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- [00:00]
Jen
Why choose a Sleep Number Smart bed?
- [00:02]
Jill
Can I make my site softer? Can I make my site firmer?
- [00:05]
C
Can we sleep cooler?
- [00:07]
Jen
Sleep Number does that cools up to eight times faster and lets you choose your ideal comfort on either side. Your Sleep Number setting Get early Access to sleep number's biggest sale of the year, 25% off the i8 bed. Our most popular plus free home delivery limited time All Sleep Number Smart beds offer temperature solutions for your best sleep. Check it out at a Sleep number store or sleepnumber.com today.
- [00:30]
Philippa Hsu
Searching for a romantic summer getaway? Escape with Rich Girl Summer, the new Audible original from Lily Chiu the exquisitely talented Philippa Hsu. Returning to narrate her fifth Lily Chu title. This time, Philippa is joined by her real life husband, Steven Pasquale. Set in Toronto's wealthy cottage country, AKA the Hamptons of Canada, Rich Girl Summer follows the story of Valerie, a down on her luck event planner posing as a socialite's long lost daughter while piecing together the secrets surrounding a mysterious family and falling deeper and deeper in love with the impossibly hard to read and infuriatingly handsome family assistant, Nico. Caught between pretending to belong and unexpectedly finding where she truly fits in, Valerie learns her summer is about to get far more complicated than she ever planned. She's in over her head and head over heels. Listen to Rich Girl Summer now on audible. Go to audible.com richgirlsommar which debt should.
- [01:25]
Jill
You pay off first?
- [01:31]
Jen
Welcome to the Frugal Friends podcast where you'll learn to save money, embrace simplicity, and live a richer life. Here are your hosts, Jen and Jill.
- [01:46]
Jill
Welcome Frugal Friends. I'm Jen. I'm Jill and today we are helping you decide which of your debts you should pay off first. If that is a question you may have, ultimately it doesn't matter which one you pay off first, as long as you say, right? So quick episode, thanks, bye. But if you do want to optimize and want some opinions on what's better, highest interest rate? Highest debt? Hybrid approach, we're going to talk about the pros and cons of all of them. But first, this episode is brought to you by Buying what you love while you're still in debt. Buying what you love while paying off debt rather. And if you want to pay off debt, we have found the biggest key is not the order in which you pay it off, but the consistency with how you stick to it. You have to be committed to sticking with this for years and you're not going to do that if you deprive yourself. And so we wrote a book about how to do that. And it's called buy what you love without going broke. But if you're already broke, it can help you buy what you love without going more broken. And it is available wherever you buy books. If you go to buywhatyoulovebook.com, you can see our favorite places to buy it and instructions on how to request it at your local library. So we highly recommend, if you are starting a debt payoff journey, get the book. It is going to help you stay consistent with all the numbers, all the opinions, all the logistics that you can't really change that don't really make a big difference. It's gonna help you with all the stuff that does make a difference.
- [03:47]
C
Becoming debt free for Jen and I has been such a huge financial goal that we've had and then a huge accomplishment that has really opened up optionality for us. So while we don't think debt is bad, we believe debt is neutral. And we talk about that a lot in the book. We do think it could be very helpful for people in a debt payoff journ. But we also think it's a great goal and it can really help us financially in the long run. It can really catapult what we're able to do with our money once we get rid of our debt. And in order to really take a swing at this, there is strategy involved. And so that's what this episode is about. It is a rerun from our archives, an episode that you all really loved. But we know you're not digging through episodes that we put out years ago. And so we wanna bring it back up to the surface. And we think that the content here is really evergreen and we hope that it helps you in figuring out what's your best approach to be able to get your debt gone quickly, but in a reasonable way that isn't backbreaking. So let's get into it.
- [04:56]
Jill
We're talking about debt payoff order, a hotly debated topic in personal finance.
- [05:04]
C
There's so many things to debate, apparently.
- [05:07]
Jill
Yeah, I mean, we don't have much to debate in personal finance because so much of it is very standard advice. And so we choose things like this.
- [05:17]
C
Should I or shouldn't I pay off my mortgage early? And boy, do people get heated.
- [05:23]
Jill
Yeah, it's crazy. So first we're going to cover, in this first article from Investopedia, the debt avalanche versus the debt snowball. We're going to talk about the difference because these are the Most these are the standard ways to pay off debt in an accelerated way. So let's just cover them, get a foundation, talk about the pros and cons. And then in the next article we're going to go to nuances on how you can customize it.
- [05:50]
C
Yeah.
- [05:50]
Jill
What did you what do you think about the debt avalanche versus debt snowball debate? Where are you, Jill?
- [05:56]
C
I think I would lean more towards the logical side of things, attacking the interest more than the emotional side that might be more closely tethered with the debt snowball. I know you're about to explain the two, Jen, and so our listeners will understand more, but I think I would lean more towards the avalanche if I were to be going back and doing this all over again. But Lord willing, I won't be. Lord willing, this dead freedom will stick.
