A Foolproof Plan to Ditch Debt #620

a bad thing. We're gonna talk through how to put together a plan to eliminate that debt, as well as some other tips as well. Regardless of the the approach that you decide to take, there are a few things that you can implement, some different ways of looking at your debt in order to make sure that you are moving onwards and upwards with your finances. Yeah, and if people have been listening for any amount time, they know we like to be nuanced on the topic of debt.

But we're specifically talking about like the crumbiest forms of consumer debt in this episode, which is what a lot of people are battling in January, right, and the credit card statement comes in your email in box and you're like, dang it, I didn't think it was that bad. Maybe even today that statement showed maybe you had a December fifteenth to January fifteenth statement and you are, yeah, you're

you're maybe you're a little disappointed in yourself. Yeah, and but and that's how like that happens, right, people, But how do you combat those? Now? How do you move forward? That's yeah, what we're gonna talk about the exactly man. Yeah, but first, actually, so I've got a frugal or cheap for you, but it is actually for once, it's not me being cheap. It is it's up to you to decide whether or not Kate is being frugal or cheap. Okay,

you're white, that's right. So she was considering getting this face serum. It's this oil that you if you ever see her do it, which that'd be weird. I guess if you're if you are doing a night she does it right before she gets to bed. But it's like this little glass usually hanging out of that time. Yeah, yeah, my wife has some face here, and so I think I do. She had like this dropper where she squeezes into this glass room and she likes squirts it like

across her forehead, over her cheeks. I forget where normally buys hers from. But I tried to convince her to go with the Costco brand when it was on clearance. She gave she gave it a shot, and she's like, it's not it's not as good. This is garbage. And I was like, dang it. So maybe Kate felt that same way as well, because the stuff that she wanted to buy, I forget the name of the website, but it's like a hundred bucks. It's over a hundred bucks for a three ounce bottle, which is that is not

very many ounces here? Uh? And so what and she realized that, man, this is too stink and expensive. But the website for the bottle that she was wanting, they list out all the different ingredients. They list out the oils, and obviously she doesn't know the exact ratios, and I mean there's a little bit of fragrance thrown in there as well, but she would had just ordered some nice organic versions of those oils and created her own blend, and so she's able to make a three ounce bottle.

So the equivalent of what you would pay over a hundred bucks for and she's able to make that for under ten dollars, staying per bottle. It's like like argone oil or like rose hip, a little bit of like grape seed, like like all these oils combined, a lot of a lot of branding that goes into makeup. But so I'm just how's this going? By the way, She's like, it is going incredibly well, and so she's super happy with it. But what are your thoughts? Do you think

she was being frugal or cheap? Sounds frugal? Is all get out to me? Like I think if I was, like I agree, I am all for this, it was like destroying her face or something like that. That's the risk, right, Like I guess if is there a risk that you run by not getting the proportions exactly right and you put on your face and all of a sudden you've

got you know, first degree of burns. Yeah, if you were putting out with potentially face melting acid or something in this concoction, then it could be seen as cheap. You might need some sort of expert blender to get exactly right. But it's it's a bunch of these organic oils to create a face like the chances are you can't screw it up that bad, right, and you can always like test it out on your arm or something before going like full board, just like scorting it on

your face. Right, But this sounds like thing in an inconspicuous location, sort of like if you're doing a treatment for laundry, right, that's what they say. Yeah, I'm thinking the next step for her though, could be the launched aside hustle with this, like start selling her own serums, kates serums. Yeah, I like it, so I don't know, maybe I'll talk her into that. Next time I sear Her first customer will be Emily. She probably probably hopefully it's a that that'll save us money too. So No,

I like that. I like experimenting in ways like that. I think that's one of those things that you don't you don't even think of doing. Let me just try to make this concoction myself, because wow, they're charging a lot of money for it. But when it's when the cost is that insane, maybe it brings you back to the drawing board and you're like, yeah, maybe I'm gonna give it a shot and see what happens. Absolutely, I kind of like the creativity and the ingenuity that she's

that she's expressing them. Yeah, thinking outside the box a little bit. I will pass along her the frugal approval by my cod were pound on the back for me. Well, alright, let's introduce our beer this episode. This is Perpetual Composition. This is a beer by Southern Grist Brewery, who we've had on the show many times before, but not this particular beer. And we will share our thoughts at the end of the episode, for sure. Let's get on the

topic in hand though. We are talking about creating a fullproof plan to ditch holiday debt, and Matt there are some folks out there who might think that just a little bit of debt is no big deal. But it makes me think about something else that we might not consider to be all that bad, and that is sitting sitting down. And it's it's interesting. I think a lot of new information has come to light in recent years

about how bad sitting can actually be for us. Like we we all sit down, You and I were sitting down doing this podcast right now, and we're not heeling over and dying, right, But uh, it turns out that's sitting on your butt all day is much worse than we thought. And it's actually been called the new smoking.

