WEBVTT - The Truth About Debt Consolidation #077 0:00:00.080 --> 0:00:03.000 Welcome to How to Money. I'm Joel and Dine Matt, 0:00:03.200 --> 0:00:26.160 and today we're discussing the truth about deck consolidation. Yeah, 0:00:26.239 --> 0:00:29.920 joll for folks who have debts, especially consumer debt, that 0:00:30.040 --> 0:00:32.680 consolidation is something to consider. We've gotten a bunch of 0:00:32.720 --> 0:00:35.440 emails recently of folks asking if that's something that they 0:00:35.440 --> 0:00:37.720 should consider. So I'm glad that we can answer some 0:00:37.720 --> 0:00:41.000 some listener questions. At least do a listener Request Request 0:00:41.040 --> 0:00:44.960 hotline to set that up. Yeah. Yeah, dec consolidation is 0:00:45.040 --> 0:00:47.639 kind of one of those tricky subjects. There's a lot 0:00:47.640 --> 0:00:51.360 to consider before you consolidate any of your existing consumer debt. 0:00:51.560 --> 0:00:54.160 But it is also something that especially for people paying 0:00:54.240 --> 0:00:57.080 high interest rates on their debt, it's something that they 0:00:57.240 --> 0:00:59.160 des probably want to figure out. So yeah, I think 0:00:59.200 --> 0:01:01.240 it's gonna be a good up quickly before we get 0:01:01.240 --> 0:01:02.800 to that, Matt, what you got for us? I wanted 0:01:02.840 --> 0:01:06.480 to mention I just this past weekend sprayed for pests 0:01:06.560 --> 0:01:09.440 at my house and so if people aren't aware doing 0:01:09.440 --> 0:01:11.400 your own pest control, We've written about that on the 0:01:11.440 --> 0:01:13.840 website and it is something that can save you hundreds 0:01:13.880 --> 0:01:16.520 of dollars a year, and it's actually really doesn't take 0:01:16.560 --> 0:01:18.679 that much effort to do it. So I just want 0:01:18.720 --> 0:01:21.840 to say, man, I got out my gloves, makes my solution. 0:01:22.319 --> 0:01:24.440 Did the spraying around the exterior of the house. And 0:01:24.480 --> 0:01:26.520 I do this at my rental properties to just to 0:01:26.560 --> 0:01:29.080 save me, like literally over a thousand dollars a year 0:01:29.120 --> 0:01:31.960 when we're talking about all the houses together, and a 0:01:32.040 --> 0:01:34.759 quarterly spray really doesn't take much time out of my day. 0:01:35.000 --> 0:01:36.679 Just swung by my way after work to do a 0:01:36.680 --> 0:01:38.840 rental property the other day too. So yeah, it's pretty simple. 0:01:39.000 --> 0:01:40.720 You mentioning that just rubbed in my face because I 0:01:40.720 --> 0:01:42.760 haven't yet. Gotta get with it, man, it's really not 0:01:42.800 --> 0:01:45.120 that hard. Yeah, what's this warming up here in the south? 0:01:45.280 --> 0:01:46.720 Termites is something you have to keep an eye out 0:01:46.720 --> 0:01:49.880 for as well, And so that's how star pro. Is 0:01:49.880 --> 0:01:52.440 that what you used? Yeah, yeah, that's that's that's what 0:01:52.480 --> 0:01:54.880 I have as well. But that's really great for keeping 0:01:55.040 --> 0:01:57.720 termites down as well. Yeah, and for anyone who is 0:01:57.800 --> 0:02:00.400 interested in potentially saving a few hundred dollars a year 0:02:00.600 --> 0:02:02.720 and doing their own pest control. Just a quick word 0:02:02.720 --> 0:02:04.480 of the wise. You don't want to go to home 0:02:04.520 --> 0:02:06.880 depot or lows and pick up the stuff there. There 0:02:06.880 --> 0:02:09.480 are websites that sell the stuff that the pros use, 0:02:09.840 --> 0:02:11.799 and Amazon even sells some of the stuff that the 0:02:11.840 --> 0:02:13.600 pros used too. We linked to that stuff in the 0:02:13.720 --> 0:02:15.560 article we wrote on how to money dot com, so 0:02:15.560 --> 0:02:17.320 you can totally check it out. It's just one of 0:02:17.360 --> 0:02:19.640 my favorite money saving tips, especially this time of year 0:02:19.680 --> 0:02:21.480 when the bugs are out full force. Yeah, one of 0:02:21.480 --> 0:02:24.320 those Joel originals. All right, Joel, let's introduce our beer 0:02:24.480 --> 0:02:26.920 for this episode, and to remind our listeners why you 0:02:26.960 --> 0:02:29.400 and