10 Top Tips to Pay Off Debt and Stop Using Credit Cards | 579

0:00Vanessa:Your credit card balance is not your budget. You're playing a game that you didn't know you were in. Everybody wants to get right to the savings buckets. Everybody wants to get right to paying off debt. But the first step is your spending column. Figure that out first. You're not actually in control of your money. You're not actually budgeting when you're using that for everything or when you're using it to bail you out. It's literally a whole different way that you handle your finances. Do you make good money but have nothing to show for it? Are you tired of living paycheck to paycheck? Do you have big dreams for your financial future?

0:30Vanessa:Do you want to get debt free, but you don't want to live on beans and rice? Or you don't want to give up those pumpkin spice lattes? If you don't already know how to budget, or if you're using credit cards to get through the month. If you want to seem like you have your finances all together, or you're not on the same page with your spouse when it comes to finances. We know what you're doing probably isn't working, but guess what? You're in the right place. We're Shaina and Vanessa. We're best friends, business partners, and master financial coaches trained by Dave Ramsey. We've been in business since 2019, helping hundreds of amazing people like you create budgets, get out of debt, stop living paycheck to paycheck, and know exactly what to do with their money.

1:07In this podcast, we'll share with you everything we know plus everything we're working on with our clients so that you have the best chance at reaching your financial goals.

1:14Vanessa:We want to help you take the guesswork out of your budget, improve your marriages, and even bring your kids in on the conversation. We can help you no matter where you're at, whether you're the single mom who's never had$500 in her savings account, or the millionaire who's paid off four real estate mortgages. And we're not going to shy away from the tough love. We'll tell you what you need to hear and encourage you at the same time. This is the Financial Coaching for Women podcast. All right. If you're trying to pay off debt, but still feel like nothing is working, this episode is for you. We pulled together 10 of our best debt payoff tips to help you stop spinning your wheels, stop making debt worse, and start making real progress with a plan that actually fits real life.

1:54So what other people tell you is to put extra on debt, pay double, do your snowball method or whatever. How do you know how much you can do? This is how you figure out how much you can pay. You have taken your income, you've subtracted your minimums, you've subtracted all your bills, you've subtracted what you're going to spend on groceries, gas, spending money, your haircuts, your kids, your pets, whatever you're going to spend on your life every month. And you've subtracted what you need to be saving for so you don't have to use debt right in the future. And so now all of that equals hopefully not zero, but it'll equal a number.

2:25And that's how much you can put extra on debt to begin with.

2:28Vanessa:So let's talk about paying off debt. How many, like, do we always recommend the snowball method or how many different ways do we talk about how to pay off debt? Yeah. So the most popular way that you probably have heard a lot of talk about is a snowball, but we, in our budget system, all of this is in our budget system. All of the math does it automatically for you that we're going to talk about, but we also list the avalanche method and the minimum payment method. Okay, just really quickly, the snowball method is going to go, you're going to pay each card off by balance, right by the minimum or the current balance, and it's going to be the lower one first, and then you're going to go from there.

2:59The avalanche is actually going to look at the biggest balance slash biggest interest rate. And you're going to you're going to look at the biggest interest rate and try to get that one knocked out because otherwise, you're paying so much more just to have the card every month. And then finally, the minimum payment method is you look at I have a client right now, they have I'm not kidding you. They have a$1 ,200 or$1 ,800 balance and the minimum payment is$320 a month. Okay. So I'm like, whatever we do, even though that's not your smallest one, you're going to pay that one off first because you get$320 back in your budget.

3:30So we look at the minimum payment and that's how we decide that one.

3:33Vanessa:I think that's really big. I had a lady come in for a free call one time and she was like, she completely bypassed her car payment. She had$3 ,000 left to pay on her car, but her car payment was like$800. Yes, exactly. And I said, just pay off your car. And she's like, yeah, but the interest rate's 6%. I'm like, doesn't matter. If you pay off your car, you get$800 back in your budget tomorrow. And that, she was like, oh, that was an aha moment for her, that light bulb moment. She was like, oh, I didn't realize that. So we're not always recommending the snowball. We always do recommend is if you have that$1 ,000 and you're going to put it on debt, then the next time when you pay off the, whatever one you do, whether it's avalanche minimum or snowball, you're going to still roll that other minimum payment into this new amount of money that you have left over each month.

