LWL14. Get Out of Debt
CHECK-IN – Maximum time 20 minutes.
Mindfulness: Take a break from what you have been doing, breathe deeply, relax and recharge.
Step 1: Find a comfortable seated position with both feet grounded on the floor. Put a hand on your stomach. Close your eyes.
Step 2: Take a deep breath in through your nose and out through your mouth. Notice your thoughts and feelings and any tensions in your body.
Step 3: As you inhale and exhale, breathe deeply so your belly fills and empties with air. The hand on your stomach helps you practice belly – not chest breathing.
Step 4: For the next two minutes make breathing in and out your only focus. Let your thoughts come and go without trying to control them. If you find an area of tension in your body, relax it and let the tension go.
Step 5: At the end of the two minutes slowly open your eyes. Gently bring your presence back to your surroundings.
Gratitude: Taking time every day to be grateful can help our health, relationships, emotions and happiness. What is something you are grateful for this week? (Everyone in group shares.)
Discuss: How did you benefit from working on last week’s commitments? (Everyone in group shares.)
Review “How Are We Doing?” worksheet. (Led by loved one with behavioral health disorder.)
· Past week’s recovery activities.
· Goals for next week.
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SKILL FOR A LIFE WORTH LIVING section – Maximum time 20 minutes
Discuss: How did you benefit from working on last week’s commitments? (Everyone in group shares.)
Think: What would my life be like if I was debt free?
Pay Off Your Debts. We have been counseled to pay down our debts as quickly as we can: “If you do incur debt, … work to repay it as quickly as possible and free yourself from bondage” (True to the Faith [2004], 49). Here are four steps that will help you make and follow a plan to get out of debt.
1. Decide to pay extra toward your debts.
2. Decide where to pay extra.
3. Use the rollover method.
4. Take additional steps as needed.
Decide to Pay Extra toward Your Debts. One of the most expensive ways to get out of debt is making minimum payments. Often the minimum payment is a percentage of the balance. As the balance goes down, so does the minimum payment. This extends the time it takes to pay off the balance and costs you more in interest. To get out of debt much more quickly, you will need to pay more than the minimum payment. For example, you have a credit card with a $4,000 balance, a 17% interest rate and a minimum monthly payment of $97 dollars. By making only minimum payments it would take 20 years and 9 months to pay it off and would cost $5,107.62 in interest. If you paid the current minimum payment of $97, plus an extra $100 a month you would pay it off in 2½ years—that’s 18 years sooner and save $4,357.49 in interest!.
You have been tracking your expenses and have developed a budget. How can you free up some money in your spending to make extra payments on your debts? When considering your first debt to pay off, pick a fixed amount that includes extra above the minimum payment, and pay at least that until the debt is paid off.
Decide Where to Pay Extra. Here are a couple of options for deciding which debts should be paid first. You can pay extra toward the debt with the highest interest first or the lowest balance. Paying down the highest interest first eliminates the most expensive debts earlier and could take longer to reduce the number of credits. It may also delay psychological wins.
Paying down the lowest balance first reduces the number of creditors and minimum payments more quickly. One or the other may provide quicker psychological wins.
Use the Rollover Method. When you pay off a debt you can rollover the money that had been going to that loan to pay down another loan This is where you really start to get out of debt more quickly. For example, if you paid an extra 100 a month to credit card #1, your monthly payment would be 197. After it was paid off, you would have an extra 197 you could use to pay off another debt. If you used that 197 extra and put it toward the 6,500 balance for credit card #2, you would Pay off that credit card more than 23 years sooner than if you paid minimum payments save over 8,500 in interest! Once you paid that credit card off, you would have an extra 365 to pay toward other debts, and so on. The rollover method works well to eliminate debt quickly.
If you are having a difficult time making minimum debt payments, then you may need to take additional measures like:
· Finding extra or better work:
· Selling some things that you can live without.
· Downsizing. Sometimes your best move is to move—literally. A less expensive home, apartment, or car may be a good option.
· Refinance debt at a lower interest rate or to consolidate several of them to a single loan with a lower interest rate. There may be costs to refinancing or consolidating, so be sure to understand the expenses beforehand.
· Find help from mentors or financial counselors.
Discuss: Would any of these measures work for you?
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COMMIT & CELEBRATE section
Commitments. This week I will:
· Complete the “Get Out of Debt Worksheet”
· Decide which debt you will pay down first.
· Determine how much extra money you can set aside to put toward paying down that debt.
Benefits from keeping commitments:
· Understand why and what you spend money on.
· Sharing pleasant recreational activities helps keep us close and can become a buffer for negative interactions that can be part of any relationship.
Watch: Lyric video. (Video that reinforces this week’s topic.)
GET OUT OF DEBT WORKSHEET
Step 1: List all of your current debts.
Step 2: Put a check next to the loan with the highest interest rate.
Step 3: Circle the loan with the smallest balance.
Step 4: Decide which loan to pay extra to first
Description Balance Interest Rate Monthly Payment
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