How to Work with Your Debt
Forty seven thousand dollars in student loans is incredibly daunting I get it I see that number all the time but six hundred dollars a month is manageable so where can I find six hundred dollars a month to pay off my student loan on my credit card and really think about what can I do to change the reason I got in here and maybe this is a reality check that I have got to earn more money to pay off this debt there are some also credit unions and we're going to talk a lot about banks and credit unions that could lend you this money to pay off the debt working with a credit union committee really wonderful experience because it's a fixed rate no of you either of you had experience with credit cards uh yeah I have a credit union and I have a credit card and I'm almost credit card debt free great how did you pay that off? Um uh well first I have to credit cards one I made a plan for and set up on automatic payment every month and then eventually just paid itself off and the other one did you...
still use the credit card I actually caught my credit cards how did that feel to cut it up I do it immediately I got into bad credit card debt when I was really young and then from then on I just wanted to be like credit so I cut the credit cards and the night I have to make really conscious purchases generally so it's, you know, I actually have to put find the two pieces and put them together and the number of someone you really gotta want the purchases where I really have to, I can just, you know, go out to you and say, I'm going to put it on my credit card, is that something that would get me in trouble generally, but my the how I got, how I basically just paid off my debt was, um was a freelancer. I came into more money than I usually do, and then I just decided to put it all towards my okay, that to payoff to not accrue more interest, but along with what you're saying, I think one of the questions I came up earlier and I think it's really important and something to think about, at least for me, is, um having to save some money, even though you are in that. How did that feel when I said that teo it's something that I've always wondered it's twice do I saved? I pay off my debt because if I don't pay it off, that I'm actually owing more money because it's building an interest so it's is saving even worth it because the savings are I'm actually losing money by screenings you know and that's such a good point I mean, the way it is, we're really gonna talk about this, but if you have an extra four hundred a month again, three hundred of it is going to go towards debt and then one hundred toward savings, so we are going to focus on paying off the debt but start building up that savings. I just I pay everything these days, um, through my debit card, and I've just been better over time of having separate accounts for every single thing and just getting away from the shiny american express thing like, oh, you got all these points and tata and for many years I would actually look at what the point you got me at the end versus what they charge you just to be a member, I'm on top on top of if you don't pay the balance off every month um, what does that cost you? So, you know, three hundred four hundred dollars and gift cards that I could get through on light given marketplace really doesn't equate tio two hundred fifty dollars annual fee plus, right whatever interest this plus the fact that your pain, you know, fourteen hundred dollars, yeah in interest and that's my money right way and by the way, eighteen percent I wish I got eighteen percent return on my money you know it's interesting what I didn't even bring up here but I am I'm such don't say hate but I am not a fan of department store cards and just even the the store cards like you go to express or you goto you know any of these stores which I love to shop but those stores too and they say, well if you open a car today you're going to get ten percent off okay? So maybe I'm saving forty dollars if I spend four hundred or maybe I'm saving seven dollars if I spend seventy five so the forty dollars that I think I'm saving or the seven dollars I think I'm saving is actually costing me fourteen hundred dollars because again I look at so many peoples different habits and so the clients that I've seen that I've gotten into trouble when I look at their credit report which will talk a lot about in a few minutes after the break the credit report which doesn't lie that's what the lenders you're looking at macy's victoria's secrets express gap it's just a habit I see that when people tend to accumulate a lot of credit card debt, it tends to be from stores like this because it's easy to just spend unconsciously and it's also you think you're saving but you're not you're actually getting yourself into trouble the only one that I've seen that you're right about that I agree um nordstrom actually they always ask you and they actually allowed me to connect it with my debit account okay so that I get the point but it's coming straight from my dad and when and can I use credit cards for everything? So we're going to talk a lot about what we talked about budgeting how to use credit cards safely smartly consciously it's just more that if the credit cards are engulfing you if they're keeping you up at night if you cannot get past paying off your credit card debt you got to think about how can I stop using them and not taking advantage of an offer like you know something that will save you ten percent it's like that sugar rush I mean you gained five pounds you're like god, I should have had that cronut or whatever I quick question and I think I'm probably you go into it more about credit scored and I'm just really curious about what affects your credit score and what hurts your credit scored would doesn't like there's so many minutes out there about it like if I get a credit card safe or from a store and I get my ten percent discount