4:15Vanessa:Yeah. The extra on debt that you're budgeting on purpose each month. Yeah. So now you're rolling all of that over, but it doesn't necessarily have to be in the snowball method, but you're still taking all that extra money and putting it towards debt. Sometimes you may get a bonus. And so one month, actually, I'm going to do the debt avalanche this month, this time, because this works better for me right now. It doesn't always, once you choose a method, it doesn't mean you have to stick with it every time. Right. And it really does depend on the moment. So you might do the snowball like throughout the year.

4:42And then every once in a while, when you get a bigger chunk of money, or when you when you have a different situation, you might go one or two months to an avalanche or a minimum payment method, and then you go right back to the snowball. But really, it is up to your budget. And that's why knowing that extra on debt is so important. And actually, every month, it might change because you might get overtime, you might have a garage sale, you might do some other things to get you more extra on debt. And so if you only have$300 regularly every month, but then this month I worked a bunch of overtime and I have$1 ,300, that might change which debt you pay off, might change your answer to that question.

5:14And that's why it's so important to have that whole list of them and see all of it. You can see the minimum payment amount. You can see the current balance amount. You can see your interest rate. You can see it all and make an informed decision

5:24Vanessa:each month. And you may have two debts. Let's talk about this. One has$13 ,000 and one has$14 ,000. And your$13 ,000 one has a interest rate of 16%. But your$14 ,000 one has an interest rate of 31%. You better be sure that we're going to be tackling that$14 ,000 balance one first. If you are coaching with us, because the balance is right there. You're playing a game that you didn't know you were in. I think that's really what happens is you're doing this for so long. And then all of a sudden you look up, become the ostrich in the sand. And you look up and you're like, what is happening? How did I get myself in this situation?

6:01Vanessa:It's because you're exactly where they want you to be. And I hate to say it. I'm not trying to be ugly. And even a lot of people come to us and they say, yeah, but I don't pay any interest because I pay it off every month. But you're probably, and we've seen it nine times out of 10, you spend more money naturally because you're using a credit card versus using a budget. If you were using a debit card instead of using a credit card, you would spend less money because you're more conscious of your spending habits. So it really does make a difference. your credit card balance is not your budget. Watching that go up every month is stressful, it's unnecessary, and it again is not a budget.

6:36Vanessa:Yeah, it's not a budget. And I think we are just relying on it because we're in the throes of life, the throes of busy life. But you're not actually in control of your money. You're not actually budgeting when you're using that for everything or when you're using it to bail you out. But we understand it's not necessarily the easiest thing to do. But and so what we often do with our clients is they will, we will come in, we will put everything on on piece of one piece of paper, and they will say, Oh, I have more money than I thought. Oh, I don't need to use the credit cards. And if we can just start there, it doesn't mean you necessarily will be able to pay off all of your debt month one, right?

7:13But your first step to breaking up with your credit cards is to not use them anymore. That's what we want to do. We want to not use them, use our budget, use cash, use the debit card, like Vanessa said, get on a budget. And then when you see that budget altogether, you'll see how much extra you can start to put on debt and get that, get those. And then you can start really, truly building wealth, investing, whatever it is you want to do and be in control of your money, be in control of your financial future.

7:37Vanessa:So there's one thing that you heard or you're going to hear out of this entire podcast. It's swap the credit card for the debit card. And it's going to be hard, especially when you've been relying on credit for so long. We get it, but you have to start somewhere. All right. So anyway, PayPal, though, can we just say, please don't do it. We advise against all debt, but definitely PayPal. Don't open that. Even though I think now there's a Venmo credit card and stuff. Don't get sucked into any of that. Or the Karma, Afterpay, Sizzle, all that. Klarna. Klarna, yeah. All of those are big no for you.

8:08But PayPal is very interesting because they have zero interest periods. They loop you in with that. Super sneaky. And it's zero interest for another month or whatever.

8:16Vanessa:Who can keep up with that? I've had several clients try. I think that's the point though, right? They try to confuse you enough so you don't even do anything about it. It gives you enough, in your mind, enough wiggle room. Oh, okay. I'll be able to pay this off for sure in six months. But no, the answer is you're not going to for the most part. But just don't play. What is the phrase? Love you. Love you. Saying this with love. Play stupid games. Get stupid prizes. That's what we're doing. We're not playing stupid games. We're not getting stupid prizes. You don't need a store card. Here's a bonus tip.

