Outsmart Black Friday Hype and Tackle Credit Card Debt with a Budget Reset

Summary

NerdWallet’s Smart Money Podcast

Episode Title: Outsmart Black Friday Hype and Tackle Credit Card Debt with a Budget Reset
Date: November 24, 2025
Hosts: Elizabeth Ayola, Amanda Barroso, Shawna
Special Guest: Shelby (Listener)

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Episode Overview

This episode tackles two timely themes: 1) How to approach Black Friday deals with a smart, skeptical eye, and 2) A live budget “rehab” session with listener Shelby using the 50/30/20 rule—focused on practical debt payoff and savings tactics.
Expect actionable advice, clear explanations, and an authentic, supportive tone as NerdWallet’s hosts and experts break down strategies to avoid holiday overspending, leverage budgeting frameworks, and tackle credit card debt.

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Black Friday: Separating Hype from Helpful (00:40–13:44)

How Black Friday Has Changed

• The hosts reminisce about old-school Black Friday events: long lines, doorbusters, and “wild” in-person shopping sprees.
• Elizabeth: “Black Friday is here again. And it's another reminder that I'm getting older because I've lived through 30 something of them.” (01:36)
• Amanda shares: Sales now stretch for weeks, with retailers launching “early Black Friday” deals as early as October.

Are the Discounts Actually Worth It? (03:03–04:07)

• Amanda: “To me, a deal isn’t saving $3. Come on. I’m gonna need retailers to do a little bit better than that for Black Friday.” (03:51)
• Biggest savings are often found on:
  • Tech/electronics
  • Kids’ toys (esp. popular items from Amazon/Target/Walmart)
  • Kitchen appliances and beauty items
  • Gift cards and streaming service promos

Savvy Shopping and Price Tracking (05:06–06:40)

• Tip: Put big-ticket items in online carts early, track their prices over time, and avoid impulse buying.
• Amanda: “We’ve seen items sometimes dip to their lowest prices before a big sale even happens... The Black Friday shopping landscape has changed a lot.” (05:34–06:37)
• The rise of dynamic pricing—retailers change prices by the hour or day to compete.

Trends & Budgeting for Black Friday (06:40–09:59)

• New Trend: Extended “shopping season” means sales start in October.
• Members-only deals (Prime, Target RedCard, Walmart+, etc.)—stack them for extra savings.
• More shoppers are mixing thrifted and new items or switching to store brands.
• Budgeting:
  • Amanda: Creates a “sinking fund” in a high-yield savings account for holiday gifts, primarily using monthly interest earned.
  • Elizabeth: Chooses not to budget for Black Friday, emphasizing needs over wants.

Mindful Gift Spending (10:01–13:44)

• Discussion on payment methods: cash, credit cards, and increasing popularity of Buy Now, Pay Later (BNPL).
• Elizabeth: “While I understand that Buy Now, Pay Later has its place, I don't think it should be used to buy gifts, as that's a want and not a need.”
• Amanda warns: FICO is beginning to factor BNPL into credit scores; missed payments can impact your score.
• Tips for safe BNPL use:
  • Limit to one big-ticket item
  • Mark payment dates in your calendar
  • Stay organized; don’t lose track
• Thrifting as a gifting alternative:
  • Amanda saved $370 by thrifting: “As of today I’ve scored $562 worth of stuff for about $191.” (13:20)
  • Hosts encourage blending new/thrifted gifts and focusing on meaningful experiences over material things.

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Budget Rehab: Listener “Shelby” Gets Nerdy Advice (16:22–38:23)

Meet Shelby & Situation Overview (16:49–18:28)

• Shelby is a nonprofit worker in Austin, TX; recently bought a condo—wiped out savings and drove up credit card debt due to new home expenses.
• Shelby: “A work in progress.” (17:27)
• Juggling rebuilding savings and aggressive debt reduction with extra part-time jobs (babysitting/nannying).

Shelby’s Finances—The Breakdown

Income & Basics (20:02–22:31)

• After-tax monthly income: ~$5,570 (includes part-time income).

• Housing: $2,400 (mortgage + HOA/water/home insurance).

• No car payment (paid off in January); car/home insurance: $165/mo.

• Groceries: ~$300/mo (keeps costs low via work-provided meals).