You've heard people say sitting in a new smoking. Maybe I have only because I feel like I've heard you talk about it, but that this sort of sounds like a report that maybe came from Big Tennis Shoe, all the other shoot companies out there, by Nike and Reebok, all the uh the anti chair trade groups out there who are battling so many of them, so many of them clearly will know that when you look at stats from the Heart Foundation, they found that the people who sit,

uh sit a lot are the They're in a greater risk for heart disease and death. They have a hundred twelve percent increased risk of diabetes, increased risk of cardio vascular events like heart attack and stroke, increased risk of death from cardio vascular events in general, and a forty increased risk of death from many couts just just because of the amount of time you're sitting in a day and uh, you know, debt. I don't think that that's not going to lead to diabetes, that I know if

there's no link between the two that I've seen. But it can cause stress, It can cause relational insecurity, and it can actually lead to adverse physical effects like headaches and an inability to focus. So that's why we wanted out of your life. It's you know, sitting in small amounts isn't the worst thing. The right kinds of debt in your life aren't the worst thing. We've talked about

using debt strategically. But if you've racked up the worst kinds of debt, consumer debt, and you you actually have more in your life than you expected because of what was happening at the end of last year and what you were you were spending money on. Well, today's show is all about creating a plan to ditch it because it's worse than you think it is. That's right. Simultaneously, it's not like sitting all day once it's going to kill you, right, Like like most of us probably sit

for the majority of our waking hours. You're probably half of the folks out there might be sitting right now. Maybe you're going for a walk, though, But when those weeks turn into years, right and like when those years trying to turn into decades, like that is when this this fairly normal activity, how it can wreck our health and we definitely don't want consumer debt to become a fairly normal fixture in your life. But the truth is that if you don't have a plan, you are not

going to take action. And so that plan part like that is crucial to getting you to where you want to be. Uh. And if not having debt, you know, lingering around is what you want and it should definitely should be, then we want to help you to get there. Um, like your say, angel, consumer debt, it's it's worse than most people think. It's not like this, this this cute little thing. It's not like a pet that you want to want to keep around. It's quite literally keeping you

from achieving your bigger financial goals. It turns out that the average household today has more than nine thousand dollars in recurring credit card debt. And that's not even including uh, some of the other crappy debt products out there, like personal loans or by not pay later. Yeah, that's literally just credit card debt hanging out in people's lives. And you know, I think part of the thing that we need to address here too, is it debt. Credit card

debt in particular, is getting worse. Variable interest rate debt is steadily becoming a bigger train on your finances because we're in an era of rising interest rates, and so credit card debt is actually worse right now than it was a couple of years ago. And it's always bad, right Sure, it sucks no matter what to have credit card debt. We've never liked it. But when you're talking about interest rates, closing it on twenty at this point,

which we're gett pretty close to. I think we're over nineteen percent on average, And there's a lot of predictions because the Fed is likely going to continue to raise interest rates that we're gonna see at some point this year being the average APR on a credit card, and so making the minimums, making those minimum payments is now even worse for you than it was. That means more of each payment is going to pay that interest, which

means your debt lingers even longer. And the reality is that almost half of folks have no idea what the interest rate is on the credit card they carry anyway. So people are like just would prefer to be ignorant and just gut their head in the sand. Yeah, they prefer to keep their eyes closed and not even think about how bad this debt is. Well, the truth is

it's bad. And if you're clueless about how bad your debt is, you're likely you're you're less likely to prioritize getting rid of it, and we want you to get rid of it. So we want to tell you right now up front, Hey, it's worse than you think. It sucks, really bad, and we want you to be done with it. That's right. Yeah, And while existing credit card rates are in the sixteen percent range, uh new offers are at

nearly twenty two percent. Uh So, like you said, it's becoming much more costly to carry a balance on on the credit card these days. That's terrible. But it's also important to look at what you are giving up by having to make these payments. We're talking about the opportunity

cost here. So going back to the nine thousand dollars that the average household has, so assuming someone is just making the month payments with an and straight at around, you are looking at a three thirty dollar per month payment that is going to take over three years to

fully pay off. And so that means you're you're looking at around twelve dollars that you're giving up plus another one thousand dollars where you two have invested that money, right, And so it's I'm pointing that out because it's not just that making payments to the bank that sucks, but it's also what you're not able to achieve because of those monthly payments. It kind of going back to the sitting analogy, right, It's it's not that the act of sitting on your butt that that in and of itself

is bad for you. I think it's also what you are not doing when you are sitting down, right, Like there aren't you're not working out if you're sitting on your butt. Well, I guess technically you can go. You can get on that, you can get on a rowing machine or uh like a bike or something. Right, I do a rowing machines, So I guess I am technically you are. You are sitting. But most the time, you know, what the referring to is a sedentary lifestyle. You're talking

about folks PLoP down on the couch watching TV. And not to mention the other behaviors that oftentimes a company sitting down, like eating some popcorns, some snacks, drinking a coke, that kind of thing. And so in the same way, it's a little bit different, I guess with that because the thing in and of itself is dangerous, It is bad for you. So it's more like smoking in this in this way where the actual act of it's not that you're just not spending money on other healthier products.

Actually inhaling smoke is bad furial. Yeah, but may maybe there is a better analogy overall. But but but in this case, it also has to do with the things that you can't do with the money, the things that you're missing out on, and we want to make sure

that we're highlighting that as well. Well. Yeah, and I think, well, just in the same way that people are are spending more hours of the day sitting, which is impacting their health negatively, people are keeping consumer debt around in their lives more than ever before two which is just negatively impacting their financials. And and so let's get back to that paying the bill on time and in full every month. We we always say that when we're talking about taking

on credit card debt. We don't mind people using credit cards, and in fact, we think they're the best method of payment in many cases, but we sure I don't want people using them if they're not going to do that basic thing, which is to pay off the balance every single month. And and that's because each and every month that you don't attack that debt, that you're not doing that, you start to dig yourself a whole. And every month you let that credit card debt roll over, you're digging

that whole even deeper. And so unfortunately, that's what a lot of people are are doing. According to bank rate of credit card holders roll over their debt each month, meaning that they're not paying off that balance in full, and so they might not be paying just the minimum, which is the worst possible. So here you know that you're, well, I guess the worst possible scenaries that you're not even

paying that. But if you're just paying the minimum, you're it's going to take a really long time for you to make progress, for you to actually pay off that that debt. But some people might be paying more than that, but they're still they're paying interest to the credit card company on at least a portion of that balance, and

