At Debt.com, personal finance education is one of our top priorities. That’s why so much of what we offer is free for consumers, including our valuable webinars created by money experts – and interviews with those creators.
Our latest free webinars
Tips to Avoid Credit Repair Scams
Debt.com chairman and CPA Howard Dvorkin explains how to spot a credit repair scam, and why it’s so important to keep your credit healthy.
How to Avoid Impulse Spending
Debt.com chairman and CPA Howard Dvorkin tells FOX 24 News practical ways to curb impulse spending, and how you can save money by avoiding it.
What You Need to Know About Health Insurance from an Expert
Enrolling for health insurance plans can be confusing, especially if you’ve never done it before. That’s why we asked an expert to explain the most commonly asked questions about health insurance in plain English.
How to Avoid Credit Repair Scams
Debt.com chairman and CPA Howard Dvorkin tells FOX 24 News how to spot credit repair scams, and how to avoid them.
Reality with Vicki: Personal Finance FAQs
Debt.com chairman and CPA Howard Dvorkin and Vicki Gunvalson from the Real Housewives of Orange County and president of Coto Insurance & Financial Services review consumers’ frequently asked questions.
Financial Wellness Summit with Vicki Gunvalson and Howard Dvorkin
Debt.com chairman Howard Dvorkin and Vicki Gunvalson from the Real Housewives of Orange County hosted a financial wellness summit. The summit covered everything from how to manage each type of debt you have now to how to establish generational financial stability.
Surviving a Layoff
This webinar has info that will help you keep debt to a minimum while searching for a new job, especially in the wake of the COVID-19 economic downturn. Clcik here to watch the webinar and find more valuable resources to help you overcome the financial challenges caused by unemployment.
Our latest podcast interviews
The Pros & Cons of Debt Settlement – Queer Money
Recipe for Success with Guest Don Silvestri, Debt.com
Money Life with Chuck Jaffe and guest Howard Dvorkin
Here’s Chuck Jaffe.
That’s right, it is Tax Day. I know this normally should be playing in April for April the 15th. But this year, Tax Day, July the 15th. I now actually, I have to get a check off to Uncle Sam. You may recall that as we’re doing stuff with taxes, I had screwed things up. I had made a mistake. That’s gonna be a theme on today’s show: making mistakes.
But I had made a mistake where I thought I had sent my checks opposite. I thought I had sent my check to Uncle Sam, to the state of Massachusetts, the Commonwealth of Massachusetts, and I thought I’d sent my check to Massachusetts to Uncle Sam. And I proceeded to file my taxes if as if that was the case. Now, Massachusetts, cashed the check that was made out for the amount to go to Uncle Sam, and then refunded the money to me. So I saw that the other check had been cashed. I was sure I’d sent it to the right place. And then a funny thing happened. I heard from the tax man.
Nobody likes hearing from the tax man. But in this case, the tax man was contacting me with a refund. Now, they had already given me the refund from the state of Massachusetts, that already given me their refund. For the money that I thought I had paid to Uncle Sam, they did that before they even got my tax return. Well, it turned out that I actually sent both checks in separate envelopes to the state of Massachusetts. So my problem wasn’t that I switched the envelopes. It was that I wrote both envelopes out to the Commonwealth of Massachusetts, which meant that, well, Massachusetts got money that I didn’t think they were getting and that they owed me a refund. And now I owe Uncle Sam for the money that I thought I had paid Uncle Sam, that I had. I am more than happy to pay those taxes.
Well, I’m not really more than happy, but I’m doing it and I’m getting it done. But I waited to the last possible day, which is today, but it’s gonna be an interesting sort of historical thing, right? Because, well, tax day has been April the 15th. Unless it falls on a holiday or a weekend from 1955 through 2019. And it’s going to go back to April 15. Presumably, come 2021. But today is tax day. Are we going to talk about taxes on this show other than right now? We’re not. But we are going to talk a little bit about debt because Howard Dvorkin is here. He’s the chairman of Debt.com. And we’re gonna talk about, well, some of the problems that people are facing when it comes to their money right now and how you deal with them. And no, I don’t really believe that most of you are necessarily the target audience for this interview, but it may be your friends and your families and your loved ones. And people you know, it may be your children. And I have to say, I’m probably more excited to do this interview now, if only because, well, on yesterday’s show, I answered the question the audience question from Steven in Flower Mound, Texas about breast cancer.
Several of you wrote to me saying you know, someone who’s in that situation, and you want to make sure that they listen to it. So I don’t always think we have special unique situations, even when it feels that way. I think things are pretty common. I mean, I know I’ve got friends who have kids who are dealing with no job, etc. And looking at various things that could affect them financially. And I know, sadly, one or two folks were, you know, in one case, somebody who’s got a child who was gonna take a look at this and he was looking at, you know, do I contribute to my kids medical benefits and help them out? And the answer really is no, that the best thing they could do is pile up the debt to some extent and declare bankruptcy if that’s the way it goes, rather than him getting twisted. about where he jeopardizes his own retirement to help his kid and I know that sounds cruel. But he needed to look at the numbers and work things out. And so there are people that are more impacted, and maybe it’s you with the debt side of things.
But after we talk with Howard Dvorkin, well, today is one of those days, we’re only doing three interviews. And our middle interview when we do this is typically a book interview. And today, well, we’re about to make a terrible mistake.
I can’t help feeling that there’s been a big mistake. The mistake in this case is really about what the book is about, because the book is “You’re About to Make a Terrible Mistake.” Yes, you probably will. Because you have biases. And this book is “You’re About to Make a Terrible Mistake: How Biases Distort Decision Making and What You Can do to Fight Them. It is out from Olivier Siboney. And we will be talking with him today in our book interview. And then Larry Cordisco is here, portfolio manager for the Oster Weiss funds. Oster Weiss, capital management, and he will be here talking money, markets and more. And if he is as good as his colleagues at Australis, we are in for a treat, because I’ve never had a bad interview with anybody from the firm. And I think quite honestly, it’s kind of the expectation I had when we had Brian Barish from Cambiar.
On the show, not necessarily people who surface all the time, Auster wise for years was doing really, really good commentary. But they really didn’t talk to the media. And when they did talk to the media, they were happy to say, yeah, we’ll talk to you so you can understand what’s going on in the fund world. But we don’t want to be quoted or what have you. Which is great for me as a columnist to have folks like that who are so smart as background sources. But it doesn’t help me when I’m doing the show, because I need to have folks who want to come on and talk to you guys. But now Aster wise has said they want to do a little bit more with the media and, man, they do it really well. So I’m excited that we’ve got Larry Cordisco here.
I’m Chuck Jaffe, financial columnist and your host here on Money Life. The show is independent personal finance talk, we’re dedicated to looking smartly at a wide range of approaches and opinions on investing. To that end, you shouldn’t be surprised if somebody says buy something one day someone else says sell it the next because, well, different approaches put people on different sides of trades and disagreement makes a market we want to help you navigate so that you understand the disagreements and then could side on whichever side you think is right and best for you. Follow us on Twitter @moneyliveshow.
But right now settle back and relax, because we’ll take your mind off the fact that it is the delayed Tax Day and give you great money talk that has nothing to do with taxes. Again, it’s Howard Dvorkin, Olivier Siboney. And we’ll kick things off talking about debt.
Welcome back to Money Life, where we are talking now with Howard Dvorkin. He’s chairman of Debt.com. And well, we’d love to think that the Money Life audience never faces any financial problems. But what we know is that people don’t want to own up to their financial problems and whether they’re yours or whether they’re a family members, I really wanted to do this chat with Howard, because quite honestly, I know a few people where they’re having hard discussions with mostly their kids, right? They’ve got kids who went out, my best friend from childhood was talking to me the other day about, you know, what does he do with his daughter who works normally behind the scenes on Broadway. And she’s supposed to be paying rent for a place she’s not going to be in for months and all these things about financial lessons, and you hear that and you go, “Wait, people are definitely having some issues.”
And we want to talk about what do you do or what do you tell your family members if they can’t make the rent at the end of this month?
So here to discuss it, how we’re divorcing the chairman of Debt.com. Howard’s on twitter @HowardDvorkin. And it’s all linked up at the Money Life show recent guest page.
Howard Dvorkin, thanks for joining me on Money Life.
Thanks for having me, Chuck. Appreciate it.
I think the first thing to point out is this situation is catching a whole lot of people who never thought they’d be there. It’s the people who are successful or have been successful entrepreneurs, but they owned a restaurant that was doing okay. But now they’re months without real income or their regular income. There are a whole lot of people being caught up in this that have never been there before.
Are they making mistakes as they go through this because they never expected to be here?
I believe that when the government announced that they would put a halt to foreclosures, and a halt to evictions on the state level, a lot of people that normally would make their housing payments, have now not made their payments just because they cannot because they had financial difficulties. And that is a major, major problem. One third of the US households have not paid their mortgage, their house, their mortgage, or their rental payment in the last couple months. So it’s a giant issue.
And those protections are expiring not only on the federal level, but on the state level, too. Likely, there’ll be some protection going forward with Congress and the Senate coming to terms. But at the end of the day, right now is not a great time to be a landlord. It is a very tough thing, especially if you’re a landlord that has federal funding, meaning that has mortgage their property through Fannie Mae or Freddie Mac or one of those groups, because those are the ones that are banned. But at the end of the day, unfortunately, I think it’s human nature, people take advantage of the situation, and they are taking advantage of the situation.
But what is happening is it’s not free money, Chuck, they need to make this payment, and they need to make the bank payment, or a lot of people are going to be on the street in a very short period of time. That, and the government has made a mistake by allowing this to continue. So they can’t keep kicking the can down the road.
Well, if you are in this situation, and you could get away without paying, you still want to be in touch with the landlord, and you kind of want to find out where everything is. Because on the one hand, you may have some of these issues. On the other hand, it’s not like the landlord’s gonna go, “Wow, lots of people are moving, I can replace this tenant anytime I want with somebody who’s going to be paying, the market has gone soft. So a lot of this is about let’s have communication. Let’s see what can be done.” Right?
No question. I mean, if you’re in this situation, and you have not made your payments, you need to communicate with the landlord, you need to set up a time schedule in order to catch up on that back rent, which might be over the next three to six months, you may need to increase your payments, if you’re paying $1,000 a month, maybe you have to pay $1,500 for the next few months. The problem is those people that didn’t make those payments probably don’t have that money to pay.
Also, those are the same people that typically were getting federally subsidized by the unemployment stimulus of $600 a week, which is set to expire at the end of this month. So that all of a sudden, they may not even have a job. And then they’re getting cut down and losing that extra $2,400 a month in stimulus payments. So it’s incredibly challenging for some of these people. So you’re going to see a lot of people on the street, unfortunately. Now, the courts may be backed up for some time to come. And chances are Chuck, most judges aren’t going to throw people on the street. That’s probably not a favorite pastime, during these times of challenge for these guys. So it is a tough time. I mean, there is a light at the end of the tunnel. But a lot of people have taken advantage of this situation and they need to put figure this one out. And it’s very, very challenging.
It’s the same with the credit cards. I mean, obviously Debt.com deals a lot with credit cards. And a lot of these credit card companies said, “Don’t worry about your payment right now.” And in fact, one of them just extended access the end of September, but the fact of the matter is they’re still going to charge you that 25% interest rate on your credit card. And by the way, you need to make every single payment back up. So you know what, these people are not doing what they do from the goodness of their heart. They’re going to make their money and they’re going to put you in a worse situation, so my message to consumers right now is to go out, start making payments, even if you don’t have the money, just do your best.
Communicate as you said, but start making as much of a payments as you possibly can. Because eventually, it’s going to come and bite you in the tail. And we don’t want to see that. And then you’re gonna have to call Debt.com. Or click Debt.com. And then you’re gonna have to talk to me. So well, that’s my advice.
But that said, you know, we’ve got a lot of people who are trying to figure out what to do. I was talking with someone the other day who was considering whether or not she should be tapping into retirement accounts, because she doesn’t want to come out of this with massive amounts of debt. And they have said, “Oh, depending on what it is, you can take withdrawals.” And she’s almost of the right age to be able to do it anyway. And I have a tough time saying, “Oh, wait, you want to be tapping retirement accounts for what amounts to a temporary thing.” But her point was, well, “if I don’t do something to manage this debt, most of which I haven’t had in the past, is now is not going to be a temporary thing. It’s going to be there a lot longer.” So now, because you can tap into retirement plans without penalties or what have you, are you changing the standard advice that you might be giving people right now?
There’s some sacred things in my world not to tap into. Never ever tap into your retirement accounts, period. Because you’re taking unsecured debt that God forbid you get sick, you can’t pay the bills, you can file bankruptcy, and taking your retirement funds and converting that into income, not only will you have to pay the income tax on it, regardless of what the government alleviating the penalties on the federal side, early withdrawal penalties, but you’re still paying the the the tax on it at whatever tax rate, which may increase because you’re taking that money into income. But also, you’re putting your future at risk. I mean, there are plenty of programs that are available to help consumers out there. And that is what we do, we find the best path for you to become debt free. The second thing I always tell people is never to convert equity into your home.
And now I know that sounds a little weird. But again, you spent the better part of your life building equity in your home, and to take it and use that equity to pay off, you know, countless dinners at the fancy restaurant, which don’t resonate in for very long is kind of foolish. So people need to hold on to the retirement and hold on to their equity in their homes and just deal with the outstanding debt and make a plan.
