13. Future-Proofing Your Finances: Avoiding Debt Traps

WEBVTT

00:00:00.450 --> 00:00:05.919
Welcome to the Energetic CFO Podcast, where we empower you to take control of your financial future.

00:00:06.219 --> 00:00:10.140
I'm your host, Tiffany, an advocate for financial literacy and business success.

00:00:10.589 --> 00:00:17.989
In this podcast, we'll explore a wide range of financial topics from money mindset and budgeting to building wealth and achieving financial freedom.

00:00:18.440 --> 00:00:23.800
We'll break down complex financial concepts into simple, actionable steps so you can apply them in your own life.

00:00:24.250 --> 00:00:28.129
Whether you're a new entrepreneur or a seasoned business owner, this podcast is for you.

00:00:28.579 --> 00:00:34.530
Join me as we dive into the world of finance and discover the tools and strategies to help you achieve your financial goals.

00:00:34.979 --> 00:00:35.850
Let's get started.

00:00:36.299 --> 00:00:38.429
Welcome back to the energetic CFO podcast.

00:00:38.500 --> 00:00:40.130
I'm your host, Tiffany Vogel.

00:00:40.579 --> 00:00:43.179
And I have to say, I am so happy.

00:00:43.179 --> 00:00:44.630
We are almost done with winter.

00:00:44.799 --> 00:00:48.369
I am ready for some warmer weather to be done with hoodies.

00:00:48.539 --> 00:00:50.079
I'm always ready for hoodie weather, but.

00:00:50.439 --> 00:00:55.200
I'm ready for that to shift again and be able to like wear short sleeves and go outside.

00:00:55.200 --> 00:01:01.170
And our kids just love being outside and it just, it makes our life so much easier.

00:01:01.229 --> 00:01:10.920
And we're in the process of reworking our backyard so that the boys can go out by themselves and play on the playground, play in the dirt because they love to do that.

00:01:11.370 --> 00:01:15.859
And just be outside without us, you know, directly supervising them.

00:01:16.310 --> 00:01:17.540
It's like a new era for us.

00:01:17.540 --> 00:01:27.379
We, you know, our boys are still pretty young, so we're allowing a little bit more independence and allowing us to go cook dinner without screaming kids, yelling at us that they need something.

00:01:27.659 --> 00:01:29.349
So it's a great day.

00:01:29.379 --> 00:01:32.849
And then we're going to add a baby into the mix and it'll be easy for a little bit.

00:01:32.859 --> 00:01:36.189
Cause you know, babies don't move and then we'll have another toddler.

00:01:36.189 --> 00:01:38.090
So it's just a cycle.

00:01:38.540 --> 00:01:41.569
But we're absolutely loving it and just ready.

00:01:41.790 --> 00:01:47.310
I'm ready to open the pool, but I know we're ways away from that, but I'm so excited to be here today.

00:01:47.319 --> 00:01:50.609
We're going to talk about debt traps today and just debt in general.

00:01:51.060 --> 00:01:54.599
And I know we've talked about like good debt versus bad debt on a previous episode.

00:01:54.599 --> 00:01:56.370
So if you missed that, go check it out.

00:01:56.400 --> 00:01:58.469
But I want to talk about debt traps.

00:01:58.549 --> 00:02:01.109
So first off, what is a debt trap?

00:02:01.560 --> 00:02:09.939
I view debt traps as something that You take out debt, and then you get to where you're not bringing in enough money to cover that debt each month.

00:02:10.389 --> 00:02:15.270
So then you have to use more debt to cover the payments on the debt, and it's just this nasty cycle.

00:02:15.629 --> 00:02:30.310
I mean, you see it a lot, like, in payday loans, where someone will get a payday loan, and the interest on those things is so stinking high, and they wind up having to get another payday loan to cover the payments on that one, and then they get to the point where they can't get out of it.

00:02:30.759 --> 00:02:39.550
And I think it's interesting because like we know that example, but then we don't see that it also potentially happens in grander pictures.

00:02:40.000 --> 00:02:46.909
Using lines of credit, using a heel lock on your house, using credit cards 0 percent store financing.

00:02:47.210 --> 00:02:49.389
There's so many ways to get debt now.

00:02:49.590 --> 00:02:52.050
And honestly, it's like so easy.

00:02:52.490 --> 00:02:53.270
I mean, I know.

00:02:53.719 --> 00:02:59.900
People who don't have great credit and are able to get car loans, but they're at 15 to 20 percent interest.

00:03:00.349 --> 00:03:02.639
And it's how do you get out of that?

00:03:02.650 --> 00:03:04.580
Like it's, it's difficult.

