How to Decide Between Paying Off Debt or Building Your Savings | 572

0:01Okay, Vanessa, it's time for another Q &A session. ready and just so you guys know budgetbesties.com forward slash ask you can get your actual questions answered so we're going to do this it's like lightning round style like there's no prep we're just going to see what what we think we're going to come up with 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 do you want to get debt free but you don't want to live on beans and rice when you don't want to give up this pumpkin spice latte if you don't already know out of budget or if you're using credit cards to get through the month.

0:35If 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 Shana 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 you do with their money. In 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.

1:10We want to help you take the guesswork out of your budget, improve your marriages, and even bring your kids in on a conversation. We can help you no matter where you're at, whether you're the single mom who's never had$500 in their savings account or the millionaire who's paid off four real estate workers. 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. The first question on The Price is Not Right is, how do you decide whether to put extra money into savings, buckets, or pay off debt?

1:44Yeah, so again, remember we do nothing cookie cutter, okay? So every single person's budget is different based on their goals, what they have going on, the season of life they're in, and everything. So let's talk about your savings buckets really quick. If this is you and this is your question and you have savings buckets, you're going to need to fund the immediate emergent savings buckets. Let's say it's about to be summer, okay, before this airs. And you know you have summer coming with trips and summer camps and all this stuff maybe for the kid that's already preplanned. Well, you need to figure out how much is absolutely non-negotiable that you need to fund to be able to make that happen.

2:23You may not be able to fund all your savings buckets, but you have to fund the immediate ones, the important ones. That also goes along with annual bills. Annual bills, even though it's annual, they're just as important as monthly bills. Yes, still a bill. So you really need to look at your savings buckets and decide which ones are the most important before you decide what you're fully going to fund, savings or debt. And I have more to say, but I know Shana does too, so we'll go back and forth. Yeah. The first step here is to see how much extra you have to do anything with in your whole budget life, right?

2:59Hey, you may not have any extra to do either. Yeah. To do either. Well, you may not, but either way, you want to see that number first. So once I've funded my regular life that is sort of non-negotiable, right? We know we all have a different version of bougie on the budget. So whatever that looks like for you, what does that look like? And then let's say you have$2 ,000 left over and it's showing you on your budget. like I've paid my debts, I've paid my bills and I paid all my spending that I want to, I want to plan for. Okay. So now I'm going to, like Vanessa said, I'm going to see what do I cost in a year that is non, again, non-negotiable.

3:31What's coming up? What do I need to do with my, what do I want to do and need to do? Whatever version of that is for you. And then what, and it takes a minute, but you plan out your year, you plan out your savings. and maybe if maybe your full life saved every month is only fifteen hundred bucks a month like you if you're setting aside between christmas and vacation and annual bills and all of that is only fifteen hundred and you still have five hundred dollars then you know for sure you can put five hundred dollars toward debt right so that's a really easy scenario it's not usually that simple right so some of you might decide i'm only doing the bare minimum savings buckets because i want to get out of debt.

4:10That is the most important thing to me. I know that if I can hold my breath for six more months, I'm going to get all this money back in my budget and then I'll be able to do every saving bucket I ever wanted. Right. And that's a decision you're going to make. We, you know, Vanessa had a client that decided the opposite. She didn't want to pay off that last debt. She wanted to fully fund her savings buckets to the max life. Right. And that's what she decided. So it is like Vanessa said, it's not a cookie cutter decision. But it does start with looking at the math and really planning your year.

4:38Because if you're not, if you don't do that, then you can't say, okay, right now vacations are not as important to me once I see how much they cost as paying off debt. Or on the other hand, you might say that they are and paying off debt, it's just going to have to wait. But you need to know your numbers before you can make any of those decisions. Yeah. And you may have, you may be looking at your debt and saying, okay, when was the last time I renegotiated or even asked if I can have lower interest rates or lower payments, You can get our DIY Debt Relief workbook at budgetbesties.com forward slash DIY Debt Relief.

5:08It has all the scripts and everything in there for you to look at if that's something that you want to tackle. At that point, maybe you reduce your payments, which we've had this happen, by$500 a month. Okay, now you have$500 back in your budget, like Shayna said, on top of maybe that$2 ,000 that you already had extra. So now you can do so much more with it. So you really just need to come at it at all angles and decide, okay, I say I have this extra money left over. But what could I really have if I just put a little bit of time and effort into trying to get my debt payments lower? Maybe you haven't recorded your auto insurance in a long time or your phone bill, your internet bill.

5:41And then like Shana said, reassess your savings buckets to go, what do I really want to make sure I fund right now? But then the other question, like Shana said, is what is important to me? Do I even want to be paying off debt? Am I okay making minimum payments or do I want to be funding my savings buckets? So it just all It all depends on the season of life you're in, the situations that you're in, and what is truly important to you. Yeah. And so if you mean in this particular instance that you're getting extra money from like a bonus or a tax return or something like that, and what should I do with it?