They could do it with the help of Debt.com, but they need to make a plan to get out of debt.
For folks who are looking at this, who are now saying, okay, I’ve come near the end of my ability to stand this and I can’t stay solvent forever. What should they be doing to make it that as they start to take on debt, they’re not going to wind up in serious trouble? What’s the pecking order there for them to follow as they go from “I was debt free” to “I can’t be debt free, but I don’t want to be debt laden forever.”
Well, the first thing is they need to budget and they need to put down on a piece of paper what their expenses are, if they need help. We have a budgeting tool on Debt.com. But essentially they need to budget figure out what it costs, what are their basics, their rent, or their mortgage, their car payments, the food, the electricity, the utilities for the house, whatever the case may be, and then all the non essentials and try to cut down those non essentials. Do you need cable with 500 channels? Probably not. I don’t even and half of them are garbage anyway. But at the end of the day, cut down. Do you need Hulu and Netflix? Do you need all these different services? Do you need to spend your money unwisely? So that’s the first thing. The second thing is if you have debt, make sure you have good debt. Good debt is house or student loans, maybe even a car. But bad debt is credit cards and personal loans and things so be careful if you have to take on debt. Make sure you’re putting it on a credit card or a loan that is the least interest rate. And that you fully understand the terms of those cards and those debt vehicles so that you can easily get out of debt and understand how to do it.
Howard, I know that there are more tips you’d have for us, but we’re out of time, so folks will have to go to Debt.com to get them. Thanks so much for joining me on the show. I hope we get a chance to chat again down the line.
Thanks so much for your time and the opportunity to help people.
That’s Howard Dvorkin, everybody. He is chairman of Debt.com. Check out the website for more information and follow him on Twitter @HowardDvorkin.
The Money Girl Podcast with Laura Adams and guest Howard Dvorkin
In today’s world, it’s harder than ever to stay on top of your finances. Fortunately, simplify is here to help. Simplify makes it easy to see the big picture. So you can budget like a pro no more surprise charges from subscriptions. You forgot.
You signed up for simplify, makes it easy to know exactly where your money is going. It gives you personalized insights to help you develop healthy habits and stay on top of your finances for the longterm.
Plus, it’s more comprehensive than other apps with no third party ads. What I really like about simplifies that it’s built by people who get where you’re coming from instead of guilting you for not meeting your goals, simplifies mission is just to provide information and help see why the New York times Wirecutter is calling simplify by Quicken the best budgeting app out there. Start your free 30 day trial of simplified today. When you download the app or visit simplified money.com, that’s S I M P L I F money.com.
Hey everyone. You’re listening to the money girl podcast, where my mission is to help you live rich and love the journey. I’m Laura Adams, author of a brand new book, money smart solo preneur, a personal finance system for freelancers entrepreneurs and side hustlers. If you’re interested in the new book, there are some awesome free bonuses and giveaways.
You can claim if you preorder it before it officially goes on sale. September 22nd, 2020 to learn more, just text the word, preorder, all one word preorder to the number three, three, four, four, four, or you can visit Laura D adams.com. I’m excited about today’s show it’s about a topic that most of us have a love, hate relationship with that’s debt. We like it to buy homes, cars, and pay for college, but we don’t like it when we are feeling strapped by debt payments that leave us unable to reach critical goals, such as saving for retirement.
According to the federal reserve, consumer debt was near $14 trillion after the second quarter in 2019, that’s the 20th consecutive quarter of debt increase in the United States.
That staggering number is the total of Americans home auto student loans and credit card debt. If you are struggling with how to prioritize debt or making payments right now, believe me, you’re not alone while it might sound simple. The key to digging out of debt is staying focused on wise solutions, not dwelling on problems.
You can’t do much about the past. You have to look at what’s going on right now with your finances, how you can make some different decisions and move forward in different ways. And one of questions that I often hear about getting out of debt and staying out of debt has to do with setting priorities. Many people are really confused about which debts to tackle first and whether it’s smart to eliminate all their debt.
The best way to create a plan for getting out of debt is to understand the difference between good and bad debts debt that allows you to make money or to increase your net worth is good, but debt that causes you to lose money or for your net worth to go down is terrible. So we’re going to talk about that in today’s show. And let me give you a quick example. If you have an affordable home mortgage, that’s generally a good debt because it allows you to buy a home that may also appreciate in value over time. And auto loan is generally a bad debt, even though it may be necessary for most people in order to live their lives and get to work because vehicles depreciate quickly and they rarely make money for the owner. You get the idea going into debt for things like a vacation clothes, electronics, or furniture is not a wise investment in your future.
Likewise, buying a home that’s out of your price range is never wise. Even though I said that a mortgage is generally a good debt, a debt that’s good has to be affordable in the first place, if you have debt, but you’ve also got plenty of savings and a steady income to cover it. It may never turn into a problem for you, but if you use debt to finance a lifestyle that you just can’t afford, or if you’re paying sky high interest rates, that should be addressed sooner rather than later. So to get the perspective of a debt expert, I interviewed Howard Dworkin. He’s a CPA MBA, personal finance author, serial entrepreneur, and chairman of debt.com. Howard has founded and served on numerous boards of directors, including the United way, the better business Bureau, American heart association, and junior achievement. He’s received many, many honors for his community leadership and philanthropic work in South Florida.
I was honored to connect with Howard and interview him for this show. We talk about the current state of American debt and how consumers who are in trouble can find help. We’re going to cover a variety of topics, including the debt environment in the United States, how the pandemic has changed the consumer debt landscape, the difference between good and bad debts tips for struggling consumers to pay bills and protect their finances when you should or should not consider declaring bankruptcy and how to prioritize debt payments when you can’t make all of them. So without further ado, here’s my conversation with Howard. First of all, tell me a little bit about how and why you into the debt and the credit business. What’s your background there?
Well, it kind of died in by accident and I think it really goes back to, you know, growing up when I, you know, came from a very entrepreneurial family and I had little businesses, uh, even at eight years old, I had a small little thing going on, but then, you know, in high school I had a snow removal business in New Jersey that was actually very, very profitable enough to hire people and buy equipment. And, uh, and then I went to college and I studied accounting. And, uh, when I came out of grad school, I turned around and I was doing a lot of tax work, but then was called, they had a savings and loan crisis. I got thrown into the middle of it. So I was doing lots of workouts for my clients during the week. And on the weekends, I was shutting down savings and loans.
So I saw it from both sides, the debtor side and the, uh, banking side. So it was very interesting. So I kind of developed a, a strong understanding of debt restructuring during that period of time. And then kinda just fell into this business of, of, uh, helping people get out of debt. And it’s really probably the most rewarding career I could ever think of. And frankly, it lets me do two things, which is help people and basically tell people what they should do.
So I am a very opinionated person and I have strong opinions and frankly, this business allows me to do it. And usually I’m correct in what I preach. But at the end of the day, I started this business, uh, the credit business where every great businesses started at somebody’s kitchen table, which was my kitchen table at the time.
And, uh, started out and gave up a job that I was making a very nice salary and understood, you know, I wasn’t going to get where I want it to go and the timeframe and quit my job in 1992 and started this business right. The first year I doubled my, what I was making. And then again, doubled it and doubled it and doubled it. And you know, it was a great business and it allowed me a lot of opportunity. But at the end of the day, foregoing, the, the financial rewards, it’s really the most rewarding business you could think of because you are changing people’s lives.
Yeah. I like your entrepreneurial roots. Tell me a little bit about what you think is going on right now with American debt levels, going up, going down what’s happening right now.
It’s interesting right now, debt unsecured debt is going down, which is very surprising. But when you look at it, it was going up, up, up until the, this pandemic hit. And now people who aren’t paying their credit cards, they’re not paying their, their mortgages. They’re not paying the rent. They’re not paying their student loans. They’re taking that extra mile and they’re getting stimulus money from the government. They’re actually taking that money and paying down their credit cards.
That’s most people. So the overall debt in America has dropped by $76 billion in unsecure credit cards, which is the largest drop in the history. Uh, in recent history that I know of, I will tell you, that’s probably going to change as the government tightens up the stimulus money and the programs, because in January, all those programs are going to expire and people are going to have to go back to paying their student loans, going to have to pay their mortgages, pay their rent no more deferrals on, on credit cards. So I do believe that consumers will get choked at some point, and we will be here to help people obviously. But I do believe the usage of credit in America, uh, America is addicted to debt and that addiction is not getting going away anytime soon.
So what mistakes or maybe misunderstandings do you see people having about debt? Maybe, you know, not just right now, but, but over and over, what are some of the biggest mistakes that people are making when it comes to debt?
The biggest overall mistake that I’ve seen for the last 20 years is their financing lifestyles I can’t afford, and it’s not even picking up only credit card debt. They’re also leasing cars that they can’t afford. And so basically they’re making smaller payments to get a better car or a bigger brand or whatever the case may be.
But at the end of that lease, they own nothing versus buying the car. And at the end of three years, they still have that car and they could drive it for another three or four years and then trade it in. So that is a very big problem that the availability of unsecured debt has allowed consumers to basically find the lifestyles that they can’t afford. And, and, you know, as our parents taught us, you know, you need to save and put away money and don’t carry too much debt that went out the window with this generation after the baby boomers and even the baby boomers at the tail end of the baby, boom, you’re seeing seniors pick up debt because at the end of the day, it’s just more expensive to live right now. And you’re, there’s a place for all your dollars. And certainly your excess dollars.
One distinction that I know you make is the difference between good and bad debt for someone who has never heard that distinction, how do you describe good and bad debt?
All debt is bad in my opinion, but bad debt is credit cards. Things that you don’t necessarily need, but you want going out to dinner and, and charging a hundred dollars on your credit card, where you’re already carrying a balance and increasing the balance by a hundred bucks, 12 hours later, you get no benefits from that dinner.
However, good debt could be construed as a home mortgage, meaning you’re in debt, but you’re the asset. At least you have something to show for it or car, you know, it’s that? Yes, and it depreciates the car, but it gets you it’s worth something. At the end of the day. Also, that car gets you from point a to point B. So you can go earn money a house. Hopefully if you keep it for 20 years, it appreciates you make a lot of money.
So that’s acceptable. Debt student loans is good. Debt, student loans. You’ve got an education, assuming you got an education and you just didn’t buy the degree, which happens.
Unfortunately these days with some of these private universities, but at the end of the day, a student, student debt is probably good debt because you would take that degree. And it allows you to get a job that you can make extra money at. Then you would, if you didn’t have that degree,
I agree so good debts can help you earn more or increase your net worth bad debts, usually cause you to lose value and lose net worth. And it is so true that if you’re abusing bad debt, it’s going to catch up with you. You know, and as you said, all debt can be dangerous in one form or another.
But if you are using a credit card correctly, you’re paying it off. You’re not letting any high balances, the interest accrue over time and you’re, you’re paying off your balances. You’re not letting too much accrue there. You know, certainly you can use a credit card why wisely, but yes, uh, the good debt, bad debt can be confusing for a lot of people. And it can cause people to do things like pay off the mortgage before they pay off the credit card. You know, not prioritizing debt.
Default on the mortgage before you default on the credit cards, which we saw quite a bit in the last downturn, we saw people actually falling behind and becoming delinquent on their mortgages and cars before they gave up on their paying their credit cards, which was frightening to me. But I could understand that they were living off their credit cards.
They didn’t need the house. The other thing is you can use credit cards, as you said, but if you pay the bill off, when the bill comes in at the end of the month, pay it off a hundred percent. It’s a fine method for, for transacting or better yet use a debit card, which only allows you to charge as much as is in your account. So those are two great things to do and focus on.
With Halloween right around the corner. Lots of us are excited for spooky, scary, fun, but here’s one thing that shouldn’t scare you. Life insurance policy genius is an easy to use life insurance marketplace that makes insurance shopping a breeze. You could save 50% or more by using policy genius to compare policies. A life insurance policy can last you for decades.
So those savings can really add up just head to policy genius.com. In minutes, you can work out how much coverage you need and compare quotes to find your best price. They have policies starting at as low as a dollar a day, and you may even be able to skip the in-person medical exam. Plus policy genius works for you and they’ll handle any speed bumps you run into along the way. So if you need life insurance, head to policy genius.com right now to get started, you could save 50% or more by comparing quotes policy genius.
When it comes to insurance, it’s nice to get it right. Today’s episode is brought to you by a unique podcast. That’s been making a splash lately. It’s called something on my mind, hosts, David and Cindy. Mellowness use their financial backgrounds to give a refreshing perspective on personal finance and all things money.
They talk about current events with a side of humor, so you can improve your financial health while having a little fun, whether they’re talking about how to manage your budget or how to plan for retirement, or just taking a detour to chat about anything, you’ll feel like you’re right there, listening to two smart friends, having a conversation, and you’ll hear about surprising and funny financial topics like the town in Washington.
That’s begun printing wooden money, except it as a local currency within the town. Take a few moments and go to something on my mind.net or your favorite podcast app to subscribe this podcast will enhance your life and empower you to have fun while managing your money. Again, that’s something on my mind.net, Howard, how do you feel about using debt in a business? What advice you give? Let’s say someone who is a solo preneur, a small business owner, and is thinking about expanding and using debt. What advice can you give them.
Bins? I mean, to be Frank with you, I see it time and time. Again, a lot of people hauled that.com over and over and say, yeah, I tried to start a business and I took it. I use my credit cards and, and it didn’t work out. And my point was, you know, my response would be, well, let me ask you what was your margin? And if I didn’t get the blank stare from that question, they would say maybe I was making 10, 15%.
