The Sugar Daddy Podcast

26: Debunking Debt: Strategies for Reduction and Repayment

August 15, 2023 The Sugar Daddy Podcast Season 2 Episode 26
26: Debunking Debt: Strategies for Reduction and Repayment
The Sugar Daddy Podcast
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The Sugar Daddy Podcast
26: Debunking Debt: Strategies for Reduction and Repayment
Aug 15, 2023 Season 2 Episode 26
The Sugar Daddy Podcast

Social media will have you believing everyone is a millionaire, living their best debt free life, when the reality is most Americans have debt. In this episode, Jessica and Brandon dive into the “good debt/bad debt” nuances and give you practical ways to reduce and repay your debts. Whether you are working to pay off your student loans, medical bills, credit cards or your mortgage, you’ll learn how to properly assess your debt in order to craft a repayment strategy that works for you. 

If you’d like to leave us a question to be answered during future episodes, you can do so at Speakpipe. We can’t wait to hear from you!

Be sure to connect with us on Instagram

Learn more about Brandon, and Oak City Financial

Schedule 30 minutes with Brandon 

Please remember to subscribe, rate, review and share our podcast far and wide. It means so much to us!

Show Notes Transcript Chapter Markers

Social media will have you believing everyone is a millionaire, living their best debt free life, when the reality is most Americans have debt. In this episode, Jessica and Brandon dive into the “good debt/bad debt” nuances and give you practical ways to reduce and repay your debts. Whether you are working to pay off your student loans, medical bills, credit cards or your mortgage, you’ll learn how to properly assess your debt in order to craft a repayment strategy that works for you. 

If you’d like to leave us a question to be answered during future episodes, you can do so at Speakpipe. We can’t wait to hear from you!

Be sure to connect with us on Instagram

Learn more about Brandon, and Oak City Financial

Schedule 30 minutes with Brandon 

Please remember to subscribe, rate, review and share our podcast far and wide. It means so much to us!

Speaker 1:

all these other external issues. We seem to gloss over them when it comes to just debt in general, and I, you know, I think we tend to shame people for for having debt without looking out, without looking at the nuances of their debt.

Speaker 2:

Well, I think, too, society right In social media, everything now is be debt-free. Be debt-free here's how to take $20 and become a millionaire tomorrow. And it's like there's so much stuff coming at us. Some of it's good, a lot of it's just garbage. But if you don't have again the building blocks and the foundation and the information, then, yeah, you look at these things and you're like man, everybody's a millionaire. Hey, everyone, welcome to the Sugar Daddy Podcast. I'm Jessica and I'm Brandon and we're the Norwoods, a husband and wife team here to demystify the realm of dollars so it all makes sense, while giving you a glimpse into our relationship with money and each other. We are so glad you're here. Let's get started.

Speaker 3:

Our content is intended to be used, and must be used, for informational purposes only. It is very important to do your own analysis before making any investment based upon your own personal circumstances. You should take independent financial advice from a licensed professional in connection with, or independently research and verify any information you find in our podcasts and we start to rely upon, whether for the purpose of making an investment decision or otherwise.

Speaker 2:

Hey babe, what are we talking about today?

Speaker 1:

Today we are talking about debt reduction.

Speaker 2:

That is a great topic. I know we get a lot of questions about how to reduce debt, where to start, what to pay off first and the reality is most Americans have debt credit card debt in particular, so high interest debt and I know there's a lot of methods out there for how to reduce debt, like the snowball method, and so I think that's an important topic that we should address to help people who do have debt get rid of it and figure out how to strategically plan to get rid of it.

Speaker 1:

Yeah, we definitely say that debt is the number one issue that is plaguing most individuals and whenever I sit down with someone new, normally it's the number one thing that's at the top of their list of what they want to fix, whether that's credit card debt, student loan debt.

Speaker 2:

Some people want to pay off their mortgages.

Speaker 1:

Correct and I have my personal feelings about that, which we will also talk about. People always talk about the difference between quote unquote good debt, which is maybe a mortgage, as compared to bad debt, which could be high interest debt, such as a credit card, or sometimes people take out loans that have very unfavorable terms.

Speaker 2:

Yeah, and interest rates.

Speaker 1:

Yes.

Speaker 2:

Yeah, so would you say, just to kick it off, that any debt that you have that has over a 7% interest rate would be high interest that you should look to pay off first?

Speaker 1:

Well, I don't want to do it in that means. The reason being is that so, for example, depending on the interest rate, environment is also going to dictate what is a high interest rate.

Speaker 2:

Okay, so mortgages right now are closing at 7%.

Speaker 1:

Correct. So that's why you have to be careful in the verbose that you use. Granted, you know I'm more or less focused on with a specific debt that you have. You know, is this paying this debt is going to lead towards maybe having an asset.

Speaker 2:

Oh, okay.

