October 11, 2024 • 31 mins
Feeling overwhelmed by debt? You’re not alone... and it’s time to flip the script. In this episode, Victoria Devine helps you break free from the mindset that debt defines you. We’ll explore how to separate your self-worth from your financial situation, tackle debt with a plan, and take back control of your financial future. If you’ve ever felt stuck or ashamed of your debt, this episode is your reminder that you’ve got the power to turn it around.
Acknowledgement of Country By Natarsha Bamblett aka Queen Acknowledgements.
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Speaker 1 (00:00):
Hello.
Speaker 2 (00:01):
My name's Santasha Nabananga Bamblet. I'm a proud yor the
Order Kerney Whalbury and a waddery woman. And before we
get started on She's on the Money podcast, I would
like to acknowledge the traditional custodians of the land of
which this podcast is recorded on a wondery country, acknowledging
the elders, the ancestors and the next generation coming through
(00:23):
as this podcast is about connecting, empowering, knowledge sharing and
the storytelling of you to make a difference for today
and lasting impact for tomorrow.
Speaker 1 (00:33):
Let's get into it.
Speaker 3 (00:34):
She's on the Money, She's on the Money.
Speaker 1 (00:57):
Hello, and welcome to She's on the Money, the podcast
that's here to remind you that, no matter what's happening
in your bank account, your self worth is more important
than your net worth. My friends, if we haven't met before,
my name is Victoria Devine, and today I wanted to
use my solo Saturday episode to talk to you about
something a little bit personal. The D word, No, not
that D word. I am talking about debt. And it's
(01:19):
one of those topics that can feel like a little
bit of a dirty word, right, But here's the thing
debt is so common. In fact, I got in a
lot of debt. And I mean, I've been thinking, I
know plenty of incredibly successful people who have dealt with
debt at some point or another in their lives, right
including me. I at one point got myself into some
(01:39):
pretty serious personal debt. I was in more than forty
thousand dollars worth of personal debt between a personal loan
that I probably shouldn't have been approved for and a
credit card. And the reason I did was because I
was living beyond my means and at the time I
was so ashamed of it. I was so overwhelmed by it.
I literally would like to my housemates at the time
(02:02):
about it. And I can tell you now, it was
eight hundred and fifty three dollars each and every single
month that I had to pay back. That was the
minimum amount, and at that point in time, like I
was earning just over that amount. So I was earning like,
I think about sixty thousand dollars a year, and it
was absolutely financially crippling. I just I couldn't see a
way out of it, and I judged myself and was
(02:23):
so ashamed of how I got here. I thought it
was a reflection of who I was as a person.
I thought that it made me a terrible human being.
And I mean, at that time, I lacked a lot
of financial literacy and I just didn't understand it. And now,
looking back, I just want to scoop up past me
and go, well, you were just doing the best that
you could with the tools and the resources that you
had at the time, and you made some decisions. They
(02:45):
weren't bad decisions, but you made some decisions that weren't
in line with your values because you didn't know how
to live life in line with your values, because you
didn't have the financial literacy you deserved. And to me,
looking back on past Victoria, all she did was spend
more than she earned. That didn't ever make me a
bad person. That didn't ever mean I wasn't smart or intelligent.
(03:07):
It didn't have anything to do with myself worth. But
that's how it felt, right. And I mean, you're probably
thinking at the moment, like vuhy, you're ruining my Saturday
with a story about debt and you historically not being
very good at money. But debt is not exactly a
feel good topic, right, But I want to flip the
narrative on that today. I want to empower you when
(03:28):
it comes to debt. I'm not saying go get you more.
But debt isn't just a financial weight, right. It can
weigh heavily on your emotions, and it can weigh really
heavily on your self worth. And as I said before,
I have been there. Debt has this way of making
us feel like we have messed up. But here's the
real truth. Debt does not define your worth. Repeat after me.
(03:51):
Debt doesn't define your worth. And also wealth doesn't define
your worth. Right Like, rich people or people with heaps
the money in their bank are not worth more than
other people, So why would people in the opposite position
be worthless. Debt can feel, I guess, really heavy because
of the emotional baggage that it often carries. It's more
(04:12):
than just a number in your bank account. It's more
than just like that debt statement that you get in
the mail or in your emails. It can feel, genuinely,
and I say this from an empathetic point of view,
it can feel like a personal failure, especially when society
loves to put so much pressure on us being financially perfect.
But spoiler rella. Literally, nobody is perfect. We all are
(04:33):
on our own financial journeys, and if debt is a
part of that, that's cool, that's fine. I feel like
we go through seasons in life, and right now, if
you're in debt, that's just a season of your life
that you are going through. And that's cool because if
you're in the middle of winter and it feels really cold,
you can zoom out a little bit, as you know,
I love to say when in doubt, zoom out, but
you can zoom out a little bit, and you just
(04:53):
know that someone's coming. And like, if there's no rain
during the winter, the flowers aren't going to bloom in summer.
There have been numerous studies that have highlighted the undeniable
connection between debt and mental health. I don't know why
more people aren't talking about this, and the results are
consistently painting a very upsetting picture. Right Financial debt doesn't
(05:18):
just impact your wallet or your ability to create wealth
or buy a house or move in with your partner.
It seeps into every single corner of your life with
significant impact on your mental and physical health. So, whether
it is stress or anxiety or even depression, the weight
of debt can be overwhelming, and research across the board
(05:39):
says that the more debt people seem to accumulate, the
worse off their mental health outcomes seem to be. So
let me give you an example. In twenty nineteen, there
was a study that found that individuals with high levels
of debt reported significantly higher levels of stress and anxiety.
Another study was done at about the same time showed
(06:01):
that unmanageable debt often led to depression, and it highlighted
that it's actually not just the amount of debt, but
help people perceive their ability to manage it that can
actually trigger serious mental health issues. So debt doesn't just
impact your mood either. It can disturb your sleep. And
I can attest to this, like literally, when I was
in debt, I used to stay up all night and
(06:24):
I didn't know why at the time, Like obviously I
was thinking about my debt, and I was stressed about
my debt, and I was wondering how I was going
to pay it off, and like if I wanted to
do something, I was like, oh my gosh, how am
I going to afford my debt payment? And this, But
there was a study in twenty twenty that linked financial
stress to disrupted sleep patterns, which often worsen anxiety. I mean,
(06:45):
everything's worse at three am. Right. Relationship strain is also
really common when you are in debt. It's the number
one thing that couples fight about, right because emotional struggles
can actually lead to being emotionally distant and even fighting
with your partner. And some people that are in debt
actually turned to very unhealthy coping mechanisms. They might get
(07:07):
involved in substance abuse. And it was actually highlighted in
a study that linked financial stress to an increased likelihood
of using alcohol and drugs and all of this. It
actually just shows us and distills down the relationship between
debt and mental health, and it shows us that it
is a very in vicious cycle, and it's one that
affects more than just the dollars in your bank account. Right.