And they, and then I would say, well, what was your credit card charging you for that outstanding debt? And they would say, well, probably about 25%. I said, so every time you use your credit card, you were actually losing money because you were only making 15%, but you were paying 25% interest credit card uses and basically funding businesses.
Really. You didn’t see it back in the eighties as much in the nineties, in the mid nineties, there was a actor called Robert Townson and he financed a movie using his credit cards and it got a lot of press and the movie was actually quite popular. And a lot of entrepreneurs started using their credit cards thinking, Oh, I’ll do this and I’ll pay it off.
Well, the fact of the matter is a lot of businesses don’t make it to year two or even through year one, some cases. Um, and then people are stuck with debt. And again, if you have the ability to pay off your debt, your credit cards, when the bills come in, pay it off. If you don’t have the ability, then you shouldn’t be using those credit cards, whether it’s for business or personal use.
If a listener is really struggling right now, let’s say they’re having some financial hardship due to the pandemic and they’re behind on debt. What tips or advice can you offer? What should they be thinking about in terms of prioritizing debt or maybe dealing with collectors, if it’s gotten that far, how, how should they be thinking about managing debt in the scope of their, all the other challenges going on right now?
They need to do some research. I mean, certainly if somebody went to desk.com, they would find a tremendous amount of information on how to get out of debt. And that’s important to know an educated consumer is a better consumer. And it basically, there are too many landmines that you could step on when you’re making decisions about debt.
And it’s really challenging, uh, to me to see that, uh, you got to go to an authority that actually is trustworthy, that can get you out of debt. That can point you in the right direction, not one product or not. One method of reading yourself of debt is the best. You know, there’s several ways to get out of debt.
When somebody comes to me, I always say, there’s five methods to get out of debt. One is you could pay your minimum payments, uh, and it will get you out of debt in probably 30 years, which probably is not an option for a lot of people too, is you could stick your head in the sand, like an ostrich and hope that things get better hopes, really not a great strategy.
Either three, you can file a bankruptcy, which people bring up all too often without knowing the implications of that without having the knowledge of what that entails. And it’s probably not, should be the last case scenario rather than the first thing out of people’s mouth.
They can go into a credit counseling program, basically the underpinning of my entire debt relief business, which basically gives people a great idea of what their options are and tries to point them in the right direction. And then there’s a settlement program, which we all see on TV and you’re on the radio and see you on the internet, which may or may not be a good thing. But at the end of the day, you know, you have a bunch of options and they need to educate themselves on those options.
Since mortgage rates are so low and attractive right now, a lot of people are considering buying homes. There are a lot of first timers who are thinking about it.
A lot of people are maybe thinking about upsizing downsizing, a lot of changes going on. What advice can you give people when it comes to knowing if they’re prepared for a mortgage, if they’re ready for a mortgage and maybe some ways to think about how that very large debt taking that on, you know, kind of the role that that should play in your, your overall financial goal and plan.
People need again, to do their homework, need to sit down. And in fact, they could go to desk.com and we have a housing budgeting tool that’s available. And basically those people can go through, fill out the, uh, schedules and understand, you know, right now they may be renting and that’s it. They have a rent due the end of the month or at the beginning of the month.
And they have an electric bill and maybe they have a water bill and that’s it. But now you go and you buy a house. Not only do you have to pay that mortgage payment, which may be the same as your rent, or may be a little more, which has tax benefits, but you also have the electric bill. You have the water, you have the lawn maintenance, you have the pool maintenance, you have insurance, you have lots of extra expenses that you didn’t have before.
So they need to budget out and see really where they are from a cashflow perspective. I will tell you that a lot of people get into houses and they shouldn’t be in because they spent too much on a house. And unfortunately with families, financial pressures, cause a lot of challenges for families and actually is the number one reason for a disillusion of a marriage, the cause of divorce. Number one is financial pressure. So don’t put yourself in the position to add pressure that you don’t need, that you don’t want. And frankly, that you may not be able to handle.
Yeah. Great advice. So, Howard, tell me a little bit about debt.com. I know you provide a lot of great education and resources. You know, what else do you do if somebody contacts you what’s kind of the bread and butter of your business?
Well, I think it’s interesting to tell you how I got the progression of my career in debt relief. I actually, when I came out of being an accountant, I sat down at my kitchen table and started a company called consolidated credit counseling, which now is the largest credit counseling agency in the world, which is, I’m very proud of that. And it’s a great company and it gives people great advice. The problem with credit counseling is it only offered one product. So I decided to move on from there and start dead.com. Uh, and what would happen in credit counseling? You could only handle about 10% of the people that would contact you because signing somebody up for a program that they don’t need, that where that won’t help them is not something I want to be involved in. So we would be very strict, only nine or 10% of the people that contacted us.
We actually did business email@example.com. We’re able to help probably 40 or more 40% of the people that contact us. So whether they need credit counseling, whether they need bankruptcy advice, whether they need help with their taxes, they need credit restoration, a whole menu of things that we do, and we’re able to help people. So it’s much more satisfactory for me to help as many people as I can. And desk.com is certainly the platform to do that.
But I will tell you, as opposed to maybe some other businesses, we are very strict on doing the right things for our, the people that reach out to us. Uh, every time we don’t want to impede our reputation by doing stupid things. And we won’t push somebody into a product that they don’t need. In fact, a lot of the times it we’ll say go down this path. And by the way, we don’t help you. We don’t have the services available, but this is what you need to do. So pushing people and giving people direction and honest advice is something that I absolutely demand from our staff and frankly from our management team.
Howard, thank you so much. This has been really interesting. Um, your, your ideas and your, your background, uh, in debt is, is really fascinating how you came into this business. I really appreciate you talking about it and being on the show, where can folks learn more about you?
Well, they can Google my name and, uh, certainly, you know, there’s a lot of things about me, Howard [inaudible] dot com. If you feel that you’re overwhelmed, go talk to somebody, whether it’s at debt.com or somewhere else, but make sure that they’re credible and they’re giving you good, solid advice that you can go on and then make a decision with.
A big, thanks to Howard for taking the time to do the interview today. And I hope you enjoyed it. If you have a question about debt, credit, retirement, building a business or any financial dilemma or topic that’s on your mind, I’d love to hear it. You can connect with me by email, by visiting Laura D adams.com.
You can record a brief voice message by calling our voice line. It’s (302) 364-0308. We might even be able to use your audio in a future show. And if you don’t want your audio on a show, all you have to do is say so that’s all for now. I’ll talk to you next week until then here’s to living a richer life. Money girl is produced by the audio wizard, Steve Ricky Berg with editorial support from Karen Hertzberg. If you’ve been enjoying the podcast, take a moment to rate and review it on Apple podcasts.
That’s an easy, free way to give back, show your support and help new listeners find us. You might also like the backlist episodes and show notes that are always firstname.lastname@example.org.
Queer Money Podcast with David Auten and John Schnieder with guest Howard Dvorkin
Today we’re talking about the Big B, bankruptcy. Is it for you? Or is it for anyone? Well, let’s find out.
You’re listening to Queer Money, Episode Number 226. On today’s show, we’re joined by Howard Dvorkin, the chairman of our new partner Debt.com, an educational and news site covering consumer debt. Howard’s also the founder of Consolidated Credit Counseling company. He’s also the author of two books. The first book “Credit Hell” is a prescription for digging out of debt. His second book “Power Up” helps people who suffer from financial hardships such as job loss navigate their finances.
With over 25 years in the industry, Howard’s a great resource of information for credit counseling and Debt.com is a great platform to connect with all the resources Howard and his team offer.
We make the Queer Money podcast for you. So please email your money questions to email@example.com, and we may answer your question in an upcoming episode. Now, on with the show.
There’s personal finance for the masses. This is not personal finance for the masses. This is Queer Money. This podcast is sponsored by Capital One. Capital One is redesigning the banking experience by offering simple, straightforward and seamless ways for you to bank from almost anywhere so banking fits into your life, not the other way around.
Find out why the debt lasso method is a better way than the snowball or avalanche method for paying off your credit card debt by getting your free debt lasso calculator at debtlasso.com. Now on the show.
So welcome, Howard, to the show. It’s good having you.
Thank you very much for having me today.
So would you mind giving us a background of what exactly is bankruptcy?
Bankruptcy is the way for a consumer to eliminate any debts that they may owe that are existing. It also puts a freeze or stay on any legal proceedings that would possibly threaten the ownership of those items. Meaning if people are in foreclosure or cars getting repossessed, you file for bankruptcy and you can stop that from happening, at least temporarily.
So it sort of protects some of your assets for a period of time, I guess, until the courts and whoever you owe your funds to work everything out.
It actually in the long run doesn’t protect anything. You’re actually letting the courts, or the what’s called the bankruptcy trustee, make the decision for what happens to your assets at some point in the future, which is sometimes not the best way to go if you’re trying to get yourself back on your feet.
Yeah. So that brings me to my next my next question, what are the what are some of the pros and cons of doing bankruptcy? Why would want someone choose it over another option? And what would be the potential detriment?
Well, bankruptcy should be the last option. There’s many, many ways to get out of debt. And, frankly, a lot of the times because of the aggressiveness of bankruptcy attorneys, they’re going to tell you that you need to file bankruptcy, whether it’s the best thing for you or not. That being said, people go to them because they are lawyers, and they are supposed to be honest, and they are supposed to do what’s right for the customer.
However, that doesn’t always happen. And certainly, in my experience, bankruptcy is not the best option. Most of the time, bankruptcy is a good tool for certain people, but not everybody.
Yeah, it’s kind of interesting because you say this, because I think that there’s a maybe a misconception or a kind of pervasive feeling out there that bankruptcy is the way I can just get off the hook from everything that I owe. I think a lot of people have this mental idea, or projection that if I declare bankruptcy, everything just goes away and everything is going to be great after that.
But that’s not the reality, right?
That’s the problem because in 2005, they changed the bankruptcy laws, which were pushing people to pay back some of the debt they owe before 2005. In 2006, people could file bankruptcy and you could just walk away free. The Department of Justice’s bankruptcy division turned around said, “We got to make it a little more detrimental.” And quite frankly, I was heavily involved in the bankruptcy process and actually helped develop some of those rules back in the early 2000s. And what typically happens is most people don’t understand what bankruptcy is and don’t educate themselves and go to a bankruptcy attorney thinking that they’re going to be treated fairly. And that’s not always the case.
What typically happens is a person who wants to file bankruptcy has to first take a course. And this is where I come in play: that educates the person, the consumer, for the available options that don’t include bankruptcy, meaning you could go into credit counseling, you can get educated.
Before you file bankruptcy, it was meant to prevent people from going through and filing bankruptcy that don’t necessarily need to file bankruptcy, then you have to apply for either a chapter 13, or chapter seven. Chapter seven is the complete liquidation of your debt where you can just walk away. Chapter 13, you’re paying back a portion of your debt, that actually takes three to five years, because you’re making small incremental payments along the way. Then, upon completing that, the consumer has to take an educational course, which essentially, is a finance course.
So they don’t end up filing bankruptcy again, and these are all requirements of the US trustees office, and you can’t file a bankruptcy without taking those two courses.
I think that may may help some people and I think may make some people think to themselves, well, I don’t want to necessarily go through that. Maybe I’ll do this on my own, or I’ll figure out a better way out of this situation.
I want to be very frank with you. probably half the people that file bankruptcy probably don’t have to file bankruptcy. There are other options, and there are better options. You know, sometimes bankruptcy is the right option, but not always, and it shouldn’t be your first choice, it should be a last choice. Now, I will tell you somebody with significant assets should not be filing bankruptcy, somebody with limited assets, and limited future prospects, maybe should file bankruptcy.
Bankruptcy destroys your credit history and it takes away your personal assets. Frankly, now, is that permanent? No. Some lenders specialize in lending to people who have filed bankruptcy simply because these people are actually very good credit candidates. Because there is a prohibition once you file bankruptcy, you can’t file bankruptcy for another seven years. So that’s not a bad candidate. And by the way, if they file bankruptcy, there is no more debt. But you’re going to pay the price. If you’re running a balance, because you file bankruptcy, you’re going to pay higher interest rates and any debt that you get, regardless if it’s a car loan, or mortgage or even credit cards.
Yeah, that’s interesting. I wasn’t aware of the fact that you couldn’t file again for seven years, which is a good thing. I guess it makes sense. Because, you know, a lot of people may see this as a reset button. I’m just going to start over. And if they get it, I guess it’s kind of you might think of similar to divorce. People go through one divorce and say, “I’ll just get divorced again, if I find somebody that I don’t like,” and then they may have the same kind of mentality or thinking when it comes to bankruptcy.
Well, the rules that we developed back in the early 2000s, were not meant to be punitive, they were really meant to be more educational, so that people would not look at bankruptcy as a first option, they would look at it as the last option. It was just too darn easy, right in the ’90s. And also bankruptcy was losing its stigma.
Frankly, I feel when I was growing up, and I think I’m maybe a little older than you guys, actually, probably a lot older than you guys. But it was bad to file bankruptcy. It was almost a scarlet letter right on your chest with big Scarlet B. Then a Scarlet A with when we go back to our English Lit class, but the Scarlet B was a bad thing and you were frowned upon in the ’70s and ’80s. And then the ’90s started to look a little different and I think that was kind of when pop culture took over where we see some of these superstars filing bankruptcy, which was absolutely bizarre because these people were on top of the world one minute, and then they were out of money.
