August 11, 2024 • 28 mins
Why stop with paying off credit cards continue with other debt. Doing all the work to get to this point why stop just continue with other debt.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Charles McDonald (00:03):
Hello, I'm your host, Mr. Chuck, a retired
accountant turned truck driver,I reduce my debt in a relatively
short period of time, debtreduction to achieve financial
freedom takes commitment,confidence determination. Why
stop with credit cards? Why stoppaying off credit cards continue
(00:26):
with other debt, doing all thework to get to this point, why
stop, just continue with otherdebt. The point of this episode
is maybe your initial goals wasget your credit cards under
control, maybe you're justwanting to pay him down. So you
had carrying a lower balance.
But why don't we change thatgoal to this pay off all our
(00:47):
credit cards, and you've gottento that point where you're maybe
in the next three to six months,you're gonna have your credit
card paid off, because you canfigure out how much money you're
saving and what's going on howoften you're applying extra
money to a credit card, and youfigure it out within the next
(01:11):
four to five months, you willhave your credit cards paid off,
and you'll be happy. My point iswhy stop there, he had done all
the work to get to this pointyou you're doing tracking on a
regular basis, you're keeping upwith your control center, you
got all your spending, undercontrol your pan the bare
(01:35):
minimum you can get by with,you've changed your cell phone
plan your insurance companies,and he really done a good job of
getting your spending undercontrol. So why stop with just
paying off your credit cards,maybe you have a boat or RV
(01:55):
payment or two car payments, orboth to car payments and or boat
payment. Maybe you have a firstmortgage and a line of credit on
your home. So why stop with thecredit cards. But let's first
focus and you're you know,you're a few months away. So now
(02:18):
is the time to think about whatyou're gonna do when you achieve
that goal. Well, the first thingyou might be aware of is do not
cancel any credit cards, do notclose them out or anything. But
keep them use themresponsibility. Use them like
cash, make small charges onthem, and pay them off at the
(02:42):
end of the week or the next weekor the next pay period. Let's
look at the different type whattype of debts would you have
remaining. Once you get yourcredit cards paid off considered
a type of debt you have somedebts like high interest credit
cards are more urgent to pay offthan others. So that's why
(03:02):
you're working on it. Maybeyou've already got rid of that
payday loan also maybe you wentback and paid off your pawn
loans, and you got your personalloans, pretty much under control
before you start working on yourcredit cards. If you have any
personal loans, or if you did aconsolidated loan, I don't
(03:23):
recommend that. Because there'ssome people who don't qualify
for it. So I want to keep itsimple. So maybe you paid off
your credit cards but got a newloan. So you have a lower
interest rate, which is good,but you really didn't reduce
your debt, you just shiftedaround a little bit. So let's
(03:43):
focus on getting that loanconsolidation, loan, pay down
and pay it off. And then thislook at what else you have. What
type of loans do you havepersonal loans, credit cards,
car, auto mortgage, studentloans, things like that? What's
the interest rate? And how muchtime you have left on pan on
(04:06):
them? What's your monthlypayment? What's your age and
what your goals were you want todo? Maybe you have a smaller
boat, he wants to upgrade to alittle bit bigger boat and you
have a 10 year loan for theboat. You're in your second or
third year. Are you upside downwith that? Is the boat worth
(04:31):
less than what you owe? And heshould look at all these
factors, even for yourautomobiles or your automobiles
worth less than what you owe onthem. And then there's the
emotional factors. What do youpersonally feel you should be
doing? If you're getting closeto retirement, maybe you don't
want to have all this debt goinginto retirement. Remember when
(04:54):
you go into retirement you'regonna have most likely less
income For most people, so youmay not be able to handle all
the debt, so you need to getyour debt under control. And
that's what I did. Personally, Igot all my dad under control, so
I can have a happier retirementand not have to worry about
making payments on anythinggoing payments, I'm making some
(05:18):
my real estate taxes andinsurance. So let's think about
it. What do you have, and whatare your goals should be the
factors that you're determiningon what he should continue to
do, don't just stop with payingoff your credit cards, don't
(05:38):
just stop was paying off thatconsolidation loan. Let's
continue on this journey. Now ifonce you get your credit cards
paid off, your emergency fundshould increase to a minimum of
$2,000 and then build it up to4000. Well, more 5000. So you
(06:00):
can then have 3000, you're gonnaapply it to something. So over
time, your emergency fund shouldbe growing, to get up to a
minimum of three months worth ofexpenses, and then six months
worth of expenses. Look at allyour other loans. So let's say
(06:23):
you have a boat loan, it's about$350 a month you've been paying
on it for three years, the boatis worth little bit less than
what you owe on the loan, youhave two cars, you only have one
loan on one car, which is fairlynew, and you have zero rate of
(06:46):
interest on that. So you feelthat while the car loan is good,
even though the car is worthless than, then the loan on that
not really cost me interest. Solet's just keep that for now.