  “I find myself eating more at work just from things that are brought to the break room than actually having to eat my food that I brought.” —Shelby (21:32)

• Note:

  • Housing eats up 44% of take-home pay, above the standard 30% recommendation, but manageable per Shelby.
  • Anticipates mortgage rate increasing due to a 3-2-1 buydown structure; planning to possibly refinance.

The 50/30/20 Budget Context (24:26)

• Elizabeth explains: “50% usually goes to your needs, 30% to wants, and 20% to debt and savings.”

Saving & Investment Accounts (24:40–27:39)

• High-yield savings account (emergency fund: aiming for 3 months’ expenses or ~$9-10k; currently at 25% of goal).
• 401(k) (6% salary contribution; employer matches 3%)
• IRA (just started; $50/paycheck)
• HSA ($100/paycheck)
• Additional bank savings accounts for smaller and “play” money.

“...all of the supplemental work that I'm doing with the nannying, hopefully that's not forever. So the more I do that, the quicker I can achieve my goals and the sooner I can hopefully just have one job.” —Shelby (26:58)

• Current “savings score”: 11.7% (below the ideal 20%).

Credit Card Debt—The Big Stressor (27:39–34:18)

• Four cards with balances (~$8,600 total):

  • Auto repair card: $1,000 at 0% for 6 months
  • New general card: $1,600 at 3.99% (promotional)
  • Southwest travel card: ~$4,000 at 20–24%
  • Chase Freedom: ~$2,000 at ~27%

• Credit score: 759

  “I hate when people pay egregious amounts of interest and anything north of 20% is going to be in that category.” —Shawna (29:34)

• Using “avalanche” debt payoff method: focus on highest interest rate cards first.

• Shawna's tip: Consider balance transfer cards to get 0% on transfers for 18–24 months, particularly to shift high-interest balances.

Wants & Lifestyle Spending (31:42–33:23)

• “Wants” (mainly experiences with friends) = 28% of monthly income, right on target.
• All friends in similar financial circumstances; birthdays are an exception to the budget.

  “It’s like calories don’t count on your birthday. Neither does the budget.” —Shelby (32:14)

• Hosts suggest considering a temporary cutback on wants to accelerate debt payoff—unless a good balance transfer option can be found.
• Shelby is already optimizing and supplementing with extra income.

Final Troubleshooting & Listener Q&A (34:18–38:08)

• Shelby asks if it’s wise to pause or minimize savings to focus solely on debt.

  • Elizabeth: Not a terrible idea if you have high-interest debt, but always get your 401(k) match and maintain at least a $1,000 emergency fund.
  • Shawna: Avoid pulling back entirely—savings are crucial to prevent future debt!

• Balance transfer deep dive: You can often combine multiple balances onto a single card.

• Which card to transfer? Generally, transfer the highest balance, even if the rate is slightly lower, for biggest interest savings.

  “I want your money to go towards more fun things than paying interest to a bank. And transferring your balance might be the best way to do that.” —Shawna (31:17)

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Notable Quotes & Memorable Moments

• “The holidays aren’t worth going into debt over. And anyone who is in your circle who loves and cares about you will probably tell you the same thing.” —Amanda Barroso (10:29)
• “I spoil [my son] more with experiences, to be honest.” —Elizabeth Ayola (09:51)
• “I've scored $562 worth of stuff for about $191. That's a good savings.” —Amanda Barroso (13:20)
• “A budget is always a work in progress. No matter how great it is, it can always be refined and updated.” —Elizabeth Ayola (17:32)
• “It seems like you got into this debt because of household expenses. You weren't racking up vacations on them, correct?” —Shawna (33:40)

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Key Takeaways

Outsmarting Black Friday

• Don’t fall for superficial markdowns—compare actual prices and prioritize real needs.
• Start “window shopping” early and track big-ticket prices.
• Members-only deals and extended sales periods can help you stack savings.
• Don’t go into debt for holiday gifts; try mixing new and thrifted items.
• Be wary of Buy Now, Pay Later—missed payments will start affecting credit scores.

