Episode 127. How to Get Out of Debt and Build an Emergency Fund | Brad Nelson - Wake Up with Miya

Episode Transcript
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(00:02):
It's because of the psychology that begins to change because
people get to check things off. And I think that's that's one of
the most critical things when you're getting out of debt and
improving your finances is beingable to see consistent and
regular progress, even if it's small.
Because so many people who live paycheck to paycheck are so used
to just constantly getting theirteeth kicked in and they're
pushed to the ground all the time with their finances.

(00:24):
They're constantly playing defense.
Some of these people feel like they haven't had a win in
forever. And so just a check off, like,
man, I paid off $100 credit card, you get to cross it off.
That feels really good. You know, it's like a, you know,
it's like going on a diet, you know, like you start exercising,
you're doing well, you're watching what you eat.
And all of a sudden those first few pounds come off and it's
like, this is working. And what do you want to do?
You want to keep doing more, right?

(00:45):
And so I, I think that's the mentality behind the death
snowball is, is seeing that consistent progress.

(01:08):
Aloha and welcome to another show, guys.
Today we have a very special guest, Brad Nelson, founder of
Debt Free Dad and a host of DebtFree Dad podcast.
Now, I know this isn't the usualkind of topic we cover, but I
truly believe it's something that can benefit everyone.

(01:28):
And let's be honest, no matter what path you're on, financial
stress can hold you back. And if you're weighed down by
debt or struggling to save, it affects your energy, your
mindset, and your ability to focus on the bigger picture.
That's why I wanted to have thisconversation today.
Brad has helped countless peopletake back control of their

(01:51):
money, get out of debt, and finally experience financial
freedom. After struggling with debt
himself, he turned his own journey into a mission to help
others break free from paycheck to paycheck cycle and to create
real financial security. If you ever felt overwhelmed by

(02:13):
debt or unsure how to start saving, this episode is for you.
Brad is going to share actionable steps to help you
make smarter money decisions, ditch debt for good, and build
an emergency fund that actually work.
I also want to mention that in the very beginning of my podcast

(02:34):
recording, I talked about different financial strategies
and I'll link those episodes in the show notes because I
personally think being financially secure is very
important in life. This was recorded early on in my
podcast career. The audio quality may not be the

(02:54):
best, and as embarrassing as it may be, I believe the
information is definitely valuable.
So before we dive in guys, don'tforget to follow, share, and
subscribe to this show. If you found value in today's
conversation, please leave me a positive review.

(03:15):
It really helps us to reach morepeople.
Now without further ado, let's welcome Brad to the show.
Aloha Brad and welcome to the show.
It's great to have you here. I believe one of the biggest
financial struggles people face today isn't just making money,
but figuring out how to manage it wisely.

(03:39):
That can feel like a never ending cycle, and saving money
can often take a backseat, especially when you're trying to
keep up with the bills. So sometimes having emergency
fund is crucial to staying financially secure, especially

(04:00):
with the cost of living rising so fast.
So how can we balance paying offdebt while still saving for the
unexpected? Yeah.
I mean, I think it even before you get to saving, so to speak,
I think for for most people, I think it really kind of comes
down to developing an overall plan, plan for your income, plan

(04:23):
for your spending. And you know, after helping
thousands of people over the years and doing our podcast, the
Duffy Dad podcast, now we're on our on our fifth year of doing
that show as well. And, and what we have found is
that, and, and I know from firsthand experience, 'cause I used
to live this same way is that I wanted to save.
I wanted to get out of debt. But my spending, my overall

(04:45):
management on my finances was anabsolute mess.
I had no real direction. I had these loose goals of I
wanted to save, I wanted to get out of debt.
But no, no like clear plan or path on how to do it.
You know, so I think for most people, even before you get to,
I want to save first, Let's prioritize your expenses and

(05:06):
your spending around the life that you want to live.
Let's do that. And I think all too often in
this day and age, especially with social media and, and just
how much access we have to everybody's life, you know,
everyone's showing things off. It's sometimes our spending
habits and our behaviors can begin to become like this herd
mentality of they look like whateverybody else is doing.

(05:27):
But is that really that really the life that you want to live?
Or is that just because of what everybody else is doing?
So for me, in my journey of getting out of debt, it was
almost like a, a learning process of figuring out what
what it is that I wanted. And, and as soon as I was able
to start figuring that out and it didn't happen overnight, it
was amazing how much spending didn't need to happen or how

(05:49):
many things just didn't interestme as much as they did.
Now I'm human just as much as the next person.
I still deal with, you know, fear of missing out.
And, you know, right now it's spring break.
Our family is, is doing a staycation at home during spring
break for us because we went on a Christmas vacation.
But I'm feeling FOMO because I live in Wisconsin and it's cold
here still today. It's a little warmer.

(06:10):
You know, it's cold, it's snowing some days.
It's nice. You know, it's like, I want to
get out of here and experience some, some warmth, right?
So I, I feel that too, But at the same time, it's very short
lived now because I know that we've got financial goals, goals
that are working. They're allowing us to save,
they're allowing us to stay out of debt, they're allowing us to,
to pay cash for purchases that we want.

(06:30):
So I think it first starts there.
And then once you have that spending plan, so to speak, of
what you want your life to look like, then you can see, OK,
based on how much I have left, how much am I able to save now?
If you don't have much to save, then you know that the life that
you want to live is costing you a savings.

