018. Drowning in Credit Card Debt: Healing Habits & Personal Loans

Lifestyle

Oct 24

Escaping credit card debt requires self-forgiveness and accountability.

Today, Amber helps a listener explore both the psychological and tactical approaches to debt repayment and if personal loans or debt consolidation is the right solution for her. This episode will dive deep into credit card debt so you can climb out of it and pave your way to financial freedom.

In today's episode, we cover the following:

A review of the Aspire Conference (2:38)

Behind the scenes of Amber's business transformation at AFMKTG (7:21)

Advice on getting out of credit card debt (10:35)

Amber's personal experience with credit card debt (11:24)

Healing habit #1: EFT tapping (16:18)

Healing habit #2: Journaling (17:06)

The dark truth behind student loans (18:15)

Self-forgiveness and deciding to break free from debt (19:30)

Paying off debt: The Basics (24:10)

Considerations before taking out a personal loan and consolidating debt (30:14)

The pros and cons of debt consolidation through a personal loan (36:10)

Getting approved for a personal loan (46:30)

TRANSCRIPT

Speaker 1 (00:02)
Hello and welcome back to The Old Money Podcast. This is the show for women who are building the trust fund they wish they were born with. I'm your host, Amber Frankhuzien. I am so happy that you're here. This episode, I don't know about you guys, but I got through the launch. I got through some figuring out what I wanted to talk about, really. And honing my craft, I don't know what episode this is, 17, 18, 19. We're getting into it now. I feel like I've hit my stride and you all are writing to me, and I am so honored about that. I have an incredible submission from somebody today who wants to talk about being in debt and how to get out of it. We have not talked about debt at length yet. This is going to be the episode, the thing that is going to guide you. If you're in debt, you've ever been in debt, you know somebody in debt, send this episode to them. This is it. I'm going to talk about it all. I'm going to talk about the psychological. I'm going to talk about the tactical. We're going to go through it.

Speaker 1 (00:59)
Thank you so much for writing in this letter. This is what people need to hear. So like I said, I feel like I'm in my stride. We're getting into it. We're getting into the nitty gritty. The episodes that I have coming for you all because of the education that I've been going through, it's a lot. We've got a lot of hot stuff coming. And why don't I tell you about it? Let me give you a little behind the scenes. And instead of a birdie and a bogey today, I'm actually going to change the program because I want to take you into what my organization actually does, our team meetings. We have a team meeting at AF Marketing every Monday morning where we go through our projections for the week, tasks, rocks, blocks, etc. And I got this program from Traction, which is a business operation system called EOS, Entrepreneurial Operations System. That is how some businesses run their business, right? So again, the book is called Traction. Eos is the Entrepreneurial Operating System. And I've taken a lot of different things from the learnings of how to run a business from this program. Well, I just read the book, there's not a program.

Speaker 1 (01:57)
Actually, you could probably buy a course, but I'm not selling anything here. However, every Monday morning we have our meeting. And one of the things that we start every meeting with is what are our personal best and what are our professional best. Now, if you're a friend of the show and you've heard one of the other podcasts that I helped program and launched this summer. You might hear this on another show, I'm not quite sure. But I think it's really relevant because it's what we actually talk about our personal best and professional best, because when we come to work, we're coming as humans. We definitely want to highlight what we've been doing well or what's been going well for our clients and our projects. But I also want to know from my team what's important to them and what's happening outside of the work that we do. So my personal best for this last week has been attending the Aspire conference. Now, I got hooked by an Instagram ad for this conference, and I'm so glad that I did. So Aspire tour is put on by three entrepreneurs. They do, I think, $74 million a year on this tour.

Speaker 1 (03:00)
They travel from city to city and they pool all of these speakers to come talk about anything from money to motivation to personal development. Basically, it's like a personal development seminar for entrepreneurs, small business owners. That's really their target market. And this was a room of 2,000 motivated-ass people. And holy shit did I need to be in that room. Now, I bought this ticket during the summer. It was not expensive, by the way. I got a platinum ticket. I think I spent 99 bucks on it, maybe 49. I don't know. It was nominal. It was not expensive. And I just felt like I've really been pushing my own motivation recently. It would be nice to go to a place with no expectations and see if somebody could speak some life into me that might give me an idea or speak me into a new direction. And that's exactly what this conference did. I 10 out of 10 recommend it, especially for the price point. As with any conference, you should expect no matter where you go to any conference, you're always going to be upsold. That's why people have conferences. That's like the low hanging fruit.

Speaker 1 (04:01)
They come in here, they get you to raw, raw, raw and feel really good with all these motivational speakers, and they're going to give you something that you could buy to continue your journey with them. They're going to tease you with the information. And you all, I was teased and I bought. And I'm so fucking excited about this whole program. So I'm going to be doing a money mastery course, basically really elevating my knowledge of all of the accounts, all of the strategies that uber-rich people. I'm talking like Matt Romney. I'm talking like Peter Thiel. I'm talking about these multi-hundred millionaires and the ways that they've set themselves up through tax advantage accounts to really build their wealth strategically and diving deeper into that knowledge that I can share it with you and also obviously do it for myself. So anyway, the takeaway for me on this whole adventure was that not everybody's going to be for you, right? And so they have however many speakers, eight or whatever, and not every speaker slept. However, the one speaker that I was like, I know this person, I'm not a huge fan, whatever, I'll sit around, see what's up, blew my fucking mind.