(07:29):
But let me tell you right now, as I said before,
debt does not define you. And I know that if
you're listening to this, you're like, yeah, but why do
I still feel like trash about it? V? I get it,
I've been there. Having debt actually doesn't make you an
irresponsible human being. It doesn't mean that you're bad with money.
I think there's a massive misconception that if you are
in debt, you must be bad at managing money, and
(07:52):
that is actually not the truth. Like for some people
it might be let's be honest, but it's not actually
the truth. It's not a reflection of your car. It's
just a financial tool. And if you haven't been good
at using those tools, because no one taught you how
to use the tools, I can teach you how to
use the tools and you can get back in control
and you can control your life instead of that feeling
(08:14):
of being in debt controlling your life. So let's talk
about some numbers for a hot second. Did you know
that here in Australia, consumer debt is actually in the trillions,
not billions, trillions. That's credit cards, personal loans. Obviously mortgages
fall into a part of that. Honestly, debt is a
part of life for most Australians. So if you're feeling
(08:35):
like you're the only ones struggling with it, and you're
a bit like past Victoria and you're like, I don't
want to talk about this, you're definitely not alone. Life happens,
right and we can't control it. And I mean over
the last few years going through COVID, we literally have
seen it play out for us, whether it's medical bills
or trying to put yourself through university to give yourself
the best possible chance to create the life that you
(08:57):
deserve or you wanted to, you know, invest in homes
you've got a mortgage. Debt is often just part of
that journey. Debt. It's not actually good or bad. It's
actually very neutral. It's a tool, and it's a bit
like a hammer, right, and what you do with that
tool is what matters. So think about, like I guess,
(09:17):
your hex debt or you know, any debt you went
into to study and mortgages. These are often called and
I often refer to them as good debts because they're
actually helping you build something. So whether that is your
education or it's your home, you're kind of investing in
your future. And these are what I would call, I
guess examples of debt that is opening doors for you.
(09:38):
I mean, it might feel all consuming and overwhelming, but
like skip ahead thirty years, if you have a really
good education, it is very likely that you are going
to have a higher income. It's not to say that
you have to have a really good education to have
a high paying job. We see on money diaries all
the time people absolutely killing it without an education. We
also see people purchasing homes and their mortgages stressing them
(10:01):
out of their brains. But if they've bought in a
really good area and they pay off their mortgage over
you know, a thirty year period, they're not paying it
off earlier. But like that thirty years of paying back
a mortgage is really stressful. They pay it back, they're
in a really secure financial position. They own the roof
over their heads. Right. But sometimes we take on debt
that we have to take on because we're going through
(10:23):
a really rough patch. So maybe there was a whole
heap of unexpected costs, or you really needed a credit
card to cover an emergency. That's actually okay, Like I
get it. There is no such thing as being financially perfect.
It doesn't make you any less capable or any less responsible.
Life happens, and sometimes debt is just part of life happening.
(10:45):
And it's actually our plan to deal with debt that
is going to change the trajectory of our lives, not
necessarily whether we have it or not. I mean, I
don't want to talk about myself too much, but I
was in forty thousand dollars worth of personal debt. It
felt all consuming, overwhelming, And I think if you look
at what I've done, obviously I am an absolute outlier
(11:06):
and what I have done is very different to the norm.
But like, I managed to get myself out of that
hole with good financial literacy, and at that time I
had still a sixty thousand dollars income. I did get
a pay rise at that point. I think I was
earning closer at eighty thousand dollars. But I got out
of that debt. I saved up for my first home
deposit with my partner having not made any of the
(11:28):
money that I've made. Throusella and Cheese on the money, Like,
life happens, and we can create a plan that puts
you in the best possible position. You don't have to
have something that is life changing to change your life. Right,
And let's talk a little more about this idea of
good versus bad debt. Right, So, a mortgage that helps
you to build equity in your home, or like your
(11:49):
hex debt that sets you up for a better career
in the future, are really good examples of good debt
because they lead to I guess, long term gains. But
on the other hand, you've got bad debt, I suppose,
so those high interest credit cards where you're purchasing things
that you don't really need and you have the ability,
and a lot of people do to spiral out of
control if you're not careful. And I mean I have
(12:11):
not met one person, and there are hundreds of thousands
of you in our shoes on the money community. I've
not met one person that said, Victoria Devine, I got
a credit card because I just really liked the idea
of spiraling out of control and spending beyond my means.
I just one day wanted to wake up with an
amount of debt that's dropped me from sleeping well, enjoying
life and you know, having a good relationship with money.
(12:32):
Not one person says that no one gets a credit
card with the intention of misusing it, right, no one
does that. But even if you ended up in that position,
there's usually a reason for it, and the best way
to get back on top of that is to deep
dive into why, when, where, how, and not judge yourself
for it, Because even if you have bad debt. It's
(12:53):
not the end of the world. It's just that other
chapter in your financial story. And with the right plan,
you can manage it. We can get out of debt.
We can, you know, create a plan. We can see
the light at the end of the tunnel together. But
I think so many times when you are spiraling out
of control, you just overlay this idea that you are
terrible at money and that you're not very good at it,
and what you need to do is just bury your
(13:15):
head in the sand and not deal with and that's
actually the worst thing that you can do. So we've
talked about debt and how it doesn't define your worth,
and I hope that you listen to me about that,
but don't get it twisted. It is just a financial tool.
Money is neutral. And I guess people in our community
and you, my friend, you are not going to let
debt define you. And if you feel like it is
(13:37):
defining you right now, we are going to change that
narrative and we're going to change it today. So I
guess the question now is what do you do when
you've got debt that feels overwhelming. I don't just want
a motivational talk from victoria that says it doesn't define me,
that it's neutral. That doesn't help anybody, right, I mean
it might get you interested in changing, but like, we
need some tools, So stick around. I'm going to go
to a really quick break and on the flip side,
(13:57):
I'm going to tell you exactly how to change that narrative.
Welcome back, my friends. Now let's have a chat about
managing debt without the shame, because that's seemingly where a
lot of us end up getting stuck. When debt feels
overwhelming and all consuming. It is so easy to feel
(14:19):
so powerless. But my friends, here's the thing. Tackling debt
can actually be, or I think it can actually be
really empowering because you're not just managing I guess a
responsibility that you have, your taking control of your financial journey.
You are putting few to you in the best possible position,
and I promise she's gonna thank you for that. Like,
can you imagine if today you're looking back on your
(14:42):
journey and you're like far out, Like I cannot believe
that I was so good to current me because I
paid off all that debt and I'm not in it
right now. That's such a win, and you're putting yourself
in that position. I would say, and I've said it
before on the podcast, I believe that looking after your
finances is the highest form of self care that can exist.