(06:51):
And then you got to decide what's more important.
Is it more important to spend today and have nothing for
tomorrow and continue to rely ondebt?
Or should I cut back temporarilyto build up my emergency fund,
build that up quick, and then I can add some things back into my
life. But again, remember, it's just
temporary. But I think it all comes down to
really kind of getting a, a really good plan together,
managing your finances, understand where you're spending

(07:12):
your money. And then I think it kind of
builds off of that. Yeah, I'm sorry, we kind of
skipped over. Wanted to have you introduce
yourself in a a little bit aboutyour journey with our listeners.
I know you have a podcast as well.
Yeah, yeah. So for those of you who don't
know, my name is Brad Nelson. I'm, I run a company called

(07:33):
Jeffrey Dad. I've been doing this 10 years
now and never had any plans of getting on a podcast with an
individual like you and for youraudience of teaching people
about money and personal finance.
But I too, at one time, you know, struggled with a lot of
terrible spending habits, paycheck to paycheck living, had
a lot of credit card debt, made a lot of terrible choices with

(07:54):
cars and car payments and, and was living just this cycle of
crisis to crisis living. And eventually as I got to my
early 30s, I just, I didn't wantto live like that anymore.
I, I, I was, I did pretty well in my job.
Not, I mean average, I wouldn't say well, but you know, for, for
what I was doing for a living, Imade some pretty good money.
But at the end of the day, I hadnothing to show for it.

(08:15):
And I was getting raises, I was getting bonuses, I was getting
things. And it's like, where is all this
money going? You know, And it seemed like
every time something turned around or there was like another
emergency, it's like all we weredoing is constantly swiping a
credit card, you know, And so I just really started to learn
about personal finance and really went on this journey of
really just letting my ego go about what I thought money

(08:36):
should be and just trying to figure out what were successful
people doing with money? What were they doing?
And come to find out, it, it really wasn't anything that
fancy. It was living below your means,
having a budget, having a good financial plan, not only just,
you know, for right now, but also what are the next 5 to 10
years look like? And for me back then, man, that
was like, Oh my gosh, 5 to 10 years.

(08:57):
How can I even think that far ahead?
I'm trying to figure out how I can afford tomorrow, right.
So it was something that, you know, I I I built over time and,
you know, I've been debt free now for and what is this 212
plus years now outside outside of my mortgage and I have two
kids and yeah, but I mean peopletoday.
And I think what separates us from most people out there is

(09:19):
like we're we're still still pretty normal guy.
Like I live in a normal house, Idrive normal cars.
I don't, you know, live in some mini mansion and and live this
exotic life. It, it's, I've just done some
pretty simple things that most people have the ability to do.
And if you're willing to do themand you're willing to work hard
at them and be consistent with it over time, I believe most

(09:39):
people, especially middle incomeearners or middle to higher
income earners, man, the Sky's the limit.
You can. You can really live a pretty
fantastic financial life if if you're willing to put in the
work and sacrifice a bit. Yeah, that sounds great.
So when someone is struggling financially, what should they
prioritize first? Would it be paying off debt or

(10:03):
building an emergency fund? Or should they do a little bit
of both? Yeah.
I would say first and foremost, you're never going to get out of
debt if you're constantly relying on it.
So I think building an emergencyfund or or some sort of a
savings account is priority number one.

(10:23):
And my recommendation, people always ask, well, how much did,
how much is that, Brad? I recommend at least 1000 to
$3000. If you can get it to $3000,
fantastic. Now, if you want to do more
because I have some people who are like, I would feel more
comfortable at 5:00, then OK, let's get it to 55 grand.
But for most people, that 1000 to $3000 is a good level.

(10:43):
Now, people might say, well, that's not really a lot of
money. And you're right, it's not, but
it's not always the big things that throw us off, right?
It's all of the little things that add up over time.
And I know for me it was always like $100 emergency there or if
I, I forgot about that bill. Now I got to swipe again.
And you're swiping again. You're swiping again.

(11:03):
It's like death by 1000 cots. All of a sudden you turn around
and you're looking at this mountain of debt and you're
wondering what in the heck is all of that?
And for me and for a lot of people out there, it was just a
lot of these, oh, I forgot or oops or yeah, it was some
emotional spending. I shouldn't have probably did
it, but I did it anyways, right?So I think when you have an
emergency fund savings it, it really changes the psychological

(11:28):
thinking of I don't have to relyon debt because I saved and
prepared for this. So when an emergency comes up,
I'm going to use cash rather than going into debt and swiping
the card. So it breaks the constant habit
of of looking at debt as an emergency backup plan.
You are the emergency backup plan.
We just have to become better atcreating a habit of saving and

(11:50):
planning for those unexpected expenses that are coming down,
you know, the line. I mean, I mean, long term wise,
I mean big picture, I mean, ideally you, you'd want to at
least build at some point a three to six month emergency
fund. I mean, there's some people out
there, you know, depending on your situation, you may even
want to consider doing a 12 month emergency fund.
And how you would calculate thatis just saying, OK, if I was to

(12:13):
lose my income today and I needed just the basic amount of
money to cover my basic necessities, what's that number
every month? And then multiply that however
many months you need. And that's, that's your savings
number. And that way if a big thing
comes up, you get sick or you know what, whatever might
happen, job loss, you know, you've got something to fall
back on. But that takes time to build.