00:03:04.590 --> 00:03:13.110
And then if you have a situation where the car gets totaled and you have to get a new car and you don't have gap insurance, like it's just a nasty, nasty cycle.

00:03:13.460 --> 00:03:20.259
So I want to talk about future proofing your finances so that you can avoid getting into these kind of debt traps.

00:03:20.280 --> 00:03:23.469
And if you're in one building a strategy to get out of it.

00:03:23.919 --> 00:03:29.599
So when Eric and I were building up our real estate portfolio, we didn't have tons of cash to invest.

00:03:29.960 --> 00:03:33.250
We didn't need a ton of cash with the strategy we were using, but we needed some.

00:03:33.659 --> 00:03:37.199
So what we wound up having to do was like take loans on our 401k.

00:03:37.650 --> 00:03:46.909
And it worked, we were able to buy the assets and Some of them, we were able to pull more cash out of the property than we put in it.

00:03:46.919 --> 00:03:49.599
So we were able to use that to buy more properties and it worked.

00:03:49.879 --> 00:03:55.110
But the problem we found is that we wound up where we were always kind of behind.

00:03:55.500 --> 00:04:04.669
We were never able to fully get ahead and use true cash and not debt through the 401k or credit cards or whatever we were using.

00:04:05.120 --> 00:04:18.810
And it got nerve wracking and We got into these cycles of, as we're finishing on a renovation project, because renovations seem to always go over budget and over time, we would get down to the wire.

00:04:18.860 --> 00:04:21.110
And I don't understand how we always made it through.

00:04:21.220 --> 00:04:25.100
I don't know if God just had his hands on us because we always made it through.

00:04:25.139 --> 00:04:30.629
We never missed a payment or had to be late on something for our mortgage or anything like that.

00:04:30.639 --> 00:04:40.970
But we would get down to the wire and as soon as the refi closed, we'd get a massive check, but it just disappeared to go pay off all the debt we had accumulated.

00:04:41.420 --> 00:04:44.550
And it's a cycle we're still working our way out of.

00:04:45.000 --> 00:04:49.430
And the way we're working out of it is through building up more active income.

00:04:49.550 --> 00:04:55.420
So it could look like flipping more houses or growing the CFO business.

00:04:55.439 --> 00:05:10.730
Or we have another business idea in the works that we're playing around with that I will announce once it's solidified but it's so hard once you get in it and it's something we have lived and breathed where we're maxed out to the nines there's no strategy after that.

00:05:10.810 --> 00:05:12.870
Like, there's no solution other than more debt.

00:05:13.319 --> 00:05:20.990
And, I've, seen people take cash advances in my CFO work to pay off their credit cards.

00:05:21.060 --> 00:05:25.410
So they're using a cash advance on a credit card to make a minimum payment on three other cards.

00:05:25.860 --> 00:05:28.579
And the interest rates on that is crazy high too.

00:05:28.600 --> 00:05:31.000
So, yeah, I just want to talk through this.

00:05:31.449 --> 00:05:34.379
So if you're not in a debt trap, how do you avoid it?

00:05:34.709 --> 00:05:45.860
I think it's having really clear grasp on your numbers and knowing exactly how much cash you have in the bank, how much you need each month for your monthly expenses and how much you have available for investments.

00:05:46.170 --> 00:05:47.790
And that way you're using.

00:05:48.175 --> 00:05:55.444
Funds that you truly have to make investment decisions or hiring decisions or whatever the thing is in your business.

00:05:55.894 --> 00:05:57.144
I mean, it's in real estate.

00:05:57.144 --> 00:06:03.134
It's so interesting because, you know, you plan for a certain budget and then things happen.

00:06:03.134 --> 00:06:12.564
Contractors mess up and you have to pay someone else to fix it or the project goes long or, you know, you tear down a wall and find, here's a fun story for you.

00:06:12.944 --> 00:06:14.355
Our fridge was falling apart.

00:06:14.754 --> 00:06:22.764
It came with the house and it was a great fridge, but all the plastic pieces in the door were falling apart and we've replaced half of them.

00:06:23.214 --> 00:06:24.425
We didn't want to replace the other half.

00:06:24.425 --> 00:06:32.444
We have an even better, nicer fridge out in our pool house that literally was like to hold beer and popsicles for the kids.

00:06:32.894 --> 00:06:33.584
And.

00:06:34.035 --> 00:06:42.855
It's a nice fridge and I'm like, why are we fighting this little rinky dink old fridge when we have a really nice one that we own that's just sitting there.

