Less Spending Power, More Debt? Navigate a Declining Dollar and Make Progress on Credit Card Bills

Summary

NerdWallet's Smart Money Podcast: Episode Summary

Title: Less Spending Power, More Debt? Navigate a Declining Dollar and Make Progress on Credit Card Bills
Release Date: April 24, 2025
Hosts: Sean Pyles, CFP®, Elizabeth Ayoola, and guest Anna Helhosky

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1. Introduction to Financial Challenges

The episode opens with the hosts, Sean Pyles and Elizabeth Ayoola, engaging in a lighthearted conversation about personal habits. Elizabeth admits to her late-night dining habits, humorously linking them to unusual dreams, while Sean shares his penchant for unnecessary vintage clothing purchases on eBay. This segues into the episode's primary focus: tackling credit card debt and understanding the declining value of the US Dollar.

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2. Weekly Money News: The Declining Value of the US Dollar

Guest Speaker: Anna Helhosky

The hosts introduce Anna Helhosky, their news colleague, to delve into the current decline in the US Dollar's value—a topic that impacts everything from daily purchases to international travel.

• Factors Affecting the Dollar's Value:

  • Trade Policies: "The US has instituted protectionist trade policies in the last few months, and as a result, our biggest trade partners have responded in kind," explains Anna (02:00). This trade war, particularly with China, creates significant economic uncertainty.
  • Economic Indicators: Shaky data on consumer sentiment, growth forecasts, unemployment, and inflation are eroding investor confidence.
  • Monetary Policy: The Federal Reserve's interest rate decisions play a crucial role. Higher interest rates can strengthen the dollar by attracting investors, while lower rates may weaken it (05:13).

• Measuring the Dollar's Value:

  • Domestic Purchasing Power: Determined by inflation and the cost of goods and services.
  • International Exchange Rates: Compared against other currencies like the euro, yen, and pound.
  • Dollar Index (USDX): A composite measure against six major currencies, primarily influenced by the euro (03:37).

• Impacts of a Weaker Dollar:

  • Consumer Perspective: Reduced purchasing power means higher costs for goods, services, and international travel (06:14). "International travel will also get more expensive for Americans because you won't be getting as favorable an exchange rate," Anna notes.
  • Investment Landscape: A weaker dollar can make US assets less attractive, prompting investors to seek opportunities abroad (07:35).

Notable Quotes:

• "The US Dollar is usually considered a safe haven when the market is volatile or when investors are concerned about the economy." – Anna Helhosky (01:36)
• "When the dollar weakens, its value does too. Which means your dollar won't go as far as it once did." – Anna Helhosky (06:14)

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3. Listener Question: Overcoming Persistent Credit Card Debt

The focus shifts to addressing a listener's financial dilemma submitted by Alison. Instead of reading her email, the hosts employ a role-play technique where Elizabeth assumes Alison's persona to provide a more engaging and relatable response.

Alison's Financial Situation:

• Debt Details:
  • Credit Card 1: $22,000 balance with $300/month interest.
  • Credit Card 2: $17,000 balance with $150/month interest.
• Current Payments: Approximately $1,100 towards each card monthly.
• Income: $5,000/month after taxes.
• Challenge: Despite substantial payments, the debt continues to grow due to additional charges.

Discussion Highlights:

• Debt-to-Income Ratio (DTI): Sean introduces the concept, explaining that understanding DTI is crucial for determining the best repayment strategy (15:00).

  • Under 36%: Debt is manageable within the budget; continue regular payments.
  • 36%-42%: Debt is impacting the budget; consider strategies like the debt avalanche or snowball methods.
  • Above 42%: Debt is becoming unaffordable; seek professional debt relief options.

• Repayment Strategies:

  • Debt Snowball Method: Focus on paying off the smallest debt first to gain momentum and a sense of accomplishment (18:57).
  • Debt Management Plan: Through nonprofit credit counseling agencies, consolidate payments and potentially reduce interest rates.

