July 30, 2021 • 44 mins
Our country has opened back up and we’re guessing that you probably spent a lot more money this summer compared to last year. Consumer spending isn’t going anywhere, student loans are ever-present, and car loans are becoming even more of an issue as consumers take out 72 and 84 month loans. The reality and feeling of drowning in debt is compounded when folks don’t know how to get out from underneath this crushing weight. Where do you even begin?! What we need is a plan to help us get out of debt and get our feet set in the right direction this year. Now is the time to get your personal finances in order and creating a debt payoff plan is vital to achieving your financial goals.
During this episode we enjoyed a Barrel Aged Yeti Imperial Stout- thanks to our friends there at the brewery for donating this one! And please help us to spread the word by letting friends and family know about How to Money! Hit the share button, subscribe if you’re not already a regular listener, and give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to change the conversation around personal finance and get more people doing smart things with their money!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Joel, what's going on, buddy? Hello, my friend, are you
enjoying your time right now at the beach? I am
recording this before we go there, but I'm just imagining
the joy I'm gonna feel. I'm asking future Joel if
if he's going to enjoy his he's having a rock
and time. Yeah, we're actually at the beach for a
few days. We've gone there with our families. We're spending
a lot of time out there in the sun, in
(00:20):
the waves. But we are replaying a bestie episode. This
is a really good one, as it seems a lot
of people are returning to their old spending ways. There's
nothing wrong with being intentional with your money, but we
don't want you to get carried away with your spending. Uh.
And in this episode, we actually go step by step
on how to create a debt payoff plan and how
(00:40):
to stick with it. Yeah, I feel like this episode
does deserve another spin, Mattine. People haven't listened to it
because it's way back in the back catalog. Well, it's
right here for you right now and U. Yeah, but
before we get to that episode, you know, this is
typically a Friday flight episode, and we did want to
mention actually one Friday flight story before we get into
this Bestie episode one headline it everyone out there should
(01:01):
be excited about that that we saw a pesky refinance
fee is going away. Hooray. Any listeners that have been
around for any length the time, you know how much
we hate fees. And as of August one, lenders will
no longer have to pay Fannie and Freddie an additional
half a percent fee that was imposed at the end
of last year, and so that means lower rates for
you when it comes to refinancing a mortgage, which I
(01:23):
know a lot of people are considering right now because
rights or low. Yeah, this is great news because it
will save the average person twenty dollars a month on
a three thousand dollar mortgage loan and twenty bucks a month.
That's not chump change, not at all. Yeah, So shopping
around for that refinance is of course always a good idea.
But we wanted to pass on the good news that
rates that you're seeing next week could be even lower
(01:44):
as this fee gets acts completely. It's something that we
covered towards the end of last year because we saw
that this was gonna be something that was going to
be added to the cost of underwriting alone, but that
is not something you're gonna have to worry about much longer. Yeah, man,
I'm kind of guy who wants to see, like an
Elon Musk flamethrower take into all the fees in existence,
and so yeah, just seeing a fee go down in
flames like this just makes me so happy. By the way,
(02:06):
make sure to check out Monday's episode, we have an
interview with the one and only Clark Howard, my good friend,
and so yeah, there's some really helpful travel advice that
we got into in that conversation, as well as some
wisdom when it comes to being your own advocate in
the tumultuous world of personal finance. So you can look
forward to that hitting your podcatcher. But for now, let's
get on that bestie episode about debt payoff and Matt
(02:27):
back to the beach for us. Welcome to How the Money.
I'm Joel and I am Matt, and today we are
discussing creating a debt payoff plan. Joel Man, we are
(02:54):
talking about debt. Everybody's got it. A lot of people
do people not everybody. A lot of people do though,
and the amount of debt that we as a country
have us as individuals. There is just so much debt
going around. We know that we want to get rid
of debt, but we don't necessarily know what steps to
take in order to get rid of that debt. But
a plan can help a whole lot, Yes, exactly. So
(03:15):
that's what we're gonna talk about this episode. We're gonna
talk through what it actually takes to paid on debt. Yeah,
But before we get to that, Matt, real quick, I
wanted to talk about guilt and money. And I think,
especially this time a year, maybe a lot of us
are feeling guilt over how we've spent. And some of
that might be warranted. Right. We we might have in
November December, in the lead up to the holidays, we
(03:35):
might have bought too many gifts for other people. We
we probably could have done just a little bit better
in how we thought through a spending plan, right, And
we're gonna talk about a debt plan, but we could
have thought through our spending a little bit better. But
I think ultimately this show and how we talk about money,
we don't want people to feel guilty all the time
about how they're spending. And I think certain folks in
the personal finance space. That's kind of their main tactic
(03:57):
is to make people feel guilty about how they do
spend versus motivating folks to help them spend less and
to save more. And so I think, you know, as
we get further and further into this new year, I
just want to let people know that this podcast, that
what we do, it's all about helping people prioritize the
right things and it's not about shaming them for the
for the move that they've made, for the things that
(04:18):
they haven't done as well as they could have done. Yeah,
totally do. I completely agree. I think you said shame,
which totally may think of something else as well as
I'm gonna go there in one second, But I think
a guilt trips for you know, based on your spending,
that's a bad idea. If you have identified what it
is that you want to spend your money on, like,
if you have a plan, if you know where your
priorities lie, then it's okay to spend money. And yes,
(04:39):
you do not need to feel guilty. I do think though,
that a little bit of guilt can be a good thing, right,
Like to me be proud a little bit at time. Exactly. Yeah. Like,
to me, guilt is basically knowing that you could have
done something better but you didn't. It basically cause attention
to the fact that you're responsible for your actions. And
when it comes from money, I think there's definitely a
need for more responsibility when it comes to you know,
(04:59):
personal finances. But interestingly, like you mentioned shame, and I
think that's so clutch because there's a big difference between
guilt and shame. Have you read any of Burnet Brown.
She's like, she's a she's you know, she has ted
talks and she's written books and she's an author. I'm
familiar with her just because my wife talks about her
a lot. I haven't read any of her books. She
she's I think she's really great. But she talks about shame,
and one of the ways she characterizes it is that,
(05:21):
like shame is well, for let's start with guilt. Guilt
is knowing that you did something bad and so you
feel bad for that action, right, whereas shame is like
you identify as being a bad person, and so we
want to focus on the behavior. You know, you're not
a terrible person because you you know, you blew your
budget one month or maybe you didn't quite put enough
towards retirements that year, right, But when you identify with
(05:44):
being a poor saver, like if that's who you feel
you are, well, that's when it can become negative versus
a positive effect. It can almost be become a self
fulfilling cycle. Oh yeah. If we identify ourselves as a
certain way, we're going to act accordingly, and so we
have to kind of break that psychological barrier of feeling
shame with how we've handled our money. And I completely agree.
(06:05):
I think a little bit of guilt can help drive
us in the proper direction. But if we completely identify
as being someone who doesn't know how to handle money, well, well,
then hopefully this show can help people this year to
learn some of those tools and then to kind of
help break those chains of potential shame that's associated with
how they handle money. Totally. Um, that's that's what we
want to be here. We don't want to be here
to use a stick to beat you over the head
(06:26):
because you haven't done things properly. What we want to
do is encourage you, motivate you, give you the tools
to create a more positive outlook on your relationship with
money and then specifically give you the proper approaches to
how you can handle your money well so that you
can make changes moving forward, so that whatever cycle maybe
you've become accustomed to living in relationship to your money
(06:47):
just isn't the case anymore. Yeah, totally. I think if
you feel a tiny little bit of guilt when you
learn something new or maybe you hear something that you
haven't done, I think that can be okay if you
respond positively to that. Right. It's just like constructive criticism
or back that you receive on a project or something
that you're working on. If you take that feedback and
you then modify your behavior and that allows you to grow.
(07:07):
What's It's a positive thing. It's about gaining knowledge and
learning from our mistakes. And yeah, like you said, you
hopefully that's what folks can do from listening to this podcast. Yeah, man,
I think I used to feel guilt over buying really
nice beer, and now I just don't anymore. It's because
it's something that I've prioritized highly and something that I've
made an important line item in my budget. And so
(07:27):
I think that's another way that people can approach it.
And so Matt, speaking of beer, the beer that we're
having on the show today is barrel aged Yetti Imperial
Stout by Great Divide Brewing and the kind folks at
a Great Divide in Denver, Colorado, they sent this beer
our way. I'm really excited to have the barrel aged
version of their Yetti Imperial Stout on the show with
you today, my friend. Yeah, this is our last one
by them, we've had them for the past few episodes now.
(07:50):
So man, Great Divide, y'all are fantastic. You make some
awesome beers like you always have. And yeah, we'll get
to our tasting notes on this one at the end
of the episode. All right, Matt, let's get into the
topic at hand. We're talking today on the show. We're
talking about creating a debt payoff plan. And let me
ask this question to our listeners at the very beginning
of the episode, and it might be a little awkward,
how's your debt situation? And does that question itself cause
(08:13):
a lump to rise in your throat? Well, personal levels
of indebtedness are a major issue in our country, but
lots of folks feel like they're stuck in quicksand up
to their midsections and they don't know how to navigate
themselves out of the problem that they put themselves in.
We need a plan to help us get out of
debt and to get our feet set in the right
direction this year. And so when we see headlines Matt
like we've seen lately eight six percent of millennials overspent
(08:35):
on Christmas gifts, well, we know what that means. That
means that a lot of those folks have put that
extra spending on plastic on credit cards and this time
a year they're getting that statement in the mail and
they're a little shocked. They didn't know that they spent
that much, and they didn't realize that they wouldn't be
able to afford the bill, and now they need some
help to tackle that debt, not to mention the other
death they might be caring right now, so it doesn't
get even further out of hand. Well, Joel, you're talking
(08:56):
about debt, and I feel like I'm super a d
D today because you mentioned quicksand and I started thinking
about quicksand why is why is like why would we
When we were kids everything was quicksand like Mario Brothers
to head quicksand like even as kids playing it's like
watch out for the quicksand like quicksand was this real thing,
like this real problem that we had to watch out for.
When I think about quicksand I think about the Princess Bride,
you know, I mean to me that's strongly correlated. Yes,
(09:18):
it's like late eighties, early nineties quicksand was everywhere. Now
everything's lava, like the kids have moved on to lava,
like it used to be quicksand now it's lava. Alright, Well, sorry,
a little side with old school reference. We're gonna stick
with quicksand floors lava. All right. Let's get back to
debt a little bit. Though. Here's the thing. Here's a
fact for you. Outstanding student loan debt, Joel, it has
reached an all time high last year. We hit one
(09:40):
point four one trillion dollars of Americans have credit card debt,
and the average outstanding balance it's just over six thousand dollars,
while consumer debt as a whole stands at fourteen trillion.
It's not just I covered my ears there because it
just got so horrendous. Way can you say it again? Dude?
It's terrible, and not only is it just an incredible
amount of mon but it's also how we're going about
(10:02):
getting this debt. Car loans they've gotten longer, with some
folks not just taking out sixty months of payment, but
seventy two and eighty four month long loans, and then
you know, they end up trading their cars and while
they're upside down, or taking out debt for smaller and
smaller purchases as well. Everyone out there, like all the
different retailers, offer a payment plan now, and it spans
from you know, services at home like your h VAC too,
(10:25):
urban outfitters if you just want to, you know, pick
up some shoes. We are funding our lifestyles through the
accumulation of more and more as well as riskier debt.