Speaker 1:

Or is it simply because you are paying interest, because you overspent?

Speaker 2:

Okay, oh, that's a good way to think about it.

Speaker 1:

Because you could even, in a sense, take a look at like this. Like you know, there could be the topic of student loan debt. Now, obviously, you know normally you are paying towards, hopefully, an asset, which is a better education, which often can lead to a higher paying job. But hopefully, and that's what I'm saying, where you can have some controversy in regards to is student loan debt getting to a point where you know the return of the ROI on it is not there.

Speaker 2:

Right. Well, and then even on the student loan side, you have private loans, you have subsidized loans like federal loans. So that will determine the interest rate too, because typically private loans have higher interest rates than federal student loans. Right. No, not always Because sometimes I didn't say always Okay.

Speaker 1:

Well, because sometimes the way that they entice you to private.

Speaker 2:

I say always. Sorry, you did not say always. We can listen to the recording.

Speaker 1:

But the way that private lenders entice you is by having a, you know, maybe initial lower interest rate and it could be, a variable interest rate.

Speaker 2:

Well, that's what they're doing, even with mortgages. Now, correct, you know your first year. Maybe, if you buy down the points, you'll be in the high fours you know low fives, and then year over year you're adding to that interest rate and then you'll end up in the 6.5s, maybe even higher, at this point, yes.

Speaker 1:

So, from a debt standpoint, I would more or less focus on what is the type of debt by. What I mean by that is is this a debt that's going to lead to an asset, or is this simply a debt that you're paying because you were not, maybe budgeting properly?

Speaker 2:

Okay, so people should think about the kind of debt that they have. Is it student loans, is it mortgages or a mortgage, is it credit cards, personal loans, car note, et cetera. And then what should they do from there?

Speaker 1:

Well, first and foremost, you need to always, in these scenarios, when it comes to paying off debt, is assess where you're at currently from a financial standpoint. You know how much money do you have coming in, what is your income, what is your income and where do you have money going out.

Speaker 2:

Again, your cash flow, your cash flow budgeting whatever you want to.

Speaker 1:

maybe you know the verb is you want to use. I don't personally like the term budgeting because we've said before that I think has a negative connotation with a lot of people just restrictive. Yes, it makes them feel restrictive, but having an idea of what your cash flow is, that's the first and foremost. Okay, okay, so once you have an idea of what your cash flow is, you know. Hopefully, in these scenarios, you were at least paying the minimums on your debt.

Speaker 2:

Right.

Speaker 1:

All right, that's first and foremost. Are you at least paying?

Speaker 2:

the minimums. Your bills. Are you paying your bills?

Speaker 1:

So let's even take a step back. Let's say, hypothetically, you know you aren't all consistently paying the minimums on your debt. You need to address that first. You know, because often in those scenarios you know you're receiving calls, you're receiving letters and people tend to shy away from that.

Speaker 2:

And it's affecting your credit score, which will later impact you when you maybe are looking to buy a house, a car, some big ticket item.

Speaker 1:

So the number one I was thinking I would say there is that if you're not consistently paying the minimum bare minimums, at least on the debts that you have, then don't shy away from the debt collectors. That's not going to help you at all.

Speaker 2:

Right.

Speaker 1:

It's actually more beneficial to reach out to them and have these conversations, because the collectors would prefer to get some form of their money back and set up some type of plan that enables you to at least pay something. Then the simply not receive anything. You know there's this, I guess people obviously you know you have a amount of shame and maybe you know, maybe even a little bit scared, that you know when, the when you're receiving these letters or receiving these phone calls. Like you know, I'm just not going to address it now, I'm not going to, I don't have the money or whatever, because I can't pay what it says on the paper.

Speaker 2:

Yeah.

Speaker 1:

Call them more times than not. They want to work with you to set up some form of a plan to get start getting some money back. So that's the first thing that I would do.

Speaker 2:

Yeah, and that's the same with medical bills as well. So, and don't quote me on this, I haven't done enough research. But I think again, we are not your financial advisor. Even though he is a financial advisor, I think that legally, you can tell the collection agency for medical bills hey, I can pay you $2 a month, and they have to accept that so and that medical bills don't have interest.

Speaker 1:

So and also often medical bills, I believe aren't necessarily reported to your credit score either.

Speaker 2:

Now sometimes the paper will say because even I've had a bill go to collections from a medical procedure and I'm like, where did this even come from? Like, I pay my bills, I log in, but it was one of those weird scenarios where I paid the hospital, I paid the radiologist, I paid the imaging center, I paid all the people, even though the insurance took care of the bulk. And then there was, like I don't know, the anesthesiologist or something, some random practice. You know, I didn't have a portal set up. It was all bizarre. I have no idea how this happened.

Speaker 1:

Yeah, medical bills are difficult because they don't make it very easy.