- [06:26]
Jill
Lord willing. All right, so yes, I, I will cover what they are and then Jill's going to cover like pros and cons. So let's start with the debt avalanche. I too enjoy the debt avalanche. I but honestly, ultimately I prefer a combination and we'll get into that later. But so the debt avalanche, for those who are unfamiliar, it involves making minimum payments on all your outstanding, outstanding accounts, so all of your debts, and then using any remaining money that you've earmarked for debt to pay off the bill with the highest interest rate. So how you would do this is you would list all of your debts and the prioritization would go from highest interest rate to lowest interest rate. And this is assuming these are all fixed interest rate. If you have a variable, then that order obviously can change as the variable interest changes as it varies, but at a snap, at a moment in time, whatever the interest rate is, we're listing from highest, also called apr, annual percentage rate, to lowest. So their example, they use a $10,000 debt on a credit card at 18.99. That's the first the 9000 car loan with a 3% interest rate. Good for them. That's no, they don't have it listed out. So the next one would be their $15,000 student loan at four and a half and then would be their $9,000 car loan at a 3% interest rate. So that is their list of debts in order of, you know, we got like 19, four and a half, three percentage rate. And that is the order in which you would pay them off. Not paying attention to the amount on the loan.
- [08:24]
C
Yeah.
- [08:24]
Jill
Does that cover it?
- [08:25]
C
Yeah, I think that, that yeah, you're prioritizing which one has the highest interest rates Getting them out of the way so that you're not paying as much towards the interest. And that would be the pro of this approach, is that you're gonna save hundreds, if not thousands, depending on how big of loans or debt you're in on paying it off more quickly, throwing more money at that principal, and less money just at the minimum payments, which is largely going to the interest. So the argument here is that you're going to pay less money in interest over time when you tackle it this way, rather than only focusing on the amount of each loan. The other thing that the article references, and I'll get your take on this too, Jen, it didn't totally make sense to me, but they were referencing a pro of the debt avalanche method being that it can reduce the amount of time it takes to pay off the debt. But I don't see why that wouldn't be like just across the board. Like, if you're going hard at debt payoff, you're just reducing the time across the board. I don't know why this method would reduce it more than another.
- [09:37]
Jill
Yeah, because it lessens the amount of money you're paying. Theoretically, it lessens the amount of time because if you have the same money to pay off debt, if you're paying off the higher interest rate first and saving money, then theoretically you are saving time as well. But I've done various calculations with debt snowball versus debt avalanche. And I mean, 10 times out of 10, the debt avalanche does save you money. For the amount of time for that money, it's usually just maybe a month or two. Honestly, like, it's not a lot.
- [10:15]
C
Okay, yeah. And they only referenced a few months as well. But I mean, when you get close to the end of debt payoff, weeks and days mean something to you. So. And then some of the cons to the debt avalanche that they reference is that it can take maybe a greater degree of discipline and commitment to make more than the minimum payments. One of the things that is referenced by both those who really rally for the snowball or the avalanche is that sometimes your debts that are larger in amount and you're just chipping away at them, you don't have all of the emotional kind of motivation behind it to be paying it off. And so it requires kind of this consistency rather than a win here and there. So if that's you, then that might be viewed as a con. And then it's also recognizing that it requires a consistent amount of discretionary income, meaning extra money to throw at this debt. I would argue that that's any debt payoff scenario. Like it requires you to set aside more money to throw at it. So that maybe that's just a con of debt payoff in general.
- [11:36]
Jill
Yeah, I love the debt avalanche. And I don't think, I don't think either method has as many like cons or they're, they're very, they're being very generous on what they're considering, pros and cons. But yeah, if you want to optimize your, if you're a very math oriented person and the numbers are really what motivate you, the debt avalanche system is going to motivate you more than the debt snowball. Because every dollar you pay off essentially counts for a little bit more money you have moving forward. And honestly, like so does the debt snowball. So it's just like a, when we get into the nuances and, and really talk about how we can create a hybrid version of these, that's where I get really excited. But for what it's worth, face value, this is the debt avalanche. Next is the debt snowball, which involves listing your debts out from smallest amount first to largest amount. And I know some people will do it where they will. Like in student loans. There are typically multiple loans within a student loan account. Like I know I had probably two loans per year. So they will either count that as one or they will separate it out, each one in their debt snowball. Again, up to you, whatever makes you feel good. So. But it's listing it out from smallest to largest and essentially tackling the easy jobs. First we tackle the smallest debt and then work up to the largest debt so that by the time you get to the largest debt, you have built so much momentum, so much self confidence that you are able to finish quickly, finish with the same momentum. And it is a great psychological like method for paying off debt because like what Jill said, paying off debt is just hard. It doesn't matter which method you're choosing, it is hard. So for their example, using the same debts as we used above, they would start with the $9,000 car loan because it is the smallest debt, even though it's the smallest interest rate. Then go to the $10,000 credit card debt and then to the $15,000 student loan. So they essentially are paying off, they're keeping that 19% APR credit card around for however long it takes to pay off the car loan. And that, that may not sit well with a lot of people because these debts are so close together. So we're talking 9,000, 10,000, 15,000 I think where the debt snowball very much shines is when you've got your 9, your 10, your 15, but you've also got a couple credit cards with maybe like a thousand here, 900 there, stuff like that, because that really cleans out the debt, so to speak. So anybody who's decluttered or simplified knows that when you declutter you just feel better. You feel better about things. To get out all the clutter of your finances is a very similar feeling. When you're staring down 10 different debts and you're able to clear out four, five, six of those with relative speed, then that can be super motivating. Just it feels very good. So that's where the debt snowball really shines is in those situations.