It's just become easier to take on debt for anything now.
Like you go to the dentist and you can take
out a payment plan on that new artificial tooth or
whatever surgery you had to undergo. Yeah, I gotta think
that that is the absolute least fun loan to pay on. Yeah,
(10:48):
paying on my root canal still, I'll give you a
three loan on that root canal, Matt. But that's just
the kind of day and age we live in. Easy
access to debt for almost anything. Yeah, your local small
business electrician probably has the ability to offer you alone
on that new age fact. I mean, it's just kind
of almost gotten preposterous. And then we end up sinking
ourselves in a hole, even if it's zero percent, Even
(11:08):
if it's zero percent for multiple years, we'll take out
the debt and then ultimately we just don't have the
money to meet those obligations. So we have to change
our relationship to debt and how we consider taking it on.
But Matt also too, I think it's important to mention
before we get into the specifics of creating a debt
payoff plan that we don't think all debt is terrible,
Like we're not anti every single kind of debt out there.
(11:29):
Not all debt is bad debt. Some debt can be
used effectively, and there are reasons worth accruing debt, for example,
going to get an education or starting a business, or
buying a home, and we kind of discussed that in
more detail and episode one. But just because you're considering
one of those good debts doesn't give you a free
pass to blindly take out loans in order to go
to a fancy school or to pursue your dream of
(11:49):
owning your own restaurant, or to buy more house than
you can afford. You still have to take value into
the equation when you're thinking about what debts you take on. Yes,
we we need to take value in account because you know,
not having massive amounts of debt is important, and so
I mean, I'll not note. You might be asking like, well, well,
why is getting out of debt? Why is that actually important?
(12:10):
The biggest reason that we're gonna share that getting out
of debt is so stinking paramount is because debt is expensive.
In the moment, it doesn't feel expensive to pay with
the credit card or maybe to take out alone. If anything,
it feels like free money, right, And it's really easy
to gain access to that credit, which is why in
a recent episode MAUT we talked about cash, debit or
credit like how we spend using credit cards is in particular,
(12:32):
the biggest downside is the ease abuse, and that's what
causes us to use them more frequently. Even though it's
a smooth transaction. Even though we like credit cards, it
can be away for us to spend money that we
don't have exactly. Yeah, but here's the thing at the
core of it, though, Like using your credit cards as
a tool, that's not the problem because it really is
just a tool. It's when we don't pay off the
balances and the interest begins to accrue. It's when we
(12:55):
use these tools incorrectly. And so when we're paying interest
on a balance, we're paying way too much money for
the things that we likely shouldn't have purchased in the
first place. So, for example, if fitsing thousand dollar car
like that could easily end up costing you closer to
twenty dollars because you took out a car loan and
you're paying interest, and so effectively you're paying way more
than you should have for that vehicle. And it's hard
(13:15):
to reach your financial goals when you're constantly over paying
for things. Yeah, Matt, having a lot of debt puts
you on just not solid footing. It puts you in
this kind of quick sand thing, right, I mean, let's
get back to the Quicksand it puts you in this
scenario where you're not as financially flexible as you could
be if you didn't have that debt in your life.
The more debt you have, the weaker position that you're
in and the less freedom you have. And when we're
(13:37):
constantly overpaying for pretty much everything in our lives, it's
also it's hard to get ahead and to reach any
of those financial goals that we have. The going is slow.
When we have interest payments working against us. It feels
like all the cards are stacked against us, and that
can be really discouraging. And instead, we want to be
on the receiving side of interest, and that means like
having a high interest savings account. That means our investments
(13:58):
essentially making money for us while we sleep. Instead of
interest working against our money, it's working for us and
it's allowing us to quickly achieve our goals. That's when
it allows us to build wealth. We're using interest in
the positive frame. We're using returns in the positive sense
as opposed to everything we buy having a much larger
price tag based on the fact that we have interest
(14:19):
payments going alongside of it. Yeah, that's the difference between
paying interest versus receiving interest. Right, And I got a
quick illustration for you. Imagine have you ever been to
a store where there's like a second floor, or maybe
e've been to a mall, a movie theater perhaps, Right,
where there's an escalator. So imagine you're on level one
and level two. That's where you're trying to get to
level two, Joel. That's where your financial dreams and hopes
(14:40):
are in front of you. You've got two escalators. You've
got one that's coming down. At least, it's not like
a sky skyscraper that I have to climb, you know. Yeah,
but on one side you've got an escalator coming down.
On the other side, you've got an escalator going up.
And when you have debts, that is when interest is
working against you, right, That is you trying to get
to the second level by going up the side of
(15:00):
the escalator that's coming down. When you're doing that, you're
working crazy hard. It takes way longer, and you know what,
at some point you might even actually give up because
it's too hard. I probably could have done it really
easily when I was twenty five, Matt, But even still, like, yes,
I agree, right, like I've I've done that before as
a kid, But it's still a lot harder versus when
you have interest working for you. When you're receiving interest,
(15:20):
it's like you're getting on the correct side and you're
you know, you're writing that interest up. If you want,
you can only rely on that interest and you can
just stay in there. But if you continue to work
a little bit, imagine how quickly you're gonna get to
that next level walking while you're on an escalator. It's
like the best feeling I know. I mean, how quickly
do you get from like one level to the next
just by doing that. It's amazing. And so maybe the
next time you're thinking about taking out a car loan
(15:42):
or some other consumer debt, some credit card debt, picture
that illustration, because like that truly is what it's like.
It's like, like you said, being in quicksand and you're
trying to trying to hop out of that quicksand it's
so difficult to do that. It's so difficult to make
any progress when we're bogged down with that interest working
against us. Yeah, no doubt. And we have to get
to these specifics for folks that are writing that down
escalator and they want to get off, they want to
(16:02):
get out of debt, and they want to make their
money work for them. Well, let's get to the specifics
of how to create a debt payoff plan right after
this break, all right, Jill, we're back and we're talking
about creating a debt payoff plan. By the way, did
you like my my little illustration about the escalator? That
(16:24):
was a great illustration another one I was thinking of two.
I was just like, okay, what about like headwinds and
wins that you're back. I'm like, I was gonna say
an example of you know, when you're up at the
tea box and you're playing disc off and you're getting
ready to throw your driver, but you've got that strong headwind,
it's gonna be a lot harder than if you had
to win at your back, right, True, It's true. Yeah,
that's another great illustration and one that makes sense to me.
But I feel like most folks have probably been on
escalator is more often than they've actually thrown a disc off.
(16:47):
It's probably true for most folks out there, sadly, because
disc golf is a great sport. All Right, We're gonna
talk now, though about what steps that you need to
take when it comes to creating a debt payoff plan.
These are the steps that we're going to actually help
you to make real substantial progress this year. The first
thing that you need to do is to make a
list of all your debts. The first step in any
plane of action is to get organized, and so making
(17:07):
sure that you're aware of all the debts that you
oh is a really important fort step on your path
to crushing debts. Yeah. Man, I mean we've used this
illustration before, but if you're planning a road trip, you're
going to make the dots along the wave where you
want to stop. You kind of want to know the layout.
How long is it gonna take me to get here
and there, especially if you got kids, Like where are
we gonna stop to pete? Where we're gonna stop to eat?
There's all these questions that come with a big, major trip, right,
(17:30):
And so I think the same thing, like paying off
your debt is this big trip and you want to
plan the points along the way you want to you
want to know exactly what's in store so that nothing
hits you terribly by surprise. Yeah, you don't just throw
everybody in the car and just start driving. That's a
terrible plan. Like lick your fingers sticking up in the air,
decide which way then we're gonna go east. Let's do it.
We'll see where we end up. Yeah, Yeah, that's not
(17:51):
a good way to go. So, yeah, making a list
of all your debts helps you at least get the
lay of the land. And then you need to pick
your approach. And then we've talked before about the debt
snowball approach for is the debt avalanche approach and which
one people should consider, And we went into a lot
of detail on how you decipher which plan is better
for you in episode eighty six. But do you need
or just want some more emotional rewards along the way,
(18:13):
or do you just want to pay these debts off
as quickly as humanly possible while paying as a little
interest as you can. Either way, he'll focus hard on
completely obliterating one debt while paying the minimums on the others.
In both approaches. Maintaining a high level of focus is
the key to success, because once you know that lay
of the land mat it's really important to kind of
choose which approach you're gonna take and then sticking to it.
(18:35):
If you've come up with a strategy, do you think
it's gonna work for you? Looking at the strategies that
might potentially work for you and then picking one and
sticking to it is going to be crucial to your
probability of success. Yeah, Joel, you know. And one thing
I'll say is that I think for folks especially who
are listening to this podcast, they're thinking, no man, debt avalanche,
that's the way to go. Look at the numbers, do
(18:55):
the math. But the older I get, I realized that
so much of our money is not just knowing the
correct information, isn't just seeing the numbers right. Because we
don't operate as robots, we don't always make the rational decision.
Our emotions play such a huge role when it comes
to how we handle our money. And because of that,
I think the debt snowball needs to be considered my
(19:17):
way more people than it actually is, because you are
receiving that feedback more quickly. You're able to quickly pay
off a debt and then quickly move on to the
next one, and that feels good, and when it feels good,
that's something that you will continue to do. Exactly. The
best plan that we can create is the plan that
we can stick to. Yes, it's not just the best
plan in theory, it's the one that we can actually
accomplish in real life. And just quick example, Matt, for me,
(19:40):
for a lot of years, I wasn't fully funding my
wrath I r A, and I was just investing a
lot more in my four owing K because it was
a lot easier for me to click the button that
up the percentage point coming out of my paycheck. I
barely felt it than it was to actually increase that
automatic draft amount from my bank account into Vanguard to
fund my wrath. And so it literally took more work
for you to up your wrath I RA versus your
(20:02):
four own case. Yeah, and really the work is the same.
It's the mental It's a mental hurdle I couldn't overcome.
And so I think that's a huge thing that we
do need to consider. What what what's the easiest mental
mental hurdle for us to overcome? And again, the plan
that we can stick with is the one that we
need to commit to. So true man, all right, So
now you've made a list of all your debts, you've
gotten organized, you've picked your approach. You know, you thought
about which strategy is gonna work for you. The next
(20:24):
step is we want you to look at your timeline
a little bit. This is when you are going to
do some math and you want to calculate how much
monthly income you can put towards your debts and and
actually figure out how long it will take you to
be rid of it all. It is important to know
how long this will take in order to manage your
own expectations. If you don't take the step, you might
(20:45):
think you'll knock out your debt, let's just say by
the end of the year, and then maybe October rolls
around and you realize that you're not even close. If
you are not realistically approaching your debt path plan, it
can be easy to lose hope and basically just burn
and fizzle out. Yeah. It reminds me of our conversation
with J. D Roth not too long ago, and he
specifically mentioned he gave a very vivid picture of his
(21:07):
when he was in the bath. Okay, he was like,
this is how I came up with my debt payoff plan.
