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Debt Prioritisation · She's On The Money

0:00
Speaker 1: She's on the Money. She's on the Money.
0:23
Speaker 2: Hello, and welcome to She's on the Money, the podcast
0:26
Speaker 2: the Millennials who want Financial Freedom. So you've got a
0:29
Speaker 2: few bad debts and you're ready to pay them off.
0:31
Speaker 2: But where the heck do you start in terms of
0:34
Speaker 2: prioritizing your debts and what tricks are there to actually
0:37
Speaker 2: start paying them off sooner? I know, Gi, I know,
0:41
Speaker 2: she's got the answers. My name is Georgia King, and
0:44
Speaker 2: joining me as always to answer these questions is financial
0:47
Speaker 2: advisor Victoria Divine. Why is debt prioritization so very important?
0:53
Speaker 3: Because if we're in debt, we need to prioritize it,
0:55
Speaker 3: which is probably the wrong thing to say at the
0:58
Speaker 3: start of an episode, but at the end of the day,
1:01
Speaker 3: often when it comes to debt, and if we are
1:03
Speaker 3: in debt and we are stressed about it, we stick
1:05
Speaker 3: our heads in the sand and don't do what we should,
1:08
Speaker 3: which is sit down and go, you know what, how
1:10
Speaker 3: am I getting out of this place? What am I
1:12
Speaker 3: going to be doing? And what am I going to prioritize? First?
1:16
Speaker 3: Once you make a list of prioritizations, you'll find that
1:19
Speaker 3: you are so much more motivated to actually kick them
1:23
Speaker 3: down and get it done and start seeing progress. Whereas
1:27
Speaker 3: if you haven't made a priorities list and you haven't
1:29
Speaker 3: worked out how you're going to get out of that place,
1:32
Speaker 3: you are often more likely to feel just super overwhelmed
1:35
Speaker 3: and like it's never going to happen. So we're doing
1:38
Speaker 3: it one so we can get out of debt, but
1:40
Speaker 3: two for our own mental health. Jodge a king beautiful.
1:43
Speaker 2: So it's like a plan that'll make us pay down
1:45
Speaker 2: our debts sooner we'll feel more motivated. And that's kind
1:47
Speaker 2: of the gist.
1:48
Speaker 3: Yet, Yeah, and it's all about just understanding as well,
1:51
Speaker 3: like why are we here? How did we get here?
1:53
Speaker 3: Are there some things we need to change? But also
1:55
Speaker 3: what one are we going to pay first? Are we
1:57
Speaker 3: going to pay credit card one or two or three?
1:59
Speaker 3: Or you know, maybe you've got a personal loan, And
2:02
Speaker 3: it's about working out what that looks like, because often
2:05
Speaker 3: when you have a lot of debts or you're in
2:07
Speaker 3: a situation where there is a number of different ones
2:10
Speaker 3: to prioritize, so often we can feel super overwhelmed and
2:12
Speaker 3: just putting ourselves in the best possible position is going
2:15
Speaker 3: to mean that we are actually going to get out
2:17
Speaker 3: of these instead of consistently putting it off or just
2:20
Speaker 3: paying the minimum because you're just not sure what to do.
2:23
Speaker 4: Yeah, okay, cool.
2:24
Speaker 2: So before we do get into it V as well,
2:27
Speaker 2: I assume today we're going to be talking about good
2:29
Speaker 2: debt and bad debt. Our OG is going to know
2:33
Speaker 2: exactly what the difference is. But for our newer listeners,
2:35
Speaker 2: can you clarify what it does? Mate?
2:38
Speaker 3: I can clarify that. And if you've read my book,
2:40
Speaker 3: which arguably everybody should have, you know that I classify
2:44
Speaker 3: debt in three ways. I classified as good debt, bad debt,
2:48
Speaker 3: and okay debt. So good debts are things that actually
2:51
Speaker 3: help contribute to your wealth creation. So that could be
2:55
Speaker 3: something like a mortgage because over time you're actually creating
2:58
Speaker 3: an asset for yourself. An investment loan not as common,
3:01
Speaker 3: but definitely worthy of consideration, where you've borrowed money and
3:05
Speaker 3: you've invested in something. It could be a business loan
3:09
Speaker 3: as well. I don't want people to think that any
3:11
Speaker 3: type of loan is negative, but if it's creating your wealth,
3:14
Speaker 3: from my perspective, it's good debt. Doesn't mean we don't
3:17
Speaker 3: prioritize it, we absolutely do, but we don't see it
3:21
Speaker 3: as something that we have to extinguish asap because it's
3:24
Speaker 3: meant to be helping us over the long term. Okay,
3:27
Speaker 3: debt from my perspective is something like a hex debt,
3:30
Speaker 3: So I wouldn't call it good debt because at the
3:33
Speaker 3: end of the day, yes, it is helping your future
3:35
Speaker 3: wealth because you're getting an education, but it's still something
3:38
Speaker 3: that is going to impact your cash flow if you
3:40
Speaker 3: have those help repayments coming out of your income each
3:43
Speaker 3: and every single week or month. So with hex debt, yes,
3:47
Speaker 3: it's really important to prioritize and make sure we're paying down,
3:50
Speaker 3: but it's something that a lot of people make the
3:52
Speaker 3: decision to not add contributions to, so they might just
3:55
Speaker 3: be paying the minimum for a long period of time
3:58
Speaker 3: and that's totally okay. And the reason they might not
4:01
Speaker 3: prioritize that is because hex debt or help debt as
4:05
Speaker 3: it's called nowadays. It's just showing my age that debt
4:11
Speaker 3: doesn't actually accrue any interest and there's no timeline on
4:14
Speaker 3: paying it, so if you don't earn over a certain
4:17
Speaker 3: amount of money, you don't have to start paying it back,
4:20
Speaker 3: and it only increases in line with CPI or indexation,
4:24
Speaker 3: So that's how much the cost of goods and services
4:27
Speaker 3: increase each and every single year, So it's only accruing.
4:30
Speaker 3: I think last year was like one point eight percent,
4:34
Speaker 3: And that's an okay thing to carry, given the amount
4:37
Speaker 3: of flexibility that these repayments carry. So if you lost
4:40
Speaker 3: your job, you're not going to be in a position
4:42
Speaker 3: where the government's like, oh my gosh, you have to
4:44
Speaker 3: pay back your hex debt? What are you doing? Or
4:46
Speaker 3: it's the same as not true for a credit card,
4:49
Speaker 3: which I categorize as bad debt. So bad debts are
4:52
Speaker 3: debts that actually stop you from attaining any level of
4:56
Speaker 3: financial freedom. These are things like credit cards, after pay,
5:00
Speaker 3: any type of buy now, pay later scheme, and personal loans.