that's not good. And so yeah, for a lot of folks, we think they can handle credit cards wisely, but we only want folks to consider using credit cards if they're going to be able to basically curb rolling over that debt if they're only only if they're going to be able to pay it off on time and it full every single month, Because yeah, we want you to refuse to allow yourself to pay extra for using this method of payment. That turns something that can be good for

your finances into something that's pretty bad exactly. Yeah, we see it as a tool that you need to wield properly. And it turns out to more than one third of folks, according to a wallet hub survey, said that they overspent

during the holidays. I think most folks it's something like in the th range, but hopefully just based on you know, just the beginning of this podcast asked you've been alerted to just how bad keeping credit card debt around can be, how it's actually getting worse, how it's bad for your health. Like quite literally, debt is bad for your health and you all. You also might want to even consider looking to buying a standing desk as well. After hearing Joel's

the sitting stats. I mean, I'm thinking about it right now. Really, you have mentioned it multiple times. We saw last time you and I were in Costco together and I was like, Matt, maybe we should upgrade to these standing desks. It feels like just such a commitment, you know what, Let's figure out a way to just elevate our current desks, just to try it out. Like, I guess that's the thing

for me. I guess we can always take it back to Costco, obviously, but it's the commitment of like getting I mean, they're big and heavy and a lot of times are adjustable, and so it's it's nice because, like you know, while sitting too much is bad for you, you you also can't stand necessarily for eight or nine hours a day and all I could in perpetuity. You don't want to be hunched over. You want it to be whatever. Yeah,

size properly for you. Um. But back to debt. For the rest of the episode, we're gonna talk about creating an effective plan to get rid of that debt that we're talking about, and we will get to that right after this. All right, Matt, let's keep talking about debt. Let's do it. Clearly, we don't like consumer debt. We don't like these high interest credit card debts that people are keeping around in their lives and the average person.

I think it's in in a recent survey I read, I think it takes something like five months for them to pay off the debt they accrued over the holidays. So we're talking about like we're basically in summer right by the time people are people are done getting rid of that debt. We don't want that to be the case. We want you to pay it off in short order. And the key to doing that is to create a plan. We want you to make a plan to pay off your debt. That's crucial to getting rid of it. And

so that's what we're going to discuss now. Because you know that there are there are a lot of folks, by the way out there who who are going to tell you I can help you create a plan. And I'm not I'm not talking about us, but like I'm talking about that's what we're saying. Yes, we're saying we actually can. But there are organizations out there who wants you to pay them money and then they promised that they're going to take care of your debt issues for you.

Do not want your money, right, No, don't send us anything, just just listen. But it might sound nice. There might be people on the internet or on let's say you're listening to traditional radio or something like that. There might be companies that say, listen for a small fee will help you created that plan, and even if you pay us, we'll take care of some of that debt on your behalf. And that sounds really nice because then you're offloading that

responsibility to an expert or supposed expert. But almost always they end up making your situation worse. So we'll discuss more on that in just a minute, but but let's start. Let's talk about taking the d I Y route. How you can create your own plan. We don't we're not going to create it for you, but we're gonna help you create one. How can you create your own plan

to get rid of that debt? Let's right, Yeah, So the first thing that you'll want to do is determine how much you owe by listing out all your debts between multiple credit cards and buy now pay later companies that are out there. My guess is that a lot of folks underestimate how much debt they get into. And I just mentioned by not pay later, it makes me think about Uh. We had a listener actually recently email us and she's she's an HR manager. She works for

the government. She's talking about someone she's about to interview and he had something like eighteen delinquent by now pay later accounts on his name, and she didn't like flat out say that she wasn't going to hire this guy. But it wasn't a good thing. It's definitely not helping his change. He might not be all that responsible. Yeah, well, especially when it comes to different government jobs like that, because there's a security issue. So that's just store that

one away. That's another benefit of making sure that you aren't carrying around large amounts of consumer debt and that you're not delinquent on your accounts because they can keep you from potentially getting a job that you're hoping to land.

And by the way, and hunting for you just mentioned that we're probably a lot of people are underestimating how much they owe on some of these to some of these by now pay later companies, And it reminds me of when we talked about how much people I think they spend in subscription dollars every single month versus the reality of how much I spend, and I guarantee the

same thing is true. They're people vastly under estimate how much they spend on recurring subscriptions, and once they dig into the details, we're like, oh, I didn't realize that so much I was spending, and I gives some problem is because most of most of the time, folks aren't digging into the details. They haven't sat down, they haven't done their homework. And that's the whole point of might not pay later. They want you to forget. They want you to make it easy installments so that you don't

realize how much you're paying. Yeah, you immediately forget about it. But if you don't know how much debt that you are trying to pay, if you're not sure what the end goal is, well obviously it's gonna be a lot harder to achieve and it's almost always going to ensure that you're you know that you're gonna take longer to reach that goal. So what we would recommend is to log into the back end of your credit card, UH, log into Karna or after pay those different accounts so

that you can put eyeballs on the numbers. We want you to get organized and write them all down in one place, because knowing the totality of how much you owe like that is a crucial first step so that you can make a plan to get out of the step. That's right, So first looking the numbers in the face, how much that do I actually have? Not just rounding it or are assuming, but knowing the actual specific amount that's gonna be a massive help in helping you in

allowing you to formulate this plan. Next, let's talk about how to come up with how much a payment amount that you can reliably and realistically handle, because once you know how much you owe, it's important to figure out how much you can spare to pay that debt off. Can you put an extra twenty bucks a month towards it or an extra two Can you truly only afford to pay the minimums? Or is there actually more wiggle