8:43I don't use debt. Every single time you go to checkout, they'll say, would you like our store card? you're gonna say no thank you I don't use that or find a phrase and just get used to saying it don't care what their offer is don't care what the deal is it's a hard pass for you

8:55Vanessa:don't even think about it just the words are coming out of your mouth as they're saying it to you yeah so you don't get tempted because that's 30 % off 40 % off 50 % off or whatever you guys have to understand that their marketing strategies like their marketing budget is more than we'll ever make in a lifetime because they know that if they can just get you to open the card you're gonna spend so much more money with them and you don't need it when you need new clothes or whatever it is, buy it with cash. You don't need the temptation to spend more. Be nice to yourself and don't do that. Call every one of those creditors, debt companies, whichever ones that you're listing out in your debt tracker, you're going to call them all.

9:27You're going to see if they can offer you a lower interest rate or deferment sometimes. So I have a client right now where we're actually strategically waiting for her, which, which month she's going to ask for her vehicle to be deferred because we're going to need that. We're going to need that coming up. Right. But you can get your vehicle loan one month deferred, it'll just add it to the end of the loan and that will free up that money for one month. And sometimes that's really going to help you. It's going to help you get ahead or something. So we want to do all of that. Go through, contact them, see if they have any payment plan or something that's going to be more advantageous to you or make your budget life easier.

10:01And then also maybe if you can defer something here or there, that will help too. It's time to enter your coaching era because making good money should feel like making good

10:11Vanessa:money. Yeah. Imagine six months of private coaching where we'll tell you exactly what to do. No guesswork, no confusion, and absolutely no judgment. It's a done for you system that actually works. You don't know what you don't know, and that's not your fault. And that's why we're here. Financial coaching with us looks like two coaching sessions a month, personalized recaps, and after our support, you can text and email. So you're never stuck wondering what to do next. Together, we're going to build your budget, set up your system, and tackle any challenges that come up along the way, which, by the way, they always do.

10:44Vanessa:If what you're doing isn't working and you're tired of trying to figure it out on your own, sign up for financial coaching at budgetbesties.com forward slash coaching before all of our spots fill up, and we will help you go further faster. Six months from now, you'll wish you started today. We have all the time, Vanessa, we have clients that come in and they're paying just a little bit extra than the minimum. So my payment's$30 and I'm paying$100 and I'm basically doing a really great job. And it's no. And they're doing that on several cards. So that's when we're going to tell them, no, we're going to shift that to where you're going to put every extra dollar you have that month on the one card because that is going to save you the most money and make the most progress in the long run.

11:23Vanessa:And we have a lot of clients that when we tell them to do this, we're like, oh, look, you can actually pay off two cards this month. And they're like, really? And then the idea is to take those minimum payments that you were making plus all the extra and you're going to snowball it, right? Again, avalanche method, if you're choosing the highest interest rate because you have some balances that are close by, that doesn't matter. The point is you're getting all that money that you can and putting it on one other card. Yeah. The snowball method has you put all your extra dollars toward your lowest balance credit card, right?

11:50And then avalanche has you do it toward your highest interest, which just goes along with this conversation. We, as coaches, want you to do whichever one makes the most sense with your budget this month, really. Because some months you might be able to throw$5 ,000 and get one complete knocked out. and we're going to want to do that so that you end up paying less interest and you're done and that's great. And then some months, all you can do is really tackle a very small credit card and just try to, and that's really how it's going to snowball into really good progress. But either way, that's why these methods are popular because we want you to always focus all your extra dollars on one credit card and get that one gone and then move on to the next one.

12:24Vanessa:And what we don't recommend is you splitting up the debt payments and going, okay, I'm going to put an extra 50 here, an extra 20 there, an extra 100 here. Don't do that. Pick one debt that you're going to tackle. Okay. And that's the one that you're focused on. If there are a couple savings buckets that you have to focus on, the wedding or something, we keep saying that over and over again. It has to be a high priority item that's coming up that you have to save for. So pick the one or two buckets that you need to save for, and you can put a little bit of money in there. But like Shana said, the majority of your money needs to go towards the debts, but the one, all the ones.

