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Consolidating Debt & Refinancing · She's On The Money

0:00
Speaker 1: She's on the Money. She's on the Money.
0:22
Speaker 2: Hello, and welcome to She's on the Money, the podcast
0:26
Speaker 2: for millennials who want financial freedom debt consolidation? What is it?
0:30
Speaker 2: How do we do it? And is it the right
0:32
Speaker 2: option for us? While it can seem like a really
0:34
Speaker 2: great option for some people, there are a few traps
0:37
Speaker 2: we need to be aware of to avoid ending up
0:39
Speaker 2: in a worse financial position than where we began, and
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Speaker 2: today we're unpacking them all. My name is Georgia King,
0:46
Speaker 2: and joining me today to get to the very bottom
0:47
Speaker 2: of it all is award winning financial advisor Victoria Define
0:51
Speaker 2: the Let's start with the basics. What is debt consolidation, Georgia,
0:57
Speaker 2: Debt consolidation a fickle thing, and if you can considering it,
1:00
Speaker 2: you might be in a little bit of a pickle.
1:02
Speaker 2: Hey that rhymed, I'm a poet. Didn't know it. That
1:05
Speaker 2: was good.
1:06
Speaker 3: That wasn't good. That wasn't even scripted. In fact, if
1:08
Speaker 3: it was backspaced real quick. But debt consolidation is essentially
1:14
Speaker 3: just a way to roll a whole heap of types
1:16
Speaker 3: of debts into one debt, which can be a whole
1:19
Speaker 3: heap less overwhelming. The idea is to try and achieve
1:22
Speaker 3: a lower interest rate and lower monthly payments so that
1:25
Speaker 3: you can get on top of the debt instead of
1:27
Speaker 3: feeling like it completely gets away from you. Essentially, the
1:30
Speaker 3: idea is to try and achieve a lower interest rate
1:33
Speaker 3: as well as lower monthly repayments so that you can
1:35
Speaker 3: get on top of the debt, stop being overwhelmed, stop
1:38
Speaker 3: having a whole heap of debts coming out. It just
1:40
Speaker 3: makes your life a whole heap easier, especially if you
1:43
Speaker 3: have found yourself in a little bit of a pickle.
1:46
Speaker 2: And do we go to like a bank and say hello, sir,
1:50
Speaker 2: like I would like a big new debt and then
1:53
Speaker 2: can you put the other ones in?
1:54
Speaker 1: There?
1:55
Speaker 2: Is that how it works? You feeling that's actually how
1:57
Speaker 2: it works? But there are a couple of reasons you
2:00
Speaker 2: might consolidate your debt, So let's start there, not with
2:02
Speaker 2: just asking for it. But it's really.
2:04
Speaker 3: Important to understand exactly what debt consolidation is, how it works,
2:08
Speaker 3: and what's going on with it, and why you might
2:11
Speaker 3: want it, because a few people in our community historically
2:14
Speaker 3: have said, oh my gosh, like I have a few
2:16
Speaker 3: credit cards, so what I'm going to do is apply
2:18
Speaker 3: for an interest free credit card and then I'm going
2:20
Speaker 3: to roll my other credit cards into that, which is possible,
2:23
Speaker 3: but there's a really big trap there because the only
2:26
Speaker 3: reason I'd be like, yeah, gee, like that sounds like
2:28
Speaker 3: a good idea is if you genuinely knew you could
2:31
Speaker 3: pay that debt off within the interest free period of time.
2:34
Speaker 3: So say they say, hey, it's interest free for six months,
2:37
Speaker 3: and you go, great, no problems. But you've got a
2:40
Speaker 3: ten thousand dollars credit card that you need to pay out.
2:43
Speaker 3: Are you actually going to be able to pay that out?
2:46
Speaker 3: Or are you going to put yourself in a sticky
2:47
Speaker 3: situation where you consolidate your debt into this one interest
2:50
Speaker 3: free credit card and then it stings you with a
2:53
Speaker 3: higher interest rate after that six month introductory period. So
2:56
Speaker 3: we need to be really smart about the decisions we're
2:59
Speaker 3: making because in the short term, you ain't go, oh
3:01
Speaker 3: my gosh, this is going to make me feel so
3:03
Speaker 3: much better, but long term, it's a really bad financial decision.
3:07
Speaker 3: So keeping in mind your goals for debt consolidation, so essentially,
3:10
Speaker 3: debt consolidation is picking up a whole heap of debts
3:13
Speaker 3: that you have and transferring them into one individual debt
3:17
Speaker 3: with one single facility, so that you can potentially make
3:21
Speaker 3: it a whole heap more manageable. The sticker here, though, Georgia,
3:25
Speaker 3: is that it's not actually available to everybody. So sometimes
3:28
Speaker 3: if your debt is one of those things that is
3:32
Speaker 3: overwhelming and something that is really hard to deal with,
3:34
Speaker 3: and you've tried to go through debt consolidation before and
3:37
Speaker 3: they've said no, you're actually too risky for us to
3:40
Speaker 3: want to do that, the next best step I genuinely
3:43
Speaker 3: would consider is calling our friends at the National Debt
3:46
Speaker 3: Helpline because they know exactly what next steps to take,
3:49
Speaker 3: and unfortunately they're not always the same. They change dependent
3:53
Speaker 3: on situation, and they'll be able to help sort you
3:55
Speaker 3: out there. But essentially, if you're considering debt consolidation, it's
3:58
Speaker 3: usually because you have a few different debts. You might
4:01
Speaker 3: be overwhelmed, or you might just be on top of
4:04
Speaker 3: them and just want one easy repayment as opposed to
4:07
Speaker 3: having your car loan coming out having a credit card
4:09
Speaker 3: than your partner having a credit card, And like, maybe
4:11
Speaker 3: you have a small personal loan that you're paying back,
4:13
Speaker 3: maybe it's just easier so debt consolidation is definitely something
4:17
Speaker 3: to have a think about and work out if it
4:19
Speaker 3: works for you in your personal situation. Okay, so there's
4:23
Speaker 3: pitfalls to be mindful of, but we will get to
4:25
Speaker 3: them a little later on in the show. So how
4:28
Speaker 3: does it work though? Do we call up our financial advisor,
4:31
Speaker 3: do we take a trip to the bank. How are
4:33
Speaker 3: we actually consolidating these debts?