• Emotional Support:

  • Sean emphasizes that credit card debt isn't a personal failing. Addressing feelings of shame and promoting a proactive approach are vital for financial recovery (18:01).

• Budgeting and Tools:

  • Utilizing budgeting tools, such as the NerdWallet app, can provide clarity on spending and aid in tracking progress (21:31).

Notable Quotes:

• "When the dollar weakens, its value does too. Which means your dollar won't go as far as it once did." – Anna Helhosky (06:14)
• "You likely won't be able to use your credit cards while on this plan. What? Yeah, that can be a rude awakening for people." – Sean Pyles (19:56)
• "Sean, you are for sure going to need to have your big girl pants firmly on. And we may both want a drink when this is all done, but we can take care of your debt together." – Elizabeth Ayoola as Alison (14:34)

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4. Practical Advice and Resources

Sean and Elizabeth provide actionable steps for listeners grappling with similar debt challenges:

• Budget Analysis: Encouraging a detailed review of income and expenses to identify unnecessary spending.
• Debt Repayment Plans: Guidance on choosing between the debt avalanche and snowball methods based on personal preferences and financial situations.
• Professional Assistance: Recommendations to consult nonprofit credit counseling agencies for tailored debt management plans.
• Savings Strategy: Emphasizing the importance of maintaining an emergency fund to prevent future debt accumulation.

Resources Mentioned:

• NerdWallet App: A comprehensive tool for tracking credit scores, cash flow, net worth, and insurance, available on both iOS and Android platforms.

Notable Quotes:

• "Moderation is key. Go back to knowing your why you're going to have to make some sacrifices when you're paying off your debt..." – Sean Pyles (20:50)
• "We have a lot of pressure to spend a lot of money. So try to rid yourself of some of that guilt and understand that a lot of people are in a similar situation." – Sean Pyles (18:33)

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5. Conclusion and Encouragement

The episode wraps up with the hosts reiterating their commitment to helping listeners navigate financial challenges. Elizabeth expresses newfound optimism about overcoming debt, while Sean underscores the importance of emotional resilience in financial planning.

Final Encouragement:

• Stay Proactive: Address financial issues head-on rather than avoiding them.
• Utilize Available Tools: Leverage resources like the NerdWallet app for better financial management.
• Seek Support: Remember that you're not alone; many face similar financial hurdles.

Notable Quotes:

• "I know that I've worked to clean up some of it and take out the trash today." – Elizabeth Ayoola as Alison (23:12)
• "And with that said, until next time, turn to the nerds." – Sean Pyles (25:53)

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6. Additional Information

• Listener Interaction: The podcast encourages listeners to send in their financial questions via voicemail, text (901-730-6373), or email ([e-mail]).
• Follow-Up: Listeners are advised to download the NerdWallet app for personalized financial tools and insights.
• Disclaimer: The hosts clarify that the podcast provides general educational and entertainment content, not personalized financial or investment advice.

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Timestamp References:

<a id="02:00"></a>[02:00]
<a id="03:37"></a>[03:37]
<a id="05:13"></a>[05:13]
<a id="06:14"></a>[06:14]
<a id="07:35"></a>[07:35]
<a id="15:00"></a>[15:00]
<a id="18:57"></a>[18:57]
<a id="18:01"></a>[18:01]
<a id="21:31"></a>[21:31]
<a id="20:50"></a>[20:50]
<a id="18:33"></a>[18:33]
<a id="19:56"></a>[19:56]
<a id="14:34"></a>[14:34]
<a id="23:12"></a>[23:12]
<a id="25:53"></a>[25:53]

For a comprehensive understanding and personalized advice, listeners are encouraged to tune into the full episode and utilize the NerdWallet resources mentioned.

Transcript

[Sean Pyles]

Elizabeth, what's something you know you shouldn't do but just can't manage to stop doing?

[Elizabeth Ayola]

I like to think that I don't have any bad habits, Shawn.

