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