room than you thought? Those are good questions to ask, and you want to be realistic with how much you can devote to that debt in order to to keep yourself from flaming out after you've only been out it for a couple of weeks. I keep you're like, listen, I will reduce my grocery bill from six or fifty dollars a month to to fifty by eating only rice and beans. I'm making a thousand dollars. I'm gonna put

a thousand dollar payment every single week. Yeah. Yeah. Fourteen days later you're like, oh yeah, gnawing, hunger paying star you're and you're like, I that was a bad move. I can't actually stick to this and you know, scrap it all together. That that's not a good way to tackle it. We want, we want you to financial stamina. And of course, like a simple budget is going to be an incredible tool that will help you to calculate a reasonable payment. So take a look at your overall incoming,

your overall outgoing. That's massively important. It will help you figure out how much free cash you have left over after paying all of your other obligations to dedicate towards debt pay down and making it happen quickly. That's right. Yeah. And this past Monday, we talked with Jesse Meekham, the

founder of y nap. And if you are looking for and and this is it's funny because they charge you in order to use the software, right, and so you might be thinking, well, man, Joel, I can't believe you're going to recommend going with this program, with the software, with this app that is going to cost me money well, first of all, free trial, and you don't have to inter credit card information into to take part in that free trial. But secondly, if you've never done this before,

you might need some handholding. You might need uh an app or a program like that. And by the way, not everyone needs it in order. I think even Jesse would say that, you would say that, I would say that you don't want to certainly need a program. You

can do it without one. But if that's what it takes to get you making it happen, and that is what it takes for a lot of people, like whin nap helps a lot of people, absolutely, and if if that's what it takes, we would it's worth the money, Yeah, totally.

And when it comes to so maybe you're you're kind of like all gung ho about it, right, If that's you, it's important to note that we don't want you to empty out all of the cash that you have on hand, like all of the cash out of your your bank account in order to pay this debt off like a hammer to your piggy bank and all right, and then take it to your credit card. We still want you

to maintain that that cash buffer. We still want you to maintain at least that bare minimum emergency fund of two thousand, four d and sixty seven dollars as a base amount in your savings account for just some of those other emergencies, some of those bumps on the road that could pop up, because you might be tempted to destroy this debt as fast as humanly possible by taking that balance straight down to zero, but that's gonna leave you in an incredibly vulnerable position two four six seven.

That should be your essentially like your low water line that refuse to dip below. But then every every dollar above that, every dollar beyond that should be headed toward that debt demolition. Yeah, so we want you to list out those debts. We want you to figure out a pragmatic payment amounts which should maintain that cash buffer those that you're not dipping below it and putting yourself in

harm's way. And then then once you know how much you can dedicate to debt payoff and how much those debts stack out to, what should come up with the timeline to get rid of that debt. We want you to have a firm week or month amount that is going to take you to get rid of it. Because now you. You have those numbers in hand, and you should be able to It's a basic math equation now that will tell you how long it's going to take

to pay it off. So let's say you owe the average amount of holiday debt, which I said, it's something like one uh. And let's say you've got four dollars a month. You figured out that you can put towards paying off that debt, well, you should have it paid off in four months. And and now there's light at the end of the tunnel. Your debt elimination date is set. And that's powerful to know that, Hey, it's not just like this, I don't know how long it's going to take.

I'm not sure when I'm gonna get rid of it, but I'm trying my best. Now it's like, no, no, no, I know what I'm gonna be done with it. I know when this monkey is gonna be off my back. And so we want you to have that specific date, do the math, and look at your calendar and put an X mark. And that's such just like an empowering feeling to have to say I know when this is

going to be out of my life completely. In that way, it feels more like a program as opposed to just a slog right, like where your heads down, you're not even paying attention to the numbers. That being said, I think for some folks maybe that's what they need to do. I think different personalities are are going to react differently, but I think for a lot of folks, having that that thing that you're trying to achieve on a timeline

is incredibly helpful. Like it's it's one thing to say that you want to pay that debt off like maybe sometime this year. It's a very different thing to say that you're gonna have the financial capability to pay off that debt by May, right, knowing how long it will take, I think only March, but maybe your reality that's okay. I think it'll just help folks to stick with that that payoff plan and to ensure that this debt payoff

actually happens. We would recommend for you to automate the plan by setting up recurring payments of the amount that you want to make on a weekly or bi weekly or monthly basis. Again going back to once you've determined your payment amount, you've got your total, divide that out, you know how many payments you need to make and at what dollar amount? Well, go ahead and uh schedule

those ahead of time. Uh. Something else you could do consider just talking about your debt payoff journey with a friend who might be interested in talking about finances with you, or if not, it is like you joined the Facebook group how do Money Facebook group, basically just giving someone else like a peak under the hood. I think that can provide not only some motivation, but some accountability to make sure that you're getting it done as well. There's

also like that element of not embarrassing. I guess it's embarrassment if you kind of put it out there for the for everyone in the group to know that this is something you're working towards. And if you, I don't know, if you kind of slink off into the background and you don't actually achieve achieve that there might be some additional pressure there for you to actually get it. It It might be that kind of good pressure though, kind of like we talked about with Katie Milkman right earlier in

the year, might be like good peer pressure. Yeah, it's like putting a good peer pressure to to kind of help force you in the right direction. So maybe you listen to this episode you do some of these steps here and you kind of realize, here's how much I owe, here's how much I can afford to pay, here's the timeline now for me. And then you make that public

and how to money Facebook group. You you do a post later this week and you say, hey, guys, I know you don't know me, but I've just realized, like, this is how much consumer that I'm in and this is the date at which I'm not gonna have anymore.