[Sean Pyles]

Okay.

[Elizabeth Ayola]

But actually, I'll be honest. It's eating dinner at 10pm especially when I don't feel like I had enough protein for the day.

[Sean Pyles]

I feel like that would give you some weird dreams. You ever hear about that if you eat too close to bedtime, you have strange dreams?

[Elizabeth Ayola]

Well, that might explain why I'm always flying in my dreams.

[Sean Pyles]

But, hey, well, there you go. For me, it's browsing the vintage clothing sellers on ebay and buying stuff that I simply do not need. But we're not here to talk about that today. Instead, we'll dive into how to break some bad spending habits that might be contributing to your debt. Welcome to NerdWallet's Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Pyles.

[Elizabeth Ayola]

And I'm Elizabeth Ayola.

[Sean Pyles]

This episode, we're talking about some smart strategies to tackle credit card debt. But first, our weekly money news roundup where we break down the latest in the world of finance to help you be smarter with your money.

[Elizabeth Ayola]

Today, we're talking about something that touches everything from your shopping cart to your online checkout screen and your summer travel plans. The value of the US Dollar.

[Sean Pyles]

We've talked about tariffs many times before on the podcast, but today we want to zero in on what those policies mean for the value of the dollar and your spending. To help us unpack all that, we are joined by our news colleague, Anna Helhosky. Hey, Anna.

[Ana Helhosky]

Hey, Sean.

[Sean Pyles]

As usual, let's start with the big picture here. Why are we talking about dollar value?

[Ana Helhosky]

So the US Dollar is usually considered a safe haven when the market is volatile or when investors are concerned about the economy.

[Sean Pyles]

Sounds familiar.

[Ana Helhosky]

It sure does. But right now, as the markets are volatile and there are mounting concerns about the. Something kind of strange is happening. The value of the dollar is falling and investors are selling US Assets.

[Elizabeth Ayola]

Any idea why?

[Ana Helhosky]

It's uncertainty, really. There are two main causes of that uncertainty among investors. The first is Trump's trade policies, I. E. His wide reaching tariffs, which have escalated a trade war. And the main partner fighting back is China and it's an economic powerhouse. So there are a lot of financial implications for global trade and that makes investors highly concerned about how that's going to play out and the other causes of uncertainty which are not unrelated to Trump's trade war are some of the recent shaky data about consumer sentiment and forecasts for the US Economy like growth, unemployment, and inflation. And they're not exactly inspiring confidence with investors.

[Elizabeth Ayola]

Ana, how do we know what the dollar value is? Tell us how it's measured.

[Ana Helhosky]

Yeah. So its value is measured in two ways. At home and abroad. Now, domestically, the dollar value is its purchasing power, which is tied to prices and inflation. In the US Purchasing power is just what your money can buy. So when prices increase, the purchasing power goes down and vice versa. Now, at the international level, the dollar's value is measured against the strength of other currencies. You know, when you travel internationally and you exchange your US Dollars for the euro, for example, and the amount you get back in euros isn't exactly the same face value as your dollar amount that you put in. So we look at the exchange rate. If the dollar rises compared to another currency, that means the dollar value is strengthening. But if the exchange rate for the dollar goes down compared to another currency, that means the dollar value is weakening.

[Sean Pyles]

And how much is the US Dollar worth now? Other than looking at an exchange rate, how do we know?

[Ana Helhosky]

We can tell by the dollar index. And that compares the value of the US Dollar to a basket of six other key global currencies, including the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc. And those currencies are weighted according to its reach or share. By far, the euro comprises the largest share. Now, the value of the dollar index, displayed as USDX in markets will rise and fall. Based on those domestic and international measurements that I talked about. It's basically supply and demand at home and abroad.

[Elizabeth Ayola]

Can you talk more about what factors impact supply and demand?