00:06:43.305 --> 00:06:46.745
So Eric hit the breaking point, decided he was done.

00:06:46.785 --> 00:06:50.535
So he maneuvers the fridge out, which if you've ever moved a fridge.

00:06:50.985 --> 00:06:51.725
It's interesting.

00:06:52.175 --> 00:06:56.375
The way our house is designed, it was not made for, like, large appliances to be moved.

00:06:56.774 --> 00:07:02.524
So he had to, like, take the doors off of the fridge and, like, yeah, it was a hot mess.

00:07:02.555 --> 00:07:05.425
But he finally gets the new fridge in.

00:07:05.875 --> 00:07:06.464
It's great.

00:07:06.495 --> 00:07:07.384
We love where it is.

00:07:07.384 --> 00:07:09.235
We've completely reorganized the house.

00:07:09.555 --> 00:07:10.254
We love it.

00:07:10.704 --> 00:07:15.425
The problem is where the old fridge was, the waterline was leaking and we had no idea.

00:07:15.875 --> 00:07:22.814
So the floor is caving in and I'm like, we have tile, like actual tile, not like LVT.

00:07:23.264 --> 00:07:25.855
And I noticed that the floors are a little wonky.

00:07:25.865 --> 00:07:34.915
And like sometimes when you walk past where the fridge was, the tiles would kind of like crack, not crack, like break, but like you could just feel them like, pivot a little bit.

00:07:35.365 --> 00:07:40.384
And now it makes sense because the floor wasn't level because it was falling through because it was soaked.

00:07:40.735 --> 00:07:44.415
So we tapped the water line, got it closed off.

00:07:44.865 --> 00:07:48.214
Our kids decided one afternoon that they wanted to peel up all the tiles.

00:07:48.214 --> 00:07:49.714
So like half the tiles gone.

00:07:50.095 --> 00:07:57.704
So we have this damaged sub floor and half the tiles missing, which it's in their water table because I don't know if they thought that was a good idea.

00:07:58.154 --> 00:08:01.334
And we're, yeah, we put the trash cans over it.

00:08:01.334 --> 00:08:03.095
So it's not like a big issue.

00:08:03.425 --> 00:08:08.595
But we've had like a fruit fly infestation for probably months now.

00:08:09.045 --> 00:08:12.814
I in first trimester left rice in the rice cooker.

00:08:13.264 --> 00:08:14.774
For like probably weeks.

00:08:14.824 --> 00:08:19.254
I don't know how long it was and we got a fruit fly infestation from it.

00:08:19.555 --> 00:08:24.214
That was their food source and we have been trying to catch up from that.

00:08:24.545 --> 00:08:29.964
Well, they started using the water from this leak as their water supply.

00:08:30.415 --> 00:08:37.134
So once we figured that out, our four year old comes up and says, Hey, dad, This is where the flies are coming from.

00:08:37.554 --> 00:08:40.004
So we realized like there's a hole into the crawl space.

00:08:40.365 --> 00:08:41.065
There's water.

00:08:41.095 --> 00:08:42.644
So the fruit flies are living off of that.

00:08:42.644 --> 00:08:44.475
And like, it has been an ordeal.

00:08:44.904 --> 00:08:52.245
So I feel like Eric's like this crazy man, like Jumanji style, like attacking fruit flies, but it is under control.

00:08:52.264 --> 00:08:53.735
We are finally fruit fly free.

00:08:53.835 --> 00:08:54.434
Feels great.

00:08:54.445 --> 00:08:55.784
Cause we just felt so gross.

00:08:55.784 --> 00:08:57.394
Like, Oh, there were just flies everywhere.

00:08:57.845 --> 00:09:00.975
We now have this like hole in the floor that we need to fix.

00:09:00.975 --> 00:09:07.674
And we're working to fix the sub floor, get new flooring.

00:09:07.825 --> 00:09:14.054
So all of us to say, we've lived in this house for two years and had no clue that the water supply was leaking.

00:09:14.504 --> 00:09:17.695
So we didn't do the floors in the kitchen when we bought it.

00:09:17.784 --> 00:09:20.445
We bought it right when our second son was born.

00:09:20.894 --> 00:09:23.794
We're trying to do like the bare minimum on the renovations.

00:09:24.245 --> 00:09:28.205
So had we done the floors then, we would have caught it and it would have, you know, we would have fixed it.

00:09:28.294 --> 00:09:34.825
But honestly, I'm glad we didn't do the floors then, because that would have just been a bigger scope in a time that we did not need more work.

00:09:34.825 --> 00:09:37.804
But this house is great.

00:09:37.865 --> 00:09:38.820
We love it.