But the boat is starting to goupside down, but it's not too
(07:06):
bad. But if I continue on thesame path, if I trade in a boat,
I'm not going to have anyequity, and it might cost me
some additional money. In orderto kick down the new boats
priced at 100% financing, youdefinitely don't want to do
(07:27):
that. So let's focus as get offthose credit cards and get them
paid off, but we're not gonnaclose them. And we're gonna use
them like cash and make a chargeon them and pay them off at the
end of the week or within acouple of weeks. So that you can
keep a zero balance at alltimes. And that will improve
(07:49):
your credit score. Now let'slook at that boat loan, even
though maybe the boating seasonis coming to an end, does the
boat need any maintenance, youneed to put it in storage, those
are all additional costs.
(08:11):
Maybe it might be better to sellthe boat, pay off the loan, save
up your money, and then buy anew boat or a different boat, a
bigger boat, a couple years downthe road when you get your debt
under control. Well, that's anoption or in just a little bit
(08:32):
getting behind on the value. Solet's keep the boat because it's
the took really good care of it.
It looks good. It performs good.
You've done the oil changes andthe maintenance and the hall
cleaning and the hall paintingand whatever you need to do to
maintain it, and you reallyliked his boat. But you know, in
(08:54):
five years, you want to get alarger boat for whatever reason.
So you know that in four months,you're gonna free up some money
because these credit cards aregoing to be paid off. So let's
look at that boat loan. What canwe do to get back under control?
(09:15):
Oh, we got roughly seven yearsleft on a 10 year alone. How
much extra do I need to pay andyou can find a calculator. How
much extra need to pay everymonth in order to pay this boat
loan off. And three yearsbecause you figure in three
(09:38):
years. That's about the timeyou'd like to get another boat
the boat will be roughly sixyears old. It still has some
value and you'd be able to tradeit in and get a good down
payment for the newer boat thatyou plan or wanting to purchase.
(09:59):
He never Oh, if you're in thenews boat market, you never know
when one's going to come up thatyou really would like to have.
So you need to be ready, andmaybe a year and a half. So
let's say that your boat loan ifyou pay an extra $50 a month,
and you can start that when yourcredit cards have paid off, you
(10:20):
can have a paid off in threeyears. But if you continue to do
the same thing, keep building upyour emergency fund, build up to
5000, apply 3000 to theprincipal on that boat loan,
you're gonna have a paid off ina year and a half. And then
you'll be able to save up somemoney and increase your savings
(10:44):
for a newer boat that you want.
So if one becomes availablebefore your time period, you're
already ready, you got a boat toEgan sell, and keep 100% of the
sales price unless you will pluscommissions or whatever you have
to pay or trade and to thedealer, who you can then 100%
Apply that money to the newerboat that you're wanting to
(11:12):
purchase. So that you can thenapply some cash that you have
built up, keep some formaintenance, and for some
upgrades and change because ifyou buy a used boat, there's
probably something you're gonnahave to do to it sooner or
later. Keep some cash availablefor that option. And then
(11:33):
finance the rest 10 years andmaybe your payment could be less
than the old bolt payment. Soyou're making progress. As you
go down your journey of life,and you're doing what you want
to do. And then at the sametime, you're looking at that car
(11:54):
payment, well, it's almost paidoff, but I'm gonna keep it for
another five or 10 years. So I'mjust gonna zero right interest,
I'm just gonna make my minimumpayment, keep on going there.
Now look at your mortgage, oryour line of credit on your
home, what's the interest rate,maybe the interest rate on that
(12:15):
is higher than your boat loan.
So maybe you need to apply somethat 3000 on your line of credit
and take care of that. As youcan see, here, it becomes a very
complex situation. So puttingeverything down in front of you,
(12:35):
and having all the informationand facts available for each and
every loan, the rate ofinterest, the mountain, the Met,
the minimum payment, the duedate, when it will be paid off.
All that type of influence andwhat the type of loan it is. A
line of credit could be event asmost likely a variable loan. So
(12:59):
as interest rates go up, it'sgonna go up and cost you a lot
more. And then maybe a year ago,it was cheaper than your boat
loan because he used it as adown payment for that boat. But
now it's more expensive becausethe interest rates went up. So
everything is always changing.