And I just love it. Hey, root for me. And that kind of public statement I think does go a long way, and it it's meaningful, and it can help kind of steal your resolve to keep pushing in the right direction, because hey, you made a public display of your hatred for dead and like when you're gonna be done with it? And even though those people most of them probably don't know you, maybe none of them know

you in real life, there's still something powerful about that totally. Alright, So Matt, let's talk about we we've kind of got some of the some of those basics for how to ditch a debt and how to kind of kind of create a payment plan to make sure you're getting rid

of it. Out of the way. But let's talk about maybe like the order of operations when it comes to debt payoff, like and and how you decide which If you have multiple debts, right, you might be just using one credit card and boom, it's it's a little bit easier. But you might also have multiple credit cards with balances, and it's hard to know which debt to pay off first. It's you might have some buy now, pay later debt as well, like you talked about. And that's a good question.

I mean, I think the most important part of the debt pay off plan is is what is what we've just talked about. It's discovering how much you owe and how much you can dedicate towards paying off those debts, and then you know, creating that actual timeline. But it's important to configure an order of operations to to decide which debts you're gonna attack first. And and I think really, when it comes down to it, that question is mostly it mostly comes down to the snowball versus avalanche approach.

That's right, Yeah, which one should you go with? And actually we have an article on that up on the website. So if you want to dive in deep here. We would recommend for you to check that out. We'll sure too linked to that article in the show notes for this episode. But in short, the snowball approach, that's the method where you are paying off your debts with the

smallest balance first. This method prior prioritizes the psychological winds, the psychological satisfaction that you're gonna derive from getting rid of a small debt and then getting you get that endorphin rush, which will then only embolden your resolved to pay off that next debt even more quickly. Uh. And then you've got the debt avalanche method, and it prioritizes not the psychological side of things, but it prioritizes the numbers, like the cold hard facts, by paying off whichever debt

in your life has the highest interest rate first. So this is it's all about the math, it's not psychology at all. And so which one is right for you? Well, I think it depends on your personality. It depends on a lot of the different things in your specific given circumstance. It depends on some of the debt that you have and the balances that you have. But at the end of the day, we think that something more of a hybrid approach is uh, that might be the best approach

for many folks. The toyota prius of debt payoff methods, you might say, and I think you're right. I think if you were put a gun to my head and you're saying, which one done, avalanche, debt snowball, first off, don't do that because that would scare me. But debt snowball, I think is is something I think early on in our podcasting days, we would have been like, oh, we totally knocked the snowball. Yeah, we were Avalanche people because we're all about the facts. It's all about the numbers.

But the more you learn about personal finance, the more you learned about the deep psychology that's play. And the more I'm married to someone who's becoming a uh, you know, working to become a licensed therapist. It's like psychology. It impact is a big rol our history are you know, all so many things going on underneath the surface in our brains and our bodies, like impact how we we tackle things. And so I do think that that psychological aid of getting rid of one debt like it can

help build progress for people. Sure, And the fact is if it if it was only about the numbers, well you wouldn't be in debt to begin with because you would have seen the interest rate. You would have known that this is and end up costing you weigh more money down the road. And you would have said, I'm going to use credit cards the way that Matt and

Joel recommend for me to write. But the fact is, if that is not how you naturally think, well, then we need to use the tools of psych psychology at those psychological wins, those emotional wins to your advantage, as

opposed to using them against you. Yeah. Well, let's talk about that hybrid approach to a little bit like and maybe give an example here, because when we're talking about paying off let's say three different credit cards that all have between a an interest right between sixteen and nine, then we're really splitting heres and the snowball appear basically the same. The snowball approach is basically slam donk. Just pay off the lowest balance first. That's going to create

the momentum boom. It's great, but if you let's say you toss a car loan into the mix that you financed a few years ago, we're not really seeing rates at one point nine percent these days. But let's say you locked in three years ago and you got that one point nine percent rate, that's a different story. Do we still want you to pay off that car loan?

Of course, but there's such a massive disparity in the rates between what you owe on that car versus what you owe on the credit cards, and it's just so much worse that we'd rather see you even if that's the lowest balance that that that car loan, that car notes, we'd rather see you pay off the credit cards first, uh, and just the minimums on your car, because this is an instance where the specific type of debt, the specific interest rate matters, and and some people might be tempted

to throw their mortgage in these calculations, and depending on your interest rate, like well, consumer debt is worse than these other kinds of debt, and so you just that's why you just have to be careful when you're coming up with these calculations so that you're not prioritizing the wrong thing first. And so yeah, just know that the higher the interest rate often the more important it is.

And if the interest rates are close enough, then we would say snowball approach is great, but if they're far enough apart, that's when I think the hybrid approach makes the most sense. And if you're looking for a tool to help you create that payoff plan, if you if you don't want to just like sit down with a pen and paper or create your own Excel spreadsheet, but you want a software to help you out on debt dot it, we will link to it in the show notes.

