WEBVTT - Creating a Debt Payoff Plan #159 0:00:00.080 --> 0:00:02.719 Welcome to How the Money. I'm Joel and I am Matt, 0:00:02.880 --> 0:00:05.760 and today we are discussing creating a debt payoff plan. 0:00:24.600 --> 0:00:27.440 Joel Man, we are talking about debt. Everybody's got it. 0:00:27.600 --> 0:00:30.160 A lot of people do people not everybody. A lot 0:00:30.200 --> 0:00:32.920 of people do, though, and the amount of debt that 0:00:33.120 --> 0:00:36.440 we as a country have us as individuals, there is 0:00:36.479 --> 0:00:38.280 just so much debt going around. We know that we 0:00:38.280 --> 0:00:40.960 want to get rid of debt, but we don't necessarily 0:00:41.120 --> 0:00:43.320 know what steps to take in order to get rid 0:00:43.360 --> 0:00:46.159 of that debt. But a plan can help a whole yes, exactly. 0:00:46.200 --> 0:00:47.839 So that's what we're gonna talk about this episode. We're 0:00:47.840 --> 0:00:50.520 gonna talk through what it actually takes to paid on debt. Yeah. 0:00:50.680 --> 0:00:52.080 But before we get to that, Matt, real quick, I 0:00:52.080 --> 0:00:54.800 wanted to talk about guilt and money, and I think, 0:00:55.040 --> 0:00:57.200 especially this time a year, maybe a lot of us 0:00:57.200 --> 0:01:00.880 are feeling guilt over how we've spent and some of 0:01:00.920 --> 0:01:04.520 that might be warranted. Right. We might have in November 0:01:04.520 --> 0:01:06.840 December and the lead up to the holidays, we might 0:01:06.880 --> 0:01:08.560 have bought too many gifts for other people. We we 0:01:08.600 --> 0:01:10.600 probably could have done just a little bit better in 0:01:10.760 --> 0:01:13.440 how we thought through a spending plan, right, and we're 0:01:13.440 --> 0:01:14.840 gonna talk about a debt plan, but we could have 0:01:14.840 --> 0:01:16.920 thought through our spending a little bit better. But I 0:01:16.959 --> 0:01:19.960 think ultimately this show and how we talk about money, 0:01:20.160 --> 0:01:22.240 we don't want people to feel guilty all the time 0:01:22.240 --> 0:01:24.840 about how they're spending. And I think certain folks in 0:01:24.880 --> 0:01:28.120 the personal finance space that's kind of their main tactic 0:01:28.360 --> 0:01:31.080 is to make people feel guilty about how they do spend, 0:01:31.480 --> 0:01:33.600 versus motivating folks to help them spend less and to 0:01:33.680 --> 0:01:35.600 save more. And so I think, you know, as we 0:01:35.640 --> 0:01:37.720 get further and further into this new year, I just 0:01:37.720 --> 0:01:40.000 want to let people know that this podcast that what 0:01:40.040 --> 0:01:43.880 we do, it's all about helping people prioritize the right 0:01:43.920 --> 0:01:47.720 things and it's not about shaming them for the for 0:01:47.800 --> 0:01:49.440 the move that they've made, for the things that they 0:01:49.440 --> 0:01:51.160 haven't done as well as they could have done. Yeah, 0:01:51.240 --> 0:01:53.680 totally do I completely agree. I think you said shame, 0:01:53.720 --> 0:01:55.400 which totally may think of something else as well as 0:01:55.400 --> 0:01:57.200 I'm gonna go there in one second, but I think 0:01:57.240 --> 0:01:59.560 a guilt trips for you know, based on your spending, 0:02:00.280 --> 0:02:03.600 that's a bad idea. If you have identified what it 0:02:03.640 --> 0:02:05.440 is that you want to spend your money on Like, 0:02:05.520 --> 0:02:07.160 if you have a plan, if you know where your 0:02:07.160 --> 0:02:10.119 priorities lie, then it's okay to spend money. And yes, 0:02:10.160 --> 0:02:12.440 you do not need to feel guilty. I do think though, 0:02:12.560 --> 0:02:16.040 that a little bit of guilt can be a good thing, right, 0:02:16.040 --> 0:02:18.480 Like to me, be proud a little bit at time, exactly. Yeah. Like, 0:02:18.520 --> 0:02:21.160 to me, guilt is basically knowing that you could have 0:02:21.160 --> 0:02:24.360 done something better but you didn't. It basically calls attention 0:02:24.360 --> 0:02:26.480 to the fact that you're responsible for your actions. And 0:02:26.480 --> 0:02:28.560 when it comes from money, I think there's definitely a 0:02:28.560 --> 0:02:30.600 need for more responsibility when it comes to you know, 0:02:30.639 --> 0:02:33.760 personal finances. But interestingly, like you mentioned shame, and I 0:02:33.800 --> 0:02:36.440 think that's so clutch because there's a big difference between 0:02:36.680 --> 0:02:39.480 guilt and shame. Have you read any of Burnet Brown. 