The next minute we saw MC Hammer, we saw Mike Tyson, we saw a lot of people file bankruptcy and and get back on their feet rather quickly. And it wasn’t good for pop culture. To be frank with you. There bankruptcy wasn’t a great option, because it should be the last option. It does have a major impact on your life and anybody that says, “My life hasn’t changed because I filed bankruptcy,” is not being honest with themselves and probably not honest with you.
How does your bank support the LGBT community? Not at all, for pride in June, or 365 days a year? Capital One proudly supports the LGBT community throughout the year. Maybe it’s time to support a bank that supports us. Go to debtfreeguys.com/cafe for more info.
Hi, I’m Louise Chernin. I am with Washington State’s LGBTQ and ally Chamber of Commerce. And we are about business development, looking at everything through the eye of equality, equity, diversity and inclusion and investing over $600,000 a year in LGBTQ students, join us, we welcome everybody.
So you mentioned earlier that bankruptcy has an adverse effect on your credit score. We know it can bring it down pretty precipitously. What kind of long term consequences are there beyond your credit score, maybe even with your tax consequences with bankruptcy?
Well, it’s interesting because the rule of thumb is taxes could never be included in a bankruptcy, nor could student loans. These days, most attorneys are going to recommend you just put them in there unless the bankruptcy trustee sorted out whether they’re going to allow it or not, because there’s also taxes, and there’s all sorts of student loans. But there are consequences, obviously, the major one is your credit rating goes down, and it will stay down for seven to 10 years. Also, you know, there is a court filing on your credit reports that shows that you filed bankruptcy. So there are some detrimental effects and not nearly what it should be. Because in my mind, you’re walking away from your debt. And frankly, a lot of the times it could have been avoided. Now there are certain times when people have to file bankruptcy, and it’s not from mismanagement of money, things happen, life happens. You get sick, you lose a job, you get divorced, who knows? Lots of things happen to throw people off what I always call the tight rope of credit.
But there are other options. The first option should never be bankruptcy.
Yeah. I think we had Jay Fleischman, who’s an attorney, on our show several years ago. And he said, “I’m probably the only bankruptcy attorney who says, ‘Please try not to hire me.'” That’s very, very kind because he’s an honest guy. But unfortunately, you know, a lot of bankruptcy attorneys are desperate for money. Everybody is, but unfortunately, they are doing a lot of volume. And the more people they sign up, the more money they make and the more people they’re leading people astray.
But sometimes the intentions are not good. And there’s many options before and frankly, that is why I started Debt.com, to give people options to give people the ability to choose what programs are better for you. And frankly, you know, whether it’s debt management, credit counseling, whether it’s debt settlement or bankruptcy, we’re going to tell you honest advice.
You know, we’re going to point you in the right direction. And the one thing that that I can tell you unequivocally is that, you know, if somebody goes to Debt.com, they’re going to get the truth. They’re going to get it straight. And we’re not going to leave them down a path. We’re going to tell them what they should do.
Yeah, and this is exactly why we’re partnering with Debt.com, because you can help people in ways that we can’t and we know your heart’s in the right place. You have some great resources such as debt management, debt settlement, student loan consolidation, that are maybe better options for people to look at before they consider bankruptcy, but you can help them with that.
So, to answer my next question, what is the bankruptcy process? And how exactly can Debt.com help our listeners if they think that this is the solution that they need?
Well, if it’s the solution they need, just call into Debt.com, and talk to one of our certified credit counselors. That can give you an honest appraisal of where you are and where you’re heading and if a program that we offer makes sense. And frankly, you know, the one thing that we should realize, and it’s funny, we were having this conversation, because earlier this week, I gave a speech to a new group of recruits saying, “We’re always going to do the right thing for the consumer.” I’ve been doing this for 27 years now. At the end of the day, I am not going to put somebody in a program, just to make a buck. First of all, I don’t need it. And second of all, it’s not right.
We have built our reputation of being the honest people in the business, we have built a reputation of taking the client first. And we’re always going to do the right thing for the client. So we’re going to do a analysis of the person’s income, and then we’re going to look at their expenses, we’re going to look at their expenses, and maybe even make suggestions on how to save people money. And then we’re going to dive into their debt and figure out what program they actually need. Do they even need a program? Or do they just need to be pointed in the right direction? And get education on their own? Or maybe hit our website for some of that education? Or do they need a debt management plan? Do they need a debt settlement plan? Do they need tax help? Do they need student loan help? Or do they need actual bankruptcy?
We’re going to tell it to you. We’re not lawyers, but we’re going to try to advise and gives the best advice possible, to understand. If we can’t partner with you, we can send you with one of our partner companies that do that specific job and you’re going to be better off.
Nice. And to that point, if Debt.com and the client determined that bankruptcy is the solution, is an attorney needed, and can Debt.com help our listeners find that appropriate attorney?
Absolutely, we have a network of attorneys that we will send out referrals to. They have been vetted. We have a very, very in depth vetting of our partners. In fact, they have to fill out a questionnaire to get our seal of approval. We do an independent investigation on all our partners. So we don’t put people with the wrong providers. We will never put people in a bad position. And and frankly, you know, as I said, I’ve been in this business a long time. And I’ve seen lots of good people and lots of bad people. And, you know, we don’t want to partner or associate with bad people, we won’t do it.
Nice. That’s great. Thank you very much. So to our listeners, if you’re curious, if you think bankruptcy is a solution for you or if you want to learn more about Debt.com, you can call them directly at 844-334-7813. Again, that’s 844-334-7813. Or you can simply go to debtfreeguys.com/226 and speak directly to Debt.com.
Any other ways that our listeners can connect with Debt.com that you can recommend? Well, they can go to your link. But there’s lots of information on the Debt.com site. But obviously, we want you to go through your site if possible, but they can obviously click on their keyboard Debt.com and go directly. But frankly, if we know it’s coming from you, we’ll treat those people extra special.
Awesome. Thank you so much. We appreciate you coming on the show and explaining this to us and I think it would be wonderful for our listeners.
Thank you very much.
Thank you, Howard, for taking the time to visit us on Queer Money. We really appreciate it. Thank you to our listeners for listening to another episode of Queer Money. Here’s your takeaway from this episode: Don’t assume that bankruptcy’s an easy fix for your debt problem or that it’s a solution for you.
As you heard, bankruptcy is not for everyone. Call 844-334-7813 or go to debtfreeguys.com/226 to connect with Debt.com to find out for certain if bankruptcy is for you, and if not, what other solutions may be a better fix. Remember, we make the Queer Money podcast for you. So please email your money questions to firstname.lastname@example.org, and we may answer your question in an upcoming episode. Thank you again.
And now a quick word from our sponsor: Capital One’s checking and savings accounts have no fees and no minimums. And with one of the best saving rates in America, you can rest easy watching your money grow with no fees to bring it down and you can open an account in about five minutes, which means you are only about five minutes away from getting your savings to grow with one of the nation’s best rates.
That’s the debt lasso method and it’s helped pay off over $250,000 in credit card debt in less than two years so far. See what it’ll do for you by getting your free debt lasso calculator at debtlasso.com
Our latest video interviews
Kumiko Love, The Budget Mom
The whole reason I think that they’ve approached you is that I can’t stop talking about you it’s changed my life I started using the budget by paycheck workbook. In August, in those few short months I’ve paid off about ten thousand dollars in debt and I’ve really gotten a grasp on how I spend money and how to manage it.
One of the things you always say is and I wrote it down so I wouldn’t forget is how to manage your money in a way where you don’t depend on debt. Yeah, I’d love hearing that the sinking funds in my life I think is what made a huge, huge difference as well.
I think that’s where it was like one of those aha moments like oh my gosh why didn’t I think about this before? But it really goes down to that you know preparing yourself for the future so you don’t have to feel pressured to use your credit cards. Exactly, and it’s great to hear you say that you know something about your system resonates.
I think one of the things that really helps readers and people like yourself is seeing someone do it in there you know? In their real-life. Like I mean you showing I think for some people just seeing it just seeing someone else do it.
Not necessarily their numbers don’t have to match theirs. Their circumstances don’t have to be the same watching someone do it I think it really makes something in our minds click like oh yeah that’s how you do that and that’s why you do it. So that makes me so happy and congrats on paying off the $10,000 of debt.
That’s huge. Thank you for putting it all out there. Your real numbers, which has to be so hard to do. It’s one of the things that frustrated me the most when I was learning how to budget. I just wanted to scream at people like okay you’re telling me but can you please just show me like show me what this looks like in your life?
So we really made that a focus here at TBM and it is true some days it’s hard to share those really not those real numbers but I also think that the reason why we do it is so so crucial and so important that we just can’t give it up and so it’s the chances that we take. Because it is such an important mission, but that means I’m so happy that you’re making such great progress and you’re finding that awareness in your life.
That’s ultimately what it’s about especially when you’re paying off debt. It was the mindless spending online shopping which one of the things that you speak about is when you first. Start tracking your spending for a whole month. Write down everything you spend and I did that and it was mind-blowing with my readers call it a slap in the face moment.
Yes so how do Tiffany’s bad habits align with the issues that your readers have because I know you just said it’s like that slap in the face moment and for me personally like tracking my spending first I was almost scared to do it. I almost didn’t want to know like aware like how bad it was gonna be is that something that you find that other readers are thinking about.
Yeah, you know it’s funny because once you get into the mindset of knowing deep down you want to create a budget what happens is you feel this level of excitement. You get very excited you’re like I want to create a budget so what do you do you sit down and you automatically the first thing you want to do is start creating that budget and putting numbers down on a piece of paper and assigning limits.
Putting down categories but writing a budget is so drastically different than writing a realistic budget a budget. In a realistic budget are completely two different things one is on based on fictitious numbers that you want to spend on a budget that you want to have. In your life, a realistic budget is a budget based on what’s realistically happening with your spending.
I think that for me that was one of my biggest struggles and why I failed for so long. In the beginning, is I was sitting here just wanting to tackle the work. I was wanting to tackle and just get that budget in place because it’s ultimately what we’re trying to find is peace. And that peace comes from knowing that we have a plan to follow with our finances and so we start creating that plan without bringing awareness into our lives and into our finances.
Awareness can’t really be found until you know where your dollars are going but also the careless spending really resonates with me because my problem was clothes. I would spend $30 on a shirt and say well it’s only $30 it’s not that big of a deal. But next week it was $30 again, and the week after it was $30 again until before you know I was spending $300 or $400 a month on new clothing that would just sit in my closet literally with the tags still on them.
I think that once you bring that awareness into your life being able to step back and ask yourself the hard questions like well wait a minute why am I here standing in line with a bunch of new clothes over my arm when I know deep.
Like why am I here? And it’s until we can figure out our spending triggers and those underlying causes. But a lot of us kind of ignore through our lives because it’s either we don’t want to admit it to ourselves. Look it wasn’t easy for me to come out and say hey I’m not comfortable in my own skin. I don’t like the way I look.
But until I can say that out loud and honestly answer that for myself I couldn’t address the spending triggers. And that’s where tracking and bringing that awareness into your life really comes into play the amount of stuff I’ve spent money on and said well it’s for self-care.
I do think that term gets thrown out really loosely nowadays but I also, think that there’s something really important to say I’m a huge believer in. It’s something that I do and implements into my own life. But I think where it gets dangerous is labeling all of our wants that’s self-care.
When it gets like it becomes a problem, at that point a debt payment to pay off journey is not just making debt payments it’s a self-discovery journey. It’s an emotional journey and it’s making sure and like she said. What I always say a debt payoff journey is managing your money in a way where you don’t rely on debt in the future which means you need to learn and fill the management of the financial management skills throughout your journey.
If you don’t you’re gonna pay off all your credit cards and be one of the people that just goes right back in the credit card debt our mindsets of can I actually do this it’s about throwing out the word impossible and no longer is in our dictionaries and saying to yourself I got this. I mean you all of a sudden become someone who’s scared to look at your debt numbers.
Then all of a sudden you become a warrior. It’s almost like you’re in it for the fight of your life. It’s that important to you. So the mindset is just a hundred percent crucial as you’re working through your financial and debt journeys. It really was just changing everything that I thought I knew before you know. Most of my debt was zero percent interest so I was like whatever it doesn’t matter it’s not getting into.
I’m not paying interest. What does it matter how long it takes me to pay it off? It’s not about that, it’s about not having this debt and not having to pay monthly towards it so I can allocate that money towards my other goals so instead of paying you to know $50 here for this medical bill $100 here for this credit card and you know taking three years to pay that off it really wasn’t mindset change.
That’s not what it’s about, and you need to be working towards these other goals. I think too it comes I mean how many times do we say in our lives well. I would go out and pursue that if I didn’t have that I would I would seize that opportunity if I didn’t have that I would go back to school I didn’t have ten. I would go on that family vacation if I didn’t have that.
All of a sudden we find ourselves making our excuses and really like giving up such potential and opportunity in our lives because we feel like debt is hanging over our head. It’s not so much about. It sucks yeah the interest that we have to pay but what sucks, even more, is the way that we feel limited in our lives because that is hanging over our heads and that has a huge thing to do with mindset.
I think it’s sometimes hard for my readers and my audience to understand you know. I’m known for you to know single mom pays off seventy-seven thousand dollars in eight months and a lot of my new readers and new followers Sita is so unrealistic unattainable and unrelatable.