Undebt it is one of our favorite sites that helps you create a debt payoff plan if you want, yeah, some software to kind of have your back into where you can kind of track it and see it just helps you make that plan. That's always one of the my favorite resources that we always help check out if they're like I'm in debt, and especially if they have multiple, you know, multiple balances with different rates. It allows you to, h, yeah,

create that hierarchy of which debts you're gonna attack for it. Again, just like we were talking about with why now do you need it? No? Can you do it yourself manually? Yes? But like does it help sometimes to be able to type some numbers into a piece of software and have it render everything for you so that you can more easily see your trajectory and and what that payoff plane is going to look like. Yeah, for a lot of people, that is a motivating factor and it's gonna help them

actually stick to a plan. But now we've got more to get to. We want to talk about this foolproof plan to ditch holiday debt, and there are a few things you can actually do to speed up your progress. And we'll talk about how to do that and what to do if you're like I came up with a plan in and it said it was going to be thirty two years before I get out of this credit card debt. Like, if that's the case, then you might have to take more drastic measures. We'll talk about both

of those things right after this. All right, man, let's continue to help folks on their way to becoming consumer debt free. We've got a few other suggestions in different ways to minimize the impact of your debt as you try to pay it off. Uh. And the first one is this is I don't know, I don't I don't want this to see him like, uh, the kind of moment, but uh, make more money when you have a bigger shovel that is going to allow you to dig yourself

out of that hole even faster. A wallet hub survey found that fifty eight percent of folks would be willing to work longer hours to get out of debt. And we we like hearing that. We're all about work life balance, but if you took on too much debt over the holidays, you might actually want to take this approach. We're actually gonna give a bunch of ideasm how it is that you can increase your income in next week here on

the show. But if you can increase your income, that will allow you to pay off crappy debt even faster. And of course you know, I mean, the best way to make more money in the long run is not to trade your time for money by like driving for Uber or taking online surveys that kind of thing. But it will quickly add ammunition to eradicate that debt in

the near term, right like temporarily. If you are in a bind and you have some ridiculous debt where you're paying a dumb interest rate, then we are not above you taking some of these more drastic steps to make sure that you are out of that debt quickly. Yeah. Man, it's not often that we tell people to drive for Uber or you have to do some of these these um gig jobs where you beholden to these giant companies

do with you whatever they want. Yeah, and we'd rather you make less money typically, but build something that could be more sustainable and potentially more lucrative for you over the years. But but if we're talking about getting rid of of some of this high interest debt and get rid of it more quickly, I think treating it like it's a serious problem and uh, signing up for whatever you can do to make a little extra income to make that debt payoff happen even more quickly is worth considering.

It's like a tourniquet, like you are just trying to stop the bleeding. Yeah, we can worry about stitches later, but right now, just like whip off that belt and yeah, tighten that sucker. It doesn't have to be forever, right, even if it's just two months driving for Uber, so you can knock knock this out more quickly. That's that's fine. But let's talk to another thing that you can do

and you should do in all likelihood. If you think this is as big of a problem as Matt and I do if you think this consumer debt is just a financial calamity, is that you should consider cutting your spending, and that there were a lot of folks in that same survey you just mentioned that said that they would cut out luxuries or skip vacations in order to get rid of their debt faster. Yeah, and I think those are both great choices. And again I feel like, you know,

we're all about balance here. We don't want people working eighty hours a week normally, we won't want people skimming vacations for years on end or never buying anything they care about. Like we want people to be intentional with their spending too. But again, consumer debt should be treated like a real, severe problem. And I wouldn't want to spend personally a couple of thousand bucks on a beach vacation while credit card debt is still lingering in the background.

I wouldn't want to be booking my beach vacation for for July and spending money that I don't have, adding to the problem. And so you know, dialing back you're spending on the big stuff until you've eradicated that debt is crucial. We also say don't forget the small expenses either, right, there likely some monthly spending categories where you can cut back at least temporarily in order to grow the gap,

which is going to speed up the process. Again, that doesn't mean rice and beans right for months on hand, but there are smart ways maybe for a couple of months, though for a couple of weeks. I don't know how long you're being. Yeah, I think it can be a good approach. Yeah, it is a it's a real problem. And cutting back on spending, especially on some of those big things for the time being, until you've got it under control, until you've gotten rid of it, is I

think it's a really important move to make. Yeah. Well, I mean again, it's temporary, right, and I think by making some of those more severe cuts, it can strengthen your resolve to actually stick with the program, to actually not want, you know, for you to say this sucks and I don't ever want to end up in this kind of situation. Again, I think it can can strengthen your resolve by actually experiencing some true, uh, temporary suffering

when it comes to the money that you're spending. It's not again, like you said, this is not your new lifestyle. But maybe it is until you are out of that worst of the worst debts, like suffering with a purpose because it is I think it is doing is doing it. It's teaching you a deeper lesson and it's also at the same time helping you get out of this place

more quickly. Exactly. Yeah. And so another way to make your debt less egregious and to catalyze the process is by asking for a lower APR from your current credit card provider. Asking for a lower rate. Obviously, if you don't ask, you you're certainly not going to receive You're certainly not going to get one. But seventy percent of folks who ask, according to recent survey, receives some sort of interest rate reduction. And we're talking about an average

reduction somewhere in the ballpark of seven percent. That is huge, And of course that reduction will mean more of your dollars are then going to be attacking the debt balance, which is huge. And one of the reasons that we're highlighting this is because I'm afraid that like that we're a generation that where we're not advocating for ourselves enough.

I think a lot of folks feel like it's personal where they feel like whoever they're talking to like that, they're then not going to be able to put food on the table because that there that they might be offering a lower rate. No, this this is just business and they either have the permission or they don't have their permission to lower your APR based on your credit score, maybe your payment history, a variety of different factors that they have to take into account. Right, you're not taking

food out of the baby's mouth. The customer service representative you're talking to, you're just advocating for your for yourself and you are asking say, hey, based on my my longstanding relationships which with you with this bank as a customer, based on would you like to keep me around? Yeah, I'm basically a good customer for are you? Because I am willing to have this conversation? Yeah, yeah, will you? Will you now give me a little bit of a break.