0:02:39.720 --> 0:02:42.400 She's like, she's a she's she has ted talks and 0:02:42.400 --> 0:02:44.480 she's written books. She's an author. I'm familiar with her 0:02:44.520 --> 0:02:46.160 just because my wife talks about her a lot. I 0:02:46.200 --> 0:02:48.000 haven't read any of her book. She she's I think 0:02:48.040 --> 0:02:50.480 she's really great, But she talks about shame, and one 0:02:50.520 --> 0:02:53.000 of the ways she characterizes it is that like, shame 0:02:53.200 --> 0:02:56.400 is well for let's start with guilt. Guilt is knowing 0:02:56.400 --> 0:02:58.160 that you did something bad and so you feel bad 0:02:58.200 --> 0:03:02.040 for that action, right, Whereas shame is like you identify 0:03:02.080 --> 0:03:05.120 as being a bad person, and so we want to 0:03:05.120 --> 0:03:07.160 focus on the behavior. You know, you're not a terrible 0:03:07.200 --> 0:03:09.720 person because you know, you blew your budget one month 0:03:10.040 --> 0:03:13.160 or maybe didn't quite put enough towards retirements that year. Right, 0:03:13.400 --> 0:03:16.680 But when you identify with being a poor saver, like 0:03:16.760 --> 0:03:18.960 if that's who you feel you are, well, that's when 0:03:18.960 --> 0:03:22.800 it can become negative versus a positive effect. It can 0:03:22.840 --> 0:03:26.000 almost be become a self fulfilling cycle. Oh yeah, if 0:03:26.040 --> 0:03:28.960 we identify ourselves as a certain way, we're going to 0:03:29.040 --> 0:03:31.600 act accordingly, and so we have to kind of break 0:03:31.639 --> 0:03:34.840 that psychological barrier of feeling shame with how we've handled 0:03:34.840 --> 0:03:37.280 our money. And I completely agree, I think a little 0:03:37.280 --> 0:03:39.440 bit of guilt can help drive us in the proper direction. 0:03:39.440 --> 0:03:41.880 But if we completely identify as being someone who doesn't 0:03:41.880 --> 0:03:44.280 know how to handle money, well, well, then hopefully this 0:03:44.320 --> 0:03:47.160 show can help people this year to learn some of 0:03:47.200 --> 0:03:49.480 those tools and then to kind of help break those 0:03:49.840 --> 0:03:52.640 chains of potential shame that's associated with how they handle 0:03:52.680 --> 0:03:54.839 money totally. Um, that's that's what we want to be here. 0:03:55.000 --> 0:03:56.680 We don't want to be here to use a stick 0:03:56.840 --> 0:03:58.640 to beat you over the head because you haven't done 0:03:58.640 --> 0:04:01.480 things properly. Well. We want to do is encourage you, 0:04:01.600 --> 0:04:03.960 motivate you, give you the tools to create a more 0:04:04.000 --> 0:04:08.000 positive outlook on your relationship with money, and then specifically 0:04:08.000 --> 0:04:10.400 give you the proper approaches to how you can handle 0:04:10.440 --> 0:04:13.240 your money well so that you can make changes moving forward, 0:04:13.520 --> 0:04:16.320 so that whatever cycle maybe you've become accustomed to living 0:04:16.839 --> 0:04:20.279 in relationship to your money just isn't the case anymore. Yeah, totally. 0:04:20.320 --> 0:04:22.400 I think if you feel a tiny little bit of 0:04:22.400 --> 0:04:24.560 guilt when you learn something new or maybe you hear 0:04:24.640 --> 0:04:26.520 something that you haven't done, I think that can be 0:04:26.600 --> 0:04:29.240 okay if you respond positively to that. Right. It's just 0:04:29.279 --> 0:04:31.960 like constructive criticism or feedback that you receive on a 0:04:31.960 --> 0:04:34.160 project or something that you're working on. If you take 0:04:34.279 --> 0:04:37.440 that feedback and you then modify your behavior and that 0:04:37.480 --> 0:04:39.840 allows you to grow. What's It's a positive