5:04
Speaker 3: So if you're a bit confused and you're like yeah,
5:06
Speaker 3: but be like, I don't know if it's good or
5:07
Speaker 3: a bad debt. The question is what have you got
5:10
Speaker 3: to show for it? Is it clothes, it's shoes, or
5:13
Speaker 3: is it future wealth. If the answer is future wealth,
5:16
Speaker 3: it's probably good debt. But if it's stopping you from
5:19
Speaker 3: creating your wealth, then that's when we really need to
5:22
Speaker 3: be having a think about prioritizing it and smashing it
5:25
Speaker 3: out asap. So when we look at it, I'm not
5:28
Speaker 3: saying shun credit cards, shun personal loans, like as you know,
5:32
Speaker 3: g I've had a personal loan. I've had credit cards.
5:35
Speaker 3: I found myself in a bit of a sticky situation
5:37
Speaker 3: with them. But at the same time, would I change
5:40
Speaker 3: why I used them? No. I used a personal loan
5:43
Speaker 3: so I could go overseas and study because I couldn't
5:46
Speaker 3: afford it in that moment. Yes, a lot of people
5:49
Speaker 3: would say, oh, you should have saved for longer and
5:50
Speaker 3: just done it the year after, but I wanted to
5:52
Speaker 3: do it then, and you know what, it worked for me,
5:54
Speaker 3: So gee, I don't regret getting them. I do regret
5:57
Speaker 3: the amount of stress and anxiety I put myself through
5:59
Speaker 3: and the amount of sleepless nights. But at the same time,
6:02
Speaker 3: I wouldn't change that because that got me to where
6:04
Speaker 3: I am today. But it's one of those things that
6:07
Speaker 3: I wish someone had sat me down and said, Victoria,
6:09
Speaker 3: do you actually understand what this means? So, yes, I
6:12
Speaker 3: was paying for an experience. I wouldn't change it. I
6:14
Speaker 3: had a brilliant time. But I do wish I had
6:16
Speaker 3: better savings have it so I wasn't in that position
6:18
Speaker 3: in the first place.
6:19
Speaker 2: Yeah, but like, look how far it got you. You
6:21
Speaker 2: learned so much from it, And I guess this episode
6:25
Speaker 2: today it's like not about shame. There's none of that
6:27
Speaker 2: in the Shoes on the Money community anyway. But yeah,
6:30
Speaker 2: we're just going to talk through exactly how you can
6:32
Speaker 2: get ahead sooner. Okay, So let's get into it then, V.
6:35
Speaker 2: What strategies are there for debt prioritization? Oh my god,
6:39
Speaker 2: I need a sip of my tea. What is my
6:40
Speaker 2: voice doing? Well?
6:41
Speaker 3: You have a suplico tea while I explain what these
6:44
Speaker 3: strategies are. So strategies for debt prioritization there are millions,
6:49
Speaker 3: but I talk about two key methods more often than
6:51
Speaker 3: not because I feel like they actually help the most.
6:55
Speaker 3: And these two strategies are not my own. I didn't
6:58
Speaker 3: create these. I'm absolutely not taking credit for them. I
7:01
Speaker 3: don't know who created them because I feel like they're
7:04
Speaker 3: so universal when it comes to debt reduction, but they
7:07
Speaker 3: work really well. And these two strategies are called the
7:10
Speaker 3: Avalanche method and the Snowball method, And I mean sounds
7:14
Speaker 3: very like ooh, it's a winter festive episode. But both
7:20
Speaker 3: of them actually have nothing to do with the snow
7:22
Speaker 3: or winter. But both of them do accelerate the debt
7:25
Speaker 3: reduction process in their own ways and give you the
7:28
Speaker 3: structure you might be craving to help you get out
7:31
Speaker 3: of debt. So the first one is the avalanche method.
7:35
Speaker 3: Avalanche avalanche unsure of which is right in Australia, I'm
7:39
Speaker 3: sure not. They corrected on that later G. But essentially,
7:42
Speaker 3: this method of debt reduction sees you paying the highest
7:46
Speaker 3: interest rate first, while still making minierum more payments on
7:49
Speaker 3: all other debts. You're not paying them at all, but
7:52
Speaker 3: we are aggressively trying to get rid of the debt
7:55
Speaker 3: that has the highest interest rate first, and then once
7:58
Speaker 3: that's paid off, you work your way down to end
8:02
Speaker 3: up paying the debt with the lowest interest rate. So
8:05
Speaker 3: there are a number of reasons why you do this.
8:07
Speaker 3: So the goodbits using this method means that you will
8:10
Speaker 3: pay less in the long run money in because you
8:12
Speaker 3: are targeting the debt with the largest amount of interest first,
8:15
Speaker 3: so that you're not accruing a lot of other debt
8:18
Speaker 3: in the background. And it can also speed up the
8:20
Speaker 3: debt repayment process. So by only paying minimum on your
8:24
Speaker 3: other debts and aggressively paying one, you're saving the most interest,
8:28
Speaker 3: and that's putting you in the most preferable position. A
8:31
Speaker 3: couple of downsides there always are. Requires a fair bit
8:35
Speaker 3: of discipline, so it's not easy to do these things,
8:38
Speaker 3: and that is okay, but it is about commitment, and
8:41
Speaker 3: it can stay harder to stay motivated because sometimes the
8:45
Speaker 3: debt with the highest interest rate is not necessarily the
8:49
Speaker 3: biggest debt you have, So we need to make sure
8:51
Speaker 3: that we understand why we're doing this and commit to
8:54
Speaker 3: it so that over the long term we get rid
8:56
Speaker 3: of it and stay motivated. In comparable, the snowball method
9:01
Speaker 3: g is exact opposite. Oh that's a bit dramatic. It's
9:05
Speaker 3: not the exact opposite, but the snowball method is basically
9:09
Speaker 3: the opposite of the avalanche method, where you pay off
9:12
Speaker 3: and target your smallest debt first, so you completely forget
9:15
Speaker 3: about the interest rates on all of the debts and
9:18
Speaker 3: you just plan on tackling the smallest step first, and
9:21
Speaker 3: then you work your way up to the largest s
9:23
Speaker 3: deet without taking into consideration any of the interest rates.
9:27
Speaker 3: So some people prefer this because there's a number of
9:31
Speaker 3: obviously good bits and I'll explain those in a second.