Everything is a complex puzzlethat you need to continually be
(13:21):
me viewing, thinking about andplanning for, what's your next
stop. My suggestion is, as longas you have that, as long as
you've got everything undercontrol in your personal
finances, let's continue to workon getting that debt paid down
(13:44):
and paid off. But there'sanother thing that pops up is
interest rate. I did an AI andit's telling me interest rate,
compare your debts and straightwith potential investment
returns. If your debt interestis higher, prioritize paying it
off. Which means if it's lower,it shouldn't be making
(14:09):
investments but they're nottelling you one piece of that
puzzle is with investment comesrisk. Even though it's projected
to have a 6% rate of return.
That does not mean you're gonnaget a 6% rate of return each and
every year. It might be apercent one year it could be 3%
(14:31):
And next year, or it could be anegative. You never know what's
gonna happen with them. So, mysuggestion is invest for your
retirement, maybe you canincrease it a little bit.
Increase your retirement savingsor the savings for your
(14:51):
children's college education orsavings for whatever you're
planning on in the future. ButDon't put it all 100% into
investments because you havethat risk factor, which is not
taken, account of or accountaccounted for. So what are the
(15:13):
benefits if you pay off all yourdebt, your mortgage your line of
credit your boat loan, your autoloan, what's the benefits?
Paying off your debts offersseveral benefits that can
significantly impact yourfinancial well being. Peace of
mind. being debt free, reducesstress and provides emotional
(15:36):
relief, financial freedom, nomore monthly payments, your
money is yours to allocate asneeded. Well, that's no more
monthly payments for loans andsuch improve credit score, pan
off that positively affects yourcredit history and score. Lower
(15:57):
interest rates, future loans maycome with better
Unknown (16:00):
rates. May is the key word there.
Charles McDonald (16:05):
Not always but it could better job prospects,
employers often check creditscore so being debt free can
enhance your chances of landingyour dream job, easier apartment
hunting, landlords sometimescheck credit scores, rent
renting apartments, I don'tthink it's more than sometimes I
think they always do. So thelast debt you got to have, the
(16:29):
better off you got to be, yourinsurance rates will be lower
because they check your creditscore. Also, if you have a lot
of debt, your fate insurancecompany can save you a higher
risk. And they're going tocharge you more on your
premiums, among other things,and then the benefit of having
more cash available to do whatyou want to do. And if you're
(16:55):
not sure how much that would be,add up all your minimum
payments, look at your debt,control your control center,
what is the total of all yourminimum payments. That's the
amount of money you would haveavailable to pay for your needs,
(17:15):
and other things that you wantto do. And just because you've
got 100% debt free, does notmean you can go out and buy that
$250,000 luxury automobile, youalready always want it and pay
$3,000 A month car paymentdoesn't mean that you go out and
(17:40):
buy that boat and have a $3,500a month boat payments. While you
may be able to do those things,it's probably not a good idea to
do those things. Because what'sthe point of freeing up money
and having this money, and thenautomatically soon as you get
(18:02):
that free and have yourfinancial freedom as they call
it. Go back and go back in debt.
You need to plan for everythingyou do in life. So if you want
to buy that big boat, you're onthat mid size motor yacht, let's
say that 5060 foot motor yacht,that's gonna cost you 500 to
(18:24):
$750,000 You need to plan forthat, you need to have a decent
amount of downpayment, he needto get the loan down to a point
where it's manageable, that isnot gonna kill your budget and
other things you want to do. Itdon't want to put all your eggs
(18:48):
in one basket and be tied to it.
And it's the same fat way withbuying a home. The you don't
want to put all your money thatyou make, and to making a
mortgage payment. If you usemore than 40 or 50% of your take
(19:12):
home pay to make your mortgagepayment you're gonna be
struggling with everything youdo. And you're gonna acquire
more debt called credit carddebt. And it's got to wear on
you. That's what you're tryingto avoid. So by saving money up
in advance, by making largerdown payments on things so your
(19:35):
finance last year, better ratesof interest, cost you less so
you'd be able to pay it offfaster. That's the advantage of
being debt free. You can planyour future. He can plan what
(19:58):
you want to do. Do and thenachieve those goals. Quicker
than having lots of debt thatyou're trying to get by on.