[Ana Helhosky]

For some background, the US Dollar was once backed by gold, but that changed in 1971 under Nixon. Now, it's a fiat currency, meaning that because the US Government says it's legal tender, it's legitimate. But its actual market value is not determined by the government, but rather by factors that influence supply and demand. Now, the first, as you might expect, are international trade policy and the overall geopolitical climate. The US has instituted protectionist trade policies in the last few months, and as a result, our biggest trade partners have responded in kind. And restrictive trade policies tend to cause volatility in investment markets. Now, as I mentioned before, usually the dollar value increases during volatile times, since it's considered a safe haven. But when the economy of the US Itself is unstable, investors may opt to sell off US Assets like Treasury bonds and that weakens the dollar.

[Sean Pyles]

So foreign investors are reacting to the health of the US Economy?

[Ana Helhosky]

Yes, that's a big part of it. In stable economic periods, the dollar tends to have greater value. The health of the economy, as we know, is a mix of policy and economic data indicators. First is monetary policy, which is set by the Federal Reserve's Federal Open Markets Committee. The FOMC sets interest rates, which impact the dollar value. Demand for the dollar goes up when interest rates are high, since high interest rates are more desirable to investors. But lower interest rates create less demand for the dollar, which means the value goes down. Now, other economic indicators like consumer spending and inflation influence market sentiment as well as consumer sentiment and economic forecasts. All of the above will impact investor assessment and expectations. Positive sentiment leads to more investment in the US Economy, and that could increase the dollar value. Right now, the economy is technically doing okay, but there is a lot of fear and uncertainty about the direction it's heading.

[Elizabeth Ayola]

As you mentioned earlier, the dollar is weakening. What does that mean for people and what can they do?

[Ana Helhosky]

When the dollar weakens, its value does too. Which means your dollar won't go as far as it once did. When purchasing power goes down, goods and services are more expensive for you, me, and everyone else in the US So people are going to want to keep an eye on prices and potentially adjust their budgets, find ways to cut back on spending, etc. It's the usual advice for dealing with inflation that consumers have had to do over the last few years. That said, domestic goods that don't rely on imports may not increase in price due to tariffs. It depends what supply chains that companies are part of now. One last thing. A weaker dollar can typically make US Goods cheaper for consumers in other countries and ease the trade deficit. But with the current trade war, that's far from a sure thing.

[Sean Pyles]

And what about when you travel outside the US I'm asking as someone who is a couple weeks out from a vacation in the uk.

[Ana Helhosky]

International travel will also get more expensive for Americans because you won't be getting as favorable an exchange rate. And that'll obviously vary from country to country. If you are planning a trip abroad, keep in mind that your dollar isn't going to go as far as it used to. And that means in local currency, everything from hotels and transportation to food and gifts for friends back home are going to cost more. But again, it'll really depend on where you go. The dollar is still strong in places with lower costs of living.

[Elizabeth Ayola]

Does the dollar's strength impact investments?

[Ana Helhosky]

Definitely. Investments in US Assets like stocks and bonds may decline because the dollar won't be as appealing anymore. Foreign investors can get more for their money outside US Markets. If you invest, you may want to diversify your portfolio to include other international assets.

[Sean Pyles]

Well, Ana, thank you for walking us through that.

[Ana Helhosky]

No problem.

[Elizabeth Ayola]

Up next, we answer listeners question about how to deal with credit card debt that never seems to go away. But before we get into that, a reminder listener to send us your money questions. Are you looking to diversify your accounts but don't know where to start? Are you trying to have a big money conversation with your partner but aren't sure how to navigate that? Whatever your money question, leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901730, nerd. Or you can email [e-mail] now let's.