Speaker 2:

Yeah, it's not consolidated, like can I get one bill that's like itemized for who was in the room? But anyways, we're not going to solve that on today's episode. But so I got this letter that said you know, my bill has gone into collection and I don't even remember getting a first or second or third bill.

Speaker 2:

Like what did you know? I don't even remember getting that or getting any kind of a phone call, so I was super annoyed just for all of those reasons. But also then I'm, like you know, on the statement. It said that they can report to the credit bureaus. I don't know if that's a scare tactic or if that's actually something that would have happened.

Speaker 1:

Here's a fun, interesting fact about that I was pretty pissed about it. No company is required to report to the credit bureau. It's voluntary.

Speaker 2:

So they're just voluntarily being jerks.

Speaker 1:

Yeah, so you actually have companies that you know on a typical basis, do report to the credit bureaus, but one company may just choose not to, so you're not actually required to.

Speaker 2:

That's interesting.

Speaker 1:

I want to do a whole episode on you know credit scores because it is a weird, fascinating game that they play, you know.

Speaker 2:

Yeah, my credit score has been going down because we've paid all of our bills.

Speaker 1:

Which is what wants to get into a weird game. It's so annoying, Like when you pay off your debts you're put in the debts I have no balances and you know my credit score dropped 18 points.

Speaker 2:

Like how is that what? Okay, so I think we're going off on a tangent here. I think we were talking about good debt versus bad debt and analyzing what cash flow you have coming in, what cash flow you have going out, so assessing your current situation and then I think from there, looking at specifically the debts, what you have going out, whether what you should have going out minimum payment right, whether you're paying them or not and then what do you think about the idea of like stack ranking based on the interest rate?

Speaker 1:

I personally like that idea.

Speaker 2:

Okay.

Speaker 1:

You know me, I'm a math person, so I would prefer to tackle debt that has a higher interest rate, because that's going to lead if I'm able to pay that off sooner, that's going to lead to me paying less in interest.

Speaker 2:

Right.

Speaker 1:

Now, however, for some people, they might take a look at putting it in order from the lowest amount to the highest amount, and they want to go ahead and pay off the lower ones.

Speaker 1:

So they regard less interest rate. So they get those wins and I'm not going to discount that method because I'm a firm believer that when it comes to, you know, individuals, when it comes to them, comes to their money and financial planning, that it's a huge part of it is emotion, yes, the psychological issues that you're, you know, thought process that you're dealing with. So, if paying off smaller debts is going to, you know, give you that small one that you need in order to continue on and it puts and it puts you in a better place mentally when we're having the conversations about your debt.

Speaker 1:

I'm going to do that method as compared to maybe paying off the higher interest ones first. That might take longer because a big part of the, you know, working with a client is that you have to get them buy in but you get them to keep doing the work. And if my method, in my mind, from a mathematical standpoint, is not going to get them to fully buy in and keep them you know a part of the process then obviously that's not the right method to use, right? So it's to determine who you are as a person Like you know. Do you need these small wins to, you know, keep going along? Or are you a person who's analytical, maybe, and you're like, hey, I want to pay the least amount of interest period as far as money wise? So I'm going to tackle those higher just higher interest debts first.

Speaker 2:

Right. I think that's a really good call out because I think I'm a small wins person when it comes to money. So I know I would feel more accomplished paying off a smaller credit card, even if it had a higher interest rate, and then I can check it off the list right. Then I can cut that card up and not look at it at it again. I know some people will close the accounts. I, as a non financial advisor, would not advise that you actually close the accounts, because we've talked about it in a past episode it will actually change your credit utilization and the amount of money you have access to.

Speaker 1:

So but cut up the card so it could lower your credit score.

Speaker 2:

It could also lower your credit score, but cut up the card right Once you're done. Cut up the card or think about, as you're if we're speaking specifically about credit cards, because that's the majority of debt that Americans have Again, go back, think about what kind of credit card do I want to use in the future, when I can use it responsibly? Again, are you looking for points? Are you looking for miles? What do you want to gain as far as a benefit from using credit cards?

Speaker 2:

But I think those small wins for a lot of people will make a big difference, because if you start with maybe the larger amount and the higher interest rate, it could feel daunting.

Speaker 2:

It's much more daunting to say, hey, I have $15,000 to pay off versus okay, I've got one that's $700 and I'm gonna go hard for a month. I'm gonna really put every extra dime that I have towards this, pay that off in two months. Okay, now I've got it done and now you move to the next one. Then you can also, either way, I would assume that whatever you were paying towards one card to pay off, while maintaining paying at least the minimums on your other cards that you then take that money maybe not in full, but you roll it into the next debt. That's the snowball method, right where you even though I know your snowball method doesn't include restricting your entire life, not investing on the side, not building a savings on the side but I mean snowballing in the sense that you're taking what you were paying for one bill and now rolling part of that into another bill.