I have a craft beer on the show every 0:02:29.440 --> 0:02:32.040 single week, And it's because we like beer. We love 0:02:32.080 --> 0:02:34.840 craft beer, and it's an example of a way that 0:02:34.880 --> 0:02:37.720 we are balancing our lives by living a little bit 0:02:37.760 --> 0:02:40.000 of life now while at the same time saving for 0:02:40.040 --> 0:02:41.840 our futures and being smart with our money. It's it's 0:02:41.880 --> 0:02:44.760 not all about depriving the here and now for some 0:02:44.840 --> 0:02:47.640 lofty goal of being financially independent at some point. We 0:02:47.680 --> 0:02:50.119 also like to take some small little winds and pleasures 0:02:50.240 --> 0:02:51.519 right now, and one of those for you and me 0:02:51.960 --> 0:02:53.880 is delicious craft beer. And I feel like we literally 0:02:53.919 --> 0:02:56.519 just kind of outlined a way in which we save 0:02:56.600 --> 0:03:00.320 money in one possibly for some considered to be an 0:03:00.320 --> 0:03:02.799 extreme way by doing your own pest control. And yet 0:03:02.880 --> 0:03:06.120 we will spend money on fairly expensive craft beer from 0:03:06.120 --> 0:03:08.160 time to time, but this one, unfortunately, Matt, we didn't 0:03:08.160 --> 0:03:10.200 have to spend any money on. And why is that? 0:03:10.200 --> 0:03:13.120 That's right? Man? This beer was sent in from a listener, Naomi, 0:03:13.440 --> 0:03:15.200 and she mentioned that her and her husband they kind 0:03:15.200 --> 0:03:16.959 of went off for the weekend, I think, to Wilmington, 0:03:17.040 --> 0:03:18.960 North Carolina. There's an awesome beach there. Have you ever 0:03:18.960 --> 0:03:20.799 been up there? I haven't. No, I've been there once. 0:03:20.800 --> 0:03:22.760 It's actually really nice. But her and her husband they 0:03:22.760 --> 0:03:25.800 discussed their values and how they relate to financial goals 0:03:25.840 --> 0:03:28.000 per one of our earlier episodes, and she said that 0:03:28.000 --> 0:03:31.240 the conversation and the beer was amazing and she wanted 0:03:31.280 --> 0:03:32.799 to thank us, and she picked us up one of 0:03:32.840 --> 0:03:36.480 these beers from Wilmington's brewing company, which is called Secret 0:03:36.480 --> 0:03:39.880 Lovers the sequel, which is pretty awesome. And this is 0:03:39.920 --> 0:03:43.160 a collaboration beer with New Anthem Brewing, which is also 0:03:43.280 --> 0:03:45.400 right there in Wilmington as well. Yeah, and this one's 0:03:45.440 --> 0:03:47.600 right up our alley. It's in New England style double 0:03:47.640 --> 0:03:49.080 I p A. We'll let you know what we think 0:03:49.080 --> 0:03:50.560 of this beer. At the end of the show, big 0:03:50.600 --> 0:03:52.880 thanks to Naomi for sending this out. It's inspiring to 0:03:53.040 --> 0:03:55.200 to hear kind of the story behind why she's in 0:03:55.320 --> 0:03:57.240 this beer. That's just that's kind of fun. Yeah, we 0:03:57.240 --> 0:03:59.880 don't talk about that often, but that's a huge rewarding 0:04:00.040 --> 0:04:02.400 aspect of of what we do, being able to talk 0:04:02.400 --> 0:04:04.880 on the silly podcast and talking about money but actually 0:04:04.920 --> 0:04:08.800 having an impact on individuals lives, helping relationships. I would 0:04:08.840 --> 0:04:10.600 have never thought that, in some sort of weird way, 0:04:10.720 --> 0:04:13.480 that were these financial counselors and helping couples talk through 0:04:13.480 --> 0:04:15.040 their money. But in a way I feel like that 0:04:15.040 --> 0:04:16.480 you and I are kind of doing that. Yeah, it's 0:04:16.480 --> 0:04:19.640 weird to think about, right, because we started this podcast 0:04:19.680 --> 0:04:22.200 just two buddies drinking beers talking about money. Um, and 0:04:22.360 --> 0:04:25.120 you have the response. Our listeners are the best. All right, Matt, 0:04:25.200 --> 0:04:27.880 Let's get onto the topic at hand, the truth about 0:04:27.920 --> 0:04:31.919 debt consolidation. So let's quickly touch on the problems involved 0:04:31.960 --> 0:04:35.760 with debt consolidation. People fall prey to the lofty promises 0:04:35.960 --> 