9:33
Speaker 3: But some people don't like this because obviously interest rate
9:37
Speaker 3: isn't taken into consideration, and that can make people feel
9:40
Speaker 3: a bit angsty. So, as I said before, there are
9:43
Speaker 3: some good bits. I love the snowball method because it
9:45
Speaker 3: helps you nail smaller goals. Sooner you're going to feel
9:49
Speaker 3: more motivated. You're going to feel more accomplished because you
9:51
Speaker 3: be like, heck, yes, I got one debt smashdown and
9:54
Speaker 3: you can move on to the next one. So it
9:57
Speaker 3: makes you feel like you are making more progress and
10:00
Speaker 3: you are. With the avalanche method. Doesn't mean you are
10:03
Speaker 3: or not. It's just usually when you get to close
10:05
Speaker 3: your credit card or get to shut your after pay like,
10:08
Speaker 3: that's going to feel really good and keep you on
10:11
Speaker 3: the right track. One of our best mates Dave Ramsey,
10:15
Speaker 3: he's not my best mate gee, but I would like
10:17
Speaker 3: to get him on the show.
10:18
Speaker 4: You guys should do a collab, we should.
10:21
Speaker 3: I think he's pretty picky with who he collabs with,
10:24
Speaker 3: but did you know he collabed with our mate Glenn
10:26
Speaker 3: James from My millenial on Andrew's podcast on My Millennial Money.
10:30
Speaker 4: Really Yeah, when he came.
10:32
Speaker 3: To Australia, he hung out with Glenn James, and I'm
10:35
Speaker 3: not gonna lie, it's a little bit envious because he's
10:38
Speaker 3: known as a bit of a finance whiz in the US.
10:41
Speaker 3: In saying that I do want to stipulate, I don't
10:43
Speaker 3: agree with all of his advice, and there are some
10:46
Speaker 3: things he says that I go, come on, Dave, mate,
10:49
Speaker 3: calm down. But he is really inspirational in this area.
10:53
Speaker 3: So anyway back to what I was trying to say
10:55
Speaker 3: about old mate Dave, he basically says that even though
10:59
Speaker 3: the avalanche method should technically see us paying less, the
11:02
Speaker 3: snowball method is more effective because personal finance is twenty
11:06
Speaker 3: percent head knowledge, which knowledge knowledge. It's not how I
11:11
Speaker 3: would have explained it, but you have head knowledge and
11:14
Speaker 3: eighty percent about behavior, which we do at Cheese on
11:18
Speaker 3: the Money. Absolutely agree with that, and you need some
11:20
Speaker 3: quick wins in order to say super pumped enough to
11:23
Speaker 3: get out of debt completely, so is not wrong. The
11:26
Speaker 3: snowball method is also easy because you don't have to
11:29
Speaker 3: do any maths, you don't have to think about the
11:31
Speaker 3: interest rate, You don't have to calculate anything. You just
11:33
Speaker 3: start with the smallest debt, start smashing it off and
11:36
Speaker 3: making as many repayments as you can to that small
11:39
Speaker 3: debt to get rid of it, obviously while still making
11:42
Speaker 3: minimum repayments on your other debts, please don't neglect them.
11:46
Speaker 3: But it just is a little bit simpler because there's
11:48
Speaker 3: no working things out or calculating interest rate or how
11:51
Speaker 3: much you'll pay over the long term versus how many years.
11:54
Speaker 4: So what are the negatives then be So as I.
11:56
Speaker 3: Said before, gee, you're gonna end up paying more because
11:59
Speaker 3: of the interest factor. But again, it's about motivation and
12:02
Speaker 3: feeling like you're smashing it out. And it may be
12:05
Speaker 3: a longer journey to becoming debt free, but it's more
12:09
Speaker 3: about what are you actually going to be able to
12:12
Speaker 3: feasibly commit to. It's not about which one's going to
12:15
Speaker 3: save us the most money, because when it comes to debt,
12:18
Speaker 3: we actually just need a plan that works for us personally,
12:22
Speaker 3: not necessarily works best on paper.
12:24
Speaker 2: Yeah okay, so avalanche is harder but more effective, not
12:29
Speaker 2: necessarily more effective, but in like on paper, more effective.
12:33
Speaker 3: More effective if we work out what that actually means
12:35
Speaker 3: on paper.
12:36
Speaker 2: Yep, Snowball is potentially easier, but a slower and steadier
12:40
Speaker 2: method of going about things.
12:42
Speaker 4: How do you decide which one is right for you?
12:44
Speaker 3: Well, I prefer doing it based on which name you
12:48
Speaker 3: think is cuter, So like I think snowball soft, like
12:51
Speaker 3: Snowball's fun. It was the name of the Cat and
12:53
Speaker 3: the Simpsons, like it just makes sense. Avalanche sounds aggressive,
12:57
Speaker 3: so like I don't go with it, but more serious. Gee,
13:00
Speaker 3: it comes down to your personality. It comes down to
13:03
Speaker 3: whether you're someone who has strong discipline to be able
13:06
Speaker 3: to put that extra cash towards debt repayments. So if
13:09
Speaker 3: that's you, I'd probably choose the avalanche method because you're
13:12
Speaker 3: on top of it and you're actually motivated by that.
13:15
Speaker 3: But if you're someone who struggles with self motivation, which,
13:18
Speaker 3: to be honest, I think I would be a snowballer,
13:21
Speaker 3: not an avalancher, because even though it makes logical sense,
13:25
Speaker 3: I just like progress. So sometimes if I see that
13:28
Speaker 3: I owe thirty bucks or something, I'm far more likely
13:30
Speaker 3: to just want it gone and then I feel accomplished.
13:32
Speaker 3: I'm the type of person as well. G When I'm
13:35
Speaker 3: writing a to do list, I write things I already
13:37
Speaker 3: have done.
13:37
Speaker 4: The same same then you highlight them.
13:39
Speaker 3: So if that's won you resonate with putting to do
13:42
Speaker 3: list items on the to do list that you've already done,
13:44
Speaker 3: I'd probably say you're a snowballer, So completely up to you.
13:48
Speaker 3: And just like sunscreen, because we obviously are very big
13:51
Speaker 3: advocates of sunscreen in this community, where they say the
13:54
Speaker 3: best sunscreen is the one you use. The same goes
13:57
Speaker 3: for debt reduction methods. The best one is just one
14:00
Speaker 3: that you're going to stick to.
14:01
Speaker 2: I love that, Okay. So that is the snowball and
14:04
Speaker 2: the avalanche methods sorted fee. So they're the main methods
14:08
Speaker 2: of debt prioritization and paying down our debts. But what
14:11
Speaker 2: about debt consolidation Is that is that a method as well? Gee,
14:16
Speaker 2: I guess it's not really prioritizing. It's really just prioritizing
14:19
Speaker 2: all of them and making them one.
14:20
Speaker 3: And yeah, Cook did an entire no I love this,
14:24
Speaker 3: We did an entire episode on debt consolidation. So do
14:27
Speaker 3: you should be a wizard on this by now? Like,
14:29
Speaker 3: come on, Georgia King. But debt consolidation is essentially if
14:34
Speaker 3: you didn't listen to that episode. Please do, but if
14:36
Speaker 3: you didn't, it's where you take out a loan to
14:38
Speaker 3: cover all of our debts so that we're just working
14:41
Speaker 3: out paying one debt instead of multiple. And there are
14:45
Speaker 3: a number of reasons we would do this. So one
14:48
Speaker 3: because personal loans and credit cards often carry higher interest rates.
