Latest / Cash Confident with Brie Sodano / Getting off the hamster wheel of debt, once and for all

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Getting off the hamster wheel of debt, once and for all · Cash Confident with Brie Sodano

• 0:01
  Speaker 1: Welcome to the Cash Confident podcast.
• 0:03
  Speaker 1: I'm Brie Sedano, your fearless host, personal finance expert and the visionary behind the revolutionary Cash Confident community.
• 0:10
  Speaker 1: Get ready to embark on an electrifying journey where we redefine the rules of money and empower women to harness the immense power to craft a life they truly, truly desire.
• 0:22
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• 0:32
  Speaker 1: We leave no stone unturned as we delve into the depths of money management, mindset mastery and the undeniable influence of emotions on your financial decisions.
• 0:43
  Speaker 1: Prepare to rise above the societal limitations and break free from the chains that have held you back, as we equip you with the tools and knowledge to make bold, confident choices with your cash.
• 0:55
  Speaker 1: We believe that true financial power begins with knowledge, and that is exactly what we deliver.
• 1:02
  Speaker 1: So buckle up, my fierce and ambitious friends, as we embark on this transformative journey to becoming Cash Confident together.
• 1:10
  Speaker 1: Today, we are going to be talking about the hamster wheel of debt, and this is a topic near and dear to my heart, because most of the people that have worked with me over the past and even still come to see me because they have a problematic amount of credit card debt.
• 1:33
  Speaker 1: So today I'm going to teach you some of the things that I do with my clients, so that way you can maybe see the underlying issues of what goes on that causes credit card debt how to get out of credit card debt in a way that is sustainable And, just honestly, let yourself off the hook a little bit.
• 1:51
  Speaker 1: A lot of times with credit card debt comes a lot of shame and embarrassment and bad feelings and just mental torture a little bit, and so none of that is helpful for building wells for getting out of credit card debt.
• 2:05
  Speaker 1: We're really just having a good day, to be honest.
• 2:10
  Speaker 1: So these are the things that we are going to talk about, all right?
• 2:14
  Speaker 1: So before I get into teaching you what to do to get out of credit card debt, i want you to understand what goes into getting into credit card debt.
• 2:27
  Speaker 1: Now, first, actually, before I get into this, i do want to say you can use debt for business purposes.
• 2:33
  Speaker 1: You can have a healthy relationship with debt.
• 2:35
  Speaker 1: I don't believe for a second that debt is bad or wrong.
• 2:39
  Speaker 1: I think it's just a tool.
• 2:40
  Speaker 1: It's a leverage tool.
• 2:41
  Speaker 1: It helps make a little bit of money much more powerful, like when you buy a house, you put a little bit of money down.
• 2:47
  Speaker 1: You're able to leverage that little bit of money for a lot of money and then buy a house.
• 2:51
  Speaker 1: Same thing for business, same thing for car loans And what you get for the interest is time with the thing that you bought.
• 2:59
  Speaker 1: So, for example, i have a mortgage on my house and I bought this house well before I had hundreds of thousands of dollars saved for it, and so I get to live in this house for the 30 years while I'm paying it off, and so that's what I get for the interest.
• 3:16
  Speaker 1: The interest is like the rent on the money, if you will.
• 3:20
  Speaker 1: Now, when you're buying things that are going to make money or that you're going to use every single day, like to live in like a house, debt is fine.
• 3:27
  Speaker 1: It's great When you're leveraging your money to buy like margaritas or noodles or new outfits, that's where it can become a problem.
• 3:39
  Speaker 1: Not that it necessarily is a problem, but if that's done over long periods of time, it can become a problem.
• 3:45
  Speaker 1: So I do want to say that, first, that there is such a thing as a healthy relationship with debt.
• 3:49
  Speaker 1: Being debt-free can be one of your financial goals.
• 3:52
  Speaker 1: It's a fine goal, but it's also not a measure of financial health.
• 3:56
  Speaker 1: Like when I'm looking at somebody's full financials debt-free isn't the biggest indicator of financial health to me, like when I'm like, all right, we have some debt here, and having access to credit is also actually a indicator of financial strength.
• 4:10
  Speaker 1: So we want to look at these things with a balanced view.
• 4:15
  Speaker 1: We don't want to get all crazy, not crazy, but we don't want to get all nuts that we have to just be debt-free or just do it one way, like you can use credit wisely, right, and also carry a balance under credit cards or carry a balance for things that you bought on purpose.
• 4:35
  Speaker 1: So where I'm going with the hamster bail of debt is probably not that backside of the conversation.
• 4:40
  Speaker 1: It's generally when people have credit card debt that they can't seem to get out of credit card debt that eats up a lot of their cash flow credit card debt that maybe wasn't used to buy things with a lot of intention, or maybe it was, but it's where the credit card debt becomes problematic to the full financial life.
