2014

6 TASK 2 Bad Debt vs Better Debt 1. On a whiteboard, draw a horizontal line from one side to the other (continuum). 2. At one end, write BAD DEBT, at the other end write BETTER DEBT. 3. Ask the groups where they would place the following types of lending and why. You may get group s members to place "Post It Notes" along the continuum to indicate where they believe the "debt" is located along the line. Include Debt Type Notes Loan shark bad debt end interest, costs, penalties, conditions e.g. future acquired chattels clauses, financial power of attorney etc Credit Contract (Hire Purchase) bad debt end interest, costs, penalties, conditions, product value when paid off Credit card bad debt end pay it off in full each month no interest, get rewards points e.g. flybuys (remember the $2000 purchase over 56 years) Loan from a family middle of continuum no interest but stressful relationships? member or friend Student loan better debt end can increase future income if applied to career steps Bank loan or lending options of your choosing Page 5 Improving My Money Situation - Debt CBNZ 2014

7 TASK 3 Session Reminder Start with getting the budget/cashflow correct sustainable, then work on the debt. Achieving a stable budget/cashflow is the key to debt repayment. Some ways to fix my finances Correcting budgets and cash flow- play the right "CARDS"! Cut out spending - remove it totally. Alter spending frequency e.g. takeaways weekly to fortnightly. Reduce spending - where possible and appropriate. Defer (Put off) spending e.g. no takeaways for 3 months. Supplement income. Or combinations of the above Reducing current Debt - give it a "SCARE"! Snowball debt repayment when one debt is gone, increase amounts to the next. Consolidation loan very, very BIG caution here. Accelerate (Increase) regular debt repayment or extra one-off payments. Raise income. Eliminate debt gift, refinance, interest free loan, insolvency option. Reducing Future Debt - Ideas. Increase education. Get a job - part time, casual, full-time, contract. Identify wants from needs and reduce wants. Save! Save! Save! Increase understanding of immediate and long term consequences of each option. Review the negative consequences of doing nothing. Encourage choices that meet client goals. Questions for group discussion and learning consolidation (Include the Bold ones) How does your financial "picture" (visual image) change your view of your finances? Can debt repayment dates now be seen as goals? How do/might you FEEL when all your debts are gone? How will you FEEL if you "consolidate your debts" into a loan repayable in 5 years time? If you earn $25,000 for 40 years, what would your income be ($1million) or If you earn $40,000 for 25 years, what would your income be ($1million). How might/does advertising affect your debt levels. Name 6 savings companies (could use the yellow pages). Remember the $2000 on your credit card a taking 56 years to pay off. What does fine print on a loan mean? What loans/debts might our parents have had? Page 6 Improving My Money Situation - Debt CBNZ 2014

8 TASK 4 Cool Ways To Clear Debt And Save Overview Of The 2 Bank Account Method The following 3 pages explain how to operate the 2 bank account system. These pages are also included in the student module later on in this section. Some key points of the 2 bank account system are: Only 2 accounts are required, it's not complicated. You need a plan first - one that works! The 2 account systems facilitates the ongoing repayment of debt. The 2 account systems facilitates the build up of savings! Bank fees can be reduced depending on the accounts be operated. 'Account 1' manages ALL your money acting as the distribution account only. 'Account 1' has no EFTPOS,Internet banking, telebanking, mobile banking access to reduce the temptation of tinkering (casual or unplanned withdrawals). Weekly AP's are set up to manage your spending by transferring the 'set amount' into your other account (account 2) to cover this like groceries, personal spending etc. When a debt is repaid and the AP stops, this repayment amount becomes extra savings building up in 'account 1'. Caution: It can be necessary to complete a cash-flow to ensure the 2 account systems will work both correctly and long term. Sometimes, a budget will not be sufficient due to the inflow and outflow of funds such as where larger amounts are withdrawn in the near future for planned bills or where the surplus on the budget is minimal. Remember, you will be heralded as 'amazing' if you help your group members achieve the success they are looking to achieve but you may get the 'blame' if the plan you help implement doesn't work successfully, even when followed to the letter! Additional Note For those who continually struggle with reducing the regularity and amounts of spending, a suggestion may be to half the weekly spending amount due each week and pay the 2 'halves' on different days of the week (e.g. Tuesday and Friday). This idea can work well with those who may have reduced or fluctuating mental health issues as an example. Page 7 Improving My Money Situation - Debt CBNZ 2014