- [15:29]
C
One of the things that this article didn't seem to touch on, but has been my understanding of the debt snowball is not just getting rid of your lowest amount debts first, but that there's this like compounding nature to the snowball. This has been my understanding with this method is that you continue making minimum payments on all of your other debts while throwing extra as much as you can to the lowest amount of debt. And maybe that's budgeted, it doesn't have to be willy nilly. So let's say this is the certain amount you're able to put monthly towards that lowest amount debt. Then once that's tackled, you add that to the next debt, the next lowest amount debt, and add that on to the minimum payment so that each time you're kind of increasing the amount of debt you're able to pay towards the next debt, because it's what you're already used to having paid, if that's making sense. And this article didn't reference that, but I feel like that's part of even like the imagery of the snowball is as it rolls in the snow, the snowball is getting bigger and bigger. You're putting larger chunks of money towards the next debt, which is part of what makes it helpful to go at it in order of amounts because then by the time you get to the highest loan amount, you've got the most money to put towards it because you're kind of compounding the payments towards it.
- [17:06]
Jill
Yeah, I'm glad you explained that, Jill, because it does give you the snowball does give you the best visual representation of that in that method, because the bigger the debt gets, the bigger the amount of money you have to put towards it. But the same thing happens in the avalanche, it's just that the amount of the Debts may vary on both methods. You are paying your minimum on every single debt. It's just in when you budget and maybe you have, you have $500 a month to put towards debt. When you add up all of your minimums, that adds up to $400. So it's where do I put this extra hundred? That is the, that's what these method really explaining there or helping you prioritize is where does that extra margin go? In the debt avalanche, that extra margin would go to the highest interest rate loan. And then once you pay that off and maybe your minimums, you're getting rid of credit cards. So your minimum's now 350. Now you have 150 of margin. That 150 now goes to the second highest interest rate. With the snowball, your margin goes to the smallest amount debt. When you pay that off, then you have 350 for minimums, 150 in margin, that 150 goes to the second smallest debt. So you're doing the same thing in both methods. I think you get a little bit more of a visual gratification when you are doing the snowball, but it's happening in the avalanche as well.
- [18:44]
C
Nice.
- [18:45]
Jill
Yeah, yeah.
- [18:46]
C
So as far as pros and cons, we've said it already, but with the snowball, it's a lot more of that emotional side, the motivational side. When we can get these quick wins, it can help us to keep going, which I don't want to downplay. There is a big part to debt payoff that has to do with our mental, emotional, relational, physical date. And so if seeing an accomplishment is going to be a big motivator, help keep you on track, then the snowball is worth considering. Again, like Jen said, if you're a little bit more logical and it's the numbers game and that's what's going to speak to you and keep you on track, then it might be the avalanche that you want to move towards. Certainly with the snowball, it can be easy to implement as well. I mean, both of these are. Either one is taking a quick look at the numbers and deciding which way you want to tackle it. But then of course, the con of the snowball is that you could incur more interest or if it takes longer, if you end up paying a high interest loan later because it's a greater dollar amount, then obviously you're going to pay more in interest. In that regard, it could take longer to become debt free. But again, as we said, maybe months different from each other, not a large amount of time in the grand scheme.
- [20:12]
Jill
Of things, and usually not thousands of dollars either. It's usually in the hundreds which whatever keeps you motivated to pay off the debt faster. It's going to be a wash honestly, whether you if the snowball keeps you motivated and this comes into they have a few questions to help you decide at the end of this article and one of them is which is better? And the one that's better is the one that you're going to set stick with Ever check your bank account and think how did I spend that much again? It's so easy to lose track between takeout and impulse buys just to avoid that toddler tantrum at the store. It can really add up, right?
- [20:53]
C
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- [21:07]
Jill
Monarch was honestly a reality check. I didn't realize how much we were spend on takeout until I saw it all laid out. Now Travis and I do weekly check ins and it's actually helped us stay on track with eating at home more.
- [21:19]
C
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- [21:32]
Jill
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- [21:49]
C
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- [22:11]
Jill
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- [22:25]
C
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- [22:49]
Jill
Because if the psychological accomplishment side is going to do more for you than the debt avalanche or the simplifying, minimizing the number of debts you have is going to help you more and help you stick to it, that one is better for you. And there's absolutely nothing inferior about is worth paying a couple extra hundred dollars to stick with it and to finish it than to do it the quote unquote right way and not be able to stick with it as long. So the one that's better for you is the one you feel best honestly customizing it in the way that makes you feel even better about it.