Speaker 1:

Yeah. So you know, for example, if you're paying off one credit, say, you have like maybe three credit cards and you're trying to pay down the debt on those and you have one credit card we were making $200 a month payments on it and you pay that card off. The ideal scenario is that the $200, you were already accustomed to paying that that you go ahead and apply that to the next you know credit card that was on your list.

Speaker 2:

Yeah, so then that amount that you were gonna pay on the next card increases and then you keep doing that. Now I think one of the things that we talk about often, or that you are a big proponent of, because you know there's people out there, dave Ramsey, that say you know, hey, if you have any kind of debt, you don't need to put money anywhere else only to that debt. But I think you're of the mindset of you should still be working towards an emergency fund, you should still be investing right, even if it's not hundreds of dollars, but maybe you can invest $5, $10, just the act of that steady. What can I contribute to get into that good habit, to automate what goes into this account? Talk to us about what you think about paying off debt and saving and investing. Is it too much?

Speaker 1:

It depends on the individual. Be honest with you, okay, because we all finance personal. Finance is personal, so you really do have to assess who you are as a person and what you can handle. Now, the one issue that people often overlook when it comes to going in debt. Now, obviously there are circumstances where, like you know, the single mother who's working multiple jobs trying to support her, you know, children maybe she goes into credit card debt, not because she's the bad budget or because she just simply doesn't have enough money and this is what she needs to use in order to put food on the table to make it.

Speaker 1:

I'm not talking about that scenario. I'm talking about the scenario where you're just simply overspending because maybe you're not paying attention to it or maybe you know. Whatever the reason may be, it's a habit. So you do have to take a look at your habits, of what's got you in the debt, because even though you're paying off your debt, you also have to change your habits your behavior?

Speaker 2:

what got you into debt?

Speaker 1:

So, if you are, swiping the card, knowing that you don't have money. You're like I'll just worry about another day. You need to change that habit, that behavior. So you need to address those. But then also, the same time, people tend to maybe throw too much money at the credit card and they're not saving. So nine times out of 10, the reason that you are, you know, in credit card debt is because you didn't have any savings to pay for things, right? So if you were to go ahead and pay off your credit card debt, great, you pay off your credit card debt, but at the same time you weren't saving. So you don't have anything saved up. And what always happens during the time.

Speaker 2:

Yeah, something, something in life the tire will go flat, some sort of home repair will come up. Your dog will get sick.

Speaker 1:

And you don't have the money saved up. So you don't have the money saved up, and what ends up happening now is that you all that hard work you put into paying off your credit card debt, you go right back into it again it's a cyclical cycle, a cyclical cycle, yes, yes. Cycle cycles aren't always cyclical.

Speaker 2:

Are they not? Oh, okay, okay.

Speaker 3:

All right Cyclical cycle.

Speaker 1:

The word cycle doesn't imply circle.

Speaker 2:

Okay, that's fair. Maybe I got stuck on the alliteration. I don't know what that word is. Cyclical cycle Is that alliteration? I don't know. We're getting off track here, so okay, so you definitely advise building your saving your savings alongside debt reduction.

Speaker 1:

Yeah, because what ends up happening is that that life happens and then you go right back into debt. Right, and then you're like oh, I got to pay it off again. You pay, pay, pay, you pay it off. Then life happens again.

Speaker 2:

Yeah, what about the investing portion?

Speaker 1:

So the investment portion, there could be some benefits, okay.

Speaker 1:

So one, you really have to assess how much debt do you have, like, do you just have a tremendous amount of debt where, like you really like, if you ran up like $50,000 in credit card debt, like maybe we should just be focused on your credit card debt, you know?

Speaker 1:

Okay, but if you have like $10,000, $5,000, then maybe you know we can incorporate some of their aspects of the financial planning aspect to prepare you for the future as well. So if you, for example, if you have a 401k plan through your employer, you know, let's just say that your employer provides a 3% match, which means that up to the first 3% of your contribution, your employer will also contribute 3%. All right, let's say, when I sat down, anyone looking at your scenario, that you're contributing 7%, 8%. Maybe we drop it down to 3% so that you are still taking advantage of the match from your employer. So you're essentially getting that free money, so you're still investing. You're also getting that free money from your employer to invest, but we've also freed up some excess cash that we can now use towards debt reduction.

Speaker 2:

Okay, what if there's no 401k? Because that's the easy one, right? If you are a W-2 employee and your employer offers a match, you should always get the match, because it's free money right Now, going above and beyond, that is a different conversation. But what if? What if this is an entrepreneur? There is no match, then what?

Speaker 1:

I mean even still, maybe put in $25 a month into an investment account you know could be beneficial. I mean, it really comes down to like I say I always say in my mind, like I'm going to run the numbers first, okay, so I can run the numbers and that could be a basis of what we're talking about. But you do have to really take into account the emotions of each individual and the behaviors.