thing. It's 0:04:39.839 --> 0:04:42.400 about gaining knowledge and learning from our mistakes. And yeah, 0:04:42.440 --> 0:04:44.880 like you said, you hopefully that's what folks can do 0:04:45.040 --> 0:04:47.560 from listening to this podcast. Yeah, man, I think I 0:04:47.640 --> 0:04:50.800 used to feel guilt over buying really nice beer, and 0:04:50.839 --> 0:04:54.120 now I just don't anymore. It's because it's something that 0:04:54.200 --> 0:04:57.320 I've prioritized highly and something that I've made an important 0:04:57.360 --> 0:04:59.360 line item and my budget, and so I think that's 0:04:59.400 --> 0:05:01.240 another way that people can approach it. And so, Matt, 0:05:01.279 --> 0:05:03.040 speaking of beer, the beer that we're having on the 0:05:03.080 --> 0:05:06.600 show today is barrel aged Yetti Imperial Stout by Great 0:05:06.640 --> 0:05:09.440 Divide Brewing and the kind folks at a Great Divide 0:05:09.480 --> 0:05:11.800 in Denver, Colorado, they sent this beer our way. I'm 0:05:11.839 --> 0:05:14.000 really excited to have the barrel aged version of their 0:05:14.120 --> 0:05:17.240 Yetti Imperial Stout on the show with you today, my friend. Yeah, 0:05:17.279 --> 0:05:19.200 this is our last one by them. We've had them 0:05:19.240 --> 0:05:22.520 for the past few episodes now. So man, Great Divide, 0:05:22.640 --> 0:05:25.400 y'all are fantastic. You make some awesome beers like you 0:05:25.400 --> 0:05:27.640 always have. And yeah, we'll get to our tasting notes 0:05:27.680 --> 0:05:30.040 on this one at the end of the episode. All right, Matt, 0:05:30.080 --> 0:05:32.280 let's get into the topic at hand. We're talking today 0:05:32.279 --> 0:05:34.640 on the show. We're talking about creating a debt payoff plan. 0:05:35.240 --> 0:05:37.000 And let me ask this question to our listeners at 0:05:37.040 --> 0:05:38.760 the very beginning of the episode. And it might be 0:05:38.760 --> 0:05:42.560 a little awkward. How's your debt situation? And does that 0:05:42.680 --> 0:05:46.240 question itself cause a lump to rise in your throat? Well, 0:05:46.360 --> 0:05:49.839 personal levels of indebtedness are a major issue in our country, 0:05:49.920 --> 0:05:52.000 but lots of folks feel like they're stuck in quicksand 0:05:52.040 --> 0:05:53.920 up to their midsections, and they don't know how to 0:05:54.000 --> 0:05:56.760 navigate themselves out of the problem that they put themselves in. 0:05:57.120 --> 0:05:58.719 We need a plan to help us get out of 0:05:58.760 --> 0:06:00.800 debt and to get our feet set in the right 0:06:00.839 --> 0:06:03.440 direction this year. And so when we see headlines Matt, 0:06:03.480 --> 0:06:06.440 like we've seen lately eight six percent of millennials overspent 0:06:06.520 --> 0:06:09.200 on Christmas gifts, Well, we know what that means. That 0:06:09.279 --> 0:06:10.919 means that a lot of those folks have put that 0:06:11.000 --> 0:06:13.920 extra spending on plastic on credit cards, and this time 0:06:13.920 --> 0:06:15.719 a year they're getting that statement in the mail and 0:06:15.720 --> 0:06:18.000 they're a little shocked. They didn't know that they spent 0:06:18.040 --> 0:06:19.920 that much, and they didn't realize that they wouldn't be 0:06:19.920 --> 0:06:21.560 able to afford the bill, and now they need some 0:06:21.600 --> 0:06:23.760 help to tackle that debt, not to mention the other 0:06:23.760 --> 0:06:25.440 death they might be caring right now, so it doesn't 0:06:25.480 --> 0:06:27.479 get even further out of hand. Well, Joe, you're talking 0:06:27.480 --> 0:06:29.640 about debt. And I feel like I'm super a d 0:06:29.720 --> 0:06:33.240 D today because you mentioned quicksand and I started thinking 0:06:33.240 --> 0:06:35.520 about quicksand why is why is like why would we 0:06:35.600 --> 0:06:38.320 When we were kids, everything was quicksand like Mario Brothers 0:06:38.360 --> 0:06:40.599 to head quicksand like even as kids playing, it's like 0:06:40.720 --> 0:06:42.840 watch out for the quicksand like quicksand was this real thing, 0:06:42.880 --> 0:06:44.240 like