• 5:00
  Speaker 1: That's really where I'm going, and the hamster bail of debt is debt that doesn't go away.
• 5:05
  Speaker 1: It's debt that we work and we pay off, and we work, and we pay off, and we work and we pay off, but somehow it just doesn't ever seem to go away.
• 5:13
  Speaker 1: All right, so the first thing that I want you to know about the hamster bail of debt is the main cause.
• 5:20
  Speaker 1: So the main cause of debt is needing money, and this is a debt is at the simplest, most foundational level.
• 5:28
  Speaker 1: If you have debt, it's because you needed money.
• 5:31
  Speaker 1: Now the solution to that is having money, which we're going to get into as we go through the episode.
• 5:38
  Speaker 1: All right, now, needing money comes in some different flavors.
• 5:43
  Speaker 1: There's some nuance to this, right?
• 5:44
  Speaker 1: So sometimes we are not so great at having money and then we need money because we have a low comfort zone for money.
• 5:52
  Speaker 1: Sometimes people can't get a certain amount in their savings account if they're free to go and get rid of it, right?
• 5:57
  Speaker 1: So sometimes, depending on where you're starting from and where you're at, sometimes that's $500, or $1,000, or $10,000, or whatever.
• 6:04
  Speaker 1: But sometimes, once our savings account crosses a threshold of a certain number, something happens inside of us and we want to get rid of that money.
• 6:15
  Speaker 1: The money causes our minds to talk a lot, to open up to a lot of different financial possibilities And your brain is like let's get rid of this money.
• 6:25
  Speaker 1: Money is a form of power.
• 6:30
  Speaker 1: It's not all of power, but it's a form of power And sometimes when we cross certain thresholds, it becomes super uncomfortable and may even feel dangerous, like to your brain and your body.
• 6:42
  Speaker 1: And I think that's worth mentioning, because a lot of times when I talk to people with credit card debt, it's actually the result of not so much as poor money management as like they just can't hang on to the money, like the money freaks them out and then they get rid of the money and then they don't have the money for bigger purchases when the time comes.
• 6:59
  Speaker 1: So that's something just to be aware of.
• 7:01
  Speaker 1: Another nuance is poor savings habits, and again, this can be poor savings habits can be like on the savings side not actually being able to save, always having things that you need more than you can hold the money for, or it could be back to the first reason, which is like I save the money and then I get up to a certain point and then I use it Or, and it's not, i get rid of it.
• 7:27
  Speaker 1: Okay, sometimes credit card debt can be the result of a sudden life change a loss of a job, a death in the family, moving, a divorce all of those an illness, all of those things can be a very big cause of credit card debt.
• 7:45
  Speaker 1: Sometimes, unclear or what I will call convoluted financial systems can be the cause of credit card debt.
• 7:51
  Speaker 1: And what I'm talking about here is sometimes I will see people's finances and it's like they'll have many different bank accounts with many different credit cards and they'll use, like, one credit card to buy certain kinds of things And then they'll pay it off with another credit card for a period of time.
• 8:10
  Speaker 1: And then it will you know things like oh, i only use this bank account to pay my car payment, or I use credit cards and then pay off this with certain weird rules, right?
• 8:24
  Speaker 1: Like, this money comes in for my husband's paycheck, i use it to pay off this credit card, and this happens.
• 8:29
  Speaker 1: And then and like there's not not anything necessarily wrong with that, but where this becomes a problem is when our financial situations are so complicated that when we look at them, we cannot get a clear picture of what's going on, right?
• 8:41
  Speaker 1: So if we're playing with credit cards a lot of times, we're also playing with time, so we're adding in a variable.
• 8:47
  Speaker 1: If you're just having your bank accounts, what you have is what you have, right, and if we're playing with our, if you're also using credit cards, what you have on your credit card balance, you have a period of time to pay off and you can hold a balance there.
• 9:01
  Speaker 1: So a lot of times it's those soft boundaries with money that will allow for credit card debt.
• 9:07
  Speaker 1: So things like oh, i started, you know, this is what the situation will sometimes look like.
• 9:12
  Speaker 1: Oh, i started using my Mx to get the points and, you know, after a few months I realized I started where I was able to pay it off.
• 9:21
  Speaker 1: I'm like I was able to pay it off all the time, but now I realize I'm a month behind.
• 9:28
  Speaker 1: So now the bill comes and I'm paying for last month And so it takes a minute, but it's like I basically overspent by a month, you know, over the last few months.
• 9:38
  Speaker 1: And that's how you know.
• 9:40
  Speaker 1: It's the soft boundaries and it's the lack of clarity.
• 9:44
  Speaker 1: And when you're playing with credit card, it's because you have those extra 30 days, you know.
• 9:50
  Speaker 1: So you get to spend your money and then your billing cycle starts and then you have, you know, and then you have a period of time to pay it off.