4:35
Speaker 2: So the first thing is to think what type of
4:37
Speaker 2: facility you would like to achieve, So you don't necessarily
4:40
Speaker 2: have to call your bank. You could call a bro
4:42
Speaker 2: car or someone who can do that for you. To
4:45
Speaker 2: be honest, the best step would be researching and I
4:47
Speaker 2: know I don't want to say it on the podcast,
4:49
Speaker 2: just google it, but literally google debt consolidation and see
4:52
Speaker 2: what types of options are available because they could be
4:55
Speaker 2: one available at your bank. So say you've got a
4:58
Speaker 2: personal loan and a car loan and your credit card
5:01
Speaker 2: with NAB, maybe you want to just go straight to
5:03
Speaker 2: NAB and say, hey, could we consolidate these together? What
5:06
Speaker 2: can you do? It's completely up to you.
5:08
Speaker 3: And your situation, but there are also people out there
5:11
Speaker 3: that are going to be able to help you consolidate
5:14
Speaker 3: debt and put you in a better financial position. So
5:16
Speaker 3: do we need to worry about our credit score within
5:19
Speaker 3: that process?
5:20
Speaker 2: But do we need to check that out before? Yes, sir,
5:22
Speaker 2: very important. So you need to make sure that you're
5:25
Speaker 2: eligible for a debt consolidation. As I said before, there
5:28
Speaker 2: are some people that actually just aren't eligible for debt consolidation.
5:32
Speaker 2: It might be because you currently don't have an income
5:35
Speaker 2: and when you got the loan you did and they're
5:36
Speaker 2: not willing to service that because they're deemed too risky.
5:39
Speaker 2: So the first thing I would say, obviously look into
5:42
Speaker 2: what debt consolidation is. Understand it, listen to this podcast,
5:45
Speaker 2: you genius, and then go get your credit history. So
5:49
Speaker 2: jump on and get a free credit report. As you
5:52
Speaker 2: guys know, there's Equifax, there's Experience, there's Ilion and then
5:55
Speaker 2: you know, you remember from last season we worked with
5:57
Speaker 2: our friends at Wiser. They provide free credit score checks,
6:01
Speaker 2: which is really important. And once you understand your.
6:04
Speaker 3: Current position, then it would be all about working out
6:07
Speaker 3: which lender would work best for your personal situation. So
6:10
Speaker 3: a broker might be best position to assist you with
6:13
Speaker 3: that because they can pad out the story that you're
6:16
Speaker 3: going to the bank with because in a lot of situations,
6:19
Speaker 3: the bank's going to want to know why you want to.
6:21
Speaker 2: Consolidate that debt.
6:22
Speaker 3: So when it comes to debt consolidation, they're going to
6:24
Speaker 3: want to know your motivation behind actually applying for that,
6:27
Speaker 3: not just saying, oh, can I have.
6:29
Speaker 2: A debt consolidation? Have three debts?
6:30
Speaker 3: They're going to go why, and you'll say, oh, well,
6:32
Speaker 3: actually it makes it more reasonable so that I can
6:34
Speaker 3: save more, or so that I can make it easier
6:37
Speaker 3: or more manageable. So they're going to want to know
6:39
Speaker 3: your motivations as well, because if your motivations weren't as
6:43
Speaker 3: pure as most peoples, they're going to say no. So
6:45
Speaker 3: I think it's really important to understand your eligibility, get
6:49
Speaker 3: your credit score, and make sure that you're somebody that
6:51
Speaker 3: a bank might lend to before considering that. And as
6:54
Speaker 3: I said, if all else fails, our friends at the
6:57
Speaker 3: National Debt Helpline will help you with this. Again, never sponsored,
7:01
Speaker 3: They're just good eggs doing good things, putting you guys
7:03
Speaker 3: in better financial positions, which ge we love.
7:06
Speaker 2: That's what we're all about. So would you say, is
7:09
Speaker 2: there a difference between going directly to a bank and
7:12
Speaker 2: going through a broker in terms of who has our
7:15
Speaker 2: who has our best interests at heart? Like, will the
7:18
Speaker 2: banks be more likely to kind of rip us off?
7:21
Speaker 2: So you're always going to be the one that has
7:23
Speaker 2: your best interests at heart. I don't think in this
7:26
Speaker 2: situation a bank is necessarily going to rip you off.
7:29
Speaker 2: But if you're going to take the time to consolidate
7:31
Speaker 2: a debt, i'd want to be talking to a broker
7:34
Speaker 2: because talking to a broker means you're going to have
7:37
Speaker 2: access to a whole heap more options than just the
7:40
Speaker 2: options that one bank has access to. I think you
7:43
Speaker 2: also need to look at your motivations, right So if
7:46
Speaker 2: you're just like, oh, yeah, I'll just refinance that because
7:49
Speaker 2: you're being financially irresponsible, I want you to go deeper.