- [23:41]
C
Yeah. And then of course there's the additional questions of well, what else should I be doing with my money? Is it better to pay off the debt or save or invest or fill in the blank? And we've answered that in a previous podcast episode too, which you can feel free to head Back to episode 171. What should you focus on in debt payoff? But just to cover that briefly, because it's also meant mentioned in this article specifically, they're asking the question is it better to put money in savings or pay off debt? I think they're using the term savings interchangeably with investing. We know they're two different things. But of course paying off debt versus just stashing money away, not making any level of interest, paying off debt's going to be far better. But if we're talking about investing that money or putting it into a high yield savings account, you want to look at percentage rates of interest rates, right? What are you earning on that money versus what are you going to owe in interest? And so certainly it can be worthwhile to consider investing, especially investing for retirement congruent to alongside paying off debt. Especially when our debt interest, the interest rate on the debt is lower than what we're earning on interest in those investment accounts. So certainly we're again, it's going to be up to you as an individual for what feels good for you. But if you're an average income earner, you really are going to want to consider investing as early as possible. That's just our little. Our little hot take. Not that hot of a take. I'm just make up your own mind. But. But then of course it's worth saying with savings. Yes. Have an emergency fund. So alongside paying off debt, we do want to have some money stashed away for medical or other emergencies as they arise. So don't leave yourself high and dry. So few things to consider there. Retirement emergency savings alongside debt payoff.
- [25:54]
Jill
Yeah. Especially with the example they've given in the article of the two of their loans are under 5%. We've got a 3% and a 4.5% and that is really good. That is way less than what you'll get over time in the stock market. If we're looking at like a 30 year horizon, whereas 18.99% you would be, I mean expert pro to get that in the stock market over a 30 year time horizon. So like you're not going to probably not going to make that up by investing. So getting rid of that is a great idea, but it's not as important. I mean the 3% interest rate and the 4.5% interest rate you don't have to be as on fire about and we'll talk about that in the next article. So I don't want to get ahead of myself. All right. So our next article is called Things to consider when prioritizing which debts to pay off first. Did you learn anything new in this one, Jill?
- [27:01]
C
I don't. I can't say anything new stood out to me. You just know everything was affirming. I think, I think we talk about this well a lot more recently in saying debt is neutral. Debt can be a tool and a resource. We are not of the mindset that debt is evil and it's going to ruin you and you're unwise to have ever gotten into debt. We're not going to say that. And so I think this is really helpful to recognize. Okay. And especially for our debts that have very low interest rates on them, it's okay to ride out the length of that loan, especially if it means it gives us more wiggle room to be investing and saving or investing for our future. Recognizing retirement hopefully can come for us that we don't have to go hot and heavy at these loans that are only 2 to 3% interest. So yeah, I'm going to talk more about that. But I think just affirming it's always good to hear this more kind of radical middle approach when it comes to hey, what should I be doing? What should I be prioritizing or considering when it comes to debt payoff and when we eliminate the shame. I love that.
- [28:24]
Jill
Yeah. So there are four different questions to Ask or things to consider when you are trying to customize the debt avalanche or the debt snowball. So the first one is tax breaks and I don't think I would put this as the first one, but they have. So they state that tax breaks can come in the form of credits reductions or exemptions. Certain loans like mortgages and student loans do have tax deductions that allow you to reduce your taxable income. But this is slightly misleading. Mortgage interest can only be deducted if you are itemizing deductions, which most of our listeners are taking the standard deduction. So that's not really a thing. When you're thinking about paying off your mortgage, don't consider the tax implications or a tax break when you are paying that off. It's if you're taking the standard deduction like most people. Student loan interest on the other hand is deductible. If you take the standard deduction, it's considered a income reduction. So you would reduce it just like if you were contributing to a health Savings account or 401k. Those are things that are considered off the top income reductions that then will reduce your taxable income. So student loan interest when it was occurring was deductible. If you see any student loan interest, it will be deductible as income. So that is a small thing to consider. And I would say mostly if you're teetering on the edge of an income bracket that's maybe more important or if you're in a highly taxed area, highly taxed income, maybe those are things you want to keep around. But if you are not, then it's really not something I would consider. That's not the definitely not at the top of my list when making considerations on what debt to pay off.
- [30:34]
C
And the second consideration, that should have been the first consideration and you've already heard us talk about it, interest rates. So here you go. Here's like a really simple template. Prioritize anything in the double digits immediately. Yeah, of course. Reference back to whatever your preference is. Avalanche or snowball. We just love snow, I guess. Those are intense.
- [30:58]
Jill
No, we don't.
- [30:59]
C
Illustrations though. Yeah. Avalanche or snowball. Both of them are. Anyhow, anything between 5 to 9% is going to be secondary. So the next thing that you want to be tackling. And then they say anything under 5% is at your discretion. This is very low interest. And again, most likely your money is going to go further invested. When the typical average return is 7% and you know, yeah, average. Anything under 5% then yeah, take your Time live out the life of that loan if you want. Again, at your discretion.