14:51
Speaker 3: So the average of a credit card usually sits between
14:54
Speaker 3: fourteen and twenty two percent interest rate. A personal loan
14:58
Speaker 3: is probably sitting around fourteen if it's unsecured, maybe a
15:01
Speaker 3: little bit less if it is a secured personal loan.
15:04
Speaker 3: But essentially, when you roll them all together, you take
15:07
Speaker 3: out what's called a debt consolidation loan, and it's essentially
15:10
Speaker 3: a personal loan that just covers all of those debts,
15:12
Speaker 3: pays them back, and you just have one in one place.
15:15
Speaker 3: So a good example is, if let's say you have
15:17
Speaker 3: three different credit cards, all with different levels of debt
15:20
Speaker 3: associated with them and different interest rates, and they're being
15:23
Speaker 3: paid at different times of the month. Debt consolidation would
15:26
Speaker 3: mean it swops in, it pays off all of those
15:29
Speaker 3: for you, gives you one single loan that you owe
15:32
Speaker 3: interest on. It's often a lower rate of interest, and
15:36
Speaker 3: you just pay that off once a month. The benefits
15:39
Speaker 3: of this is it can feel so much more free,
15:41
Speaker 3: Like if you're someone who is in a bit of
15:43
Speaker 3: a pickle, lots of debts can feel really overwhelming and
15:46
Speaker 3: it does feel like you're pulling them all together, taking control,
15:49
Speaker 3: and you just have one repayment to make it's less overwhelming,
15:53
Speaker 3: and it just puts you in a position where you
15:55
Speaker 3: feel a little bit more empowered to get debt free.
16:00
Speaker 3: You might be able to manage a law interest rate,
16:02
Speaker 3: which is a bit of a money win. So that
16:03
Speaker 3: means that you are going to be saving money over
16:06
Speaker 3: the long term. And it's important to understand that it's
16:10
Speaker 3: one less admin task as well. So at the end
16:12
Speaker 3: of the day, if you're paying lots of different debts,
16:15
Speaker 3: let's be honest, doing one thing instead of three or
16:17
Speaker 3: four kind of just makes sense.
16:19
Speaker 2: Gem okay, so be that that actually does sound quite good.
16:23
Speaker 2: But I remember from that episode that there were some
16:26
Speaker 2: down downsides.
16:28
Speaker 4: Can't remember what they are, so.
16:32
Speaker 3: I'm sorry, honestly, g King, you have been on this
16:34
Speaker 3: show long enough to be a financial whiz yourself. But
16:37
Speaker 3: as you were asking for, when it's not a good idea,
16:40
Speaker 3: there are a number of downfalls and we just need
16:42
Speaker 3: to be aware of them. It doesn't mean we don't
16:44
Speaker 3: do it. So it can take us longer to pay
16:47
Speaker 3: off one large loan instead of you a multitude of
16:50
Speaker 3: little debts which could ultimately cost us more. We just
16:53
Speaker 3: need to take it into consideration. It can leave us
16:56
Speaker 3: a bit tempted to spend more and leave you in
16:59
Speaker 3: a deeper level of debt if you do go and
17:01
Speaker 3: get another credit card. So if you don't have a
17:04
Speaker 3: lot of self control, I would be really careful about
17:07
Speaker 3: this because consolidating it makes it feel like it's going
17:10
Speaker 3: away even though it's still there. It's just more manageable
17:13
Speaker 3: and more palatable. So you might go, you know what
17:16
Speaker 3: I've got that that's really manageable. I'm going to go
17:18
Speaker 3: get another credit card. Yeah. Not a good idea, Yeah, yeah, right.
17:23
Speaker 3: And there are a few scammers in this space, so
17:25
Speaker 3: please be careful if you do go down this path,
17:28
Speaker 3: please please please make sure you do so with a
17:30
Speaker 3: legitimate mainstream lender, as there are a few scammers out
17:35
Speaker 3: there that do make you pay upfront freeze to set
17:38
Speaker 3: up loans and then they never follow you up and
17:40
Speaker 3: give you the money that is required to pay off
17:41
Speaker 3: all your spoiler debts, which means that you're in a
17:43
Speaker 3: bigger piogle than you were before. And if you do
17:46
Speaker 3: have a home loan, it could be impacted if things
17:49
Speaker 3: go pair shaped with your debt consolidation loan. We have
17:52
Speaker 3: spoken about this before and it's a bit of a
17:54
Speaker 3: shout out to an old show partner that you know.
17:56
Speaker 3: I actually still keep in contact with it. I haven't
17:58
Speaker 3: worked with in a little while, but hopefully we will
18:01
Speaker 3: soon because I love them. But our friends at Wiser
18:04
Speaker 3: so WISR. They do a lot of debt consolidation and
18:08
Speaker 3: also help advise on what the best outcome would be
18:11
Speaker 3: and I really like what they do. Obviously, you can
18:14
Speaker 3: also call the National Debt Helpline and all of that
18:16
Speaker 3: because they are really helpful. But when it comes to
18:19
Speaker 3: debt consolidation, Wiser do a really good job. Again, that's
18:23
Speaker 3: not a sponsored mentioned. It's just good eggs doing good things,
18:26
Speaker 3: and you guys deserve to know about it.
18:28
Speaker 4: Brilliant.
18:29
Speaker 2: Are there any other methods that people use or are
18:31
Speaker 2: they the main.
18:32
Speaker 3: They're pretty much the main methods. I mean, there's a
18:34
Speaker 3: million different ways you could do it. You could put
18:36
Speaker 3: a chart on your fridge, during app on your phone,
18:38
Speaker 3: or you know. There's lots of different ways that you
18:40
Speaker 3: could get rid of debt, but those are the two
18:43
Speaker 3: main ways that I see people doing it and I
18:46
Speaker 3: talk to clients about. And then obviously debt consolidation is
18:50
Speaker 3: something on the top of that that you go, is
18:53
Speaker 3: it actually better to do that? But with debt consolidation,
18:56
Speaker 3: one thing to be aware of is if you are
18:58
Speaker 3: up the river of debt pretty far, sometimes it won't
19:02
Speaker 3: apply to you. Sometimes they'll say, look, we're not willing
19:05
Speaker 3: to take on that level of risk. So if you've
19:07
Speaker 3: got a few credit cards and you know you're in
19:09
Speaker 3: a bit of a people, yes, debt consolidation might be
19:11
Speaker 3: an option. But I have worked with clients and people
19:14
Speaker 3: before where we've gone to consolidate a debt and the
19:18
Speaker 3: banks have said, no, thank you. Come back once you've
19:20
Speaker 3: gotten a fair bit of debt down so that we
19:23
Speaker 3: can do it then, because we're not willing to take
19:25
Speaker 3: the risk right now. So don't feel bad if that
19:27
Speaker 3: is you. And if it is you and you're feeling
19:29
Speaker 3: super super super overwhelmed, I get it. Our friends at
19:32
Speaker 3: the National Debt Helpline are going to be able to
19:35
Speaker 3: tell you exactly what your next steps should be.