(12:35):
And I highly recommend once you start paying down debt, it
becomes much easier to build it cuz you got more money to throw
out a savings account like that because you're getting further
out of debt. True.
Is all debt bad debt or are there any situations where
taking on debt can be beneficial?
Yeah, I love, I love the good debt, bad debt, because I've

(12:56):
been in a situation especially back in 2010 and 2011, my first
marriage ended in divorce and I bought a house that I couldn't
afford. Neither one of us could afford
it on our own. So we ended up having to go
through a foreclosure process with that home because at that
time, the housing market, the homes weren't worth as much as

(13:17):
you owed on them back then because the mousy market was,
was going down. And so at that time people might
say, like even today people might say, well, mortgage is a
good debt. I can tell you it's not a good
debt when you can't pay it. I don't care how much you call
it a good debt, if you can't payit, it's not good anymore.
It's not fun. So on the debt free debt
podcast, we just, it's funny youbring this up, Mia, because we
just had this conversation and what we like to call it is

(13:39):
instead of good debt, bad debt is what is tolerable debt,
what's tolerable. And so I think when it comes to
houses, you know, mortgages, I think that's a tolerable debt.
I think if you're going to open a business, I think that could
be a tolerable debt because thatbusiness is going to eventually
and hopefully soon create an income, right?
I think where you have to be careful though, it is when

(14:02):
you're getting into homes or you're getting into a business
or anything like that is you have to be aware of, of the
risks and go into it with a goodplan.
Like right now, there's too manypeople who are buying homes that
have no money in their savings account.
And when I'm working with people, it's not the mortgage
that typically is causing the problems.
It's all of the other things that come across or come with
the house. It's the the upkeep and the

(14:24):
maintenance. And all of a sudden we have a
US, you know, the roof is leaking and we have no money to
fix it. And what happens if you have no
money going into it? What are you doing?
You're going further and furtherand further into debt for
something that is supposed to bea really good asset for you to
build wealth. So I think home buying can be a
great thing, but I think people just have to go into it with,

(14:45):
with a good plan. And I think if you do, that can
be definitely a tolerable debt. I mean, I still have a mortgage
today, but I can tell you I learned my lesson from that
first house. I, I lost and I went into the
new home purchase many, many years later with a much better
plan because I, I knew the pain that can come from not having a
good one. So, so yeah, I would say those,

(15:08):
those are a few things. You know, some people might
stay, you know, student loans. Is student loans a tolerable
debt or is that a good debt or abad debt?
All depends. All depends.
I think you have to as as parents and as students, we need
to be doing a definitely a much better job educating not only
the students, but also the parents on what these kids and

(15:30):
eventually very young adults aregetting themselves into.
Because many are getting themselves into thousands and
thousands, 10s of thousands of dollars of debt.
And they don't understand the repercussions of what that's
going to mean once they become mid to late 20s.
And let's say they went for a job that didn't necessarily have
a great salary right out of college.
And now they've got these huge student loan payments.

(15:52):
The repercussions are people arefeeling that, you know, so I
think you know it, I think student loan debt it, it can be
something that could be considered tolerable as long as
you're going into it with a goodplan.
I think there's also a lot of ways, student, you can go to
school with very little debt or no debt at all.
Do you have to do it a little bit different than most people?

(16:12):
Yeah. But it's still possible today
for you to do it. It just takes a little time, a
lot more planning and having a strategy.
Yeah, absolutely. I know with my my son he has in
his company they have a work plan for school like they pay
for the schooling. As long as you have a C and

(16:35):
above average they will pay for the schooling.
Sounds perfect. Yep, I know.
And there's a lot, there's a lotof places that'll do it.
And I think that I think when itcomes to college, and I mean, we
could probably have multiple episodes just about this this
topic, but I think when it comesto college is that there's a lot
of this idea that I need to havethe college experience.
You know, these kids feel like they need to have that

(16:56):
experience. Well, that experience comes at a
very high price. And and so and, and I think
parents sometimes can get wrapped in that too.
My kids going to this name brandschool out there.
But the reality is, is when you ask, and we've asked this on our
social media posts and, and talking about it, most
employers, they don't care whereyou went to school.
Now there are there some professions out there and by the

(17:19):
way, minimal professions out there that care or where it
matters. Yes, there is, right.
So it doesn't apply to everybody, but for the majority
of people out there, they don't care.
I used to do hiring. You know, I used to work in the
graphic design industry. I worked in the sign industry
for 15 years prior to doing thisbusiness.
And I used to hire my team and Inever looked at where they went
to school. Never.

(17:40):
It was just never something thatwe looked at.
So you want to think about thosethings.
I understand right now as kids and even as parents might say,
like it's really exciting that they're going to the school or
you say I'm going to school and have this great experience,
right? Nobody cares 10 years later,
right? And but you're still going to be
paying on it 10 years later if you're not careful.
So you just want to be thoughtful of those things.

(18:00):
Yeah, absolutely. And for mortgages, do you
suggest maybe people pay off extra, paying extra every month
to get down the principal? Yeah.
I mean, I think eventually that's a great plan.
I, I mean, I think ideally, you know, it would be great to get
to retirement and have a paid for home.