0:04:39.120 Matt of debt consolidation companies. A quick fix always sounds 0:04:39.160 --> 0:04:42.159 so nice, But just like unloading your timeshare with an 0:04:42.240 --> 0:04:44.320 upfront fee is going to leave you with thousands less 0:04:44.320 --> 0:04:46.440 than the bank account and still with a timeshare on 0:04:46.480 --> 0:04:48.960 your hands. Signing up with a debt consolidation or debt 0:04:49.000 --> 0:04:51.839 settlement company could cost you money points on your credit score, 0:04:52.080 --> 0:04:54.480 and in the end could potentially not move the needle 0:04:54.520 --> 0:04:57.880 at all. There are ways where you can consolidate your 0:04:57.920 --> 0:05:00.280 debt and it's actually gonna be helpful to you. Will 0:05:00.360 --> 0:05:02.200 kind of go over some of those ways, but there 0:05:02.240 --> 0:05:04.520 are a lot of potential pitfalls, and we have to 0:05:04.560 --> 0:05:06.400 talk about those. For people that do have debt and 0:05:06.440 --> 0:05:08.520 want to figure out a way to kind of lower 0:05:08.560 --> 0:05:10.680 their payments and lower their interest rate. First, let's go 0:05:10.680 --> 0:05:14.279 ahead and to find debt consolidation, and that is combining 0:05:14.360 --> 0:05:17.359 lots of individual unsecured debts that you have into a 0:05:17.440 --> 0:05:20.920 single monthly bill, right into a single monthly payment. What's 0:05:20.920 --> 0:05:23.080 really important to keep in mind is that this doesn't 0:05:23.200 --> 0:05:25.960 actually get rid of any debt. It just restructures that 0:05:26.040 --> 0:05:29.040 you're just changing the shape of it. Essentially, if you're 0:05:29.080 --> 0:05:30.880 going through a company, what you're doing is you're paying 0:05:30.880 --> 0:05:34.560 for the convenience and that focus, and you know that 0:05:34.640 --> 0:05:37.360 actually might be a good thing. If you have lots 0:05:37.400 --> 0:05:39.839 of high interest debts, in particularly if you have lots 0:05:39.839 --> 0:05:41.919 of credit card debts. If you're looking at over like 0:05:41.920 --> 0:05:44.279 six is the average credit card interest rate that folks 0:05:44.320 --> 0:05:46.560 are carrying these days. So if you know you've got 0:05:46.560 --> 0:05:50.120 sixteen percent or higher, it might be worth it to consolidate. However, 0:05:50.200 --> 0:05:51.680 you still need to be careful. There's a lot of 0:05:51.720 --> 0:05:55.200 considerations and I'm excited to talk about this today and 0:05:55.240 --> 0:05:58.960 debt consolidation, Matt is not to be confused with debt settlement, 0:05:59.279 --> 0:06:02.160 which is is much much worse for people. We do 0:06:02.240 --> 0:06:03.800 have to mention that before we kind of move on 0:06:03.839 --> 0:06:06.240 and talk about the particulars of debt consolidation and whether 0:06:06.240 --> 0:06:08.560 it works for your situation. In the case of debt 0:06:08.600 --> 0:06:11.720 settlement companies, well you'll hear them often advertising on TV 0:06:11.800 --> 0:06:14.640 and radio that that's like a popular place for for 0:06:14.680 --> 0:06:16.880 them to hang out. Probably a lot of daytime television 0:06:16.880 --> 0:06:19.520 shows too often, sometimes the worst advertisers that prey on 0:06:19.560 --> 0:06:22.360 people advertises during those times of the day. And debt 0:06:22.400 --> 0:06:26.000 settlement companies in particular tell customers not to pay their 0:06:26.000 --> 0:06:28.200 debts anymore, that they don't have to pay their credit 0:06:28.200 --> 0:06:30.440 card company, they don't have to pay that personal loan 0:06:30.480 --> 0:06:32.960 back and that this debt settlement company is going to 0:06:33.080 --> 0:06:35.719 essentially handle everything for you and you're gonna be fine. 0:06:36.040 --> 0:06:37.560 And you know what else they tell you On top 0:06:37.600 --> 0:06:39.720 of that, They say you need to pay an upfront fee, 0:06:39.960 --> 0:06:43.480 sometimes thousands of dollars. And while you're paying them, oftentimes 0:06:43.480 --> 0:06:45.680 the only money that's left in your bank account as 0:06:45.680 --> 0:06:48.240 they tell you they're negotiating your debts down, you're also 0:06:48.279 --> 0:06:50.680 not paying the companies that have lent you money, which 0:06:50.839 --> 0:06:53.760 is leading to a ruin of your credit score. And then, 0:06:53.760 --> 0:06:56.120 on top of that, the debt settlement companies almost never 0:06:56.240 --> 0:06:59.000 make good on their promise to actually negotiate your debts 0:06:59.160 --> 0:07:01.919 with your lenders, and so your credit score gets ruined. 