this real problem that we had to watch out for. 0:06:44.279 --> 0:06:46.279 When I think about quicksand I think about the Princess Bride, 0:06:46.880 --> 0:06:49.760 you know, I mean to me that's strongly correlated. Yes, 0:06:49.880 --> 0:06:53.159 Like late eighties, early nineties, quicksand was everywhere. Now everything's lava, 0:06:53.440 --> 0:06:55.240 like the kids have moved on to lava, like it 0:06:55.320 --> 0:06:57.720 used to be quicksand now it's lava. Alright, Well, sorry, 0:06:57.760 --> 0:06:59.160 a little side we go with old school reference. We're 0:06:59.160 --> 0:07:02.520 gonna stick with quicksand floor's lava, all right. Let's get 0:07:02.520 --> 0:07:04.600 back to debt a little bit though. Here's the thing. 0:07:04.640 --> 0:07:07.799 Here's a fact for your outstanding student loan debt, Joel. 0:07:08.000 --> 0:07:11.120 It has reached an all time high last year. We 0:07:11.240 --> 0:07:15.560 hit one point four one trillion dollars of Americans have 0:07:15.640 --> 0:07:18.240 credit card debt, and the average outstanding balance is just 0:07:18.280 --> 0:07:20.640 over six thousand dollars, while consumer debt as a whole 0:07:21.160 --> 0:07:24.800 stands at fourteen trillion. It's not just I covered my 0:07:24.840 --> 0:07:26.720 ears there because it just got so horrendous. Way can 0:07:26.720 --> 0:07:29.360 you say it again, dude, it's terrible. And not only 0:07:29.440 --> 0:07:31.440 is it just an incredible amount of money, but it's 0:07:31.480 --> 0:07:35.119 also how we're going about getting this debt. Car loans 0:07:35.120 --> 0:07:37.280 they've gotten longer, with some folks not just taking out 0:07:37.440 --> 0:07:39.960 sixty months of payment, but seventy two and eighty four 0:07:40.000 --> 0:07:42.920 month long loans, and then you know, they end up 0:07:42.920 --> 0:07:45.679 trading their cars and while they're upside down. We're taking 0:07:45.680 --> 0:07:49.520 out debt for smaller and smaller purchases as well. Everyone 0:07:49.640 --> 0:07:51.760 out there, like all the different retailers, offer a payment 0:07:51.760 --> 0:07:54.480 plan now, and it spans from you know, services at 0:07:54.520 --> 0:07:57.600 home like your h VAC, to urban outfitters if you 0:07:57.640 --> 0:07:59.520 just want to, you know, pick up some shoes. We 0:07:59.560 --> 0:08:03.600 are funding our lifestyles through the accumulation of more and 0:08:03.680 --> 0:08:06.720 more as well as riskier debt. It's just become easier 0:08:06.760 --> 0:08:09.160 to take on debt for anything now, Like you go 0:08:09.240 --> 0:08:11.560 to the dentist and you can take out a payment 0:08:11.560 --> 0:08:14.160 plan on that new artificial tooth or whatever. Surgery you 0:08:14.240 --> 0:08:16.000 had to undergo. Yeah, I gotta think that is the 0:08:16.040 --> 0:08:19.520 absolute least fun loan to pay on. Yeah, paying on 0:08:19.560 --> 0:08:21.720 my root canal. Still, I'll give you a three loan 0:08:21.720 --> 0:08:23.640 on that root canal. Matt, But that's just the kind 0:08:23.680 --> 0:08:25.480 of day and age we live in, easy access to 0:08:25.520 --> 0:08:29.040 debt for almost anything. Yeah, your local small business electrician 0:08:29.160 --> 0:08:32.040 probably has the ability to offer you alone on that 0:08:32.080 --> 0:08:34.439 new age fact. I mean, it's just kind of almost 0:08:34.480 --> 0:08:37.200 gotten preposterous. And then we end up sinking ourselves in 0:08:37.240 --> 0:08:40.120 a hole, even if it's zero percent, Even if it's 0:08:40.200 --> 0:08:42.680 zero percent for multiple years, we'll take out the debt 0:08:42.840 --> 0:08:44.360 and then ultimately we just don't have the money to 0:08:44.360 --> 0:08:46.760 meet those obligations. So we have to change our relationship 0:08:46.800 --> 0:08:49.240 to debt and how we consider taking it on. But 0:08:49.320 --> 0:08:51.400 Matt also too, I think it's important to mention before 0:08:51.600 --> 0:08:54.160 we get into the specifics of creating a debt payoff plan, 0:08:54.440 --> 0:08:57.400 that we don't think all debt is terrible, Like we're 