I'll be back in one moment withmy final thoughts are the
articles are referred to in myepisodes have a link in my show
(20:20):
notes. If you're interested inchecking out the software that I
personally use to get my democontrol, it's in my show notes
under shop financial, you needto copy and paste the link. And
it will take you to the websitecan any questions, you can just
contact me through thatparticular website. If you value
(20:43):
this podcast and I like to makea contribution, I had a
contribution link in my shownotes also give whatever you
feel is appropriate for theinformation I am providing. I
thank everyone for listening tomy podcast, your initial goal
was to pay off your creditcards. Why stop there, you've
(21:07):
done all the work to get to thepoint where your credit cards
are under control. And you oweda bundle of money on credit
cards, you have 5000 on one 1000on another 10,000 on another
maybe 4000 on another, you'vepaid off a lot of debt, and it's
(21:27):
high interest debt. So you madesome really big progress and
getting your debt under control.
So why stop at this pan offcredit cards, he should be
looking ahead, plan in the head,know what kind of debt you have,
how much is costing you how longit's going to be if you continue
(21:51):
on the normal terms to pay itoff. And what's the benefit of
being having a lot less debt inme to focus on everything. Don't
stop with just paying off creditcards. Specially if you've got
(22:11):
if you've never tracked before,and you never had a budget
before. And now you're doing iton a regular basis, you see that
debt reduction plan work in theequate using your credit cards,
your made the minimum payment,you build up your emergency
(22:32):
fund, and you apply D mergencyfund with a minimum of 1000 he
applied DX s every three or fourmonths to your debt, your credit
cards and you made somesignificant improvements. He got
one credit card left to pay off,he think you'll be paid off in
(22:56):
the next three to six months.
Don't stop there. Start planningtoday for what your progress
your new goals are gonna be.
Maybe your goal is to pay off acar payment, set that goal start
planning for it and stay focusedand stay determined on reaching
(23:20):
these goals. As you pay off yourcredit last credit card. Now's
the time to consider increasingyour emergency fund minimum,
maybe you just increase it $100Every time you apply the excess.
(23:41):
The difference between themaximum and your minimum, you
just leave an extra $100 there.
So now you have a learner loveand $100 minimum and then you
have $1,200 minimum, then youhave $1,300 minimum. And over
(24:01):
time, that's gonna be $2,000minimum. And you just keep doing
that. Because your goal when youget that free, which may be
another a year and a half, twoyears or three years is to have
three to six months worth ofexpenses and your emergency fund
(24:22):
because now we're planning forthe future. We're planning for
the unknown. You never knowwhat's gonna happen, whether
you're gonna have unemployment,or there's gonna be a big
depression and recession in theeconomy. You get laid off or you
get injured and you can't workor you have children and one of
(24:44):
you or your spouse quits workingto stay home with the children.
You never know. So let's kind ofplan for the unknown by
increasing that emergency fundand look at The as your credit
cards are getting paid off anddown, what's the next item?
(25:07):
Should you start focusing on,maybe it's a car payment, maybe
it's an RV payment, maybe it's aboat payment. Maybe it's your
line of credit on your home, youneed to prioritize, prioritize,
which can save you the mostmoney while paying off whichever
has the highest rate ofinterest, or whichever loan
(25:31):
where the interest rate can beadjusted and go up. They should
be your focus on getting it paiddown and off, and keeping your
personal finances under control.
And if you're thinking, whyshould I go to that all that
extra effort to do that isbecause you've already made the
(25:54):
effort. You just got to continuedoing what you're doing. And it
will automatically happen. Youjust need to think about which
one should I focus on next,which loan can I pay off, which
one can help me the most andbenefit me the most by pan off
(26:15):
one with the highest rate ofinterest for the one, we're the
it's attached to an asset, wherethe loan is worth more, you owe
more than what the assets worthcars worth less than what you
owe on it, a boats worth lessthan what you owe on it. Maybe
those need to be focused on. ButI'd pay off the high interest
(26:41):
first, unless it's one of thoseother two, and then focus on
which asset you want to get ridof next, because we need to pay
down that loan. So we don't haveto come up with a whole lot of
money, or refinance more and thenext car or the next boat we get
because the we owed more thanwhat it was war. So you have to
(27:05):
prioritize, you have to knowwhat's going on with everything
in your life, and stay focusedand be determined because you
can do it. And it's gonna happena lot faster, he had those
credit cards paid off, then it'sgonna speed up because that's
(27:26):
that much more you're gonna beputting into your emergency
fund. And that much faster, yougot to start applying it to the
next debt. And as you get eachone paid off, it's gonna speed
up speed up. And before you knowit, you'll be debt free, and
only took it three and a half,four years or five years,
(27:47):
whatever it was. You're notlooking at that 30 year loan
that you'd had 27 years left.
It's gone. You paid it off, youpaid everything off. you're debt
free, you have financialfreedom, you can bank a lot of
money, you can save forretirement you can save for your
children's college or whatever.