- [31:39]
Jill
Yeah, and these are just standard. So again, these are just recommendations that we are making because of kind of psychology of, you know, the psychology of motivation, the psychology of simplicity, but also math. You know, like when we are sitting with loans in the double digits that's eating up any return that we could get in this in the stock market. So that's really important, I think. And typically what we see is credit cards have lower balances anyway than like a car or a student loan. So it usually just ends up that they're at the top of the snowball and the top of the avalanche. Normally that's what you're going to see. If for some reason you're not seeing that. I would definitely say prioritize the double digits first and traditional like for the last 20 years wisdom is to if you're not going to pay off everything, just pay off everything over 5%. Because the minimum kind of you're going to get long term in the stock market has shown to be about 7%. It's usually between 7 and 10% is what we usually plan to earn. And so anything under 5% is really at your discretion. But we're in an a season where interest rates are so high that may not be feasible right now. It used to be very easy to get a car loan under 5%, like all car loans were under 5% and now it is very difficult even if you have excellent credit. So that's why like we're saying anything 5 to 9% is secondary because you want to make sure you are maintaining your emergency fund so that you don't have a reason to go back into double digit interest rate debt. And that you're also starting to incorporate some investing that if you were able to invest and maybe a new interest loan is keeping, like trying to pay off, that will keep you from investing. Try to stay at the status quo of where you were and just secondarily try to incorporate that debt that's between 5 and 9%. But it's really up to you. That's just like a recommendation from your.
- [34:11]
C
Frugal friends and this article.
- [34:15]
Jill
Yeah. So next is to consider the remaining balance. And that would have been my second suggestion is to consider the remaining balance because like we said before, there is a science to simplicity and it will not just give you a sense of accomplishment and a sense of motivation, but there is an overwhelm that comes when our lives are cluttered, scheduled to the brim. Our transactions list is a mile long. Like there is an element of stress that comes with that. And it's the same with our debts. The more debts you have and the higher the amount. But even just the individual debts causes more stress and anxiety. So if that is something that you are seeing, then definitely maybe starting with a snowball and then progressing to an avalanche might be what works for you. Alternatively, when we interviewed a couple for our Debt Free stories series on YouTube, we found that they prioritized the higher minimum payments. So they didn't look at interest rate as much. Well, they did look at interest rate, they didn't look at amount, but they did focus on. I don't forget this. If this is a coupler or one of the other girls, I don't remember who did it actually. But they focused on the monthly payment and focused on the higher monthly payment so that they could get that out of their life quicker. So once they paid that off then they had this huge amount to add to their margin. And, and so that was. And that normally will probably end up being probably your largest interest rate. I'm not sure, I don't know where it would end up being actually. But it was super motivating to free up that entire chunk of minimum payment every single time way more than it had just been a small like 20 or $50 addition to the margin.
- [36:40]
C
I think that's what you hear too when people say people make it a priority to pay off their mortgage. It's, it's not just an interest rate decision. It's also that freedom of no longer having a mortgage freeing up what is usually a big portion of where their monthly expenses are going. And so yes, similarly if you've got a payment that is taking up a good chunk of your take home pay, then you're going to experience a good deal of freedom when now you've got that 400, $500 not obligated to be paying every month and you can kind of put it where you want to, whether that's towards more debt or just living large.
- [37:26]
Jill
Yeah, no, this is definitely, I think the interest rates and how you feel about the remaining balances, those are the two biggest things for me.
- [37:38]
C
What's going to keep you on course, what you know about yourself already. The last one that they mention on here to be considering in determining prioritizing debts to pay off. This one's an interesting one to me.
- [37:54]
Jill
It's probably also important. Probably also should have considered this one.
- [37:57]
C
Yeah, it says the consequences of default. Now this is interesting to me because we're talking about Paying off debt, not not paying debt. So, like, considering the consequences of default is considering the consequences of not paying the debt, which is not what we're talking about. We're talking about increasing payments towards debt and which one is most important. They're kind of referencing like, if you didn't pay your mortgage after a little bit of time, you're going to get kicked out of your house. Or if you don't pay child support, you could go to jail. But it's like, that's not what we're talking about. But yes, okay, so look at which debts are important for you. Kind of maintaining some semblance of like being a contributing member of society and having a roof over your head. But obviously we're talking about paying off the debt, not ignoring the debt. So I don't actually know how important.
- [39:00]
Jill
That is to be thinking about are on the line. If you are going through a season or are working on getting a new job or getting a job, I think this is something to consider. If you are not looking at how should I spend the margin to pay off debt faster? If I'm just looking to stay stable and just pay debt on anything, then yes, this is a way to consider. But if you are, if you are budgeting and your budget shows that you should have margin, extra margin to play with to pay off debt, then don't. This isn't where we should be looking. We should be looking at interest rates and balances and kind of creating a plan based on those.
- [39:52]
C
Yeah, the consequences of default, I think that's more so like a budgeting technique. And if money's really, really tight, what are you going to prioritize? Like, you're going to pay your rent and you're going to pay your bills and you're going to buy some food. Like that's where that's going to go.
- [40:08]
Jill
Yeah, I would say definitely more of a budgeting technique than a debt payoff strategy consideration.
- [40:15]
C
But you know what falls under all categories? Always, everywhere, all of the time.