Speaker 1 (05:07)
And when I was reading this person's bio, the bio that they have, not my favorite. The bio reads something along the lines of like, This person only eats fruit until noon and loves to do ultra marathons and is a big fan of a run DMC. And it's like, okay, try hard. Also, running ultra marathons, I could never. I would never want to. She doesn't do that. Jesse Heisler was the speaker. That was the bio for Jesse Heisler, because I did a terrible job butchering it. When I tell you I was fucking captivated by this man speaking on stage. I've never seen anyone send it so hard for an audience and give every ounce of passion, energy. Homeboy was sweating, sweat through his shirt. He had a DJ on stage with him that accompanied his talk with music throughout the entire thing. And you know that music is such an amplifier for emotion. And he tells the story about training with a Navy SEAL from the backwoods in Georgia. His name is Chad Wright. And how Chad's mindset tricks, Navy SEAL tricks, helped him run a hundred-mile race. I will never do justice to the presentation, so I will link it, this part of his speech in particular.

Speaker 1 (06:21)
I will link it in the show notes or in Instagram or whatever so that you can watch it. It's worth 10 minutes of your time. Put your headphones on, get into it. It will move you. And it's all about the words that we speak matter. The words that we speak about ourselves matter. And you guys, I was so shocked and so captivated, and I wanted to cry, but I couldn't even allow myself to cry because it was too powerful and too good. I just can't say enough good things about seeing this person speak. And the way that I look at this day, again, it's a small investment, okay? You can charge me for the hours of my time or whatever else, but what a boo-wing, that's a word from the toast right now. A booeying experience that really catapults us to the next level. So exposing yourself and putting ourselves in places where there's going to be other people that are like-minded. We can learn from people who are farther along on the journey than us. Just so happy. And then my professional best just to take you into the business really quickly is that I've been going through quite a huge business transformation for the last, I would say, 45 days, including a team restructure, client restructure, package restructure.

Speaker 1 (07:37)
And it's been painful. I'm going to be super honest with you. First of all, it's very hard to look at all of the things that are going wrong in your business and then figure out how to fix them and then do it yourself. It's very hard to make decisions that are potentially taking you out of something that's comfortable and into the unknown. And I've been working with two business coaches for the last 45 days or so that have been invaluable in keeping my mindset right and then complementing that with the tactics and helping me through the tactics. And honestly, I pride myself in really being a strategic business leader and making the right decisions for my team and my business. And I've just got complacent and stuck and used to what was happening. And sometimes you just have to burn it all down and start again. And since doing that, the amount of clarity that has come for the next clients that we're working with, for the new people that we're going to be bringing on board. It's just been phenomenal. But it's been really, really hard. However, now things feel so much better. And one of my coaches was sharing with me, you've heard this before, that story of the frog in the boiling water.

Speaker 1 (08:43)
There's the story that if you drop a frog into a pot of boiling water, it will instantly leap out. But if you put a frog in a pot filled with regular temperature water and then gradually heat it, the frog will remain in the water until it boils to death. Gruesome. I totally know. However, I think it's really relevant because for me, this complacency, I was sitting in this pot of water. I was working way more than 40 hours a week. My stress level, my cortisol, as you know, has been through the roof. And I'm like, What am I going to do to change it? And a lot of the times we talk about this rock bottom scenario, right? When are you going to hit rock bottom? Whether it's in your business, in your relationship, in your life, maybe it's with your debt. And a lot of the times we're just floating around letting the water take us where it's going to go. But it's not until you reach the bottom of the pool, of the ocean where you have the springboard of the bottom of the pool to jump and push yourself back up to the top.

Speaker 1 (09:38)
It's things have to get so bad to galvanize us to action. And how can we, instead of hitting rock bottom, course-correct and decide that as the water is getting hotter, as we're the frog in the pot, we're going to get out. And that's the conversation I want to have today. And I also just want to just to close the loop on the business thing as well. If you're in a place of your business where things are not going well, it's okay to start and start again. That's how the best businesses survive, is they iterate, they change, they adapt, they move, they groove. And that's what I want to talk about today with healing debt as well. So let's start it off with reading the letter that was submitted. And if you have a question for me, anything you want help with, go to oldmoneypodcast. Com, go to the contact page. You can leave an anonymous note there. And that's what this person did. I printed it out. I have a real piece of paper in front of me. It's from anonymous, okay? It says, Hi, Amber. I've been loving the pod, your mission, and all the frivolous and factual information you talk about.

Speaker 1 (10:38)
Thank you so much. I wanted to write for some advice on credit card debt. Due to some life changes, I have gotten myself stuck in some significant credit card debt that I can't seem to get out of. It is drowning me and I don't know where to turn. Do you have any recommendations for a personal loan? I feel that with that, I could pay off all the credit cards and just have one payment to make. Appreciate any help you can provide with your financial background. Girl or boy, I don't know. Thank you for writing. This is the shit we need to talk about, because if you wrote this question, there are probably 10, 20 other people listening to this podcast that are in the exact same position as you, and we can help all of you together. So first and foremost, I am so sorry that you feel the words that you're using very powerful, stuck and drowning. I've been there. I have been there. I feel it very deeply. To me, debt feels crushing. It feels like on my chest, on my shoulders, like it's pushing me down like a boulder that I can't pick up.

Speaker 1 (11:32)
The feeling of debt has a lot of psychological ramifications. It can feel really impossible to get out of. But I want to tell you that it's not. Also, if you haven't listened to the other podcast, please remember that I was, up until a couple of years ago, a chronic carrier of debt. I was always in some debt. And it really reached its peak a couple of years ago, actually, during COVID. I had just adopted my beautiful, perfect little angel baby, Poppy, my chow-chow. I rescued her from Camp Pendleton, and she had a traumatic history. She had been found after being hit by a car and she was a disaster. She was a hot ass mess and I brought her into the good life. And within a month or so of having her, I recognized she was having some really severe health problems. Didn't know what it was. So that was a trip to the emergency vet, a trip to another vet. It was blood work. It was ultrasounds, X-rays. And she's so scared of people. That was sedation every time. Next thing we know, we're finding out that her liver is shutting down and she has all of these really elevated liver enzymes.