(15:02):
So taking steps to handle your debt, whether it is
small steps like creating a budget, or big steps which
feel overwhelming, like negotiating with creditors, or just being really proactive,
it's a way of looking after yourself and looking after
your future. Because I promise once you take that step,
(15:22):
you'll realize it's not as big and scary as it
currently feels. And I know that you've got this. I
know that you are able to do this, and I'm here,
our community is here. You're not alone in this process.
You're not doing it by yourself. So if it is
feeling like if you're listening to this and you're like
V it's actually insane, Like I actually can't deal with this,
(15:43):
this is all too much, you know what I do?
I'd start by calling our friends at the National Debt Helpline.
I'll obviously put their number in the show notes. It's
a not for profit service that I have worked with before.
I love them. I think that they are absolutely incredible.
They are people just like you and me. They provide free,
independent and confidential support to help people tackle their debt problems.
(16:06):
I promise they are not lenders and they don't have
anything to sell or they don't make money from you.
They are legitimate professional financial counselors that are there to
offer you guidance and practical advice on managing debt, and
they have seen it all. I promise going to them
it shouldn't be embarrassing going to them and laying it
all out on the table. They'll go, yep, no worries,
(16:27):
what else? And when you say no, that's it, you'll
be like, oh, it's not as bad as I thought
it was going to be. So don't be afraid of them.
I promise. They are just like you and me, and
you know what, they're probably better than me. They spend
their entire life working for a company that helps people
just like you get out of debt. Like they're on
your side. They're not going to crucify you for where
(16:49):
you've been. They're just going to help you create a
bright future. The other thing I would say here, which
can feel really overwhelming, is don't be afraid to reach
out to creditors. I mean, at the end of the
what's the worst they can say no, feeling intimidated. I
get it, But many creditors are very willing and very
able to work with you on new payment plans that
(17:09):
are way more manageable. Or if you're struggling with a
heap of debts, you might want to consider, and you've
probably heard about this before, debt consolidation, and this can
really simplify things by pulling all your debts together into
one payment, often with a lower interest rate, that feels
less overwhelming. One of the key things I want you
to tackle when it comes to your debts is also
(17:31):
to understand the different types of debts you have. It's
so often that I talk to people and I'm like, oh,
are you in debt? They're like, yeah, it's so bad.
And then I hear they've got a mortgage, and I'm like,
that is a wealth creating debt. Not all debts, my friend,
are created equally, So things like credit card debt with
high interest rates are very different to a mortgage, which
could have a lower interest rate over a long period
(17:54):
of time. That helps you create wealth. And understanding what
you owe and why is going to help you make
much better decisions moving forward. So one of the things
I also wanted to talk to you about was interest
free loans, and I have spoken about them on the
podcast before, but often they could seem like a great deal.
I have met so many people and spoken to so
many people in our community who think that this is
(18:15):
going to be the answer to their problems. You can
take all of your credit cards with high interest rates
and you can transfer them to this, you know, interest
free loan. But more often than not, there is a
catch because even though you're only making minimum repayments set
by the lender, you might not be in a position
to clear the debt before the interest free period ends,
and then they're literally setting you up for failure in
(18:38):
the long term. And even though you might be like me,
but like my interest rate's seventeen percent, if you read
the fine print on a lot of these interest free loans,
after twelve months or after twenty four months, it jumps
to like twenty two percent interest and that's worse for you, Like,
that's going to absolutely cripple you. So what I would
be doing is everything literally to avoid surprise interest charge,
(19:00):
and I would take control. So let's have a look
at debt consolidation. Maybe we can actually use an interest
free loan to our advantage. But please make sure that
you're either able to pay off the balance before the
period closes, or you're able to increase your monthly contributions
to that debt to wipe them in time. And when
(19:20):
it comes to borrowing any type of money, I think
my biggest call out here is please, please please always
read the fine print. Now let's talk about by now,
pay later. You guys know how I feel about this.
Say you're using after pay to buy a two hundred
dollar handbag that you've got your eye on. It's on
the iconic and you're all over it. In most of
our brains, the math is, all right, well, that's actually
(19:42):
just like four payments of fifty dollars, and that's so
much more palatable. But your brain actually, and this is
scientifically proven, your brain actually anchors to the smaller amount
of fifty dollars and it makes you feel like that's
all you're spending. And if you have been in the
after pay traps before, I can almost guarantee that if
(20:03):
I asked you what that dress you bought was, or
what that bag was, or whatever you put on after pay,
I can almost guarantee you don't remember the full price.
You just remember what payment came out, and that's what
anchoring is. And before you know it, you add another
cute top to the cart as well, because what's the
difference between fifty and seventy dollars? Right? So only seventy dollars.
That's not that much. And after pay his own website
(20:26):
actually brags. So if you go to the after pay
website and then go to like I'm a small business
and have a look, they literally brag to potential merchants
that work with them, the average order increases by eighteen percent.
They know that you're going to spend more because you're
not spending your own money. So while this might be
(20:47):
interest free and you might go this is a really
good tool for MeV where a costs more is actually
in the amount that you're justifying to spend. And I
think that just understanding these things can help you make
better choices. And some people might be listening to this
and going the I'm actually really good at after pay.
I use it as a cash flow tool, and I've
also spoken about this as a lot before as well.
(21:09):
Then the great this tip is not for you, and
that is fine. But there are people who don't know this,
and there are people in our community who after pay
just doesn't work for And I'm one of those people.
I know that anchoring works very well on me. I
think it's very related to being a little bit neurospicy,
where that's the first number I saw, that's all I'm
(21:30):
going to remember and moving forward, that number actually makes
me feel a lot better about myself than two hundred.
So I know what I'm going to anchor too, and
I know that to have the best financial health personally,
something like after pay or any by now pay later
is just not going to fit into my financial plan
or my financial modeling. Right. The other thing we need
(21:51):
to get really real about is your finance habits or
your money habits. And I'm actually here talking about just
being brutally honest with yourself and be really hard. Like
I remember coming to the conclusion that I'm just not
good at money and debt, and this is before I
became a financial advisor. I wasn't good at handling money.