Speaker 2:

Right.

Speaker 1:

You know, because I'm, since this is what I do for a living I'm able to, you know, basically juggle multiple balls at one time and think about it. That's not going to be the case for most individuals, so it might be more beneficial for them to focus on one or two things rather than, like three or four, all the things.

Speaker 2:

Got it Okay.

Speaker 2:

Let's talk about the other really important thing that I think is vital when working towards debt reduction and building your savings on the side investing just all of it.

Speaker 2:

I think especially on the debt reduction side people become so hyper focused on. I've got to get rid of this debt, which is a good mentality, because you do need focus and discipline, but what I don't like is the idea that you have to deprive yourself and that you cannot get that latte, or you can't go out to dinner with friends, or maybe you can't go, you know, and do an activity with your family, et cetera. I think there has to be a boundary right, just like if you're working on you know, quote unquote dieting, or watching what you're eating, if everything is healthy and you are counting every calorie and you're doing your macros and you know there is no break from being strict right and you're like I can't have the pizza, then all you're going to think about is the pizza, right? I think there needs to be a balance in Not rewarding yourself but still living a responsible life where you can also find joy.

Speaker 1:

I mean I think in those scenarios like extreme deprivation often leads to not a healthy relationship with whatever that specific thing is Food.

Speaker 2:

Money doesn't matter. Exercise yeah.

Speaker 1:

So you know that I'm a firm believer in that we need to plan for the future, but we need to enjoy it today, because the future is not guaranteed. You know, obviously you have to do that within certain parameters so that you can save enough money up for the future so you can still live the life that you want to live. But we know scenarios where people saved and saved for sometime in the future to do that big grand thing and unfortunately the future didn't pan out the way they thought it was going to be. And that grand thing that they thought they were going to be able to enjoy, they could not either enjoy it or they couldn't enjoy it to the extent that they thought they were going to be able to.

Speaker 2:

Right.

Speaker 1:

And obviously being able to, like you know, unless you're buying 30 lattes a day like that's not, that's not even buying 30 to a lot days a day. You already have. I don't you have some issues to begin with. So that concept of like oh you know, don't buy Starbucks Like if you're buying one drink of Starbucks a day, that's not going to be what makes you in the day.

Speaker 1:

It makes your break Makes your break. That's not it. It's not the little small, tiny, you know, you know things. It's more or less the larger things and the habits.

Speaker 2:

Yes, the habits Right.

Speaker 1:

I mean, the hardest part is really taking a step back and assessing. So I think, when it comes to debt, the hardest part is that people just don't even address it, they don't look at it, they don't even sit down and think, hey, you know, if I have this amount of debt and I'm making this number of payments with this amount of interest, how long would it take for me to pay it off? That's really a mathematical equation, like I could tell you that very simply what that's going to be. And if, oh, you know, if I'm paying the minimum, this is how long it's going to take to pay off. But if I add an additional $100 a month, this is a short time from to this. You can do that, but people don't do that and I think that's one of the biggest detriments that people are, you know, causing in their lives is that if you sat down and you actually, sometimes scenarios aren't as bad as they look on paper.

Speaker 2:

Right.

Speaker 1:

You know you might see, because all you're seeing is this lump sum that you know you think is never going to go away. But when we actually sit down and look at the plan and set it up like this could be gone in two years, three years, maybe you know. So you actually have a plan and an end goal. So what most people the problem is with the debt that they have they don't see that there's an end goal.

Speaker 2:

Yeah, well, because it feels so heavy and daunting.

Speaker 1:

Especially with student loan debt, people are like I have no idea what, I'm going to pay it off.

Speaker 2:

Yeah. Or people are like I'm just going to take it to the grave and that's fine too, right? Like I mean I've literally heard people say that. Oh.

Speaker 1:

I mean people who have been, you know, who have a profession that require more education. 100% I've had, I've listened, I've talked to doctors and attorneys who have said the same thing.

Speaker 2:

Yeah, they're like.

Speaker 1:

I knew what I was getting myself into.

Speaker 2:

I'm not even worried about it. And yeah, well, I just think you know there's a lot of people and programs that are like you've got to give, throw every single cent and dime that you make to the debt and that leads to that deprivation. And then what do you do, especially if you haven't built the good habits you know financial building blocks and the money habits is you go wild, right? It's like you know what this is too much. I'm going to do all the things. I'm going to go to the spa, I'm going to buy the things I'm going to, you know, have the $200 brunch with my friends. And then you go right back to where you were, versus building in a plan of okay, I have this coming up, I would like to participate in this event, or that bachelorette party or this dinner, or I know I have a, you know, a birthday event coming up, etc.

Speaker 1:

All comes on the planning and building it in. The thing is, too, is I don't want to overlook this aspect, which I think often is is that we are the first generation dealing with all of these, because, if you think about it, when our parents were, like you know, younger in college and right you know, age right after college, credit cards were not still that pervasive. What people weren't just using credit cards left and right like that.