0:07:02.000 --> 0:07:04.279 In most cases, it drops by a hundred and forty 0:07:04.320 --> 0:07:07.000 two a hundred and sixty points. And at the end 0:07:07.000 --> 0:07:09.840 of that terrible saga, you're out thousands of dollars and 0:07:09.880 --> 0:07:12.920 you're in arrears with your debtors. So be very very 0:07:12.960 --> 0:07:15.760 careful before you jump in bed with a debt settlement company, 0:07:15.800 --> 0:07:18.520 because often they're gonna leave you in a much much 0:07:18.560 --> 0:07:21.520 worse financial and credit situation than you were in to 0:07:21.600 --> 0:07:24.480 start with. And John, you mentioned fees up front. That's 0:07:24.520 --> 0:07:27.600 a huge red flag of a company that isn't direct 0:07:27.680 --> 0:07:30.600 violation of the FTC. So if they take any fees, 0:07:30.680 --> 0:07:33.880 any money before they actually settle or they get your 0:07:33.880 --> 0:07:37.760 payments lowered, they're breaking the law. Like that's completely illegal. Again, 0:07:37.800 --> 0:07:40.160 that should be a huge red flag. You also mentioned 0:07:40.200 --> 0:07:43.240 them actually not negotiating on on on your behalf. Well, 0:07:43.440 --> 0:07:46.360 I don't want to defend debt settlement companies, but the 0:07:46.400 --> 0:07:49.440 fact is they actually might be trying to. But the creditors, 0:07:49.600 --> 0:07:51.960 whoever you have debts with, they just don't have any 0:07:52.000 --> 0:07:55.480 obligation to actually say yes and work with the settlement companies. 0:07:55.760 --> 0:07:57.800 They may have very well made that phone call and 0:07:57.840 --> 0:08:00.480 are talking to them, but whoever you actually debts do, 0:08:00.840 --> 0:08:03.600 they're just not willing to work with that specific settlement company. 0:08:03.840 --> 0:08:05.760 And so that's something to keep in mind. Even though 0:08:05.800 --> 0:08:08.200 that a settlement company might say, oh, yes, we can 0:08:08.240 --> 0:08:10.760 do this or we will do this, your creditor has 0:08:10.840 --> 0:08:13.600 zero obligation to work with that company. Yeah, and those 0:08:13.800 --> 0:08:16.760 potentially thousands of dollars that you spent upfront to hire 0:08:16.800 --> 0:08:19.480 this debt settlement company to do the dirty work for you, well, 0:08:19.520 --> 0:08:21.920 oftentimes that would be better off sitting in your savings 0:08:21.920 --> 0:08:24.680 account as an emergency fund or paid in lump sum 0:08:24.760 --> 0:08:26.800 towards your highest interest rate debt to kind of get 0:08:26.880 --> 0:08:30.200 you started working on that road towards paying down your debts. 0:08:30.600 --> 0:08:32.960 That's right, Okay, So think about this. If your debt 0:08:33.360 --> 0:08:35.600 isn't more than half of your income right now, and 0:08:35.640 --> 0:08:38.319 you've got a pretty good credit score, and this is 0:08:38.360 --> 0:08:40.680 almost the most important thing I think, Joel, if you 0:08:40.760 --> 0:08:44.240 have a plan to not take on any more consumer debt, well, 0:08:44.240 --> 0:08:46.959 you know, debt consolidation might actually be a good option 0:08:47.000 --> 0:08:48.920 for you. And so after the break, we're gonna talk 0:08:48.920 --> 0:08:51.880 about ways and not just through a consolidation company, but 0:08:51.960 --> 0:08:54.480 just different methods that you can consolidate your debt and 0:08:54.520 --> 0:09:05.800 also some other pitfalls to keep an eye off for. Alright, man, 0:09:05.800 --> 0:09:08.400 we're back, and before we get into the specifics of 0:09:08.520 --> 0:09:11.600 debt insolidation, let's talk about the specifics of who is 0:09:11.640 --> 0:09:15.480 going to be a good candidate to consider deconsolidation. And 0:09:15.520 --> 0:09:18.120 like you mentioned going into the break, if your debt 0:09:18.640 --> 0:09:21.400 is less than half of your income, that's gonna be 0:09:21.400 --> 0:09:25.280 one big reason that you should consider deconsolidation as an option. 