19:38
Speaker 2: So, speaking of the national debt helpline EE has that
19:41
Speaker 2: for a transition. When I was doing some reading for today,
19:45
Speaker 2: they mentioned high priority debts and they said that they
19:49
Speaker 2: should be the ones that we focus our attention on first.
19:51
Speaker 4: What are they?
19:52
Speaker 3: Yes, So I think that that's really important to point
19:55
Speaker 3: out as well. So when you're in debt, it can
19:56
Speaker 3: feel super overwhelming. But basically, these are debts that impact
20:01
Speaker 3: our lives directly the most. So we're talking things like
20:05
Speaker 3: your rent or your mortgage, or counsel rates or body
20:08
Speaker 3: corporate fees, or a car repayment, or things like energy
20:11
Speaker 3: and water and food. We are not talking go and
20:15
Speaker 3: pay off your credit card for the shoes that you bought.
20:17
Speaker 3: If you can't put food on the table, we need
20:20
Speaker 3: to negotiate that. So if you are struggling, then these
20:24
Speaker 3: are the debts that you need to focus on first.
20:27
Speaker 3: And often we feel really guilty because a credit card
20:29
Speaker 3: company will call us and they make us feel awful
20:32
Speaker 3: for not paying it, and we don't feel good about
20:34
Speaker 3: that situation. So you're like, oh my gosh, maybe I
20:36
Speaker 3: should just pay that off. But if you're not able
20:38
Speaker 3: to put food on the table. That is not something
20:41
Speaker 3: you should be paying. And I know that they're not
20:43
Speaker 3: going to love me for saying that, but I would
20:45
Speaker 3: be saying to them, look really sorry, I don't have
20:47
Speaker 3: the funds for that. Right now. I have to put
20:50
Speaker 3: food on the table for my kids or for myself,
20:52
Speaker 3: or I need to pay rent so that I can
20:54
Speaker 3: keep a roof over my head. Because nobody deserves to
20:57
Speaker 3: lose their home over bad debt. Suriously struggling, please please
21:02
Speaker 3: please reach out to our friends at the National Debt Helpline.
21:05
Speaker 3: They are always so helpful. They are a wealth of
21:07
Speaker 3: knowledge in this space, and they'll be able to help
21:10
Speaker 3: you create a plan. I know some of you have
21:12
Speaker 3: messaged me and you've said, look, be I really want
21:14
Speaker 3: to call them, but I feel really overwhelmed or I
21:16
Speaker 3: don't think my situation is bad enough. No, there's no
21:19
Speaker 3: such thing. When you call them, they'll work out what
21:21
Speaker 3: you need. So they'll pick up the phone. They'll be like, hey, gee,
21:24
Speaker 3: how are you hope you've been well? How can we help?
21:27
Speaker 3: And you'll tell them a little bit about your situation
21:29
Speaker 3: and they will match you with the right person if
21:32
Speaker 3: it's not the right service for you. They're just going
21:34
Speaker 3: to tell you that they are very kind humans. But
21:37
Speaker 3: usually they will match you up with a financial counselor
21:40
Speaker 3: for free to help you get out of the situation
21:43
Speaker 3: that you're in, which is why I am such a
21:45
Speaker 3: big advocate of them.
21:47
Speaker 4: Do you hear that a lot?
21:48
Speaker 2: I'm not sure like if you would hear it with
21:49
Speaker 2: clients or in our community V But do you feel
21:52
Speaker 2: like a lot of people don't reach out for help
21:54
Speaker 2: because they don't think they're in a bad enough spot,
21:56
Speaker 2: or maybe they think that they're taking that service from
21:58
Speaker 2: someone else who needs it more.
21:59
Speaker 3: Is that? Yes? And it's not a thing and complete tangent.
22:04
Speaker 3: Have you watched on Netflix? Mate?
22:06
Speaker 4: Oh my god, that's what I was thinking of when
22:08
Speaker 4: you were saying all of this stuff.
22:09
Speaker 3: Yes, So I watched that recently with Steve, and she
22:13
Speaker 3: in that show does exactly that. She like goes to
22:16
Speaker 3: help and she's like, yeah, but like, I don't have
22:18
Speaker 3: real abuse. And the woman at the shelter's like, what
22:22
Speaker 3: is real abuse? And she's like, oh, like, my partner
22:25
Speaker 3: doesn't hit me. And it was emotional abuse and anyway,
22:28
Speaker 3: financial abuse, Yeah, it was emotional abuse, financial abuse. It was.
22:31
Speaker 3: It was a lot. It's a really good show. It's
22:34
Speaker 3: probably a bit triggering if you're going through it, so
22:36
Speaker 3: just a bit of a content warning there for you guys.
22:38
Speaker 3: But I really enjoyed it. But the thing that I
22:40
Speaker 3: saw was, Yes, we always think about other people being
22:44
Speaker 3: in a worse off situation than us, when in reality,
22:48
Speaker 3: if you're struggling with something, that doesn't mean that just
22:51
Speaker 3: because someone else has that harder, that your struggles aren't
22:54
Speaker 3: worthy of consideration. Like you are worthy and at the
22:57
Speaker 3: end of the day, if it's something that you need
22:59
Speaker 3: help with, please I don't feel like you can't reach out.
23:01
Speaker 3: But yeah, George, I get a lot of messages from
23:03
Speaker 3: people saying, hey, v I just don't know who to contact,
23:06
Speaker 3: And I say National Debt Helpline. They're like, oh yeah,
23:08
Speaker 3: but I'm just not bad enough for that. Yeah, that's okay.
23:12
Speaker 3: You can still call them. You don't need to be
23:14
Speaker 3: the worst of the worst to call them. They're there
23:17
Speaker 3: for everybody. They're there for help. Like if I was
23:19
Speaker 3: in a situation and I didn't know what to do
23:22
Speaker 3: and I had a whole heave of debt, I'd call
23:24
Speaker 3: them and feel really comfortable calling them because I know
23:26
Speaker 3: they're the right people for those situations. So please don't
23:30
Speaker 3: feel like you need to have a worse situation than
23:32
Speaker 3: what you do to reach out for the help that
23:34
Speaker 3: you deserve.
23:35
Speaker 4: Yeah, really, well said.