00:09:39.269 --> 00:09:40.679
But we're still finding stuff.

00:09:40.779 --> 00:09:46.169
So when you're doing a project, there's going to be things that pop up that you just don't expect.

00:09:46.570 --> 00:09:52.559
Like recently Eric found that our whole guest room was built with plywood on the floor.

00:09:53.009 --> 00:09:54.710
So he had to rebuild the floors there.

00:09:54.710 --> 00:09:58.590
So that long story to say, don't get fruit flies.

00:09:59.039 --> 00:10:03.070
And You never know like what kind of unexpected expenses are going to come up.

00:10:03.250 --> 00:10:15.769
So having cash reserves is really important and making sure that you aren't in a spot where you're spending exactly how much you make or working to increase your income.

00:10:15.769 --> 00:10:22.039
If that is where you are, I have eight levels of wealth building that I can share in the show notes.

00:10:22.490 --> 00:10:27.269
It's just such a helpful tool to help you figure out like, what's the next step for you financially.

00:10:27.720 --> 00:10:30.240
And we start with just knowing your number.

00:10:30.250 --> 00:10:40.080
So like having clarity on your personal P& L what's coming in, what's going out, how much money do you need to sustain your family for a given month or year?

00:10:40.529 --> 00:10:44.220
And it's interesting cause you have to account for the unexpected stuff.

00:10:44.529 --> 00:10:50.440
The one off stuff like Christmas and birthdays that come, you know, they're coming, but they only come one month a year.

00:10:50.759 --> 00:10:54.100
So making sure that you're accounting for all of that and your number as well.

00:10:54.519 --> 00:10:57.250
So having that clarity, then we get to paycheck to paycheck.

00:10:57.250 --> 00:11:01.559
So you're covering your expenses and you're just breaking even every month.

00:11:01.629 --> 00:11:05.730
And then we have the next level where we're starting to build some reserves and have a little bit extra.

00:11:06.179 --> 00:11:13.679
So before you buy things for yourself, That are, I think a big thing is wants versus needs.

00:11:14.129 --> 00:11:15.620
Do you need a new cell phone?

00:11:16.070 --> 00:11:16.870
Probably not.

00:11:17.320 --> 00:11:28.529
I mean, it's nice to have a phone that can get on the internet and do all the things, but if that's going to cost you a couple thousand dollars or probably a thousand, is it worth it versus getting an older iPhone or something that's refurbished?

00:11:28.529 --> 00:11:31.700
Do you need a car that has all the bells and whistles?

00:11:32.120 --> 00:11:34.250
Or can you get one that's 10 years old?

00:11:34.700 --> 00:11:46.700
Here's Eric's done an example of when he feels the itch to get a new phone, he'll go buy a new phone case because the phone case is 30 versus a thousand, but it makes him feel like he got something new.

00:11:47.149 --> 00:11:51.659
And one of the things we've done with our vehicles, we have older cars.

00:11:51.700 --> 00:11:55.559
I mean, I think we're 2011 to 2016.

00:11:56.009 --> 00:12:00.159
In our vehicle ages, so 10 years old, roughly a little bit older.

00:12:00.610 --> 00:12:05.539
But the ones that are closer to 2010 don't have a great navigation system in them.

00:12:05.970 --> 00:12:13.789
So we just installed some aftermarket screens by we, I mean, Eric and we can connect into Apple.

00:12:13.860 --> 00:12:16.190
What is the Apple CarPlay or Android auto?

00:12:16.639 --> 00:12:29.259
I'm an Android girl, so I don't know the Apple sign, but we'll connect our phones in that way and it gives us the features that having a new car has as far as that technology without having the monthly payment to go with it.

00:12:29.679 --> 00:12:35.330
So are there ways that you can get the things you want in a more affordable way?

00:12:35.779 --> 00:12:39.779
I am looking to redo my office and add some new furnishings in.

00:12:40.230 --> 00:12:49.210
And I wanted to get these giant salt lamps that are like 30 pounds a piece and started looking into it and I mean, we can make it happen.

00:12:49.220 --> 00:12:53.070
It's not a big deal, but also we have plans to travel in the future.

00:12:53.070 --> 00:12:56.960
And as our kids get older, I don't know that we're going to stay in this house forever.

00:12:57.070 --> 00:12:59.110
And if I want to move with my things.

00:12:59.559 --> 00:13:06.690
Having an extra hundred pounds worth of decor, it's not super logical for the kind of lifestyle that we're thinking.