(18:20):
You know what the idea is. And, and retirement I use
loosely. Everyone has a different idea of
what retirement looks like, but you know, when you get to a
retirement years there, when youget to your older years, you,
your income becomes more limited, right?
You, you don't have the flexibility of going out and
working two or three jobs. I mean, some of them have to,
but you're probably not going towant to, right.
So ideally speaking, you want toget to the point of, of paying

(18:41):
down your home by the retirementyears or sooner if you can.
But where most people really need to spend their focus on is
getting their credit cards paid off because those are at really
high interest rates. Getting your student loans paid
off the the car payments are just unbelievable right now.
The average car payment is $750 a month, $750 a month, 20% now

(19:05):
of all loans are now $1000 per month or, or or more, which is
unbelievable. And so, and I know we, there's
two things that we can post about in our, in our business
that we know is going to irritate people more.
It's, it's credit scores and cars.
If we talk about either of thosethings, our social media posts

(19:25):
just blow up. They go, they go crazy viral.
In fact, I've got 3 posts right now that have hundreds of
thousands of views and, and comments.
And they all, a lot of them haveto do with cars.
Like we, there are people who just love their cars here in the
United States and they'll, they'll defend them to the
death, right? But the reality is if you're
living paycheck to paycheck and if you're like a lot of people
that I've helped over the years,car payments are one of the

(19:46):
number one things that keeps most people stuck.
And it is the top reason that people do not get approved for
mortgages is because of high carpayments.
Wow, that's interesting. So these cars that they're
buying, I don't know what they're buying, but it it's
about. Like you said $700.00 average
and these are seven years, isn'tit is these are typically seven
years? Yeah, I mean, right now, I mean,

(20:08):
you still have people that are doing, you know, 60 months, 72
months, you know, 84 months. Those are those are kind of in
that range. But I've heard of nine years
even not obviously that's not ascommon, but it's out there.
And it's not only just the car payments, but you know, it's
also if you know, you do have a,a less than, you know, like,

(20:30):
let's say you don't have a very good credit score.
I mean, the interest rates that they're charging on these loans
is, is insane too. So you got to keep that in mind
as well. And so, you know, those would be
the, those are going to be the things that I'm going to focus
on more say than a home, you know, again, because for, for
most people, when you're buying a home, you know, for most

(20:51):
people, the mortgage isn't nearly as bad as all of the
other things combined. And if you got rid of all of
those other things, or at least reduce them drastically, it it
would definitely reduce a lot ofthe stress on the cash flow.
And I'm just on the whole whole household in general.
Hey Ohana, I hope you're loving this conversation as much as I
am. I just wanted to pause for a

(21:12):
quick moment to ask for your support.
If you're enjoying what you're hearing and feel like we've
earned it, you'd be so grateful if you could leave us a rating
or review. Your honest feedback really
helps us grow and reach more people who love exploring these
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would resonate with someone you know, don't forget to share it

(21:33):
with them. Mahala Nui Loa for being part of
our journey. Now back to the show.
Wow. Yeah, many people feel
overwhelmed by debt. Where's the best place for them
to start when trying to pay off their debt?
Would it be the? Smaller cards, I'm sorry.

(21:53):
Yeah, yeah, absolutely. So I mean, I love the debt
snowball approach. I mean, it's, it's been made
popular obviously by, you know, the gurus like Dave Ramsey and
all that. And, but I, I love it because
the debt snowball and they've, they've studied this like debt
avalanche, which is the interestrate method, you know, focus on
the higher interest rate or the snowball method, which is again,
focusing on the lower balance. You know, they've done studies

(22:15):
on these and multiple studies have come back and proven over
and over again that the debt snowball method is the most
effective method. And it's, it's because of the
psychology that begins to changebecause people get to check
things off. And I think that's, that's one
of the most critical things whenyou're getting out of debt and
improving your finances is beingable to see consistent and
regular progress, even if it's small.

(22:37):
Because so many people who live paycheck to paycheck are so used
to just constantly getting theirteeth kicked in and they're
pushed to the ground all the time with their finances.
They're constantly playing defense.
Some of these people feel like they haven't had a win in
forever. And so just a check off, like,
man, I paid off $100 credit card, You get to cross it off.
That feels really good. You know, it's like a, you know,
it's like going on a diet, You know, like you start exercising,

(22:59):
you're doing well, you're watching what you eat.
And all of a sudden those first few pounds come off and it's
like, this is working. And what do you want to do?
You want to keep doing more, right?
And so I, I think that's the mentality behind the debt
snowball is, is seeing that consistent progress and that's
what begins to build more confidence.
And the more confidence that youhave, the more willing you're
willing to take or you're more willing you are to take action.

(23:20):
And so that's how that thing consistently grows.
But yeah, that's noble because smallest to largest, that's what
how you're going to list your debt, smallest to largest by
balance owed and you just pay them off in that order.
Nice, So what is the biggest mistakes people make when trying
to pay off debt? I think looking for quick fixes
is probably 1 big one. You know, a lot of people when

(23:42):
they're on their own, they mightfall for things like debt
consolidation or balance transfers or, you know, taking
out a home equity line of creditto, to consolidate debt.
And I know on the surface those things can look good and
appealing because it is reducingyour monthly cash flow, because
it's reducing your payment to goout, it's reducing your

(24:03):
interest, at least initially. And it can feel good because
it's like we, we've done something now we have extra
money every month. But the reality is, is people
like, and they'll even use this.I actually have some examples
that I use in some of my workshops that I do.
And marketers will actually sellthese products.
We'll say they'll use words likeyou just paid off all of your
credit cards using a consolidation loan.