But what they’re missing is the story where it actually started I have a lot of people who tell me Emiko you are so much more relatable when you are paying off debt. Here’s what’s really important, I started the budget mom to show readers that paying on that and budgeting is not just about the struggle.
As I started sharing my debt payoff journey and the budget mom grew it was hard for readers to understand the business side of what I was doing because I don’t share my business numbers I stopped doing that after my lawyers advised me to stop sharing for security purposes to stop sharing my business numbers I still share my personal numbers but it’s hard for me sometimes because I can’t share the business side which entrepreneurship has such has had such a huge massive effect on my debt payoff to me.
Essentially why I was able to pay off so much debt so fast I grew a passion in something I was really dedicated to, which is helping people it kind of turned into a business on its own.
I always like to remind my readers I didn’t create the budget mom to start a business or to make a dollar I did it to fill the community. Oh, they have no choice but to hear about it time you all hear me I heard lots about it my husband has been fully on board and once he saw the effects of it.
At first, he was like oh I have to pay for gas with cash as I could go inside like this is not good but he told me like a couple weeks ago he’s like this is just amazing what you’ve done.
Yeah, I always like to say that you know it’s hard on this journey because a lot of people don’t will understand your journey. I get it a lot but our journeys aren’t for them this for us. So that’s when you just step back and you say you know what that’s okay because I’m gonna kick butt. Oh well, I’m gonna do you know.
So I love that. Yeah, yep, I’m the one who’s gonna pay for a house. Yeah you know there was that roadblock with oh now I have to go to the bank and get cash now. I have to go inside and instead of paying at the pump I had roadblocks as far as and this will happen to you once you start paying off more of your debt is a lifestyle and income inflation right.
We started to have a lot more disposable income where all of a sudden step back was like we’ll wait a minute. This all used to go to debt what the heck do I do with it now. That was kind of my struggle especially as much as my income has changed over the last four years was really stepping back and learning to not want more.
When they’re learning the psychological and emotional benefits of bringing pen to paper. I have always been a huge believer that there is different psychological benefits to writing things down so did you like the act of writing it down.
Yeah, I holding the cash I’ve always painted. I love getting my hands dirty I like writing even my to-do list I still write them out and for work, I do all of that by hand. It’s something about crossing that just it has more of an effect bringing the pen to paper.
I think it is what adds and what is what makes my budgeting method oh so much different is the level of the fun aspect that it brings into the method itself. I think what happens when we pay off that is for so long and if it’s such a long journey we’ve been fighting to pay off our debt right and we’re so focused on that one priority that when it’s over we get confused when it’s finally over and done and we no longer have that we’re fighting for it’s almost like we start to question what to do with our money.
I think it’s super important that anytime there is a life change in your life a big life change like paying off your debt going back and re-analyzing and re-prioritizing your financial goals is a must.
Anytime I hear like Tiffany’s story for me I get very emotional. It means so much to me you know I started this journey not knowing if I could even help one person one other mom out there who was like me so to hear her say that she’s found the success and I helped motivate her to do that.
I didn’t just change her life but I changed her husband’s life her kid’s life. I feel blessed I feel honored that she let me into her life the way she did and let me enter her home the way she did.
I’m just ecstatic. I’m so excited for her and I can’t wait to hear her finally say by debt and about say dancing and watch her hit all two other financial goals in her life. So it’s just important. It’s extremely important to me just the impact it’s had is amazing and I just thank you so much for everything you do.
Laura Adams, The Money Girl Podcast
Laura Adams is a personal finance expert author and speaker who makes understanding complex financial topics simple. She’s hosted the money girl podcast since 2008, and we’re always happy to have her answer our readers questions on Debt.com’s Ask the Expert section.
So I just wanted to start if you could maybe give us a little intro. of yourself i have been a personal finance expert writer speaker podcaster since about 2007. I started podcasting in 2008 and that opportunity kind of led to a lot of other things including writing books and doing PR as well.
It’s funny when you write a book, people expect you to go out and talk about the book and really promote it and realize i really liked it and kind of got into doing more PR.
What is it about and why is it important right now?
Yeah this is the new book “Moneysmart Solopreneur.”
It is really something that I created out of a lot of requests. I was noticing that a lot of people have been very interested in working for themselves. They’ve been asking a lot of questions about starting a business right now independent contractor doing a side gig in the on-demand economy.
It’s great for you. But it’s also great for anyone who also has aspirations to grow and maybe hire employees and answer questions like you know do I need to incorporate before I begin making money.
You know do I need a business bank account? What are all of the kind of administrative tasks that I need to be doing? When I talk about personal finance and business I like to keep it you know on a kind of a real basic level and kind of just lay it out for people in a kind of a tips based process of tip space format so they can know exactly what they need to do when they finish the chapter.
There are a lot of like important tips for solopreneurs. But I was wondering what you think the biggest money mistake a new solopreneur could make if you only had to pick one?
There’s so many mistakes. A one that i see often is people will get very excited about new revenue they’re they’re doing a new a new business. Maybe it’s you know something in the on-demand economy and a new opportunity that they started and they are not thinking about taxes.
This is something that will catch up with you you’re going to figure out pretty soon. When the next tax day comes along that you know you owe taxes that you may not have expected.
So this can catch a lot of new entrepreneurs. By surprise talking to an accountant a friend or family member may have somebody that they recommend that you use.
Figuring out what are my estimated taxes going to be for this year. What’s so tricky about it is that you have to estimate. You have to really guess you know what that income is going to be for your first year.
You may completely overestimate. You may underestimate. But the IRS does require that you make your best guess. At that the idea of focusing uh on your OMO your One Money Objective.
So could you talk a little bit more about that and how it fits in not only to people’s entrepreneurial plans but their debt plans?
Right so your one money objective is this overarching idea or concept that you are trying to achieve with your money. I think that we really can get confused. Because there’s so many things we’re supposed to be doing with our money. We’re supposed to be saving. We’re supposed to be looking at potential emergencies retirement saving for kids education.
But your one money objective is something that you want to focus on right now. So what it helps you do is make decisions. For instance, my objective is retirement.
That’s my one word. When I think about making a financial decision, I ask myself is it going to help me build my retirement? Is it going to help me build not only the income that i want to have in retirement, but help me retire on time when i want?
If the answer is no, that decision would not help you with your retirement. I know I’m not going to do it so it really does help you center and say okay let’s remove all the distractions and focus on this one objective at a time.
Yeah I like the idea of it. Bringing in your decisions because you have to be reminded every time: Does this fit with my goal? Or does it not?
I’ve seen all these one-off articles online about starting a freelance career or handling your side gig. But I’ve never seen all of this stuff in one place. So I’m always left with more questions than were answered in that article.
As I started doing a research for the book I was a little shocked that 85 percent of small businesses are what they call non-employee businesses. That means they’re like me: They don’t have employees they may use other freelancers or independent contractors.
But that’s about 25 26 million people who have solo businesses that’s a whole lot of people and I think that number is growing. As we’re dealing with the challenges with the pandemic. I know so many people have been turning to the idea of working in the on-demand economy or creating freelance work as either a brand new career or a way to make extra money.
You’re allowing yourself the opportunity to go after opportunities. See if they make sense and pivot make a change if they don’. But never really leaving yourself vulnerable at or at financial risk, right? That can be a lot of pressure.
You’re in the perfect situation to begin creating that safety net. To also have a side business or also make that leap eventually from the nine to five to the business.
So things like you’re talking about paying down debt at least down to reasonable levels, building up your emergency savings, you know thinking about setting up your retirement plans – there may be a little bit of credit card debt that you might you might leverage to you know buy some supplies or get started.
But in general i think paying down debt and not going into debt for business is a really stress-free way to begin a business and sustain it.
You also mentioned that putting debt into your budget before you even start is very important, which is something that we like to emphasize on Debt.com, as well.
Before you start anything, when you’re making any budget you should definitely put your debt payments in it. First, I really do believe in prioritizing debt from high risk down to low risk.
So when i talk about high risk debt I’m talking about typically consumer debt credit cards. Maybe you’ve got some very high interest payday loans, dangerous types of debts with very high interest rates.
Those you need to be aggressive to make sure that those are paid down aggressively. Other debts that are low interest lower risk such as a low rate fixed mortgage. Even a low rate student loan that you may have.
So there’s definitely a lot of strategy with debt as you know at Debt.com. That’s what you do. So I definitely encourage folks if you’ve got debt that you’re dealing with you know create a plan have a strategy first.
That may also make you feel more confident about starting a business. And starting a business and making extra money may also be a strategy to pay off your debt.
So it can they can really work hand. The final thing that I wanted to ask you was who is this book really for who did you write it for and could it benefit Debt.com’s audience?
How I think anyone who is interested in sort of stepping into the entrepreneurial world thinking about ways to earn extra income or they’ve already started a business but they’re feeling like they’re really not handling it efficiently or they are not.
Let’s say using all the tools that they could. To be the best money manager possible. I think it’s for them I think it’s also for people who are worried about their future.
If you’re thinking gosh I don’t have a retirement set up you know I’ve got debt. Maybe I’m struggling with not having the insurance that I want to have because I left a nine-to-five job.
So I think there’s a lot of folks in your audience that could benefit and I hope you’ll check it out and it’s available for pre-order right now. It is so if folks go to my website at lauradeadams.com or to moneysmartsolarpreneur.com.
Then it’ll be for sale everywhere that finance books are available as of Sept. 22. So if you are looking for some additional resources, you can pre-order the book and also get my most recent book “Debt-Free Blueprint” maybe of interest to you if debt is a topic on your mind.
Giving away that ebook for free is part of the bonus package.
Thank you, Laura, for being with us today and talking about your new book.
Kira, this was great thank you so much. We really recommend that our audience gets a hold of it especially before just Sept. 22 for the pre-order.
David Auten and John Schneider, The Debt Free Guys
David Alton and John Schneider are husbands who worked hard to pay off $51,000 in debt, also known as the Debt-Free Guys. They say their debt lasso method is the fastest and cheapest way to get out of debt.
There are five steps to the process:
No. 1: Commit to incurring no more credit card debt and making the same payment each month.
No. 2: Trim your debt down by paying some low balances for quick wins.
No. 3: Lasso your debt by using debt consolidation and balance transfer methods.
No. 4: Automate all your payments so you don’t miss anything.
No. 5: Monitor payments and debt balances.
We talked to the Debt-Free Guys to learn more about this debt repayment method and how their own journey led them here.
When it comes to the snowball or avalanche method, how do you describe the main differences? And why this could work better for some?
People like the snowball method. It has a psychological benefit to it. What you’re doing there is you’re paying off your smaller credit balances first and increasing to the larger balances that can feel really fast especially toward the beginning.
So you’re getting a lot of quick wins there. The problem there though is that you’re not necessarily focused on the –whatever the high-interest rate credit cards are.
So, mathematically it could be more expensive for you in the long-run.
The avalanche method where you’re focused on paying the high-interest rate credit cards off first makes the most sense but it does.
So for some people seem to take a long time and not a lot of people have that kind of patience to stick with paying off their credit card debt and they fall off the wagons spend their money again all of a sudden.
They’ve accumulated the debt again or they’ve got more debt than they had before. That’s the fear that we had with ourselves we knew that we wouldn’t have the patience to stick with either method.
That’s why we thought, “well the problem is the high-interest rate if we can remove that or at least lower than considerably then we can expedite paying off our credit card debt.
So that’s really the big difference if you’re someone who needs really really needs quick wins. The snowball method might make sense for you if you’re someone who’s fine focusing on the mathematical value then the avalanche makes the most sense for you.
If you’re someone who wants to take advantage of essentially both of those strategies then the debt lasso method is the strategy that you want to follow. For most people, I would argue that’s probably the best method.
When I was reading about the debt lasso method, I noticed that you make it very clear that it’s not refinancing.
So how do you explain lowering those interest rates to someone and the way that it’s different from refinancing your credit card debt?
I think one of the biggest things to remember about refinancing is like the engine of a car, the better engine you have the faster you can go but you cannot drive anywhere if you just have an engine, right?
So that’s why refinancing is just of the overall package. That’s why there are five steps to the debt lasso method. And the actual refinancing or lasso portion of it is just one of those steps another thing on your site is of course living fabulously.
So in your own words what does that mean, and what does it mean to do that while you’re still paying off debt?
As soon as david itemize all of our expenses for the previous year we were sort of blown away with some of the categories that were clear outliers that no humans should be spending relative to the income that we had at the time.
What was ironic was that when we looked at how we were spending our money prior to that had you asked us if we had an amazing life we would be like.
Yeah you know it’s decent it could be better but on paper when you looked at how we were spending our money. We were like wow this is crazy. We are living like rock stars on a beer budget.
And we thought well we’re clearly not getting the ROI out of our spending that we should be getting we should have. We should be having a much better feeling of quality of life than we were at the time.
We thought well why is that so that kind of started a conversation for the two of us about what is it we really want in life. What actually makes us happy. What do we want to achieve? What do we want our legacy to be? And we realized it came down to three things:
<li>We wanted to be able to get back to the LGBT community.</li>
<li>We wanted to save for a comfortable retirement.</li>
<li>And we wanted to be able to uh what was the third one and travel as much as we can without using credit cards.</li>
So we looked at our expenses all the clubbing; all the designer clothing; all the happy hours; all the expensive dinners; all of the expensive wine; lots and lots of expensive wine.
We thought well that’s really clearly not giving us the quality of life that we want but we sort of felt like we had to live that lifestyle because that’s what our friends were doing.