I was in the shower. I had this epiphany. He's like,
I ran out, I didn't dry off, I had a
towel around me, and I sat at the table for hours,
and I came up with this debt payoff plan. What
I know, Yeah, I know, I totally picture. I can
totally picture it was. It was maybe too vivid, and
he said he realized it was gonna take thirty six
(21:28):
months for him to pay off his debt after kind
of calculating it out, and this timeline helped him track
his progress. Knowing that timeline helped him have a realistic
expectation in mind for how long it was going to
take him to be rid of all his debt. And
that's really important step for us to take in this
process is to map out the length of time that
it's going to take us to go from a bunch
(21:50):
of debt to no debt, because that can help us
stick with it. If we know that it's going to
take three years, well there's light at the end of
the tunnel. If we have no idea and we just
or aimlessly attempting every month to put more money towards
our debt, but we don't have a time frame in mind,
well then it can just be a little more difficult
to actually stick with it. It's like the difference between
running a marathon versus like a sprint, Like you need
(22:11):
to know the distance because if you start running a
marathon like you're running a Fodre sprint, well, guess what
you're gonna burn out and you're gonna completely give up.
And so yeah, having that and goal in mind and
knowing that time frame is is so important. And there
are tools that can help, by the way, and well
link to those in the show notes, whether you're taking
the snowball approach or the avalanche approach, will link to
a tool that can kind of help you as you
(22:32):
plug in your information, it can give you that timeframe
so that you're not just doing pen and paper. You
can actually plug it into a spreadsheet and then you've
got breadsheets. You can share it with your significant other
or your partner, and it's this kind of perfect opportunity
to be on the same page, to be looking at
the same numbers, and it can kind of just kind
of help you plot your path. Well, you know, I'm
all about the spreadsheets. I know you are, buddy. Yeah,
And so another step we want you to take is
(22:54):
essentially to create a debt slaying identity. Basically, what I
want you to do if you're in debt and you're
looking to get out of it, is I want you
to say to yourself this year, I am all about
paying off that debt. It's like your alter ego, Yes,
like that that's just who you are. What this means
is not saving for a vacation, not saving for that
new car that maybe you wanted. Instead, it means throwing
(23:15):
all of your weight behind that one singular goal. This
is a crazy powerful approach, and anyone who has paid
off large amounts of debt quickly will attest to the
power of this type of focus. And again, you want
to make sure to prioritize that top debt while you
pay minimums on everything else, regardless of what approach you take,
whether you take the debt snowball or whether you take
the debt avalanche. All right, we've referenced Batman in this
(23:37):
podcast before, Matt, but so basically Batman is this perfect
representation of creating an alter ego. It's it's not that
he has these special powers. I mean, sure he's got
a cooler vehicle and like a grappling hook or whatever,
but he can't actually fly or do anything super duper special.
He's just creating an alter ego that helps him to
fight crime. It's almost like when he puts on the suit,
he becomes a different person. And I think that's kind
(23:58):
of how we need to appre coach paying off debt
in our lives is to create this alter ego, to
put ourselves in this new state of mind, in this
new superhero suit, if you will. And I think that
that just kind of mental shift in telling ourselves that
we are someone who can pay off a large amount
of debt, who can make a change in our life,
who can shift our habits. That's a that's a really
(24:19):
powerful thing for us as we step up to the
plate in order to vanquish the debt that has become
the bane of our existence. That's a nerd bad guy reference.
I love it. The next step is basically to move
on to debt number two. Once you've done all of
that and you've crushed that first debt, move on to
the next debt on the list. Again, regardless of which
(24:41):
method that you're taking. After that first debt is eliminated,
you're gonna have more money. It's blast that next debt
on your on your list. You might notice that it's
a little bit easier to attack that next debt that
you have on your lists. Right, Like interest is still
working against you because you still have debt, but it's
not working against you quite as hard. Going back to
the escalator analogy, like you're still going up the wrong escalator,
(25:03):
but maybe the escalator has slowed down a little bit.
And not only has this slow down, Jill, you've also
gotten stronger because now you have more money to throw
and to attack that next debt with. Yeah, it's incredible
how this process, the debt payoff plan becomes easier after
that first debt is removed, whether you're going avalanche or snowball,
having one fewer debt, it just increases your ability to
(25:24):
attack debt number two. It's a beautiful thing. Yeah, you've
got more money and it's just easier to focus as well,
because guess what, if you've got six different debts that
you know that you want to pay down, it might
take a lot of mental capacity to focus on that
one debt when you know you've got these other ones
that you're just paying minimums on, right, But guess what,
you knock out one of those and now you've only
you've only got five, so you're paying against one of them,
and there's just four of them that that are kind
(25:45):
of sitting there, and then you know, the number just
gets smaller and smaller. There are so many reasons why
focusing on a singular debt is so the way to go. Yeah,
and Matt, I think another important thing to say on
when we move on to another debt is it it's
important to give ourselves a little reward along the way
with each major milestone that we achieve. We discussed this
recently in the gamification episode, but small rewards along the
(26:08):
way can give us a renewed hope to pause and
realize that we're doing it. Well, that's huge, and then
we can start to rent and repeat and kind of
continue along in the process. But once we've appropriately celebrated
knocking out a credit card debt or a car loan,
then start setting your sights on the next debt to crush.
Maybe student loans are next on the hit list. But
(26:30):
however you're doing it, make sure that you do give
yourself like a little reward along the way. It can
really increase that positivity and continue to fuel you in
that superhero esque pursuit of paying your debt off. Yeah. Man,
we're emotional creatures and to have that positive feedback is
so important. And I think that's one way too that
we can reward our So it's not even by spending money,
but there's ways that we can reinforce that behavior, even
(26:53):
just with sharing it with others. If you've told some
friends about your financial journey or like your plan to
pay down some debt and you tell them, hey, guess what,
you know those three credit cards that I'm planning to
knock out, one of them is completely done with. Like,
that's huge, and hopefully you know, if you've talked about
your money with these folks, these are friends who can
then celebrate with you and encourage you and they become
like your cheerleaders, like encouraging utically. And if you don't
(27:15):
have these these type of friends, we would encourage you,
you know, a to talk about money with your friends
and family, but also check out Facebook. Within our group,
folks are often posting their winds and then how they're
succeeding with their money, and we would suggest jumping in
there encouraging those folks. And then when the time comes
for you to knock out some of your big debts
or meet some of your financial goals, you can share
that in there as well, and it will be folks
(27:36):
in there who will be pumped for you. And guess
what that costs you? Nothing? Yeah? Man, sharing those wins
with other people that you don't even have to like
treat yourself to something super fancy, but honestly, even just
that encouragement from people around you that are rooting for you,
that's enough of a reward oftentimes for us to keep going.
That can really be a big motivation for us and Matt. Now,
if we are kind of in this debt playing superhero mindset,
(27:59):
a question pops up, well, how can we accelerate this
debt payoff plan process? Well, there are ways that we
can potentially earn extra money and then other ways that
we can cut back in our spending, and those things
can accelerate the amount that we're able to put towards
that debt to kind of make that thirty six month
plan let's say a thirty three month plan. And that's
kind of fun too. Yeah, that's right. We need to
address both sides of the equation, right. We talked about
(28:21):
this last week on our episode on frugality, how frugality
doesn't always cut it, but we need to address our
big expenses as well as some of the big ways
that we can increase our income. Yeah, totally. So, on
the note of cutting back, will choose a specific few
areas that are meaningful for you to be able to
still enjoy life. Don't stop drinking craft beer altogether necessarily,
but make it maybe a special treat. And that act
(28:43):
of cutting back, well, it can help you to achieve
this quote unquote no bad debt status far more quickly.
And if you can continue it after this debt payoff
plan is complete, it's gonna help you build savings and
have money to invest for your future at the same time. Yeah, Joe,
So that's addressing expenses, right, if we're able to cut back.
And on Money's episode, we talked about earning more money,
(29:04):
you know, through entrepreneurship, through starting your own small business.
We had an interview there with Vincent, so we'd recommend
checking that one out if you're looking to address that
side of the equation. But either way, you can accelerate
the process by focusing on your expenses, by focusing on
your income. You want to make sure that you're doing
both of those. We're gonna continue to talk about creating
a debt payoff plan, and after the break, we're gonna
talk specifically about some different practical advice and some different
(29:27):
tactical steps that we can take in order to pay
down our debt. Faster. We're gonna get to those right
after the break. All right, now, we're back to break,
and we do have some practical and tactical things we
have to share in their galactical In this part of
(29:48):
the show about how people should approach their debt payoff plan,
we kind of went through all the steps, but there
are a lot of other things to consider, some tips,
some hacks, as the kids like to say, on how
to approach this plan that can help accelerate it. Beyond
just the ideas of earning more money, there are specific
things that we can take advantage of in order to
help us lower the interest rate or find the help
(30:10):
that we need in order to achieve our debt payoff
more quickly. So, Matt, I think one of the first
things that needs to be noted is we really need
to think long and hard about the things that led
us to to this state of debt in the first place.
One of the major things we need to come to
grips with is to think about our triggers, like what
caused us to spend money that we didn't have in
(30:30):
the first place. Knowing those triggers is the first step
to changing our habits, and that's a really crucial process
in this whole plan. So if your credit cards are
your arch nemesis and you just don't know how to
stop using them, will cut them up or freeze them,
put them in a freezer bag inside of your freezer,
like literally put them in a ziplock bag, fill it
with water, and stick in your freezer. Put that junk
on ice, exactly. Like, if that's your trigger, you have
(30:52):
to figure out how to make that stop, because even
as you're paying off your debt, you might be accruing
more along the way, and you're just kind of it's
this is your row some game if we don't know
the things that are actually triggering us to spend in
the ways that are hurting our finances and real quick
you mentioned like putting your credit cards in a block
of ice. Let's clarify, because that is literally one way
to freeze your credit cards. But there's I think sometimes
(31:13):
some confusion when people say I've freeze my credit. Well,
that's not freezing your credit. That's literally freezing your credit
cards to curb your behavior. But then you can actually
freeze your credit by going to trains, Union, Experience and Equifax,
and that actually puts a lock on your credit. That way,
nobody including yourself, is able to take out new credit
new credit cards unless they go on their first and
(31:35):
unfreeze it, typically temporarily. Yeah, And that's something that we recommend,
is is for folks to freeze their credit so that
other people can't take out credit lines in your name.
But freezing your credit card definitely a step to take
if that credit card has become this problem in your life,
this thorn in your side, yeah, man. And another thing
to note on at since we're speaking about your credit
score and freezing your credit, well, your credit score is
(31:57):
this awesome thing to monitor along the way while you're
involved in this debt payoff plan. And we really like
the website credit Karma. There are other sites out there
as well that can help you stay in touch with
your credit score. Discover has one as well, credit scorecard
dot com. If you check out sign up for one
of those services and you're staying familiar with what's going
on with your credit score, well, as you're paying your
debt off, it's going to have a direct positive benefit
(32:19):
on your credit score, and that is motivating as you
see that credit score balloon over time, as it continues
to rise from let's say it's at six a d.