12:57Vanessa:And I giggled when you said that because I just had a session this morning. And we get that question a lot, right? We had paid$650 on her credit card already. And then this month, and then they had$1 ,492. And I said, Columbus sell the ocean blue. They had$1 ,492 left in their budget to pay this paycheck to pay on debt. And he's, oh, let's put it on my credit card now. He said, it's my turn. And I said, that's one option. But then also the other option is to continue to pay off the one that's lower that we started with. And then you can see that progress. And they did. They were so excited that that number was at like 9 ,000.

13:34And it's down like six. It's a high six, but it's on the six. It's so exciting to see it go down. And now they can focus on that one. And then that will be gone. And then that's a good feeling versus let me try to keep up staggering with the interest.

13:48Vanessa:That's not fun. I think this is an important thing to think about in the step, like the order of operations here, right? Right. So like Vanessa will always say, everybody wants to get right to the savings buckets. Everybody wants to get right to paying off debt. But the first step is to make sure, you know, like this lady we talked about, get your gas and groceries, your spending column figured out. Figure that out first. Then let's work on the savings buckets. And then once we feel like those are good, then let's go to paying off debt. And it's okay, because as you kind of alluded to, not or funding this is going to allow me to not put it on debt.

14:23So we are still in the debt category by not adding to it, by making sure that we're taking the steps that when these things pop up, we don't have to add the debt later. But it really, you know, again, if you want how to not live life and how to not be allowed to go to restaurants and how to live on rice and beans so that you can pay off debt, there's someone out there that you can listen to. Here, we want you to be able to live your life, to feel like you know what's going on with your money. And like I said, there's a step. Get your spending. Figure out your savings. then let's go hard on that debt, you know?

14:54Right.

14:55Vanessa:There's just like, there's a couple of steps you got to get to before all of this. And then we like to tell people, look, we know you heard the podcast, you heard all of our steps. You're so excited. You want it, you want it all tomorrow. Right. But unfortunately building the whole system isn't going to, it doesn't work that fast. It's not a quick fix. It is a lifelong change of how your mindset, your habits, all of that is how you handle your money. And that's, what's going to make you successful long-term. We're not just putting words and numbers on paper and calling in a budget. It's literally a whole different way that you handle your finances.

15:26Vanessa:And so being able to implement one part at a time, yes, it may not happen as fast as you want it to happen, but you're going to be successful longer. So the idea is you want to take your money when you get paid, divvy it up, figure out how much you're going to spend on groceries, gas, personal money, and then all that left over that you're just going to wait till the end of the month to use to pay off debt. You're going to actually pay off the debt right now. You're going to go and you're going to do it the second you get paid because you want to make sure that money isn't there. If you remove the temptation from your bank account, you're going to be less likely to stumble and you're going to be more likely to stay on course.

16:03If this is you, don't worry because it's all of our clients. That's why they come and work with us because they're just spinning in circles or whatever and they just can't figure it out. And when we make them do it, they're different. I can think of several clients where this is the case and they just want to wait till the end of the month are you sure you're sure you're sure and we're like no no right now though right now here's the thing too is we love to say

16:26Vanessa:we love math because money doesn't lie or numbers don't lie so you're sitting here doing the budget you're like you literally got paid this amount hey guess what your expenses were this amount which means you have this amount left over and so when you see that on paper and you hold yourself accountable and you're saying this is what i'm going to do then you have that money the money is there to be used for debt. That's the whole purpose. It's the whole reason why you're getting financial coaching. It's the whole reason why you're wanting to get on a budget and hold yourself accountable to only spending a certain amount of money.

16:53Vanessa:So when that money is there, put it on debt now. Yeah. A lot. Like when I started with one of my clients, if he saw money in the bank accounts, he thought he, it was to spend. And he's not like that anymore, but for sure, when we started, it's absolutely, you have to pay it right now because you're going to think when you see that the money's in there that it's available for you to spend. And it's not. And with another one of my clients, it was not that client, but the spouse that was the case. So one good thing about it is it removes the ability to spend it because you've already spent it. Right.

17:24So it really makes you accountable early on.