(24:25):
Congratulations. But have you really paid
anything off? But when you're reading that, it
looks like I paid off all my credit cards.
No, all you've done was move from the name credit card over
to consolidation loan. You still have the debt, but it
can feel like progress, but it'sfalse progress.

(24:46):
So it it can, it can make you feel like you're doing
something, but you're actually not.
And then the reality is where a lot of people get bit by this is
not by the consolidation loan, but it's by them and their
behaviors and their habits that didn't really change that got
them into that debt to begin with.
So what tends to happen is they do a consolidation loan, they do
a balance transfer, those cards become clean or whatever they

(25:09):
cleaned up. Now all of a sudden it's a few
months later, things have been good.
And guess what, those habits come back and you start swiping
those cleared off cards again. And before you know it, you have
the original consolidation loan and now you're adding balances
to those new, those, those old cards again because they were
options, right? And I feel like that's, that's
an area where people really needto understand is like, there are

(25:31):
no elevators out of debt. There are no quick fixes.
There's no get out of debt overnight.
You didn't, you didn't get into debt overnight.
It's going to take you longer than overnight to get out.
So you really first want to focus on you like the behaviors,
the habits, the choices, the things that you have done to get
you to where you are and what can you do to begin changing

(25:51):
those things. Because once you do that,
everything now begins to change.Now, I might sound like a little
bit of a hypocrite. It's not to say the debt
consolidation and balance transfers can't work.
They can. They be, they can be a tool.
But first you have to address the real issue.
And for most people, not everybody, but for most people,
it is the money mindset, it is the behaviors, the habits and

(26:14):
choices that are causing the issue.
Focus on that first, and then you can see how some of those
types of tools can fit in later once you're addressing those
things. Mom, how can someone with an
irregular income effectively build and maintain an emergency
fund? So a regular income is

(26:35):
interesting. I, I love this one and I think
it's not that I, I think everyone should have a budget.
I think everyone should have a plan, But people who make a
regular income, man, I'm, I'm going to pick out you guys.
I'm one of them 'cause I run my own business too.
You know, you guys need a budgetand a plan more than anybody
because your income is up and down all the time, right?
So I think you're going to buildit the same as anybody else

(26:59):
would. I, I would say what a lot of
people struggle with their regular income is how do I plan
for my money and my expenses? Because I don't even know how
much money I'm going to make each month.
So my first piece of advice or suggestion would be to figure
out an average. You know, if you go back and you
look at how much, let's say the last year, I, I like a year

(27:19):
because you have the seasonalityof your income.
Most careers have some sort of, you know, peaks and valleys in
their year. So get an average throughout the
year and then, you know, base that average on the time of the
year. Like, you know, if it's really
slow in the month of January, you may not want to use the
average of the entire year. Bump it down a little bit,

(27:39):
right? And then as the income comes in
throughout the month, you can adjust the income and you're
spending based on the money that's coming in.
And then again, that budget is really going to be the
determination of how much money you're going to be able to put
into your emergency fund. Now, I do have one cool trick
that fixes all this takes time, but I like to practice.

(28:01):
What I like to call is the monthbehind system.
So what I do like for my business, and if you make a
regular income, it work for you too, is let's say like we're in
the month as we're recording this, we're in the month of
March. All right, So right now
everything that I've made in my business from March 1st all the
way through March 31st, I don't touch it.

(28:21):
I leave it in there and at the very last part of the month, I
closed my month, I figure out what were our expenses in the
business, what, what is everything I'm keeping in the
business as far as you know, money for future investing or
whatever we're going to do in the business.
And then how much am I going to pay myself because I work for a
living, right? I want to, I want to make a
living too. And being that the money's
there, I can say on April 1st, I'm going to pay myself X amount

(28:43):
of dollars. So that way when I do my April
budget, I know exactly how much money I have to use because it's
already there. So I always just work one month
behind. So the money I used to bill like
to, to budget in April is the money I made in March.
And again, the reason I do it this way is because it takes all
the guessing out of your finances because it's a known
number now. Right now the hard part for most

(29:05):
people is how do I start it? Because I need the money I'm
making in March right now. I can't wait a month, Brad.
So what I typically find is the best time is this time of year
is tax time where you're gettingmaybe a return of some sort or
if you get like again, a bonus or maybe you have a really good
month of your regular income, start putting a little extra
money in this fund that you could live on essentially for a

(29:28):
month to get this thing going. I've worked with so many small
business owners, especially likegig workers, direct sales
people, like I've worked with a lot of those types of people and
the people that can get this system going, it takes like so
much stress off of managing their business finances and
their personal finances. It just takes a little time and
planning to get it there. That's interesting, I never

(29:51):
heard that before. What did you call that?
The. It's called.
I call it the month behind system.
Month behind system OK. Because again, you're using the
previous month's income to budget for the current month
you're in. That's that's incredible.
OK. How do you address, and I guess
how do you address, how do you address the challenge of

(30:15):
unexpected expenses that depleteour emergency funds?
Well, I mean, you're going to and that happens because again,
if if you're going to, if you'restarting with 1000 to $3000,
especially in this day and age, doesn't take much to spend that
amount of money, right. That's why I suggest push to
that three, if we can get to that three, all the better.