7:53
Speaker 3: I want you to care about your budget. I want
7:55
Speaker 3: you to care about your cash flow. If you have
7:57
Speaker 3: a whole heap of different debts with various lenders and
8:00
Speaker 3: you can actually manage all of those, it's just you
8:02
Speaker 3: being a bit unorganized. I would argue that if you
8:05
Speaker 3: have a couple of really low interest credit cards, consolidating
8:08
Speaker 3: it just to make it an easier payment might not
8:11
Speaker 3: be best for you. You actually just need to use the
8:13
Speaker 3: snowball method or the avalanche method to actually smash down
8:17
Speaker 3: those debts and put yourself in a better financial position.
8:20
Speaker 3: The other thing I'd really want you to look at
8:23
Speaker 3: is why are you in this debt in the first place,
8:26
Speaker 3: and is consolidating it and taking that pressure off actually
8:29
Speaker 3: going to put you in a position where you get
8:31
Speaker 3: into debt again or are you going to consolidate it
8:34
Speaker 3: because you're like, Nope, final straw, I'm not going to
8:36
Speaker 3: get myself into any debt.
8:37
Speaker 2: This makes it.
8:38
Speaker 3: Easy so that I have a lower monthly repayment so
8:40
Speaker 3: that I can save and create financial freedom for myself.
8:43
Speaker 3: So I want to know exactly why you want that, Georgia,
8:46
Speaker 3: not necessarily is it a good idea or not? Like
8:49
Speaker 3: are you putting yourself in a better financial position by
8:51
Speaker 3: doing it?
8:51
Speaker 2: Yes or no? And also how are you going to
8:54
Speaker 2: plan to not do it again? Okay, you said that
8:59
Speaker 2: that it's refinancing. Is debt consolidation refinancing it they're the
9:03
Speaker 2: same thing.
9:03
Speaker 3: Essentially, you're refinancing a loan, so in the same way
9:06
Speaker 3: that you might have a home loan and a couple
9:08
Speaker 3: of years after you established that loan, you might go, oh,
9:10
Speaker 3: there's a better, more sexy option out there, I want that,
9:13
Speaker 3: and you go back to your broker. You are actually
9:15
Speaker 3: refinancing a debt. So what would happen is, let's say
9:19
Speaker 3: bank A has said, yup, gee, I'm going to consolidate
9:22
Speaker 3: your debt. I'm going to do that for twenty like,
9:25
Speaker 3: you'll get a twenty thousand dollar loan. We would then
9:27
Speaker 3: use that money to pay off your credit cards and
9:30
Speaker 3: pay off all of your other debts, so you then
9:32
Speaker 3: only have one debt remaining, so it kind of all
9:35
Speaker 3: gets rolled into one place. They're not extinguishing it for you.
9:38
Speaker 3: We're not talking our way out of any debts. We
9:40
Speaker 3: are actually just putting ourselves in a position where we
9:44
Speaker 3: have just one repayment instead of many. Talking about that
9:48
Speaker 3: for a hot second, though, if you're in a credit
9:51
Speaker 3: card pickle, or you are in a situation where you've
9:55
Speaker 3: got a personal loan that you are struggling to repay debt,
9:59
Speaker 3: consolidation is a really great way to negotiate. So I
10:03
Speaker 3: know that this is a little bit left field and
10:05
Speaker 3: a bit off center, but important to know still, if
10:08
Speaker 3: you're going to consolidate a debt or you are going
10:10
Speaker 3: to pay it out, or for some reason you have
10:12
Speaker 3: a whole heap of savings you just haven't paid that
10:14
Speaker 3: debt out. Then is a really good time to pick
10:17
Speaker 3: up the phone and say, hey, can't afford it, can't
10:20
Speaker 3: pay back that loan. The bank are going to go,
10:23
Speaker 3: oh my gosh, like we want to recover whatever's possible.
10:26
Speaker 3: So you say, can we come to a different settlement.
10:29
Speaker 3: So so you have a twenty thousand dollars personal loan
10:31
Speaker 3: and you go, guys, I'm really struggling to pay this back.
10:34
Speaker 3: Can we come to a settlement number? Like what would
10:37
Speaker 3: you take today if I just paid that loan out
10:40
Speaker 3: in full instead of me going back and forth and
10:43
Speaker 3: like maybe missing payments, Like what is the best you
10:45
Speaker 3: can do? And in some situations they are able to
10:49
Speaker 3: actually cut that loan down, so instead of you paying
10:52
Speaker 3: that twenty thousand dollars back, they might say, gee, all right,
10:55
Speaker 3: if you pay today, it's fifteen grand, which is a
10:58
Speaker 3: very great option. And if you don't ask, you don't
11:01
Speaker 3: get I don't think there's any shame in calling up
11:03
Speaker 3: and being like, well, what could we negotiate out of that?
11:06
Speaker 3: Like if I've got the cash sitting there, or if
11:08
Speaker 3: I have access to be able to pay you out today,
11:11
Speaker 3: what would that look like. How can I get out
11:13
Speaker 3: of this debt and save some money at the same time.
11:15
Speaker 3: Kind of feels like a no brainer to me.
11:17
Speaker 2: No, that's smart. Okay, So back to debt consolidation, the consolidation,
11:23
Speaker 2: What are your thoughts on it? As a financial advisor?
11:25
Speaker 2: Is this something that you are recommending to your clients frequently? Absolutely,
11:29
Speaker 2: It depends on what the situation is like. If you
11:32
Speaker 2: came to me and we do our fact find process
11:34
Speaker 2: g and then we find out that you've got a
11:36
Speaker 2: whole heap of credit cards with really high interest rates
11:39
Speaker 2: and you're actually a good little saver, but you know,
11:42
Speaker 2: you've just got these credit cards. Debt consolidation could be
11:45
Speaker 2: a really powerful tool for you because you're a good
11:46
Speaker 2: person to lend to.