Tackling Debt and Building a Sustainable Budget

• Use the avalanche method, or consider 0% balance transfer cards to avoid high interest.
• Even if you need to pause aggressive savings temporarily, always:
  • Get your 401(k) match
  • Maintain a starter emergency fund
• Supplementing income (side hustles) is a valid strategy if expenses can’t be cut further.
• Enjoy your money—experiences and milestones matter, but keep the big picture in mind.

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Timestamps for Key Segments

• 00:40 – 04:07: How Black Friday and retailer behavior have changed
• 05:06 – 06:40: Why and how to track prices for major purchases
• 06:40 – 09:59: Budgeting for Black Friday and family strategies
• 10:01 – 13:44: Buy Now, Pay Later and alternative gift-giving
• 16:22 – 18:28: Shelby’s financial background and home purchase
• 20:02 – 22:31: Income, basic living expenses, and housing costs
• 24:40 – 27:39: Savings strategy and emergency fund realities
• 27:39 – 34:18: Dissecting credit card debt and balance transfer tactics
• 31:42 – 33:23: Wants category and lifestyle choices
• 34:18 – 38:08: Listener Q&A on pausing savings and transferring debt

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For tailored budgeting help, reach out to the NerdWallet team via their hotline or email. Let the Nerds help you build the roadmap for a stronger financial future—whether you’re holiday shopping, managing debt, or planning for 2026 and beyond!

Transcript

[Amanda Barroso]

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[Shawna]

Style, every home, extra value meals are back.

[Elizabeth Ayola]

That means 10 tender juicy McNuggets and medium fries and a drink are just $8 only at McDonald's for a limited time only. Prices and participation may vary. Prices may be higher in Hawaii, Alaska and California. And for delivery, some parts of your finances you can set and forget. But budgets aren't usually one of them. They often need reworking. And this episode, you'll listen to us do that live with a listener. Welcome to NerdWallet Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Elizabeth Ayola. This episode, we're doing another session in our budget rehab series.

[Shawna]

Yay.

[Elizabeth Ayola]

But first, we're joined once again by fellow nerd Amanda Barroso. And we're talking all things Black Friday. Amanda. Hey, girl. Hey.

[Amanda Barroso]

Hey, girl. Listen, I am reporting live from my guest room where I hide all of my Christmas gifts in the closet. So this is perfect timing.

[Elizabeth Ayola]

I love it. I haven't bought any Christmas gifts to hide yet, but shame on me.

[Amanda Barroso]

Shame on you.

[Elizabeth Ayola]

All right, Black Friday is here again. And it's another reminder that I'm getting older because I've lived through 30 something of them. I've also been witness to how Black Friday has evolved over the years. Now, a core memory for me is when people would sleep outside of stores to bag a Black Friday deal and I would see them on the news. And I always thought that was a little wild.

[Amanda Barroso]

I can remember I must have been like, in middle school or something, going with my mom to Best Buy and standing in line to get a DVD player. That was the hot item that Black Friday. I have, like, very distinct memories of, like, the DVD players just stacked in boxes in the middle of a row and everybody just, like, grabbing one. It was like, $20. What? And I know.

[Elizabeth Ayola]

Well, I will say that a couple of things that I do like about Black Friday are that it happens a few weeks before the holidays so you can knock some shopping before crunch time. It also gives Shoppers like a chance to get some items on discount. Now, I want to mention that NerdWallet's holiday spending report found that some holiday shoppers plan to take advantage of big sales days like Cyber Monday, Black Friday, as we're talking about, and also Small Business Saturday. Amanda, I know your team works hard to provide Black Friday content so that people get the best deals and they can actually identify real deals versus the little sketchy markdowns. We see you companies doing that. Are people really saving that much in these Black Friday sales or are retailers mostly giving consumers subpark discounts?

[Amanda Barroso]

We're still a few days out from the actual Black Friday weekend, so it's hard to know what deals we'll actually be seeing during this time. But you're right, people are gearing up to shop. I've shopped. I've been girl, I've been shopping since October. You know that same nerd wallet study that you mentioned found that holiday shoppers plan to spend on average almost 200 more this year than last year. I know, but it's hard to know if that spending increase is due to people buying more things or if tariffs and things like that are making things just more expensive. For me personally, I found some really great deals for kids toys and gifts at Target and Walmart. Already they've been having sales since October. I do think people should be side eyeing the discounts like you mentioned. Pay attention to the actual percentages off that you're getting. I'm poking around on these websites and to me a deal isn't saving $3. Come on. I'm gonna need retailers to do a little bit better than that for Black.