0:09:25.400 --> 0:09:27.559 And also you're gonna need a pretty good credit score. 0:09:27.679 --> 0:09:29.760 You're also gonna need to be committed to not taking 0:09:29.840 --> 0:09:32.360 out any more debt, and in particular, that credit score 0:09:32.440 --> 0:09:35.679 is going to be key, because deconsolidation isn't gonna be 0:09:35.720 --> 0:09:38.160 helpful for you if you have a really low credit score, 0:09:38.280 --> 0:09:40.080 because that is going to prevent you from getting the 0:09:40.120 --> 0:09:42.720 lowest advertised rates. If you have a great credit score 0:09:42.720 --> 0:09:44.480 and a lot of debt, there's a good chance that 0:09:44.520 --> 0:09:47.360 you could qualify for a much lower rate than what 0:09:47.440 --> 0:09:50.000 you're paying on, let's say, your credit cards. But if 0:09:50.040 --> 0:09:52.040 you have a really low credit score, there's just not 0:09:52.160 --> 0:09:53.480 much of a chance that you're gonna be able to 0:09:53.559 --> 0:09:56.839 lower your rate by any meaningful amounts, and lenders might 0:09:56.880 --> 0:09:58.920 not be willing to work with you at all. Yeah, Basically, 0:09:58.920 --> 0:10:00.680 if you have a crappy credit score, like those rates 0:10:00.679 --> 0:10:02.319 that you see advertise, they're going to be too good 0:10:02.360 --> 0:10:04.560 to be true. And there's something else to consider if 0:10:04.600 --> 0:10:07.640 you're looking at debt consolidation companies is that extending your 0:10:07.679 --> 0:10:10.920 payment terms might mean some more financial breathing room, but 0:10:11.240 --> 0:10:14.160 it can also mean higher rates and obviously longer time 0:10:14.240 --> 0:10:16.679 in actual debt. And even if you get a lower rate, 0:10:16.840 --> 0:10:19.560 it can mean paying more in interest overall because you've 0:10:19.559 --> 0:10:22.360 extended how long you're paying towards that loan. Yeah, it's 0:10:22.400 --> 0:10:24.640 like if you have a thirty year mortgage matt at 0:10:24.640 --> 0:10:26.600 four and a half percent, and you're ten years into 0:10:26.640 --> 0:10:29.240 that mortgage. But if there's a screaming deal for a 0:10:29.240 --> 0:10:32.079 mortgage rate at four point to five, well, if you 0:10:32.160 --> 0:10:35.199 refinance into that, guess what you're back paying for ten 0:10:35.280 --> 0:10:37.599 years longer, and overall you're gonna pay a heck of 0:10:37.640 --> 0:10:40.280 a lot more in interest because of that refinance than 0:10:40.320 --> 0:10:42.600 you would have otherwise. That lower rate seems like a 0:10:42.600 --> 0:10:44.720 good idea, but it's not because of all the fees 0:10:44.760 --> 0:10:46.640 and extra interest you're gonna pay because of the extended 0:10:46.640 --> 0:10:48.920 load terms. Ye basically you're hitting that reset button and 0:10:48.960 --> 0:10:52.160 you're starting all over. And the typical debt consolidation loan 0:10:52.200 --> 0:10:54.640 is about five years. And honestly, if you think you 0:10:54.679 --> 0:10:56.680 could pay down some credit card debt maybe in like 0:10:56.760 --> 0:10:59.640 eighteen months, eighteen months of hard work where you're buckling 0:10:59.640 --> 0:11:01.520 down and really getting after it, just think about how 0:11:01.559 --> 0:11:04.000 much longer paying another three and a half years on 0:11:04.040 --> 0:11:06.320 top of that is. And this is typically for consumer debt. 0:11:06.600 --> 0:11:09.160 These are purchases that that you made of stuff that 0:11:09.200 --> 0:11:11.040 you may not even have anymore. Like it's it's something 0:11:11.040 --> 0:11:13.280 that you may have thrown away and you're still paying 0:11:13.280 --> 0:11:15.920 on it five years later. Yeah, that's just terrible. So 0:11:16.000 --> 0:11:18.720 let's talk about credit cards in particular. If you have 0:11:19.000 --> 0:11:22.200 less money to get solidate