11:48
Speaker 3: It just because you have debt doesn't actually make you
11:51
Speaker 3: a bad person to lend to, which I think is
11:53
Speaker 3: a really common misconception when they say you're a bad
11:56
Speaker 3: person to lend to. And I mean, that's probably not
11:58
Speaker 3: the right language, but we're going to go with it, guys,
12:00
Speaker 3: because that's how we would talk about it, just you
12:02
Speaker 3: and me.
12:03
Speaker 2: Yep.
12:03
Speaker 3: But it doesn't make you a bad person. It actually
12:06
Speaker 3: just means are you somebody who pays back your credit
12:09
Speaker 3: on time? So say, GEU went and got a credit card,
12:12
Speaker 3: and your friend went and got a credit card at
12:14
Speaker 3: exactly the same time, and you paid yours off consistently
12:18
Speaker 3: every single month with absolutely no bumps in the road.
12:21
Speaker 3: You always paid your fees, there was never any question.
12:23
Speaker 3: But your friend did the same thing, but just missed
12:25
Speaker 3: payments here and there and kind of was like, oh whatever,
12:28
Speaker 3: Like I just won't pay it this month, I'll just
12:30
Speaker 3: pay it next month, or got a couple of additional
12:33
Speaker 3: late fees and stuff like that that shows up on
12:36
Speaker 3: your credit report. So just having a credit card or
12:38
Speaker 3: not doesn't necessarily make you a bad person to lend to.
12:42
Speaker 3: It actually puts you in a position where they go,
12:44
Speaker 3: all right, so she took on that responsibility. Could she
12:47
Speaker 3: handle it in your situation, Georgia, and I gave you
12:50
Speaker 3: the good outcome here, just Jeph, you're responsible goal pow.
12:55
Speaker 3: But in your situation they might look at that and go, oh,
12:58
Speaker 3: she always paid it back, no, no problems at all.
13:00
Speaker 3: She's a responsible goalpal. She's a responsible girl, whereas your friend,
13:05
Speaker 3: even with exactly the same credit card, just by missing
13:08
Speaker 3: a few payments and maybe not being as responsible, that
13:11
Speaker 3: would put her in a position where a bank might say, nap,
13:14
Speaker 3: you can't be held responsible or something like this because
13:17
Speaker 3: you haven't been able to prove it historically. So it's
13:20
Speaker 3: not necessarily just having debt. It's actually how you deal
13:24
Speaker 3: with it. And that's why I jump down people's throats,
13:27
Speaker 3: and I don't mean to. I'm not aggressive in real life.
13:29
Speaker 3: Last Georgia, I'm five to two, Like.
13:30
Speaker 2: I'm really not that scary if you're not able to
13:33
Speaker 2: make a repayment on something and you're like, look, you
13:35
Speaker 2: know a lot of people have gone through this recently
13:37
Speaker 2: where financially the pandemics hit us really hard. Instead of
13:41
Speaker 2: burying your head in the sand, call your electricity company,
13:44
Speaker 2: call the credit card people. Have the payments deferred, instead
13:48
Speaker 2: of having a instead of having a default on your
13:51
Speaker 2: credit report, Like you can protect your credit score just
13:54
Speaker 2: by being open and honest and truthful and calling them
13:58
Speaker 2: and saying, hey, gee, it's so worry you know how
14:00
Speaker 2: I owe you fifty bucks, I'm not able to pay
14:03
Speaker 2: that this month?
14:03
Speaker 3: Is there anything that we can do? And more often
14:06
Speaker 3: than not, they'll say, okay, no problems. What if we
14:08
Speaker 3: just pushed it out by fifteen days, would that be
14:10
Speaker 3: all right? And you go, oh yeah, actually I get
14:12
Speaker 3: paid next Friday, like I could pay it then, and
14:15
Speaker 3: they go, great, no problems. We'll push it out for free,
14:17
Speaker 3: no fees associated with that, no defaults on your account, nothing,
14:21
Speaker 3: we don't have to chase you up. And you're putting
14:23
Speaker 3: your future self in a better financial position, even though
14:26
Speaker 3: you can't afford it today. So it's all about and
14:29
Speaker 3: I feel like a broken record not putting your head
14:32
Speaker 3: in the sand when it comes to debt or payments
14:34
Speaker 3: that you owe. But I guess back to debt consolidation.
14:38
Speaker 3: I have recommended it to some clients. I've even helped
14:41
Speaker 3: some of my clients facilitate that happening with their brokers.
14:45
Speaker 3: But I also have had to have some fickle conversations
14:48
Speaker 3: with clients, sat them down and said, actually, gee, you
14:51
Speaker 3: and I both know you can pay this off, so
14:53
Speaker 3: pull your finger out and get it done, Like, stop
14:55
Speaker 3: trying to rely on a different solution instead of just
14:59
Speaker 3: buckling down and paying off the debt. So I as
15:02
Speaker 3: a financial advisor. I'd like to think I'm a good advisor,
15:05
Speaker 3: but I'm definitely not going to always be like, oh,
15:08
Speaker 3: let's do the easiest option, or let's do the option
15:10
Speaker 3: that makes you feel the most comfortable, because sometimes to
15:13
Speaker 3: put ourselves in a better financial position, we have to
15:16
Speaker 3: be a little bit uncomfortable.
15:19
Speaker 2: All Right, before we head into the break V, we've
15:21
Speaker 2: obviously just been chatting about credit scores. Does debt consolidation
15:26
Speaker 2: impact your credit score?