Now you know, over six months you might be at
seven thirty, and that is going to help you achieve
these other goals of being able to potentially take out
a mortgage right. If you want to buy a house
and you have a really low credit score because you
have an overwhelming amount of debt, well attacking that increases
(32:43):
your score and not only means you have less debt
weighing you down, but also means the possibilities of taking
out positive future debt right of something like a house
are just greatly increased. Yeah, seeing that credit score boost
like that, that's an amazing secondary benefit of paying down
that debt. It's also talk about where not to go
if you're in debt over your head, if you're not
(33:05):
able to handle the payments currently on your debt, do
not sign up with a debt consolidation company. They charge
big money and they rarely live up to their claims.
Often you end up paying them, you know, a lot
of money, and they do little or nothing to help
you in your debt payoff pursuit. UH. In that case,
you're often better off on your own because at least
(33:25):
then you can toss more of that money towards your
debt and not going to the service that's not actually
providing any value. Yeah, if you hear an advertiser or
someone specifically tells you, yeah, if you just pay these
people a couple of thousand dollars, three or four thousand dollars,
they can help you consolidate your debt, they can work
with your creditors, they'll help you achieve your own debt
payoff plan. Well upfront payment for someone to do that
(33:46):
for you. When most of the things that these debt
payoff companies say they're gonna do, they either don't do
or you can do yourself. That's just not a smart
way to go. Yeah, that money upfront huge red flag.
So what you do want to go if you're debt
is overwhelming, is going to be your local affiliate of
the n f c C, which is the National Foundation
for Credit Counseling. They are a nonprofit and they are
(34:07):
full of helpful financial services like debt and budget counseling.
They have the power to help and kind of counsel
you along your debt journey. They do the things that
many of the debt payoff firms say that they'll do,
but then they don't in actuality. Yeah, that's true. The
NFCC is the only place I would tell someone who
is up to their eyeballs in debt and doesn't know
where to go and can't afford their debt payments. That
(34:29):
is the only place I would send them to. And
so yeah, NFCC dot org, find your local affiliate, meet
with someone there. That is your best path forward if
you're in debt that you can't manage. And Matt, let's
talk quickly about apps. There are apps popping up all
over the place that claim to help people with their
debt payoff. And there are some apps that I think
could potentially be helpful, but they come with a caveat.
(34:52):
There's one called coins q O I n S and
there's one called tally that offer to help, but they
charge you to do so as well. So you know,
you and I we prefer the D I Y no
fee approach. But these apps can be helpful for the
right person who has a tough time actually sticking to something.
And if these apps are going to help basically make
the process smoother for you, and that fee is basically
(35:15):
going to prevent you from defaulting on your debt. Well,
then what we would say is use one of those apps,
use it to its full potential, because, yeah, paying a
fee is is better than not doing it all together.
If that's gonna get you motivated, if that's going to
be the thing that helps you to actually stick to
a debt payoff plan, well then that's great. And those
are two worth considering. Yeah, man, those are some of
the different apps. And there's also some websites that can
(35:36):
help as well. I'm thinking of unburied me and undebt it.
And by the way, those are unburied dot me and
undebt dot it's I guess thattand's in Italy the I T.
I love how the different websites are using the different
I don't know what you call it, like the dot com,
dot net, like the postscripts or whatever, but they're working
them into the name of their site, which is I
(35:56):
love it. That's why we're changing the u r L
for our website from how the Money dot com to
how the Money dot listen to our podcast now how
the Money dot Beer. Actually I legit think there is
a beer. Yeah, I was gonna say that that's a
really oh my gosh. Either way, though, let's talk about
these websites unburry me and undebtit. They are both similar
(36:16):
and they can offer some help creating a debt payoff plan.
If you prefer a more digital interface, definitely give one
of these shot with the different graphs and you know,
the digital feedback it might help you to visualize your progress.
And and and you know, for that reason it can be
really valuable. But at the same time, we don't want
tech to keep you from actually getting a plan together
at all. Pen and paper can be really valuable, especially
(36:39):
when it comes to just tracking your progress. You know,
like it is pretty easy to create a little graph
and a little chart and you kind of fill it
in as you work your way up that notebook paper.
Just know yourself and participate in any of these different
little tips and strategies that you know will resonate the
most with you. Yeah, man, I agree. I think part
of it comes down to knowing yourself and knowing the
ways that your best going to be able to stick
(37:01):
to a debt payoff plan. And and and some people
they're on a computer all day and using a website
like unburied dot me or on debt dot it is
is going to be a massive help in the way
they approach paying off that debt. And for other people,
you know what, a pen and some paper that's gonna
be motivation enough. They don't need some sort of really
cute see graph and interface to help them tackle their debt.
So just kind of know your tendencies and that can
(37:22):
help you, and Matt, I feel like there are a
few more hacks that we really should mention to help
folks actually save more on interest payments and potentially pay
off their debt even more quickly once they have a
clear plan in place. A zero percent credit card transfer
can be a game changer for folks, especially if they're
on the fast track to eradicating debt. And this is
particularly useful, Matt, for folks that have a good credit score.
(37:44):
If they can qualify for a credit card with a
zero percent intro period of like let's say fifteen or
eighteen months, and they're ready to to pay off their
debt quickly, well, this can mean no interest payments on
the majority of that debt for a long period of time.
And so we just wrote an article about the best
balanced transfer credit cards. It's up on our site at
how to money dot com. For folks that specifically are
interested in a card like that, and we outline the
(38:06):
ones that are going to charge the fewest fees so
that when you make that transfer, your payments are working
to pay off your debt. They're not going towards the
bottom line of the credit card companies. And if you
currently have a credit card and that's one of the
major debts that you're looking to pay off, well, another
hack that you can do is to call your credit
card company and ask for help. Whether it's a credit
card company or another creditor, they're often procedures in place
(38:29):
for people they call and ask for help. Matt. We've
talked about asking for a discount before. This is asking
for potentially a lower interest rate on your debt, which
is going to help you to be able to pay
it off more quickly. And Matt, one example I wanted
to mention is let's say you've got a student loan
through a company like so FI, and one of the
coolest benefits that they offer is help if you lose
(38:49):
your job. Not only will they provide actual assistance for
you looking for employment, but what they'll do is they'll say,
you know what, you don't have to pay your loan
for the next six months while you're looking for employment,
it and so stuff like that. It's out there depending
on who you're doing business with and what sort of
programs are in place. It's just worth it to ask
whoever you have debt with to see if there's some
(39:10):
sort of way that they can can help you along
the process. Yeah. On the note of lower interest rates
as well, Man, we would recommend for folks to consider
checking out maybe some alternatives to credit cards. If you
have a home, you can consider a helock home equity
line of credits. You're going to be able to get
a lower rate. Obviously, there's going to be some risks
associated with that. You're taking your debt and you're tying
(39:32):
it to your property. That debt is now a secure
debt because your home is collateral. So if you are really,
really sure that you're going to knock out that debt,
then that might be something that you can do. But
this does not need to be something that you you
take on lightly. Yeah, because it's one thing to not
be able to pay off a credit card. There are
certain rights that you have. You're not gonna lose your
(39:52):
house or get thrown in prison. For not being able
to pay your credit card debt. But if you tie
it to your home, if you refinance or you take
out a helock, that cau are that homes on the line. Dude, Yeah, exactly.
And so if you're gonna have trouble paying it off
with a helock, even if it lowers your interest rate,
don't do it because you don't want to lose your
home over credit card debt you were unable to pay.
That's right. And another option to consider is you can
(40:13):
always borrow money, maybe from a family member. This is
something that it just depends on who you are and
what your relationships are with your you know, those in
your family, because it can get awkward. In many cases,
it isn't worth the possible harm that could come to
that relationship. But if your credit score is really low,
that might be your only option for lowering any super
(40:35):
high interest rates that you might have, So definitely consider that. Yeah, Matt.
If someone submitted and ask htm question for the shows
where we answer listener questions and said, hey, should I
loan money to a family or friend, I think we
would probably say don't do it? Or if you do,
know that there's a good chance that you don't get
paid back all together, and just kind of go into
that loan situation knowing that's the case. But if someone
(40:56):
has a really low credit score, if they don't have
that many options, this might be the best option for them,
if they have a good relationship with a friend or
family member that is willing to help them out in
this way. So, yeah, those are some ways that you
can approach lowering potentially your overall rate of interest, some
moves that you can make to help accelerate that debt
payoff plan, and yeah, crush that debt once and for all. Yeah,
(41:17):
And it's important to keep in mind as well that
these are things that you want to consider after you
have a solid plan in place, like these are these
are the little tweaks. Right, Like last week we talked
about frugality and how we need to focus on the
big things. Well, in this case, the big thing is
creating that plan and really getting after it. These these
little tips and tricks, these are the little tweaks. This
is the frugality aspect of paying down your debt. They
(41:38):
are certainly things that could make a pretty big impact
and really help you along and provide some encouragement and
make it possible for you to pay down that debt,
but first you do need to have a solid plan
in place for these additional pieces to kind of slot in. Yeah,
I completely agree. And you know what, for anybody out
there who is it's experiencing a load of debt that
is uncomfortable, well, best of luck to you and creating
(42:00):
a debt payoff plan. I feel like having this plan
sometimes can help you at least have this target to
aim at, and it can make a huge difference in
in helping you actually achieve being rid of it as
opposed to kind of feeling like you're in this quicksand
scenario and you don't know how to get out. The
plan is like the rope in Princess Bride that helps
you get out of the quicksand it is right, that's
exactly what that debt payoff plane is as you win.
(42:23):
All right, it's it's beer time. Let's take a back
to the beer. This episode, you and I shared a
barrel aged YETI Imperial Stouts. I want to say this
can it's it's brown and gold and it's like perfect
for for the way this beer tastes. And I want
to mention to you the way it poured, and it
poured pitch black, and at the same time, it had
this amazingly dark brown head. It looked like crema, Like
(42:46):
if you've ever gotten an espresso where you know the
the espresso bubbles, like the little cream at the top,
they call it crema. A little insider knowledge for you, exactly.
But I couldn't get over how richly brown that head
was on his beer. And every time I kind of
world it, it it almost had like some red notes in
it looked amazing. But yeah, what were your thoughts on
how this spear tasted? Man, this beer was so good.
(43:07):
It had these nice boozy barrel notes on an already
delicious stout. I felt like the stout was chock full
of bitter, dark chocolate vibes and that paired so well
with the sweetness coming through from the whiskey barrel that
it was aged in. So in my mind, if you
get the dark chocolate, bitter stout combined with aging in
whiskey barrels, it's that perfect pairing, it's that perfect marriage.
(43:27):
And that's what that's what this beer was. It was
so good. Yeah, it's really good. It was Asian whiskey
barrels and I feel like you could tell that it
wasn't Asian and bourbon barrels, because typically I think when
you get bourbon, it's a little bit sweeter, and this
stout drink a little dryer to me, like it had
a ton of flavor, but it wasn't. It wasn't overly sweet,
a little bit on the dry side, and so it
kind of reminds me of like that fancier chocolate where
it's like eight percent caw cow or is that how
(43:49):
you say it, you say calco cocoa. I don't know.