Speaker 2:

Right, well, yeah, because if you couldn't afford it, you didn't buy it.

Speaker 1:

So we're the first generation that really had to deal with just the easy access to credit cards. And you know, we grew up, you know, seeing our parents, in some aspects, start to use them and just so it became a part of our you know everyday aspect. But then also we're the first generation dealing with student loan debt on top of that. So, you know, we were told, you know, go to college, go to college, you're going to get a job, go to college, get a good job. And then how do you pay for it? Oh, just take our student loan debt and I think a lot of people don't realize that the people that were taking our student loan debt wasn't like. These individuals did these loans on their own at 18. Their parents took them out.

Speaker 2:

Right.

Speaker 1:

So they didn't actually have an understanding of what was going on, and the parents, more than likely, didn't have student loans, so they didn't understand the requirements of them either. So I think that's a big conversation that's being overlooked. People are like oh well, you decided to take on the debt. You need to pay your debt back. And it's like no, I didn't take on the debt. My parents decided to take on the debt for me, and none of us understood what the debt was.

Speaker 2:

Right, yeah, that's a whole, and it also didn't pay off because you know a lot of like.

Speaker 1:

you know, I graduated in 2005 from college and attended law school for a year, and a lot of my friends, who you know, are attorneys now they graduated from law school in 2008. We don't know what happened in 2008.

Speaker 2:

It was one of the worst times ever find a job. Ever get a job yeah.

Speaker 1:

So you know you, all these other external issues, we seem to gloss over them when it comes to just debt in general. And I, you know, I think we tend to shame people for for having debt without looking out, without looking at the nuances of their debt.

Speaker 2:

Mm. Hmm. Well, I think to society right and social media. Everything now is be debt free. Be debt free. Here's how to take $20 and become a millionaire tomorrow. There's so much stuff coming at us. Some of it's good, a lot of it's just garbage. But if you don't have again the building blocks and the foundation and the information, then yeah, you look at these things and you're like man, everybody's a millionaire, everybody's spending their summers on a yacht, everybody's living in a 10,000 square foot house, everybody's driving a fancy car and that's what we see right.

Speaker 2:

Because nobody's putting their bad days on social media or their actual statements or credit card, you know, bills, etc. So what we're seeing is everybody's living their best life, but I have debt. What am I doing wrong? Now I feel that shame and it's just this pervasive constant, like I'm doing something wrong, but I haven't been given the proper tools.

Speaker 1:

Yeah, social media is can be the killer of the joy, because it's always a constant comparison and you know you could have two individuals that you know. Let's just say you have two individuals that became doctors. Okay, so they went through, obviously, undergrad, medical school and became, you know, successful doctors. They could have two completely different financial situations of debt based upon their upbringing. So you have one individual came from a wealthy family where his parents were doctors.

Speaker 2:

Maybe he didn't have to say his what women can't be doctors.

Speaker 1:

Actually no more female doctors and male doctors. So just calling you out, my mom's a doctor, not a medical doctor but a PhD doctor.

Speaker 1:

But we have student who went, who came from a wealthy family student a student, a doctor, a doctor a who came from a wealthy family and didn't have to make it and didn't have to maybe take student loans for undergrad, maybe even have scholarships, because you had parents that were able to help them and everything like that through high school and everything like that, and, you know, head medical student loans, but his parents were able to help pay off that and so he almost is, you know, uh, debt free because he came from a good family. Now you have student B who came from a lower income family where they didn't know, they didn't have their parents, maybe didn't go to school they're going to be the first ones to go to college. So it took out student loans in order to go to college, still did well in school, took out more student loans to go to med school, still got the great you know job, same salaries, completely different debt issues.

Speaker 2:

Right.

Speaker 1:

And people don't look into that. You know, we just compare.

Speaker 2:

Yeah.

Speaker 1:

Oh, you know we're.

Speaker 1:

We're in the same job, we should be around the same thing, it's like, and you've had completely different lives brought up you know, so, like the shame behind debt, I think we need to really work on I think a lot of people need to work on the psychological aspect of how it weighs on them, because the people that got into debt because this is what they needed to do in order to survive, to get to the career that they wanted, like you didn't have bad habits, you had to do what you had to do because you would lack the means to do it.

Speaker 2:

Right. But then also going back to the behavior, some people's debt is just I'm trying to keep up with the Joneses, correct? I'm trying to live my best life, I work hard, I deserve nice things, swipe, swipe, swipe.

Speaker 3:

So there's so many different scenarios. Yes, and that's not good.

Speaker 2:

Well, and then there's other people too who you know maybe did have some crazy thing that happened to them or got into some you know terrible accident, and now they are strapped with insane medical bills that are just daunting and you know, soul crushing and another reason we need universal healthcare. But you know that I mean that's hard to come out from too. Maybe they were doing everything right you know quote, unquote everything right, and then got into an accident and now they are strapped with $200,000 of medical bills.