23:37
Speaker 2: They're v all right, guys, we will be back after
23:39
Speaker 2: a very short break to talk through strategies of paying
23:42
Speaker 2: down our debts faster. Plus we'll be answering a few
23:45
Speaker 2: debt inspired questions from the community, So please don't go anywhere,
23:54
Speaker 2: all right, b Let's talk through some strategies for actually
23:57
Speaker 2: paying down our debts faster. What tricks of the trade
24:00
Speaker 2: do you have for us?
24:01
Speaker 3: Tricks with the truck? Look, let's call them tricks. Is
24:04
Speaker 3: the trade? Do you guys are going to be like, hey,
24:06
Speaker 3: it's be the broken record again because I'm going to
24:08
Speaker 3: be like, sort out your budget, sort it out, just
24:11
Speaker 3: get it done. Do you know what I'm so passionate
24:13
Speaker 3: about you guys sorting out your budget? So that I
24:15
Speaker 3: put a free one on my website that you can
24:17
Speaker 3: go and download. It's literally the one I use with
24:19
Speaker 3: my clients. It's not the fancy budget and cash Flow
24:22
Speaker 3: masterclass one that calculates your cash flow and tells you
24:25
Speaker 3: what bank accounts to put it in. It's not that
24:28
Speaker 3: one because unfortunately I can't give that one away for free.
24:31
Speaker 3: But this one is going to help you track what
24:33
Speaker 3: you earn, what you spend, what you own, and what
24:35
Speaker 3: you owe. It takes into consideration everything that you need
24:39
Speaker 3: to get a clean, clear budget in order and work
24:42
Speaker 3: out if you are spending more than you are earning
24:45
Speaker 3: or you're earning more than you are spending, which is
24:47
Speaker 3: a very good situation to be in. So download that budget.
24:50
Speaker 3: If you haven't done it yet, please do. It's literally free,
24:56
Speaker 3: and then have a think about some things that you
24:58
Speaker 3: can do in addition to that. Budget is going to
25:01
Speaker 3: be helpful, not because it's restrictive. So I'm not saying
25:04
Speaker 3: go on a budget like cut back, but a budget
25:07
Speaker 3: is going to tell you where you're spending your money
25:09
Speaker 3: and where you're not. It's going to tell you what
25:13
Speaker 3: you are prioritizing, and it might just highlight some things
25:16
Speaker 3: that you go, oh, Victoria over eat three nights this
25:20
Speaker 3: week is unacceptable. Whereas if I didn't have my budget,
25:24
Speaker 3: maybe I wouldn't have been thinking about that because like
25:26
Speaker 3: the hard numbers aren't in my face. The next thing
25:30
Speaker 3: is thinking about how can you get some additional funds
25:33
Speaker 3: in the door. Can you get a side hustle? And
25:36
Speaker 3: we're not saying go and start an entire business. Gee,
25:38
Speaker 3: we recently did an entire episode on I think it
25:41
Speaker 3: was like five ways to bring cash in the door
25:43
Speaker 3: without leaving a couch yep, Like, go listen to that episode,
25:47
Speaker 3: because it's side hustles that don't require any money to start.
25:51
Speaker 3: It's surveys, it's online work. It is stuff that you
25:55
Speaker 3: can do literally today without having to put another dollar aside,
26:00
Speaker 3: Which is the money when I reckon the next one.
26:03
Speaker 3: Take a leaf out of Jessicriici's book, sell some stuff
26:06
Speaker 3: you don't need. She's the biggest hustler I know, g
26:09
Speaker 3: like she is all across Facebook marketplace. She puts her
26:12
Speaker 3: clothes on depop all the time. Sell stuff you don't need,
26:16
Speaker 3: and chuck that cash towards debt repayments. Like even if
26:19
Speaker 3: you're like Gina, what I don't have enough to get
26:22
Speaker 3: rid of the debt, but it'd feels so good to
26:24
Speaker 3: have another month's worth of debt repayments just in the rag,
26:28
Speaker 3: or putting that cash into an emergency account so you
26:32
Speaker 3: feel a little bit more comfortable about your budget. So
26:35
Speaker 3: it doesn't necessarily mean you need to go and sell
26:38
Speaker 3: stuff to get rid of the debt completely, but you
26:40
Speaker 3: might be feeling a bit uncomfortable about your financial situation.
26:44
Speaker 3: So selling some stuff to create an emergency fund while
26:47
Speaker 3: you have debt can be really empowering because you know,
26:50
Speaker 3: you know what, if I don't have the funds this week,
26:53
Speaker 3: I've got an emergency fund that I can dip into,
26:55
Speaker 3: pull it out, and I'm all good, and I'm not
26:57
Speaker 3: going to go into further debt because I don't have
27:00
Speaker 3: cash available. So for my clients and I, that seems
27:03
Speaker 3: to be a really empowering way of kind of getting ahead,
27:07
Speaker 3: even though we're not in the position to be able
27:09
Speaker 3: to extinguish the debt completely right now, because we feel
27:12
Speaker 3: a little bit more cushy, a little bit more comfortable,
27:14
Speaker 3: and it makes you feel so much more secure on
27:17
Speaker 3: that journey. It's one stay motivated using visuals. Go download
27:22
Speaker 3: the shes on the Money, debt tracking charts and our
27:25
Speaker 3: savings hacks, put them on your fridge, keep them front
27:28
Speaker 3: of mind, make a little mood board. Put pictures on
27:31
Speaker 3: your fridge of what you're going to get up to
27:33
Speaker 3: when you are out of debt and hell you're going
27:35
Speaker 3: to feel, so it is always front of mind, and
27:38
Speaker 3: make sure that you are putting yourself in the best position.
27:42
Speaker 3: If you can't pay down the debt, stop putting so
27:44
Speaker 3: much more pressure on yourself to do it faster. Just
27:48
Speaker 3: because we're talking about it does not mean it's going
27:50
Speaker 3: to work for you. If it is the long slog
27:53
Speaker 3: for you, and you know that that's the case, that's okay.
27:56
Speaker 2: Too, all right, v I thought it would be fun
27:58
Speaker 2: to finish today's episode by answering some debt related questions
28:02
Speaker 2: from our community. Genius you sucked, okay, So the first
28:07
Speaker 2: one here is from Danny. So she hates the feeling
28:10
Speaker 2: of having a hex debt. She doesn't like the feeling
28:13
Speaker 2: of debt at all, and knowing her goal one day
28:16
Speaker 2: in the near future it will be to have a
28:17
Speaker 2: house and then take on more debt. What is your
28:20
Speaker 2: advice then for HEX? Does she just leave it? She's
28:24
Speaker 2: also added that it makes her so uncomfortable watching the
28:27
Speaker 2: indexation get whacked on, which for her is over five
28:30
Speaker 2: hundred dollars a year, et cetera, et cetera. That's the
28:34
Speaker 2: essence of ze questions, so what do you think me?