• 9:55
  Speaker 1: So your problem can grow in those 30 days before you even notice it, before you even see that there's a problem there.
• 10:03
  Speaker 1: So an unclear, convoluted situation can be a cause of credit card debt.
• 10:10
  Speaker 1: And then the last nuance that I think is worth mentioning is points chasing.
• 10:15
  Speaker 1: Now listen, some people can use credit cards for all of their purchases and get the credit cards and do some travel or get whatever bonus rewards for free.
• 10:25
  Speaker 1: I very, very rarely see that work out well, and if you're going to do that, what I would suggest is making sure that you are in a place of financial strength before you do that.
• 10:34
  Speaker 1: Like you actually have six months of money set aside, because what ends up happening is when you do that, you modify all of your spending habits, and habit changes are harder, they're harder to break than you would imagine.
• 10:49
  Speaker 1: So the credit card companies they make money in two different ways.
• 10:54
  Speaker 1: They make money on interest and fees, right, like.
• 10:56
  Speaker 1: When you get your bill, you pay the interest.
• 10:58
  Speaker 1: But they also make about 3% on all your transactions, right, like, so, like, like when my clients pay me, right, like they might pay me $99 and I get 96 and change, because I pay the credit card processing And so, as a consumer, you may not see that or understand that, and that's I'm teaching it to you right now, but that's part of how credit cards make money, so they charge 3%, they give you back a percentage, and that's where those points come from, and that's it's a good idea, it's fine, there's nothing wrong with it.
• 11:29
  Speaker 1: But really, what I end up seeing is the modification of all of your habits, combined with a little bit of a lack of clarity of what's actually going on, and combined with the time element where, if there is a problem, you may not notice it until one month, two months, three months, six months down the road where your balance is creeping up and you're like what's going on here?
• 11:50
  Speaker 1: So I find that points points chasing for the vast majority of people can very easily be a very slippery slope to credit card like, to big balance credit card debt, because by the time you notice that you've really overspent, it's not just your swiping habits, like actually paying with the credit cards, but now you have established a lifestyle that you actually can't afford And now you have to cut all of that back, and it feels really bad to cut back things that you've gotten used to, and so this is kind of how these small habits of overspending get really solidified, and I've seen a lot of people do it in an attempt to get a free vacation from their points.
• 12:34
  Speaker 1: All right, so I just want you to understand some of the nuances, and the reason that I teach you these things about the nuances of what kind of causes the credit card debt is because these things have very different solutions.
• 12:47
  Speaker 1: Now, a lot of times, when it comes to money, the conventional wisdom that we get is a gross, disgusting over simplification that is not only unhelpful but a lot of times is degrading and full of judgment and also not gonna work right.
• 13:02
  Speaker 1: So, for example, if you look at all your credit cards and you're like, oh my goodness, i have all this credit card debt, i need to just cut back on my expenses and I need to, i think there is a financial guru out there that says to eat rice and beans until you are debt free.
• 13:16
  Speaker 1: Rice and beans is delicious, and that's probably not gonna work Like that financial solution is probably not gonna work because we're not addressing your comfort zones, we're not addressing your habits.
• 13:30
  Speaker 1: We're not addressing sometimes we need to change our circumstances to be able to address our financial situation, sometimes our living situation, or our job situation or our car situation.
• 13:42
  Speaker 1: Sometimes something actually needs to change to be able to address a situation, And when we don't actually understand the underlying cause, we can look for solutions that are very surface level and are probably going to be very ineffective.
• 13:58
  Speaker 1: So I think understanding the underlying cause of credit card debt and sometimes also I didn't mention this yet, but sometimes it's reckless overspending or emotional spending And in one of the previous episodes that we did is on how to understand and break emotional spending patterns And a lot of times, if we're recklessly overspending, there's actually a life situation that needs to be addressed.
• 14:21
  Speaker 1: Maybe we're unhappy in some way, shape or form, or we're bored or we're missing something and we're just using our money to fill a void within ourselves.
• 14:32
  Speaker 1: So understanding these nuances helps us to understand what does it actually take to solve this problem in a way that makes sense and is going to last a long time.
• 14:40
  Speaker 1: Sometimes it's just not as easy as a strategy, all right.
• 14:46
  Speaker 1: So the dynamic of the hamster wheel of debt is to have debt, use all of your free cash flow to pay off the credit card debt.
• 14:55
  Speaker 1: Then life happens, comes and gives you a little smack-a-roo in the face And then, since you don't have money because you used it all to pay off your credit card debt, you use your credit again.
• 15:05
  Speaker 1: So it's like one step forward, one step back.
• 15:07
  Speaker 1: Sometimes it's two steps forward, one step back.
• 15:09
  Speaker 1: Sometimes it's one step forward, two steps back.