And in hindsight we were spending that way for two reasons:
One we were trying to make up for the past because we both came from times and places when it wasn’t okay to be gay.
So we were trying to make up for sort of that pain that we had not dealt with up until that point. But then simultaneously we were part of a new community and we thought if we didn’t sort of live up to their expectations we might be ostracized from another community and we were afraid of that.
But we realized that that wasn’t really providing us happiness and we weren’t having the quality of life that we wanted what would happen if we would spend according to our values.
That’s sort of when everything changed when we figured out what our why was. Then whatever strategy we were going to implement we had more of a commitment to pay off our credit card debt. So we would actually become debt-free and then start living a much more authentic life.
I would also say that for you kind of said it yourself very well when you’re asking the question in your own words what does fabulous mean and that’s what really it is: A fabulous life is what it means in your own words.
To you, what does fabulous need mean to you?
You know a lot of us to spend a lot of money to be able to post pictures on Instagram or Facebook or share stories with our friends at cocktail parties or virtual cocktail parties today.
You know we want to be able to share these kinds of stories because it gives us some momentary satisfaction or excitement.
But that eventually goes away and we know that what really makes people feel fabulous is when they feel happy long-term and that happiness long-term takes a little bit of time to figure out what should I be spending on to make my life long-term happy for other people different.
Maybe it’s having a family. Maybe you love animals and want to have a pet farm or something like that. Whatever it is for you those things that will bring you long-term happiness those are the things that make you feel fabulous.
That’s where it’s important to spend not on the things that are superficial or momentary do the steps of the debt lasso method help people build that life.
How John mentioned earlier when we removed that credit those credit card balances and having to spend $10,000 a year to pay towards high interest on our credit cards we basically gave ourselves a $10,000 raise.
That’s when we are able to implement the more fabulous life obviously we try to trickle it in while we were paying our debt off but the steps are really designed to have the mindset and the process to pay your debt off as fast as you can.
Speaking of the people that you have helped um you’ve helped people including yourselves pay off 300 000 in credit card debt um so tell me a little bit about how that worked and how you’ve worked with people so far we have uh our debt lasso calculator which is available and free on our debt lasso site.
But our real driver at helping people pay their off as fast as possible involves them going through a class or basically a course that hits all of the points as that are what helps people pay their debt off it’s the mindset. It’s the habits it’s the lassoing your debt.
It’s trying to figure out how you can make a little bit more money, especially in the short term so to put towards that so all of that is kind of wrapped up in our credit card payoff plan that plan is available in basically a couple of methods you can do it all on your own.
You can do it with group coaching and you can do it with one-on-one coaching with us and it’s the individuals especially in the group coaching who have gotten probably the most value because the group coaching they now.
I guess in an endearing term refer to it as their money therapy.
So we get together on a weekly basis.
We talk about challenges and wins and questions that people have while they’re going through the course.
And the nice thing is is that it gives people a little bit of accountability.
Because they see other people who are doing it other people we have had this happen a number of times where people will call each other.
You know what I did exactly what you’re doing I know what you’re trying to get away with which is kind of good sometimes to have somebody who’s not your coach saying I have already gone through that process and I know where what path you’re headed.
down be careful thanks so much for joining us today. And be sure to check out the Debt-Free Guys on their Queer Money podcast, as well as on debt lasso.
DeShena Woodard, Extravagantly Broke
Hi, I’m Kira with Debt.com. In this video we’re catching up with DeShena Woodard of Extravagantly Broke about how your money mindset impacts your financial life. So why did you decide on the name Extravagantly Broke?
Because I feel like that’s how I was living you know it’s like I was I’m a professional, I made a decent salary but I had no money. It’s like I went to college to get a degree so that I can get a good job so that I can make money and then I’m always broke, I’m always in debt. I’m always living paycheck to paycheck. I’m having physical symptoms every time I’m paying my bills. I always felt on edge especially around bill to paying time.
Yet on the surface I had the luxury car, I have a nice house, my kids are in activities, so I probably looked like I was doing well but behind the scenes I’m stressed. So that’s that’s kind of my thinking behind Extravagantly Broke.
Because I look like on the outside like things are going well but yet I had no money, nothing really to to to feel good about.
Did that stress and those physical symptoms around bills start
going away once you changed your mindset and used your budget?
The tremors stopped the heart pounding stop but you know they’re still always ingrained that scarcity, that little bit of scarcity behind them that’s probably why I had to save first
I mean I had to make sure I’m building savings and you know so there’s always the worry or fear that it could all go away what if something you know tragic happens you know and and then you’re back in that situation. but I think definitely once with the mindset shift I know that I know the things not to do you know like not to go out and just start charging things or getting loans you know just to be more intentional with my money in general and keeping track which were things that I never did before so now I think that will never go away but there’s always that little bit of you know fear in the back of your mind that what if something happened?
But hey a pandemic happened but fortunately actually with my job actually I am a registered nurse so I still am working.
I did have a nice cushion. I’d be good for a couple years at least anyway which I’m trying to grow that. That’s my thing now,
I’m trying to grow my my funds but yeah, definitely the physical symptoms went away but a little bit of the fear remains and the saving helps a lot with your mindset in general too because I know when I have more savings I feel much more secure for my future.
That definitely goes hand in hand with the mindset because when
you’re managing your money effectively, keeping your expenses low it’s like right now I don’t owe anybody so that’s such a relief you know I don’t owe anybody because I’m debt free. Of course I have to pay the power company, the water company but those are bills that will never
go away but I don’t owe anything.
Not owing anybody is always a good feeling yes I also have a question, more of an advice question because I’m wondering obviously we’re Debt.com so we talk a lot to consumers that are in debt and so I’m wondering how do you think that consumers can stay positive even if they’re struggling to pay down debt and save? How did you stay
positive even when it got really hard when you were doing that yourself?
I stayed positive once I started to look at the big picture and I think small wins help. Because it’s like once you get that small wind in it that kind of gets the ball rolling within a few months that one was paid which before and then you’re looking at the interest it’s like, ‘Oh my God look at all this interest I can’t just keep paying all this interest!
So that was a motivator for me because that’s just free money I’m giving away you know I’m already you know complaining that all my paycheck is gone but yet I’m giving away all this extra money and free interest so you know for me I focus on I pay off the small bill and then I went after the the high interest because that really benefits me to see that I’m paying this much on interest.
Some people prefer one or the other but at least once I started paying off one or two things that was a motivator. It’s like okay I can do this now I don’t have those bills anymore now let me let me see what else I can attack. Well let me see which one you know it’s like you know which one can I pay and what can I do and let’s see how I can move this around and how I can do.
It was the snowball effect I guess. It just started the ball rolling where
you know I think once you get at least one or two wins then you you realize okay this can be done and then and then with the mindset shift you don’t even want to go back to the same thing because it’s like like I said you start to realize what’s really important and you know having an iPhone doesn’t matter to me. I just need a phone that I can call my kids and that can get me back your GPS that’s what I mean.
I just feel like you know you gotta determine what you value. But then I’ll pay money on a cruise because I love that I love traveling
with my family but luxury car? Don’t care so much that can just shift your whole life when you decide what really matters to you.
So for your blog do you work with clients like financial coaching?
I am. I’m still new at it and I’m still you know since I’m new I’ve worked with a couple of clients but I’m still trying to grow that part of my business and oh it’s so amazing this one couple that I just finished with the transformation, she, in the beginning, felt like being debt-free was unattainable.
I mean she was always behind and actually I have gotten I’ve been sending out and like an email series to my my email list about their journey and I’m actually gonna do a post about it and I did an interview with them but she also wrote a testimonial for
me… I feel like I’m behind on everything, keeping up and now with my son homeschooling trying to track him in school oh my god it’s crazy and she had that same feeling like, ‘Oh let me see how much more I can say what more I can do?’
You know and and she’s just like it’s just been such a lifesaver so yeah so I have coached a few and I’m trying to grow that business.
That sounds like you’ve already had some successful clients so that’s great. So what are the usual tips that you give to either clients or just
in general on your blog that you think is the most necessary. If you had to narrow your advice down to three things what would it be?
Number one is definitely write it down. Track you have to be tracking because like I said I’ve done some interviews with some financial experts and this one had been coaching for over 20 years and she said the biggest thing that she sees is that eighty or ninety percent of her people don’t track. If people just don’t track they I don’t know we just don’t want to but like I said I dive into that one day and I post just to see why or what we can do to convince people how important that
is but definitely tracking.
Stop creating new debt and people think they even realize that when you’re charging it could take like… I did a post where I believe it was like just to pay off people put on their credit cards like $1,100 that on average during the Christmas time. And they can still be paying that off five years later if you’re just paying the minimum. Five years to pay that off.
And people don’t even realize it. It’s like most people feel though that they’ll pay it off in like six months. But to do that you have to really be
intentional you have to really be planning to to dedicate a certain amount every month to get that paid off.
But tracking, stop creating new debt, pay cash. Cash is your
friend. I think that with tracking, some people just don’t want to
admit what they’re spending.
I think that’s part of the negative mindset, too. People don’t want to face it and I say that a lot in my in my email posts and and on some of my posts I say that people just don’t want to see the monster. But you can’t fight the monster when you’re afraid to see it.
So you have to see it so that you know how to attack it. And seeing it lets you take control back. If you don’t know, you can’t do anything.
That’s right, so true.
Yeah I think I’ve covered most of my questions for you but do you have anything else you want to say about your blog or any extra advice?
Well in my blog, I really want to empower women to know that you can be debt-free and you can work towards living the life that you want to live. You don’t have to just be an entrepreneur or anything you can just pursue whatever your passion is, whatever it is because for a long time I put my dreams on hold. Now I’m trying to pursue them.
I actually wrote a book, that’s part of also the reason why I started my blog: to build an audience because I wrote a book about expenses, like an Extravagantly Broke book but and I wanted to grow my audience so that I can put my message out there.
I wanted to really empower professional women to know that you
don’t have to live in debt. We weren’t taught that, but just because you weren’t taught doesn’t mean you can’t learn.
I like that, especially that you can always learn. Like I said, we’ll follow up with you. Be safe and we’ll be in touch soon.
Bernadette Anat, HeyBerna
A few years ago, Bernadette also known as Berna was $50,000 in debt. In 2017, she not only paid that off but she saved enough money to quit her job at Instagram and buy a one-way ticket to San Francisco with her partner since then, she’s been giving out financial advice on her popular blog, HeyBerna.
Debt.com is speaking with Berna today about living financially safe in the aftermath of this awful pandemic. So hey Berna, what’s up? How’s life in San Francisco?
It’s as good as it can be. I’m gonna repeat the same thing you keep hearing over and over which is I just can’t complain. We are locked down, we’ve been locked down for a while. This is a new normal and I live within a 10-foot space of life and here we are.
Making the best of it?
Yes, absolutely making the best of it. It’s cozy, it’s nice really getting to know my yoga mat on my floor, really getting to know all the furniture in my house that irritates me. I want to go to Home Depot and fix all those things that when you’re inside a quarantine you’re like hmm, I want to fix everything now, I want to touch everything.
You start noticing everything.
Yes, exactly. And you find new things to spend money on even when you can’t leave the house. You’re like, ‘Oh, Lowe’s delivers? That’s so interesting! Look at all the things I can buy!’ I’m sure we’ll get into that in the conversation soon. But I’m doing great, what about yourself?
Good, we’re doing very well and we really appreciate your time. We’re gonna just ask you a few questions and we’re really excited for our audience to get to know a little bit more about you.
Sure. When we were speaking via email, you were telling me about one financial result from COVID that was pretty interesting. You said that personal finance experts need to do more than urge everyone to save, they need to be advocates for change. Can you just go into that a little bit about what you meant?
Yes, absolutely. So it’s a really exciting time to be inside the personal finance base. I’m sure the entire Debt.com team knows everybody’s paying very close attention to their money and specifically, the money that they don’t have that they wish they had saved.
I think before COVID, the “BC time,” everyone’s calling it “BC,” everyone was banging the pot like three to six months of savings: you should do that, you should have that. Even then, that kind of advice was already a little bit tone-deaf for folks who were living close to or below the poverty line and I’m forgetting now where the stat came from, but I read the other day that said in the average U.S. household with the average U.S. income, it would take an average U.S. family up to 12 years to save three to six months of savings off of the paychecks and the cash that they currently experience.
So it’s even more stuck now that we hit this pandemic head-on, just a huge financial emergency and of course, we’re all wishing that we could have 3 to 6 months of savings, but we’re realizing how incredibly hard that is even without a pandemic.
With a pandemic it’s nearly impossible because you’re just trying to stay afloat and so I think people are starting to look around a little bit more and think OK, maybe it isn’t that we suck at saving, maybe it isn’t that we weren’t disciplined enough or we’re doing the right budgeting spreadsheet or using the right like little mechanism apps and whatever.
Maybe it’s that we’re not getting paid enough. Maybe we need to pay attention more to the way that money flows toward families to the money that people are earning or not earning. Maybe we need to be looking at what minimum wage jobs look like when the you know $1,200, if that, $1,200 stimulus check came down and that that first relief package came through.
So many people were like $1,200? What you’re looking at $1,200 then you’re looking at your mountain of debt and being like oh, that’s adorable. What is this supposed to help? I can’t live off of at $1,200. Nobody can.