Speaker 1 (12:30)
We're doing emergency this, emergency that. And I have now spent $6,500 or so in my dog and saving her life in the span of a few weeks. And in this process, I was at one point at the emergency vet in San Marcos here, and I was sitting outside and there was a woman there who was sobbing and I held her hand as she was making the decision. Do I spend the money to give my dog what it needs? I can't afford it. What do I do? And so I sat with her. It was during COVID, so we weren't allowed inside. I'm sitting outside in a parking lot with this woman at one o'clock in the morning. She's just completely ripped to shreds. And we had some conversations about, okay, your dog's stable right now. You need to get some sleep. And when you get sleep, you'll feel better. And you're going to find some opportunities. Who can you call? What can you sell? What can you do to do what you need to do for your dog? If that's what you feel called to do. Now, I decided in that moment, I would never, ever put myself in a position where I had to make a decision about Poppy's life or health based on what I could afford.

Speaker 1 (13:29)
It was just not going to happen. And of course, there was many other weeks of her going through all of these different vet appointments. And at one time I had to take her back to the emergency vet and they kept her. And so I was on the phone with my mom. I was crying. And I was like, I'm just going to go to Anthropology and smell some candles and try to feel better. And as I'm pulling into the parking lot at the Forum in Carlsbad, I'm fucking sobbing and I side-swipe a brand new parked Volvo as I'm pulling into a parking spot because I'm so very clumped. You guys, it couldn't have gotten much worse. Not to mention that I'm still in the startup phase of my business. I'm still barely taking a salary at this point. I'm struggling. I was already in debt to start this. So at the end of the day, I'm now five figures in credit card debt. And I asked somebody close to me in my life for a personal loan, and that person turned me down. And I tell you that to let you know that I have felt the weight of that crushing debt.

Speaker 1 (14:23)
I have felt the weight of not knowing what's next to come. And I knew I needed to change something. So that's when I started thinking about in my mind, this financial fight or flight. Why am I in this position all of the time and what is driving me to overspend? If you haven't listened to the financial fight or flight episode, it's episode number three. And man, I just gave away all of my best stuff, episode number three. I swear to you guys, that is the one to start with because that's where I had to figure out where to start on my debt healing journey. And notice that I'm calling it a healing journey, not a payoff journey, because I firmly believe that if you do not heal the root causes of what's gotten you into debt, you will continue to create it in your life. And it is deeper than just paying off a credit card. And we'll talk about that. We're going to get to consolidation, all the stuff. I want to talk about healing debt. And first and foremost, I think this started for me with really forgiving myself for being in the debt.

Speaker 1 (15:20)
And now, okay, I'm telling you these stories if I crashed into a car and my dog was sick, but I had been in a continual spiral of debt for my entire adult life. And I needed to basically get rid of the identity of a person that was in debt all the time and put on a new identity of being a person who was not going to be in debt, a person who was actively building their wealth and was going to make this a priority in their lives. And I had to really work on forgiving myself for always being in debt and thinking about the money I wasted, quote-unquote, or the debt that I had gotten into or the decisions that I had made. Essentially, I really had to start with healing my own relationship with myself and my self-image the way that I looked at myself because I would really judge myself for always being in debt, and I would always feel really bad about it. So first of all, the forgiveness piece of it was huge. And there was a couple of different techniques that I used to work through that. The first one was EFT, emotional freedom technique, tapping.

Speaker 1 (16:22)
If you need a resource on tapping, Gala Darling. I've been following her since I was in college, I feel like probably since 2009. When she was a fashion blogger, I followed her on Google blogs or Google Reader, it was called. She was one of the blogs I subscribe to. And she is a tapping teacher. And that is where I would really start. And you walk yourself through tapping on the different meridian points of your body, think of it as acupuncture with your fingers, and speaking through the different ways that you have acted in the past or behaved or thought, and then actively forgiving your sofa it and immediately giving yourself the love and healing that you need. Now it's very woo woo, I get it. But it worked for me, for sure. So that was one thing for sure. The other thing was I talked to my therapist about it a lot and really journaled on it a lot. Some of the journal prompts that I would use would be like, Why do I want to buy this thing? What do I think it will get me? What is the feeling I am chasing? Or looking back at, I'm going through my credit card purchases for the month, Why did I buy that thing?

Speaker 1 (17:25)
What was really going on bigger picture for me emotionally on that day? Or not even looking back at the month, but in the moment I'm at Target, I'm like, Why am I here? What am I doing here right now? Am I bored? Am I feeling not pretty? Am I feeling unsafe? Am I feeling overweight? Am I looking for something that's going to shortcut me? What do I know to be true about why I'm here and what do I not want to look at? These are really heavy conversations. I talk more about this in the Financial Fight or Flight episode, like I mentioned. But that extreme ownership about what's happening for you at the moment and that extreme forgiveness, I think, is so key. And the other thing, too, is opening our eyes and being aware to the things that are out there influencing us to make those purchases. The sales, the emails that are always in my inbox, unsubscribe to those, by the way. But one of the things that's really caught my eye recently is I'm on a subreddit for San Diego State University because I'm so involved in the university. I'm seeing a lot of conversations about people needing help with their financial aid.