- [40:23]
Jill
First priority after the first part of the show.
- [40:30]
C
The bill of the week.
- [40:42]
Jen
That's right. It's time for the best minute of your entire week. Maybe a baby was born and his name is William. Maybe you paid off your mortgage. Maybe your car died and you're happy to not have to pay that bill anymore. Duck bills, Buffalo Bills, Bill Clinton. This is the bill of the week.
- [41:02]
Nick
Hey, this is Nick, longtime listener. I have listened to every single one of Yalls episodes. Thank you very much for what you do for our community. Y' all are amazing. My bill of the week is the mental tax and exhaustion from being an introvert trying to network. Listening to your most recent episode when I'm recording this and hearing just go out and do it. It's not that bad for introverts to network. Just throwing it out there as my bill. It is extremely taxing and exhaust. Just had to recently do this at a couple work professional conferences and it took days to recover. So thank you guys again for what you do and God bless Nick.
- [41:38]
C
You've listened to every single one of our episodes. Every single single one. I mean, that's amazing. I'm not saying. Yeah, I'm not saying you're not telling the truth.
- [41:52]
Jill
Jill hasn't even listened to all of our episodes.
- [41:54]
C
Yeah, probably not. I don't even know if I would was here for all of them. But also great point. What a great bill that is. Also a great point about the mental task and exhaustion.
- [42:08]
Jill
Yes. I had to come to terms with this as well. And if you don't know what he's talking about. Nick's talking about our episode with Mandy Woodruff Santos where she talks about increasing your income by getting better jobs, getting promotions, by becoming poachable, essentially. So in the way you become quote, unquote poachable is by networking and meeting new people that could quote, unquote, poach you and get you that could hire you for a better position or higher paying position, et cetera. And the idea of networking at like big networking events as an introvert, yes, I'm totally against it. I. When I go to conferences, even the conferences where like I know people and feel comfortable are still quite overwhelming. But it's the places like. So my friend joined like a softball league at her school and she got to know like teachers and other grades through that softball league. And she did not enjoy the softball aspect, but it was a great way to meet people in her field that she would have otherwise not probably not gotten to know as well. Or doing small social gatherings, if there are any small groups, like professional group outings. Like my old job used to have a book club. And so not necessarily joining because I love books though I do. But joining because it's a way to meet people on a smaller level, have a reason to talk, have something to talk about, stuff like that. So like not just thinking about social events and stuff at face value, thinking like, oh, I don't, I wouldn't enjoy doing that, so why would I go? But thinking about them as ways to network with people that are better than bigger Actual networking events. So for any introverts out there that are scared of networking, I see you. I get you. Try these smaller social outings that maybe you would have otherwise not thought about but could be great for networking because of their small size.
- [44:22]
C
If you out there listening are an introvert or an extrovert and you've got a bill for us, or if you've got a bone to pick with us about some networking advice we've given and how difficult it is for you, or if you know you've just got a bill of some other sort, we're here for it. Frugalfriendspodcast.com Bill leave us your bill. We're here to provide all of the support after you've tried implementing on these tips and tricks.
- [44:56]
Eric Sirianni
Running a business can be exhausting. Building your website shouldn't be. With wix, you can express your ideas, give direction, then leave the heavy lifting to AI. From site creation to branded content and images. Have fun with the details, customize what you want the way you want, and manage your whole business from a centralized dashboard with expert AI tools. Build, scale and enjoy the incredible results. You can do it all yourself on wix.
- [45:25]
C
And now it's time for the lightning round.
- [45:28]
Jill
The lightning round. All right, in today's lightning round we've been talking about debt payoff order and what the standards are, how to customize it. And in this lightning round, we are going to talk about how we personally paid off our debt. Like what was the strategy and how we decided to prioritize it. I remember mine vividly because I remember when we started, I was told I needed to do the debt snowball. So I said, that is the way we will do it because that is the way we were told to do it. And why would you deviate from it if you were told to do it that way? And I know nothing and this person, you know, seemingly knows everything. So why would I listen to myself or.
- [46:20]
C
Right. And you're such a rule follower too.
- [46:23]
Jill
This was a different me, Jill. It was a different me. It's crazy the ways that you will compromise yourself when you are in fear or overwhelmed.
- [46:34]
C
Overwhelmed. Yeah.
- [46:35]
Jill
So that's. Yeah, that's a good note. And Travis, when I said this was like, I don't think that that is the smartest way to do it. And I was very reluctant to listen to him because I was like, I don't trust you. I don't. I just married you. I don't trust you. I don't know you like that. And this person seems to be smarter than you. And I said, well, if I want to be married to this person for more than three months, I should compromise. This will be our first compromise. It'll be okay. And when I prove him wrong, it'll be even better. And so we decided. I paid off my car loan, which was actually the smallest loan before we got married, so it doesn't really count. But. So we decided to start with my student loan. Even though it was our largest loan, it was like 50 something. 50 grand. And it had little loans within. It had about six of them, I think. And so we started with that because it was 6.5% interest, and then went to Travis's student loans, which was about 24 grand, because his were mostly between 3 and 4%. They were all federal, and they all had a different interest rate, which was interesting. Mine was grad student loans, so I guess that's why they were all the same. So we went pretty much avalanche. And within my student loan, we chose to go snowball within that bigger student loan just to clear them out and to get that sense of satisfaction just because they were all the same interest rate. So it didn't matter. So we were like, well, we might as well do the snowball within it. And lo and behold, we did pay off the debt. We got it paid off and not going in the order I was told to go in turned out to be absolutely fine. Didn't deter us. Doing the snowball within the bigger student loan was super helpful, but nobody struck us with lightning for doing these because.