[Sean Pyles]

Get to this episode's Money Question segment. That's coming up in a moment. Stay with us. Today's episode is sponsored by the Best One Yet, a podcast from Wondery. Did you know that Netflix borrowed a growth hack from Ludacris? Or that the White Lotus Effect has the power to boost tourism by 20%? Or how women postponing hair appointments is an economic indicator? Watch out for Recession brunettes. Every morning on the Best One yet podcast, best friends and ex Wall street guys Nick and Jack break down the three most interesting business stories in just 20 minutes. They call it Pop Biz, where pop culture meets business news. Their show is formerly known as Robinhood Snacks Daily and that delivers takeaways and laughs in a digestible 20 minute episode. To start your day, whether you're aiming for that promotion, launching the next big thing, or just want to be the most interesting friend at brunch who spots a recession brunette, start every morning with business news from the Best One Yet. Follow the Best One yet on the Wondery app or wherever you get your podcasts. Or you can listen ad free right now on Wondery Plus.

[Elizabeth Ayola]

We're back and we're answering your money questions to help you make smarter financial decisions. This episode's question comes from Alison, who sent us an email with some questions about paying off their debt. And at this point we'd usually read our listener's email. Except that's not what we're going to do. Sean, do you want to tell our listeners this idea that you cooked up?

[Sean Pyles]

Gladly. This episode we're going to do something a little bit different to answer Allison's question. Truth be Told I really wanted Allison to join us on the podcast, but they were unable to do so. And I'm nothing if not persistent. And I do love a creative solution. So Elizabeth and I are going to do a little role play to answer Alison's question. Elizabeth will play Allison and I will play myself to keep things from getting too confusing. I'm not going to call Elizabeth by Alison's name, but we'll just use the details from Allison's email throughout the conversation.

[Elizabeth Ayola]

Okay, I think I'm following you, Sean.

[Sean Pyles]

Okay, so get into Alison Elizabeth mode. Ready to dive in?

[Elizabeth Ayola]

Me, me, me.

[Sean Pyles]

Go for the Oscar. Here we are. Well, Elizabeth, Alison, Elizabeth, tell me about your financial life right now. Where do you think you're doing well? What's been challenging?

[Elizabeth Ayola]

Wow. Where do I start, Shawn? I think in terms of where I'm doing well, I think I have a good level of self awareness, so I understand how much debt I'm in. That is one of my pain points. At the moment, I have quite a bit of debt. I think I'm earning quite a bit of money, and I generally have a good understanding of my financial basics.

[Sean Pyles]

So let's talk about that debt. Exactly how much do you have and how did you get into it, Sean?

[Elizabeth Ayola]

So at the moment, I have two credit cards with high balances. One of the balances, the highest has $22,000 on it, and the other one has $17,000 on it. For the $22,000 credit card, the interest only on that card is about $300 a month. $17,000 credit card, I'm paying $150 a month of interest on that credit card. So it's quite a lot of money that's coming out of my paycheck each month. And at the moment, what I'm putting towards that is about $1,100 a month on each card. But you know the issue I'm really having, Sean, can I be honest with you?

[Sean Pyles]

Please.

[Elizabeth Ayola]

Even after shelling out about $1,100 per month on each card, I somehow end up charging again. And I just don't understand why I'm in this cycle of paying off the debt and then mounting back up the debt and just finding the debt is not moving anywhere.

[Sean Pyles]

Yeah, a lot of people find themselves in similar situations with their credit card debt. It can become so normal in a way. It's like a piece of furniture in your house that you don't really care about but just is there forever and you want to get rid of it, but you're having a Hard time shaking it, but it's good that you know how much you have. Nearly $40,000 in credit card debt is sizable. I'm glad to hear that you at least know the amount of interest that you're paying on these debts. But let's talk a little bit about what even got you into this debt. What are you spending your money on that led to this high balance?

[Elizabeth Ayola]

What's crazy sometimes with credit cards for me is I use them with the idea that I'm going to pay it off at the end of the month. What I realize is I end up not tracking how much I'm actually spending. And then the end of the month comes, and I'm ready to pay it off, and I'm like, well, who spent all that money? Couldn't have been me, but I guess it was me.

[Sean Pyles]

Yeah.