00:13:07.139 --> 00:13:25.269
So instead I'm pivoting to either some smaller lamps or potentially like some bowls or something different to get the same feel that I really want in having these giant salt lamps, but doing it in a way that fits our future lifestyle and is more affordable.

00:13:25.720 --> 00:13:41.960
So having a really clear picture of what's a want and what's a need, and then potentially on the wants, can you do something in tweaking it in a more affordable way to scratch the itch that you have without having to pay the full amount?

00:13:42.409 --> 00:13:45.019
There's, in stoicism?

00:13:45.120 --> 00:13:45.889
I think that's how you say it.

00:13:46.289 --> 00:13:47.769
There's the hedonistic treadmill.

00:13:48.210 --> 00:13:56.429
And this is where, We are constantly seeking pleasure and luxury and you get to the point where, okay, I really want this new thing.

00:13:56.429 --> 00:14:01.269
So then you get the new thing and then you want the next version of the new thing and then the next version of the new thing.

00:14:01.649 --> 00:14:09.929
And you are constantly trying to hit the next level of comfort and personal satisfaction that you can't get out of the loop.

00:14:09.929 --> 00:14:14.610
And it's, I mean, it creates this, that's, I think that's how we get in the debt trap.

00:14:14.980 --> 00:14:19.049
Just constantly seeking the next level of comfort, the next thing we want.

00:14:19.500 --> 00:14:32.850
And the problem is when you buy a new car, it's so exciting for the first couple months, and then you gradually get used to it and it just becomes part of your normal life and you lose the appreciation for it.

00:14:33.299 --> 00:14:37.919
I bought a little Lexus convertible probably like a year ago now.

00:14:38.370 --> 00:14:46.970
And I, for some reason, I just love this car and I have not lost the joy every time I get in it.

00:14:46.970 --> 00:14:48.840
I'm just like so happy to be in it.

00:14:48.840 --> 00:14:54.840
I don't know if it's because like compared to the minivan you just, yeah, there's something different about driving a little two door car versus a minivan.

00:14:54.919 --> 00:15:03.370
And I think what it is, is when I'm driving the Lexus convertible, whether I have the top down or not, I am going to do something for me.

00:15:03.784 --> 00:15:06.625
For the most part, I'm going out to exercise.

00:15:06.625 --> 00:15:07.884
I'm going out to get a massage.

00:15:07.884 --> 00:15:13.544
I'm going out to, even if it's running errands, it's generally something for me and I don't have kids with me.

00:15:13.995 --> 00:15:26.745
So I think it's probably the feeling of, you know, when you get your driver's license for the first time and you're out in the car and you're like, I can go anywhere in the world, well, anywhere that's drivable.

00:15:27.195 --> 00:15:29.695
And like the sense of freedom you get from that.

00:15:30.029 --> 00:15:38.700
I get that every time I get in the So, how can you create that feeling with the things that you have instead of just getting caught in the Monday?

00:15:39.149 --> 00:15:43.220
So, I've been talking a lot about avoiding the debt trap.

00:15:43.220 --> 00:15:44.399
I think it's all mindset.

00:15:44.850 --> 00:15:53.700
And being happy with the things you have until you can afford to really make the purchase for the thing that's that next level.

00:15:54.149 --> 00:15:56.700
I think really having a clear understanding of interest rates.

00:15:57.149 --> 00:16:00.129
We, I mean, we have a ton of debt through the real estate.

00:16:00.210 --> 00:16:03.419
And it is insane to me.

00:16:03.870 --> 00:16:06.529
Our mortgage on our personal residence is like 7 or 8%.

00:16:06.980 --> 00:16:12.210
And the payment on it is so much higher than we had on our other house that was a 3 percent mortgage.

00:16:12.659 --> 00:16:19.960
And like, obviously, logically, it makes sense, but It like doubles the price that you're paying with that interest rate.

00:16:20.409 --> 00:16:26.889
And part of the debt trap is you're paying so much of your money towards interest, especially early in the loan.

00:16:27.190 --> 00:16:29.769
So when you buy a loan, that's amortizing.

00:16:29.779 --> 00:16:33.679
So that means a part of the payment goes to principal and a part goes to interest each month.

00:16:34.129 --> 00:16:42.157
When you're first making payments on that loan, 80 percent of that payment is going towards interest, and then roughly 20 percent is going towards the loan pay down.

00:16:42.157 --> 00:16:48.580
And as you get further down, and let's say it's a 10 year loan, so lots going to interest.

00:16:48.809 --> 00:16:52.429
Halfway through, you probably have like a 60 40 split.

00:16:52.879 --> 00:16:55.149
And then towards the end, most of it's going to pay down the loan.