And how do you handle money? Are you super self
(22:12):
aware about how you make money choices or are you
a bit head in the sand, Like, are you able
to avoid going further into debt and start gaining control
of your life? And that can be a big shift
because often that involves complete lifestyle shift. So if you're
going into debt because you're spending more than you earn,
often that is reflective of you living a lifestyle that's
(22:33):
actually beyond your means. You might go there. I don't
really want to change that, Like I love brunch with
my girlfriends, like I love going and buying new activewear,
Like this is just for me. I'll work it all
out later. Like it does involve being brutally honest with yourself,
and that can sometimes be a little bit painful, but
I promise by doing that, you're putting yourself in the
best possible situation. Let's talk about credit card debt as
(22:57):
an example. So, like a zero percent balance trans to
somebody who is like me might seem like a golden ticket,
but it only works if you transfer the balance and
take to that card with a pair of scissors and
stick to that repayment plan and pay it off during
that interest free period. And people in our community have
(23:17):
done that. It's been a brilliant strategy for them. But
if you're prone to spending and you're just gonna justify
to yourself, which we've all done, like, oh my gosh,
actually I I'm going to keep this card in my
wallet just in case, for just in case splurges. This
is I promise you, this is going to spiral you
out of control. And I know that this sounds a
little bit lame, but maybe if you're not ready to
(23:39):
cut the credit card up completely, you do that thing
where you put it in a container of water and
chuck it in the freezer, so the card still exists
but you can't really access it. Maybe that would work
for you, so that the card still exists but you
can't really use it, and if you want to use it,
it's going to take you some serious thought about how
to get back to it at some point. All right,
let's pivot away from that and talk about two of
(24:02):
the most popular methods for paying down debt. Right, so
you've probably heard about them in our community. It's the
snowball and then the avalanche methods, and both can be
super effective, but they work in completely different ways and
are actually suitable for different people. And I think this
is where you need to know yourself you need to
know your personality type and who you are and what
might work now. I don't think it will come as
(24:23):
a surprise. I am an instant gratification girly at heart,
which is why this first method that I'm going to
talk about, the Snowmall method, that's for me, so let's
talk about it. It's all about quick wins and it
is perfect for people who need a little extra motivation
to stay in the game. The idea is relatively simple.
What the plan is is you focused on your smallest
(24:45):
debt first and then just throw every extra dollar that
you have at it. So we're not going to worry
about our interest rates for now. We're actually going to
think about psychological wins or the fact that you're going
to get instant gratification, because what you're going to do
is you're going to take your debts and then you're
going to list them in smallest balance to largest balance,
and then you're going to make minimum repayments on all
of them. So we're not going to stop paying back
(25:06):
our debts, but we're not going to make just minimum
repayments on the smallest one. For the smallest one, you're
actually going to take any additional money that you have
and pay it off as quickly as you possibly can.
And then once that first stet is gone, you're going
to take that money that you were using to pay
that debt off and you're going to pay the next
smallest debt. And it's kind of like building a snowball
(25:29):
of momentum, and bit by bit you keep adding what
you were paying before to the next one in line,
and boom, your debt actually starts disappearing bit by bit.
And for me, it's such a satisfying feeling that every
time you pay something off, it's kind of like a
victory lap that keeps you going. Like I'm the type
of person that instant gratification works for, So if you're
(25:49):
somebody who like me, I just thrive on seeing results
quickly and I need a consistent sense of accomplishment to
stay on track. This snowball method, my friend, is for you.
I think it's actually perfect if you're just really overwhelmed
by debt, because knocking out those smaller balances I think
really builds confidence. But it's also not too technical, like
(26:10):
there's no maths involved. You just look at which one
is the smallest and start paying that off aggressively. But
if you're a bit more of an efficiency girly and
you're all about cutting costs and putting yourself in arguably
the best possible position, then the avalanche method might be
more on your page. So this one actually focuses on
paying off the debt with the highest interest rate first,
(26:31):
which is obviously going to save you the most amount
of money in the long run. As I said, this
one is arguably the quote better method. But for me
when I was paying back my debts, the snowball method
worked better for me because again, instant gratification curly. So
how do you do the avalanche method? What you're going
to do is, instead of focusing on what the smallest
debt is, you're actually going to list your debts from
(26:53):
the highest interest rate to the lowest interest rate, and
we're going to go after the most expensive debt first.
So once you've got your list, you're going to make
minimum payments again on all your debts. We're not going
to not pay any off except for the one with
the highest interest rate, and that one you're going to
throw all your extra cash at it until it has gone.
It might take a little bit longer to get that
(27:14):
first debt knocked out completely. But financially, this one actually
makes the most sense because you're cutting down on all
of those sneaky interest charges. When that I guess first
high interest debt is paid off, then you're going to
take the money that you were using to paid off
and roll it into the next high interest debt and
you just keep going from there. It might not feel
like you're making progress as fast as the snowball method,
(27:37):
but you'll be saving a lot more over time. So
if you're somebody who is more motivated by saving money,
and you know, having the most control you could say,
and you can actually handle the patients it takes to
focus on the long game, then I would say this
one's definitely for you. It's also the best option if
you've got a really high interest debt, like maybe a
big credit card balance, because that interest up really fast.
(28:01):
But when you're picking the method, I think the most
important thing that you do is actually think about you
and your personality and what's going to motivate you. So, yes,
you might save a bit more interest in the avalanche method,
but even the fact that you are considering a method
to pay off your debt means that you're going to
save money in the long term. For me, the Stoneball
method made sense. I'm sure if I went back and
(28:21):
calculated it, I could have saved some interest charges. But
like I see that as the payment for actually finding
the motivation and getting it done. Like, I don't think
I missed out on that. And if you wanted to
get technical, yes I could have left out money. The
Avalanche method might have been better. But at the end
of the day, I got out of debt and that
was the main goal, and that is what I'm most
proud of. I'm running out of time here really quickly,
(28:45):
so I just wanted to, I guess touch on something
a little bit fluffier, and it's more of like a
little reminder for you. You are more than your debt.
It is actually just a number on a piece of paper.
It doesn't define who you are or what you're capable of,
or your thoughts, your feelings, you're belief your values. It
doesn't define who you are or what you're going to
create with this life that you've been given. Every single
(29:07):
person's financial journey is so different, and having debt doesn't
take away from your value or your potential or the
ability to be successful in the future. I was forty
thousand dollars in debt. I was up to my eyeballs.
I would cry about it all the time. Eight hundred
and eighty three dollars I was paying back each and
(29:28):
every single month, and I had nothing extra Like that
was a chapter for me, a chapter that was really sad,
and I didn't feel my best, and I felt like
it defined me. But I feel like I'm a very
good example of coming out the other side. So does
being in debt define who you are? Absolutely not. I
think what matters the most is actually how you're planning
(29:50):
on moving forward. It's not about perfection or creating a
debt free life tomorrow. It's actually about understanding that debt
is just part of your financial story to chapter, and
you actually have the power, like the complete power to
write the next chapter in a different font. So be
kind to yourself, show yourself some compassion, and know that
(30:12):
tackling your debts, I would say it's very brave, but
it's also a really important step and one going in
the right direction. I think that being in debt it
can be overwhelming and all consuming, but I promise it
doesn't define who you are. I have run out of
time now, so I'm going to stop going on about it.
But I think that you are brilliant. I think that
(30:34):
if you have listened to this entire episode, hopefully it
resonated with you. And if it did strike a chord
with you, please don't forget to subscribe because it helps
me to continue to bring this content to you on
a weekly basis. And I hope you have a beautiful
weekend and I will see you bright and early on
Monday for a money diary. Bye. Shared on She's on
(31:01):
the Money is general in nature and does not consider
your individual circumstances. She's on the Money exists purely for
educational purposes and should not be relied upon to make
an investment or financial decision. If you do choose to
buy a financial product, read the PDS TMD and obtain
appropriate financial advice tailored towards your needs. Victoria Divine and
(31:21):
She's on the Money are authorized representatives of Money. Sheper
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nine
Hello.