[Elizabeth Ayola]

Friday, I'm telling you. And they'll try to distract you with all that red markup. And I'm like, wait a minute, do I really need this for 50 cents less?

[Amanda Barroso]

Right, right.

[Elizabeth Ayola]

Speaking of which, what items usually do you see the best markdowns on?

[Amanda Barroso]

Yeah, so every year, tech, electronics. Those are always big holiday items. People are always looking for those things. Kids toys. Of course. We gotta make the kids happy. There's always hot toys with a lot of hype. Basically anything in that Amazon toy catalog that hit everybody's mailboxes back in October. I know my six year old daughter, she about ran her marker dry circling everything in that book. I think also if you're in the need for a small kitchen appliance or a beauty item, those things are always discounted pretty well during Black Friday. Some things people don't always think about gift cards. It's A good time to buy those even streaming service deals. They'll come out with special promos for the year. If you're in need of that might be a good time to look. We have an article on what to buy and skip during Black Friday, which we will include in the episode description. So if people are curious, that's a great resource.

[Elizabeth Ayola]

All right. I know we have tracked Black Friday prices at NerdWallet in the past. Is that something worth doing as a consumer, though?

[Amanda Barroso]

I don't think consumers need to be quite as intense as we were during our price tracking experiment. But my advice is to put big ticket items that you know you want into various online shopping carts across the Internet starting in early October. Probably that's when retailers start hosting their early Black Friday sales and you can kind of get a gauge on what those prices are. So for me, that's a fairly low lift way to kind of keep your eye on prices. Just open up that app, pull up that tab on your browser, pop in, check the price. I think the reason I suggest this is because we've seen items sometimes dip to their lowest prices before a big sale even happens. So, like the week before prime day, for example. So if you're not keeping your eye on it, you'll miss out or you'll fall victim to those half deals that sometimes retailers are promoting that aren't as good as they are in other times of the year. The Black Friday shopping landscape has changed a lot. It used to be that many deals happened on that day alone. The day after Thanksgiving, that's when you did all your shopping. So shoppers felt really confident that they were scoring the best price. So now we're in the age of dynamic pricing and retailers are able to manipulate the prices by the hour. They're able to change to compete with other big retailers. So could be by the hour, by the day. And I think that this is really causing shoppers to be more proactive to save money.

[Elizabeth Ayola]

All right, are you seeing any new trends for Black Friday that people should keep in mind while shopping?

[Amanda Barroso]

So we mentioned that just the Black Friday shopping season has become really extended. Early October, you're seeing these sales that are marked early Black Friday. So the extended shopping season is something that you can take advantage of. I think we'll also continue to see members only deals. This was big last year and I think there's no stopping it now. So for example, prime member only deals or discounts or deals for people with a Target card or Walmart plus members, if you have a retailer card or Membership, don't forget about it. Take advantage of those perks to shop early and start stacking those discounts while you can. I think people are also entering this season with maybe a bit more caution and skepticism or, I don't know, maybe they're just thinking more critically about where and how they want to spend their money. We're coming off the heels of the longest government shutdown in American history, and my family was personally impacted. My husband is an attorney for the VA and was working without pay during that whole time. So, you know, it changes the way that you think about money and how you want to spend it. I think people are also feeling the pinch of rising prices across nearly every budget category, from groceries to insurance to gas. People might be buying less, mixing thrifted and new items, or swapping brand names for house brands to try to save a little where they can.

[Elizabeth Ayola]

It also reminds me of something that you were mentioning earlier of people kind of going, do I really need this item or is it a want? And really, does it fit into my budget? So do you budget for Black Friday, Amanda?

[Amanda Barroso]

I do. I have a sinking fund and a high yield savings account that my husband and I both have access to. And typically what we'll do is the interest that we earn every month on our total savings will redirect into that gift fund so that by the end of the year we've got a couple hundred bucks that we're able to spend on the holidays. And sometimes we have to supplement here and there, especially if we've pulled money from that for birthday gifts and things like that.

[Shawna]

But.

[Amanda Barroso]

But we always have something to lean on. What about you?