less outstanding debt in a 0:11:22.240 --> 0:11:24.000 decent credit scored at the same time, it might be 0:11:24.000 --> 0:11:27.120 best to shop around for better credit card offers. If 0:11:27.120 --> 0:11:29.440 you're looking at paying off let's say that last three 0:11:29.440 --> 0:11:32.000 thousand dollars in credit card debt, Well, bouncing to a 0:11:32.120 --> 0:11:35.040 zero percent interest rate intro offer isn't a bad idea. 0:11:35.240 --> 0:11:37.319 You'll want to know the promo period, like how long 0:11:37.360 --> 0:11:39.600 that zero percent interest rate lasts, and if there are 0:11:39.600 --> 0:11:43.079 any transfer fees associated. Oftentimes there's a three percent fee. 0:11:43.160 --> 0:11:46.120 Sometimes there's as much as a five percent fee if 0:11:46.120 --> 0:11:48.280 you transfer a balance over to a zero percent card, 0:11:48.440 --> 0:11:50.600 So know that ahead of time. Also know that it's 0:11:50.600 --> 0:11:53.160 going to take discipline. After you've gone through the effort 0:11:53.200 --> 0:11:55.959 to transfer to a zero percent interest rate card, you're 0:11:55.960 --> 0:11:58.199 gonna want to make sure you have the discipline to 0:11:58.240 --> 0:12:00.880 tackle that debt within the time A lotted before that 0:12:00.960 --> 0:12:04.280 promo rate runs out edel and not just rolling over 0:12:04.360 --> 0:12:06.600 credit card debt to other credit card debt. But if 0:12:06.640 --> 0:12:08.720 you have a plan and you you just mentioned discipline, 0:12:09.080 --> 0:12:10.440 If you have a plan and you know that you 0:12:10.440 --> 0:12:13.559 can pay down within eighteen months or whatever that introductory 0:12:13.559 --> 0:12:15.400 period is where you have zero percent, you can roll 0:12:15.480 --> 0:12:18.360 over other debts into a single credit card. Again, if 0:12:18.400 --> 0:12:20.520 you have a plan, if you know that, you're just 0:12:20.520 --> 0:12:23.000 buying yourself some time, and eventually this is gonna reset 0:12:23.040 --> 0:12:25.160 and it's gonna blow up in your face. Yeah, and 0:12:25.160 --> 0:12:28.640 that rate's gonna jack back up to well, honestly, there's 0:12:28.679 --> 0:12:31.160 just not much point in doing that. You're just basically 0:12:31.160 --> 0:12:33.760 shuffling your debt around and it's with these guys for 0:12:33.760 --> 0:12:35.800 a little bit and then it's over here, and sure 0:12:35.800 --> 0:12:37.120 you might save a buck here and there, but your 0:12:37.120 --> 0:12:39.240 credit is gonna suffer. And honestly, when you're kind of 0:12:39.240 --> 0:12:41.440 playing that shuffle game and you're moving your money around, 0:12:41.559 --> 0:12:44.040 it's hard to keep track of what is with who, 0:12:44.080 --> 0:12:46.440 and what fees have been paid and what annual fee 0:12:46.480 --> 0:12:49.160 is about to hit. You're complicating your life. I'm getting 0:12:49.160 --> 0:12:52.000 stressed even thinking about it. And that without a plan, 0:12:52.240 --> 0:12:55.080 you're not gonna get very far with this approach at all. Yeah, 0:12:55.080 --> 0:12:56.920 we're talking about discipline, you don't that makes me think 0:12:56.920 --> 0:12:59.679 of makes me think of a fellow podcaster, Jacko that 0:13:00.000 --> 0:13:03.600 podcast here listening one. What's his last name, Jocko Willink. Yeah, 0:13:03.600 --> 0:13:05.240 So that guy man, he's a he's a baller. And 0:13:05.240 --> 0:13:08.400 if you need any motivation to get disciplined, check out 0:13:08.520 --> 0:13:10.800 Jackos podcast or Yeah. I just know that he was 0:13:10.800 --> 0:13:13.319 in armed forces and he's jacked. And I made a 0:13:13.360 --> 0:13:15.280 joke one time about bidding him in arm wrestling, So 0:13:16.559 --> 0:13:19.320 I think his arms are bigger than our bodies. That 0:13:19.360 --> 0:13:22.640 guy's massive. But another important point Matt on that subject 0:13:22.720 --> 0:13:24.559 is that if you do consolidate your credit card debt 0:13:24.600 --> 0:13:26.880 into a lower monthly payment like a zero percent interest 0:13:26.880 --> 0:13:29.559 transfer card, you need to cut up those old cards. 