15:28
Speaker 3: Yes, potentially, because you're taking on a new debt. Again,
15:31
Speaker 3: it's all about how debt consolidation is going to be
15:34
Speaker 3: dealt with. Are you actually able to meet that fee?
15:37
Speaker 3: Like what did it look like before? And that's something
15:39
Speaker 3: that you can talk through with a broker and work
15:41
Speaker 3: out what that means. But essentially, I would assume the
15:44
Speaker 3: reason you're consolidating a debt is to be more responsible
15:48
Speaker 3: and pay potentially more awful lower your rate of interest
15:51
Speaker 3: that you're paying on that, which from my perspective is
15:54
Speaker 3: a step in the right direction. Yes, so long term
15:56
Speaker 3: it will have good impacts on Yeah, because we're.
15:59
Speaker 2: Trying to get out of debt right, moneywin the perfect
16:02
Speaker 2: place to head to the break I think VD, But
16:04
Speaker 2: after the break, we will be chatting through the pros
16:06
Speaker 2: and cons of debt consolidation, and we'll be chatting through
16:10
Speaker 2: some alternatives if it's maybe not the right option for you.
16:12
Speaker 3: Spoiler, you can consolidate your debt con you still have
16:17
Speaker 3: the debt, so you're after the break.
16:18
Speaker 1: Well wrapped.
16:24
Speaker 2: All right now into the rest of the show. What
16:28
Speaker 2: would you say are the main benefits of debt consolidation.
16:31
Speaker 3: I would say that there are a few, and the
16:34
Speaker 3: number one benefit I believe would be the feeling of
16:37
Speaker 3: being more in control and that piece where you feel
16:41
Speaker 3: a lot more liberated and less constricted, and with a
16:44
Speaker 3: plan for your finances moving forward and a clear idea
16:47
Speaker 3: of when you're going to be out of debt is
16:49
Speaker 3: really empowering. Often with credit cards, even if you can
16:52
Speaker 3: quote afford the minimum repayment, that's really stretched out, it
16:56
Speaker 3: is a really long period of time that you'll be
16:59
Speaker 3: paying that back, and debt consolidation is essential if you're
17:03
Speaker 3: in a situation where you've got a number of different
17:05
Speaker 3: credit cards and you're paying the minimums, because at the
17:08
Speaker 3: end of the day, it's going to be thirty years
17:10
Speaker 3: before you actually pay those off. Whereas with a debt
17:13
Speaker 3: consolidation of personal debt, you could be out of it
17:15
Speaker 3: in ten years in comparison, So you're not just doing
17:18
Speaker 3: the best thing right now to feel less stressed. You're
17:21
Speaker 3: doing the best thing for future you as well, because
17:24
Speaker 3: the second that debt is gone, the second you can
17:26
Speaker 3: start creating financial freedom. And I say this all the time,
17:30
Speaker 3: and I want to keep saying it because I still
17:32
Speaker 3: get that question, should we be saving while we're in debt,
17:36
Speaker 3: which you know obviously you were going to ask me
17:38
Speaker 3: right then and there, won't you charge up? Yes, the
17:40
Speaker 3: answer is yes and no. Oh, yes, you should be
17:43
Speaker 3: saving for an emergency account. The reason we want an
17:46
Speaker 3: emergency account, Georgia is because we really want to put
17:49
Speaker 3: ourselves in the position of power, so if another debt
17:53
Speaker 3: comes up, or another cost comes up, we don't have
17:55
Speaker 3: to put it on debt again. Yeah, like if re
17:58
Speaker 3: JO came out, you'd be like, oh my gosh, like
18:00
Speaker 3: I've been smashing down this debt. I have no money
18:02
Speaker 3: set aside for something like that. So being in control of.
18:06
Speaker 2: Your budget and your emergency fund is essential. But during
18:10
Speaker 2: this period of time where you are.
18:11
Speaker 3: In personal debt, yes, having an emergency account is important,
18:15
Speaker 3: but we're not saving for our home deposit. We're not
18:17
Speaker 3: saving for our future life. We aren't saving for things
18:21
Speaker 3: like that that are above and beyond, like we're not
18:24
Speaker 3: planning for our next holiday. I'm not saying you can't
18:26
Speaker 3: do those things in collaboration. Like if you've consolidated your
18:29
Speaker 3: debt and it's all well and good and you know
18:31
Speaker 3: what that payment is, and you've integrated into your life
18:33
Speaker 3: because you're good at budget and cashlow, because you clearly
18:36
Speaker 3: did my masterclass, that's a different story. But if you're
18:39
Speaker 3: in mountains of credit card debt and burying your head
18:41
Speaker 3: in the sand, stop trying to save and pay the minimums.
18:44
Speaker 3: We need to get rid of that debt because paying
18:47
Speaker 3: off debt in itself is an investment. It's an investment
18:50
Speaker 3: in your ability to save. It's an investment because if
18:53
Speaker 3: you are paying interest at eighteen percent, that money is
18:57
Speaker 3: essentially making you eighteen percent when you paid off, because
19:00
Speaker 3: you don't incur an eighteen percent bill later. So I
19:03
Speaker 3: could rant on about this four literally hours, but I
19:06
Speaker 3: will save you that and ask you do you have
19:08
Speaker 3: any other questions to save?
19:09
Speaker 2: Way away from it. I really like what you've said
19:12
Speaker 2: there because it is. It's kind of switching your mindset
19:15
Speaker 2: to understand that that paying off your debt needs to
19:18
Speaker 2: be the priority. Because even though you might have ten
19:21
Speaker 2: grand in your savings account and think that that's awesome,
19:24
Speaker 2: it's not.