in and six months later I don't want it anymore and I want to cancel it does that hurt way talk so much about that so I just you know I'm going to save that for the next segment you have such your question is what other people are thinking I literally gave us some in our two days ago and the questions on credit scoring credit report just I couldn't stop them coming so let me sort of give my spiel on that and then hopefully that answers your question great I know we're going to talk about credit after the segment so next hello erica who says we're not living beyond our means we've cut things out like crazy thie end is that we aren't making enough way aren't making enough when we were not making as much as we once were I guess we're still spending too much I'm not sure what else to cut out could you offer up some strategies about where to look and our budgets to sort of if we're not seeing it absolutely and we're going to talk a lot about budgets but I would just start with when you look at your expenses initially and just on a big picture basis you really have two kinds you've got your fixed and you have your variable and again we're going to talk a lot about that this afternoon and tomorrow so you might want to start by just looking at your expense is kind of like your needs of her sister wants your fixed versus your variable so the fixed is what I call you roll out of bed in the morning and you still got to spend it it doesn't include food it doesn't include entertainment it does not include clothing it doesn't include those extras so what it is is your home finances your rent your mortgage, your utilities there are some other fixed ones but it's really some very, very basic and again I promise you I will give you that all later on but what you might want to start doing is by looking at your expenses your fixed versus your non fixed so the fixed you can lower and so you know again through the service which I'm going to check out I can't wait to check that out but that also just through can I move? Maybe I need to move maybe I get rid of some utilities maybe I need to get rid of my landline and do a cellphone maybe I need to get a roommate so that's how you can change them the fixed expenses and then if you've got a certain incomes who say you're only making ten thousand dollars a year, you can't you take away the fixed expenses and then you put yourself on a budget for what's left over for the ones so maybe you could only do one hundred dollars a week again? I'm being very sort of drastic and giving you some very last case scenarios but start with what you've got in terms of the income you've got so it sounds like they know their income to take away the needs for the fixed expenses and then put themselves on a budget for the wants for the extras from any just talking about when you were doing consolidation and looking at credit cards says I strongly recommend going no credit union over a bank whenever possible not only they're working for you in the case of our credit union, the visa right is well under ten percent do so in fact, I don't have the website on me now, but I think day two I talk a lot about banks versus credit unions and I actually gave you some great website to find credit unions are so stay tuned yeah big fan you know, I I don't know the name, but I know there's actually a credit union in colorado and again, I'm not endorsing them I don't work for them, I don't get paid or anything like that, but and, you know, I think they're more of like a buddhist philosophy, if you will and they will actually work with you on some loan consolidation and paying some money and they're not the cheapest rate, but they'll work with you in terms of bad credit and things like that, I don't know a lot about them again, I don't work with them, but I've had some clients who've worked with, um and it's been a really great experience yeah, and there are a few people saying that, in fact, that concept of roommates might not come teo straightaway, but it's a really great way and pull down their eggs cost yeah, e I mean, we all are making decisions, we're making choices, and so I think the thing is and what I'm hearing initially of the people who are just really freaking out, franklin and I get it, I totally get it that you're freaking out because you all this money and you don't have the money to pay off, I don't want to say it's simple in that it's not simple, but it's really, you've gotta either really reduce your expenses or make more money, and you can do both, but don't limit yourself in the mindset that, like I on ly have because if you think that that I only have this much money or this little money, you're never gonna have enough, so you definitely have to be open to having mohr and thinking about what I've got to make more money, maybe that's what this exercise does for you is it really says, well, I have got to find more money, a story of films has a question also saying you might you might get to that, but do you have an opinion on what debt to attack first, for instance, the high interest right one do you buy that dad requested? The lower dollar amount to feel accomplished is such a great question national vs physical pie down that's a great question, and actually, I do think you should solid eight your credit card debt not necessarily, too, just because you're you're wanting to find a better interest rate, but more that if you have five credit cards and you owe sixty dollar minimum on each, so that might be a three hundred dollar minimum that might be more than you've got, you might not be able to afford that. So first of all, I would focus on credit card debt versus student loan debt, because when we talk about the credit report on the credit score, student loan debt is probably the best that you could have. And while that number is daunting in a gosh, I feel for the person who had the forty seven thousand dollars, I get that I mean, I had seventeen thousand I couldn't