[Elizabeth Ayola]

I do not budget for Black Friday because I am not a huge Black Friday shopper. Actually, that I think is one of the times of the year where I'm able to decipher my needs for my wants.

[Amanda Barroso]

What about your son? Is it hard not to spoil him?

[Elizabeth Ayola]

Oh my goodness. Have you seen the amount of toys I've stepped on? Matter of fact, it was his birthday earlier this month and I bought him, I don't know, five different things. They're all broken or lost now. So no, I do not go crazy buying him things in the Black Friday sale. Absolutely not.

[Amanda Barroso]

It's funny that you say this because in our house we do like a big toy clean out in the weeks before Black Friday just to kind of assess what's being played with, what we can donate to other children who might need it. And my daughter's old enough now to where I'm getting her involved and saying, okay, look, girl, you're going to be getting some new stuff. You got to make room. Let's have a generous heart this holiday season. And that's been kind of fun to, like, get her involved in that. But I hear you that most of these kids have plenty. I struggle because I, I do. I'm like, oh, I want to. I want to spoil you. But that's a tragic flaw for sure.

[Shelby]

Yeah.

[Elizabeth Ayola]

And I will say I spoil him more with experiences, to be honest.

[Amanda Barroso]

I love that. And you don't step on experiences. They're not like a Lego that hurts your foot in the middle of the night.

[Shelby]

Exactly.

[Elizabeth Ayola]

All right. I know people use different means to pay for gifts. For some people, it's cash. Other people use credit cards. And now we have an increasing number of consumers using Buy Now, Pay later now. The latter is a tool that some shoppers plan used to buy gifts this year. While I understand that Buy Now, Pay later has its place, I don't think it should be used to buy gifts, as that's a want and not a need. My personal opinion, while it is kind to give gifts, is it really worth potentially going into debt over?

[Amanda Barroso]

No, no, no, no, no. The holidays aren't worth going into debt over. And anyone who is in your circle who loves and cares about you will probably tell you the same thing. If it's between buying them a gift or making sure that you're not overdrafting your checking account, the folks that love and care about you will say, please keep that money in your account. But here's the thing. The temptation and the pressure are real for most of us. Going Back to that NerdWallet survey that founded 1 in 52025 holiday shoppers will use Buy Now Pay later services to purchase presents. Here's the thing. Starting now, for the first time ever, this could impact credit scores. This summer, FICO announced that they're going to be rolling out new scoring models with Buy Now Pay later data this year. And so if people aren't thinking about that, they're not used to that. They're not up on their their credit scoring news like we are. They could see their credit scores hit pretty hard in 2026, especially if they miss a payment.

[Elizabeth Ayola]

If people do choose to Buy Now Pay later, how can they do so in a way that's financially smart, Amanda? Especially considering all of the other holiday expenses that are coming up beyond gifts. We still got food and travel and just happy spending.

[Amanda Barroso]

I think the key to using Buy Now Pay later, if you have to use it is to do it responsibly by not overextending yourself. So when people are using installment loans from companies like Affirm Klarna for too many purchases, it becomes hard to keep up with payment schedules and deadlines. And again, like we said, one missed payment can really hurt your score or you're overdrafting your account. I mean, there's a lot of stuff that can go wrong. So if you have to use Buy Now, Pay later this holiday season, I'd recommend using it for one of your bigger ticket items, marking down those deadlines on your calendar, having calendar alerts set up so that you are aware this is not sort of a click yes and forget it kind of thing. Right. We want to be responsible. We want to be staying on top of those payment schedules.

[Elizabeth Ayola]

I'll just throw another tip in there for saving on gifts outside of Black Friday. I think thrifting or buying secondhand gifts can be really handy, which you're doing.

[Amanda Barroso]

Amanda, I spent August through October thrifting gifts for my kids Christmas and I have loved this challenge so much. I went to kids secondhand shops, used Facebook Marketplace. With the money that I saved buying used, I was able to get a few new things too for my kids, like some Barbies and doll accessories and this huge Fisher Price bus that I think my son's going to love. But so I really like doing the mix of the old and the new.

[Elizabeth Ayola]

Sounds like a good way to save money. Now Amanda, this year has been full of experimenting for you. You did a low buy challenge at the start of the year and now you're thrifting gifts for the holidays this year. How many gifts have you gotten so far and how much have you saved?