00:16:55.600 --> 00:17:07.680
So when you're buying a new car every couple years and you're not paying it all the way off, you're just constantly paying money towards interest and not really tackling the balance of the loan.

00:17:08.099 --> 00:17:15.700
So the longer, if you do have debt, the longer you can keep it before you move on to the next upgrade, the better it's going to be for you.

00:17:16.150 --> 00:17:18.160
We talk about this in real estate circles.

00:17:18.410 --> 00:17:29.119
When you're buying a property and taking over the existing mortgage, there's a difference in a mortgage that's been around for three years versus a mortgage that's been around for 10 years or 15 years.

00:17:29.569 --> 00:17:33.289
Because the percentage of that payment is going towards the loan pay down.

00:17:33.740 --> 00:17:38.039
So, one of those nuances in finance that's not common knowledge.

00:17:38.400 --> 00:17:46.170
If you pull up an amortizations table, you can use chat GPT to do it and just enter in, you need five inputs.

00:17:46.619 --> 00:17:49.119
When is the mortgage, originated?

00:17:49.569 --> 00:17:50.910
How many months was it?

00:17:51.359 --> 00:17:52.869
That's gonna get your time factors.

00:17:52.880 --> 00:17:54.400
So that's one of the metrics.

00:17:54.849 --> 00:17:56.160
The original balance.

00:17:56.490 --> 00:18:01.640
The interest rate and the monthly payment and ask it to build an amortization table.

00:18:02.089 --> 00:18:12.380
If I missed anything, it'll probably ask you for the additional information, but get that amortization schedule and look at the ratio of loan pay down to the interest pay down.

00:18:12.829 --> 00:18:19.549
And you'll see, as you get further down in the years or months, you're paying more towards the loan.

00:18:20.000 --> 00:18:22.089
So it's really important to have clarity on that.

00:18:22.539 --> 00:18:25.230
The same goes for loaning money.

00:18:25.680 --> 00:18:30.750
Interest is such a powerful tool, and I think Einstein called it the eighth wonder of the world.

00:18:31.009 --> 00:18:34.569
When you are paying interest, it is hard to get ahead.

00:18:35.019 --> 00:18:39.289
But when you're earning interest and compounding, it is such a magical tool.

00:18:39.670 --> 00:18:47.119
The more that you can loan and be the bank versus being the borrower, you'll get further ahead in life.

00:18:47.569 --> 00:18:51.809
So how do we avoid getting into a debt trap?

00:18:52.259 --> 00:19:00.200
It's having clarity on the numbers, having an emergency fund, having a gap between your personal income and spend.

00:19:00.519 --> 00:19:10.789
And if you are in a situation where you're just breaking even each month, finding a side hustle or a way to increase your income in some way, or reduce your expenses.

00:19:11.240 --> 00:19:14.630
One thing we've realized is we eat out a ton.

00:19:15.079 --> 00:19:16.819
And I don't think we've really noticed it.

00:19:17.170 --> 00:19:20.849
So we've been working to just pivot a little bit.

00:19:20.859 --> 00:19:28.240
Like, we had a coffee hangout with a friend the other day, and instead of getting a 15 breakfast burrito, like, what the heck?

00:19:28.269 --> 00:19:30.500
When did breakfast burritos get that dang expensive?

00:19:30.950 --> 00:19:36.180
So instead of dropping an extra 30 on breakfast, we're like, let's just wait until we get home.

00:19:36.630 --> 00:19:46.640
Now, pregnant lady here, I got a muffin because I wasn't going to be able to make it that long, but You get the ideas, like just thinking a little bit ahead of, do I need to take a snack with me?

00:19:47.069 --> 00:19:50.150
And then making the decision to eat at home has been huge.

00:19:50.500 --> 00:19:55.380
I mean, we've cut our credit card bill by like 3, 000 and I don't think it's all eating out.

00:19:55.380 --> 00:19:57.630
I think we've stopped spending a ton on Amazon.

00:19:58.079 --> 00:20:03.700
Whew, it hurts when you look at that Amazon account and see what you spent for the year, but we just have made some small shifts.

00:20:04.150 --> 00:20:05.640
So we don't even really feel it.

00:20:06.089 --> 00:20:24.339
And we still go out for a date night and things like that, but we're focusing on if we're going to go out to eat or spend money on something, we're making sure that it's something that really makes a difference and makes us feel good instead of just swinging by and grabbing Chick fil a on the way with the kids because it's just easier than packing a PB& J.

00:20:24.789 --> 00:20:31.630
So getting really clear on your finances, increasing your income, reducing expenses, things like that.