You have your life undercontrol, and you feel good
Hello, I'm your host, Mr. Chuck, a retired
accountant turned truck driver,I reduce my debt in a relatively
short period of time, debtreduction to achieve financial
freedom takes commitment,confidence determination. Why
stop with credit cards? Why stoppaying off credit cards continue
(00:26):
with other debt, doing all thework to get to this point, why
stop, just continue with otherdebt. The point of this episode
is maybe your initial goals wasget your credit cards under
control, maybe you're justwanting to pay him down. So you
had carrying a lower balance.
But why don't we change thatgoal to this pay off all our
(00:47):
credit cards, and you've gottento that point where you're maybe
in the next three to six months,you're gonna have your credit
card paid off, because you canfigure out how much money you're
saving and what's going on howoften you're applying extra
money to a credit card, and youfigure it out within the next
(01:11):
four to five months, you willhave your credit cards paid off,
and you'll be happy. My point iswhy stop there, he had done all
the work to get to this pointyou you're doing tracking on a
regular basis, you're keeping upwith your control center, you
got all your spending, undercontrol your pan the bare
(01:35):
minimum you can get by with,you've changed your cell phone
plan your insurance companies,and he really done a good job of
getting your spending undercontrol. So why stop with just
paying off your credit cards,maybe you have a boat or RV
(01:55):
payment or two car payments, orboth to car payments and or boat
payment. Maybe you have a firstmortgage and a line of credit on
your home. So why stop with thecredit cards. But let's first
focus and you're you know,you're a few months away. So now
(02:18):
is the time to think about whatyou're gonna do when you achieve
that goal. Well, the first thingyou might be aware of is do not
cancel any credit cards, do notclose them out or anything. But
keep them use themresponsibility. Use them like
cash, make small charges onthem, and pay them off at the
(02:42):
end of the week or the next weekor the next pay period. Let's
look at the different type whattype of debts would you have
remaining. Once you get yourcredit cards paid off considered
a type of debt you have somedebts like high interest credit
cards are more urgent to pay offthan others. So that's why
(03:02):
you're working on it. Maybeyou've already got rid of that
payday loan also maybe you wentback and paid off your pawn
loans, and you got your personalloans, pretty much under control
before you start working on yourcredit cards. If you have any
personal loans, or if you did aconsolidated loan, I don't
(03:23):
recommend that. Because there'ssome people who don't qualify
for it. So I want to keep itsimple. So maybe you paid off
your credit cards but got a newloan. So you have a lower
interest rate, which is good,but you really didn't reduce
your debt, you just shiftedaround a little bit. So let's
(03:43):
focus on getting that loanconsolidation, loan, pay down
and pay it off. And then thislook at what else you have. What
type of loans do you havepersonal loans, credit cards,
car, auto mortgage, studentloans, things like that? What's
the interest rate? And how muchtime you have left on pan on
(04:06):
them? What's your monthlypayment? What's your age and
what your goals were you want todo? Maybe you have a smaller
boat, he wants to upgrade to alittle bit bigger boat and you
have a 10 year loan for theboat. You're in your second or
third year. Are you upside downwith that? Is the boat worth
(04:31):
less than what you owe? And heshould look at all these
factors, even for yourautomobiles or your automobiles
worth less than what you owe onthem. And then there's the
emotional factors. What do youpersonally feel you should be
doing? If you're getting closeto retirement, maybe you don't
want to have all this debt goinginto retirement. Remember when
(04:54):
you go into retirement you'regonna have most likely less
income For most people, so youmay not be able to handle all
the debt, so you need to getyour debt under control. And
that's what I did. Personally, Igot all my dad under control, so
I can have a happier retirementand not have to worry about
making payments on anythinggoing payments, I'm making some
(05:18):
my real estate taxes andinsurance. So let's think about
it. What do you have, and whatare your goals should be the
factors that you're determiningon what he should continue to
do, don't just stop with payingoff your credit cards, don't
(05:38):
just stop was paying off thatconsolidation loan. Let's
continue on this journey. Now ifonce you get your credit cards
paid off, your emergency fundshould increase to a minimum of
$2,000 and then build it up to4000. Well, more 5000. So you
(06:00):
can then have 3000, you're gonnaapply it to something. So over
time, your emergency fund shouldbe growing, to get up to a
minimum of three months worth ofexpenses, and then six months
worth of expenses. Look at allyour other loans. So let's say
(06:23):
you have a boat loan, it's about$350 a month you've been paying
on it for three years, the boatis worth little bit less than
what you owe on the loan, youhave two cars, you only have one
loan on one car, which is fairlynew, and you have zero rate of
(06:46):
interest on that. So you feelthat while the car loan is good,
even though the car is worthless than, then the loan on that
not really cost me interest. Solet's just keep that for now.