28:37
Speaker 3: So obviously I can't tell you which debt to prioritize
28:40
Speaker 3: because that would constitute personal advice. But do you know
28:42
Speaker 3: what I can tell you, guys? I can tell you
28:43
Speaker 3: what I do personally, and I pay my hextet off
28:46
Speaker 3: at the minimum. It is no secret that I am
28:50
Speaker 3: one of those just like real nerdy people like ge.
28:53
Speaker 3: You know, my little sister, we are chalk and cheese.
28:56
Speaker 3: She's like the cool one that always has the fashionable wardrobe,
28:59
Speaker 3: and I've been the one that's like, oh, but I
29:01
Speaker 3: went to UNI, and then I went to UNI again,
29:03
Speaker 3: and bam, I went to UNI again because like just
29:06
Speaker 3: not cool, Like maybe cool kids do go to UNI.
29:09
Speaker 3: I don't know. But anyway, to be brutally honest, my
29:13
Speaker 3: hex stet is still, gee, put your coffee down because
29:16
Speaker 3: you'll spit it out. Still over six figures, six figures,
29:20
Speaker 3: six figures, because I have I have my undergraduates, I
29:24
Speaker 3: have my postgraduate and then I have a master's degree
29:27
Speaker 3: as well, and then I've also paid for other education
29:30
Speaker 3: outside of that because I couldn't put it on hex,
29:33
Speaker 3: which is totally fine, but I prioritized personally saving up
29:38
Speaker 3: for a mortgage over paying off my hex deet, and
29:41
Speaker 3: I did that because hex doesn't stop you from getting
29:44
Speaker 3: a mortgage, so unlike having a credit card or a
29:47
Speaker 3: personal loan, which will potentially stop you from getting a mortgage.
29:52
Speaker 3: Hex stet it's just taken into consideration as a part
29:55
Speaker 3: of your cash flow because the bank knows if you
29:58
Speaker 3: don't have an income, that's a debt that not going
30:00
Speaker 3: to be chased. It can just be put on the
30:02
Speaker 3: shelf and put to the side. It does impact your
30:05
Speaker 3: cash flow, So each and every single month, before you
30:08
Speaker 3: get your salary from your employer, it will be taken out,
30:12
Speaker 3: which means, yes, if you earn seventy thousand dollars, less
30:15
Speaker 3: money will go into your account if you have a
30:17
Speaker 3: hex deet than somebody whose hextet is gone. But from
30:21
Speaker 3: my perspective, I'd much prefer that then to put off
30:25
Speaker 3: the goal of purchasing a house, because gee, if I
30:28
Speaker 3: had prioritized paying off my hextet instead of purchasing a
30:32
Speaker 3: house with Steve, I would still be paying off my
30:35
Speaker 3: hex step. Yeah, like I wouldn't have a house, I
30:38
Speaker 3: wouldn't be creating wealth, I wouldn't be in that situation.
30:42
Speaker 3: So I made the conscious decision to not do additional
30:46
Speaker 3: hextet repayments because releasing that additional cash flow wasn't my priority.
30:51
Speaker 3: My priority was getting in the market and actually saving
30:54
Speaker 3: for a home. And I knew that if I had
30:57
Speaker 3: to then pay off another one hundred grand plus, which
31:00
Speaker 3: is really scary and probably not something I should literally
31:03
Speaker 3: admit on a podcast this big, but I'm happy to
31:06
Speaker 3: share it, I would be purchasing in another five years
31:09
Speaker 3: because of my savings capacity. So I just don't want
31:13
Speaker 3: to put myself in that position. In saying that, I
31:16
Speaker 3: think that a lot of people do feel uncomfortable with
31:18
Speaker 3: it because we are geared to feel relatively uncomfortable with debt,
31:22
Speaker 3: and that's how we see it. But five hundred dollars
31:25
Speaker 3: a year indexation isn't additional debt. Like, yes, it goes up,
31:29
Speaker 3: but it's just going up to make sure that it
31:31
Speaker 3: matches the costs of goods and services in that financial year,
31:35
Speaker 3: which from my perspective, i'd prefer to be paying that
31:38
Speaker 3: five hundred dollars in additional debt, then I would to
31:42
Speaker 3: not be in the housing market because I was saving.
31:45
Speaker 3: But again that's me, and it might not work for you,
31:48
Speaker 3: and I just want to share that because it's one
31:51
Speaker 3: of those things where people are like, oh, what should
31:53
Speaker 3: I do, And I'm like, well, I can't tell you,
31:55
Speaker 3: but I can share with you what I do personally.
31:57
Speaker 2: Yeah, for people like me who we listen but we
32:00
Speaker 2: don't always absorb. What does What is indexation again?
32:04
Speaker 3: Right? Indexation G, or let's specifically reference what it means
32:08
Speaker 3: for help debt. It means that it maintains the real
32:11
Speaker 3: value of your debt by adjusting it in line with
32:14
Speaker 3: changes of the cost of living, which is measured by CPI,
32:18
Speaker 3: and CPI is the Consumer Price Index and that is
32:22
Speaker 3: calculated on the first of June each and every single year,
32:26
Speaker 3: and indexation is applied to part of an accumulated study
32:30
Speaker 3: and training debt that remains unpaid for more than eleven months.
32:35
Speaker 3: So when it comes to CPI, the best way to
32:38
Speaker 3: explain it is with a macas cone. So remember when
32:43
Speaker 3: we were little G and Maca's cones were like fifty cents, Yes,
32:47
Speaker 3: and they've increased in price. Why have they increased in price? G.
32:51
Speaker 3: Don't say China screw sofa, because they absolutely are. But
32:56
Speaker 3: it's increased because the cost to produce that items increased,
33:01
Speaker 3: so it's not as though they're like, oh my gosh,
33:02
Speaker 3: over time, we can just charge more and make the
33:04
Speaker 3: same profit. Like the cost of all of those things
33:07
Speaker 3: and transport has all increased over time, so the macas
33:11
Speaker 3: cone has increased in price. So inflation for indexation is
33:15
Speaker 3: essentially the method of linking the price or value of
33:18
Speaker 3: an asset to a price or price index of some
33:21
Speaker 3: type to adjust for inflation.
33:24
Speaker 2: So it's all linked, my friends, the name indexation name.
33:28
Speaker 3: So it's one of those things where yes, things increase
33:31
Speaker 3: in price over time and to make sure that our
33:34
Speaker 3: debt actually you know, gets paid off. But also the
33:36
Speaker 3: government is in an okay position to continue to provide
33:40
Speaker 3: this service to us because this isn't normal. So yes,
33:43
Speaker 3: in Australia we are incredibly lucky. But in the US
33:46
Speaker 3: they literally have to go get personal loans to be
33:49
Speaker 3: able to pay their university fees and they are so expensive.