0:08:57.400 --> 0:09:00.240 not anti every single kind of debt out there. Not 0:09:00.360 --> 0:09:03.480 all debt is bad debt. Some debt can be used effectively, 0:09:03.679 --> 0:09:06.319 and there are reasons worth accruing debt. For example, going 0:09:06.320 --> 0:09:08.480 to get an education, or starting a business or buying 0:09:08.480 --> 0:09:10.600 a home, and we kind of discussed that in more 0:09:10.600 --> 0:09:14.280 detail and episode. But just because you're considering one of 0:09:14.280 --> 0:09:16.559 those good debts doesn't give you a free pass to 0:09:16.640 --> 0:09:18.720 blindly take out loans in order to go to a 0:09:18.720 --> 0:09:21.360 fancy school, or to pursue your dream of owning your 0:09:21.360 --> 0:09:23.880 own restaurant, or to buy more house than you can afford. 0:09:23.920 --> 0:09:27.400 You still have to take value into the equation when 0:09:27.600 --> 0:09:29.920 you're thinking about what debts you take on. Yes, we 0:09:29.920 --> 0:09:32.480 we need to take value into account because you know, 0:09:32.520 --> 0:09:35.920 not having massive amounts of debt is important, and so 0:09:36.120 --> 0:09:38.440 I mean, I'll not note you might be asking like, well, well, 0:09:38.520 --> 0:09:40.880 why is getting out of debt? Why is that actually important? 0:09:41.000 --> 0:09:42.720 The biggest reason that we're gonna share that getting out 0:09:42.720 --> 0:09:46.720 of debt is so stinking paramount is because debt is expensive. 0:09:47.040 --> 0:09:49.600 In the moment, it doesn't feel expensive to pay with 0:09:49.640 --> 0:09:51.199 a credit card or maybe to take out a loan. 0:09:51.720 --> 0:09:54.520 If anything, it feels like free money, right And it's 0:09:54.559 --> 0:09:57.400 really easy to gain access to that credit, which is 0:09:57.440 --> 0:09:59.760 why in a recent episode Maut we talked about cashed 0:09:59.800 --> 0:10:02.400 up in or credit like how we spend using credit 0:10:02.440 --> 0:10:05.880 cards is in particular, the biggest downside is the ease abuse, 0:10:05.960 --> 0:10:07.840 and that's what causes us to use them more frequently. 0:10:07.880 --> 0:10:10.120 Even though it's a smooth transaction. Even though we like 0:10:10.160 --> 0:10:13.080 credit cards, it can be away for us to spend 0:10:13.160 --> 0:10:15.440 money that we don't have exactly. Yeah, but here's the 0:10:15.440 --> 0:10:17.760 thing at the core of it, though. Like using your 0:10:17.800 --> 0:10:20.520 credit cards as a tool, that's not the problem because 0:10:20.559 --> 0:10:22.640 it really is just a tool. It's when we don't 0:10:22.679 --> 0:10:25.520 pay off the balances and the interest begins to accrue. 0:10:25.520 --> 0:10:28.640 It's when we use these tools incorrectly, and so when 0:10:28.679 --> 0:10:31.400 we're paying interest on a balance, we're paying way too 0:10:31.480 --> 0:10:33.760 much money for the things that we likely shouldn't have 0:10:33.760 --> 0:10:36.000 purchased in the first place. So, for example, if hitting 0:10:36.160 --> 0:10:38.920 thousand dollar car like that could easily end up costing 0:10:38.920 --> 0:10:41.280 you closer to twenty dollars because you took out a 0:10:41.320 --> 0:10:43.840 car loan and you're paying interest, and so effectively you're 0:10:44.000 --> 0:10:45.800 paying way more than you should have for that vehicle. 0:10:45.840 --> 0:10:48.480 And it's hard to reach your financial goals when you're 0:10:48.480 --> 0:10:51.040 constantly over paying for things. Yeah, Matt, having a lot 0:10:51.040 --> 0:10:53.679 of debt puts you on just not solid footing. It 0:10:53.760 --> 0:10:55.200 put you in this kind of quick sand thing, right, 0:10:55.240 --> 0:10:56.720 I mean, let's get back to the quick sand. It 0:10:56.760 --> 0:10:59.440 puts you in this scenario where you're not as financially 0:10:59.480 --> 0:11:02.240 flexible you could be if you didn't have that debt 0:11:02.240 --> 0:11:04.440 in your life. The more debt you have, the weaker 0:11:04.520 --> 0:11:07.040 position that you're in and the less freedom you have. 0:11:07.440 --> 0:11:10.200 