Speaker 2 (00:01):
My name's Santasha Nabananga Bamblet. I'm a proud yor the
Order Kerney Whalbury and a waddery woman. And before we
get started on She's on the Money podcast, I would
like to acknowledge the traditional custodians of the land of
which this podcast is recorded on a wondery country, acknowledging
the elders, the ancestors and the next generation coming through
(00:23):
as this podcast is about connecting, empowering, knowledge sharing and
the storytelling of you to make a difference for today
and lasting impact for tomorrow.
Speaker 1 (00:33):
Let's get into it.
Speaker 3 (00:34):
She's on the Money, She's on the Money.
Speaker 1 (00:57):
Hello, and welcome to She's on the Money, the podcast
that's here to remind you that, no matter what's happening
in your bank account, your self worth is more important
than your net worth. My friends, if we haven't met before,
my name is Victoria Devine, and today I wanted to
use my solo Saturday episode to talk to you about
something a little bit personal. The D word, No, not
that D word. I am talking about debt. And it's
(01:19):
one of those topics that can feel like a little
bit of a dirty word, right, But here's the thing
debt is so common. In fact, I got in a
lot of debt. And I mean, I've been thinking, I
know plenty of incredibly successful people who have dealt with
debt at some point or another in their lives, right
including me. I at one point got myself into some
(01:39):
pretty serious personal debt. I was in more than forty
thousand dollars worth of personal debt between a personal loan
that I probably shouldn't have been approved for and a
credit card. And the reason I did was because I
was living beyond my means and at the time I
was so ashamed of it. I was so overwhelmed by it.
I literally would like to my housemates at the time
(02:02):
about it. And I can tell you now, it was
eight hundred and fifty three dollars each and every single
month that I had to pay back. That was the
minimum amount, and at that point in time, like I
was earning just over that amount. So I was earning like,
I think about sixty thousand dollars a year, and it
was absolutely financially crippling. I just I couldn't see a
way out of it, and I judged myself and was
(02:23):
so ashamed of how I got here. I thought it
was a reflection of who I was as a person.
I thought that it made me a terrible human being.
And I mean, at that time, I lacked a lot
of financial literacy and I just didn't understand it. And now,
looking back, I just want to scoop up past me
and go, well, you were just doing the best that
you could with the tools and the resources that you
had at the time, and you made some decisions. They
(02:45):
weren't bad decisions, but you made some decisions that weren't
in line with your values because you didn't know how
to live life in line with your values, because you
didn't have the financial literacy you deserved. And to me,
looking back on past Victoria, all she did was spend
more than she earned. That didn't ever make me a
bad person. That didn't ever mean I wasn't smart or intelligent.
(03:07):
It didn't have anything to do with myself worth. But
that's how it felt, right. And I mean, you're probably
thinking at the moment, like vuhy, you're ruining my Saturday
with a story about debt and you historically not being
very good at money. But debt is not exactly a
feel good topic, right, But I want to flip the
narrative on that today. I want to empower you when
(03:28):
it comes to debt. I'm not saying go get you more.
But debt isn't just a financial weight, right. It can
weigh heavily on your emotions, and it can weigh really
heavily on your self worth. And as I said before,
I have been there. Debt has this way of making
us feel like we have messed up. But here's the
real truth. Debt does not define your worth. Repeat after me.
(03:51):
Debt doesn't define your worth. And also wealth doesn't define
your worth. Right Like, rich people or people with heaps
the money in their bank are not worth more than
other people, So why would people in the opposite position
be worthless. Debt can feel, I guess, really heavy because
of the emotional baggage that it often carries. It's more
(04:12):
than just a number in your bank account. It's more
than just like that debt statement that you get in
the mail or in your emails. It can feel, genuinely,
and I say this from an empathetic point of view,
it can feel like a personal failure, especially when society
loves to put so much pressure on us being financially perfect.
But spoiler rella. Literally, nobody is perfect. We all are
(04:33):
on our own financial journeys, and if debt is a
part of that, that's cool, that's fine. I feel like
we go through seasons in life, and right now, if
you're in debt, that's just a season of your life
that you are going through. And that's cool because if
you're in the middle of winter and it feels really cold,
you can zoom out a little bit, as you know,
I love to say when in doubt, zoom out, but
you can zoom out a little bit, and you just
(04:53):
know that someone's coming. And like, if there's no rain
during the winter, the flowers aren't going to bloom in summer.
There have been numerous studies that have highlighted the undeniable
connection between debt and mental health. I don't know why
more people aren't talking about this, and the results are
consistently painting a very upsetting picture. Right Financial debt doesn't
(05:18):
just impact your wallet or your ability to create wealth
or buy a house or move in with your partner.
It seeps into every single corner of your life with
significant impact on your mental and physical health. So, whether
it is stress or anxiety or even depression, the weight
of debt can be overwhelming, and research across the board
(05:39):
says that the more debt people seem to accumulate, the
worse off their mental health outcomes seem to be. So
let me give you an example. In twenty nineteen, there
was a study that found that individuals with high levels
of debt reported significantly higher levels of stress and anxiety.
Another study was done at about the same time showed
(06:01):
that unmanageable debt often led to depression, and it highlighted
that it's actually not just the amount of debt, but
help people perceive their ability to manage it that can
actually trigger serious mental health issues. So debt doesn't just
impact your mood either. It can disturb your sleep. And
I can attest to this, like literally, when I was
in debt, I used to stay up all night and
(06:24):
I didn't know why at the time, Like obviously I
was thinking about my debt, and I was stressed about
my debt, and I was wondering how I was going
to pay it off, and like if I wanted to
do something, I was like, oh my gosh, how am
I going to afford my debt payment? And this, But
there was a study in twenty twenty that linked financial
stress to disrupted sleep patterns, which often worsen anxiety. I mean,
(06:45):
everything's worse at three am. Right. Relationship strain is also
really common when you are in debt. It's the number
one thing that couples fight about, right because emotional struggles
can actually lead to being emotionally distant and even fighting
with your partner. And some people that are in debt
actually turned to very unhealthy coping mechanisms. They might get
(07:07):
involved in substance abuse. And it was actually highlighted in
a study that linked financial stress to an increased likelihood
of using alcohol and drugs and all of this. It
actually just shows us and distills down the relationship between
debt and mental health, and it shows us that it
is a very in vicious cycle, and it's one that
affects more than just the dollars in your bank account. Right.
(07:29):
But let me tell you right now, as I said before,
debt does not define you. And I know that if
you're listening to this, you're like, yeah, but why do
I still feel like trash about it? V? I get it,
I've been there. Having debt actually doesn't make you an
irresponsible human being. It doesn't mean that you're bad with money.