Speaker 1:

There's so many scenarios. I believe medical bills is one of the leading causes to people filing for bankruptcy. I believe it.

Speaker 2:

Oh also student loans, do not get wrapped into bankruptcy.

Speaker 1:

They do not.

Speaker 2:

Yeah, fun fact.

Speaker 1:

And I wonder why Right so okay?

Speaker 2:

So if you had to kind of sum it all up and give people you know a one, two, three, four step way of addressing their debt, just to summarize, what would those be? First, Regardless of what kind of debt it is, Okay.

Speaker 1:

First step I mean first step is understand all the different debts you have.

Speaker 2:

Write it down.

Speaker 1:

Write it down so you physically see, so you see what the debt, what kind of debt it is, whether that's credit card or student loan, whatever it may be. You also see the balance and you also see the interest rate.

Speaker 2:

Yes, write all of those down.

Speaker 1:

Write all those down, all right. So you need to understand that now within I would probably put this maybe like as a one A, because sometimes people don't understand the terms of their debts. So either you make that one A or step two. Step two is you know, understand the different terms of each debt. You know what flexibility do you have in regards to paying the specific type of debt back. You know, for example, like you know with student loan debt, maybe if you're unable to pay for a period of time, you may have some ability for forbearance or deferment, or deferment.

Speaker 1:

You know you need to understand the nuances of each debt that you have and what maybe you know within those terms could be beneficial for you to help pay it down.

Speaker 2:

Right, okay.

Speaker 1:

And that's going to involve, obviously, one looking at your debt online, but then also maybe calling in and having a conversation with the um, no, the debt collector, whoever, whatever you know the debt is, but then also that might be just simply having a, also having a conversation with the professional that you know it can help you with that.

Speaker 1:

All right. Now next step I would say is one obviously making sure that you're paying your minimums, but then assessing your budget. So this is step three assessing your budget to see do you have anywhere you can cut back and have some excess money going towards paying down a specific debt. Now I'm not going to say which method you should use. You know whether or not you want to start with the one of the lowest balance or you want to start with the one with the highest interest rate. Whichever one you're choosing, but you do need to have an understanding of your cash flow and where maybe you can have some free up, some excess money to help put towards that debt.

Speaker 2:

Sidebar. This is also a great opportunity to have the side hustle which we talk about a lot. Is there a way for you to bring in more money? Because if there's not a way for you to increase your salary or your hourly wage, or however it is that you're currently getting paid, you need to understand that A your debt is likely going to keep increasing if you don't have a way to properly address it. So then the only other way is you have to make more money.

Speaker 1:

Oh yeah.

Speaker 2:

So can you either ask for a raise when is your next raise? Make sure you're doing you know all the things we talked about with Mandy money but then also, what are you currently doing that you can monetize? That's something we keep coming back to. What are you doing? What do people come to you for where you can make a little bit of extra money, or maybe a lot of bit of extra money on the side to put towards your debt?

Speaker 1:

I mean, I always say not just myself, but you know, a great income is going to solve a lot of financial problems. It's not going to be the magic pool that maybe fixes everything when it comes to finances. It may be your behavior with money, but it can fix a lot of problems.

Speaker 2:

Yes.

Speaker 1:

So the more money you bring in, it's going to be a lot easier to make your situation better.

Speaker 2:

Yeah. So again, think about the side hustles. Think about the things that people are coming to you for. Can you monetize it? Even I mean $75 a month, $50 a month, that is money that you previously didn't have. Now that's something that you could potentially put towards your debt or to put towards that emergency fund. So, again, that's something we're always going to keep coming back to. What can you monetize to bring in additional funds to put towards? Whatever those goals are? All right. What's the next step?

Speaker 1:

So step four would be for you to actually just have a plan in sense of knowing for each debt if you're paying this specific amount, how long it's going to take for you to pay it off. Because, like I said before, I think having an end goal is able to help a lot of people like, oh you know, I'll be able to pay. If I'm paying this amount, then I'll be able to pay it off in two years. If I'm paying this amount, I'll be able to pay it off in three years. Being able to have an end date is going to be much more helpful than a lot of people just paying randomly and not really having any idea.

Speaker 2:

Right, okay, what else is there, honestly?

Speaker 1:

continue to pay it At that point in time. Once you've already know, found all the details of each debt and kind of put it in order, You've also understood the nuances of that debt. You have put together a cash flow plan on how much you can allocate towards paying that debt. Now you do enact the plan and continuously pay it.

Speaker 2:

Yeah, could we throw in there, automate those payments? I would recommend that to make it easier and have it come out.