[Elizabeth Ayola]

Yeah. And then in terms of what I spend it on, I mean, different things. I don't know about you, Sean, but the inflation has been kicking my butt. So I'm finding I'm spending a lot more on groceries. I eat out with friends sometimes. I'm paying my bills, of course. And then sometimes unexpected expenses will come up. Sean. Oh, my goodness. Recently, I have had to fix something in my home that broke the water boiler, and that's going to cost me about $2,000.

[Sean Pyles]

Yeah. Geez, I'm sorry to hear that. So it's a mixture of lifestyle inflation. It seems you're going out more, you're buying more clothes, and then regular old inflation that we're all feeling. Everything else is more expensive. And then life just happens. Like you have to replace your water heater, and suddenly you're out another grand. All of this is building up and making it so that you're having a hard time paying off your debt. But it seems like you know deep down that this might partially be a behavioral thing. You aren't entirely tracking how much you're spending, and you aren't really paying off your credit card debt as much as you might be able to. So, Elizabeth, let's talk about your income a little bit. How much are you taking home? Because that might help me figure out how we might be able to pay off your debt.

[Elizabeth Ayola]

Before we go into that, Sean, I know you said that I'm going to have to charge about $1,000, but. No, Sean, I'm going to have to charge about $2,000 on a card I had paid off in January, and it's only April, I'm telling you. It just feels oppressive right now, like, I need a drink. Shawn. But I probably just need to put on my big girl pants and get some discipline over my spending.

[Sean Pyles]

Elizabeth, you are for sure going to need to have your big girl pants firmly on. And we may both want a drink when this is all done, but we can take care of your debt together. I'm confident in that. I want to go back to your income though, because that might be the key to how we're paying off your debt. What are you bringing home monthly?

[Elizabeth Ayola]

I'm bringing home about $5,000 after taxes.

[Sean Pyles]

One thing I want you to do is look at your budget in detail. Look at your credit card statements, see how much you're spending and how that compares to your income. Because what we call your debt to income ratio, how much debt you have compared to your income can be a great way to determine the best path forward for your debt payoff. So let me give you some quick parameters here. If your debt to income ratio is less than 36%, your debt is probably affordable within your budget and you can just keep shoveling money toward your debt and paying it off. If your debt to income ratio is somewhere between 36% and 42%, your debt is eating more and more of your budget. Paying it off DIY style might work. You're probably going to want to use a debt payoff strategy like the debt avalanche method or the debt snowball method. But it's important to really make a proactive plan to pay it off. Depending on where your credit stands. If it's around 670 or above, consider looking into a balance transfer credit card or a debt consolidation loan. We have a bunch of roundups on the Nerdwall website that can help you sift through these options. Then, if your debt to income ratio is north of 42%, your debt's going to be increasingly unaffordable and you may want to seek debt relief, such as a debt management plan at a nonprofit credit counseling agency, or bankruptcy. So I've just run through a lot of different ways to pay off your debt. What maybe is standing out to you in terms of where you think you might fit on that scale of debt to income ratios?

[Elizabeth Ayola]

Sean, if I'm going to be honest with you, you lost me at the budget part because I'm terrified of looking at my income and expenses right now because I feel ashamed. I feel a lot of shame around how I'm spending and I feel like it's going to be really difficult for me to actually sit down and just rework my budget because then I'm going to have to face my indiscipline and the spending habits that I've adopted right now.

[Sean Pyles]

Yeah, and I completely understand where you're coming from. I had a brief stint with credit card debt a number of years ago, and it was pretty embarrassing and I felt ashamed of the debt that I racked up. I felt like I didn't have enough self control and it can be hard to get out of that rut. What helped me was thinking about why I wanted to pay off this debt. I imagined what my life was going to look like when I was on the other side of credit card debt. On your end, Elizabeth, what would your life look like if you weren't paying $1,100 or so in credit card debt each month? That's a lot of money that it would free up in your budget. So just thinking out loud here, what would you do first if you had that amount of money free in your budget?