(30:36):
But essentially what you would do is if, if for some reason you
had an emergency that depleted all of that money, you would go
back. So you cause at that point, once
you're, once you have your emergency fund built, like
you're using the debt snowball, you're attacking your debt,
you're paying it down, you're paying it down, you're paying it
down. Anything extra, you're throwing
at your debt. Well, if you have to use your
emergency fund and deplete all of that, you would go back to

(30:56):
just making minimum payments on everything.
And then you would put your mainfocus again and step #1 of
rebuilding your emergency fund. So it's, it's kind of like a
seesaw game. Obviously, the idea hopefully
is, is that we don't have to go too far to rebuilding our
emergency fund over and over again.
But I mean, I've had members that have had to do it six or
seven times. And but the beautiful thing is

(31:19):
they're not going into debt to cover those things.
They're not making their situation worse, right?
So they but, and eventually theydo get out.
Other members get a little bit lucky.
They don't have to rebuild it only but a few times.
But it, it just kind of depends on your particular situation.
As someone who has, you know, several kids, I have two kids
myself. My partner has three.
Like we're used to emergencies around here.

(31:40):
This is this is constant, right?So this emergency fund should be
about, you said 1000 to $3000. That's what we take.
Again, that's what we typically would recommend for the average
person. And again, everyone's situation
is different. So if you're someone who you
know, feels like, you know, yoursituation is a little bit more

(32:01):
unpredictable, maybe you are someone who has a regular
income, like we just talked about, you'd like to have a
little bit more money in savingsjust in case.
In that sense, it, it might makesense to build it a little bit
bigger. But Mia, the goal is to get
people to get paid off their debt as fast as possible.
Like we, we don't want you staying in debt.
We don't want you strolling yourway through this.

(32:22):
We want you to get really intense, really focused and you
get it paid off as fast as possible.
Because when you're, when you'rein debt, you are being penalized
and it's called interest, right?You're being penalized and
they're making money off of you not having a plan, right?
And we want to get you to the point where interest can be the
benefit, which is when you get to invest, which is when you get

(32:43):
to put money in the market and, and actually begin to plan your
future or put it into a businessthat you're going to open that's
going to create income, right? But until you can loosen up that
cash flow, none of that can happen.
So, you know, we, we really wantto make a good plan of like, we
want to get this done and have the mentality of urgency.
What can we do right now to get this done?
Short term sacrifices. Let's work hard and then we get

(33:06):
to live the rest of our life with very little debt or no debt
at all and be able to have a lotof our different opportunities.
So should people do a little bitof both?
Should I know we should remove the debt, but should they put a
little on the side as well or should they just focus on debt
1st and then the emergency fund?Yeah, I mean, I think this is
more of like it's kind of a choose your own adventure.

(33:27):
You know, I, I would say we, we have some people that, that will
do that. They feel comfortable.
They like the idea of, I want toput 50 to 100 bucks in my
emergency fund every month alongwith paying down debt.
There's absolutely nothing wrongwith that.
I mean, those are great things. I would much rather you do that
than say spend an extra 100 bucks going out to eat and not
wondering where your money's going, right.
So there's, there's definitely not nothing wrong with that.
Same thing with where we'll havepeople ask questions of should I

(33:49):
continue to invest well, say building my emergency fund or
paying down debt, or I get a match at my employer because
they match a little bit of money.
Every situation is different. In some cases it makes sense to
keep doing that. And in others it might make
sense to pause that and say I need to heavily focus on getting
my my foundation built. And once that's done, then I can

(34:10):
consider turning that back on a little bit.
But when it comes to investing and those sorts of things, like
if, if you're in a situation where you have like a lot of
credit card debt, like you thinkabout the interest you're paying
on that credit card debt that's revolving every single month.
And then if you think if you getto pay that back and pay that
off, all of that interest that you were paying is now money
back in your pocket, that's guaranteed money back in your

(34:32):
pocket. You're no longer paying.
There's no guarantee you'll everget a guarantee in the, in the
stock market. It's not going to come right.
They'll give you based on average returns.
This is what you can expect to get.
But you know, if you have a credit card that's got 29%
interest and you're paying 29% interest on revolving debt every
single month, you know, I'm getting that 29% back in my
pocket every single month as soon as that thing gets down to

(34:53):
0, right? So that's the way you want to be
looking at get out of especiallyhigh interest debt before you
start considering like major investing and things.
Makes sense. Can you share any success
stories where someone's life changed after getting out of
debt and started to build their savings?
I mean, I, I hate, I hate to patus on the back.

(35:16):
We've so many. I'm going to pick on page
though, 'cause I just literally interviewed her on my podcast
right before I jumped on with you.
And Paige Snyder is a single lady and she started working
with me 18 months ago. And she, she had mentioned she's
like, I, I tried everything. I tried working extra hours, I
tried cutting out expenses, I tried, I tried budgeting a
little bit, but she's like, nothing ever seemed to work.

(35:37):
I always would just kind of slipback to my old ways and, and it
wouldn't seem like no matter howmuch money I would make, that
was just never enough to do whatI wanted to do.
So she ended up joining our, ourmembership site roots and I
started working with her and shestarted coming to our, our group
coaching calls that we do. And she started working the plan
and, and admittedly she says in the 1st 90 days, it was tough.
And she, we even had a coaching call, one-on-one call with her.