6:10That's still a similar question. You're still going to put it in your budget, and you're still going to see what's left over. But if you have a regular budget and you feel like I've kind of got this down, I've got the savings buckets that I want, I've got my spending figured out, I've got my bills paid, I'm a paycheck ahead, whatever, all of that. and then you get some extra money. So then we're going to do the same thing. What is most important to me? Is it more important to me to get these payments out from underneath me to get more money back in my monthly budget so I'm willing to sacrifice a little bit more savings?

6:39Or is this the one time if I use this money, I know we'll be able to go on vacation without using debt and I want to? Or I had a client that it was her son's senior trip that they wanted to take as a family to go to Glacier National Park and they split the bonus between paying off debt and they they talk about a bougie they've spent five thousand dollars going like backpacking in a national park i'm like so which is like expensive but not right so but they split it right um and they did a little bit of both because they they they were able to but they the first priority for them was that vacation and then everything else that they could do with the money was great uh you know it was bonus on top but they they funded that first and you might have some savings buckets that have to get funded that way that are only coming from bonus checks, commission, stuff like that.

7:25And so then you just want to go down the list and see what do I want to fund? And if there's anything left over, then I'll put it towards debt if that's something I want to do. Yeah. And remember, if paying off debt is one of your goals, then you will have more money in your budget once that debt is paid off or lowered at least, right? So I had a client who put like$28 ,000 on one credit card because they got that cash and that brought their payments down two pennies a month compared to what it was. So that starts the domino effect to them, for them and their budget of having that extra, that snowball so that way they can start now paying off more debt because they're fine with their savings buckets right now.

8:02So just, you just got to see it as a whole. It's time to enter your coaching era because making good money should feel like making good 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-hour support, you can text and email. So you're never stuck wondering what to do next.

8:39Together, 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. 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. Okay, Vanessa, you ready for the next question? Okay. Hey, ladies, I'm so glad I found you. We're glad you found us too, girl. Yes, girl. Okay. My question is how do you know if it's a spending problem or an income problem?

9:13We only have about$1 ,000 to $2 ,000 every year out-of-pocket medical deductibles debt. Our mortgage is 45 % of our income. Whoopsies. Monthly is$6 ,800. We're going on kid number eight. Whoa, whoa, whoa, whoa, whoa, whoa. They're going to have such fun Christmases. Yes. And it seems impossible to get any savings account or separate money for spending and other just life things? Any advice on how to get out of the paycheck to paycheck living? Okay. Well, the first thing I'll say, and probably the lie that people tell themselves, is that I can't separate my money because there's nothing there. I can't separate my money because I don't know how, because I don't see the money, and I don't know how to get it separate.

9:59You're spending the money throughout the month anyways, right? So you're buying groceries and gas, even if you don't go out to eat at all. and that's all you have is gas and grocery money. You're still spending it. So for that, I would say, because you said it seems impossible to get any savings or separate my money. No, absolutely open up that second account, immediately put money in there to be able to make that happen for yourself. Because when you can see that separation and you know your bills are being covered and you have the money for spending, I will say that is gonna be, because there's a couple different questions in here, but I wanna hit that one first.

10:28I think that is really gonna be helpful for you and your family, especially a family of 10. I'm assuming, right? So you have eight kids and a husband and wife. So you need to be able to know what you can spend on your family and know that your bills are being covered. Yeah. My advice is to put your kids to work. Like you have so many of them. Truly some of them can start working. No, I'm just kidding. I think this comes back to something that we've talked about before, which is let's be realistic. Let's be realistic. If we have eight kids and I'm assuming, which might not be correct, we have one income, but that might not be correct.

11:03But that, like, our choice in life is a big family, and that's our riches. And maybe there's not a lot because they're expensive. Just to feed them is expensive. You know what I mean? Maybe they need to grow their own food. That's what I'm going to put them to work. Science project. No, I'm just kidding. I had a client. She had a$1 ,000 grocery budget with three kids and a husband and her. Love them all. And they're, like, from Oklahoma. Like, they're not, you know, they're going to eat. You know what I'm saying? They're not, like, eating on salads. Okay? Anyway, I was like, girl, that's not enough money to feed a family of five.

11:36It's just not. And I think a lot of times we're stuck in this, like, it's me. I could change the numbers versus the reality of life is expensive, right? And so that's the first thing I would say is let's be realistic with how much you're actually going to be able to save while you have eight kids in the house or going on eight kids in the house. Maybe the savings years are coming when some of them graduate or maybe it's just not. It's kind of the season that we're in. The other thing is you pointed it out so you know that 45 % of your income being going to a house. Now, this is what I'm saying.