- [48:53]
C
They didn't know where you were.
- [48:56]
Jill
That's probably true. And I've given too much away on the show, and if I were to try it again, who knows what would happen?
- [49:04]
C
I took an approach that we didn't talk about yet called the whack a mole approach, where.
- [49:10]
Jill
Ooh, I love this one. I love to hear a new approach.
- [49:13]
C
And I was just trying to whack them and forget about them. It was a lot of, you know.
- [49:23]
Jill
That I loved the arm, like, movements that went along with it. That just like the whack a mole. Yeah. But if she had, like, two whackers, I love how much she was playing two games.
- [49:35]
C
You remember, Jen? I don't know what it is. I. I guess I. I don't have a great memory or I block out things that I perceive to be traumatizing. I couldn't.
- [49:48]
Jill
And I hold on to trauma I don't have. I just hold onto it like a passover.
- [49:53]
C
I remember. I don't know, like the exact interest rates of each of the different loans. I can remember how they happen. But if you've heard some of my story already, this is. Jill, then you know that Eric and I took out loans in the process of debt payment. It's a lesser known thing. And certainly if they knew where I was, they would have struck me with lightning far before they were trying strike you, Jen.
- [50:25]
Jill
That's so true.
- [50:26]
C
It was intentional.
- [50:27]
Jill
I am protected by.
- [50:28]
C
It was eyes wide open. It's like you don't have to outrun the bear. You just have to outrun your friend, the lowest person.
- [50:40]
Jill
Well, Jill, that's why we have so many friends.
- [50:42]
C
Yes, yes.
- [50:43]
Jill
That's why that happens.
- [50:45]
C
There's always someone doing worse. So. So. But eyes wide open. And I, I don't regret the decisions that we made. They business decisions. They were future decisions that ended up setting us up to a point where I could again pay off my grad school, like cash flow, my grad degree. So that's all great and awesome, but it's kind of complicated for me to describe what I did because, yes, I started paying off my student loans, but then in the midst of that, we took on a truck loan. We ended up paying off the truck loan before I was done with my student loans. So it was just a whack, a mole approach. 11 popped up. We knew it was popping up. It wasn't. You know, the illustration breaks down somewhere, but that's how we tackled that one. Follow me for more tips.
- [51:44]
Jill
Well, I mean, it also, it aligns kind of like a few episodes ago when we had the bill of the week where Stephanie put $50 on her credit card to buy a course that would help her start the side hustle that has made her like, like 1600 times the investment. Like, sometimes you are in debt, sometimes you knowingly take on debt for the betterment of the season. And so debt is neutral. And when you go into it and this is what trips so many people up. And I feel so sad to see so many good people feel like idiots because they took out student loan debts. Debt. Like, because you took out debt, took out a loan to get an education when you were 18. Like, nobody would have given you a car loan for a Tesla at 18. Nobody would have given you a business loan at 18. There are so many loans that you would not have been approved for yet you were approved for a student loan. And it is not the fault of 18 year olds who are not educated in the nuances of finance. There is no guilt and there is no Shame in debt, especially when that debt can help you better your life. And so the question is not whether is debt bad or good, should you have debt, should you not? It's what is it doing for you now? What it did for you then, that was then, what's it doing for you now? And if, if what it did for you then has helped you now, we thank the debt. We say thank you debt, thank you, thank you loan. And now if it's holding you back from moving forward, we say bye, goodbye debt, we gotta get rid of you so we can do other things moving forward. But ultimately there is no shame in actually having the debt. And it's just a sad thing to see people feel so oppressed.
- [53:59]
C
I mean I get it, it can feel very overwhelming. But then that doesn't need to move to inaction. It can help us to identify, well then what's going to bring relief, what's going to bring peace to me. And yeah, thank you for the thing you bought me, right? Debt doesn't exist for no reason. What did it buy you? How can you value that thing and then say I've got other plans for my money now. So we're going to get rid of you and then identify what's going to be the most logical and mentally and emotionally helpful way for you to tackle that debt. So we hope that this has been helpful if you were kind of uncertain about the different methods, the avalanche, the snowball, what's best for you, how to even identify ways to tackle. But at the end of the day, if we could also summarize by saying just one foot in front of the other, maybe identify your approach, but it doesn't have to be all at once. You could even potentially start in your debt payoff journey by identifying bills that you can lower, expenses you can get rid of, ways that you can save to prepare yourself to begin making extra payments. Just one foot in front of the other. We are here for ya.
- [55:26]
Jill
A friggin men.