Speaker 1 (18:28)
Hey, financial aid office. I talked to this, I talked to that. Financial aid, such an interesting concept because do you know what financial aid is? It's fucking student loan debt. And they use this verbiage for the students in college. Financial aid sounds like help. It doesn't sound like you're going to be saddled with $200,000 of debt and you're going to be paying it off until you're 65 for your liberal arts degree. They're using different language for a reason. I wasn't even conscious to that. Up until a couple of weeks ago, think about the kids that are 18 years old and they're trying to figure out how to survive in a new environment at college and pay their bills for the first time. These poor 18-year-olds are getting the marketing message of student loan debt while it's benefiting them. And then after they graduate, it turns on its head. And I think about these 18-year-olds, and I wonder how many of you out there have that 18-year-old inside of you that maybe wasn't as educated as you would have hoped to be about what that really looked like for your future. Maybe you would have made different decisions if you could have seen into the future of what those student loan payments might look like.

Speaker 1 (19:37)
Forgiving yourself, forgiving your parents for not helping you, forgiving the marketing department, of the financial aid department to calling itself that. All of these things, all of the things that we can point to of the reasons why we've overspent and undersaved, it's okay. And healing and really believing that and really holding your younger self with a lot of empathy, but knowing also that you're not that person anymore. Now you have more information. Now you've learned more. Now you've suffered a little bit. You feel that crushing debt. You feel that, as this letter writer put it, drowning feeling. And you've decided that you don't want to feel that anymore. And making a new decision is the first step to really healing this. Making a new decision about how you're going to manage your money. Maybe you're making a decision about putting your credit cards in frozen water in a ziplock bag, like I suggest, to freeze them, so you're not using them. Maybe you're making a new decision on your thought processes and the way that you're going to think about debt. And maybe you're going to make a new decision on the standard you're going to hold yourself to, and you're going to make a new decision on how you're going to approach this challenge of paying off debt, which is less about cutting back more about earning more.

Speaker 1 (20:55)
I'll get to that in just one second. And the last thought that I want to leave you with as it relates to debt is that for the majority of people, debt equals bad because debt means that you owe somebody else, you're paying interest, you're not building your own wealth. But I want to give you another idea too, that debt in its full glory, in every sense of the word, it actually could be good. A lot of businesses are grown on debt. A lot of people buy homes on mortgages, and that's a form of debt. A lot of people buy assets, build their wealth by leveraging debt effectively. So how could something that is both good and bad be both good and bad? It's because it's not good or bad. It's totally, totally neutral. I have talked about this before. Money is neutral. It's the meaning that we assign to it that gives it a good or bad flavor. So if we can decide that this debt that I have, it's not bad. I saved my dog's life, hopefully. I mean, she's doing great now. A couple of years later, I made right my mistake for swide typing that volvo.

Speaker 1 (21:58)
That gentleman was not happy with me, but I made it right. I took care of my side of the street, and that debt really helped buey me in a situation where I needed some extra cash. And I'm looking at that as, wow, I'm able to buy into my future and be able to take care of myself using this as a tool, because that's really what debt is. It's a tool. It becomes not helpful to us when we're paying so much an interest that we're not able to build our own futures. And that's what we're going to talk about. So whatever your past decisions that you made, knowing you were in a place then and you're in a new place now, you know different. You're going to make different choices. You're recognizing the programming, even if it's keeping up with the Joneses, you're forgiving your sofa overspending on something for somebody else's benefit. By the way, I saw the best quote the other day. It was, Oh, no, it wasn't a quote. It was Gary Vee at this conference I told you about. I saw Gary Vee talk there as well. And he said, Most of us...

Speaker 1 (22:53)
He was asking us, Who are we trying to impress with everything that we're doing? And he says, Most of us are trying to impress somebody who's not even emotionally available to give us the flowers we want. Mike, drop Gary Vee. Gary Vee was in a bit of a mood. He comes up and preaches a lot of empathy and kindness or whatever, and he's in a fucking mood all the time. Am I right? Such an interesting guy. Anyway, I digress. We're talking about healing. The choices that you made and the time that you made them. You had the information that you had. Younger you were healing. We're doing the tapping. We're looking at things in a way that it's part of our journey. And this is where I want to come back to the frog in the boiling water. I'm going through this right now in my business. Have I made some mistakes before? Have I made some decisions that maybe currently wouldn't have made? Yeah, a hundred %. But I'm not mad at myself. I'm not wasting any energy on past me and past decisions. I'm just making new decisions and moving forward with that.

Speaker 1 (23:47)
So the state of feeling that I'm looking for is to feel forward motion and positive momentum because that is how you pay off debt. So I really want to do right by this letter writer, and I'm going to talk specifically about what she asked for, which was about consolidating her credit card debt on a personal loan. But before we get to that, let's just talk about the basics of paying off debt. And I am holding in my hands right now. Do you hear this? It's a book. I have a book, a real book in my hand. And it is the book. It's called Total Money Makeover by Dave Ramsey. Now, why do I have this book? It's because somebody gave it to me a really long time ago. And let me tell you, this turned me off to anything having to do with money so fucking much. I can't even tell you. This is the problem that I have with Dave Ramsey. Homeboy is real, real harsh. And that's just not the way that I or I think most millennials or Gen Z react well to change. Now, there are some good points in this book.

Speaker 1 (24:48)
I do disagree with a lot of things. I've had this book for probably 10 years, by the way. But let me just give you a taste of the way that Dave Ramsey talks to his audience. He says in here, If you were so fabulous with math, you wouldn't have debt. So try this my way. I'm sorry. Not going to work for me, Dave. And if I ever get preachy like that on the podcast, will somebody fucking call me out? Because how disgusting and what a disgusting way to approach somebody with such a delicate subject, something that we have so much emotion around, without talking about the psychology of how they might feel and just talking so punitively to people. And the way that this turned me off to money, no matter that this is the total money makeover, I'm telling you, I probably lost out on years of compound interest because it surely, really did make me want to avoid talking or looking at money because the voice that was talking about it to me, Dave Ramsey, which I thought at the time was a good resource, was so fucking harsh that me, as my sensitive soul, was trying to avoid being yelled at in a book that I was reading.