I think there's a massive misconception that if you are
in debt, you must be bad at managing money, and
(07:52):
that is actually not the truth. Like for some people
it might be let's be honest, but it's not actually
the truth. It's not a reflection of your car. It's
just a financial tool. And if you haven't been good
at using those tools, because no one taught you how
to use the tools, I can teach you how to
use the tools and you can get back in control
and you can control your life instead of that feeling
(08:14):
of being in debt controlling your life. So let's talk
about some numbers for a hot second. Did you know
that here in Australia, consumer debt is actually in the trillions,
not billions, trillions. That's credit cards, personal loans. Obviously mortgages
fall into a part of that. Honestly, debt is a
part of life for most Australians. So if you're feeling
(08:35):
like you're the only ones struggling with it, and you're
a bit like past Victoria and you're like, I don't
want to talk about this, you're definitely not alone. Life happens,
right and we can't control it. And I mean over
the last few years going through COVID, we literally have
seen it play out for us, whether it's medical bills
or trying to put yourself through university to give yourself
the best possible chance to create the life that you
(08:57):
deserve or you wanted to, you know, invest in homes
you've got a mortgage. Debt is often just part of
that journey. Debt. It's not actually good or bad. It's
actually very neutral. It's a tool, and it's a bit
like a hammer, right, and what you do with that
tool is what matters. So think about, like I guess,
(09:17):
your hex debt or you know, any debt you went
into to study and mortgages. These are often called and
I often refer to them as good debts because they're
actually helping you build something. So whether that is your
education or it's your home, you're kind of investing in
your future. And these are what I would call, I
guess examples of debt that is opening doors for you.
(09:38):
I mean, it might feel all consuming and overwhelming, but
like skip ahead thirty years, if you have a really
good education, it is very likely that you are going
to have a higher income. It's not to say that
you have to have a really good education to have
a high paying job. We see on money diaries all
the time people absolutely killing it without an education. We
also see people purchasing homes and their mortgages stressing them
(10:01):
out of their brains. But if they've bought in a
really good area and they pay off their mortgage over
you know, a thirty year period, they're not paying it
off earlier. But like that thirty years of paying back
a mortgage is really stressful. They pay it back, they're
in a really secure financial position. They own the roof
over their heads. Right. But sometimes we take on debt
that we have to take on because we're going through
(10:23):
a really rough patch. So maybe there was a whole
heap of unexpected costs, or you really needed a credit
card to cover an emergency. That's actually okay, Like I
get it. There is no such thing as being financially perfect.
It doesn't make you any less capable or any less responsible.
Life happens, and sometimes debt is just part of life happening.
(10:45):
And it's actually our plan to deal with debt that
is going to change the trajectory of our lives, not
necessarily whether we have it or not. I mean, I
don't want to talk about myself too much, but I
was in forty thousand dollars worth of personal debt. It
felt all consuming, overwhelming, And I think if you look
at what I've done, obviously I am an absolute outlier
(11:06):
and what I have done is very different to the norm.
But like, I managed to get myself out of that
hole with good financial literacy, and at that time I
had still a sixty thousand dollars income. I did get
a pay rise at that point. I think I was
earning closer at eighty thousand dollars. But I got out
of that debt. I saved up for my first home
deposit with my partner having not made any of the
(11:28):
money that I've made. Throusella and Cheese on the money, Like,
life happens, and we can create a plan that puts
you in the best possible position. You don't have to
have something that is life changing to change your life. Right,
And let's talk a little more about this idea of
good versus bad debt. Right, So, a mortgage that helps
you to build equity in your home, or like your
(11:49):
hex debt that sets you up for a better career
in the future, are really good examples of good debt
because they lead to I guess, long term gains. But
on the other hand, you've got bad debt, I suppose,
so those high interest credit cards where you're purchasing things
that you don't really need and you have the ability,
and a lot of people do to spiral out of
control if you're not careful. And I mean I have
(12:11):
not met one person, and there are hundreds of thousands
of you in our shoes on the money community. I've
not met one person that said, Victoria Devine, I got
a credit card because I just really liked the idea
of spiraling out of control and spending beyond my means.
I just one day wanted to wake up with an
amount of debt that's dropped me from sleeping well, enjoying
life and you know, having a good relationship with money.
(12:32):
Not one person says that no one gets a credit
card with the intention of misusing it, right, no one
does that. But even if you ended up in that position,
there's usually a reason for it, and the best way
to get back on top of that is to deep
dive into why, when, where, how, and not judge yourself
for it, Because even if you have bad debt. It's
(12:53):
not the end of the world. It's just that other
chapter in your financial story. And with the right plan,
you can manage it. We can get out of debt.
We can, you know, create a plan. We can see
the light at the end of the tunnel together. But
I think so many times when you are spiraling out
of control, you just overlay this idea that you are
terrible at money and that you're not very good at it,
and what you need to do is just bury your
(13:15):
head in the sand and not deal with and that's
actually the worst thing that you can do. So we've
talked about debt and how it doesn't define your worth,
and I hope that you listen to me about that,
but don't get it twisted. It is just a financial tool.
Money is neutral. And I guess people in our community
and you, my friend, you are not going to let
debt define you. And if you feel like it is
(13:37):
defining you right now, we are going to change that
narrative and we're going to change it today. So I
guess the question now is what do you do when
you've got debt that feels overwhelming. I don't just want
a motivational talk from victoria that says it doesn't define me,
that it's neutral. That doesn't help anybody, right, I mean
it might get you interested in changing, but like, we
need some tools, So stick around. I'm going to go
to a really quick break and on the flip side,
(13:57):
I'm going to tell you exactly how to change that narrative.
Welcome back, my friends. Now let's have a chat about
managing debt without the shame, because that's seemingly where a
lot of us end up getting stuck. When debt feels
overwhelming and all consuming. It is so easy to feel
(14:19):
so powerless. But my friends, here's the thing. Tackling debt
can actually be, or I think it can actually be
really empowering because you're not just managing I guess a
responsibility that you have, your taking control of your financial journey.
You are putting few to you in the best possible position,
and I promise she's gonna thank you for that. Like,
can you imagine if today you're looking back on your
(14:42):
journey and you're like far out, Like I cannot believe
that I was so good to current me because I
paid off all that debt and I'm not in it
right now. That's such a win, and you're putting yourself
in that position. I would say, and I've said it
before on the podcast, I believe that looking after your
finances is the highest form of self care that can exist.
(15:02):
So taking steps to handle your debt, whether it is
small steps like creating a budget, or big steps which
feel overwhelming, like negotiating with creditors, or just being really proactive,
it's a way of looking after yourself and looking after
your future. Because I promise once you take that step,
(15:22):
you'll realize it's not as big and scary as it
currently feels. And I know that you've got this. I
know that you are able to do this, and I'm here,
our community is here. You're not alone in this process.