And when we're constantly overpaying for pretty much everything in 0:11:10.200 --> 0:11:12.160 our lives, it's also it's hard to get ahead and 0:11:12.200 --> 0:11:14.120 to reach any of those financial goals that we have. 0:11:14.559 --> 0:11:17.439 The going is slow when we have interest payments working 0:11:17.480 --> 0:11:20.120 against us. It feels like all the cards are stacked 0:11:20.120 --> 0:11:23.199 against us, and that can be really discouraging. And instead, 0:11:23.240 --> 0:11:25.520 we want to be on the receiving side of interest, 0:11:25.760 --> 0:11:27.840 and that means like having a high interest savings account. 0:11:27.880 --> 0:11:31.320 That means our investments essentially making money for us while 0:11:31.360 --> 0:11:34.960 we sleep. Instead of interest working against our money, it's 0:11:34.960 --> 0:11:37.800 working for us, and it's allowing us to quickly achieve 0:11:37.880 --> 0:11:40.320 our goals. That's when it allows us to build wealth. 0:11:40.360 --> 0:11:43.559 We're using interest in the positive frame. We're using returns 0:11:43.640 --> 0:11:46.240 in the positive sense, as opposed to everything we buy 0:11:46.440 --> 0:11:49.120 having a much larger price tag based on the fact 0:11:49.240 --> 0:11:52.000 that we have interest payments going alongside of it. Yeah, 0:11:52.040 --> 0:11:54.959 that's the difference between paying interest versus receiving interest. Right, 0:11:55.000 --> 0:11:57.400 And I got a quick illustration for you. Imagine, have 0:11:57.480 --> 0:11:59.480 you ever been to a store where there's like a 0:11:59.480 --> 0:12:01.480 second floor, or maybe eve been to a mall, a 0:12:01.520 --> 0:12:04.920 movie theater, perhaps right where there's an escalator. So imagine 0:12:04.960 --> 0:12:08.120 you're on level one and level two. That's where you're 0:12:08.120 --> 0:12:10.240 trying to get to level two, Joel, that's where your 0:12:10.280 --> 0:12:13.839 financial dreams and hopes are in front of you. You've 0:12:13.840 --> 0:12:16.120 got two escalators. You've got one that's coming down. At least, 0:12:16.120 --> 0:12:17.720 it's not like a sky skyscraper that I have to 0:12:17.720 --> 0:12:20.560 climb up, you know. Yeah, But on one side you've 0:12:20.600 --> 0:12:22.280 got an escalator coming down. On the other side, you've 0:12:22.320 --> 0:12:25.000 got an escalator going up. And when you have debts, 0:12:25.520 --> 0:12:27.920 that is when interest is working against you, right. That 0:12:28.040 --> 0:12:30.679 is you trying to get to the second level by 0:12:30.720 --> 0:12:32.960 going up the side of the escalator that's coming down. 0:12:33.320 --> 0:12:35.800 When you're doing that, you're working crazy hard. It takes 0:12:35.840 --> 0:12:37.400 way longer, and you know what, at some point you 0:12:37.480 --> 0:12:39.880 might even actually give up because it's too hard. I 0:12:39.920 --> 0:12:41.640 probably could have done it really easily when I was 0:12:41.640 --> 0:12:44.960 twenty five Matt, but even still, like, yes, I agree, right, 0:12:45.000 --> 0:12:46.840 like I've I've done that before as a kid, But 0:12:46.960 --> 0:12:49.720 it's still a lot harder versus when you have interest 0:12:49.760 --> 0:12:52.199 working for you. When you're receiving interest, it's like you're 0:12:52.200 --> 0:12:54.400 getting on the correct side and you're you know, you're 0:12:54.400 --> 0:12:56.880 writing that interest up if you want, you can only 0:12:56.920 --> 0:12:59.080 rely on that interest and you can just stay in there. 