Speaker 1 (25:49)
Okay, so that's my take on Dave Ramsey, and that's why I like to try a different approach. We're talking about psychology, we're talking about the tactics. However, he has in here his way to pay off debt, which is the snowball method. What he recommends is to list all of your debts and you're going to list them in the order of the smallest amount of money to be paid to the largest, regardless of interest rate. And he's going to tell you to pay off the smallest amount of balance due first. And so let's say, for example, you have a credit card with $1,000 on it, a credit card with $10,000 on it, and then you have a car loan for $20,000 on it. He's going to tell you, regardless of the interest rate, to pay off the smallest $1,000 credit card, be done with that. Then put the money that you were putting towards that towards the next and then to the next after that. That's one method, and it doesn't take into consideration the interest rates on the cards. It just talks about the balance is due. The opposite of the debt snowball is the debt avalanche, which means that you're going to be making the minimum payments on all of your debts and using any extra funds to pay off the debt with the highest interest rate.

Speaker 1 (26:58)
So that's totally different because you're now considering giving more money to the debt. Let's call it the credit card, for example, with the highest interest rate as opposed to the lowest balance. Because Dave's methodology is saying, Well, once you pay off one credit card, it's going to feel so good that you're going to want to pay off the other ones in order. Now, if there's a snowball and an avalanche, my method, I'm coining this right now, I'm literally just making this up, my method is the Motherfucking Snowstorm. This is a blizzard. And I threw everything that I had at my debt with a vengeance. And for me, speaking of Gary Vee, I sold everything that I could afford to sell. I was selling shit like five dollars for a T-shirt that I wasn't wearing anymore. Okay, not a T-shirt, but you know what I mean? I was listing stuff on Facebook marketplace. I was looking for opportunities around me. I was picking up extra work. I was doing whatever I could to earn more money. And then, by the way, at the same time, I was also making sure that my lifestyle was adjusted to what was most important to me at the time, which was paying off that debt.

Speaker 1 (28:00)
You can pay the minimums on your credit card forever and drag out being in debt, or you can shortcut the pain, make it hurt more for a shorter amount of time, and get it over with. And that's what I did. I did so much as I sold some of my stocks. Like I said, I picked up extra work. I was doing consulting. I was selling shit. I was doing whatever I could to throw money at the debt. And I was never, ever looking at the minimums. I was actually taking my debt payments as seriously as I was my other expenses. And I wasn't looking at here's all my expenses for the month, and this is what I have left over for debt. I was saying, how can I generate more revenue so that I could put more towards my debt more quickly and get it the fuck out of my life? I was so passionate about it and so hungry to get it paid off because as I said, I wanted to make a new decision about my life. I did the inner work. It was ongoing. It's still ongoing. That never ends, by the way.

Speaker 1 (28:55)
I hate to break it to you. But I wanted to really heal this part of myself that was always in debt, create a new identity for myself around what wealth would mean to me and how I would use debt in the future. And I decided to get disciplined. I got focused on opportunities. And I realized that you cannot save your way to financial freedom. You cannot hate yourself to financial freedom, but you can build your way to financial freedom. And if you're starting in debt, you have to build yourself back up to baseline before you can build on solid ground. So with that, my snowstorm blizzard situation included looking for opportunities like getting a roommate, for example, making different purchasing decisions, going on a pretty regimented eating plan just so that my expenses for food were more stable. I decided to stop going out and drinking at bars. I just made that decision. And it was really nice for me because it happened to coincide with COVID. So that really helped enforce the fact that I wasn't going out. But I had to decide every day. And then I also had to put the guardrails in place to protect myself from overspending in the future and protect myself and give myself a tripwire, essentially, so that I would have just a second longer, a pause that would get in my way before I could make a decision on spending again on the card.

Speaker 1 (30:11)
Because let's get back to this listener's question about should she consolidate or he, I don't know, I'm sorry, should they consolidate their debt? And the number one consideration about this is if you're going to consolidate your debt using a balance transfer or a personal loan, if you have credit available to you and you have not yet healed the things inside of you or the circumstances outside of you, it is very likely that you will find yourself back in debt again, worse than ever, because after you get a consolidation loan or you get a personal loan to pay off your debt and then you rack up more credit card debt, you're going to be... I mean, obviously you're going to be even more in debt, but now you have less options available to you. So one of the things I want to acknowledge as well, those external circumstances, and this person said, Due to some life changes, I've gotten myself stuck in some significant credit card debt. And that could mean that maybe they move, maybe they got a divorce, maybe their child got sick. What are the things? And let's take this big picture really quickly.

Speaker 1 (31:12)
Ramit Sati says this all the time, and I love this question. When you're feeling healthy, optimistic, you can look for opportunities and problem-solve in a different way. Okay, that's not what Ramit says. That's what I say. What Ramit says is stop worrying about three-dollar decisions and start making $300,000 decisions. And what he means by that is people are saying like, Oh, you want to pay off your debt? Skip your latte. Okay, that's my biggest pet peeve. And the questions you should be answering or asking yourself rather are, Can I get another job? Should I get a different job? Should I be moving? Should I be pulling in a roommate? Do I have an extra room in my house? What could I be doing with my free time to generate more revenue? What is the value that I can bring to people that I know where I could earn some more cash? And what is the life that I want to lead? Really? What is the thing that is pulling me through that I see myself winning at the end of this? What am I going after? I'm still holding Mr. Ramsey's book right here, real book.