(35:59):
And she's like, I don't know if I can do this.
And I said, Paige, you got to understand, just like we, we
just talked about, you didn't get here overnight.
You got to give this some time to work.
It's, there's no quick fixes. Just keep putting on the work
and eventually that negative momentum that you're now feeling
will turn to positive. But it's got to start with one
little step at a time. And in her first nine months,

(36:21):
she paid off thousands of dollars.
And I had her on her podcast. This is about a year ago.
And she's like, I can't believe this.
She's like, I'm so excited. Like this is, this is
incredible. Like I feel so much different,
so much better. I have less stress.
But she also knew she's like, I got a long way to go and there's
still some things that I need tofix.
So I brought her back because now she's near up to $25,000
paid off again on a single income in the last 18 to 20

(36:44):
months. And, and she says like I, she
and she actually said she's likemy mom and my grandma said I was
crazy for wanting to do this. They were like, you're going to
waste your money. It's not going to work.
And she's like, now they've comeback to me and apologize and
they can't believe the difference that it's made in my
life. And, and she's like, it's, it's
been unbelievable what she's been able to do.

(37:06):
And, and even still, you know, she says there's still some
things that I need to figure outand I need to work on because it
is a journey. It's not something that you
know, your path is not going to be linear.
It's going to have some ups and downs and even she's experienced
those things. But it was just great to talk to
her because talking to her 90 days in and seeing where she is
today, like she just looks completely different.

(37:27):
Voice sounds different. She's excited, she's hopeful,
like like she's she's loving it.I mean, how cool, how cool is
that? You know and.
Yeah, you said $25,000. She did.
In how long? In 18 to 20 months.
That's amazing. That really is is what is the
average time that it takes to bring down a a debt, something

(37:49):
kind of big like that? Yeah, I mean, everyone's a
little bit different. I mean, man, I've had, I mean
I've had members pay off 80 grand in 12 months, people who
thought I was never going to be able to get there.
I've had, I mean, we've and we have people from all different
walks of life. We have some, you know, pretty
high income earners that'll comethrough that are making some
really great money. But just because they're making

(38:10):
great money doesn't mean they know how to manage it well
either, right? So they have a nice might may
have a nice wrapper, right? They have a much nicer outside
wrapper looks good. But on deep inside it's about
the same as everybody else, right?
But we've had those people pay off hundreds of thousands of
dollars in debt. But then, you know, I have, you
know, again, like single people that'll come through and they're
on different, you know, they allhave different resources and

(38:32):
means of what they're able to do.
And, and some people, you know, within six months are, are
paying off 5 grand. You know, it just, it just kind
of depends on everyone's particular situation.
And it also depends on what people are willing to do.
You know, like a single person has unlimited time.
They can work probably as many hours as they want.
They have no one depending on them.
They don't have any kids. Like their ability to go out and

(38:55):
make money is virtually endless outside of needing sleep, right?
Or as opposed to if you talk to a single person who's got kids,
different situation, right? But that does not mean it's
impossible. It just means that you have to
look at things based on your situation and what you're
willing to do. And if you're willing to do that
and get, get outside and, and think outside the box, man, the

(39:15):
options are limitless, especially in this day and age,
you know, with phones and Internet, I mean, there's so
many different ways that you cannow make money just from home
and, and, and honestly, really good ways of doing it too.
And so the options are out there.
So I get everyone's situation isdifferent.
So it's hard to put a number on what's the average just because
everyone's in a different place when they get started.

(39:37):
OK, I see. And you offer classes on this.
Yeah, So how we work is we, we typically recommend people go
through our free workshops that we have.
So we have a budgeting workshop.It's actually free.
We give you a budget, we show you how to do it, how to get
your first dump one done. What are the steps to getting
this success successfully done? That's free.
You can go on our website. It's right on our website.

(39:59):
We also have a a workshop calledLife Without Payments and that's
more of a. A general overview of like, hey
Brad, I'm ready to get out of debt.
Like I'm tired of living this way.
I just don't know the steps likeshow me what I need to do.
And that workshop will walk you through step by step, the things
that you need to do, the things that you need to focus on.
And in that live without payments workshop, we actually

(40:20):
give you the debt snowball worksheet with all the
directions and everything to geteverything started.
So, so we give you a lot of great free resources to get
started. But where a lot of people are
missing in their journey of getting out of debt isn't that
they don't know what to do because the information is out
there like it's, it is out there.
It's it's personal finance education is ultimately a lot of
it's free, it's already there. What a lot of people lack is

(40:41):
really this ongoing support and accountability to keep doing it.
And that's where we offer our accountability member or our,
our accountability and support system called Roots.
And so inside Roots, not only dowe give them 9 modules full of
education on everything personalfinance related, but we also
give them group coaching calls. We give them access to our debt

(41:03):
free dad app, which has our community in it of hundreds of
other members. We do monthly challenges with
our members to look at their spending like no spend
challenges and gratitude challenges and really producing
and, and helping them fine tune a more positive money mindset.
And then we like to give out prizes and have fun.
And it's just a great group of people.

(41:24):
And it's cool because you know, again, in this, in this day,
especially in today's society, you know, a lot of people do
live paycheck to paycheck. And not that everyone wants to
do that, but there are somebody who are OK, there are some
people who are OK with that spend, spend, spend.
We are consumer society. So sometimes it's, it's, it's
easy get sucked into that mentality, right?