It's a spelled like cal cow, and I don't think
I use that word very often. I don't know either,
But you know the fancy chocolate where it's there's zero
sweetness going on at all. That's what I picked up
out of it. It just had incredibly deep flavor notes
and I really enjoyed it. All right, man, Well is
that going to be it for this episode? That's gonna
do it. Let's wrap it up, all right. For folks
(44:10):
that want more money information, well, you can go to
our website at how to money dot com and we'll
also have show notes up for this episode. All right, man, Well,
that's gonna do it, Joel until next time. Best friends out,
best friends out,
Joel, what's going on, buddy? Hello, my friend, are you
enjoying your time right now at the beach? I am
recording this before we go there, but I'm just imagining
the joy I'm gonna feel. I'm asking future Joel if
if he's going to enjoy his he's having a rock
and time. Yeah, we're actually at the beach for a
few days. We've gone there with our families. We're spending
a lot of time out there in the sun, in
(00:20):
the waves. But we are replaying a bestie episode. This
is a really good one, as it seems a lot
of people are returning to their old spending ways. There's
nothing wrong with being intentional with your money, but we
don't want you to get carried away with your spending. Uh.
And in this episode, we actually go step by step
on how to create a debt payoff plan and how
(00:40):
to stick with it. Yeah, I feel like this episode
does deserve another spin, Mattine. People haven't listened to it
because it's way back in the back catalog. Well, it's
right here for you right now and U. Yeah, but
before we get to that episode, you know, this is
typically a Friday flight episode, and we did want to
mention actually one Friday flight story before we get into
this Bestie episode one headline it everyone out there should
(01:01):
be excited about that that we saw a pesky refinance
fee is going away. Hooray. Any listeners that have been
around for any length the time, you know how much
we hate fees. And as of August one, lenders will
no longer have to pay Fannie and Freddie an additional
half a percent fee that was imposed at the end
of last year, and so that means lower rates for
you when it comes to refinancing a mortgage, which I
(01:23):
know a lot of people are considering right now because
rights or low. Yeah, this is great news because it
will save the average person twenty dollars a month on
a three thousand dollar mortgage loan and twenty bucks a month.
That's not chump change, not at all. Yeah, So shopping
around for that refinance is of course always a good idea.
But we wanted to pass on the good news that
rates that you're seeing next week could be even lower
(01:44):
as this fee gets acts completely. It's something that we
covered towards the end of last year because we saw
that this was gonna be something that was going to
be added to the cost of underwriting alone, but that
is not something you're gonna have to worry about much longer. Yeah, man,
I'm kind of guy who wants to see, like an
Elon Musk flamethrower take into all the fees in existence,
and so yeah, just seeing a fee go down in
flames like this just makes me so happy. By the way,
(02:06):
make sure to check out Monday's episode, we have an
interview with the one and only Clark Howard, my good friend,
and so yeah, there's some really helpful travel advice that
we got into in that conversation, as well as some
wisdom when it comes to being your own advocate in
the tumultuous world of personal finance. So you can look
forward to that hitting your podcatcher. But for now, let's
get on that bestie episode about debt payoff and Matt
(02:27):
back to the beach for us. Welcome to How the Money.
I'm Joel and I am Matt, and today we are
discussing creating a debt payoff plan. Joel Man, we are
(02:54):
talking about debt. Everybody's got it. A lot of people
do people not everybody. A lot of people do though,
and the amount of debt that we as a country
have us as individuals. There is just so much debt
going around. We know that we want to get rid
of debt, but we don't necessarily know what steps to
take in order to get rid of that debt. But
a plan can help a whole lot, Yes, exactly. So
(03:15):
that's what we're gonna talk about this episode. We're gonna
talk through what it actually takes to paid on debt. Yeah,
But before we get to that, Matt, real quick, I
wanted to talk about guilt and money. And I think,
especially this time a year, maybe a lot of us
are feeling guilt over how we've spent. And some of
that might be warranted. Right. We we might have in
November December, in the lead up to the holidays, we
(03:35):
might have bought too many gifts for other people. We
we probably could have done just a little bit better
in how we thought through a spending plan, right, And
we're gonna talk about a debt plan, but we could
have thought through our spending a little bit better. But
I think ultimately this show and how we talk about money,
we don't want people to feel guilty all the time
about how they're spending. And I think certain folks in
the personal finance space. That's kind of their main tactic
(03:57):
is to make people feel guilty about how they do
spend versus motivating folks to help them spend less and
to save more. And so I think, you know, as
we get further and further into this new year, I
just want to let people know that this podcast, that
what we do, it's all about helping people prioritize the
right things and it's not about shaming them for the
for the move that they've made, for the things that
(04:18):
they haven't done as well as they could have done. Yeah,
totally do. I completely agree. I think you said shame,
which totally may think of something else as well as
I'm gonna go there in one second, But I think
a guilt trips for you know, based on your spending,
that's a bad idea. If you have identified what it
is that you want to spend your money on, like,
if you have a plan, if you know where your
priorities lie, then it's okay to spend money. And yes,
(04:39):
you do not need to feel guilty. I do think though,
that a little bit of guilt can be a good thing, right,
Like to me be proud a little bit at time. Exactly. Yeah. Like,
to me, guilt is basically knowing that you could have
done something better but you didn't. It basically cause attention
to the fact that you're responsible for your actions. And
when it comes from money, I think there's definitely a
need for more responsibility when it comes to you know,
(04:59):
personal finances. But interestingly, like you mentioned shame, and I
think that's so clutch because there's a big difference between
guilt and shame. Have you read any of Burnet Brown.
She's like, she's a she's you know, she has ted
talks and she's written books and she's an author. I'm
familiar with her just because my wife talks about her
a lot. I haven't read any of her books. She
she's I think she's really great. But she talks about shame,
and one of the ways she characterizes it is that,
(05:21):
like shame is well, for let's start with guilt. Guilt
is knowing that you did something bad and so you
feel bad for that action, right, whereas shame is like
you identify as being a bad person, and so we
want to focus on the behavior. You know, you're not
a terrible person because you you know, you blew your
budget one month or maybe you didn't quite put enough
towards retirements that year, right, But when you identify with
(05:44):
being a poor saver, like if that's who you feel
you are, well, that's when it can become negative versus
a positive effect. It can almost be become a self
fulfilling cycle. Oh yeah. If we identify ourselves as a
certain way, we're going to act accordingly, and so we
have to kind of break that psychological barrier of feeling
shame with how we've handled our money. And I completely agree.
(06:05):
I think a little bit of guilt can help drive
us in the proper direction. But if we completely identify
as being someone who doesn't know how to handle money, well, well,
then hopefully this show can help people this year to
learn some of those tools and then to kind of
help break those chains of potential shame that's associated with
how they handle money. Totally. Um, that's that's what we
want to be here. We don't want to be here
to use a stick to beat you over the head
(06:26):
because you haven't done things properly. What we want to
do is encourage you, motivate you, give you the tools
to create a more positive outlook on your relationship with
money and then specifically give you the proper approaches to
how you can handle your money well so that you
can make changes moving forward, so that whatever cycle maybe
you've become accustomed to living in relationship to your money
(06:47):
just isn't the case anymore. Yeah, totally. I think if
you feel a tiny little bit of guilt when you
learn something new or maybe you hear something that you
haven't done, I think that can be okay if you
respond positively to that. Right. It's just like constructive criticism
or back that you receive on a project or something
that you're working on. If you take that feedback and
you then modify your behavior and that allows you to grow.
(07:07):
What's It's a positive thing. It's about gaining knowledge and
learning from our mistakes. And yeah, like you said, you
hopefully that's what folks can do from listening to this podcast. Yeah, man,
I think I used to feel guilt over buying really
nice beer, and now I just don't anymore. It's because
it's something that I've prioritized highly and something that I've
made an important line item in my budget. And so
(07:27):
I think that's another way that people can approach it.
And so Matt, speaking of beer, the beer that we're
having on the show today is barrel aged Yetti Imperial
Stout by Great Divide Brewing and the kind folks at
a Great Divide in Denver, Colorado, they sent this beer
our way. I'm really excited to have the barrel aged
version of their Yetti Imperial Stout on the show with
you today, my friend. Yeah, this is our last one
by them, we've had them for the past few episodes now.
(07:50):
So man, Great Divide, y'all are fantastic. You make some
awesome beers like you always have. And yeah, we'll get
to our tasting notes on this one at the end
of the episode. All right, Matt, let's get into the
topic at hand. We're talking today on the show. We're
talking about creating a debt payoff plan. And let me
ask this question to our listeners at the very beginning
of the episode, and it might be a little awkward,
how's your debt situation? And does that question itself cause
(08:13):
a lump to rise in your throat? Well, personal levels
of indebtedness are a major issue in our country, but
lots of folks feel like they're stuck in quicksand up
to their midsections and they don't know how to navigate
themselves out of the problem that they put themselves in.
We need a plan to help us get out of
debt and to get our feet set in the right
direction this year. And so when we see headlines Matt
like we've seen lately eight six percent of millennials overspent
(08:35):
on Christmas gifts, well, we know what that means. That
means that a lot of those folks have put that
extra spending on plastic on credit cards and this time
a year they're getting that statement in the mail and
they're a little shocked. They didn't know that they spent
that much, and they didn't realize that they wouldn't be
able to afford the bill, and now they need some
help to tackle that debt, not to mention the other
death they might be caring right now, so it doesn't
get even further out of hand. Well, Joel, you're talking
(08:56):
about debt, and I feel like I'm super a d
D today because you mentioned quicksand and I started thinking
about quicksand why is why is like why would we
When we were kids everything was quicksand like Mario Brothers
to head quicksand like even as kids playing it's like
watch out for the quicksand like quicksand was this real thing,
like this real problem that we had to watch out for.
When I think about quicksand I think about the Princess Bride,
you know, I mean to me that's strongly correlated. Yes,
(09:18):
it's like late eighties, early nineties quicksand was everywhere. Now
everything's lava, like the kids have moved on to lava,
like it used to be quicksand now it's lava. Alright, Well, sorry,
a little side with old school reference. We're gonna stick
with quicksand floors lava. All right. Let's get back to
debt a little bit. Though. Here's the thing. Here's a
fact for you. Outstanding student loan debt, Joel, it has
reached an all time high last year. We hit one
(09:40):
point four one trillion dollars of Americans have credit card debt,
and the average outstanding balance it's just over six thousand dollars,
while consumer debt as a whole stands at fourteen trillion.
It's not just I covered my ears there because it
just got so horrendous. Way can you say it again? Dude?
It's terrible, and not only is it just an incredible
amount of mon but it's also how we're going about
(10:02):
getting this debt. Car loans they've gotten longer, with some
folks not just taking out sixty months of payment, but
seventy two and eighty four month long loans, and then
you know, they end up trading their cars and while
they're upside down, or taking out debt for smaller and
smaller purchases as well. Everyone out there, like all the
different retailers, offer a payment plan now, and it spans
from you know, services at home like your h VAC too,
(10:25):
urban outfitters if you just want to, you know, pick
up some shoes. We are funding our lifestyles through the
accumulation of more and more as well as riskier debt.
It's just become easier to take on debt for anything now.