Speaker 1 (32:10)
You can hear it. Not one time in this book does he talk about earning more money. I mean, I looked again at the table of contents. Maybe it's mentioned in passing. So don't quote me on that. But I don't see anything in here about earning more to A, pay off debt, and then B, live the life that we really want to live. And when you talk to people about the rules for creating wealth, there are typically three rules that people say. They say if you want to be wealthy, you need to, one, create wealth, two, keep your wealth, and three, protect your wealth. But this is where I get a little spicy that I have more to that because I also want to optimize and enjoy my wealth. Dave Ramsey's book's about cutting back and fighting hard and sacrificing to build wealth, and that's definitely one way to do it. Another way to do it is to work the system if you can and optimize your journey on the way there. And I don't think there's any other personal development journey as powerful as trying to create revenue for yourself through business, freelancing, et cetera.

Speaker 1 (33:07)
So I highly encourage that. But let's dive into the meat of the question from the listener here, which is debt consolidation. As I said, if you are considering whether it's a balanced transfer card or debt consolidation, you must make sure you're not going to rack up more debt on your credit cards because it's very common that that happens if you move balances and pay off cards and then still have them open. So debt consolidation is essentially the process of taking out a personal loan so that you can get a personal loan typically at a lower interest rate so that you'd pay off all your credit cards and then you only have one payment that's at hopefully a lower interest rate. And so the process of doing that means you're going to take out a personal loan and you're going to have to get qualified for it. So first question is, can you even get qualified to do this? And that's going to depend on your credit score and your credit history. The other thing is, if you do get qualified is the interest rate better or is it the same as the interest rates on your credit card?

Speaker 1 (34:04)
If it's the same, there really isn't any benefit to doing this. But if it's significantly lower, you could get a pretty good deal and save a lot of money on interest. Again, remember the debt snowball versus the debt avalanche versus the debt-everything, Snowstorm? I really think it's important to make sure that we're minimizing the interest that we're paying because we want to be able to pay off the principal balance. Remember, the principal balance is the money that you spent at Ulta. It's the money that you spent at Sephora. The interest is what the credit card company or bank will charge you on top of that principal balance for the privilege of using their money to conduct a transaction instead of your own, right? Because when you pay for something on credit, Visa is covering it for you until you pay Visa back, right? So typically on credit card, you could be looking at a 20 to 30 % interest rate. So when you go and spend $100 at Sephora on your Charlotte, Tillberry, Flawless, Face, Primer stuff and the Patrick toe palette, 100 bucks is actually going to cost you $130 after you pay off the interest if you don't pay it on time or you don't pay it before interest gets charged on the balance.

Speaker 1 (35:11)
So if you were to take out a personal loan, you would get approved for the loan. Obviously, if your credit score allows, your credit history allows, you would ensure that that interest rate is better than the interest rate on your credit cards. And then you would take that money that you got from the new loan to pay off all your old debts. So, for example, let's say you have $20,000 in credit card debt split among three or four different cards. They all have an interest rate of 25 %. But you might be able to take out a $20,000 personal loan with an interest rate of 10 %, 13 %. And on a five-year term length, you could be paying that debt off faster and saving money on interest. Again, this only works if you don't incur more debt. So whether you're closing the cards, whether you're putting them in the freezer, you're saving them for a real emergency, you really have to look at the underlying causes or problems that led to your current debt, like overspending or current circumstances to make sure you don't get in that problem again. So let's talk about the pros and cons of debt consolidation.

Speaker 1 (36:08)
That's the ABCs of how you do it. But the pro would be, as this listener's reader... No, not a reader, they're a listener. They're listening to a podcast. Okay, as this person wrote in their letter, debt consolidation or taking on a personal loan can help you in only having one payment to make instead of five with all these different due dates, et cetera, et cetera. So it'll streamline your finances so that you make sure you don't miss payments or anything like that. So I think a lot of people when they're in debt, it's hard to look at the money, right? I've been there. It's hard to look at the bills. And life gets in the way. And then you have this envelope on your desk or this email in your inbox and you don't open it, you don't open it. You don't open and then next thing you know, you open it and it's past the due date and you've been charged a late fee. If that is you, this might be a good strategy so that you have one thing to keep track of one payment to make each month. The other thing is that it might help you pay off your debt a little bit faster because you'll be accruing less interest than all the individual credit cards or loans would.

Speaker 1 (37:05)
So that means you can put more towards the principal and pay off the debt slower. Obviously, you could also lower your interest rate, as I mentioned, which is going to help save money on the interest that you have to pay. And it might even reduce your monthly payments that are due. So if you have five different credit cards and they all have a minimum payment of $500 on them, that's $2,500 a month that you have to pay just to these credit card minimums. But if you consolidate them with a personal loan and maybe your personal loan term is for longer, you have a minimum payment due of $1,000 a month. However, you know me, I'm not a big fan of minimum payments. It's like the minimum is just the minimum. We're always paying the maximum, the maximum we can afford. The minimum payment should be the very least that you consider. You should be thinking about how you can throw your whole freaking snowstorm on it, right? If you're in debt, this isn't the biggest consideration at the moment, but it can improve your credit score because although when you get approved for a loan, it might give you a temporary dip because you're going to do a hard credit inquiry.

Speaker 1 (38:04)
Over time, if you're paying off these other balances, you don't have so many accounts open, it could help your credit score over time. Let's talk about the dark side or the cons of debt consolidation through a personal loan. It might actually come with additional costs. That's something you have to really, really look out for. I actually pulled some personal loan rates from... I printed this again, sorry, but I just like to have paper. I printed this from nerdwallet. I don't know why nerdWallet is not yet a sponsor of the Old Money podcast, but they should be, they will be because I'm obsessed with nerdWallet. These are some really incredible aggregates of information for anything that you would want to know about the financial market. Now, there's a ton of ads on there, so don't click on the ads. That's where you can go wrong. But this website is such an invaluable resource for so many things. Lists of, like I said, best personal loans or best travel credit cards or best balance transfer credit cards, that's where I'm going to get to in just a second. But I also use their mortgage calculator, their compound interest calculator.

