Out of Slavery: Life After Debt

Help and Hope for Your FinancesHelp and Hope for Your Finances
Out of Slavery: Life After DebtOut of Slavery: Life After Debt
José R. FigueroaJosé R. Figueroa
July, 2013July, 2013
www.figueroafinancial.comwww.figueroafinancial.com

July, 2013
ContentsContents
 Life after DebtLife after Debt
 DefinitionsDefinitions
 Debt in AmericaDebt in America
 God’s View on DebtGod’s View on Debt
 Why do we use Debt?Why do we use Debt?
 What if?What if?
 Breaking the ChainsBreaking the Chains
 The Debt SnowballThe Debt Snowball
 Final TipsFinal Tips
Help and Hope for Your Finances - www.figueroafinancial.com 2

July, 2013
 Debt:Debt: An obligation of a consumer to payAn obligation of a consumer to pay
money, whether reduced to judgment or not.money, whether reduced to judgment or not.
 Consumer:Consumer: A person who owes a debt.A person who owes a debt.
 Creditor:Creditor: A person who extends credit to aA person who extends credit to a
consumer or is owed a debt by a consumer.consumer or is owed a debt by a consumer.
Source: Fair Debt Collection Practices Act
Definitions

July, 2013
Average car payment is over $400 per month.
Average credit card debt is over $7K per household.
46% of Americans surveyed say they're suffering
from debt-related stress according to an AP poll.
In 2007, total consumer
debt was $2.5 trillion.
Consumer overall indebtedness
(including mortgages)
increased from $1.4 trillion
to $11.5 trillion
from 1980 to 2005.
The U.S. national debt
now exceeds $16 trillion.
In 2008 it stood at only $9 Trillion.
Over 200,000 students graduated
from American colleges w/ over
$40,000 in student loan debt in 2007-08.
Debt in America Today

July, 2013
The average U.S. household's total mortgage,
credit card & other debt
is 122% of annual disposable income.
Debt in America Today
The American Church is
$33 billion in debt.
Fees currently account for a whopping 48%
of all revenue for credit card issuers
-that's up from 31% 10 yrs ago.

July, 2013
God’s View on Debt
“The rich rules over the poor, and the
borrower is the slave of the lender.”
Proverbs 22:7 (ESV)

July, 2013
 We don’t plan for expenses.We don’t plan for expenses.
 Lack of control over our money when we don’t haveLack of control over our money when we don’t have
a cash flow plan (i.e., a budget). It seems we don’ta cash flow plan (i.e., a budget). It seems we don’t
have enough.have enough.
 Lack of discipline for saving money for majorLack of discipline for saving money for major
expenses. We mistake a credit line for an emergencyexpenses. We mistake a credit line for an emergency
fund.fund.
 We seek to take advantage of deals (airlineWe seek to take advantage of deals (airline
miles, points for other purchases, etc.).miles, points for other purchases, etc.).
 We are influenced by the culture.We are influenced by the culture.
 We accept that paying interest is a way of life.We accept that paying interest is a way of life.
Why do we use debt?

July, 2013
Why do we use debt?
We need to use this But we want to use this
We want it now!!!

July, 2013
When surveyed, the Forbes 400
were asked, “What is the most
important key to building wealth?”
75% replied that becoming and
staying debt free was the number
one key to wealth building.

July, 2013
 How much could you…How much could you…
 SpendSpend
 SaveSave
 InvestInvest
 Give?Give?
What if you didn’t have any
payments?

July, 2013
 You will get out of debtYou will get out of debt
when:when:
 YouYou admitadmit that using debtthat using debt
will not bring youwill not bring you
prosperity.prosperity.
 You getYou get sicksick to yourto your
stomach when you realizestomach when you realize
how much interest you arehow much interest you are
paying.paying.
 You getYou get tiredtired of carryingof carrying
the debt burden.the debt burden.
Breaking the Chains
“I have had it!!!!”