19:24
Speaker 3: You're hurting future you. If you've got ten grand in
19:27
Speaker 3: a savings account and a six thousand dollar credit card,
19:31
Speaker 3: you only have four thousand dollars saved. Like, if you
19:33
Speaker 3: are saving while you are in debt, you don't have savings.
19:36
Speaker 3: And I'm quite aggressive about that. I feel like when
19:39
Speaker 3: we first launched this podcast, I was a lot softer.
19:41
Speaker 3: I was a lot more comfortable with just being like, okay, cool,
19:44
Speaker 3: like that's what I would do. But honestly, it's putting
19:47
Speaker 3: you in a better situation. If I'm really blunt with things.
19:51
Speaker 3: I'm not here to be your best friend. I'm here
19:53
Speaker 3: to be your big financial sister that helps you get
19:56
Speaker 3: through this. And sometimes you don't like what you have
19:59
Speaker 3: to hear. Sometimes it's not good, but it's what is
20:02
Speaker 3: best for you, and I genuinely want what is best
20:04
Speaker 3: for you. I don't want you to be in debt.
20:06
Speaker 3: I don't want you to be financially struggling, and this
20:09
Speaker 3: advice is going to get you out of that position
20:12
Speaker 3: so that you can flourish.
20:13
Speaker 2: And like, how cool is that? Speaking of things that
20:17
Speaker 2: we might not want to hear, let's move on and
20:19
Speaker 2: talk about the traps of debt consolidation.
20:21
Speaker 3: Yeah, like a smart goallenge, sometimes sometimes all at the time,
20:29
Speaker 3: but there are actually a lot of things that you
20:31
Speaker 3: do need to be mindful of. And this is probably
20:33
Speaker 3: the most important. And this is probably I mean, I
20:36
Speaker 3: would say that my rant on paying debts off before
20:38
Speaker 3: saving is important, but I would say that this is
20:41
Speaker 3: also one of the most important parts of the show.
20:43
Speaker 3: So get ready to take some notes. It can take
20:46
Speaker 3: us longer to pay off a larger loan, which could
20:49
Speaker 3: potentially cost us more so to negate this, we actually
20:52
Speaker 3: need to weigh up before we consolidate debts if it
20:55
Speaker 3: is an option that will save us money or lead
20:57
Speaker 3: us to spending more. So let's do a quick example.
21:00
Speaker 3: G If you've got a car loan and a personal
21:03
Speaker 3: loan and a credit card and you're like, these three
21:04
Speaker 3: things are really overwhelming, but you've only got a thousand
21:07
Speaker 3: dollars on your credit card. Maybe just smashing that out
21:10
Speaker 3: and getting rid of one debt instead of consolidating them
21:13
Speaker 3: all is going to be a better solution for you
21:15
Speaker 3: because often, and I'm going off on a tangent here,
21:18
Speaker 3: but often when we have a car loan, that's usually
21:22
Speaker 3: a secured loan because the loans secured against that asset,
21:26
Speaker 3: Whereas when you go to consolidate debt, more often than
21:29
Speaker 3: not than not able to secure that loan against something.
21:32
Speaker 3: That could sound quite confusing in the moment, Georgia, but essentially,
21:36
Speaker 3: when you have a secured debt, the interest rate is lower,
21:38
Speaker 3: but when you have an unsecured debt, the interest rate
21:41
Speaker 3: is higher. So financially, you might be better off just
21:45
Speaker 3: keeping that car loan there because it's a lower interest
21:47
Speaker 3: rate because it's secured, paying off that credit card, getting
21:51
Speaker 3: rid of it, avalanching it, smashing it out and cutting
21:54
Speaker 3: it up, and then focusing on just two loans, even
21:57
Speaker 3: though in the grand scheme of things, the of one
22:00
Speaker 3: loan is more comforting, financially, you might be better off
22:03
Speaker 3: with just keeping things the way they are, So you
22:06
Speaker 3: do need to make sure that this works for you.
22:08
Speaker 3: But again, it's an option that could save us money
22:11
Speaker 3: as well, So it's kind of true sides of the boarder.
22:15
Speaker 3: The second is it can leave us with the temptation
22:17
Speaker 3: to spend more and leave you in deeper debt. I
22:21
Speaker 3: say this because if you've had a whole heap of
22:23
Speaker 3: credit cards and that's always been really overwhelming, and you
22:26
Speaker 3: consolidate them all into one loan, you no longer feel
22:29
Speaker 3: like you have a whole heap of credit cards. And
22:31
Speaker 3: if we don't address the reason why you got into
22:33
Speaker 3: so much credit card debt initially, you're very likely to go, oh, well, actually,
22:38
Speaker 3: I do really want to go out that holiday. I
22:39
Speaker 3: don't have any credit card debt right now because somehow
22:42
Speaker 3: that consolidated debt didn't spring to mind. And you go
22:45
Speaker 3: ahead and apply for another credit card and get that
22:48
Speaker 3: because obviously you're good at paying back your consolidated debt,
22:51
Speaker 3: and you end up creating the cycle again. So if
22:54
Speaker 3: you do get more credit, you need to make sure
22:56
Speaker 3: to stay on top of things, and you need to
22:58
Speaker 3: again going back and telling you to do your budget
23:01
Speaker 3: and your cash flow and being on top of that,
23:03
Speaker 3: because that is the best thing in this situation. And
23:06
Speaker 3: then another trap is not doing research beforehand. If you
23:10
Speaker 3: don't do the research and check the fees and the
23:12
Speaker 3: charges and the interest rates of your new loan and
23:14
Speaker 3: compare them to what you'd be paying if you paid
23:16
Speaker 3: the debts separately. You could end up in a pickle.