9 Cool Ways To Clear Debt And Save - The 2 Bank Account Method Account 1 (income account) All your money comes into this account Automatic Payments This Account Does 3 Things Examples: rent, power, phone 1. Pays your Automatic payments e.g. rent, phone, power. 2. Transfer one payment for the total of your set spending amounts to your second account to pay for specific items. 3. Builds up some cool savings. Account 2 (spending account) Total Of Set Spending Amounts Examples: groceries personal spending tip tip if you have a balanced budget, you can spend all the money in this account each week and get more the next week!!! Don't have eftpos or online access to this account to reduce the possibility of withdrawing money too easily!!! If you have to go into the bank to withdraw money, you will be less likely to waste your hard earned savings. Page 8 Improving My Money Situation - Debt CBNZ 2014

10 The 2 Bank Account System - Step 1 A Simple Budget Broken Down Into Groups Income $ Weekly Expenses rent $ (automatic payment) power $25.00 (automatic payment) food $50.00 (set spending) personal spending $20.00 (set spending) total $ Savings $40.00 Page 9 Improving My Money Situation - Debt CBNZ 2014

11 The 2 Bank Account System - Step 2 Account 1 (income account) All your money comes into this account $235.00pw Automatic Payments rent $ power $25.00 total paid $ Set up 2 automatic payments: one to pay rent one to pay power Set up 1 automatic payment for the TOTAL of your set spending $70.00pw Account 2 (spending account) Amounts you get to spend every week!!! Food $50.00 Spending $20.00 total $70.00 Builds up some cool savings $40.00pw Page 10 Improving My Money Situation - Debt CBNZ 2014

12 Goal Setting Your Debt Repayments Making SMART goals SMARTER SMART = Specific, Measureable, Achievable, Realistic, Timeframe becomes SMARTER = with an emotional and relational connection Emotional Relational People express their feelings with words and phrases such as I feel "good", "positive"," free, "hopeful", "excited"," a weight off my shoulders, when their finances are on track to achieve my goals. People are able to share their successes with significant others such as family, friends, budget advisors etc. EXAMPLE Specific Measureable Achievable Realistic Timeframe Emotional Relational What is the debt you are focusing on. Countdown the remaining payments. Budget balances or cashflow shows affordable repayment rate. budget/cash-flow might be tight but it is sustainable. the date of the last payment. How will you feel at the end when the debt is gone. Who will you share your good news with? Luke 6:45 For the mouth speaks what the heart is full of. positive emotions said by clients are" Success", "Relief"," Happy"," free" etc Page 11 Improving My Money Situation - Debt CBNZ 2014

13 Appendix - Useful Scripture References Proverbs 29:18 Comment Where there is no revelation, people cast off restraint; but blessed is the one who heeds wisdom s instruction. This is more than Goal Setting but having revealed 'vision' to follow with enthusiastic commitment. Psalm 37:21 Comment The wicked borrow and do not repay, but the righteous give generously; This is a Christian challenge not just to pay everything when it is due... but also to be generous in our lives. Proverbs 13:12 Comment Hope deferred makes the heart sick, but a longing fulfilled is a tree of life. hope is 'deferred' when debts are consolidated (i.e. rolled together into a new loan). This defers your hope of having each debt paid off on the due date. Exodus 20:15 Comment You shall not steal. This includes charging 'usury'(usury is the practice of making unethical or immoral monetary loans intended to unfairly enrich the lender by including components such as high interest rates. We often term these lenders loan sharks). Romans 5:3 and 4 Comment extract only: "...because we know that suffering produces perseverance; 4 perseverance, character; and character, hope." We need perseverance to get through many things in life including sticking to an appropriate budget/personal cash-flow. 1 Corinthians 9:23-25 The Need for Self-Discipline. Do you not know that in a race all the runners run, but only one gets the prize? Run in such a way as to get the prize. 25 Everyone who competes in the games goes into strict training. Comment It is easy to join in a race but it takes effort, courage, training and discipline to win. It is the same with your money. Advertisers, businesses, lenders etc are also in the race to "win" your money from you. Who wins every dollar that you have? The Church (Tithes)?, Others (your generosity)?, Fast food outlets? clothing shops? banks? lenders? Romans 13:8 Comment Keep out of debt and owe no man anything, except to love one another; for he who loves his neighbour has fulfilled the Law. God does not want us to be in debt - ever! He wants us to Love others. Page 12 Improving My Money Situation - Debt CBNZ 2014

14 Session Notes End of workbook Page 13 Improving My Money Situation - Debt CBNZ 2014