Like you go to the dentist and you can take
out a payment plan on that new artificial tooth or
whatever surgery you had to undergo. Yeah, I gotta think
that that is the absolute least fun loan to pay on. Yeah,
(10:48):
paying on my root canal still, I'll give you a
three loan on that root canal, Matt. But that's just
the kind of day and age we live in. Easy
access to debt for almost anything. Yeah, your local small
business electrician probably has the ability to offer you alone
on that new age fact. I mean, it's just kind
of almost gotten preposterous. And then we end up sinking
ourselves in a hole, even if it's zero percent, Even
(11:08):
if it's zero percent for multiple years, we'll take out
the debt and then ultimately we just don't have the
money to meet those obligations. So we have to change
our relationship to debt and how we consider taking it on.
But Matt also too, I think it's important to mention
before we get into the specifics of creating a debt
payoff plan that we don't think all debt is terrible,
Like we're not anti every single kind of debt out there.
(11:29):
Not all debt is bad debt. Some debt can be
used effectively, and there are reasons worth accruing debt, for example,
going to get an education or starting a business, or
buying a home, and we kind of discussed that in
more detail and episode one. But just because you're considering
one of those good debts doesn't give you a free
pass to blindly take out loans in order to go
to a fancy school or to pursue your dream of
(11:49):
owning your own restaurant, or to buy more house than
you can afford. You still have to take value into
the equation when you're thinking about what debts you take on. Yes,
we we need to take value in account because you know,
not having massive amounts of debt is important, and so
I mean, I'll not note. You might be asking like, well, well,
why is getting out of debt? Why is that actually important?
(12:10):
The biggest reason that we're gonna share that getting out
of debt is so stinking paramount is because debt is expensive.
In the moment, it doesn't feel expensive to pay with
the credit card or maybe to take out alone. If anything,
it feels like free money, right, And it's really easy
to gain access to that credit, which is why in
a recent episode MAUT we talked about cash, debit or
credit like how we spend using credit cards is in particular,
(12:32):
the biggest downside is the ease abuse, and that's what
causes us to use them more frequently. Even though it's
a smooth transaction. Even though we like credit cards, it
can be away for us to spend money that we
don't have exactly. Yeah, but here's the thing at the
core of it, though, Like using your credit cards as
a tool, that's not the problem because it really is
just a tool. It's when we don't pay off the
balances and the interest begins to accrue. It's when we
(12:55):
use these tools incorrectly. And so when we're paying interest
on a balance, we're paying way too much money for
the things that we likely shouldn't have purchased in the
first place. So, for example, if fitsing thousand dollar car
like that could easily end up costing you closer to
twenty dollars because you took out a car loan and
you're paying interest, and so effectively you're paying way more
than you should have for that vehicle. And it's hard
(13:15):
to reach your financial goals when you're constantly over paying
for things. Yeah, Matt, having a lot of debt puts
you on just not solid footing. It puts you in
this kind of quick sand thing, right, I mean, let's
get back to the Quicksand it puts you in this
scenario where you're not as financially flexible as you could
be if you didn't have that debt in your life.
The more debt you have, the weaker position that you're
in and the less freedom you have. And when we're
(13:37):
constantly overpaying for pretty much everything in our lives, it's
also it's hard to get ahead and to reach any
of those financial goals that we have. The going is slow.
When we have interest payments working against us. It feels
like all the cards are stacked against us, and that
can be really discouraging. And instead, we want to be
on the receiving side of interest, and that means like
having a high interest savings account. That means our investments
(13:58):
essentially making money for us while we sleep. Instead of
interest working against our money, it's working for us and
it's allowing us to quickly achieve our goals. That's when
it allows us to build wealth. We're using interest in
the positive frame. We're using returns in the positive sense
as opposed to everything we buy having a much larger
price tag based on the fact that we have interest
(14:19):
payments going alongside of it. Yeah, that's the difference between
paying interest versus receiving interest. Right, And I got a
quick illustration for you. Imagine have you ever been to
a store where there's like a second floor, or maybe
e've been to a mall, a movie theater perhaps, Right,
where there's an escalator. So imagine you're on level one
and level two. That's where you're trying to get to
level two, Joel. That's where your financial dreams and hopes
(14:40):
are in front of you. You've got two escalators. You've
got one that's coming down. At least, it's not like
a sky skyscraper that I have to climb, you know. Yeah,
but on one side you've got an escalator coming down.
On the other side, you've got an escalator going up.
And when you have debts, that is when interest is
working against you, right, That is you trying to get
to the second level by going up the side of
(15:00):
the escalator that's coming down. When you're doing that, you're
working crazy hard. It takes way longer, and you know what,
at some point you might even actually give up because
it's too hard. I probably could have done it really
easily when I was twenty five, Matt, But even still, like, yes,
I agree, right, like I've I've done that before as
a kid, But it's still a lot harder versus when
you have interest working for you. When you're receiving interest,
(15:20):
it's like you're getting on the correct side and you're
you know, you're writing that interest up. If you want,
you can only rely on that interest and you can
just stay in there. But if you continue to work
a little bit, imagine how quickly you're gonna get to
that next level walking while you're on an escalator. It's
like the best feeling I know. I mean, how quickly
do you get from like one level to the next
just by doing that. It's amazing. And so maybe the
next time you're thinking about taking out a car loan
(15:42):
or some other consumer debt, some credit card debt, picture
that illustration, because like that truly is what it's like.
It's like, like you said, being in quicksand and you're
trying to trying to hop out of that quicksand it's
so difficult to do that. It's so difficult to make
any progress when we're bogged down with that interest working
against us. Yeah, no doubt. And we have to get
to these specifics for folks that are writing that down
escalator and they want to get off, they want to
(16:02):
get out of debt, and they want to make their
money work for them. Well, let's get to the specifics
of how to create a debt payoff plan right after
this break, all right, Jill, we're back and we're talking
about creating a debt payoff plan. By the way, did
you like my my little illustration about the escalator? That
(16:24):
was a great illustration another one I was thinking of two.
I was just like, okay, what about like headwinds and
wins that you're back. I'm like, I was gonna say
an example of you know, when you're up at the
tea box and you're playing disc off and you're getting
ready to throw your driver, but you've got that strong headwind,
it's gonna be a lot harder than if you had
to win at your back, right, True, It's true. Yeah,
that's another great illustration and one that makes sense to me.
But I feel like most folks have probably been on
escalator is more often than they've actually thrown a disc off.
(16:47):
It's probably true for most folks out there, sadly, because
disc golf is a great sport. All Right, We're gonna
talk now, though about what steps that you need to
take when it comes to creating a debt payoff plan.
These are the steps that we're going to actually help
you to make real substantial progress this year. The first
thing that you need to do is to make a
list of all your debts. The first step in any
plane of action is to get organized, and so making
(17:07):
sure that you're aware of all the debts that you
oh is a really important fort step on your path
to crushing debts. Yeah. Man, I mean we've used this
illustration before, but if you're planning a road trip, you're
going to make the dots along the wave where you
want to stop. You kind of want to know the layout.
How long is it gonna take me to get here
and there, especially if you got kids, Like where are
we gonna stop to pete? Where we're gonna stop to eat?
There's all these questions that come with a big, major trip, right,
(17:30):
And so I think the same thing, like paying off
your debt is this big trip and you want to
plan the points along the way you want to you
want to know exactly what's in store so that nothing
hits you terribly by surprise. Yeah, you don't just throw
everybody in the car and just start driving. That's a
terrible plan. Like lick your fingers sticking up in the air,
decide which way then we're gonna go east. Let's do it.
We'll see where we end up. Yeah, Yeah, that's not
(17:51):
a good way to go. So, yeah, making a list
of all your debts helps you at least get the
lay of the land. And then you need to pick
your approach. And then we've talked before about the debt
snowball approach for is the debt avalanche approach and which
one people should consider, And we went into a lot
of detail on how you decipher which plan is better
for you in episode eighty six. But do you need
or just want some more emotional rewards along the way,
(18:13):
or do you just want to pay these debts off
as quickly as humanly possible while paying as a little
interest as you can. Either way, he'll focus hard on
completely obliterating one debt while paying the minimums on the others.
In both approaches. Maintaining a high level of focus is
the key to success, because once you know that lay
of the land mat it's really important to kind of
choose which approach you're gonna take and then sticking to it.
(18:35):
If you've come up with a strategy, do you think
it's gonna work for you? Looking at the strategies that
might potentially work for you and then picking one and
sticking to it is going to be crucial to your
probability of success. Yeah, Joel, you know. And one thing
I'll say is that I think for folks especially who
are listening to this podcast, they're thinking, no man, debt avalanche,
that's the way to go. Look at the numbers, do
(18:55):
the math. But the older I get, I realized that
so much of our money is not just knowing the
correct information, isn't just seeing the numbers right. Because we
don't operate as robots, we don't always make the rational decision.
Our emotions play such a huge role when it comes
to how we handle our money. And because of that,
I think the debt snowball needs to be considered my
(19:17):
way more people than it actually is, because you are
receiving that feedback more quickly. You're able to quickly pay
off a debt and then quickly move on to the
next one, and that feels good, and when it feels good,
that's something that you will continue to do. Exactly. The
best plan that we can create is the plan that
we can stick to. Yes, it's not just the best
plan in theory, it's the one that we can actually
accomplish in real life. And just quick example, Matt, for me,
(19:40):
for a lot of years, I wasn't fully funding my
wrath I r A, and I was just investing a
lot more in my four owing K because it was
a lot easier for me to click the button that
up the percentage point coming out of my paycheck. I
barely felt it than it was to actually increase that
automatic draft amount from my bank account into Vanguard to
fund my wrath. And so it literally took more work
for you to up your wrath I RA versus your
(20:02):
four own case. Yeah, and really the work is the same.
It's the mental It's a mental hurdle I couldn't overcome.
And so I think that's a huge thing that we
do need to consider. What what what's the easiest mental
mental hurdle for us to overcome? And again, the plan
that we can stick with is the one that we
need to commit to. So true man, all right, So
now you've made a list of all your debts, you've
gotten organized, you've picked your approach. You know, you thought
about which strategy is gonna work for you. The next
(20:24):
step is we want you to look at your timeline
a little bit. This is when you are going to
do some math and you want to calculate how much
monthly income you can put towards your debts and and
actually figure out how long it will take you to
be rid of it all. It is important to know
how long this will take in order to manage your
own expectations. If you don't take the step, you might
(20:45):
think you'll knock out your debt, let's just say by
the end of the year, and then maybe October rolls
around and you realize that you're not even close. If
you are not realistically approaching your debt path plan, it
can be easy to lose hope and basically just burn
and fizzle out. Yeah. It reminds me of our conversation
with J. D Roth not too long ago, and he
specifically mentioned he gave a very vivid picture of his
(21:07):
when he was in the bath. Okay, he was like,
this is how I came up with my debt payoff plan.