You're not doing it by yourself. So if it is
feeling like if you're listening to this and you're like
V it's actually insane, Like I actually can't deal with this,
(15:43):
this is all too much, you know what I do?
I'd start by calling our friends at the National Debt Helpline.
I'll obviously put their number in the show notes. It's
a not for profit service that I have worked with before.
I love them. I think that they are absolutely incredible.
They are people just like you and me. They provide free,
independent and confidential support to help people tackle their debt problems.
(16:06):
I promise they are not lenders and they don't have
anything to sell or they don't make money from you.
They are legitimate professional financial counselors that are there to
offer you guidance and practical advice on managing debt, and
they have seen it all. I promise going to them
it shouldn't be embarrassing going to them and laying it
all out on the table. They'll go, yep, no worries,
(16:27):
what else? And when you say no, that's it, you'll
be like, oh, it's not as bad as I thought
it was going to be. So don't be afraid of them.
I promise. They are just like you and me, and
you know what, they're probably better than me. They spend
their entire life working for a company that helps people
just like you get out of debt. Like they're on
your side. They're not going to crucify you for where
(16:49):
you've been. They're just going to help you create a
bright future. The other thing I would say here, which
can feel really overwhelming, is don't be afraid to reach
out to creditors. I mean, at the end of the
what's the worst they can say no, feeling intimidated. I
get it, But many creditors are very willing and very
able to work with you on new payment plans that
(17:09):
are way more manageable. Or if you're struggling with a
heap of debts, you might want to consider, and you've
probably heard about this before, debt consolidation, and this can
really simplify things by pulling all your debts together into
one payment, often with a lower interest rate, that feels
less overwhelming. One of the key things I want you
to tackle when it comes to your debts is also
(17:31):
to understand the different types of debts you have. It's
so often that I talk to people and I'm like, oh,
are you in debt? They're like, yeah, it's so bad.
And then I hear they've got a mortgage, and I'm like,
that is a wealth creating debt. Not all debts, my friend,
are created equally, So things like credit card debt with
high interest rates are very different to a mortgage, which
could have a lower interest rate over a long period
(17:54):
of time. That helps you create wealth. And understanding what
you owe and why is going to help you make
much better decisions moving forward. So one of the things
I also wanted to talk to you about was interest
free loans, and I have spoken about them on the
podcast before, but often they could seem like a great deal.
I have met so many people and spoken to so
many people in our community who think that this is
(18:15):
going to be the answer to their problems. You can
take all of your credit cards with high interest rates
and you can transfer them to this, you know, interest
free loan. But more often than not, there is a
catch because even though you're only making minimum repayments set
by the lender, you might not be in a position
to clear the debt before the interest free period ends,
and then they're literally setting you up for failure in
(18:38):
the long term. And even though you might be like me,
but like my interest rate's seventeen percent, if you read
the fine print on a lot of these interest free loans,
after twelve months or after twenty four months, it jumps
to like twenty two percent interest and that's worse for you, Like,
that's going to absolutely cripple you. So what I would
be doing is everything literally to avoid surprise interest charge,
(19:00):
and I would take control. So let's have a look
at debt consolidation. Maybe we can actually use an interest
free loan to our advantage. But please make sure that
you're either able to pay off the balance before the
period closes, or you're able to increase your monthly contributions
to that debt to wipe them in time. And when
(19:20):
it comes to borrowing any type of money, I think
my biggest call out here is please, please please always
read the fine print. Now let's talk about by now,
pay later. You guys know how I feel about this.
Say you're using after pay to buy a two hundred
dollar handbag that you've got your eye on. It's on
the iconic and you're all over it. In most of
our brains, the math is, all right, well, that's actually
(19:42):
just like four payments of fifty dollars, and that's so
much more palatable. But your brain actually, and this is
scientifically proven, your brain actually anchors to the smaller amount
of fifty dollars and it makes you feel like that's
all you're spending. And if you have been in the
after pay traps before, I can almost guarantee that if
(20:03):
I asked you what that dress you bought was, or
what that bag was, or whatever you put on after pay,
I can almost guarantee you don't remember the full price.
You just remember what payment came out, and that's what
anchoring is. And before you know it, you add another
cute top to the cart as well, because what's the
difference between fifty and seventy dollars? Right? So only seventy dollars.
That's not that much. And after pay his own website
(20:26):
actually brags. So if you go to the after pay
website and then go to like I'm a small business
and have a look, they literally brag to potential merchants
that work with them, the average order increases by eighteen percent.
They know that you're going to spend more because you're
not spending your own money. So while this might be
(20:47):
interest free and you might go this is a really
good tool for MeV where a costs more is actually
in the amount that you're justifying to spend. And I
think that just understanding these things can help you make
better choices. And some people might be listening to this
and going the I'm actually really good at after pay.
I use it as a cash flow tool, and I've
also spoken about this as a lot before as well.
(21:09):
Then the great this tip is not for you, and
that is fine. But there are people who don't know this,
and there are people in our community who after pay
just doesn't work for And I'm one of those people.
I know that anchoring works very well on me. I
think it's very related to being a little bit neurospicy,
where that's the first number I saw, that's all I'm
(21:30):
going to remember and moving forward, that number actually makes
me feel a lot better about myself than two hundred.
So I know what I'm going to anchor too, and
I know that to have the best financial health personally,
something like after pay or any by now pay later
is just not going to fit into my financial plan
or my financial modeling. Right. The other thing we need
(21:51):
to get really real about is your finance habits or
your money habits. And I'm actually here talking about just
being brutally honest with yourself and be really hard. Like
I remember coming to the conclusion that I'm just not
good at money and debt, and this is before I
became a financial advisor. I wasn't good at handling money.
And how do you handle money? Are you super self
(22:12):
aware about how you make money choices or are you
a bit head in the sand, Like, are you able
to avoid going further into debt and start gaining control
of your life? And that can be a big shift
because often that involves complete lifestyle shift. So if you're
going into debt because you're spending more than you earn,
often that is reflective of you living a lifestyle that's
(22:33):
actually beyond your means. You might go there. I don't
really want to change that, Like I love brunch with
my girlfriends, like I love going and buying new activewear,
Like this is just for me. I'll work it all
out later. Like it does involve being brutally honest with yourself,
and that can sometimes be a little bit painful, but
I promise by doing that, you're putting yourself in the
best possible situation. Let's talk about credit card debt as
(22:57):
an example. So, like a zero percent balance trans to
somebody who is like me might seem like a golden ticket,
but it only works if you transfer the balance and
take to that card with a pair of scissors and
stick to that repayment plan and pay it off during
that interest free period. And people in our community have
(23:17):
done that. It's been a brilliant strategy for them. But
if you're prone to spending and you're just gonna justify
to yourself, which we've all done, like, oh my gosh,
actually I I'm going to keep this card in my
wallet just in case, for just in case splurges. This
is I promise you, this is going to spiral you
out of control. And I know that this sounds a
little bit lame, but maybe if you're not ready to
(23:39):
cut the credit card up completely, you do that thing
where you put it in a container of water and
chuck it in the freezer, so the card still exists
but you can't really access it. Maybe that would work
for you, so that the card still exists but you
can't really use it, and if you want to use it,
it's going to take you some serious thought about how
to get back to it at some point. All right,
let's pivot away from that and talk about two of
(24:02):
the most popular methods for paying down debt. Right, so
you've probably heard about them in our community. It's the
snowball and then the avalanche methods, and both can be
super effective, but they work in completely different ways and
are actually suitable for different people. And I think this
is where you need to know yourself you need to
know your personality type and who you are and what
might work now. I don't think it will come as
(24:23):
a surprise. I am an instant gratification girly at heart,
which is why this first method that I'm going to
talk about, the Snowmall method, that's for me, so let's
talk about it. It's all about quick wins and it
is perfect for people who need a little extra motivation
to stay in the game. The idea is relatively simple.