But the boat is starting to goupside down, but it's not too
(07:06):
bad. But if I continue on thesame path, if I trade in a boat,
I'm not going to have anyequity, and it might cost me
some additional money. In orderto kick down the new boats
priced at 100% financing, youdefinitely don't want to do
(07:27):
that. So let's focus as get offthose credit cards and get them
paid off, but we're not gonnaclose them. And we're gonna use
them like cash and make a chargeon them and pay them off at the
end of the week or within acouple of weeks. So that you can
keep a zero balance at alltimes. And that will improve
(07:49):
your credit score. Now let'slook at that boat loan, even
though maybe the boating seasonis coming to an end, does the
boat need any maintenance, youneed to put it in storage, those
are all additional costs.
(08:11):
Maybe it might be better to sellthe boat, pay off the loan, save
up your money, and then buy anew boat or a different boat, a
bigger boat, a couple years downthe road when you get your debt
under control. Well, that's anoption or in just a little bit
(08:32):
getting behind on the value. Solet's keep the boat because it's
the took really good care of it.
It looks good. It performs good.
You've done the oil changes andthe maintenance and the hall
cleaning and the hall paintingand whatever you need to do to
maintain it, and you reallyliked his boat. But you know, in
(08:54):
five years, you want to get alarger boat for whatever reason.
So you know that in four months,you're gonna free up some money
because these credit cards aregoing to be paid off. So let's
look at that boat loan. What canwe do to get back under control?
(09:15):
Oh, we got roughly seven yearsleft on a 10 year alone. How
much extra do I need to pay andyou can find a calculator. How
much extra need to pay everymonth in order to pay this boat
loan off. And three yearsbecause you figure in three
(09:38):
years. That's about the timeyou'd like to get another boat
the boat will be roughly sixyears old. It still has some
value and you'd be able to tradeit in and get a good down
payment for the newer boat thatyou plan or wanting to purchase.
(09:59):
He never Oh, if you're in thenews boat market, you never know
when one's going to come up thatyou really would like to have.
So you need to be ready, andmaybe a year and a half. So
let's say that your boat loan ifyou pay an extra $50 a month,
and you can start that when yourcredit cards have paid off, you
(10:20):
can have a paid off in threeyears. But if you continue to do
the same thing, keep building upyour emergency fund, build up to
5000, apply 3000 to theprincipal on that boat loan,
you're gonna have a paid off ina year and a half. And then
you'll be able to save up somemoney and increase your savings
(10:44):
for a newer boat that you want.
So if one becomes availablebefore your time period, you're
already ready, you got a boat toEgan sell, and keep 100% of the
sales price unless you will pluscommissions or whatever you have
to pay or trade and to thedealer, who you can then 100%
Apply that money to the newerboat that you're wanting to
(11:12):
purchase. So that you can thenapply some cash that you have
built up, keep some formaintenance, and for some
upgrades and change because ifyou buy a used boat, there's
probably something you're gonnahave to do to it sooner or
later. Keep some cash availablefor that option. And then
(11:33):
finance the rest 10 years andmaybe your payment could be less
than the old bolt payment. Soyou're making progress. As you
go down your journey of life,and you're doing what you want
to do. And then at the sametime, you're looking at that car
(11:54):
payment, well, it's almost paidoff, but I'm gonna keep it for
another five or 10 years. So I'mjust gonna zero right interest,
I'm just gonna make my minimumpayment, keep on going there.
Now look at your mortgage, oryour line of credit on your
home, what's the interest rate,maybe the interest rate on that
(12:15):
is higher than your boat loan.
So maybe you need to apply somethat 3000 on your line of credit
and take care of that. As youcan see, here, it becomes a very
complex situation. So puttingeverything down in front of you,
(12:35):
and having all the informationand facts available for each and
every loan, the rate ofinterest, the mountain, the Met,
the minimum payment, the duedate, when it will be paid off.
All that type of influence andwhat the type of loan it is. A
line of credit could be event asmost likely a variable loan. So
(12:59):
as interest rates go up, it'sgonna go up and cost you a lot
more. And then maybe a year ago,it was cheaper than your boat
loan because he used it as adown payment for that boat. But
now it's more expensive becausethe interest rates went up. So
everything is always changing.