July, 2013
 ListList allall your consumer debtsyour consumer debts smallestsmallest toto
largest.largest.
 Pay minimum payments on everything but thePay minimum payments on everything but the
smallest one.smallest one.
 Use anything you can squeeze out of yourUse anything you can squeeze out of your
budget to pay extra on the smallest debt.budget to pay extra on the smallest debt.
 When that smallest debt is paid off apply thatWhen that smallest debt is paid off apply that
payment to the next debt in line.payment to the next debt in line.
 This will give you a plan and will help youThis will give you a plan and will help you
maintain the focus required tomaintain the focus required to pay off allpay off all ofof
your consumer debt.your consumer debt.
The Debt Snowball

July, 2013
Item Total Payoff
Minimum
Payment
New
Payment
Target
Payments
Remaining
Target
Cumulative
Payments
Debt #1 300.00 30.00 30.00 10 10
Debt #2 487.00 49.00 49.00 10 20
Debt #3 789.00 80.00 80.00 10 30
Debt #4 1,235.00 130.00 130.00 10 39
Debt #5 1,500.00 150.00 150.00 10 49
Debt #6 6,800.00 300.00 300.00 23 72
Totals 11,111.00 739.00 739.00 72
The Debt Snowball - Example

July, 2013
Item Total Payoff
Minimum
Payment
New
Payment
Target
Payments
Remaining
Target
Cumulative
Payments
Debt #1 300.00 30.00 100.00 3 3
Debt #2 487.00 49.00 49.00 10 13
Debt #3 789.00 80.00 80.00 10 23
Debt #4 1,235.00 130.00 130.00 10 32
Debt #5 1,500.00 150.00 150.00 10 42
Debt #6 6,800.00 300.00 300.00 23 65
Totals 11,111.00 739.00 809.00 65

July, 2013
Item Total Payoff
Minimum
Payment
New
Payment
Target
Payments
Remaining
Target
Cumulative
Payments
Debt #2 340.00 49.00 149.00 2 2
Debt #3 549.00 80.00 80.00 7 9
Debt #4 845.00 130.00 130.00 7 16
Debt #5 1,050.00 150.00 150.00 7 23
Debt #6 5,900.00 300.00 300.00 20 42
Totals 8,684.00 709.00 809.00 42

July, 2013
 Stop borrowing money! You can not get out of debt by borrowingStop borrowing money! You can not get out of debt by borrowing
your way out.your way out.
 Consider taking an extra job as aConsider taking an extra job as a temporarytemporary measure to increasemeasure to increase
your income.your income.
 ConsiderConsider selling assetsselling assets that could kick-start your debt snowball.that could kick-start your debt snowball.
 Stop contributing to retirement plans on aStop contributing to retirement plans on a temporarytemporary basis inbasis in
order to increase your cash floworder to increase your cash flow whilewhile you get out of debt.you get out of debt.
 Don’t fall prey to debt management or debt consolidationDon’t fall prey to debt management or debt consolidation
scams.scams. You can do this!You can do this!
 Cut up your credit cards and promise to yourself that you willCut up your credit cards and promise to yourself that you will
not use them again.not use them again.
 When you payoff the balance on each account,When you payoff the balance on each account, close theclose the
account!account!
Final Tips

July, 2013
Conclusion: So What?Conclusion: So What?
“Debt is dumb. Most normal people are just plain
broke because they are in debt up to their
eyeballs with no hope of help. If you're in debt,
then you're a slave because you do not have the
freedom to use your money to help change your
family tree.”
Dave Ramsey

About the AuthorAbout the Author
July, 2013 18Help and Hope for Your Finances - www.figueroafinancial.com
José R. Figueroa is a Personal Finance
Coach/Blogger @ Figueroa Financial:
Help and Hope for Your Finances.
He is also the author of the e-book
7 Principles for Financial Success now
available @ Amazon.

July, 2013
Figueroa Financial: Contact InformationFigueroa Financial: Contact Information
Website: www.figueroafinancial.com
e-mail: jose.figueroa310@gmail.com
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