[Amanda Barroso]

I'm so excited about this. Well, I have been like kind of keeping this updated list of things. So as of Today I've scored $562 worth of stuff for about $191.

[Elizabeth Ayola]

That's a good savings.

[Amanda Barroso]

$370 worth of savings right there like that I'm proud of.

[Elizabeth Ayola]

Thank you so much for chatting through Black Friday with me and sharing some of your tips and tricks. They're always helpful.

[Amanda Barroso]

I love being here. Thanks Elizabeth.

[Elizabeth Ayola]

Next up, we've got a budget rehab for one of our listeners. But first get out your phones and dollar text us. Maybe credit card debt has hurt your credit score and you need tips for fixing it or you wan generational wealth building journey and you don't know how. Whatever your money question, we nerds are here to help you. Leave us a voicemail. Text us on the NERD hotline at 901-730-6373. One more time. That's 9017-30-NERD. All right, let's get to this episode's money question segment. That's up next. Stay with us.

[Shawna]

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[Elizabeth Ayola]

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[Elizabeth Ayola]

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[Elizabeth Ayola]

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[Shawna]

We're back. And answering your money questions to help you make smarter financial decisions. Today we're doing a budget rehab segment, which is when we go through a listener's budget to help them optimize it and ensure it aligns with their financial Goals and values. If you'd like us to look through your budget, fill out the form in today's episode description. So today we're joined by Shelby and we're going to be looking at their budget with the 50, 30, 20 framework and go into all of what we just described around their values, their goals and whatnot. So, hey, Shelby, welcome to Smart Money.

[Shelby]

Hi, Shawna, Elizabeth.

[Elizabeth Ayola]

Hi. We're happy to have you here. So first of all, Shelby, tell us a little bit about you. Where are you from and then where do you work as well?

[Shelby]

So I am from South Texas, but I've been living in the Austin area since I came here for college. So that was fall of 2012. I graduated in 2015, and ever since then I've been working at the same place, which is a nonprofit agency here often.

[Elizabeth Ayola]

We love to hear it. We love a good non profit.

[Shelby]

Thank you.

[Elizabeth Ayola]

Now you're working at a non profit. You all do great work and you need help with your budget. So I want you to describe your budget in one word.

[Shelby]

Shelby, one word. I'll use a phrase. It's a work in progress.

[Elizabeth Ayola]

Okay. I like that. I think a budget is always a work in progress. No matter how great it is. It can always be refined and updated. So I like that a lot. Now tell us why you sent in your budget.

[Shelby]

My goal for this year was to become more financially educated and strategic. I bought my condo in December of 2024. So that used up the majority of my savings, which meant I was kind of starting from scratch again with rebuilding that, which meant really looking at my monthly budget because I had new home costs. With buying a new home, that means you've got to furnish it and paint it. So I quickly racked up more credit card debt than I am used to. So I've also been trying to like rebuild savings, but also work towards bringing down debt, which is kind of a conundrum, and thought I could get some help there.

[Shawna]

Yeah. Well, congrats on buying your condo. That's a big step.

[Shelby]

Thank you.

[Shawna]

How does it feel being a homeowner now?

[Shelby]

It is good. I was a homeowner before and then I sold that one. I haven't been a homeowner though, for about two to three years. So being back in is a nice reminder of there's always something to fix and work on and it's on me to do it.

[Shawna]

Yep. And I'm sure it changed your budget quite a bit. How did your finances change after you bought your condo?

[Shelby]

Honestly, not too much because I've always been, I would say, financially responsible.

[Shawna]

Okay.

[Shelby]

It just meant I had a little less play money.

[Shawna]

So what would you say is maybe your biggest stressor in your budget right now?

[Shelby]

I would say the credit card debt. Because while I can only reduce spending so much, bills are what they are. I can't really adjust that. Like I've adjusted wants pretty well. But I have also started doing some part time work. I've started doing like nannying and babysitting just for supplemental income with the idea of I can just throw that towards credit card debt using the avalanche method. Hopefully I'm getting that right. Focusing on credit cards with the higher interest.