[Elizabeth Ayola]

Wow. Feels like such a distant dream. But if I had that extra cash, I probably would throw it into some savings because I know that if I had a solid emergency fund that could have paid for this emergency that just happened. So I probably would beef up my emergency fund. And honestly, I'm a little behind on my retirement savings too, because all my discretionary income is going towards paying off this debt. So those are probably two things that I would prioritize.

[Sean Pyles]

Those are great priorities. I want to touch on your savings in a little bit, but I just want to underline as well that having credit card debt isn't a personal failing. It doesn't make you a bad person. As we talked about earlier, the world is very expensive and you also want to enjoy the life that you have. It can be easy to overindulge sometimes. We have a lot of pressure to spend a lot of money. So try to rid yourself of some of that guilt and understand that a lot of people are in a similar situation and it's not because they're bad people too. Things just cost a lot of money.

[Elizabeth Ayola]

Oh, thank you so much. That makes me feel so much better about my situation. But I want to know which debt repayment method works best for someone like me who wants some instant gratification from paying off that debt? Because when I'm just making the minimum payments, it feels like I'm not getting anywhere. So is there a specific method that I could use that may kind of give me that instant hit and make me feel like, yes, I'm making progress?

[Sean Pyles]

Yeah. In that case, the debt snowball method is probably going to be your Best friend here. Because with this route, you pay off your debt with the smallest balance first. You're making your minimum payments on your other credit card, but you are funneling as much extra cash as you can into that lower balance debt. That way you're seeing that you're making progress. You're paying off $1,000 at a time. You're really accelerating the payoff there. And that just feels good. But what I would really encourage you to do as well is reach out to a nonprofit credit counseling agency. They actually are nonprofits that partner with credit card companies and they can set you on what's some. What's called a debt management plan. This is where you can roll your credit card payments into one payment. It's almost like a form of consolidation. And these debt management plans allow you to slash your interest rate so that you can make much greater progress on paying off your debt. You likely won't be able to use your credit cards while on this plan. What? Yeah, that can be a rude awakening for people.

[Elizabeth Ayola]

That's crazy. That's crazy, Sean. I don't know about that, but it.

[Sean Pyles]

Seems like you are getting to the point where you realize you might need to make some tough decisions and change the way you're managing your money.

[Elizabeth Ayola]

You're breaking my heart, Sean, but I hear you, I hear you.

[Sean Pyles]

I'm trying to break your heart so you can rebuild it stronger, more financially resilient in the future to get what you want out of life. Because that's what I'm getting at here. Paying off your debt like this, gradually, slowly, over time can be okay. But it's going to, at the end of the day, impede you from making progress on your other goals, like saving for retirement, like building your emergency fund, like going on fun vacations with your friends, or buying a house. Credit card. Debt that is this expensive and this big can stop you from doing anything else with your money.

[Elizabeth Ayola]

But Sean, I want to address the elephant in the room, please. I like shopping. I like going on vacation. Is there a way that I can pay down this debt and still do the things I love and not feel like I'm a prisoner to my own debt?

[Sean Pyles]

Moderation is key. Go back to knowing your why you're going to have to make some sacrifices when you're paying off your debt and when you are going out with your friends or you get a call to get that happy hour and you think it's really not in your budget, go back to that and realize, look, this short term pain of not going out or not Shopping is worth the long term gain of being able to be free of this debt and focus on other financial goals. So, yeah, at the end of the day, you're going to have to make sacrifices, but that is the costs, quite literally of getting out of this debt that you have.

[Elizabeth Ayola]

Well, Sean, I guess I do want to get started on implementing some of the strategies that you have mentioned. So are there any resources that you can recommend? Because it does also feel really overwhelming.