Speaker 1:

Yeah, once you've looked through the entire, you know you've planned it out and you know that you can pay this specific amount. Yes, go ahead and automate it, because it'll make it a lot easier and it won't tempt you. Won't tempt you to, you know, use that money for something else.

Speaker 2:

Right, It'll be gone. Yeah, I think too. A lot of credit card statements now will tell you hey, if you pay the minimum balance, it will take you this long to pay off this balance and this is going to be the true amount that you pay and it's forever.

Speaker 2:

And it's yeah, and so I mean. I'm sure you know there's calculators online. You can work with somebody if you wanted to, but in most cases, the statement that you should be looking at is going to tell you how long it's going to take and how much extra you're going to pay.

Speaker 1:

That's a good call up because there are a lot of calculators online that you can literally type in and you know if I have a debt, this amount and the interest rate is this amount like and I'm making certain amount of payments, is how long it will take to pay it off, and you can like adjust the. You know the payment amount as far as the payments that you're making and you know if you add an extra hundred dollars and lower. You know the timeframe. It's very helpful. I think that's a good call out that there are those type of calculators online to do the math for you, cause I know that most people are not math people.

Speaker 2:

Right.

Speaker 1:

Use those easy calculators. Don't try to like you know, free-handed yourself.

Speaker 2:

Yeah, I think another thing, too, that's important to note is that this is a fluid thing, right? So once you pay off one credit card, you do need to look at the adjustments, right? Even if it's just to see. Okay, if I put an extra hundred dollars towards this bill, wow, I thought what was going to take me two years to pay this off is now going to take 13 months or 11 months or nine months. Those are also wins that you should be celebrating, because the more time you get to cut off of the time that you're paying back, the less interest you're paying and the more you know you're freeing up your cash to hopefully be quote unquote debt free, whatever that means to you Like.

Speaker 2:

For us, we are not debt free because we have a mortgage and we plan on carrying a mortgage, because we do consider that quote unquote good debt, even though we have a high interest rate on our mortgage. Now, we know and hope that we'll be able to refinance when the time comes, and instead of paying off almost $500,000 mortgage, we would rather be cash positive and have money that we can use towards our other goals. So these are all things that you need to think about when you have your plan, but it's going to be changing and moving and maybe you do bring in that side hustle and maybe you do have an extra hundred dollars a month that you can start allocating towards additional bills. But these are always things that you're going to need to look at, which is why having that monthly money meeting, whether with yourself or with your partner, is something that you should be doing.

Speaker 1:

Yeah, because there's a lot of conflicting views about you know should you pay off your home or not. I'm going to leave that for a different conversation.

Speaker 2:

But that goes back to like mentally wanting to just have no debt. Correct, right, like my mom is one of those people. Right, like she likes the idea of, like I do not have debt. And then we know other people we've talked to other people even for the podcast that are debt free, including their mortgage, and that was a big goal of theirs because they did want to be able to leverage that money.

Speaker 1:

No, I specifically say we're talking about your primary residence primary residence, the one that you are paying into.

Speaker 2:

Yeah, so, but that's a different conversation.

Speaker 1:

I'm fine with somebody else and a rental property paying off my debt. You know it's a completely different scenario, but I'm talking about your primary residence, that you have a little different about how I would pay that off. Yeah, you know what I would do with that.

Speaker 2:

Yeah, absolutely Well, just keep in mind. Obviously, brandon is here for anybody that needs help with shameless plug paying off their debts or coming up with a plan figuring that out. We do want people to live their best life, not 50 years from now, but today, whether you have debt or not, and most of us have some sort of debt, and so you can't push the envelopes under the rug. You need to address them, you need to open them, you need to see what's going on.

Speaker 1:

Just rip the bandaid off. That's the first step is ripping the bandaid off and assessing the damage.

Speaker 2:

Yeah, and see what's actually going on, understand your cash flow what's coming in, what's going out and put on your big girl panties and handle it.

Speaker 1:

Or big boy pants.

Speaker 2:

Never when you wear. If you go commando, you still need to rip the bandaid off. Okay, all right, we hope this episode was helpful. Go assess your situation, do what's right for you. Personal finance is personal and we hope you'll tune in again soon. Thanks, don't forget. Benjamin Franklin said an investment in knowledge pays the best interest. You just got paid. Until next time. Thanks for listening to today's episode. We are so glad to have you as part of our Sugar Daddy community. If you learned something today, please remember to subscribe, rate, review and share this episode with your friends, family and extended network. Don't forget to connect with us on social media. At the Sugar Daddy podcast. You can also email us your questions you want us to answer for our past the sugar segments at the sugar daddy podcast at gmailcom, or leave us a voicemail through our Instagram.

Debt Reduction Strategies and Considerations
Paying Off Debt and Financial Priorities
Building Savings and Reducing Debt
Managing Debt and Financial Habits
Understanding and Managing Debt
Creating a Debt Repayment Plan