• 15:12
  Speaker 1: And so the reason why using the vast majority of your free cash flow to pay off credit card debt is not effective is because it still leaves you with the underlying main cause of money, which is needing money.
• 15:26
  Speaker 1: So you have to learn how to have money to be able to sustainably pay off credit card debt.
• 15:32
  Speaker 1: So when people are like, oh, i'm trying to get out of debt super fast and I'm using you know, i mean I stopped saving, i stopped putting money in my 401k, i stopped doing any sort of savings so I could get all this credit card debt super fast.
• 15:44
  Speaker 1: That doesn't work, because then what ends up happening is you know you can do that for a small amount of time and it could be fine, but if your credit card debt is such that you might need to do that for more than six months you know, a year what ends up happening is then you're so focused on the credit card debt that you're not focused on the fact that you're going to need snow tires or that your kids are going to need, you know, back to school clothes, or that you're going to require car repairs or things like that, and then you're back on the credit cards when those things happen And in the meantime, all of that feels incredibly defeating.
• 16:18
  Speaker 1: And you know your money, your relationship with money becomes more and more tense over time, and one of the biggest ways that I see debt grow over time is the over focus on debt, and generally the way that this happens is somebody has credit card debt.
• 16:34
  Speaker 1: They were like, oh, i want to get out of credit card debt.
• 16:37
  Speaker 1: And then they're like it's the interest.
• 16:38
  Speaker 1: They can't get out of credit card debt because of the interest.
• 16:40
  Speaker 1: And then they take out a 0% balance transfer And so then they move their you know their credit card debt to a new credit card that maybe they even leave home, and they leave the new credit card in the drawer.
• 16:50
  Speaker 1: But if they haven't addressed the underlying habits, that cost their credit card debt and now they just have their credit card debt, which has all of their overspending habits attached to it.
• 17:00
  Speaker 1: That credit card stays in the wallet And then, over the course of a year or two, they double the size of their credit card debt.
• 17:06
  Speaker 1: And the same thing happens with personal loans and 401K loans.
• 17:10
  Speaker 1: So generally people take out a 0% balance transfer a couple of times And then, you know, and every time we do that, our situation becomes less clear and more complicated.
• 17:20
  Speaker 1: Right, because now we have, instead of having one credit card to worry about, we have two, three, four.
• 17:25
  Speaker 1: You know, sometimes I'll see people who have 16, 17, 34 credit cards, and that just becomes a lot to mentally manage.
• 17:33
  Speaker 1: So then, once we have a good handful of credit cards, we realize that the mental toll of all of those credit cards with different payments and different due dates, you know, starts to just be a lot to manage along with.
• 17:46
  Speaker 1: Then we're like annoyed because all the 0% went away and now we're paying interest on all these things.
• 17:51
  Speaker 1: And then we're like, all right, like I can't get any more credit cards.
• 17:53
  Speaker 1: This isn't effective.
• 17:54
  Speaker 1: Let me take out a personal loan or 401K loan I've seen both and we'll do that And so that way we can consolidate the payment into one payment and I can pay one payment instead of a whole bunch of payments, and that's easier.
• 18:06
  Speaker 1: And then again, if we don't build savings habits and also stop using those credit cards so it's a set of habits to break and a set of habits to build then what ends up happening is another couple of years goes by and then that credit card doubles again, you know.
• 18:22
  Speaker 1: And then we're looking at home equity loans, and I've seen people, you know, take out a home equity loan, but now we're eroding our actual wealth to pay off these credit cards, and so this is the way that debt grows.
• 18:33
  Speaker 1: And so all of this is based on that hamster wheel of debt and then in the attempt of trying to get out a credit card that as fast as possible.
• 18:41
  Speaker 1: So this is what I teach clients on how to actually sustainably get out a credit card debt.
• 18:48
  Speaker 1: So the first thing that we want to do is we want to stop habitually using our credit cards.
• 18:53
  Speaker 1: So that may mean taking them out of your you know, taking the numbers out of your phone, out of your browser, taking them out of your wallet, and, you know, starting there, and I'm not at all suggesting that you close your accounts.
• 19:07
  Speaker 1: You would leave your accounts open for this, but we would stop using the credit cards.
• 19:12
  Speaker 1: And what this is going to do is it's going to help you to understand what your actual cash flow feels like, because using your debit card and like actual paper cash money using the money that you have, is a very different experience than using the money that's on credit cards, because the money that you have will run out when you spend it.
• 19:30
  Speaker 1: Your credit cards will only run out once they're maxed out, so you have to pay much more attention.
• 19:37
  Speaker 1: So it requires a level of financial intimacy And while you're adjusting to your new cash flow, i generally recommend just paying the minimums on your credit cards for a minute to get used to your new cash flow And then taking a month or two, maybe even three months, depending on how complicated your situation is, to just pay the minimums and just get used to your new cash flow situation.