0:12:59.280 --> 0:13:01.120 But if you can do need to work a little bit. 0:13:01.320 --> 0:13:03.520 Imagine how quickly you're gonna get to that next level 0:13:03.720 --> 0:13:05.560 walking while you're on an escalator. It's like the best 0:13:05.559 --> 0:13:07.840 feeling I know. I mean, how quickly do you get 0:13:07.840 --> 0:13:09.920 from like one level to the next just by doing that. 0:13:09.960 --> 0:13:12.240 It's amazing. And so the next time you're thinking about 0:13:12.280 --> 0:13:14.280 taking out a car loan or some other consumer debt, 0:13:14.320 --> 0:13:16.599 some credit card debt, picture that illustration, because like that 0:13:16.640 --> 0:13:18.520 truly is what it's like. It's like, like you said, 0:13:18.559 --> 0:13:20.520 being in quicksand and you're trying to trying to hop 0:13:20.520 --> 0:13:22.640 out of that quicksand it's so difficult to do that. 0:13:22.679 --> 0:13:25.680 It's so difficult to make any progress when we're bogged 0:13:25.679 --> 0:13:28.439 down with that interest working against us. Yeah, no doubt, 0:13:28.480 --> 0:13:30.959 And we have to get to these specifics for folks 0:13:31.000 --> 0:13:33.079 that are writing that down escalator and they want to 0:13:33.120 --> 0:13:34.680 get off, they want to get out of debt, and 0:13:34.679 --> 0:13:36.880 they want to make their money work for them. Well, 0:13:36.960 --> 0:13:38.880 let's get to the specifics of how to create a 0:13:38.880 --> 0:13:50.559 debt payoff plan right after this break. All right, Joe, 0:13:50.600 --> 0:13:52.720 we're back and we're talking about creating a debt payoff plan. 0:13:52.760 --> 0:13:54.600 By the way, did you like my my little illustration 0:13:54.640 --> 0:13:57.000 about the escalator. That was a great illustration. Another one 0:13:57.000 --> 0:13:58.319 I was thinking of too. I was just like, Okay, 0:13:58.320 --> 0:14:00.560 what about like headwinds and when is that you're back? 0:14:00.640 --> 0:14:02.760 I'm like, I was gonna say an example of you know, 0:14:02.760 --> 0:14:04.240 when you're up at the tea box and you're playing 0:14:04.240 --> 0:14:05.720 disc off and you're getting ready to throw your driver, 0:14:05.840 --> 0:14:07.839 but you've got that strong headwind, it's gonna be a 0:14:07.880 --> 0:14:10.000 lot harder than if you had to win at your back, right. True, 0:14:10.040 --> 0:14:12.400 that's true. Yeah, that's another great illustration and one that 0:14:12.520 --> 0:14:14.360 makes sense to me. But I feel like most folks 0:14:14.400 --> 0:14:17.360 have probably been on escalators more often than they've actually 0:14:17.360 --> 0:14:19.440 thrown a disc off. That's probably true for most folks 0:14:19.480 --> 0:14:21.480 out there, sadly, because disc golf is a great sport 0:14:21.560 --> 0:14:23.960 all right, we're gonna talk now though about what steps 0:14:24.040 --> 0:14:25.840 that you need to take when it comes to creating 0:14:25.840 --> 0:14:28.120 a debt payoff plan. These are the steps that we're 0:14:28.120 --> 0:14:30.960 going to actually help you to make real substantial progress 0:14:31.040 --> 0:14:32.480 this year. The first thing that you need to do 0:14:33.000 --> 0:14:35.200 is to make a list of all your debts. The 0:14:35.240 --> 0:14:38.040 first step in any plane of action is to get organized, 0:14:38.160 --> 0:14:40.080 and so making sure that you're aware of all the 0:14:40.120 --> 0:14:42.560 debts that you oh is a really important for step 0:14:42.560 --> 0:14:44.960 on your path to crushing debt. Yeah. Man, I mean 0:14:44.960 --> 0:14:47.600 we've used this illustration before, but if you're planning a 0:14:47.680 --> 0:14:50.200 road trip, you're going to make the dots along the 0:14:50.200 --> 0:14:51.920 wave where you want to stop. You kind of want 0:14:51.920 --> 0:14:53.720 to know the layout, How long is it gonna take 0:14:53.720 --> 0:14:55.400 me to get here and there, especially if you got kids, 0:14:55.440 --> 0:14:57.080 Like where are we gonna stop to pete? Where we're 0:14:57.080 --> 0:14:59.280 gonna stop to eat? There's all these questions that come 0:14:59.480 --> 0:15:01.840 with a big, major trip, right, And so I think 0:15:01.880 --> 0:15:03.720 the same thing, like paying off your debt is this 0:15:03.800 --> 0:15:06.200 big trip, and you want to plan the points along 0:15:06.240 --> 0:15:07.960 the way you want to You want to know exactly 0:15:08.000 --> 0:15:11.320 what's in store so that nothing hits you terribly by surprise. Yeah, 0:15:11.360 --> 0:15:12.840 you don't just throw everybody in the car and just 0:15:12.880 --> 0:15:15.640 start driving. That's a