And I think they're willing to do that too because it engenders them to you. They want now now they they you're going to think of them as a company you want to continue to do business total because they were generous to you in a moment of pain. Absolutely, yeah, and so there's there's sort of like that element of it where it's just like, well, who am I to be asking? Uh, like why why why can't you know? Why wouldn't they just say no? So I feel like

there's that side of it. Why wouldn't they proactively reach out? The norm? I rate that's not how it works, that's not how business works. But there's also sort of like the social norms and like mores associated with like asking for something, which we just actually publish an article on our side about asking for a discount, will link to

that in the shop. It's because there are so many ways and and their their tips, I think, to help you do it the right way so you're more likely to get the answer as of meaning of yes instead of no. Yeah. I think a lot of times folks they're they're just too afraid of like rocking the boat. Uh, they're afraid of like offending whoever they're talking to, as opposed to just starting a versation. There's a way that you can go about this in a friendly way. Uh.

You mentioned Costco earlier with a staining desk. That same trip, we're at Costco. We're grabbing pizzas for our families for a Friday night pizza movie night kind of thing. We're standing there getting ready to pick them up, and I was holding a bag of Meyer lemons and there's a lady there and we got to talking to her and she's like, man, Meyer Lemons. I didn't We've always been wanting to try those. And I was like, you want one?

Which isn't a normal thing that you do with is standing there in the grocery store is like giving somebody some of your grocer but it's like a huge obviously it's Costco, so there's like there's a bunch of them in there. And she was like, well, yeah, but and so obviously I was like, yeah, sure, totally have one, and you autographed to know. But had she asked, I would have also been like, well, of course. I mean, granted,

we were nice and kind of offered her one. But I think there's a way that you can go about asking for something in a way where you're building sort of good will, like be cheeky about it, right, like you're being a little irreverent about what you're asking for. If you can do it in kind of a funny way, if you can kind of do it in a kind way, I think a lot of times the answer that you're gonna hear is yes, I might just call up the credit card company the one number, and I might be like, hey,

I'm sure you're getting this call. A lot a lot of people spent too much money at the end of last year. I'm one of them, Like, yeah, guilty is charged, and then start them. But I was really hoping to get that non to one and a half. What do you think, right? And like you gelve or thirteen right, And that at least is going to ensure that more of your payments are going to the principle and that you that your payment timeline is going to be shortened.

So I think that's a really important one asking for a lower rate from your current issuer. Also, what about zero percent balance transfer cards? Matt, That's another way that you can take something that is pretty dang bad and turn it into something less awful. And and that's a that's another way to to just uh move your consumer debt around to make it less nasty and to make

sure you can make more progress more quickly. And of course, like some debts are worse than others, like a three percent mortgage shouldn't be a top priority for you when you've got credit card debt lingering around. But but what if you could take a debt that looks really bad, It looks like a financial black eye, and you can just like, I don't do one of those killer makeup jobs with it, like and and nobody knows that you

got punched in the eye. Well, that's kind of what transferring to a zero percent interest credit card can do for you. And by the way, we Matt, you wrote an article about the best balance transfer credit cards. You can go to how to money dot com slash balance transfer and you can read that list and you can find one if you're like, Man, I've got ten dollars with a credit card debt. I'm but if I can get it down to zero percent for twelve months, I can be rid of it without paying any interest, and

I can do it much more quickly. Well, then this can be one of those methods to minimizing the impact of that debt as you're paying it off more quickly. Yeah, getting one means that you're gonna need to have a solid credit score, but it will also mean that you'll need to have the personal resolve to pay this debt off right because you know, transferring that debt to another piece of plastic and just continuing to spend like you've been doing like that is only going to do the

whole deeper. It's possible to use this technique just to make your situation worse. You don't want to be shifting the chairs around on the deck of the Titanic. You want to prevent it from sinking. If you deploy the strategy before you're actually ready to make some permanent changes, uh, it's it's gonna end up making things worse for you for sure. Yeah. Some people think like, oh, if I just get the lower interest rate, that's going to solve

my problems, and it's just not true. The plan is the biggest thing that having the plan, knowing the numbers and realizing how long it's going to take you to pay it off. Like these are just like uh, cherries on top of a Sunday. The sunday is the plan

that you're gonna be able to create. And so, yeah, if you can lessen the pain of the debt, if you can make it less egregious, and if you can lower the interest rate on it, that's good because it's gonna benefit you and it's gonna allow you to pay it off more quickly, but there's also ways that you can screw that up, and so we don't want you to, yeah, take out other credit cards and then you know, add more consumer debt on to the pile that you already have.

That you're making the situation worse at that point. But yeah, and let's talk about too. Matt I mentioned a minute ago about how somebody might have just so much debt and they are overwhelmed when they look at it that it's just that bad, right, that their consumer debt situation.

And maybe it didn't happen just over the holidays. In all likelihood, if it's that bad, it's been happening over the course of years and years and years, and you have built up to the point where you're like, listen, I created one of these debt payoff plans that you talked about, and it just seemed insurmountable. Even at that point, it felt like I wasn't going to be able to make progress in any sort of timely manner. And sometimes you are so mired in debt that it becomes too

hard to go it alone. And so maybe you are actually in too deep. And the truth is that this mountain of debt that you've accrued, it didn't happen overnight, like I said, and the fix isn't gonna happen in a week or two either, So it's important to know that.

I think sometimes Matt people get into a situation over the course of a number of years and they want it to be remedied really quickly, but that's just not how it happened and when it fixed overnight, and hopefully you can fix it quicker than how long it took you to get into the mess in the first place. But it's just important to note that that you know it's it typically takes time to get out of this

problem too. But if after running the numbers, it's gonna take you a lot of years to pay that debt off and it feels hopeless, we would say it's time to bring in the big guns and reach out to the not for profit folks at the NFCC or Money Management International, Unlike those for profit services that I talked about, who might you might hear advertised and they say, hey,

pay us some money up front. You might see them on social media they you know, they're saying that they can they can help you get out of this debt. But for a small fee or sometimes a large fee. Often times they're gonna make it worse. Almost always are gonna make it worse. Well, the NFCC or Money Management International, those not for profit companies, they can help you put together a debt management plan that actually works, and they can even negotiate with creditors on your behalf. So we

would say, go see a credit counselor. They can help you figure out the best way forward. If you run those numbers and you're like, it's it's worse than I even thought, that's when you're gonna want to like reach out to one of those companies, and typically it's free. Sometimes they'll charge very very modest amounts of money. I'm talking like sixty in order to see a debt counselor. But that's probably where you're gonna want to go. We will put links to both those organizations in the show notes.