Everything is a complex puzzlethat you need to continually be
(13:21):
me viewing, thinking about andplanning for, what's your next
stop. My suggestion is, as longas you have that, as long as
you've got everything undercontrol in your personal
finances, let's continue to workon getting that debt paid down
(13:44):
and paid off. But there'sanother thing that pops up is
interest rate. I did an AI andit's telling me interest rate,
compare your debts and straightwith potential investment
returns. If your debt interestis higher, prioritize paying it
off. Which means if it's lower,it shouldn't be making
(14:09):
investments but they're nottelling you one piece of that
puzzle is with investment comesrisk. Even though it's projected
to have a 6% rate of return.
That does not mean you're gonnaget a 6% rate of return each and
every year. It might be apercent one year it could be 3%
(14:31):
And next year, or it could be anegative. You never know what's
gonna happen with them. So, mysuggestion is invest for your
retirement, maybe you canincrease it a little bit.
Increase your retirement savingsor the savings for your
(14:51):
children's college education orsavings for whatever you're
planning on in the future. ButDon't put it all 100% into
investments because you havethat risk factor, which is not
taken, account of or accountaccounted for. So what are the
(15:13):
benefits if you pay off all yourdebt, your mortgage your line of
credit your boat loan, your autoloan, what's the benefits?
Paying off your debts offersseveral benefits that can
significantly impact yourfinancial well being. Peace of
mind. being debt free, reducesstress and provides emotional
(15:36):
relief, financial freedom, nomore monthly payments, your
money is yours to allocate asneeded. Well, that's no more
monthly payments for loans andsuch improve credit score, pan
off that positively affects yourcredit history and score. Lower
(15:57):
interest rates, future loans maycome with better
Unknown (16:00):
rates. May is the key word there.
Charles McDonald (16:05):
Not always but it could better job prospects,
employers often check creditscore so being debt free can
enhance your chances of landingyour dream job, easier apartment
hunting, landlords sometimescheck credit scores, rent
renting apartments, I don'tthink it's more than sometimes I
think they always do. So thelast debt you got to have, the
(16:29):
better off you got to be, yourinsurance rates will be lower
because they check your creditscore. Also, if you have a lot
of debt, your fate insurancecompany can save you a higher
risk. And they're going tocharge you more on your
premiums, among other things,and then the benefit of having
more cash available to do whatyou want to do. And if you're
(16:55):
not sure how much that would be,add up all your minimum
payments, look at your debt,control your control center,
what is the total of all yourminimum payments. That's the
amount of money you would haveavailable to pay for your needs,
(17:15):
and other things that you wantto do. And just because you've
got 100% debt free, does notmean you can go out and buy that
$250,000 luxury automobile, youalready always want it and pay
$3,000 A month car paymentdoesn't mean that you go out and
(17:40):
buy that boat and have a $3,500a month boat payments. While you
may be able to do those things,it's probably not a good idea to
do those things. Because what'sthe point of freeing up money
and having this money, and thenautomatically soon as you get
(18:02):
that free and have yourfinancial freedom as they call
it. Go back and go back in debt.
You need to plan for everythingyou do in life. So if you want
to buy that big boat, you're onthat mid size motor yacht, let's
say that 5060 foot motor yacht,that's gonna cost you 500 to
(18:24):
$750,000 You need to plan forthat, you need to have a decent
amount of downpayment, he needto get the loan down to a point
where it's manageable, that isnot gonna kill your budget and
other things you want to do. Itdon't want to put all your eggs
(18:48):
in one basket and be tied to it.
And it's the same fat way withbuying a home. The you don't
want to put all your money thatyou make, and to making a
mortgage payment. If you usemore than 40 or 50% of your take
(19:12):
home pay to make your mortgagepayment you're gonna be
struggling with everything youdo. And you're gonna acquire
more debt called credit carddebt. And it's got to wear on
you. That's what you're tryingto avoid. So by saving money up
in advance, by making largerdown payments on things so your
(19:35):
finance last year, better ratesof interest, cost you less so
you'd be able to pay it offfaster. That's the advantage of
being debt free. You can planyour future. He can plan what
(19:58):
you want to do. Do and thenachieve those goals. Quicker
than having lots of debt thatyou're trying to get by on.