terrible plan. Like lick your fingers 0:15:15.640 --> 0:15:17.280 sticking up in the air, decide which way then we're 0:15:17.280 --> 0:15:20.640 gonna go east. Let's do it. We'll see where we 0:15:20.720 --> 0:15:22.560 end up. Yeah. Yeah, that's not a good way to go. 0:15:22.600 --> 0:15:24.480 So yeah, making a list of all your debts helps 0:15:24.520 --> 0:15:25.960 you at least get the lay of the land, and 0:15:26.000 --> 0:15:28.280 then you need to pick your approach. And then we've 0:15:28.280 --> 0:15:31.560 talked before about the debt snowball approach versus the debt 0:15:31.560 --> 0:15:34.640 avalanche approach and which one people should consider, and we 0:15:34.680 --> 0:15:37.440 went into a lot of detail on how you decipher 0:15:37.520 --> 0:15:39.680 which plan is better for you in episode eighty six. 0:15:40.040 --> 0:15:42.520 But do you need or just want some more emotional 0:15:42.560 --> 0:15:44.840 rewards along the way, or do you just want to 0:15:44.840 --> 0:15:47.560 pay these debts off as quickly as humanly possible while 0:15:47.600 --> 0:15:50.240 paying as a little interest as you can. Either way, 0:15:50.280 --> 0:15:53.440 he'll focus hard on completely obliterating one debt while paying 0:15:53.480 --> 0:15:56.680 the minimums on the others in both approaches. Maintaining a 0:15:56.800 --> 0:15:59.760 high level of focus is the key to success because 0:16:00.000 --> 0:16:01.840 once you know that lay the land, Matt, it's really 0:16:01.840 --> 0:16:04.440 important to kind of choose which approach you're going to 0:16:04.560 --> 0:16:06.760 take and then sticking to it. If you've come up 0:16:06.800 --> 0:16:08.280 with a strategy, do you think it's going to work 0:16:08.280 --> 0:16:11.000 for you? Looking at the strategies that might potentially work 0:16:11.040 --> 0:16:13.520 for you and then picking one and sticking to it 0:16:13.560 --> 0:16:17.440 is going to be crucial to your probability of success. Yeah, Joel, 0:16:17.440 --> 0:16:19.440 you know. And one thing I'll say is that I 0:16:19.480 --> 0:16:22.240 think for folks especially who are listening to this podcast, 0:16:22.520 --> 0:16:25.240 they're thinking, no, man, debt avalanche, that's the way to go. 0:16:25.320 --> 0:16:28.320 Look at the numbers, do the math. But the older 0:16:28.360 --> 0:16:31.480 I get, I realized that so much of our money 0:16:31.760 --> 0:16:34.920 is not just knowing the correct information, isn't just seeing 0:16:34.920 --> 0:16:37.520 the numbers right. Because we don't operate as robots, we 0:16:37.600 --> 0:16:41.840 don't always make the rational decision. Our emotions play such 0:16:41.880 --> 0:16:43.880 a huge role when it comes to how we handle 0:16:43.880 --> 0:16:45.960 our money. And because of that, I think the debt 0:16:45.960 --> 0:16:48.960 snowball needs to be considered by way more people than 0:16:49.000 --> 0:16:52.440 it actually is. Because you are receiving that feedback more quickly. 0:16:52.760 --> 0:16:54.480 You're able to quickly pay off a debt and then 0:16:54.520 --> 0:16:57.200 quickly move on to the next one, and that feels good. 0:16:57.280 --> 0:16:59.240 And when it feels good, that's something that you'll continue 0:16:59.280 --> 0:17:01.680 to do exactly. The best plan that we can create 0:17:01.760 --> 0:17:03.760 is the plan that we can stick to. It's not 0:17:03.840 --> 0:17:05.840 just the best plan in theory, it's the one that 0:17:05.880 --> 0:17:10.680 we can actually accomplish in real life. And just quick example, Matt, 0:17:10.760 --> 0:17:12.920 for me, for a lot of years, I wasn't fully 0:17:12.920 --> 0:17:15.680 funding my wrath I RA and I was just investing 0:17:15.720 --> 0:17:17.639 a lot more in my four own K because it 0:17:17.680 --> 0:17:19.399 was a lot easier for me to click the button 0:17:19.800 --> 0:17:21.800 that up the percentage point coming out of my paycheck. 0:17:21.840 --> 0:17:24.560 I barely felt it than it was to actually increase 0:17:24.600 --> 0:17:28.600 that automatic draft amount from my bank account into Vanguard 0:17:28.640 --> 0:17:30.920