That's right, man. And one other thing that we would recommend is for you to celebrate some of the small victories along the way to paying down your debt. We would recommend for you to just treat yourself a little bit, not like Parks and Rex style treat yourself, but just find some different ways to mark your accomplishments, to mark the occasion. And it doesn't have to be and likely shouldn't be an expensive reward because obviously that will slow

down your payoff payoff progress. But it's amazing how something that just that costs very little that or maybe something you already have on hand, or something that costs you nothing, how that can provide some additional motivation. You could just be a board game night with friends. You'd be like, that's my reward, or like I'm thinking of like a creative it's not even creative, but it's just like having

a picnic in a like in your favorite park. But you might be paying off your first card here in a couple of months, once the weather warms up a little bit, invite some friends over, take a meal that you would have already eating at home. Maybe you can like show some two buck chuck, you know, like that's very affordable. That's the kind of wine. If you're into wine, you should be drinking cheap wine while you're paying off

your debt. But take something like that to apart, because that is going to help you to mark the occasion. Not only that but you're also doing it with friends. That's something that they're gonna remember. They're gonna maybe even ask you about, like why are we doing this? Or you know, what's what's the special occasion? Which is really cool too because then it'll get you and your friends talking about money, and before you know it, you're all

going to be getting richer, getting wealthier together. That's the kind of thing that we want to see you doing. We want you to pat yourself on the back a little bit here for making some smart choices and it'll make this journey a bit more enjoyable and less of

a slog. It's not that we want we don't want you to intentionally make your life miserable miserable, but we do want you to make decisions that is going to leave more money in your bank account so that you can attack this debt and be done with it once and for all. Yeah, and we just don't want this debt lingering over you anymore. That we want you to

be rid of it once and for all. And what we want you to looking ahead to, like the bigger and eight better things that you're that that you do want to achieve paying off this kind of debt often means you're looking kind of in the rear view mirror and set it through the windshield right in your life exactly, And so we want you to like, you know, you always need a rear mirror when you're driving a car, but we want you at least when it comes to your life, we want you to kind of be able

to act that off. Well, that should be done with the spending, paying for the spending you did over the past year, and we want you to be thinking about what you can save up for and invest for so that you can think about building wealth and think about those bigger possibilities, right, creating more margin. You can't even get to that point when you've still got that debt lingering around. That's first priority. So absolutely hopefully we've given you enough tips to create an effective plan to get

rid of it in hopefully not too much time. But Matt, let's get back to the beer that we had on this episode. This one is called Perpetual Composition. It's by Southern Grist who I believe they're out of Nashville, Is that correct? I think? So I can take a look here on the bottle, Yeah, Nashville, Tennessee. And this is perpetual Composition blend number two. So maybe we'll have additional blends here on the show. But what your thoughts on this one? If I can get some additional blends of

this one, I'll take it. I'm all about it. It's delicious of it. You were just mentioning wine. This one has a lot of white wine fines. Actually sure, it's the sea so it's a Solera style food or beer aged for six months in a French Bordeaux fooder. Fancy. Yeah, and I guess what. We're also not in debt, so we can afford to splurge a little bit. Exactly, Well, this one definitely so my dad he always gets this white wine called govert Demeanor, but when we have Thanksgiving

and uh, he has always called it Goosemeister for some reason. Goose. It's pretty goofy, but it's it's kind of a it's like more of like a dessert white wine. And I really don't drink wine very much, but I always look forward to it on Thanksgiving, even though I don't know anything about white wine, but this one has some of those elements. It's a little bit sweeter, kind of like one of those dessert white wines, but it's it's that golden sour. It's got more nuanced though, and I think

part of that is the oak barrel aging. But I like everything I've had from Southern grist and this is one of the better ones. It's so good. Yeah, when when we poured it, it it just had like a beautiful I mean the sun was kind of shunning through. It's kind of it's been like a sun out, sudden hidden sun out, sun hidden kind of day, and like the rays hit it perfect. Oh yeah, yeah, Like right when I cracked this thing up and poured it, like the beams of light shot through the sun. It was just

like sparkling. So it had this beautiful golden color. Uh, it was really carbonated initially. It's almost like champagne or like the a lot of effervescence coming up. But I think I feel like it was a nice balance of acidity and sweetness. It wasn't too over the top sweet for me. Um. It had that, yeah, that nice kind of tart acid profile as well, that combined with that depth that you get with the oak. If in particular, Yeah,

if you like white wine, this is abs. Look up golden sours just in general because that is a style that you will it would likely find yourself gravitate towards. But if you know your beer and you're looking for an oak aged sour, would definitely recommend this perpetual composition by Southern Grist out of Tennessee most stuff. All right, that's gonna do it, Matt for this episode. And if you want, yeah, some of the links that we mentioned on this episode, you can find them up on our

site at how to money dot com. There are also other helpful resources there too. We've got a lot of new money content that we're writing about that we're putting out on a weekly basis, and you can also sign up for our newsletter at how to money dot com slash newsletter. But Matt, that's gonna do it. Until next time, best Friends Out and best Friends Out