I was in the shower. I had this epiphany. He's like,
I ran out, I didn't dry off, I had a
towel around me, and I sat at the table for hours,
and I came up with this debt payoff plan. What
I know, Yeah, I know, I totally picture. I can
totally picture it was. It was maybe too vivid, and
he said he realized it was gonna take thirty six
(21:28):
months for him to pay off his debt after kind
of calculating it out, and this timeline helped him track
his progress. Knowing that timeline helped him have a realistic
expectation in mind for how long it was going to
take him to be rid of all his debt. And
that's really important step for us to take in this
process is to map out the length of time that
it's going to take us to go from a bunch
(21:50):
of debt to no debt, because that can help us
stick with it. If we know that it's going to
take three years, well there's light at the end of
the tunnel. If we have no idea and we just
or aimlessly attempting every month to put more money towards
our debt, but we don't have a time frame in mind,
well then it can just be a little more difficult
to actually stick with it. It's like the difference between
running a marathon versus like a sprint, Like you need
(22:11):
to know the distance because if you start running a
marathon like you're running a Fodre sprint, well, guess what
you're gonna burn out and you're gonna completely give up.
And so yeah, having that and goal in mind and
knowing that time frame is is so important. And there
are tools that can help, by the way, and well
link to those in the show notes, whether you're taking
the snowball approach or the avalanche approach, will link to
a tool that can kind of help you as you
(22:32):
plug in your information, it can give you that timeframe
so that you're not just doing pen and paper. You
can actually plug it into a spreadsheet and then you've
got breadsheets. You can share it with your significant other
or your partner, and it's this kind of perfect opportunity
to be on the same page, to be looking at
the same numbers, and it can kind of just kind
of help you plot your path. Well, you know, I'm
all about the spreadsheets. I know you are, buddy. Yeah,
And so another step we want you to take is
(22:54):
essentially to create a debt slaying identity. Basically, what I
want you to do if you're in debt and you're
looking to get out of it, is I want you
to say to yourself this year, I am all about
paying off that debt. It's like your alter ego, Yes,
like that that's just who you are. What this means
is not saving for a vacation, not saving for that
new car that maybe you wanted. Instead, it means throwing
(23:15):
all of your weight behind that one singular goal. This
is a crazy powerful approach, and anyone who has paid
off large amounts of debt quickly will attest to the
power of this type of focus. And again, you want
to make sure to prioritize that top debt while you
pay minimums on everything else, regardless of what approach you take,
whether you take the debt snowball or whether you take
the debt avalanche. All right, we've referenced Batman in this
(23:37):
podcast before, Matt, but so basically Batman is this perfect
representation of creating an alter ego. It's it's not that
he has these special powers. I mean, sure he's got
a cooler vehicle and like a grappling hook or whatever,
but he can't actually fly or do anything super duper special.
He's just creating an alter ego that helps him to
fight crime. It's almost like when he puts on the suit,
he becomes a different person. And I think that's kind
(23:58):
of how we need to appre coach paying off debt
in our lives is to create this alter ego, to
put ourselves in this new state of mind, in this
new superhero suit, if you will. And I think that
that just kind of mental shift in telling ourselves that
we are someone who can pay off a large amount
of debt, who can make a change in our life,
who can shift our habits. That's a that's a really
(24:19):
powerful thing for us as we step up to the
plate in order to vanquish the debt that has become
the bane of our existence. That's a nerd bad guy reference.
I love it. The next step is basically to move
on to debt number two. Once you've done all of
that and you've crushed that first debt, move on to
the next debt on the list. Again, regardless of which
(24:41):
method that you're taking. After that first debt is eliminated,
you're gonna have more money. It's blast that next debt
on your on your list. You might notice that it's
a little bit easier to attack that next debt that
you have on your lists. Right, Like interest is still
working against you because you still have debt, but it's
not working against you quite as hard. Going back to
the escalator analogy, like you're still going up the wrong escalator,
(25:03):
but maybe the escalator has slowed down a little bit.
And not only has this slow down, Jill, you've also
gotten stronger because now you have more money to throw
and to attack that next debt with. Yeah, it's incredible
how this process, the debt payoff plan becomes easier after
that first debt is removed, whether you're going avalanche or snowball,
having one fewer debt, it just increases your ability to
(25:24):
attack debt number two. It's a beautiful thing. Yeah, you've
got more money and it's just easier to focus as well,
because guess what, if you've got six different debts that
you know that you want to pay down, it might
take a lot of mental capacity to focus on that
one debt when you know you've got these other ones
that you're just paying minimums on, right, But guess what,
you knock out one of those and now you've only
you've only got five, so you're paying against one of them,
and there's just four of them that that are kind
(25:45):
of sitting there, and then you know, the number just
gets smaller and smaller. There are so many reasons why
focusing on a singular debt is so the way to go. Yeah,
and Matt, I think another important thing to say on
when we move on to another debt is it it's
important to give ourselves a little reward along the way
with each major milestone that we achieve. We discussed this
recently in the gamification episode, but small rewards along the
(26:08):
way can give us a renewed hope to pause and
realize that we're doing it. Well, that's huge, and then
we can start to rent and repeat and kind of
continue along in the process. But once we've appropriately celebrated
knocking out a credit card debt or a car loan,
then start setting your sights on the next debt to crush.
Maybe student loans are next on the hit list. But
(26:30):
however you're doing it, make sure that you do give
yourself like a little reward along the way. It can
really increase that positivity and continue to fuel you in
that superhero esque pursuit of paying your debt off. Yeah. Man,
we're emotional creatures and to have that positive feedback is
so important. And I think that's one way too that
we can reward our So it's not even by spending money,
but there's ways that we can reinforce that behavior, even
(26:53):
just with sharing it with others. If you've told some
friends about your financial journey or like your plan to
pay down some debt and you tell them, hey, guess what,
you know those three credit cards that I'm planning to
knock out, one of them is completely done with. Like,
that's huge, and hopefully you know, if you've talked about
your money with these folks, these are friends who can
then celebrate with you and encourage you and they become
like your cheerleaders, like encouraging utically. And if you don't
(27:15):
have these these type of friends, we would encourage you,
you know, a to talk about money with your friends
and family, but also check out Facebook. Within our group,
folks are often posting their winds and then how they're
succeeding with their money, and we would suggest jumping in
there encouraging those folks. And then when the time comes
for you to knock out some of your big debts
or meet some of your financial goals, you can share
that in there as well, and it will be folks
(27:36):
in there who will be pumped for you. And guess
what that costs you? Nothing? Yeah? Man, sharing those wins
with other people that you don't even have to like
treat yourself to something super fancy, but honestly, even just
that encouragement from people around you that are rooting for you,
that's enough of a reward oftentimes for us to keep going.
That can really be a big motivation for us and Matt. Now,
if we are kind of in this debt playing superhero mindset,
(27:59):
a question pops up, well, how can we accelerate this
debt payoff plan process? Well, there are ways that we
can potentially earn extra money and then other ways that
we can cut back in our spending, and those things
can accelerate the amount that we're able to put towards
that debt to kind of make that thirty six month
plan let's say a thirty three month plan. And that's
kind of fun too. Yeah, that's right. We need to
address both sides of the equation, right. We talked about
(28:21):
this last week on our episode on frugality, how frugality
doesn't always cut it, but we need to address our
big expenses as well as some of the big ways
that we can increase our income. Yeah, totally. So, on
the note of cutting back, will choose a specific few
areas that are meaningful for you to be able to
still enjoy life. Don't stop drinking craft beer altogether necessarily,
but make it maybe a special treat. And that act
(28:43):
of cutting back, well, it can help you to achieve
this quote unquote no bad debt status far more quickly.
And if you can continue it after this debt payoff
plan is complete, it's gonna help you build savings and
have money to invest for your future at the same time. Yeah, Joe,
So that's addressing expenses, right, if we're able to cut back.
And on Money's episode, we talked about earning more money,
(29:04):
you know, through entrepreneurship, through starting your own small business.
We had an interview there with Vincent, so we'd recommend
checking that one out if you're looking to address that
side of the equation. But either way, you can accelerate
the process by focusing on your expenses, by focusing on
your income. You want to make sure that you're doing
both of those. We're gonna continue to talk about creating
a debt payoff plan, and after the break, we're gonna
talk specifically about some different practical advice and some different
(29:27):
tactical steps that we can take in order to pay
down our debt. Faster. We're gonna get to those right
after the break. All right, now, we're back to break,
and we do have some practical and tactical things we
have to share in their galactical In this part of
(29:48):
the show about how people should approach their debt payoff plan,
we kind of went through all the steps, but there
are a lot of other things to consider, some tips,
some hacks, as the kids like to say, on how
to approach this plan that can help accelerate it. Beyond
just the ideas of earning more money, there are specific
things that we can take advantage of in order to
help us lower the interest rate or find the help
(30:10):
that we need in order to achieve our debt payoff
more quickly. So, Matt, I think one of the first
things that needs to be noted is we really need
to think long and hard about the things that led
us to to this state of debt in the first place.
One of the major things we need to come to
grips with is to think about our triggers, like what
caused us to spend money that we didn't have in
(30:30):
the first place. Knowing those triggers is the first step
to changing our habits, and that's a really crucial process
in this whole plan. So if your credit cards are
your arch nemesis and you just don't know how to
stop using them, will cut them up or freeze them,
put them in a freezer bag inside of your freezer,
like literally put them in a ziplock bag, fill it
with water, and stick in your freezer. Put that junk
on ice, exactly. Like, if that's your trigger, you have
(30:52):
to figure out how to make that stop, because even
as you're paying off your debt, you might be accruing
more along the way, and you're just kind of it's
this is your row some game if we don't know
the things that are actually triggering us to spend in
the ways that are hurting our finances and real quick
you mentioned like putting your credit cards in a block
of ice. Let's clarify, because that is literally one way
to freeze your credit cards. But there's I think sometimes
(31:13):
some confusion when people say I've freeze my credit. Well,
that's not freezing your credit. That's literally freezing your credit
cards to curb your behavior. But then you can actually
freeze your credit by going to trains, Union, Experience and Equifax,
and that actually puts a lock on your credit. That way,
nobody including yourself, is able to take out new credit
new credit cards unless they go on their first and
(31:35):
unfreeze it, typically temporarily. Yeah, And that's something that we recommend,
is is for folks to freeze their credit so that
other people can't take out credit lines in your name.
But freezing your credit card definitely a step to take
if that credit card has become this problem in your life,
this thorn in your side, yeah, man. And another thing
to note on at since we're speaking about your credit
score and freezing your credit, well, your credit score is
(31:57):
this awesome thing to monitor along the way while you're
involved in this debt payoff plan. And we really like
the website credit Karma. There are other sites out there
as well that can help you stay in touch with
your credit score. Discover has one as well, credit scorecard
dot com. If you check out sign up for one
of those services and you're staying familiar with what's going
on with your credit score, well, as you're paying your
debt off, it's going to have a direct positive benefit
(32:19):
on your credit score, and that is motivating as you
see that credit score balloon over time, as it continues
to rise from let's say it's at six a d.
Now you know, over six months you might be at
seven thirty, and that is going to help you achieve
these other goals of being able to potentially take out
a mortgage right. If you want to buy a house
and you have a really low credit score because you
have an overwhelming amount of debt, well attacking that increases
(32:43):
your score and not only means you have less debt
weighing you down, but also means the possibilities of taking
out positive future debt right of something like a house
are just greatly increased. Yeah, seeing that credit score boost
like that, that's an amazing secondary benefit of paying down
that debt. It's also talk about where not to go
if you're in debt over your head, if you're not
(33:05):
able to handle the payments currently on your debt, do
not sign up with a debt consolidation company. They charge
big money and they rarely live up to their claims.
