LWL13. Understanding 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.)
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 – Maximum time 20 minutes
Discuss: How did you benefit from working on last week’s commitments? (Everyone in group shares.)
Think: Are there financial decisions you have made that went poorly? What were the consequences? How long did you feel the effects? How did it affect you?
Debt is borrowing money that is not yours. It typically comes with a cost, known as interest. Interest is a percentage of the amount owed. You end up paying more for what you borrowed, sometimes a lot more. Debts come with expected payments, and an overall expectation to repay all that you borrowed plus interest.
There are very few justifiable reasons to go into debt and that when you do incur debt you should pay it off as quickly as possible. You should likely avoid going into debt for items other than these three. Instead, save up for expenses.
· Reasonable educational expenses that will lead to better work
· Basic transportation, if necessary
· A home
You can get out of debt! Aggressively paying down debt will require significant sacrifice, but you can do it. Below are five important principles for getting out of debt. We will cover the first three in this session.
· Understand your debt realities
· Desire to get out of debt
· Change behaviors that lead to debt
· Stop incurring debt
· Pay off your debts
Understand Your Debt Realities. How much debt do you have? What are the interest rates? What are the payments? How long will it take to pay off your debt, and how much interest will it cost you? It is important to know these things as you work to get out of debt. To do so, you will create a debt inventory like the sample below.
Description/Balance/Interest Rate/Monthly Payment
Credit card #1/$4,000/17%/97
Credit card #2/$6,500/19%/168
Car/$5,000/3%/145
Student loan/$18,000/5.5%/300
Mortgage/$170,000/4.5%/1,050
Desire to get out of debt. In order to do anything difficult, including getting out of debt, your desire must be stronger than the obstacles. We need to develop and maintain a long-term financial perspective. When we have a vision of what we can become, our desire and our power to act increase enormously. To find success, focus on your goal to get out of debt and visualize what life will be like when you are free from the burden of debt
Discuss: Why do you desire to be debt free? What will you be able to do that you aren’t able to do now?
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Change behaviors that to lead to debt. Like the children in the Marshmallow Experiment, we may need to learn how to delay short-term pleasures in order to reach long-term goals. Engaging in these behaviors will likely lead us to debt and financial stress:
· Impulsive and emotional spending.
· Ignorance or carelessness about our financial reality.
· Contrasting or comparing ourselves with others.
COMMIT & CELEBRATE
Commitments. This week I will:
· Create a Debt Inventory
· Complete the Emotion & Spending Worksheet
· Work with others on my finances.
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.)
DEBT INVENTORY
Description Balance Interest Rate Monthly Payment
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EMOTIONS & SPENDING WORKSHEET
Answering these questions will help us to better understand the reasons behind our spending.
1. What do you feel when you spend money? Circle all that apply.
Alone, Bored, Generous, Happy, Hungry, Mad, Sad, Stressed, Tired, Underappreciated
Other: __________________________________________________________________________________________________________
2. What do you buy when you spend too much? Circle all that apply.
Clothing, Eating out at restaurants, Electronic devices or accessories, Entertainment, Gifts, Home furnishings or decorations, Snacks or beverages, Travel
Other: __________________________________________________________________________________________________________
3. Who are you usually with? Circle what usually applies.
Children, Coworkers, Friends, Nobody (I am alone), Spouse
Other: __________________________________________________________________________________________________________
What did you learn about your spending patterns? What can you do when you see emotions or short-term pleasures influencing financial behavior? What can you do to protect you from yourself?
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