What the plan is is you focused on your smallest
(24:45):
debt first and then just throw every extra dollar that
you have at it. So we're not going to worry
about our interest rates for now. We're actually going to
think about psychological wins or the fact that you're going
to get instant gratification, because what you're going to do
is you're going to take your debts and then you're
going to list them in smallest balance to largest balance,
and then you're going to make minimum repayments on all
of them. So we're not going to stop paying back
(25:06):
our debts, but we're not going to make just minimum
repayments on the smallest one. For the smallest one, you're
actually going to take any additional money that you have
and pay it off as quickly as you possibly can.
And then once that first stet is gone, you're going
to take that money that you were using to pay
that debt off and you're going to pay the next
smallest debt. And it's kind of like building a snowball
(25:29):
of momentum, and bit by bit you keep adding what
you were paying before to the next one in line,
and boom, your debt actually starts disappearing bit by bit.
And for me, it's such a satisfying feeling that every
time you pay something off, it's kind of like a
victory lap that keeps you going. Like I'm the type
of person that instant gratification works for, So if you're
(25:49):
somebody who like me, I just thrive on seeing results
quickly and I need a consistent sense of accomplishment to
stay on track. This snowball method, my friend, is for you.
I think it's actually perfect if you're just really overwhelmed
by debt, because knocking out those smaller balances I think
really builds confidence. But it's also not too technical, like
(26:10):
there's no maths involved. You just look at which one
is the smallest and start paying that off aggressively. But
if you're a bit more of an efficiency girly and
you're all about cutting costs and putting yourself in arguably
the best possible position, then the avalanche method might be
more on your page. So this one actually focuses on
paying off the debt with the highest interest rate first,
(26:31):
which is obviously going to save you the most amount
of money in the long run. As I said, this
one is arguably the quote better method. But for me
when I was paying back my debts, the snowball method
worked better for me because again, instant gratification curly. So
how do you do the avalanche method? What you're going
to do is, instead of focusing on what the smallest
debt is, you're actually going to list your debts from
(26:53):
the highest interest rate to the lowest interest rate, and
we're going to go after the most expensive debt first.
So once you've got your list, you're going to make
minimum payments again on all your debts. We're not going
to not pay any off except for the one with
the highest interest rate, and that one you're going to
throw all your extra cash at it until it has gone.
It might take a little bit longer to get that
(27:14):
first debt knocked out completely. But financially, this one actually
makes the most sense because you're cutting down on all
of those sneaky interest charges. When that I guess first
high interest debt is paid off, then you're going to
take the money that you were using to paid off
and roll it into the next high interest debt and
you just keep going from there. It might not feel
like you're making progress as fast as the snowball method,
(27:37):
but you'll be saving a lot more over time. So
if you're somebody who is more motivated by saving money,
and you know, having the most control you could say,
and you can actually handle the patients it takes to
focus on the long game, then I would say this
one's definitely for you. It's also the best option if
you've got a really high interest debt, like maybe a
big credit card balance, because that interest up really fast.
(28:01):
But when you're picking the method, I think the most
important thing that you do is actually think about you
and your personality and what's going to motivate you. So, yes,
you might save a bit more interest in the avalanche method,
but even the fact that you are considering a method
to pay off your debt means that you're going to
save money in the long term. For me, the Stoneball
method made sense. I'm sure if I went back and
(28:21):
calculated it, I could have saved some interest charges. But
like I see that as the payment for actually finding
the motivation and getting it done. Like, I don't think
I missed out on that. And if you wanted to
get technical, yes I could have left out money. The
Avalanche method might have been better. But at the end
of the day, I got out of debt and that
was the main goal, and that is what I'm most
proud of. I'm running out of time here really quickly,
(28:45):
so I just wanted to, I guess touch on something
a little bit fluffier, and it's more of like a
little reminder for you. You are more than your debt.
It is actually just a number on a piece of paper.
It doesn't define who you are or what you're capable of,
or your thoughts, your feelings, you're belief your values. It
doesn't define who you are or what you're going to
create with this life that you've been given. Every single
(29:07):
person's financial journey is so different, and having debt doesn't
take away from your value or your potential or the
ability to be successful in the future. I was forty
thousand dollars in debt. I was up to my eyeballs.
I would cry about it all the time. Eight hundred
and eighty three dollars I was paying back each and
(29:28):
every single month, and I had nothing extra Like that
was a chapter for me, a chapter that was really sad,
and I didn't feel my best, and I felt like
it defined me. But I feel like I'm a very
good example of coming out the other side. So does
being in debt define who you are? Absolutely not. I
think what matters the most is actually how you're planning
(29:50):
on moving forward. It's not about perfection or creating a
debt free life tomorrow. It's actually about understanding that debt
is just part of your financial story to chapter, and
you actually have the power, like the complete power to
write the next chapter in a different font. So be
kind to yourself, show yourself some compassion, and know that
(30:12):
tackling your debts, I would say it's very brave, but
it's also a really important step and one going in
the right direction. I think that being in debt it
can be overwhelming and all consuming, but I promise it
doesn't define who you are. I have run out of
time now, so I'm going to stop going on about it.
But I think that you are brilliant. I think that
(30:34):
if you have listened to this entire episode, hopefully it
resonated with you. And if it did strike a chord
with you, please don't forget to subscribe because it helps
me to continue to bring this content to you on
a weekly basis. And I hope you have a beautiful
weekend and I will see you bright and early on
Monday for a money diary. Bye. Shared on She's on
(31:01):
the Money is general in nature and does not consider
your individual circumstances. She's on the Money exists purely for
educational purposes and should not be relied upon to make
an investment or financial decision. If you do choose to
buy a financial product, read the PDS TMD and obtain
appropriate financial advice tailored towards your needs. Victoria Divine and
(31:21):
She's on the Money are authorized representatives of Money. Sheper
Pty Ltd ABN three two one six four nine two
seven seven zero eight AFSL four five one two eight
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