• 20:02
  Speaker 1: Then we want to start building a savings habit.
• 20:05
  Speaker 1: So, again, you're going to just continue to pay the minimums for another couple months and you're going to build up three savings habits.
• 20:12
  Speaker 1: Now I call it planting preparing pleasure.
• 20:14
  Speaker 1: So planting is money that you're going to save for retirement, so it may be a workplace plan, it may be like a 401k or it may be an IRA, but it's money that you're going to start to save for investment.
• 20:26
  Speaker 1: Preparing is what I call working capital, and this is the most important money to staying out of credit card debt.
• 20:33
  Speaker 1: And what you do is you look ahead for your year, the next 12 months, and you're like what expenses can, i definitely say, coming that are bigger, that are not monthly expenses?
• 20:44
  Speaker 1: So it could be things like car maintenance, tires They kind of run in four categories things like their irregular expenses.
• 20:52
  Speaker 1: So, like I said, your car maintenance, or things like if your insurance only comes quarterly or you have taxes that are due twice a year or if in the winter you pay for a snow plow expenses that are regular, that you definitely see coming but they're not monthly, budgetable, perfectly monthly expenses.
• 21:13
  Speaker 1: So there are regular expenses.
• 21:16
  Speaker 1: Then we look at the foreseeable disasters.
• 21:17
  Speaker 1: Oh, my car is making a noise.
• 21:21
  Speaker 1: It's probably going to need a repair.
• 21:23
  Speaker 1: My roof is 42 years old.
• 21:26
  Speaker 1: It's probably going to need to be replaced.
• 21:28
  Speaker 1: My refrigerator's from 1984.
• 21:31
  Speaker 1: And it is starting to make a funny noise and leak a little water out of the front.
• 21:35
  Speaker 1: Situations where something has given you a hint that it's probably not going to last much longer.
• 21:43
  Speaker 1: Then your family obligations birthday parties, or if you host holidays, or if you have a family member that lives out of state and you might need emergency plane tickets on a moment's notice, or if you have siblings or cousins getting married, or if there is a family expectation that you would take a family cruise every year, or things like that.
• 22:05
  Speaker 1: You're just your regular family obligations And then self-care that is non-monthly.
• 22:11
  Speaker 1: So currently I have brown hair, but I used to be blonde And that wasn't every month.
• 22:15
  Speaker 1: I wasn't going to the salon.
• 22:16
  Speaker 1: I was going maybe every other month, but every time that I would go it was a considerable expense.
• 22:21
  Speaker 1: Or if you're going for a massage once a quarter, or if you're buying clothes twice a year or shoes at every quarter, things like that, and you want to look ahead and start to see all right, well, how much money do I actually spend on these things?
• 22:37
  Speaker 1: Because this is generally the reason that people get into credit card debt It's being unprepared for the regular expenses that are not monthly, just monthly, old, boring, budgetable expenses.
• 22:48
  Speaker 1: But you can certainly see coming Like, people generally announce a wedding pretty far in advance, but sometimes, oh, my brother's wedding came and we had to rent tuxes and buy dresses and do this and buy the gifts and do all the things, and that all ended up on credit, even though there was plenty of time and money if we looked ahead and started allocating that money for that in the right amount of time.
• 23:15
  Speaker 1: And then the last thing that you want to start saving money for is pleasure right, like upgrades to your house or vacations or travel or whatever's important to you.
• 23:24
  Speaker 1: To be totally honest, there's no rules about your pleasure account.
• 23:26
  Speaker 1: But we want to start with those three savings habits, because those three savings habits, as a look at that, planting money, is what builds financial strength over time And it is much more important than being debt free.
• 23:40
  Speaker 1: And I say that because and listen, there's an argument out there that says all right, well, why would you invest your money at 8% when you are paying 20% of interest?
• 23:51
  Speaker 1: And the reason that I find that idea to be incredibly, incredibly dangerous one is on a habit level, because you want a lifetime of habit habitually saving money for retirement, because that's actually really what it takes.
• 24:07
  Speaker 1: You know you have to.
• 24:08
  Speaker 1: You know you're going to live on your retirement funds for probably almost half of your life, so it takes all of the time.
• 24:16
  Speaker 1: The other thing where I think the idea that you would stop saving for retirement to pay off credit card debt is short-sighted is because money invested should double, let's say conservatively every 10 years.
• 24:29
  Speaker 1: So let's say you're 30 something and you're like, oh, i'm going to stop saving for a couple of years so that way I could get this credit card debt paid off, and in those couple of years that probably makes financial sense.
• 24:40
  Speaker 1: But what we don't see is the money that you didn't put in didn't double when you were 40 and didn't double again when you were 50, and didn't double again when you were 60 and didn't double again when you were 70.