- [55:32]
C
It is wild to think back to our own debt payoff journeys. In some ways it feels like yesterday. In some ways it feels like forever ago. But dang, it still feels so good. Like the freshness of what it felt like to finally be done is still, I can still feel that.
- [55:57]
Jill
Yeah, it is wild and it is. We did it in such a sprint that it was never the way we did it was never gonna be sustainable, but it was worth it. And we were in a season where we could do it for two years and not everybody is in, you know, affordable cost of living. Apartment with no kids, the ability to take on second and third jobs. And we were able to do that. And so we did it. And I'm so glad we did it. But it can still be done even if you can't meet all those parameters if you don't have time, if you do have kids, if you are in a high cost of living area. We have on YouTube this debt free stories series where we interviewed 10 people, different income brackets, different professions, all median income earners for the most part, and different ways that they paid off their debt, they became debt free. And so that is definitely a series to check out if you want some inspiration. But yeah, it's. It's crazy to think about. But I hope that it inspires people more than it discourages them because sometimes hearing debt payoff stories can be discouraging. And I hope we share them in a way that encourages and inspires.
- [57:30]
C
I think it's why we've chosen people not just for the YouTube channel, but for the podcast in the past in a variety of different scenarios. People who are living off of a single income or teachers or people who kind of took a long time and you and I have different stories. You took two years, I took seven years. So yeah, it is part of the process possible. If this is a goal that you have, we say you can accomplish it. Just, just be reasonable with yourself. Nonetheless, thanks for listening everybody. We are really loving to read your kind reviews. It's become one of our hobbies, especially about the book. The ones that are five stars are so thrilling to us, like this one from Debbie Sanford who wrote this about buy what you love without going broke. They said, what a great read. This book offers insights into finances and budgeting that I have not not seen anywhere else. The principles really make sense and I believe they will help me succeed in areas that have been a struggle for me. I found this book to be easy to read, informative and entertaining. Love that Debbie.
- [58:33]
Jill
Yes, thank you so much for listening for leaving reviews for the book on Amazon. Even if you're not buying it on Amazon, which we fully support. Leaving a review there helps people because that's where people go first to find their reviews or on the YouTube channel, leaving a comment on our latest video of something you liked and leaving reviews on Apple and Spotify. They all are free ways that you can support the show, help us create more content and guide the content that we create. So we are so appreciative of you.
- [59:08]
C
See you next time.
- [59:11]
Jill
Frugal Friends is produced by Eric Sirianni.
- [59:25]
C
We Knew each other both when you became debt free and we became debt free.
- [59:31]
Jill
Yeah, that was shortly before. So we met you in April of 2017 and became debt free in August.
- [59:41]
C
Yep. I remember you all did a live Facebook celebration. So we were back in PA but joined for the live kind of announcement as you paid off your final debt.
- [59:55]
Jill
You were there when we made our final payment, and everyone was waiting for Travis to get home from work, and he picked, like. Well, his employer picked, like, that day to, like, keep him late. So we were, like, waiting, and we did it as soon as he came through the door.
- [60:12]
C
Yeah. That was so fun. And we were still years. We would have been then about three years away from our debt payoff, which happened. And this is crazy. We were living. We had. Well, not living. We were parked. We were living in an rv. We were parked on your property in Florida. We were still technically living in Pennsylvania, but came down February of 2020. And it was February of 2020 that we paid off. We were sitting. We had just grilled. We did. And I made the final payment of our debt that month, not knowing what was to befall us just one month later. And that's. We.
- [60:58]
Jill
We just need a couple weeks later.
- [61:00]
C
Yeah, yeah, yeah, yeah. Just a couple weeks. And we can't know these things. When we set these financial goals, we know that they're gonna be good to achieve, and there will be benefit on the other side. And part of this, I'm just gonna say we were just. Just lucky. How did that timing work out for us? But. But one of those things that you don't know what you don't know. So, yeah, start now. Set the goal. It might seem so large and unattainable, and it took us seven years, but we finally got it all paid off. And then a pandemic happened, and thankfully, both Eric and I kept our jobs. But it really decreased the amount of stress that we had because we didn't know what was gonna happen. Like, there was so much job volatility. There was just so much that it did affect financially. Even though we were able to keep our jobs, that being debt free in that timing was this blessing we didn't even know was gonna be as much of a blessing as it was. Yeah. So I'm so grateful that seven years earlier, we decided we were gonna set this as a goal, because, man, did it help.
- [62:12]
Jill
Yeah. Start now. Start with what you have, because you.
- [62:15]
C
Don'T know what the next pandemic's gonna be.
- [62:17]
Jill
Your start does not have to look like anybody else's so start now.
- [62:21]
C
Yeah you don't know what it could set you up for and we're here for you, your frugal friends. We got you.
- [62:27]
Eric Sirianni
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- [62:57]
C
Mr. Gecko, you're a huge inspiration to us all but who was your muse 49 she would tell me always remember to be true to yourself and to use that fast and friendly claim support on the Geico app. I follow her advice to this day.
- [63:09]
Jen
Get more than just savings. Get more with Geico.