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Why We are in Debt Seminar?

Welcome to why We are in Debt Seminar?

Hello and welcome to the “Why are we in debt?” seminar. We at Debt Free Living believe that everyone can and should live a debt free life. But many don’t.

 

Slide #2 – Objectives

Let us run through the objectives of this seminar.

In this seminar; I will expose what keep people up at night, why we are in debt, the impact of the consumerism, the true cost of paying the minimum monthly payments on outstanding debt and How to get ahead.

Next; I will detail multiple solutions that you could adapt to your situation to help get ahead.

Slide #3 – What do people worry about?

Many people worry about their debt load and how they can dig themselves out, while maintaining their quality of life. Being in debt is a serious challenge for many people. Cash flow is shrinking and their ability to pay the minimum is becoming a challenge.

Many people view paying-down debt as their primary financial concern. Many are unaware of how to accomplish this.

They are lost as to how to balance today’s quality of life and the need to save for their retirement.

Slide #4 – Why we are in Debt?

The truth is that we are in debt due to our behavior and feelings about money and the greed of the lenders whom we choose to do business with.

Let me explain; we go through life buying things that we need and want. For most people, the ratio of things that they need vs. things they want is 1 to 5.

When we make a decision to buy something, we never question if we really need it or if it just makes us look cool and successful. We buy things on impulse and convince ourselves that we could afford the monthly payment – we simply say; we deserve it, we can afford it. We fail to understand that paying the minimum payment makes things twice as expensive and commit our future earnings to paying for things we have already consumed.

Over the years we accumulate things that depreciate in value and a crippling debt load.

Slide #5 – Why we are in Debt?

We are in debt simply because we have no budget and spent money we did not have.

We’ve forgotten the simple concept of “If I don’t have the money to pay for something, I can have it”. We go ahead and buy it and commit to paying the minimum for it.

We are in constant competition with the “Jones” e.g., our neighbors, colleges buddies, friends and family.

Our desire for instant gratification puts us in debt.

Slide #6 – The “Debt Traps”

Many consumers fall into Debt Traps not entirely of their own making. They are lured by over-eager sellers, easy credit, and the attraction of minimum payments.

They fall all into the debt trap, by promising to pay tomorrow. They end up accumulating lots of depreciating assets and a crushing debt load.

Finally; we find ourselves trapped in the minimum monthly payment prison.

Slide #7– Questions for thought

Let me ask you couple of simple questions:

  • Who do we work for?
  • Who is robbing our hard earned money?

Slide #8 – Who do we work for?

The answer is we work for the government, Banks, credit card companies and our employer.

We work for all level of Governments. They get their share of the income in the form of payroll taxes, sales taxes, property taxes and other hidden taxes.

Your second bosses are the Banks & Credit Card Companies. You borrow money for many reasons; you end up paying lots interest on a never-ending credit card balances.

Albert Einstein the greatest inventor of our times was asked what he thought about Compound Interest. He replied that “Compound Interest is the 8th wonder of the world”.

Your Employer, who pays your salary, is your third boss.

You wonder why a large majority of the public has no money.

Let us assume the income and the expenses on the screen depict your household financial situation:

  • Your personal income tax amount to 40% of your income
  • Your housing cost amounts to 32% of your income
  • Your minimum monthly payment represents 12% of your income
  • That leaves you with 6% of your income to live on. This leaves you with little money to meet your cost of

living. Most people end taking more debt to pay things they want and need.

That is why when it rains in people lives, it pours.

Slide #9 – How do we pay for things we buy?

People pay for things using three different methods:

  • People Buy things in Cash or a Debit card.
  • People Buy things Now and pay later using their credit cards – this creates debt:
  • Few people pay their monthly balance in full, meaning they know how to leverage credit to their advantages.
  • A large majority of people pay the minimum monthly payment. Paying the minimum payment makes the cost of things to double. These people become victims of the compound interest. They get imprisoned in debt.
  • The third method is people buy now and pay later plan e.g., first payment is due in one year. This is the most expensive method. It is a dormant problem waiting to burst. Should these people not pay on time; they are subject to 28% interest from the first day you took the loan.

Slide #10 – What is the cost of using credit?

People do not stop and think about the cost of using credit.

To illustrate how expensive credit is; I want to describe two scenarios and highlight how expensive credit could be and how we can save our money.

Slide #11 – What is cost of using credit?

Let say you need a dining set and you do not have the money to pay for it in full. You go ahead buy and charge the purchase to your credit card. You choose to pay $50 as the minimum payment. Incidentally the interest that is being charged is 20%.

The question that I would like to ask you:

  • How long will it take you to pay off the balance paying $50 per month?
  • How much interest will it cost you to pay off the balance?

I hope you know the answer. Please write it down if you do.

Slide #12 – What is cost of using credit?