I think now from from now on, we can’t unknow what we know which is now everyone understands that $1,200, nobody can live off of that and everybody who has earned a minimum wage and lived below the poverty line were like I could have told you that myself, thank you for finally paying attention. So moving forward, I think we’re gonna have to pay a lot more attention to what people earn, minimum wage, wage gaps, just the the way that people are paid. And that just a giant, giant wealth gap also between folks who live at or below the poverty line and everybody else.
It’s gonna be a lot more looking around for what the problem is in personal finance as opposed to looking inside yourself and blaming yourself for all the things that you’re not doing or the habits that you haven’t created. You can’t save money that you’re not getting so it’s got to be a 360 of you now.
Speaking of that I would like for you, I think it would really help our readers and viewers if you would give a real-life example how has this, going from what you’re just talking about how has this changed your budget? Are you saving more on certain things or you spending more on certain things? So give us a real-life example and I know there are lots of people watching that could really relate to that.
It’s interesting for myself because I am self-employed. If you ask my mom she would say I’m probably unemployed because as many immigrant mothers know it’s very difficult to relay self-employment and being a content creator or influencer as like an actual job.
But because I’m self-employed I now getting to sort of reap the benefits of obviously someone who understands personal finance and was able to pull cash flow towards me in a way that backed up my future self so now with my business I was able to sort of stack paychecks so that I could pay myself for a certain amount of time before even touching my emergency savings.
If stuff hits the fan and I end up touching my emergency savings I at least know I was able to reach that six months of emergency savings I know I’ll be good for six months and I can take those six months to breathe to reset and to try to find other streams of income. Now an emergency savings obviously doesn’t just buy you financial relief it buys you emotional relief. For those of us who do have an emergency savings right now, we totally fully feel like this is this is show time for me. This is where we go. Okay I have three months of savings. I have exactly three months to try to figure it out, get it together, find a different income stream. You know, what is furlough? Am I working that out? Where is health insurance coming from?
You buy yourself peace and you buy yourself time and that’s how I’m experiencing COVID right now. It’s a very like very privileged way to experience COVID right now obviously.
On the opposite side, I’m also very much experiencing from my family’s perspective. I’m a child of Filipino immigrants one of them is a retired mail carrier and the other one has been in customer service at United Airlines for about almost 30 years and so she has seniority and so she’s like sort of on the cusp of being furloughed, potentially laid off. She was gonna maybe retire, now I’m having to help her navigate things like applying for unemployment, what it means to have to report your earnings and your findings every week, applying for things like COLA: cost a cost-of-living allowance that her company is allowing and what the stimulus package means for unemployment and cost of living allowance what should be.
And then of course the very basic things, like ‘Mom do you understand Zoom? Can someone download Zoom my mom’s iPad so I can explain unemployment and COLA to her?’
Things like you know I was lucky enough to get a stimulus check. I’m probably going to cash it. Once I cash it I’m probably gonna be giving half to my parents so I know that they have a little bit of financial buffer there and have to this wonderful website called stimuluspledge.org because I know that there are lots and lots of undocumented families who are getting, $1200 is already a joke, but zero dollars is an even bigger joke so I’m sort of thinking on a side for me how can I split my time and my knowledge and my actual dollars to care for the rest of my community.
That’s great, that’s a really great way to put it. Money aside what are you looking forward to after the pandemic is over, whenever we think that is.
I’m like when is this vaccine gonna come because I can’t wait to put my face up against my other loved ones faces. I just can’t wait to like sandwich myself between my teenage nieces and like grab my mom’s arm the way I always used to do when I was young. My brother and my sister-in-law are having a baby girl in August and I can’t wait to sniff the bejesus out of that baby’s head.
I know that won’t be safe until after COVID and things got figured out but it’s definitely like the physical closeness and touch of my friends and family
even in social distancing. I’ll drive up to my best friend’s driveway and be like ‘Hi!’ six feet away and it’s fine but it’s not the same as being able to like fake punch her on the arm and then cook food with her and you like sit on top of her on the couch and play with her dog. The physical closeness I really really miss.
Agreed. I think we all could agree to that. So one last question before we we let you go. As a financial advisor, as someone in this industry, how do you see the future of personal finance? How are you going to direct your audience and educate your audience in the future now after COVID?
Sure. I think it’s so exciting think about what it might be five years from now because I think it’s just going to blow open in a very interesting way. I think personal finance before COVID and even right before COVID, we were starting to get a little tired of the ‘just pay off all your debt and you’ll be happy! ‘Three to six months of emergency saving!’ ‘Credit card debt is evil!
Things like that that were very sort of stale. It’s personal finance advice that worked for certain generations but the world is changing and the personal finance advice has to change with it. And kind of what I mentioned before the way that it needs to change is we need to be recognizing everybody on the wealth scale. So not just I think a lot of personal finance actually as it stands in the way that it really speaks to upper-middle class folks. Folks who have disposable income, folks who can see a world in which they
can save three to six months of savings.
You know, folks who are like I got money to throw let’s invest. Now we have to start talking about okay what is budgeting when you literally don’t make
enough to live, when you don’t make enough to even budget correctly you know what is budgeting when you are in an undocumented family, what is budgeting when, as a child, you are your parents’ retirement fund, which is really common in first and second generation families.
We need to really bring more voices from below the upper-middle class realm because a lot of this upper-middle-class personal finance advice falls completely on deaf ears or it makes the folks who do live near or below the poverty line feel like ‘I guess this isn’t for me, I guess like financial stability is not for me, personal finance isn’t for me, I’m always gonna stay in this struggle place, I’m always gonna be captain of the SS struggle, driving the
struggle bus,’ and that’s just not true.
It’s just that once we start to acknowledge everybody’s voices on that wealth spectrum, we’ll also start to realize it’s not just change that needs to happen inside our banks, in our pockets and our cash systems and our spreadsheets, it’s change that needs to happen on a big or a political level so you know how can we make it so that we don’t have to force teach ourselves financial literacy as adults.
How do we make it so that it’s built into the school structure system and we’re learning about taxes? Like how taxes actually work as opposed to you
know mitochondria is the powerhouse of the cell. That fact has never once for myself, a non-scientific person, ever come into my adult life but having to like reach back and teach myself on how interest works. I really wish that was on the school at common core level.
So how can we do that? How can we advocate for higher minimum wage? How can we now really actually pay attention to the fact that $1200 was never enough for anybody’s month living anywhere? It’s just that the conversation is gonna become a lot more multifaceted, a lot more political and a lot more deep so feelings are gonna get hurt and a lot more voices are gonna come into the play and I’m super excited about it.
That’s really exciting I think you’re really gonna get you’re gonna hit a core with people as they watch this and again we thank you so much your time today. You really provided a fresh perspective especially talking about what you see that in the future after this pandemic and you give us hope and you give us a fresh perspective so we thank you so much for your time and wish you nothing but the best. Thank you so much.
Ashley thank you so much for having me. I’m psyched to keep talking about how this all changes.
Sami Womack, A Sunny Side Up Life
Sami Womack from a Sunny Side Up Life began her debt free journey with a debt price tag of $490,000. Over a six-year journey, her and her family became debt-free. Cash flowed an SUV, a truck, two boats, an RV, and now they have purchased their 18 acre property to build their dream home.
We’re here with Sami today to talk about her debt-free journey. How are you doing today Sami?
Thanks so much for joining us.
Thanks for having me!
So Sami, you said you had almost half a million dollars in debt. So at the beginning of this journey, how long did you expect it would take you to pay off all of your debt?
We really had kind of a crazy up-and-down journey. We have three kids now, but kind of like my rock bottom moment was I was a couple of days away from having our second daughter and my husband was on the other side of the country. He was working in New York at the time and we’re in Texas and we had to max out our very last credit card and go over the limit for him to fly home for her to be born. It was just kind of this moment where we were just like what in the world are we doing with our life?
How are we raising kids and acting like this? And then about the time my daughter was nine months old, we kind of started to say, we’ve really got to change. We’ve really got to do something.
Then it still took another three months for me to be brave enough to add up our debt so I kind of like kind of sort of budgeted for like three months and then added up our debt and it was $490,000. And that was three pieces of real estate. It was credit cards, it was medical bills, it was property taxes, it was it was all kinds of things. Our original goal was just kind of get the credit cards paid off, get the medical bills paid off, and kind of just get our head above water and then we were going to just save for a nice down payment on our SUV. We never planned to cashflow it because we just thought, ‘that’s something rich people do.’
We were both always we were raised thinking we’ll always have a car payment, we’ll only mortgage-free when we’re like in our 60s or 70s, that’s not something young normal people do and we really we didn’t think we would ever be a hundred percent debt-free. But the more we got into the
journey, the more it started to seem doable. And then we were like we can just save a little bit longer in cash flow this vehicle and then like we can sell
this real estate and that will be paid off and then it just kind of went from there and here we are six years later.
I know you talked a lot about budgeting but besides budgeting what was the most crucial part and staying successful for you on this journey?
So I think budgeting is just really the tip of the iceberg when it comes to really being successful and staying successful long term. I think what a lot of people miss is the mindset work that has to go into it. The feeling like you’re worthy of actually achieving it and like for us we thought oh we’re just normal people like we’re not anyone that should be special enough or successful enough to be a hundred percent debt-free. So that was a mindset shift for us that we had to work through and there’s a lot of hard work I think that goes into it. It’s a lot of forgiving yourself for all of your past mistakes and realizing that you’re allowed to grow, you’re allowed to change, you’re allowed to mature.
A lot of people will just sit there and beat themselves up for all of the past mistakes that they made and so there is a lot of mindset work and heart work that has to go into it. That lays that foundation and I think that is
what ultimately makes you long-term successful.
So saying that, would you say the mindset was the most difficult part? If not, maybe give some advice or give some insight as to what was the most difficult part? Because viewers that are gonna be watching this that can
absolutely relate to your story so what would be the most challenging part of paying off your debt what was the most challenging part of this journey for you and your family in terms of comparison?
I feel like this generation, we have grown up most of our lives with social media we know everything about everybody and so it’s constantly in our face. It’s constantly what everyone else is doing. So I think for me, part of it was comparing myself to what everyone else is doing. Everyone’s gonna think we’re broke, look at how our house looks because now we are in a two-bedroom rent house on the older part of town and when we were in debt we were in a gorgeous 3200 square foot house in the country with land and like all this stuff and that looked so much better on social media. But like at the end of the day what actually feels good and so it was a lot of that like what do I actually want and so for us that was really hard. That was harder than I think sticking to a grocery budget. I feel like anybody can do that but to be long-term successful it really is a lot of the mindset work.
With that being said, do you feel like being debt-free has changed your life?
Yeah. I think basically our life is 90% different I mean I have the same husband, he has the same career, we have the same kids, other than that pretty much everything is different. We have like completely adopted minimalism. We have just changed how we live our daily life like how much time we spend together. We put our focus on quality time, we put our focus on what actually feels good to do and we have stepped away from the hustle, the busy, the keeping up with everyone else and I feel like all of that kind of just fell into place as we kind of went through this journey and grew along the way.
So what advice do you have for others watching this today? Advice that they could relate to their own story.
I went back and I tracked like the past three months and I got a good average of what we were spending on restaurants, what we were spending on groceries and then I made it my goal to beat my numbers and so that also kind of played into not worrying about what everyone else was doing. Everyone’s not on the same diet you are, everybody might not have three kids like I do. Our grocery budgets are different, our restaurants are different, everything’s different.
So try to beat your numbers.
What about your husband? I think people would want to know his perspective. What was his mindset going into all this?
It took a little bit longer because he does work really hard and he was like I want to enjoy you know the fruits of my labor so it took a little bit to kind of get him on board with that mindset and he started to see we’re gonna have smaller treats and cheaper things to look forward to.
Not like $60,000 trucks and I think really what helped was I asked him you know where do you want to be in 10 years? What are your dreams What are your goals? Is this what we’re almost to building our dream house having 18 acres having land and all this stuff that was both of our dream and I’m like okay how can we get there?
And we laid out that map and like let’s let’s keep dreaming together we got to focus. Anytime we would be like we got to focus and that was along the way that was his truck along the way that was his boat that was along the way. That kind of helped keep him focused as we went you know building that map definitely puts it into perspective like really what needs to happen to get to that point.
Thanks so much for coming on today!
Michael Lacy, Winning to Wealth podcast
Michael and his wife Taylor are just your everyday millennial couple raising their daughter Allison deep in the heart of Texas.
After realizing they were broke and having a money fight on their honeymoon, they decided to create a plan to pay off over $61,000 in debt. In just 16 months, they created Winning to Wealth in 2018 to help thousands of couples just like them save more money, pay off debt and get started with investing.
Hi Michael, thanks for joining us today. How are you?
I’m great, thanks so much for having me. I’m excited to be here and just talk money with you guys.
We’re happy to have you here. I would love for you to share with our audience a little bit more about your own personal finance journey: what it looks like, any obstacles that you came across when you were paying off
$61,000 in 16 months.
Yeah so my wife and I, as was already mentioned, we had a big money fight on our honeymoon and it was then where we sat down and had our first real money discussion and discovered that we were $61,000 in debt.
We got on a plane, came back, and ultimately ended up paying that off in 16 months. However that wasn’t without some challenges. Early on, Taylor wasn’t you know super gung ho about the methods that I was proposing so we had to kind of figure out a way that we could work together. Eight months into the journey, I lost my job and I was unemployed for a few months so we had that going against us.