I'll be back in one moment withmy final thoughts are the
articles are referred to in myepisodes have a link in my show
(20:20):
notes. If you're interested inchecking out the software that I
personally use to get my democontrol, it's in my show notes
under shop financial, you needto copy and paste the link. And
it will take you to the websitecan any questions, you can just
contact me through thatparticular website. If you value
(20:43):
this podcast and I like to makea contribution, I had a
contribution link in my shownotes also give whatever you
feel is appropriate for theinformation I am providing. I
thank everyone for listening tomy podcast, your initial goal
was to pay off your creditcards. Why stop there, you've
(21:07):
done all the work to get to thepoint where your credit cards
are under control. And you oweda bundle of money on credit
cards, you have 5000 on one 1000on another 10,000 on another
maybe 4000 on another, you'vepaid off a lot of debt, and it's
(21:27):
high interest debt. So you madesome really big progress and
getting your debt under control.
So why stop at this pan offcredit cards, he should be
looking ahead, plan in the head,know what kind of debt you have,
how much is costing you how longit's going to be if you continue
(21:51):
on the normal terms to pay itoff. And what's the benefit of
being having a lot less debt inme to focus on everything. Don't
stop with just paying off creditcards. Specially if you've got
(22:11):
if you've never tracked before,and you never had a budget
before. And now you're doing iton a regular basis, you see that
debt reduction plan work in theequate using your credit cards,
your made the minimum payment,you build up your emergency
(22:32):
fund, and you apply D mergencyfund with a minimum of 1000 he
applied DX s every three or fourmonths to your debt, your credit
cards and you made somesignificant improvements. He got
one credit card left to pay off,he think you'll be paid off in
(22:56):
the next three to six months.
Don't stop there. Start planningtoday for what your progress
your new goals are gonna be.
Maybe your goal is to pay off acar payment, set that goal start
planning for it and stay focusedand stay determined on reaching
(23:20):
these goals. As you pay off yourcredit last credit card. Now's
the time to consider increasingyour emergency fund minimum,
maybe you just increase it $100Every time you apply the excess.
(23:41):
The difference between themaximum and your minimum, you
just leave an extra $100 there.
So now you have a learner loveand $100 minimum and then you
have $1,200 minimum, then youhave $1,300 minimum. And over
(24:01):
time, that's gonna be $2,000minimum. And you just keep doing
that. Because your goal when youget that free, which may be
another a year and a half, twoyears or three years is to have
three to six months worth ofexpenses and your emergency fund
(24:22):
because now we're planning forthe future. We're planning for
the unknown. You never knowwhat's gonna happen, whether
you're gonna have unemployment,or there's gonna be a big
depression and recession in theeconomy. You get laid off or you
get injured and you can't workor you have children and one of
(24:44):
you or your spouse quits workingto stay home with the children.
You never know. So let's kind ofplan for the unknown by
increasing that emergency fundand look at The as your credit
cards are getting paid off anddown, what's the next item?
(25:07):
Should you start focusing on,maybe it's a car payment, maybe
it's an RV payment, maybe it's aboat payment. Maybe it's your
line of credit on your home, youneed to prioritize, prioritize,
which can save you the mostmoney while paying off whichever
has the highest rate ofinterest, or whichever loan
(25:31):
where the interest rate can beadjusted and go up. They should
be your focus on getting it paiddown and off, and keeping your
personal finances under control.
And if you're thinking, whyshould I go to that all that
extra effort to do that isbecause you've already made the
(25:54):
effort. You just got to continuedoing what you're doing. And it
will automatically happen. Youjust need to think about which
one should I focus on next,which loan can I pay off, which
one can help me the most andbenefit me the most by pan off
(26:15):
one with the highest rate ofinterest for the one, we're the
it's attached to an asset, wherethe loan is worth more, you owe
more than what the assets worthcars worth less than what you
owe on it, a boats worth lessthan what you owe on it. Maybe
those need to be focused on. ButI'd pay off the high interest
(26:41):
first, unless it's one of thoseother two, and then focus on
which asset you want to get ridof next, because we need to pay
down that loan. So we don't haveto come up with a whole lot of
money, or refinance more and thenext car or the next boat we get
because the we owed more thanwhat it was war. So you have to
(27:05):
prioritize, you have to knowwhat's going on with everything
in your life, and stay focusedand be determined because you
can do it. And it's gonna happena lot faster, he had those
credit cards paid off, then it'sgonna speed up because that's
(27:26):
that much more you're gonna beputting into your emergency
fund. And that much faster, yougot to start applying it to the
next debt. And as you get eachone paid off, it's gonna speed
up speed up. And before you knowit, you'll be debt free, and
only took it three and a half,four years or five years,
(27:47):
whatever it was. You're notlooking at that 30 year loan
that you'd had 27 years left.
It's gone. You paid it off, youpaid everything off. you're debt
free, you have financialfreedom, you can bank a lot of
money, you can save forretirement you can save for your
children's college or whatever.
You have your life undercontrol, and you feel good
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