23:18
Speaker 3: Again just doing your research, but also understanding whether making
23:24
Speaker 3: additional payments is allowed. So in some loans they might say, hey, ge, yep,
23:29
Speaker 3: we'll give you a ten thousand dollar loan for five years,
23:31
Speaker 3: and you go, okay, that seems reasonable, but you can't
23:35
Speaker 3: pay it off early, and if you do, that's a
23:36
Speaker 3: five hundred dollar fee. You go, oh, that doesn't feel
23:40
Speaker 3: fair because I was just going to put all my
23:42
Speaker 3: debts into that and pay that minimum, but also try
23:44
Speaker 3: and throw all my additional cash flow to that, because
23:47
Speaker 3: Victoria said, if you've got debt, you haven't got savings,
23:50
Speaker 3: and then you find that you're not actually able to
23:52
Speaker 3: facilitate that because they've trapped you in that position. So
23:55
Speaker 3: always make sure that when you're establishing a loan, you go, hey,
23:59
Speaker 3: what if I make it additional payments? What kinds of
24:01
Speaker 3: fees and charges will I be charged to pay out
24:04
Speaker 3: the loan in its entirety?
24:05
Speaker 2: Interesting?
24:06
Speaker 3: What if you got it down g to like two
24:08
Speaker 3: grand and then you got your tax back and that
24:10
Speaker 3: was two grand and you could extinguish that loan completely
24:13
Speaker 3: and you're really excited about it, but then you find
24:16
Speaker 3: out that there's actually a whole heap of fees and
24:18
Speaker 3: charges by exiting the loan early.
24:19
Speaker 2: Cheeky ye, not fair is fair? No? On that kind
24:24
Speaker 2: of line of thought. Us scams a thing in this.
24:27
Speaker 3: Space, sadly, yes, So if you go down this path,
24:30
Speaker 3: make sure it is legit. You can do that by
24:33
Speaker 3: googling them. You can do that by checking with your broker.
24:36
Speaker 3: Going through a broker will obviously avoid scams, but there
24:39
Speaker 3: are some scammers out there who will make you pay
24:41
Speaker 3: fees up front to set up the loan and then
24:43
Speaker 3: they actually never follow through and give you the money
24:45
Speaker 3: that you're required to pay out the other loans, and
24:47
Speaker 3: it's a bit of a circus. We did speak at
24:49
Speaker 3: length about something really similar in our Scams episode, so
24:52
Speaker 3: if you miss that one, head on back. But it
24:54
Speaker 3: can be really hard to get your money back from scams,
24:56
Speaker 3: so please please please do your due diligence and to
24:59
Speaker 3: avoid any type of scam, obviously head to our favorite website,
25:02
Speaker 3: which is the ACIC website, and make sure that the
25:04
Speaker 3: credit provider or brokers are actually licensed and legit.
25:07
Speaker 2: Which is hot tip there. And then also if you
25:10
Speaker 2: have a home like you own a home or have
25:12
Speaker 2: a home loan, it could impact that if things go
25:15
Speaker 2: pair shaped. So remember that if you have put up
25:18
Speaker 2: an asset as a security on a loan, that that
25:20
Speaker 2: could potentially be taken away if you don't pay off
25:22
Speaker 2: that loan. So make sure that you are putting yourself
25:25
Speaker 2: in the best possible position. And you know, my summary
25:28
Speaker 2: would be get a little bit of advice, reach out,
25:31
Speaker 2: have a chat, talk to some people, and make sure
25:33
Speaker 2: that you're not just making a late night decision because
25:36
Speaker 2: you're really stressed about it and you just applied online
25:39
Speaker 2: at two am.
25:40
Speaker 3: Yeh, think about it. Take a few days to work
25:42
Speaker 3: out what the best possible decision for you is.
25:45
Speaker 2: All right, So to finish off today V If debt
25:48
Speaker 2: consolidation isn't the right option for us, what are our
25:51
Speaker 2: other alternatives? So many options?
25:54
Speaker 3: Okay not heaps, but like there are a few and
25:56
Speaker 3: they're going to work for your friends. So first things first,
25:59
Speaker 3: we want to smash our debt. And I always say this,
26:01
Speaker 3: and do you know my partner Steve makes so much
26:04
Speaker 3: fun of me because I actually what a legend.
26:07
Speaker 2: I actually talk like this at home.
26:09
Speaker 3: I'm like, yeah, cool, So we're going to have our
26:11
Speaker 3: mortgage and we're going to have this and we're gonna
26:12
Speaker 3: smash that out. And he's like, oh, you sound like
26:14
Speaker 3: a financial babebae. I don't know how to break this
26:17
Speaker 3: to you, but but you want to smash out your
26:20
Speaker 3: debts and create a plan to reduce your debts as
26:22
Speaker 3: fast as possible. Two of my favorites are the snowball
26:25
Speaker 3: method and then the avalanche method, whatever works for you.
26:29
Speaker 3: The next is a creator budget and cashflow plan so
26:32
Speaker 3: that you can get out of debt sooner. I'm biased,
26:34
Speaker 3: I reckon that my budget and cashflow plan is arguably
26:37
Speaker 3: the greatest budget and cash flow plan to ever be
26:40
Speaker 3: created by Victoria Divine. See how I looped that back there.
26:44
Speaker 3: But definitely sit down, ride out your budget, Understand what's
26:47
Speaker 3: coming into your bank account and what has to go out,
26:50
Speaker 3: and what surplus cash flow you have to contribute to
26:53
Speaker 3: that debt to get out of it sooner, and.
26:55
Speaker 2: Take it a step further.
