Debt module in a personal financial literacy series.

1. Financial literacy DEBT

2. Terms of use Families and lives are destroyed from a lack of knowledge about personal finances. This is one of a series of Microsoft PowerPoint 2007 presentations intended to inform people about financial subjects from a Christian perspective. They are a work in progress created, distributed and Copyright © 2009 By James C. Johnston 1364 Cordova Ave, Ft Myers, FL 33901 239.332.0028 All Rights Reserved Use is subject to the following limitations: You may try it for free; You may not modify it without the advance written permission of the author; You may give copies to others, as long as there is no charge for doing so; If you find any mistakes or omission, or have suggestions, please share them with the author so that I may make appropriate corrections and additions; and, If you find them useful and feel moved to do so, you can make some financial contribution in recognition of the value of the time and effort that went into their creation and distribution, and to encourage updating and improving them. Be Blessed!

3. Credit Credit is your ability to borrow money or obtain goods by paying little or no money at the time of purchase. Having “credit” is a good thing.

4. debt Debt is your obligation to repay money borrowed or pay for goods obtained previously without paying for them in full. Debt should always be seen in a negative light. Not paying your debt on time and in full may damage your credit.

5. Increase in sales Retailers and manufacturers discovered that they could increase sales by making easy credit available and giving it appealing names that conceal the reality of debt.

6. No matter how you disguise it . . . . Debt by any other name is still “Debt.” Rent-To-Own Automobile Leasing Home Equity Loans 0% Interest No Payments Til . . . Pay-Day Advance “Credit” Cards

7. What THE BIBLE says . . . Being in debt is not prohibited. But, the Bible does not have one good thing to say about borrowing. All references speak of debt in a negative context and most are in the form of warnings.

8. why PEOPLE GET burdened by DEBT . . . . THINGS BEYOND OUR CONTROL THINGS UNDER OUR CONTROL

9. THINGS Beyond OUR CONTROL “Acts of Nature” Hurricane Charlie Wild Fires & Earthquakes Accidents - Terri Schiavo Sickness Unemployment Recession

11. Unrealistic Expectations

12. Recreational Shopping

13. Makes You Feel In Control

14. Self – Esteem

15. Pick-Me-Up

17. No such thing as “Good debt” There is debt that may be “Necessary” for most people to acquire things we consider necessary or desirable (“Necessary Debt”). But all debt (even Necessary Debt) should be seen in a negative light.

18. “Good debt” What we consider to be “Good Debt” is debt that returns something of long term value (e.g., a higher education or home).

19. “bad debt” “Bad Debt” is debt incurred to acquire things of a “short-term value.” It “feel good” for a season. Has no long-term value. You really can’t afford it. Don’t really need it.

21. DEBT MENTALITY The Greatest Enemy of faithful stewardship is consumer debt. Raising your standard of living by incurring consumer debt may feel good for a period of time - but the burden of accumulated consumer debt eventually becomes overwhelming.

22. for example . . . . If you accumulate $200 per month on credit cards with a 15% interest rate, In one year you will owe about $ 2,600 In two years you will owe about $ 5,600 In three years you will owe about $ 9,000 In four years you will owe about $13,000

23. PLASTIC MONEY

24. Types of Plastic money SMART CARDS CHARGE CARDS DEBIT CARDS CREDIT CARDS

26. They store personal information and are used for identification, authentication and data storage.

27. They are a flexible and secure way to transact business with minimal human involvement.

30. Amounts are deducted directly from your checking account.

34. Young users (with limited credit history and income) are charged higher interest rates.

36. Credit card pointers

37. do’s . . . Consider a debit card or pre-paid card. Look for a card with no annual fee and low interest rates. Know your card’s hidden fees. Pay on time - all the time! Look for cards that offer premiums. Pay-In-Full Monthly. If you can’t pay in full, always pay more than the minimum each month.

38. Interest savings between lowest/highest payment = $1,570; time saved = 75 months or6.25 years!

39. don’ts . . . Don’t get many credit cards. Don’t use them for cash advances. Don’t use them to pay for basics (rent, groceries, etc) unless paid in full monthly. Don’t let issuer increase you credit limit. Don’t charge more than you can pay off in a month. If you do, have and stick to a plan to pay it off quickly.

40. Paying a Credit Card bill Credit card bills are not considered paid until the company credits payment to your account. To ensure payment is credited to the account before it is due and that there are no late fees: Mail payments 7-10 days before the due date. Make electronic payment 2-3 days before the due date

41. Credit Card registers Make a credit card register by cutting a receipt to wrap around your credit card. Record each purchase or cash advance to the credit card, just as you would a check in a check register. Keep a running balance of what is charged on your credit card each month. Do not over spend your budget. Check your record against your statement.

42. Selecting and Using a Credit Card Shop-around! Study the details of the application before signing. Look for the fees charged including annual fee. Understand the details of the introductory offers and how long they last. Know what constitutes a late payment and the amount of penalties charged.

43. EXPOSING EXEMPT ASSETS TO UNSECURED DEBT

44. SECURING UNSECURED DEBT If you have sufficient equity in your home, it may be tempting to refinance high interest consumer debt with a second mortgage, to take advantage of a lower interest rate and spread payment over a longer period of time. Think twice before doing so!

45. Memories are short Instead of learning a lesson, many people who do so begin to accumulate new credit card debt almost immediately after refinancing their old balance. Without even realizing it is happening, in no time, they have replaced their old credit card balances with new ones, plus the second mortgage.

46. Exposes exempt asset Credit card companies can’t collect your credit card debt out of your homestead. In Florida, your homestead is exempt from the claims of most creditors – other that the mortgage holder. Refinancing has the effect of exposing your otherwise exempt homestead to satisfy debts otherwise not be able to be satisfied out of your homestead.

47. Florida Exemptions Assets That Are Exempt From Forced Sale Vary From State-To-State

48. Florida exemptions Homestead Life Insurance (including cash values) Alimony and Child Support Needed For Support Damages for hazardous occupation Employee injuries Property of Business Partnerships ERISA Qualified and Government Pensions Certain Public Benefits Up To $1,000 in Personal Property & Health Aids Motor Vehicle up to $1,000. Wages of Head of Household

49. Exempt Homestead In Florida, the homestead is exempt from forced sale without regard to value. Homestead includes real or personal property including mobile or modular home (without limit of value). The land cannot exceed ½ acre in municipality or 160 contiguous acres elsewhere.

50. Exempt INSURANCE Annuity contract proceeds (not including lottery winnings). Death benefits payable to specific beneficiary (not the bankrupt deceased’s estate). Disability or illness benefits. Life insurance cash surrender value.

51. Power point If your out-go is more than your in-come, your up-keep will lead to your down-fall!