0:13:29.600 --> 0:13:33.760 The biggest downfall, the biggest pitfall when you're transferring your 0:13:33.840 --> 0:13:36.040 debt from one credit card to another, is that you 0:13:36.160 --> 0:13:37.800 go back to that old credit card and you end 0:13:37.880 --> 0:13:40.640 up running up more debt. And a zero percent interest 0:13:40.720 --> 0:13:42.880 rate helps you not at all. If if you have 0:13:42.920 --> 0:13:45.440 no discipline and you're running up the other credit card 0:13:45.640 --> 0:13:47.959 at the same time, you're just compounding the amount of 0:13:48.000 --> 0:13:50.160 debt you have, and eventually that zero percent is gonna 0:13:50.160 --> 0:13:51.920 wear off, and you've got two credit cards and at 0:13:51.920 --> 0:13:54.160 that point your struggles are multiplying. Yeah, and going back 0:13:54.200 --> 0:13:56.520 to the whole credit score thing. If you're taking additional 0:13:56.559 --> 0:13:58.520 debt and rolling it onto a credit card, well that 0:13:58.520 --> 0:13:59.960 can work out, like we said, if you actually have 0:14:00.040 --> 0:14:02.160 the plan to pay that off within that period. But 0:14:02.200 --> 0:14:04.600 you need to keep an eye on your utilization rate 0:14:04.640 --> 0:14:07.520 because when you've got a single card loaded up like that, 0:14:07.520 --> 0:14:10.079 that takes that rate through the roof, not through the roof, 0:14:10.080 --> 0:14:12.439 I guess, but almost to the ceiling. And again that's 0:14:12.480 --> 0:14:14.840 that's a terrible thing for your credit score. And if 0:14:14.840 --> 0:14:16.600 you had a good credit score when you made the transfer, 0:14:16.640 --> 0:14:18.440 well you might not pretty quick, depending on what that 0:14:18.480 --> 0:14:20.880 credit limit is and what your balance is. All right, Joe, 0:14:20.960 --> 0:14:23.200 So so far we've talked about a debt consolidation company, 0:14:23.240 --> 0:14:25.240 and that's sort of like an all in one. You know, 0:14:25.280 --> 0:14:27.280 you talked at the beginning about hitting an easy button. 0:14:27.320 --> 0:14:30.320 It's an easy solution, and then we talked about credit cards. 0:14:30.560 --> 0:14:32.640 What we started talking about there was more of a 0:14:32.680 --> 0:14:35.240 manual way to consolidate your debt, and I say manually, 0:14:35.240 --> 0:14:37.400 because you're doing the work yourself. You're the one that's 0:14:37.440 --> 0:14:39.640 kind of doing the legwork. You're figuring out where the 0:14:39.640 --> 0:14:41.960 best rates are, you're making the decisions to pay off 0:14:42.000 --> 0:14:45.120 old debt, high interest rate debt, and you're taking advantage 0:14:45.120 --> 0:14:47.240 of new low offers while at the same time having 0:14:47.280 --> 0:14:50.240 a plan. Right, And another way that you could potentially 0:14:50.440 --> 0:14:53.440 manually consolidate your debt on your own is to roll 0:14:53.560 --> 0:14:57.160 some of that unsecured debt into a secure debt. That 0:14:57.280 --> 0:14:59.840 is an option. However, you have to be very very careful. 0:15:00.000 --> 0:15:01.600 You're gonna considering you that, all right, dumb it down 0:15:01.680 --> 0:15:03.760 for people Matt who don't know the difference between an 0:15:03.840 --> 0:15:06.040 unsecured and of secured debt and why is that important. 0:15:06.120 --> 0:15:09.200 Age also unsecured debt that is a debt obligation that 0:15:09.240 --> 0:15:12.440 you have that is not tied to an asset or collateral. So, 0:15:12.480 --> 0:15:14.440 for instance, if you have a car loan, or if 0:15:14.480 --> 0:15:16.840 you have a mortgage that is secured debt, credit card 0:15:16.840 --> 0:15:19.680 debt or consumer debt or personal loan, those are unsecured 0:15:19.720 --> 0:15:21.800 forms of debt. They're not coming for those fifty pairs. 