26:57
Speaker 3: Work out how long it's going to take you to
26:59
Speaker 3: get out of debt if you contribute another one hundred
27:02
Speaker 3: dollars or another two hundred dollars each week or month
27:04
Speaker 3: or a year or however long that's going to take you,
27:07
Speaker 3: because that can be really motivating, and it can also
27:10
Speaker 3: drastically change the time period. Like I know that if
27:13
Speaker 3: you're paying minimum payments on your credit card, it'd take
27:17
Speaker 3: fifteen years to paid off. But if you paid an
27:19
Speaker 3: extra one hundred dollars a month instead of just the minimum,
27:22
Speaker 3: it might be back in like four years. So it's
27:25
Speaker 3: one of those things that could shave so much time
27:27
Speaker 3: off it and make such a difference. And again, to
27:30
Speaker 3: quote myself or more accurately, to quote Paul Kelly, from
27:34
Speaker 3: little things, big things really do grow. And so even
27:38
Speaker 3: if you can only afford a few more dollars on
27:40
Speaker 3: your credit card, I absolutely would recommend looking into that,
27:43
Speaker 3: because the minimum payment is the minimum. We don't want
27:46
Speaker 3: to just be paying the minimum if we can afford it.
27:49
Speaker 3: The next year is Georgia and it's one of the
27:51
Speaker 3: final ones. Don't beat yourself up. Being in debt is
27:53
Speaker 3: not a bad thing. It does not make you a
27:55
Speaker 3: bad person. It doesn't even mean that you made bad decisions.
27:58
Speaker 3: It just means that you spent more than you earned.
28:01
Speaker 3: That's not a bad thing. Like if a friend came
28:03
Speaker 3: to you and said, hey, Jay, I've got some personal debt.
28:05
Speaker 3: You're not gonna judge them. You're just gonna go, hey,
28:07
Speaker 3: how do I help you get out of this? Or
28:09
Speaker 3: is there something I can do to help or do
28:10
Speaker 3: you want to.
28:11
Speaker 2: Talk about it?
28:12
Speaker 3: Like, being in debt does not inherently make you a
28:15
Speaker 3: bad person.
28:16
Speaker 2: And I have so many.
28:17
Speaker 3: Conversations with friends and family and people in my community.
28:21
Speaker 2: That say, oh my gosh, I'm so embarrassed. You shouldn't
28:24
Speaker 2: be embarrassed, friend, Like you really shouldn't, Like you're not
28:27
Speaker 2: a that I just I feel like I could go
28:29
Speaker 2: on about this all day. Debt is not a bad thing.
28:32
Speaker 2: It is just a reflection of the fact that you
28:34
Speaker 2: spent more money than you earned. And that is as
28:37
Speaker 2: simple as it gets. And the longer we spend beating
28:39
Speaker 2: ourselves up about it, the longer we spend not paying
28:42
Speaker 2: it off. And again, if you need to have another chat.
28:44
Speaker 3: With somebody and you just don't know where to go,
28:46
Speaker 3: we couldn't recommend a chat with our mates at the
28:48
Speaker 3: National Debt Helpline anymore. They are literally beaming angels that
28:52
Speaker 3: we your doore and you should give them a buzz
28:54
Speaker 3: if you're in a bit of a pickle.
28:56
Speaker 2: One hundred percent. And if you're not already, come and
28:58
Speaker 2: join us in the Facebook group because there's conversations about
29:01
Speaker 2: debt happening in there every single day, So come join us. Yeah,
29:04
Speaker 2: there's some good eggs in there giving good advice. I heard.
29:07
Speaker 3: Gee it's not us, by the way, it's actually the
29:09
Speaker 3: community sharing their stories. So I love it over there.
29:12
Speaker 3: But as always, I think we've run out of time
29:14
Speaker 3: on this one, Georgia. But just before we head off,
29:16
Speaker 3: we'd like to acknowledge and pay respect to Australia's Aboriginal
29:20
Speaker 3: and torrest Raight islander people's. They're the traditional custodians of
29:23
Speaker 3: the lands, the waterways and.
29:25
Speaker 2: The skies all across Australia. We thank you for sharing
29:28
Speaker 2: at the caring for the land on.
29:29
Speaker 3: Which we are able to learn. We pay our respects
29:32
Speaker 3: to elders past and present, and we share our friendship
29:34
Speaker 3: and our kindness.
29:35
Speaker 2: And remember, guys that the advice shared on She's on
29:38
Speaker 2: the Money is general in nature and does not consider
29:40
Speaker 2: your individual circumstances. She's on the money exists purely for
29:44
Speaker 2: educational purposes and should not be relied upon to make
29:47
Speaker 2: an investment or a financial decision. And we promise Victoria
29:50
Speaker 2: Divine is an authorized representative of Australia Pacific Funds Management
29:54
Speaker 2: Proprietary Limited ABN three four one three two four six
29:58
Speaker 2: three two five seven AFSL nine one one. And guys,
30:02
Speaker 2: before we do leave you to your day, I'm going
30:05
Speaker 2: to ask you very cheekily that if you do love
30:08
Speaker 2: the show and you want to support your girls, and
30:11
Speaker 2: please do leave a review. You just scroll down to
30:14
Speaker 2: the bottom of the show and you can plug in
30:16
Speaker 2: whatever you want. You could leave it a nasty one
30:19
Speaker 2: if you want as well. Don't promote that don't don't
30:21
Speaker 2: please don't and also like great five stars if you
30:25
Speaker 2: like it anyway, that's enough desperation from me. Remember as
30:29
Speaker 2: well that V's Budgeting and cash Flow course has an
30:32
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Speaker 2: in pod fifty that's Pod five zero, you'll get fifty
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30:45
Speaker 2: We welcome, guys, I think so see you next week. Guys,
30:48
Speaker 2: in sync,