33:53
Speaker 3: So yes, like five hundred bucks a year is it's
33:56
Speaker 3: a fair whack of money, but oh my gosh, that's
33:59
Speaker 3: the cost of education like that that for us is
34:03
Speaker 3: putting us in a position where we can go and
34:05
Speaker 3: access education in the same way anybody else in this
34:08
Speaker 3: country can, as opposed to in America, maybe you won't
34:12
Speaker 3: get the loan so you can't go to university, or
34:15
Speaker 3: you can't afford it because you don't have the job
34:17
Speaker 3: that would support it, whereas in Australia, if you don't
34:20
Speaker 3: have the job that supports it, then they're like, don't
34:23
Speaker 3: pay it. That's great, no problems.
34:26
Speaker 2: Yeah, yeah, oh that's interesting, So they've they've done a
34:29
Speaker 2: good job there.
34:31
Speaker 3: Anyway, what other questions have you got?
34:33
Speaker 4: So the next one.
34:34
Speaker 2: Here V is from Cassandra. So she will be in
34:37
Speaker 2: a position where the ATO owes her money roughly twelve
34:41
Speaker 2: hundred dollars we love. Her question is should she dump
34:45
Speaker 2: all of that on her credit card, leaving about one
34:48
Speaker 2: thousand dollars to pay off then she's cutting it up
34:51
Speaker 2: or should she put it into savings for.
34:53
Speaker 4: Our house deposit?
34:55
Speaker 2: So I guess the question here is you got some
34:59
Speaker 2: bonus money, savings or debt?
35:02
Speaker 3: Can you answer this? G do you reckon you have that?
35:05
Speaker 4: I think I know what is that your debt?
35:08
Speaker 2: Right?
35:08
Speaker 4: Because if you have debt, then you don't have savings.
35:11
Speaker 3: Yes, And that's what I was hoping you would say. Yeah,
35:14
Speaker 3: so again not advice, but essentially we believe it cheese
35:18
Speaker 3: on the money that if you are in personal debt,
35:20
Speaker 3: not mortgage debt, personal debt, so credit cards after pay
35:24
Speaker 3: or personal loans, you don't have savings because what are
35:29
Speaker 3: your savings going to do if you have a credit
35:31
Speaker 3: card that's accruing a whole heap of interest, especially a
35:33
Speaker 3: credit card that has from all intents and purposes, like
35:36
Speaker 3: two grand on it. Yeah, like another two grand in
35:39
Speaker 3: your savings? Is that actually getting you towards a house
35:41
Speaker 3: deposit faster? Or are you at some point just going
35:44
Speaker 3: to have to pull it out and pay off that debt?
35:46
Speaker 3: Riddle me that, Georgia King.
35:48
Speaker 4: Yeah, yeah, okay, so that one's pretty straightforward.
35:50
Speaker 3: I guess Look, it's pretty straightforward. But again, if you
35:54
Speaker 3: feel like you want to put it in savings, I
35:56
Speaker 3: can't argue with you. You just need to be educated
35:58
Speaker 3: enough to make the decision that right for you. Yeah.
36:01
Speaker 2: Well, I think it's a good reminder and it's good
36:03
Speaker 2: to make really clear because we are fed messages that
36:06
Speaker 2: we should pay down our debt and that we should
36:08
Speaker 2: be building our savings. So just to kind of clarify
36:11
Speaker 2: that debt should be your priority is important.
36:14
Speaker 4: I think yes, but.
36:15
Speaker 3: This question as well. Georgia stipulated savings for a house deposit.
36:21
Speaker 3: And to jump on my high horse for a second,
36:24
Speaker 3: I do believe in saving while you have debt for
36:27
Speaker 3: an emergency fund, because an emergency fund is going to
36:30
Speaker 3: afford you the freedom that you need while paying off debt.
36:34
Speaker 3: Because often if we're in debt, we don't have a
36:36
Speaker 3: lot of free cash flow, and if another unexpected cost
36:40
Speaker 3: comes up, it's usually going to be on debt again,
36:42
Speaker 3: and you're going to have to go further into debt
36:44
Speaker 3: on that credit card. So I would absolutely prioritize stocking
36:49
Speaker 3: up a little emergency fund so that while you're paying
36:52
Speaker 3: off your credit card, if another unexpected cost pops up,
36:55
Speaker 3: you can go, you know what, I've got this. Or
36:57
Speaker 3: if you're not able to pay the debt repayment that month,
37:00
Speaker 3: it's okay because you have savings that can cover that.
37:03
Speaker 3: So I don't ever recommend anybody to be in this
37:06
Speaker 3: situation where they have debt and absolutely no savings, But
37:10
Speaker 3: for me, those savings would be an emergency fund. And
37:14
Speaker 3: to stipulate, I don't believe that they're savings, they're an
37:16
Speaker 3: emergency fund because savings are put aside to buy something
37:20
Speaker 3: else in the future, Whereas an emergency fund is a
37:23
Speaker 3: little pool of cash that sits to the side and
37:26
Speaker 3: we have absolutely no intention of drawing on it unless
37:29
Speaker 3: it's in emergency. It's not for a future holiday, it's
37:32
Speaker 3: not for a pair of shoes that feel like an emergency.
37:35
Speaker 3: It is not for anything other than future use financial security.
37:41
Speaker 2: Circling back to what we said earlier, V like, if
37:44
Speaker 2: anyone does need more encouragement to kind of understand how
37:48
Speaker 2: important having an emergency fund is.
37:50
Speaker 4: I feel like watching Maide would be.
37:52
Speaker 3: A really good idea because I wish she makes agency fund.
37:56
Speaker 3: She was in such a pickle, and I mean she
37:58
Speaker 3: ended up getting out and that it's really good, and
38:01
Speaker 3: she ended up living her best life and being able
38:03
Speaker 3: to move. I won't ruin it for other people, I guess,
38:07
Speaker 3: but if she'd had an emergency fund, she would have
38:10
Speaker 3: been able to escape the situation she was in in
38:12
Speaker 3: such a cleaner way. So that's what an emergency fund
38:15
Speaker 3: affords us. It affords us the ability to escape a job,
38:19
Speaker 3: a circumstance, a person, a home, anything that we don't
38:22
Speaker 3: want to be in. Anymore, Even if it's just covering
38:25
Speaker 3: a taxi to leave a party you don't want to
38:27
Speaker 3: be at anymore. An emergency fund is there to protect you,
38:31
Speaker 3: not to pay off debt.
38:33
Speaker 2: Yeah, love it all right, be I do think that
38:35
Speaker 2: is all we have time for today, my friend, it is,
38:38
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