12:10We've chosen the richest and the luxury and the love of eight kids. They probably need a big mortgage, right? But that's the choice we're making rather than or that's the bougie that we are being rather than some of the other things that maybe other people are saving for. We're just living with all of our money, and we have this beautiful house, and it's the most fun ever, this fun family of eight or 10. And that's your choice, but you have to be realistic with that. We're not going to have eight kids and half of our income is going to a mortgage and all of these savings buckets. It's probably not going to happen for the most part.

12:43It could, but it may not be as realistic. Yeah, so the more I think about this when you say, how do you know it's a spending problem or an income problem, you need to do – I don't know if you have our simplified budget system. If you don't have it, I would definitely say invest in it. It's going to be a game changer for you and your family as you're trying to set everything up. But you have to plan out your year and say, how much do we cost as a family on average for a year? Put that in your budget. If that is not working now and be conservative, OK? So we say this, where you already know things are feeling a little tight.

13:13When you make your savings buckets planner, be conservative and say, this is truly what we cost. This isn't like all the lavish vacations we want to take or lavish Christmas presents we want to buy or whatever. This is really, truly. The kids can make all their Christmas presents. Yes, everything is handmade. Okay, I've got all the ideas. All handmade, yep. But you know, what are we costing in a year? Put it in your budget on a monthly basis. Remember, take those savings buckets, divide it by 12, you put it in there. If you can't afford your life on what your budget says, then it might be an income problem.

13:42But like Shana said, you have a big house. You need a big house. But at the same time, you're not maybe going out to eat all the time and you're not going to Starbucks and buying fun things at Target where, you know, we have the house and the kids are playing there and that's fantastic. And that's where your money is being spent. But you really need to look at everything as a whole and decide, can you afford everything on paper? And the one other thing I'll say about your groceries and your spending, make their realistic budget. Like Shana said, if you're trying to live off a family of eight and your grocery budget's like$1 ,500, that's not going to cut it.

14:14So figure out how much you are spending and how much you absolutely need to spend in your spending column of your budget so you can feel good knowing that it's not a you problem, it might be an income problem. Yeah. And like Vanessa said, so if you don't have our budget, you should get it. But if you don't know, we have a free printable version that is like the bare bones of it, but it will get the first draft of the job done, which is at budgetbesties.com forward slash budget template. You need to get all your numbers on paper, whether or not you, maybe you have, maybe you haven't. But what you need to look at is all of your bills.

14:48So you have a lot of knowledge already. You know how much your deductibles are. You know how much your mortgage is 45 % of your income. So maybe you've already done this. But the bills, you need to see what can be discretionary about the bills, right? And then you do need to separate. Like Vanessa said, you're spending money. You have to spend money. You have to buy grass. You have to buy groceries. You have to spend money somehow. You need to see what that amount is and you need to separate it. and then you can, this will help you to start like streamlining what's really happening in there. And then once it's all on paper, obviously, then you'll be able to see if you have any money to put towards savings buckets or not.

15:23But you need to be realistic. A lot of times we're doing this in our head. I just can't see it. I don't, I don't think we have this. I don't, and we need to put it on paper and really see. And then you'll know if it's an income problem or an expense problem, or maybe we don't need all these subscriptions, or you might just see like, look, it's tight. And that's where it's at your income's only going to go up that's that's the trend the older you get the the income goes higher so that's a good thing yeah um and then eventually like i said those kids will start like um marrying off and you know and bringing you back presents of money and food to to afford all the rest of it because you know it's only eight now look i was at okay i'll just side tangent here i was at church the the family already has um they already have seven kids okay so they have one girl and six boys and then this person that had just come for easter she's like she's pregnant again it's like yeah she's been pregnant for a minute but it's a it's a it's a girl and so but so they're gonna have eight what do you think the odds of that being the last one i don't think it is maybe it's not for you either uh so you know whether or not they graduate or not i don't know but it's lovely but we just again we we know that you're gonna make more money how much you spend is going to go up and down.

16:38But hopefully that will give you a little encouragement too. Well, and you're making the most amount of money you're ever going to make right now. You're ever made right now. And then next year it's, oh, you're making the most you're ever going to make. And then you just keep going from there. It just keeps getting better. Like Shannon said, so your situation is going to get better. But again, I really think you just need to sit down and truly make a budget for the whole year on a monthly basis, okay? Which means take your savings buckets, divide it by 12, put it in your monthly budget, see how much you truly cost.

17:04If you can't afford your life on a monthly basis, then something has to change. So hopefully those answered your questions, guys. And if you have one, don't forget to go to budgetbesties.com forward slash ask. And we look forward to answering your question on the next podcast. If you make good money but have nothing to show for it, this quiz will help you figure out what's really going on with your money and what your next step should be. You'll get a personalized result and a simple action step to help you feel more organized and less stressed. Go to budgetbesties.com forward slash quiz and take the free quiz today.

17:35That's budgetbesties.com forward slash quiz to find out what's really going on.