And then my wife also has an autoimmune disease so the stress of just me not working and all of that caused her to go into a flare and she missed a bunch of work so it was not an easy journey for us. But through all of that, we pushed through and like I said, we ultimately ended up paying off $61,000 in 16 months.
Wow, that’s definitely quite a journey for you guys.
So just from looking through your site and all of your information, Lexi and I have been discussing about your dream session. So tell us tell our audience, if they have no idea who you are and you and your wife’s story, what was the dream session you and your wife had and what did that spark inside of you and her?
Yeah so when we came back from the honeymoon, I already had a budget, I already had a plan and I was ready to go. So we get home and I’m trying to show her this budget, I’m like, “Alright, this is what we gotta do. No more eating out, no more this, no more that.” And I’m cutting all this stuff and she’s like wait this is not making sense, which kind of threw me off because on the honeymoon she was super excited about getting out of debt and getting on a budget and getting on a plan.
And then we get back and it’s time to implement this stuff and and there’s all this resistance and tension now. I just wasn’t understanding. So what I realized was that at that point, like I was fighting for a lifestyle of debt freedom and I wanted to go toward living life on our own terms and ultimately FIRE.
Meanwhile she was still kind of holding on to the things that really were a big part of our relationship like going out to dinner all the time and travel and those were things that I was cutting out. So to her it was like well these are the kinds of experiences that we built our relationship on and you’re just kind of throwing that away.
So the dream session came about because one day I just asked her like, “Look we’re spending thousands of dollars a month to debt like every single month. If we didn’t have to do that, what would you want to do with that money?” And so then she started thinking, “Well, I’d love to travel to Europe all the time. I’d love to even stay there for maybe six months to a year. If when we have kids, I’d love to explore being a stay-at-home mom if that’s what I want to do.”
She had just all these ideas of ways that we could utilize that money that weren’t towards the debt. And I was like, “That’s what you have to realize. That’s what we’re going towards. That’s our dream and so let’s work towards the dream.” So then we shift our mentality away from, “We’re cutting this stuff out to get out of debt.” We didn’t even really think of it that way. It was like we’re making these lifestyle changes so that we can live our dream life.
So that’s what pushed us through on those tough days where things got really hard.
We all know that financial differences can be tough in relationships. What advice can you give to someone who’s in a relationship with someone else who has different financial habits than them?
Yeah, I would say the first thing is to take a human approach. A lot of times, the person who has the idea to change the finances comes at it like I did like with spreadsheets and numbers and data.
That may work if you have a person who loves spreadsheets and data like I do. If my wife had come to me with that it would have been like, “Yes, OK, let’s do this,” because that’s just my language. I’m a nerd like that.
But to her, it didn’t make sense. It was just like, “OK, what does this mean? What is cutting out the debt? What does all this stuff come together to do? How does this make our lives better?”
It was getting her to understand that part of it and maybe that’s the conversation you have to have to where it’s not so much about the numbers but about what you’re going towards and what you can do together once you’re out of whatever situation that you’re in.
I agree. Yeah, I think a lot of people maybe along this journey, both men and women, or whoever in the relationship can relate to that. So you talked about how after you paid off all of your debt, your marriage really grew tremendously from this whole process. Tell us how getting your finances sorted contributed to the growth of your marriage and where you and your wife are at today.
Yeah, I think because our journey was so hard and so challenging, it felt like every month, something was being thrown at us. It forced us to communicate because, again, early on, we had agreed that this is how we want to live our life. We want to have maximum flexibility. We want to be debt-free. We want all this money we’re spending on debt. We want to invest it.
So we already knew kind of what we wanted to do. So when those challenges came up it was like we could communicate better. We were talking about how we alter the plan in a way that works for us.
Now that I’ve lost my job, or now that you’re sick, and now that you’re doing this, what do we need to do together? And so it’s just strengthened our communication. Since that point, anything that comes up, whether it’s finance or whether it’s something else, we’ve already gone through that. We can have just open and honest dialogue from the perspective of teammates. We’ve already gone through something difficult together.
If we could weather that, we can definitely get through whatever is happening now. It just drew us closer together. It strengthened the communication and I’m grateful for every challenge that we experienced on the journey because it did it made us closer together and it made us better people as a result.
We love your podcast “Winning to Wealth” and the experts you have on it are super great. Would you have a specific conversation that stands out that you’d want to share with everyone?
It was an episode with Michelle Jackson of the “Michelle is Money Hungry” podcast and it really resonated with me because of everything that’s happening right now with the pandemic.
Michelle was able to pay off $60,000 worth of debt. She left her job and she became this full-time entrepreneur while she still had debt. Her philosophy was, “Look, I can work this job that’s stressing me out, that’s draining, that’s exhausting for 10 years and reach FIRE,” or, “I can create my own lane and do something that I enjoy every day but that’s enough to pay my bills.”
It’s this kind of flipping the FIRE movement on its head a little bit and saying, ” Well, I don’t really want to wait 10 years to reach financial independence. I want to live my best life now while also being financially responsible.”
So that was one that that just really opened my eyes and kind of helped me see personal finance in a different light. I was one of those FIRE enthusiasts and ever since we’ve recorded that episode, it’s been, “She’s right about that.”
The reason I brought up the pandemic is because being here the last couple of months, I was actually laid off in May. It’s forced me to kind of sit down and reevaluate like how we want our life to look and I realize that the most important thing to me is spending time with my family.
I don’t have to have a $2 million work network to spend time with my family. I can just make conscious decisions today that get me to that goal. So that was a really impactful episode for me.
What would you say to someone watching right now that’s on their own debt journey? Paying off debt, whether they’re a single individual or with their with their family, how would you speak to someone now and maybe give them some motivation, some courage? With everything going on in the world, what would you say to someone going through a similar situation of yours?
So on the podcast, we talk about debt-free journeys a lot. A lot of my guests have paid off all their debt or they’re debt-free or they’re working towards a debt and every single one of them has encountered some form of obstacle on the journey. I think when you meet that obstacle and when you encounter that obstacle, how you respond to that is really what’s going to determine the outcome.
A lot of people get that obstacle and feel like, “Well it’s not meant for me to pay off debt.” Other people view that as, “You know what, this is why I’m going to succeed that way the next time something comes up and I’m debt free and I’ve got an emergency fund.”
They’ve got all these reasons that are going to propel them forward so that would be my advice, just to to keep going don’t get discouraged. Things are going to happen and you know don’t expect perfection of yourself. Every budget’s not going to be perfect. You’re not going to pay the same amount off every single month. Sometimes surprise expenses are going to happen so let go of the perfectionism.
Really take time to enjoy the journey, celebrate the wins, but remain focused and keep pushing forward through those obstacles.
Well thank you so much for joining us today, Michael. It was really great.
Not a problem, thank you so much for having me.
Christine Luken, The Financial Lifeguard
Over the past 12 years, Christine Luken has coached hundreds of high-earning professionals to pay off staggering amounts of debt and massively increase their net worth.
You may know her as the financial lifeguard, the founder of the financial dignity movement, and the author of “Money is Emotional: Prevent Your Heart from Hijacking Your Wallet.”
We’re here with Christine today to talk more about the emotional side of money. Hi Christine, thanks for joining us. Hi, thanks for having me. I’m so excited to be here.
Can you tell us a little bit more about your story and your past money experiences?
When I was in my mid-20s, I crashed and burned financially, despite having an accounting degree. A lot of it was due to an unhealthy relationship that I was in at the time. So I won’t go into all those juicy details, but I found myself at age 26.
Owing three different payday lenders money, being behind on my car payment, my credit was completely shot and I didn’t even have any money to move out. So I wanted to break off my engagement and it was really a low point for me personally and financially. Because I was someone who had all this formal training and actually was working in the accounting field, the amount of shame and embarrassment around my money mess was even higher than what it would be for the average person because I was someone who should have known better.
I love that you do dig deeper with your clients to help them get out of the cycle of shame and embarrassment they feel around money. Something that stood out to me that you help your clients with is how you help them recognize what has happened to me rather than what is wrong with me. Can you expand a little bit on that?
Yes, that’s a question that I hear from a lot of people. Usually what happens in this cycle of money shame is that people make a mistake and then they feel bad about themselves because they’ve made this mistake and they feel that shame.
Then because they feel that shame, it makes them want to hide and it makes them want to avoid the problem. So when you do that, then you avoid getting the help that you need to break the cycle. So if we can say, “OK, even though I am feeling this way, I’m going to reach out and get help,” or “I’m going to go and seek some information to help me fix my credit or to get out of debt,” or whatever the case may be, that’s the way we break that.
I do want to just give a little distinction between guilt and shame because sometimes we lump those two things together. When we feel guilty or remorseful, basically what we are doing is we’re acknowledging that we’ve done something wrong and maybe we’ve even hurt somebody else by our actions. But when we transition to shame rather than saying, “I did a bad thing,” we’re now saying, “I’m a bad person.”
So that’s a really important distinction. We can have healthy guilt and remorse over our mistakes that we’ve made and we can learn from them but we don’t want to internalize those and say, “I’m a bad person because I did this.”
Yeah, and you talk a lot about the subconscious mind and how it directly correlates with our financial decision making. I think that part of money is really important but not talked about enough. Can you tell us a little more about how we can’t take emotions out of financial decision making?
Most of our actions are governed by the subconscious mind and scientists disagree on the exact percentage but they usually agree that only about five percent of the actions that we take on a daily basis are coming from our conscious mind. The rest of it’s on autopilot and that’s not necessarily a bad thing because if you really had to think about how to tie your shoes, how to drive your car, you know how to turn on the stove to make dinner, like all that stuff. It’s running in the background because you’ve done it so many times, you don’t really have to consciously think about it.
But the problem is we also have programs like that relative to our money that are running in the background and if we don’t uncover those, then we’re going to continue operating out of this same paradigm and the way I like to explain it is the blueprint.
So everything that’s stored in your subconscious mind relative to money, your thoughts, your words, your emotions around money,
your early experiences, the things your parents said around money, that’s like your blueprint. So anytime you interact with
money, your subconscious mind accesses this blueprint and says, “This is how we do money.”
So if I handed you a blueprint for a ranch house, you can only build a ranch house with that blueprint. It doesn’t matter how hard you work or how fast you work or what building materials you buy, you’re only going to get a ranch house with that blueprint. The only way that we can get that two-story house is we have to go back and we have to fix the blueprint and then once we actually fix the blueprint then the external part of it is so much easier.
So I find that a lot of people who have had these struggles where they’re like, “I don’t understand, I should be doing better, I’m making good money, I see other people doing this, etc.”
People question, “What’s wrong with me? Well it’s not really what’s wrong with them, it’s what happened to you that has
caused your blueprint to be written in this way.
You help people envision their financial future. One of the things you talk about is reprogramming the subconscious mind to focus on the things we want. How can someone start the reprogramming process on their own?
We can’t really delete what’s in our money blueprint. All we can do is overwrite it. So first we have to figure out what’s even in there.
So one of the exercises I have my clients do is I have them write down all the negative things they think or say about money. So I’ll have them start a note in their phone or keep a pad of paper and anytime they catch themselves thinking something about money or saying something about money, especially if it is in opposition with what they say they really want.
So once we uncover some of those negative things that you’re saying, then we can rewrite those as positives. So we can say, “I’m the kind of person who always has plenty of money in the bank to pay for the things that I need and want.”
Repetition is really the key to overwriting. If you think about when you listen to a song 10 times in a row, you you know the lyrics. You’ll find yourself waking up the next day and the song’s playing in your head. That’s because you’ve listened to it over and over and over again. One of the tricks that I’ll have my clients do is once they’ve written out these positive money affirmations, I will have them record them in their own voice and then I will have them play that recording to themselves a couple times a day because you trust your own voice more than you trust anybody else’s voice because you hear it all the time.
So that’s a little bonus trick for our audience today. Another thing that I love that you talk about is the volcano method you use. Can you tell us a little bit more about how it’s helped you?
I’m not sure if I invented that term or not but that’s what I call it. You know probably a lot of people out there have heard about the avalanche method or the snowball method where you’re paying off the one with the highest interest rate first or you’re paying off the one with the lowest balance first so you feel like you have that quick win. Because I had a lot of baggage from my previous relationship, there was one bill in particular that just really pissed me off and it was a department store credit card bill that my ex-fiance was an authorized user on and he had bought my Valentine’s Day present on the card a month before we broke up. And now I was stuck paying for it. So every time I saw that bill come in, I was really pissed. I was really upset.
So there are times when my clients have something similar like if they are coming out of a divorce or maybe it was just a stupid mistake that they made, maybe they bought some furniture that was 36 months no interest and they missed the deadline. Then they got smacked with all this interest and so every time they see that bill it just like really ticks them off because it reminds them of that dumb mistake that they made.
I would prioritize that bill first because it gives the most emotional satisfaction once it’s paid off.
What advice can you give to our audience to better understand their own emotional relationship with money?
Our emotions don’t just happen in our head. They happen in our body. Our emotions are physically stored in our body when we experience a strong emotion. There are actually chemicals and
hormones that are released and it helps to cement that memory in there so even though, like you said, it might not seem like
anything important from an adult perspective, if there were a lot of strong emotions around that in your body as a child, then that’s part of your programming around money.
Well thank you so much for joining us today, Christine. I think the tools and the advice that you’ve shared is going to be extremely useful to our audience.
Thanks for having me.
This page is periodically updated with our newest webinars. Check back soon for more.
Article last modified on May 10, 2021. Published by Debt.com, LLC