• 24:51
  Speaker 1: So by the time that you would actually need the money, you know, by the time that you would actually be using the money that you would have invested, it probably would have doubled, tripled, quadrupled, you know, and if you're good at investing, maybe even more than that.
• 25:05
  Speaker 1: And so those couple of years that you don't save when you're young to pay off your credit card debt end up being much more valuable when you go to need the money.
• 25:18
  Speaker 1: And the thing is, when I was a stockbroker, people would come see me in their 50s and they're like we did it.
• 25:24
  Speaker 1: We're finally debt free, we're ready to start saving for retirement, and I'm like, dude, you got almost no time for this.
• 25:31
  Speaker 1: You'd have to save all that money.
• 25:33
  Speaker 1: You don't have time for the doubles, you know.
• 25:35
  Speaker 1: You don't have time to let the money work for you.
• 25:37
  Speaker 1: You're gonna have to work for this, you know.
• 25:39
  Speaker 1: And then there's not even enough time to do it in the market.
• 25:41
  Speaker 1: You gotta be looking at becoming a landlord, doing real estate.
• 25:45
  Speaker 1: Starting a business Like the market takes time, and so I find the idea that you would stop saving for retirement, i'm saying, incredibly irresponsible, like dangerously so, and that's a thing that people do when they're trying to get out of credit card debt, and it erodes financial strength.
• 26:05
  Speaker 1: And so, anyways, where I'm going with this is that financial strength piece is part of what you want.
• 26:11
  Speaker 1: You want financial strength, you want to be prepared and you want to enjoy your money, because if all you do with your money is pay bills and best for the future, then you don't get to live your life.
• 26:24
  Speaker 1: What ends up happening is eventually your brain and body get real bored with that and then you go on like a spending bender.
• 26:32
  Speaker 1: Maybe not you, but I've seen it happen plenty of times.
• 26:36
  Speaker 1: Having something to look forward to, vacations, upgrades, things like that are really important to being able to stay on track, because that's what feels like financial progress.
• 26:45
  Speaker 1: When you're saving for retirement, it doesn't really feel like financial progress because you're not going to get to use that money for another 20, 30, 40 years, depending on how old you are.
• 26:54
  Speaker 1: When you're saving for money that you're preparing, you're not buying anything exciting.
• 26:59
  Speaker 1: You're going to get oil changes and new shoes I guess new shoes sometimes can be exciting but you're going to spend that money on things that are very boring, regular old expenses, having somebody set aside for pleasure.
• 27:11
  Speaker 1: It's just important to staying on track.
• 27:14
  Speaker 1: You're going to stop using your credit card habitually.
• 27:17
  Speaker 1: You're going to start building up those three savings habits While you're doing those two things, because you'll be working on those things for a couple of months while you're paying your minimums.
• 27:28
  Speaker 1: Of course, you have to start to look at the underlying cause of the debt.
• 27:32
  Speaker 1: This may mean going through your transactions, seeing what habits are happening, seeing where your money is going where you don't want it to go anymore, seeing really looking at what lifestyle upgrades have I made that I actually can't afford yet.
• 27:46
  Speaker 1: Or how does this happen?
• 27:50
  Speaker 1: because you have to address the underlying reasons if you want the problem to stay gone.
• 27:57
  Speaker 1: If you address the credit card debt but you leave the underlying reasons that it's there that credit card debt is coming back.
• 28:04
  Speaker 1: I've seen this a zillion times, where somebody will have credit card debt and their spouse will find out about it, pay it all off and then it will come right back.
• 28:13
  Speaker 1: The spouse is devastated and feels betrayed because they paid it all off and then their spouse got right back into credit card debt.
• 28:19
  Speaker 1: But honestly, it's because they didn't actually solve the problem, they just thought they did.
• 28:24
  Speaker 1: It's always with love and an act of generosity.
• 28:29
  Speaker 1: It's just not affected.
• 28:32
  Speaker 1: We have to look at addressing the underlying cause of that credit card debt, whether or not it's a comfort zone with your money, whether or not it's habitual overspending, whether or not it's emotional spending, whether or not a life circumstance changed and we actually need to look at changing the circumstances.
• 28:48
  Speaker 1: Looking at that layers deeper.
• 28:54
  Speaker 1: Is it a mindset issue?
• 28:55
  Speaker 1: Is it an emotional issue, not just on the strategy level?
• 28:59
  Speaker 1: Then generally we're going to increase our earnings and or decrease our spending.
• 29:04
  Speaker 1: That's a practical strategy piece, but obviously that's going to be where the extra money comes from to put toward the debt payments.
• 29:15
  Speaker 1: I will tell you another thing that I see happen with credit cards is sometimes our desires drive our growth.
• 29:23
  Speaker 1: Sometimes, when we're ready for more, when we want more, we are still actually very afraid of getting a new job or asking for a promotion or demanding a raise or starting that side hustle.