[Sean Pyles]

I would recommend using a budgeting tool to help you get a really clear understanding of where all of your money is going, because you don't have to go through line by line and map out your expenses on your own in an Excel spreadsheet. I mean, some people like to do that, but it's not the most fun way to do it. One tool that we have at NerdWallet is our app. We are one of the few personal finance apps that let you track your credit score, your cash flow, net worth and insurance, all for free. You can download the NerdWallet app in the iOS and Android stores and we'll include a link to download it in today's show Notes.

[Elizabeth Ayola]

You guys have an app?

[Sean Pyles]

We do, and we have a website that has a bunch of great features on it as well.

[Elizabeth Ayola]

Oh, I'm downloading that right now. Listeners download that right now. Sean, the information you have given me today, I know it sounds cliche, but it really is life changing and I feel now like I have a shot of getting out of this debt. But I just do want to say to those listening out there, everyone needs to be prepared for this emergency and know how to shut their water off. And be sure the valve will turn and shut off when needed. And don't be like me. Don't put off your home maintenance. I knew better. This could have been a big disaster if I was gone to work or out of town when I found out that thing was broken. Please prepare for an emergency, people.

[Sean Pyles]

You know, I think you could think about your debt as like your broken water heater. It has made a bit of a mess of your financial life right now and you can be proactive to solve the issue. You're not out of town when it comes to your finances. You're actively engaged. You're in the house with your money right now, Elizabeth. Do what you need to to fix it.

[Elizabeth Ayola]

I know that's right. A little mess up here and there is not a big deal because it makes for a good story, right? I mean, so after I pay all this debt off, I'll Have a great inspirational story to share and I'll feel really good about myself.

[Sean Pyles]

One last thing I want to add onto this is the importance of saving even a little bit of money in your emergency fund while you're paying down your debt. You might think that you need to channel all of your cash toward debt payoff and it's important to put a good amount of cash toward it. But if you don't have savings, something like that water heater is going to pop up again. And this can help you from going deeper into debt when the inevitable happens. So I really encourage people to save what they can when they can. So, Elizabeth, Alison, Elizabeth, how are you feeling right now? Tell me what your plan is for your debt.

[Elizabeth Ayola]

Wow. How am I feeling? I'm feeling like I can do anything right now thanks to you, Sean.

[Sean Pyles]

That makes my heart so warm.

[Elizabeth Ayola]

I don't know if you've ever thought about an alternative career, but motivational speaking, definitely your thing.

[Sean Pyles]

Well, let me tell you, as a certified financial planner professional, a lot of my job is having emotional conversations with my friends and clients about how they can meet their financial goals is not just the nuts and bolts stuff. It's how you can kind of overcome what some people call their head garbage that's getting in their way of making progress on their goals. And I think you feeling overwhelmed, you feeling ashamed, is that head garbage? And I hope that we've worked to clean up some of it and take.

[Elizabeth Ayola]

Out the trash today for anyone who cares to know the next steps I'm going to be taking. I'm going to be blocking Zara from all, you know, deleting the apps and blocking Zara. I am going to check out this snowball method. I'm sure you guys have an article on on Nerdwallet.com about it, so I'm going to use that. So I'm going to replace the instant gratification I've been getting from shopping with the instant gratification that will come when I pay down one of those cards.

[Sean Pyles]

I love to hear it. Well, thank you so much for sharing your story with us.

[Elizabeth Ayola]

Oh, thank you for listening and being my therapist and all the other things today. I appreciate it.

[Sean Pyles]

And cut. Wow. Amazing role playing, Elizabeth. How did that feel?

[Elizabeth Ayola]

That was fun. I loved it. We need to do that again. That was fun.

[Sean Pyles]

Well, that's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730 N E R D. You can also email us at podcastnerdwallet.com follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.

[Elizabeth Ayola]

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Tess Viglund, Ana Helhoski, and Hilary Georgi. Hilary also helped with editing. Nick Karisimi mixed our audio. And a big thank you to NerdWallet's editors for all their help.

[Sean Pyles]

And with that said, until next time, turn to the nerds.