Speaker 1 (39:07)
There is so much good information on here. Let's talk about the rates in the list that I pulled from nerdWallet, best personal loan rates. And we're looking at the estimated APR here. I see the lowest APR at 7.49 and the highest at over 25 and a half %. Really interesting, you can get different loan amounts everywhere from 500 to $100,000 of a personal and the minimum credit score that's on here is a 640. However, what it doesn't say on this piece of paper or this other piece of paper, this is a different sound, ready? Different piece. That sounded different. Okay, cool. This is the page that tells me all about 0 % APR, balanced transfer cards, and what neither of these lists talk about are origination fees or balance transfer fees. Because a lot of the times, if you need to transfer a balance, you have to pay for it. So let's talk about the credit cards really quick and then we'll come back to the personal loan. So I've got this list here of 0 % intro APR from all these different credit card companies that are offering 0 % interest on purchases and balance transfers for a certain amount of months.

Speaker 1 (40:13)
It ranges from 15-21 months. The regular APR, that would be anything that is added to this balance after this initial time frame of 15-21 months. The APR ranges from 20-29.99 %. And all of these cards, by the way, shit programs for rewards. You're getting like two % cashback, 1.5 % cashback, not the best. And it's not until you click into the offer for this card where I now I'm looking at this other piece of paper where I'm talking about this particular card. I'm not going to tell you the brand, you can find it yourself. But it's telling me that I need between a 690 and 850 credit score in order to qualify. I'm going to get zero % APR and purchases and balance transfers for 15 months. And then after that, the APR will range between 20 and 29%. What it has here is all these product details. Intro offer, earn an additional 1.5 % cashback on everything you buy worth up to $300. Enjoy a six and a half % cashback on travel purchase through this card. Premier rewards program after your first year, enjoy five %, blah, blah, blah, blah, blah, blah, blah.

Speaker 1 (41:18)
You know what this is all sounding like to me? Marketing language. It's all sounding to me like ways that they're trying to incentivize you to spend. It's sounding like not the right program for you if you're in debt. If you listened to the credit card rewards episode, you learned that I really strongly believe that if you're in debt at all, ever carrying a balance, that game is not for you. And this is what I hate about these balance transfer cards is that it's still... I mean, they're still businesses. They still want to incentivize you to use their cards. It's in their best interest that you spend money on their cards, right? And then it's not until I click through this other paper. You guys, I don't know why I printed this. It's just like I can't look at the screen and read this effectively. But what is missing from this conversation is the origination fee conversation, because you would also have to pay to even transfer your balance to this card. The intro fee is either five dollars or 3 % of the amount of each transfer, whichever is greater. Obviously, if you're carrying a significant amount of credit card debt, it's going to be more than five bucks on transfers made within 60 days of account opening.

Speaker 1 (42:21)
After that, they're going to continue to charge you origination fees on moving the money over to these balanced transfer cards to get the 0 % APR. And if you're looking at a balanced transfer card, you have got to pay it off within that intro offer period. You've got to pay it off within the 15 or 18 months. Now, going back to these personal loans, there's different types of loans that you can take out. Some companies will pay off your credit card debt for you. There is where you could run into some additional origination fees or balance transfer fees, closing cost, annual fees, things like that you really need to look out for. Some people or some loans, rather, will just give you the cash so that you can go pay it with it. But I mean, this is what really scares me. It's like you might get sucked into this mousetrap of A, you have all of this credit available on your other cards, and then B, you have $20,000 in your pocket. So you're like, Well, let's spend it. I mean, hypothetically, I'm not judging anybody for this. It's just that's what I would have done five, 10 years ago.

Speaker 1 (43:20)
It's tough. The other thing, just as like a con of debt consolidation, whether it's through balance transfer or through personal loan, is just the risk of missing payments, the risk of it being a higher interest rate. If you don't qualify for a lower interest rate, it may encourage increased spending. And again, it does not solve underlying financial issues if you don't look at them. So a couple other things to how to get a debt consolidation loan, not sponsored, but nerdwallet is a good place to start doing your research. That's what I would recommend. I think it's the most comprehensive available information source of all these different types of products. But first and foremost, you have to check your credit. You want to see if you have any weird things on there? If you don't already have a card like Chase or Capital One, they have really good free credit reporting or credit score evaluation stuff. So that's a good place to check just to make sure there isn't any errors or anything weird on there that might negatively affect your loan amount or your interest rate. Then you need to get together all of these application documents that you're going to need.

Speaker 1 (44:23)
So you're going to need to get your pay stubs, your W2s, your bank statements, tax returns, all that stuff. So getting all of that organized. Then you need to get a payoff estimate from any of your current credit card companies or lenders. So if you're going to be consolidating debt, you have to usually have a statement that shows your remaining balance plus any interest that has accrued since your last payment. Some people, if you're doing especially that one type of loan where they pay off the credit for you, they might want to see that. And then you need to start looking around for rates. Again, nerd wallet, not sponsored, but they should be. And we'll give you just a breakdown of what to look for, what to expect based on your credit score. There's calculators on there where you can plug in what you have and it'll give you some estimates. And then you can see, is this even worth my time or not? Then you need to submit your application, wait around to see if you get approved. All of this can be done online. You don't have to go into a bank. It's not 1999 anymore.