• 29:34
  Speaker 1: Those desires that we have for more are there and we'll use credit to get those desires and basically force ourselves into a growth pattern.
• 29:44
  Speaker 1: This is a thing that I've never heard anybody else talk about it, but I see it all the time.
• 29:49
  Speaker 1: I see it all the time where somebody's maybe a little bit later in a career and this is especially true with teachers, nurses, people who work in unions where their income is not at all tied to their expertise or experience or anything else.
• 30:10
  Speaker 1: It's just based on a raise for seniority every year.
• 30:14
  Speaker 1: Part of that is really just because humans are made to grow and expand.
• 30:20
  Speaker 1: You might be doing the exact same job for many years and you may be happy professionally, but there also may be something going on there where some aspect of you really really wants to grow, really wants to get out of any financial limits that you have.
• 30:38
  Speaker 1: Anyways, where I'm going with this is I think that's another place where people can let themselves off the hook a little bit, where sometimes the credit card debt is just us subconsciously painting ourselves into a corner.
• 30:48
  Speaker 1: For a big change, i want you to look at increasing your earnings and decreasing your expenses.
• 30:55
  Speaker 1: Most of the money advice is just like if you got into credit card debt, it's obviously because you're an idiot and you're spending too much money, and I don't actually find any of that to be true.
• 31:02
  Speaker 1: Sometimes you have to decrease your expenses, sometimes you have to look at your habits and see what's going on there, and sometimes you have to make more money.
• 31:10
  Speaker 1: I'll give you one indication If you know exactly where your money goes and you used your credit on purpose to buy things and now you're paying off the debt and there's not enough money to save for you to want to be able to do things, but you don't have a management issue, it is time to increase your earnings.
• 31:31
  Speaker 1: I had a client once who had $6,000 of credit card debt between her and her spouse, they made like $120,000.
• 31:37
  Speaker 1: They were both close to retirement and she was wanting to buy off this credit card debt and she was like, well, i want to go to Aruba every year and I can't because I have this credit card debt.
• 31:48
  Speaker 1: And I'm like, no, that's not.
• 31:49
  Speaker 1: That math doesn't work.
• 31:50
  Speaker 1: It was shipped to Aruba every year is probably $5,000 or $6,000.
• 31:54
  Speaker 1: This credit card you're paying $120 a month on and you know where every single one of these dollars goes and you don't not make enough money to be able to do what you want.
• 32:03
  Speaker 1: That was the truth.
• 32:04
  Speaker 1: If she wanted that, she was going to have to grow into it.
• 32:11
  Speaker 1: Her current financial situation wouldn't support that level and that's where she had the credit card debt from is because she wanted these things and she worked her whole life and her financial situation just wouldn't support.
• 32:26
  Speaker 1: Sometimes it's really about increasing earnings and then sometimes it's about decreasing her expenses.
• 32:30
  Speaker 1: Again, this comes back to the nuances of the underlying issue, because not all credit card problems will be solved by just decreasing your expenses.
• 32:39
  Speaker 1: If that wasn't part of the cause, if reckless overspending wasn't the reason that you had credit card debt, chances are you still may need to decrease some of your expenses, but that's not going to be the entirety of the solution.
• 32:50
  Speaker 1: Then, from there, you pick a strategy and you start to work with it.
• 32:56
  Speaker 1: I will tell you what a lot of the strategies with credit card debt.
• 32:58
  Speaker 1: Sometimes there's a snowball, which is like you pay off one credit card at a time.
• 33:04
  Speaker 1: You pay the minimums on all of them, but then one you pay extra towards and then, when that credit card is paid off, you snowball the whole payment toward the next credit card and you go from the smallest balance to the biggest balance.
• 33:16
  Speaker 1: The avalanche is another method.
• 33:18
  Speaker 1: It's the same strategy, only instead of going balance smallest to largest, you do highest interest rate to lowest interest rate.
• 33:26
  Speaker 1: That way you're paying the smallest amount of interest.
• 33:28
  Speaker 1: I find that the snowball method is you get more momentum because you have faster wins.
• 33:35
  Speaker 1: A lot of times people have credit cards with small balance at least one or two credit cards with small balances and it's very satisfying to check those off and to roll that payment and to feel like you're making some momentum.
• 33:47
  Speaker 1: It's a little bit of six or a half dozen Other people like the avalanche because the idea of the interest really bothers them.
• 33:55
  Speaker 1: Both are fine.
• 33:56
  Speaker 1: A lot of times people are using a 0% balance transfer or a personal loan or a 401k loan to consolidate the free up cash flow.
• 34:05
  Speaker 1: Those are all fine, but you really want to make sure that you've addressed the underlying habits before you do those things, because that can be incredibly risky if those underlying habits are still in place.