00:20:31.680 --> 00:20:33.529
Building your emergency fund.

00:20:33.869 --> 00:20:38.670
So having access to cash or cash readily available.

00:20:38.789 --> 00:20:55.069
And if you have a situation where something comes up and you leverage something like a line of credit or some debt financing to make that happen, just making sure that you have a clear plan on how you're going to pay that off and not just hoping that something will work out and you'll have the income.

00:20:55.069 --> 00:20:57.900
Now if you're in a debt trap.

00:20:58.349 --> 00:20:59.380
How do you get out?

00:20:59.779 --> 00:21:01.299
It's a scary place to be.

00:21:01.329 --> 00:21:04.839
And Eric and I have been in one to the point where we had to make a decision.

00:21:04.869 --> 00:21:07.230
Are we paying school for the boys this month?

00:21:07.250 --> 00:21:08.460
Or are we going to pay the mortgage?

00:21:08.910 --> 00:21:13.960
And fortunately, our refinance closed on the day that we needed it to.

00:21:14.390 --> 00:21:18.269
Part of that was me telling the lender, like, if you can't get this closed, I'm going somewhere else.

00:21:18.289 --> 00:21:20.819
Because it was a long process.

00:21:20.869 --> 00:21:26.809
Especially DSCR lenders, you have to lay down the hammer and say, well, no, we're closing and somehow they get it done.

00:21:26.819 --> 00:21:27.410
It's amazing.

00:21:27.859 --> 00:21:33.849
So avoiding how to get out of that it's, I think it all comes down to having a plan.

00:21:33.849 --> 00:21:40.759
So I'm, I'm a huge fan of Dave Ramsey in certain situations, and this is one of those situations.

00:21:41.210 --> 00:21:44.559
I don't think all debt is bad, but I think consumer debt is bad.

00:21:44.980 --> 00:21:52.240
So laying out all of your debts and the interest rates, and there's two schools of thought.

00:21:52.289 --> 00:21:54.150
You have the avalanche and you have the snowball.

00:21:54.599 --> 00:21:57.559
So the snowball method is what Dave Ramsey teaches.

00:21:58.009 --> 00:22:01.440
So you're going to take the ones with the smallest balances and pay them off first.

00:22:01.890 --> 00:22:06.140
And avalanche is paying off the ones with the highest interest rate first.

00:22:06.589 --> 00:22:11.940
So this is one of those where money is not necessarily a hard black and white math thing.

00:22:12.390 --> 00:22:16.410
If you're looking at it from a hard black and white math, doing the avalanche makes sense.

00:22:16.529 --> 00:22:20.180
Pay off the highest interest and then you'll have more money to go towards the other debts.

00:22:20.630 --> 00:22:24.740
The problem is a lot of times those higher interest things are bigger balances.

00:22:25.190 --> 00:22:34.904
And if you're working your butt off to make extra income and to pay off this debt, and you don't feel like you're making progress, you're going to get discouraged and potentially just give up.

00:22:35.355 --> 00:22:43.525
So the idea is start with those small balances, you know, the Kohl's credit card or the, I don't know, at home, Sears came to mind, which I don't know why Sears came to mind.

00:22:43.535 --> 00:22:45.545
Like no one shops at Sears even around.

00:22:45.565 --> 00:22:46.555
I don't even know if they're still around.

00:22:47.005 --> 00:22:53.015
But pay off those small credit cards first and then use the momentum.

00:22:53.194 --> 00:23:01.795
So what you were paying towards that Kohl's card or at home or rooms to go or whatever it is, as you're paying that off, take that payment and apply it to the next.

00:23:01.795 --> 00:23:12.615
So then you're just continuing to make a dent in the debt and you get those small ones, but if you're not covering your basic expenses each month, there's not really an easy way to get outta debt.

00:23:12.615 --> 00:23:18.855
So a lot of times it's an income problem or an expense, personal expense problem, but it's just tackling it slowly.

00:23:18.855 --> 00:23:19.650
One debt at a time.

00:23:20.099 --> 00:23:24.380
And just having faith that continuing to do the work you will get there.

00:23:24.829 --> 00:23:29.910
I think it's also really important as you're thinking about this to avoid lifestyle inflation.

00:23:30.359 --> 00:23:39.700
I think back to my college days and like some of the restaurants we eat at now would have never been a thought of somewhere I would eat at in my college days.

00:23:40.150 --> 00:23:41.589
And that's lifestyle inflation.

00:23:41.680 --> 00:23:44.210
As we get older, we want nicer things.

00:23:44.660 --> 00:23:46.150
But how can we avoid doing that?