Speaker 1 (45:15)
But then if you get approved and it's the terms that you want, then you will receive your loan funds. And that's where you have to be really responsible with cash in hand and go take care of your debt ASAP. Does this hurt your credit? Well, you might see a little dip, like I said, when you do this initially, but over time, if you're paying this off, this should significantly help your credit to get the debt out of your credit report. You want to, to increase your credit score, have a low debt utilization rate. Meaning, for example, if I have four credit cards and each credit card has a limit of $25,000, that means I have $100,000 of credit available to me. Let's say I have $1,000 outstanding on one of those credit cards, my debt utilization ratio is one %. If I owe $50,000 on those four credit cards, my debt utilization rate is 50 %. So obviously lower is better. It tells creditors, and that's how you get a good credit score, that you're healthy, you're using your credit healthily and that you're paying it off so you don't have a really high balance.

Speaker 1 (46:14)
Obviously, a credit score is important for getting qualified for things like a house or a car or other loans, for example. So the credit score is telling other lenders how good of a landy you would be. Is it hard to get approved for debt consolidation? I mean, that really depends on your financial situation. So if you have a good credit score, good credit history, you could get a good interest rate. That could be really helpful for you. But if you have poor credit, low income, you're applying for a really large loan, it may be difficult to even get approved. So something to think about there. And then again, I just want to underscore it's not a good idea to do this if you are getting a higher interest rate or you're looking for some breathing room so you can rack up more debt on the previous credit cards that you had just paid off. So that's why I go so hard in the paint with the mindset stuff. And that's why I start there as the foundation, because if you're listening to this podcast and you've made it to the end of this episode and you're serious about paying off your debt, more so than the tactical things, nerd wallet will answer all of your questions.

Speaker 1 (47:17)
I'm here to answer more questions for you. Oldmoney podcast at Gmail. Com or oldmoney. Com or oldmoney on social media. You know the drill. The thing that has to be worked on really, and it's an ongoing process, is the healing around the debt. The emotional freedom technique is the tapping that I recommend you look up on YouTube. I can link a couple of videos that I would really recommend. And the forgiveness of yourself of making the decisions that you've made in the past and knowing that you have more information now and holding yourself accountable to that information. Everybody's situation is different. I get that. And between divorces and mortgages and life and losing jobs, like all of these things, these are not things that are insurmountable. If you're listening to this podcast, you are interested in bettering yourself. You are working towards a better future for yourself, for you now, and because that's what your future self wants for you, right? I have faith in you. If you're on the path, you're going to be okay. And that's not to say that it's going to be comfortable. I've been very uncomfortable many times with money in my life, but it does get better.

Speaker 1 (48:25)
It is something that needs to be tended to. So that healing, that forgiveness, that's all really a big part of it. And the more information you get, it's one thing, but you have to really put it into practice. And that does take the repetition. It's like going to the gym, right? You don't get stronger from going one time, even though I had a really hard workout today, and I'm like, Where are my abs? I get it. Having debt doesn't make you bad. Having debt doesn't make you a failure. Having debt doesn't mean anything about who you are at your core. Because I bet you at your core, you are a good person. You are a loving person. You are a smart person. And you're a person that has a lot of empathy for others. So I offer as an idea, offer that empathy to yourself so we can really get to the root of the problem and pay off the debt so that we can get to baseline and start building our wealth in a really meaningful way. So with that, I'll leave you today. I really want to say thank you to this person who wrote.

Speaker 1 (49:23)
Thank you so much for your letter. You're always anonymous with me. Again, if you go to oldmoneypodcast. Com, you can drop an anonymous in there. I think just rule of thumb moving forward. Anybody that leaves a message has a question, you get prioritized. This is triage, baby. We are going in and talking about all the stuff that matters the most to you. So let me know what you're struggling with with your money. Let me know what you want to talk about. I cannot wait to share with you all of the shit that I learned at this conference and all of the stuff that's to come. We have a lot of good episodes coming up soon. Thank you for being here with me on The Old Money Podcast. Please share this with a friend. Tag me on Instagram. I love you. I love you. I love you. You make me feel so wealthy. Thank you so much. Bye-bye. Feeling rich? I hope so. Thank you for joining me on this episode of Old Money. If you have questions you want answered, email me at oldmoneypodcast@gmail. Com or hit us up on social. We are at Old Money Podcast and I am at your service.

Speaker 1 (50:19)
If this episode spoke to you, inspired you, helped you, if you took a single note, it would mean the world to me. If you could please just take a minute to write and review the podcast. And if you're not doing so already, subscribe. And if you have friends who like getting rich, please share this episode with them, even if it's just on your Instagram story. And I'd love you more than Jeff Bezos loves Amazon Prime. Thank you so much and I will talk to you on the next episode. Remember, I'm not your lawyer, I'm not your tax professional, and I'm not your financial advisor. The content presented in this podcast is intended to entertain, educate, inspire, and support listeners and their personal and professional development and does not constitute business, financial, or legal advice. In addition to that, this episode may contain paid endorsements and advertisements for products and services.

Resources

Watch Jesse Itzler's The Words You Speak Matter in Life & Business

Episode 003: Financial Fight or Flight is Ruining Your Life

Watch Dealing with Debt - EFT with Brad Yates

Watch Gala Darling's Tapping for Cash Money

Find the best personal loans with NerdWallet

Connect with the Old Money Podcast:

The content presented in this podcast is intended to entertain, educate, inspire and support listeners in their personal and professional development and does not constitute business, financial, or legal advice. Please note that this episode may contain paid endorsements and advertisements for products and services for which individuals on the show may have a direct or indirect financial interest in products or services related to the episode.

Produced by AFMEDIA, a division of AFMKTG.