sleep, but you've invested in your education. You've invested in your mind, you've invested in your future so that's a great debt to have it's not easy to pay it off, I know that, but it is a good dad to have, so I would focus on the credit card dead, maybe any loans you have to family. We're small business loner irs had focused on those first, so first, just the very simple exercise is just really writing down who do I owe it to my percentage interest rate and the minimum. So what do I owe the percentage the minimum write those down? There is no question that you should pay the highest interest rate first, because that's what's contributing to this fourteen hundred dollars, in interest or if you only paid the minimum seven thousand and interest so there's, no question, pay the highest interest rate, but at the same time, if you've got a small one that you could just get out of the way, I would do that. So this is not a black or white answer, this might be a little gray, so if you have a small loan, small credit card that's, maybe only two hundred dollars or five hundred this heavier said you had a great month, you're like, let me just get it out of the way, I would do that, but if all things being equal pay the highest industry first, absolutely and then I would consolidate a toe, lower your rate and be you'll be more organized, you'll have to spend one or two payments instead of seven payments over the course of a month, we're going to talk a lot about how to pay our bills like do I pay my bills every week till I pay him every day? Do I paid once a month like we'll talk a lot about that and that's part of our habits and putting money into our life on a regular basis and again, if you have a lot of different credit cards and go to a lot of different people that can be overwhelming I have been there, I've seen it let's let's think about I love your thoughts on the preventative aspect, you know, there's a lot of business owners out there and my husband and I were in this position many years ago when you're expanding especially a photography business, you have a lot of gear expenses you have a lot of um if you're doing doing production, you need computers, you need all sorts of equipment um aside from saving that ahead of time right? How do you how do you suggest you to do that without going into credit card debt? More of that preventative like you are, you know, that's a great question let me you know, I need to think about that so obviously there's the just the saving for it I mean that's the obvious, but definitely the I don't see the smartest I would say your last option should be credit card dead because if you don't get the business that you were hoping to get um, you know, I'm really not an expert on buying photography equipment, but maybe initially you buy used equipment until you can afford I mean, do you necessarily need the newest? The greatest? The latest, most expensive equipment I would I would do is that I'm a big planner. There's no question about it. So I would map out what it's gonna look like over the next twelve months for you. So say, you know, whether it's love spreadsheets, but if not just paper so, you know, a month, two, three, four, five all the way to month twelve, if you can hear, is your expense line. So can I space out my expenses? Whether it's, I finance something? Or, more importantly, can I just space out what I need to spend? And then down here, what do we need to earn to pay those off? And if I get the job and month for then I can buy that piece of equipment in months six so just really map out your strategy over the next twelve months. I mean, if you need to buy something that you cannot do the business, you don't have a choice, but if you can space it out and then just really say, well, I really need to need to get if you're doing family portrait so if you're doing a big corporate gig, I really need to get that in the next three months let me have my eye on the prize so I can't afford now three thousand dollars for that piece of equipment great. Thank you have any other questions? Um it's also equipment related? Well would you count the equipment that you do own as part of your own you know, on the first exercise radio ono spend earned because some of it has like like lenses for example have really valued right, right? I know I have, you know, my administration's no, no, that that's a great question. I probably wouldn't I wouldn't I mean, I know, just like as an investor when I'm doing like investing in businesses, I like to see a balance sheet and so that's a business balance sheet, so I probably wouldn't put it as a personal oh, no, I'd probably put is a business house while obviously you do own it personally and if you need to sell it, you'll salad but it's more just that it's part of the business it's the business balance sheet and this is where I think of you think where you need to think of yourself as a business so even if you're one person shop and you're only going to be one person great here's your balance sheet so I would look at it separately. Absolutely. I am a big fan of keeping things separate. I think it keeps a cleaner we spend more money on well, I should say we spend less money or we spend it more consciously versus if you have one checkbook and everything comes out of that one cheque book you don't know what's going on. So having two separate counts completely, you know, from day one that I started my business, the first thing I did is I dealt with logistics. I went down to my local bank, I opened a supper business account and a business credit card and from day one and I tell you, I do not I mean by mistake once I used my business credit card for a personal purchase, I freaked out. I just also my I was like, oh, my god, my bookkeeping is going to get all messed up. I am I going to keep track of things now when the bill comes in, I'm gonna write this off, so I mean, it's, I'm just such a fan of really keeping it