• 34:16
  Speaker 1: That's like the five steps to really getting out of credit card debt sustainably.
• 34:25
  Speaker 1: I'll just do a quick recap before we finish up.
• 34:27
  Speaker 1: First, is you stop habitually using your credit cards and you want to be stopped, probably three, six months And then in perpetuity really.
• 34:37
  Speaker 1: But before you would look at strategies, you'd want to be stopped using those credit cards for a good few months.
• 34:44
  Speaker 1: Because the thing is is financial habits are not like other habits only because we get paid twice a month.
• 34:51
  Speaker 1: When you think about, like, if you go for a walk, you have a few just that, i'm going to go for a walk every day, you can do it every single day.
• 34:58
  Speaker 1: If you just said I'm going to eat healthy food, you have three opportunities to do that every single day.
• 35:02
  Speaker 1: And when it comes to our money, it's like those paychecks come in, you know, twice a month for most people.
• 35:07
  Speaker 1: So financial habits just take a little bit longer than other kinds of habits.
• 35:13
  Speaker 1: All right, so you want to step one is we want to stop habitually using the credit cards.
• 35:17
  Speaker 1: Step two we want to build the three savings habits.
• 35:20
  Speaker 1: Step three we want to address the underlying cause of the debt and shift our focus towards the savings and towards what we want and really stop ruminating and stop focusing on the debt, because what we focus on grows.
• 35:31
  Speaker 1: Then we want to work.
• 35:33
  Speaker 1: Step four is on increasing our earnings and decreasing our expenses to free up some cash flow to put toward the credit card debt while we are still able to save money for planting, preparing and pleasure, and then we pick a strategy to pay off our credit card debt and then we roll with that.
• 35:50
  Speaker 1: And so, listen, sometimes people are say to me things like Bre, this is going to take forever, if I just stopped doing all the savings, it would work better, and that's not true.
• 35:58
  Speaker 1: That's far less effective because of what we talked about when it comes to needing money, having money, building savings, and so, at the end of the day, i'm hoping for you to have actual financial strength, and that comes in habits and in money, in the bank and in money and investments and the ability to take money to manifestation where it's like I'm going to save this money and then take myself on vacation.
• 36:23
  Speaker 1: So these things are all part of what it takes to be in financially good shape, and I would just want to reiterate and say this again that being debt free can be a measure of financial strength and of financial well-being, but it's not as important as you might imagine.
• 36:42
  Speaker 1: And I do want to just finish up by busting one myth.
• 36:46
  Speaker 1: Sometimes people have them.
• 36:48
  Speaker 1: There's a myth out there that you need to be debt free before you start investing, or you need to be debt free before you start saving, or you need to be debt free before you start building financial strength, and that's not true at all.
• 37:00
  Speaker 1: It's just like having an extra 10 pounds on your body is not really an indication of health.
• 37:06
  Speaker 1: You can be perfectly healthy and going exercising and having good, strong bones and strong muscles, and also have a little extra and have a little extra junk in the trunk, and the same thing is true of your financials.
• 37:18
  Speaker 1: And so those are the things that I want you to know about the hamster wheel of debt.
• 37:24
  Speaker 1: I hope this is super helpful.
• 37:26
  Speaker 1: I hope you have some new insights and some new a-has and perspectives on maybe some reasons why you got into credit card debt or why you've been in credit card debt so long, and now you have the insights and tools that you need to be able to get out of credit card debt once and for all.
• 37:42
  Speaker 1: So I hope this helps.
• 37:43
  Speaker 1: So, if this did help you, please share this episode with your friends, with your relatives.
• 37:48
  Speaker 1: That shared on the internet to the socials, put it in your stories, tag me.
• 37:52
  Speaker 1: My mission is to get more money into the hands of good women, good people in general, and one of the ways that that definitely doesn't happen is when we are really fixated on our credit card debt and really, you know, really eroding a sense of financial strength and trying to be debt free.
• 38:11
  Speaker 1: So please, please, share it in all of the places.
• 38:16
  Speaker 1: All right, i love you.
• 38:17
  Speaker 1: Thank you for hanging out with me today.
• 38:19
  Speaker 1: Bye, it was my pleasure and joy to talk with you today.
• 38:27
  Speaker 1: Thank you for listening.
• 38:28
  Speaker 1: If you found value in our conversation, i kindly ask you to share the show with a friend who deserves to unleash her financial power.
• 38:35
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• 38:40
  Speaker 1: Together.
• 38:40
  Speaker 1: We can amplify the message and bring more money into the hands of good women For ongoing guidance and unwavering support on your financial journey.
• 38:49
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• 38:51
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• 38:55
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• 39:04
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• 39:14
  Speaker 1: Embrace your financial power, create the life you desire and let's ignite a movement of Cash Confident women who are transforming the world.
• 39:23
  Speaker 1: $1.00, one decision at a time.