0:15:21.840 --> 0:15:25.720 As any optical glasses that you bought right, I love Mazennis. However, 0:15:25.760 --> 0:15:28.880 with a secure debt that is again tied to collateral, 0:15:29.200 --> 0:15:31.520 and so that might sound like a terrible thing because 0:15:31.520 --> 0:15:33.320 you think, oh, man, if I don't pay my mortgage, 0:15:33.320 --> 0:15:36.560 they can come after my house. That is very true. However, 0:15:36.640 --> 0:15:39.360 at the same time, because you have collateral involved, you 0:15:39.400 --> 0:15:42.240 can get a much lower rate, which is why secured 0:15:42.280 --> 0:15:44.920 debt will look a lot more attractive when you're looking 0:15:44.960 --> 0:15:47.840 at the interest rate only. However, that is not the 0:15:47.880 --> 0:15:49.760 only thing you want to take into account if you're 0:15:49.800 --> 0:15:52.640 considering a secure debt for some debt consolidation. I know 0:15:52.720 --> 0:15:54.000 probably a lot of people at this point in the 0:15:54.040 --> 0:15:56.600 episode of thought, well, why wouldn't I just take out 0:15:56.640 --> 0:15:59.200 a home equity line of credit or even refinance my 0:15:59.240 --> 0:16:01.480 mortgage if you're a homeowner in order to get a 0:16:01.520 --> 0:16:04.000 lower interest rate overall in your debt four or five. 0:16:04.400 --> 0:16:07.160 That's way better than exactly It makes a whole lot 0:16:07.200 --> 0:16:10.360 of sense, right, But the whole point behind unsecured versus 0:16:10.360 --> 0:16:12.960 secured debt is one that you need to consider carefully 0:16:13.160 --> 0:16:15.560 because with a refinance, not only are you paying a 0:16:15.600 --> 0:16:17.280 lot of fees in order to make that happen, but 0:16:17.320 --> 0:16:19.760 at the same time, you're taking a debt that doesn't 0:16:19.760 --> 0:16:22.720 have any collateral behind it and rolling that debt into 0:16:22.800 --> 0:16:25.360 an asset that you have, and if you defaulted on 0:16:25.440 --> 0:16:27.800 that loan, that's going to cost you your house. That's 0:16:27.840 --> 0:16:29.880 the reason why an interest rate on a car loan 0:16:29.960 --> 0:16:32.400 or a home loan is so much less because those 0:16:32.440 --> 0:16:35.560 companies know they have less at risk because there is 0:16:35.600 --> 0:16:39.000 an actual tangible asset involved. At the end of the day, Yeah, 0:16:39.040 --> 0:16:41.960 they know we can come get your stuff exactly, which 0:16:41.960 --> 0:16:44.600 we're joking about. But that's the terrible thing, exactly. It 0:16:44.640 --> 0:16:45.920 happens all the time. And there are a lot of 0:16:45.960 --> 0:16:47.960 people who think, I'm just gonna roll this credit card 0:16:47.960 --> 0:16:50.440 debt into my home loan or a helock or home 0:16:50.440 --> 0:16:53.440 ECHI line of credit score that lower interest rate, but 0:16:53.480 --> 0:16:55.840 then they have trouble paying that as well, and it 0:16:55.880 --> 0:16:58.440 leads to even bigger issues with the potential foreclosure. And 0:16:58.480 --> 0:17:01.200 so you need to be really careful before rolling in 0:17:01.320 --> 0:17:04.439 on secured debt and to a secured asset like your 0:17:04.480 --> 0:17:07.400 house that could cause bigger problems than you're in right now. Miguel. 0:17:07.480 --> 0:17:10.160 And another option that sometimes folks consider when it comes 0:17:10.200 --> 0:17:13.679 to consolidating debt is tapping into the retirement accounts to 0:17:13.680 --> 0:17:16.160 pay off debt. And you know what we think about that. Yeah, 0:17:16.200 --> 0:17:19.520 this is almost always a terrible idea because you're stealing 0:17:19.520 --> 0:17:21.800 from your future self. These are your retirement accounts. This 0:17:21.840 --> 0:17:24.000 is money that you've set aside for you when you're older, 0:17:24.240 --> 0:17:25.600 when you're kicking back and you don't wanta have to 0:17:25.600 --> 0:17:28.720 work anymore. You're stealing literally from your future self to 0:17:28.800 --> 0:17:32.040 fund lifestyle and consumption right now while you're younger. It's 0:17:32.040 --> 0:17:34.160 just a terrible idea. And not only that, but there's 0:17:34.200 --> 0:17:37.280 also tax implications and penalties as well that will eat 0:17:37.320 --> 0:17:40.080 you alive if you're withdrawing those funds from a retirement 0:17:40.080 --> 0:17:43.600 account like a four O one K or an IRA. So, Matt, 0:17:43.640 --> 0:17:46.480 let's say you've got a traditional IRA with like forts 0:17:46.520 --> 0:17:49.399