Often you end up paying them, you know, a lot
of money, and they do little or nothing to help
you in your debt payoff pursuit. UH. In that case,
you're often better off on your own because at least
(33:25):
then you can toss more of that money towards your
debt and not going to the service that's not actually
providing any value. Yeah, if you hear an advertiser or
someone specifically tells you, yeah, if you just pay these
people a couple of thousand dollars, three or four thousand dollars,
they can help you consolidate your debt, they can work
with your creditors, they'll help you achieve your own debt
payoff plan. Well upfront payment for someone to do that
(33:46):
for you. When most of the things that these debt
payoff companies say they're gonna do, they either don't do
or you can do yourself. That's just not a smart
way to go. Yeah, that money upfront huge red flag.
So what you do want to go if you're debt
is overwhelming, is going to be your local affiliate of
the n f c C, which is the National Foundation
for Credit Counseling. They are a nonprofit and they are
(34:07):
full of helpful financial services like debt and budget counseling.
They have the power to help and kind of counsel
you along your debt journey. They do the things that
many of the debt payoff firms say that they'll do,
but then they don't in actuality. Yeah, that's true. The
NFCC is the only place I would tell someone who
is up to their eyeballs in debt and doesn't know
where to go and can't afford their debt payments. That
(34:29):
is the only place I would send them to. And
so yeah, NFCC dot org, find your local affiliate, meet
with someone there. That is your best path forward if
you're in debt that you can't manage. And Matt, let's
talk quickly about apps. There are apps popping up all
over the place that claim to help people with their
debt payoff. And there are some apps that I think
could potentially be helpful, but they come with a caveat.
(34:52):
There's one called coins q O I n S and
there's one called tally that offer to help, but they
charge you to do so as well. So you know,
you and I we prefer the D I Y no
fee approach. But these apps can be helpful for the
right person who has a tough time actually sticking to something.
And if these apps are going to help basically make
the process smoother for you, and that fee is basically
(35:15):
going to prevent you from defaulting on your debt. Well,
then what we would say is use one of those apps,
use it to its full potential, because, yeah, paying a
fee is is better than not doing it all together.
If that's gonna get you motivated, if that's going to
be the thing that helps you to actually stick to
a debt payoff plan, well then that's great. And those
are two worth considering. Yeah, man, those are some of
the different apps. And there's also some websites that can
(35:36):
help as well. I'm thinking of unburied me and undebt it.
And by the way, those are unburied dot me and
undebt dot it's I guess thattand's in Italy the I T.
I love how the different websites are using the different
I don't know what you call it, like the dot com,
dot net, like the postscripts or whatever, but they're working
them into the name of their site, which is I
(35:56):
love it. That's why we're changing the u r L
for our website from how the Money dot com to
how the Money dot listen to our podcast now how
the Money dot Beer. Actually I legit think there is
a beer. Yeah, I was gonna say that that's a
really oh my gosh. Either way, though, let's talk about
these websites unburry me and undebtit. They are both similar
(36:16):
and they can offer some help creating a debt payoff plan.
If you prefer a more digital interface, definitely give one
of these shot with the different graphs and you know,
the digital feedback it might help you to visualize your progress.
And and and you know, for that reason it can be
really valuable. But at the same time, we don't want
tech to keep you from actually getting a plan together
at all. Pen and paper can be really valuable, especially
(36:39):
when it comes to just tracking your progress. You know,
like it is pretty easy to create a little graph
and a little chart and you kind of fill it
in as you work your way up that notebook paper.
Just know yourself and participate in any of these different
little tips and strategies that you know will resonate the
most with you. Yeah, man, I agree. I think part
of it comes down to knowing yourself and knowing the
ways that your best going to be able to stick
(37:01):
to a debt payoff plan. And and and some people
they're on a computer all day and using a website
like unburied dot me or on debt dot it is
is going to be a massive help in the way
they approach paying off that debt. And for other people,
you know what, a pen and some paper that's gonna
be motivation enough. They don't need some sort of really
cute see graph and interface to help them tackle their debt.
So just kind of know your tendencies and that can
(37:22):
help you, and Matt, I feel like there are a
few more hacks that we really should mention to help
folks actually save more on interest payments and potentially pay
off their debt even more quickly once they have a
clear plan in place. A zero percent credit card transfer
can be a game changer for folks, especially if they're
on the fast track to eradicating debt. And this is
particularly useful, Matt, for folks that have a good credit score.
(37:44):
If they can qualify for a credit card with a
zero percent intro period of like let's say fifteen or
eighteen months, and they're ready to to pay off their
debt quickly, well, this can mean no interest payments on
the majority of that debt for a long period of time.
And so we just wrote an article about the best
balanced transfer credit cards. It's up on our site at
how to money dot com. For folks that specifically are
interested in a card like that, and we outline the
(38:06):
ones that are going to charge the fewest fees so
that when you make that transfer, your payments are working
to pay off your debt. They're not going towards the
bottom line of the credit card companies. And if you
currently have a credit card and that's one of the
major debts that you're looking to pay off, well, another
hack that you can do is to call your credit
card company and ask for help. Whether it's a credit
card company or another creditor, they're often procedures in place
(38:29):
for people they call and ask for help. Matt. We've
talked about asking for a discount before. This is asking
for potentially a lower interest rate on your debt, which
is going to help you to be able to pay
it off more quickly. And Matt, one example I wanted
to mention is let's say you've got a student loan
through a company like so FI, and one of the
coolest benefits that they offer is help if you lose
(38:49):
your job. Not only will they provide actual assistance for
you looking for employment, but what they'll do is they'll say,
you know what, you don't have to pay your loan
for the next six months while you're looking for employment,
it and so stuff like that. It's out there depending
on who you're doing business with and what sort of
programs are in place. It's just worth it to ask
whoever you have debt with to see if there's some
(39:10):
sort of way that they can can help you along
the process. Yeah. On the note of lower interest rates
as well, Man, we would recommend for folks to consider
checking out maybe some alternatives to credit cards. If you
have a home, you can consider a helock home equity
line of credits. You're going to be able to get
a lower rate. Obviously, there's going to be some risks
associated with that. You're taking your debt and you're tying
(39:32):
it to your property. That debt is now a secure
debt because your home is collateral. So if you are really,
really sure that you're going to knock out that debt,
then that might be something that you can do. But
this does not need to be something that you you
take on lightly. Yeah, because it's one thing to not
be able to pay off a credit card. There are
certain rights that you have. You're not gonna lose your
(39:52):
house or get thrown in prison. For not being able
to pay your credit card debt. But if you tie
it to your home, if you refinance or you take
out a helock, that cau are that homes on the line. Dude, Yeah, exactly.
And so if you're gonna have trouble paying it off
with a helock, even if it lowers your interest rate,
don't do it because you don't want to lose your
home over credit card debt you were unable to pay.
That's right. And another option to consider is you can
(40:13):
always borrow money, maybe from a family member. This is
something that it just depends on who you are and
what your relationships are with your you know, those in
your family, because it can get awkward. In many cases,
it isn't worth the possible harm that could come to
that relationship. But if your credit score is really low,
that might be your only option for lowering any super
(40:35):
high interest rates that you might have, So definitely consider that. Yeah, Matt.
If someone submitted and ask htm question for the shows
where we answer listener questions and said, hey, should I
loan money to a family or friend, I think we
would probably say don't do it? Or if you do,
know that there's a good chance that you don't get
paid back all together, and just kind of go into
that loan situation knowing that's the case. But if someone
(40:56):
has a really low credit score, if they don't have
that many options, this might be the best option for them,
if they have a good relationship with a friend or
family member that is willing to help them out in
this way. So, yeah, those are some ways that you
can approach lowering potentially your overall rate of interest, some
moves that you can make to help accelerate that debt
payoff plan, and yeah, crush that debt once and for all. Yeah,
(41:17):
And it's important to keep in mind as well that
these are things that you want to consider after you
have a solid plan in place, like these are these
are the little tweaks. Right, Like last week we talked
about frugality and how we need to focus on the
big things. Well, in this case, the big thing is
creating that plan and really getting after it. These these
little tips and tricks, these are the little tweaks. This
is the frugality aspect of paying down your debt. They
(41:38):
are certainly things that could make a pretty big impact
and really help you along and provide some encouragement and
make it possible for you to pay down that debt,
but first you do need to have a solid plan
in place for these additional pieces to kind of slot in. Yeah,
I completely agree. And you know what, for anybody out
there who is it's experiencing a load of debt that
is uncomfortable, well, best of luck to you and creating
(42:00):
a debt payoff plan. I feel like having this plan
sometimes can help you at least have this target to
aim at, and it can make a huge difference in
in helping you actually achieve being rid of it as
opposed to kind of feeling like you're in this quicksand
scenario and you don't know how to get out. The
plan is like the rope in Princess Bride that helps
you get out of the quicksand it is right, that's
exactly what that debt payoff plane is as you win.
(42:23):
All right, it's it's beer time. Let's take a back
to the beer. This episode, you and I shared a
barrel aged YETI Imperial Stouts. I want to say this
can it's it's brown and gold and it's like perfect
for for the way this beer tastes. And I want
to mention to you the way it poured, and it
poured pitch black, and at the same time, it had
this amazingly dark brown head. It looked like crema, Like
(42:46):
if you've ever gotten an espresso where you know the
the espresso bubbles, like the little cream at the top,
they call it crema. A little insider knowledge for you, exactly.
But I couldn't get over how richly brown that head
was on his beer. And every time I kind of
world it, it it almost had like some red notes in
it looked amazing. But yeah, what were your thoughts on
how this spear tasted? Man, this beer was so good.
(43:07):
It had these nice boozy barrel notes on an already
delicious stout. I felt like the stout was chock full
of bitter, dark chocolate vibes and that paired so well
with the sweetness coming through from the whiskey barrel that
it was aged in. So in my mind, if you
get the dark chocolate, bitter stout combined with aging in
whiskey barrels, it's that perfect pairing, it's that perfect marriage.
(43:27):
And that's what that's what this beer was. It was
so good. Yeah, it's really good. It was Asian whiskey
barrels and I feel like you could tell that it
wasn't Asian and bourbon barrels, because typically I think when
you get bourbon, it's a little bit sweeter, and this
stout drink a little dryer to me, like it had
a ton of flavor, but it wasn't. It wasn't overly sweet,
a little bit on the dry side, and so it
kind of reminds me of like that fancier chocolate where
it's like eight percent caw cow or is that how
(43:49):
you say it, you say calco cocoa. I don't know.
It's a spelled like cal cow, and I don't think
I use that word very often. I don't know either,
But you know the fancy chocolate where it's there's zero
sweetness going on at all. That's what I picked up
out of it. It just had incredibly deep flavor notes
and I really enjoyed it. All right, man, Well is
that going to be it for this episode? That's gonna
do it. Let's wrap it up, all right. For folks
(44:10):
that want more money information, well, you can go to
our website at how to money dot com and we'll
also have show notes up for this episode. All right, man, Well,
that's gonna do it, Joel until next time. Best friends out,
best friends out,
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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