(41:44):
Because it's always surrounding us.
And when you have a community ofpeople who are like, we want
different, it's pretty cool to be able to come there, be able
to celebrate, be able to ask questions, get support when you
need it, especially when times are going tough.
And that's what people come backto and say is that makes the
biggest difference is it's not just what you've taught us, but
it's all these other people who are doing this that have really

(42:06):
encouraged me to keep going and and showing me what's actually
possible. Wow.
But this has been an insightful conversation offering practical
strategies for managing debt andbuilding financial security.
But before we wrap up, Brad, could you tell our listeners a
little bit about your podcast, The Debt Free Dad and where they

(42:29):
can TuneIn? And also what's the best way for
them to connect to you if they want to learn more?
Yeah, absolutely. Which I I greatly appreciate it.
So yeah, I mean, if you love today's conversation and you
want to learn more, I would highly recommend at least
getting started with the podcast.
We are right now are currently releasing 2 new episodes every
single week. And those episodes go through

(42:49):
all of the basics of personal finance and it's geared to those
people who are living paycheck to paycheck and they just want
to live a different life. We are on our fifth year.
We have, I think right now, I think we're at like 330 total
episodes, episodes that we, thatwe've released.
I can't believe it's been that long.
But the other cool part about our podcast though, is that we
have 5 hosts on it, which peoplemight say, like that's a lot.

(43:12):
Well, we have people from all different walks of life.
Like I have Katie on who's a single person, cause a lot of
people say, well, I'm single. It's impossible for me to get
out of debt. Well, Katie started her journey
making 13 bucks an hour and in six years she's paid off nearly
$200,000. And so she's doing it on her
own. And so she's on there to share
her perspective because my perspective in a household where

(43:34):
I'm sharing expenses with somebody is way different,
right? Or I have Chris, who's now
retired. He used to be a a finance high
school teacher and he taught kids how to be debt free, how to
live debt free. And now he owns 'cause he
retired, he decided to open up his own ice cream shop as a
retirement plan. And that's what he does.
But now he gets to share his perspective of I'm retired.
I've been doing this for years. Here's how it's affected me.

(43:56):
I have my brother Ron, who was the biggest doubter of all of
this. Like you'll never get out of
debt. Brad, you're crazy for wanting
to do this. He saw me do it and he's like,
now I'm going to do it. And now he's been debt free and
now he works for our company andhelping us grow it.
So it's crazy. And then we have Amber who's
from Canada, completely different country, they deal
with a lot of the same types of issues too.

(44:17):
And so it's just a really cool dynamic of having all these
people in there having their perspectives.
Cause again, not one idea is theright idea.
It's, it's, it's all these people talking together and just
sharing like what's worked for them.
Because we're a lot of us are dealing with a lot of the same
types of stress, but we're all dealing with it in a little bit
of a different way. So it's just a cool way to to
kind of learn more about money and our perspective.

(44:38):
And again, the cool part is we're all normal people.
None of us are fancy. None of us are major influencers
in that way, you know, just justnormal people doing doing normal
stuff. So it's really cool.
And then if you want to go to our website, debtfreedad.com,
that's where you can get access to all of our workshops to get
started with. We got a bunch of free guides on
there. We've got our weekly newsletter
that goes out every single Sunday if you're interested in

(44:59):
reading some of that stuff. So I mean, we got so much stuff
you get started with. I think the key is just get
started. Just get started somewhere with
something and the little steps that you'll take, you'll be
thankful you do in a year from now when you look back and see
how far you've come. That's amazing and I love it.
I love it. So, Brad, thank you again so
much for joining us today. This has been an incredible

(45:21):
conversation and I know my listeners will walk away with
valuable insights and something that they can apply right now.
So I appreciate your time and your knowledge and everything
that you shared with us. And I'm really looking forward
for you to come back in the future.
Yeah, absolutely. I would love to thank you so
much for having me. I appreciate it.
Yes, thank you, Brad. And that brings us to an end of

(45:42):
another episode. I want to thank my special
guest, Brad Nelson for joining us today and sharing his
expertise on getting out of debtand building financial security.
If you've enjoyed this episode, don't forget to follow, share
and subscribe to the show. If you found value in today's
conversation, leave a positive review.

(46:05):
It really helps us to reach morepeople and to grow our ohana.
Until the next time guys, stay aware, stay curious and most
importantly, stay financially secure.
Until the next time, take care of Hui ho kako.
Bye. Trying to keep my hair everyday.

(46:46):
Everybody has something to say. I'll just keep on dancing 'cause
you never get the time there. Grabbing your attention with a
smile. It's going to be the best day of

(47:10):
your life, 'cause I yeah, yeah. Looking at the sunshine feeling

(47:34):
like a gold mine. I know we'll be all right.
Getting all the good vibes, Sleeping on the inside.
Going to have a good time. Looking at the sunshine.
Feeling like a gold mine. I know we'll be all right.
Getting on a good ride, Singing on the inside.
Gonna have a good time 'cause I love, I love it.
Yeah, yeah, yeah 'cause I Oh yeah, yeah, yeah.

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Episode 127. How to Get Out of Debt and Build an Emergency Fund | Brad Nelson

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Episode 127. How to Get Out of Debt and Build an Emergency Fund | Brad Nelson