00:23:46.150 --> 00:23:52.390
So that's going back to like avoiding getting into a debt trap.

00:23:52.410 --> 00:24:05.829
But if you feel like you have had lifestyle creep, which we, we have been reigning it in, like I said, with the eating out and things we're just shifting our mindset a little bit and trying to get more into maybe the early twenties, not college.

00:24:05.839 --> 00:24:06.039
Cause.

00:24:06.424 --> 00:24:07.994
College was chaos.

00:24:08.444 --> 00:24:18.704
But trying to cut back on some of our spending to bring that lifestyle creep in is another way if you're in it to just look at your expenses, see what you're spending money on.

00:24:18.815 --> 00:24:25.075
I also love Ramit Sethi's approach of he has a conscious spending plan that he uses.

00:24:25.525 --> 00:24:30.674
And what he likes to teach is making sure that you're spending money on the things that actually make you happy.

00:24:31.125 --> 00:24:38.855
And if buying a Starbucks every day, is like the brightest point of your day and it just makes you so happy, great.

00:24:39.164 --> 00:24:40.384
Keep buying the Starbucks.

00:24:40.734 --> 00:24:52.755
But if you're buying a Starbucks every day because you're just frenzied and chaos and I think I've talked about this before, but Eric used to buy a coffee and a plain bagel with cream cheese at Dunkin Donuts every morning.

00:24:53.065 --> 00:24:55.184
And he was spending, I want to say it was like seven or eight dollars.

00:24:55.184 --> 00:24:58.244
This was years and years ago before the crazy inflation.

00:24:58.694 --> 00:25:02.085
And I asked him, I was like, why not just keep?

00:25:02.535 --> 00:25:11.315
A toaster, and some bagels at your desk, and some cream cheese, and you have a Keurig, so it's not like you're working hard to make a cup of coffee.

00:25:11.765 --> 00:25:22.345
So what if instead of stopping at Dunkin Donuts and spending 15 minutes in a drive thru line, you just went to work and popped it in the toaster while you're checking your email, and make your own?

00:25:22.795 --> 00:25:24.714
So it actually saved him time and money.

00:25:25.164 --> 00:25:27.164
So like, what are the shifts like that you can do?

00:25:27.234 --> 00:25:37.625
What are the things that you can buy the phone case instead of buying the new phone that will help you feel like you're getting that little bit of gratification without having to spend a ton of money?

00:25:38.075 --> 00:25:47.095
And if you are in a debt trap or feel like you're on your way to a debt trap, and there's something you have questions on, or you'd like to chat with me about, please reach out.

00:25:47.095 --> 00:25:47.944
You can schedule a call.

00:25:47.944 --> 00:25:52.855
We can chat about, how to avoid this and like, what's the best strategy.

00:25:52.865 --> 00:25:54.894
So this is stuff I love.

00:25:55.345 --> 00:26:02.914
And in a weird way, when I have debt that I'm paying down, like student loans, we've had student loans for a long time.

00:26:03.365 --> 00:26:09.255
I love making that debt payment every month because I see that it's making a dent in the balance.

00:26:09.704 --> 00:26:21.234
And I just want to say, like, can you potentially shift your perspective around your debt payments A burden and something you don't want to do to a step closer to reaching your goals.

00:26:21.684 --> 00:26:28.025
So if you have questions or thoughts on this, please feel free to reach out Tiffany at energetic CFO.

00:26:28.025 --> 00:26:28.494
com.

00:26:28.944 --> 00:26:31.484
And I think that's it for today.

00:26:31.494 --> 00:26:33.585
So look forward to hearing from you.

00:26:33.994 --> 00:26:42.035
If you think this podcast episode will help someone, please, please send it to them, give us ratings, reviews, all the things that you can do to help us grow.

00:26:42.484 --> 00:26:43.575
I think, yeah, that's it.

00:26:43.585 --> 00:26:46.464
So, see you next time, and I hope you have a great rest of your week.

00:26:46.720 --> 00:26:50.420
Thanks for joining me on this episode of the Energetic CFO Podcast.

00:26:50.829 --> 00:26:53.519
Remember, small steps can lead to massive rewards.

00:26:53.920 --> 00:26:58.819
By taking action, staying disciplined, and seeking knowledge, you can achieve your financial dreams.

00:26:59.269 --> 00:27:02.920
If you enjoyed this episode, please be sure to share, like, and subscribe.

00:27:03.210 --> 00:27:05.660
And don't forget to leave a comment with your thoughts and questions.

00:27:06.099 --> 00:27:09.769
Until next time, keep learning, keep growing, and keep thriving.