The answer is extremely shocking. The REAL cost of the dining set is $5,450.

It will take you 9 years and 1 month to pay off the balance. And you will pay $2,950 in interest charges, meaning you have paid 118% interest. This is not a good deal!
Buying on credit and making the minimum payment makes things you buy twice as expensive.

This is not a way of life; especially if you have limited income – and the truth is – we all have limited income.

Slide #13 – What is cost of using credit?

Now; let me ask you the same question but say I asked you to pay $100 per month instead of $50.

So everything is the same as in the previous question – except that you are paying $100 per month.

And the questions are the same:

  • How long will it take you to pay off the balance paying $100 per month?
  • How much interest will it cost you to pay off the balance?

I hope you know the answer. Please write it down close to the answer to the previous question.

Slide #14 – What is cost of using credit?

The answer is much better than in the first question, but not ideal. The REAL cost of the dining set is $3,000.

It will take you 2 years and 9 months to pay off the balance. And you will pay $800 in interest charges meaning you have paid 32% interest.

Still not a good deal! But better than paying 118% interest as illustrated in the previous example.

This is where everyone becomes trapped by the minimum payments trap and where our hard earned cash is being consumed.

Slide #15 – Banks Enslave Your Hard Earned Cash!

Most of us dream in homeownership. Very few can afford to buy a house without taking out a mortgage.

Let say you take a Mortgage for $300,000, the Average Interest rate is 5.5%; and you amortize your mortgage for 35 years.
At the end of the 35 years the total interest that you will pay amount to $371,527.93.

The total interest paid in 35 years amounts to 124% of the purchased price – This represents 1.24 times the purchase price.

Clearly the “Compound interest” is the enemy. But something can be done about it.

Slide #16 – Let us analyze sample household debt load

Many people carry significant debt load; spend most of their income servicing the debt and the balances keep creeping up.

Did you know that 95% of the monthly payments on your credit card go toward paying interest and 5% to reducing your outstanding balances?

In this example, the individual is making a minimum monthly payment of $1,743.21 to service its debt; most of the payment is interest only. How can he/she possibly gets ahead in life?

That individual needs to eliminate its debt. It is doable with the same money that he or she is making.

The key is to reverse the “compound interest” trend in its financial life.

How can you reverse the trend? Stay tune the answer is in the next few slides.

Slide # 17 – Root cause of the debt problems

To reverse the trend; you need to understand the root cause of the money problems.

The first golden rule is you need to stop spending money that you do not have.

The Second golden rule you have to have a budget – Living on a budget does not mean cheap. It means you have goals in your life and you are committed to accomplishing them.
We urge you to sit down with your partner (if you have one) and create a budget. Find 5-10% savings by eliminating or reducing expenses such as entertainment, eating out, vacations, and other expenses that add noting to your quality of life. Cutting such expense altogether or reducing it will save from a financial ruin that may await you.

Apply that saving to eliminating your debt. Stop adding any new debt. Stick the course.

Slide #18 – Possible solutions to your debt

Folks, we have to do something about our debt. No one is going to do you a favor and give you an interest free loan or even a low interest loan so you can cope with your debt.

You need to shed unwanted debt. Losing financial fat is similar to going on a diet. It is hard but it is doable and no one will do it for you.

The key to coping with your debt is stop borrowing any money, find 5-15% savings in your budget to pay off your debt. Failing to follow this rule; you are left with sever options to help you restructure your financial life.

Debt Settlement – debt settlement is better than bankruptcy and proposal. Debt settlement spares you filing for bankruptcy

  • Bankruptcy
  • Consumer Proposal

Slide #19 – In Summary

In Summary; Debt Free Living believes in educating you about money management principles and how to get more for your money.

We want to be empower you conquer the challenges to be fit financially for life: We want to empower to:

  • Get a budget in your life that helps you achieve your goals. Having a budget helps you reduce or stop taking on more debt.
  • Eliminate your debt. Debt elimination is not debt consolidation

We want to see you go from debt to wealth — to have a secure and prosperous life.

We at Debt Free Living want to give you the gift of becoming debt free on $10 per day. We would love to personalize your debt elimination for you and help become happy and secure about your financial future.

Click here to request my free book and your summary debt elimination plan.

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December 22, 2005 – We would recommend George Kaadi and his firm of experts with extremely high regard and confidence to our closest friends and family members. We only wish we had been introduced sooner, as we know George would have helped us to make better decisions about our future financial plans.
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September 19 2007 – Based on the information he provided we were able to choose a strategy that was best suited to our situation and constraints. As such, he showed us how to use discipline and pay off our debts to then build and emergency fund and to invest our savings in vehicles I would not have come across talking to my banker. He taught me about tax savings and leveraging existing rules to increase my retirement fund using money the government would have simply kept to himself!
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