separate and then on the flip side so I know that again. I know what my monthly not is in terms of my business expenses and I pay myself so either pay myself every month like just a small set salary from my business I was literally just writing a check for my business account to my personal account or I know that if I have above a certain amount of money that I just empty out the account and put that extra into my personal account and that's money that I have earned in my personal account and then from my personal account I pay my personal expenses and then I put the money into different savings are we at some point talk about payroll running payroll when to run in things like that? You know, not so much truthfully because that's really dealing with running the business side, so but, you know, it's a great question I do with a lot of individuals or a lot of businesses that have payroll, so what I would say is, you know, there's two ways that you could do it again I mean, my clients that are successful with this and I'm not talking about successful that they're earning millions, but I'm talking about clients that work for themselves that are freelancers or have a small business they're successful because they have gotten a good bookkeeper or a good accountant somebody actually break, said what's a c p a certified public accountant so if we're going to get an accountant, you should get a c p a because that's the certification so it's having a good c p a who says can we set you up on a payroll like a great sepia can do that for you or they can get to you to you know, working with a dp or a bookkeeper association but the idea is that like for me I know that on the whole I can pay myself just a small salary every month because I have had my own business for ten, eleven years I kind of know what I'm making. I have some months better have some years better but I do know that I make a minimum like I feel good about that and I think a lot of you that have been working for a while I know that you are making something minimum so maybe you pay yourself five hundred dollars a month or a thousand a month but I do know that I get myself I get a salary and I take it the taxes which we will talk about that. But then if I have an amazing month where I get a great contractor I just sold a lot. Then I pay myself more in addition to my salary that month so a lot of my self employed clients do pay themselves a set salary every month and it's not enoughto live on or to save but at least it is a set amount they just again comes from their business account to their personal captain and you can easily do it through like apparel, I think even like quicken and into it have some payroll services or you could just have your accountant set it up for you. We have actually have your response to your question on equipment, which I was also thinking this is something I've come across to a story of film says regarding that question, friends who have photographers have gone in together on expensive items such as lenses and then set up a schedule for renting it so they become the rental house is part ofthe they're freelance out contract and each threw a couple of hundred and on a really expensive item which sounds like an entrepreneur cole that sounds like a real entrepreneur. I love that, you know I work with on these these he's won two wonderful women in new york who we the big thing in new york this space because off space is so expensive and you, you know, you get tired of meeting people in the coffee shop, right? So and they struggled with this themselves and was meeting space, and so they started to shared office space about six years ago just for that reason they thought, well, selfishly, we want the meeting space but let's create a community so that's actually where my office has been for six years now so that's a great idea maybe the old photo also how much money would you start within your business account? Would you put a certain percentage of your savings into the business account when you're separating the two? Well, I think the idea with the business account is that any money that you get in anybody pays you you deposit into the business account logistically you right away pay your business expenses and then anything left over goes into your personal account so it's like and and we'll talk about the money habits but it's like every week a cheque comes in business account you take those personal business expenses out including taxes, which we will talk a lot about and then anything left over goes into the personal account so I would really start with the income you get that's kind of like the big portal great last minute questions before we wrap up well, there's a lot of discussion way loving the active chat, by the way there's a lot of sharing of information to and love sharing in your quotes I love it and I love that you're sharing and what I heard was a lot of frustration and again that's probably just really saying I am not happy in my situation I'm not happy that I have this debt and that I'm not earning enough at least you're realizing that and you've got the power to change it and so the frustration that you're feeling by not earning enough and I know trust me, when I first started my own business, I came from wall street, so I would say I made good money, you get paid well on wall street, I thought, well, I'll just make that when I have my own business, well, I didn't make the first year. I definitely didn't didn't make it the second year or third here, really happy with how much I'm earning, but I definitely have not been making wall street money, but I realized that I have the power to make what I want to make, and I got my son loved to this dead, and I've got to pay it off. So let me figure out first what I owe. Let me figure out my percentage interest rate. Let me figure out how much I need to pay on a monthly basis to really paid off. Let me find that money. We'll talk about that next.