[Shawna]

Yes, that is the avalanche method. Well, we're going to get deep into your credit card debt in a little bit. First, we want to talk about your budget at kind of a high level.

[Elizabeth Ayola]

Shelby, thank you for sending us in your budget. So we were able to have some numbers to look at. So we're going to go through each category, maybe ask you a couple questions, talk through that, and then we'll look at your financial goals and how we can maybe rework your budget to align with those goals. Does that work?

[Shelby]

Networks.

[Elizabeth Ayola]

Perfect. So your after tax income is around $5,570, is that right, Shelby?

[Shelby]

That's about right.

[Amanda Barroso]

Okay.

[Elizabeth Ayola]

And then you just mentioned taking up part time work, babysitting and things like that. Does that include that income as well?

[Shelby]

It should.

[Elizabeth Ayola]

Okay.

[Shelby]

I'm not too far off. I'm about maybe a couple hundred.

[Elizabeth Ayola]

That still works. So now that we know your after tax income, we're going to move to your must haves. And I know you just mentioned that you feel like you've done a good job of kind of getting your must have bucket into shape. So your monthly housing costs, can you tell us how much you're paying at the moment for that?

[Shelby]

Yes, it's about $2,400. That would be my mortgage and my HOA. And the HOA does include my water bill as well as home insurance.

[Shawna]

What other expenses can you think of that are maybe a significant part of your must have expenses? You have a car payment or insurance for your car?

[Shelby]

I thankfully do not have a car payment. I was able to pay off my car, I think in January of this year, which is great because that's a really good story. I could afford my hoa.

[Shawna]

Yeah.

[Shelby]

Yeah. But I still of course have insurance. That includes home insurance also. Those are bundled together and that's about 165.

[Shawna]

Okay.

[Shelby]

And then of course, all other, you know, utilities.

[Shawna]

One thing I noticed in your budget spreadsheet, Shelby, is that you're spending around $300 a month on groceries, which is actually really good. How do you save on groceries? Because that's something that I struggle with personally.

[Shelby]

I think that my job actually posts a lot of luncheons for other people or they provide food at meetings and often there's leftover food. So I find myself eating more at work just from things that are brought to the break room than actually having to eat my food that I brought. So I feel like I'm able to stretch it out a bit.

[Elizabeth Ayola]

Oh, I love free food. One of the downsides of working from home is we don't get any free food. No.

[Shawna]

But looking at your housing costs and your income, I noticed that your housing costs are a little high relative to your budget. You're spending about 44% of your take home pay on your housing. Does that feel comfortable for you or does it feel a little bit tight?

[Shelby]

It feels okay because I kind of knew what I was getting into and I'm trying to tell myself this is an investment. It's an investment. Right. It's not like I'm spending this money on wants.

[Shawna]

Yeah. And it's a roof over your head.

[Shelby]

Yeah. Yeah. I feel like every month I'm able to pay everything that I need to and still have money left over for my groceries, for going out with friends on occasion. So, yeah, I'm not overly stressed with the money I have left over after all the must haves. But that does mean I can't be as aggressive towards paying down my credit card debt as I'd like to be.

[Shawna]

And what's your interest rate on your mortgage?

[Shelby]

Right now it is 4.25 because I did a 3, 21 buy down. So.

[Elizabeth Ayola]

Okay.

[Shelby]

Come January of next year, it'll go up to 5.25 and then the third year it's 6.25. And that will remain on until I hopefully refinance at a lower rate. I did that because at the time it seemed like the better deal for me in the long run and I was willing to spend the money on it.

[Shawna]

I think that's a smart move because interest rates have been pretty difficult for the past few years, especially right when you were closing. I don't have the exact numbers, but they weren't great, I'll tell you that. So looking ahead to when your interest rate might kick up to higher around 5, 6%, you might want to look at what it might cost you to refinance because typically if you can get an interest rate that's around three quarters of a percent lower than what you currently have. It's often worth it to refinance.

[Shelby]

I did hear that on maybe this podcast.

[Shawna]

You probably did. That's great. Well, I'm glad it's stuck in your.

[Shelby]

Brain because I'm trying to plan ahead for that.

[Shawna]

Well, that's great. We're all about planning for the future with your money here, Shelby. Looking at all of your must have expenses, you're spending a little over 60% of your take home pay on your needs, which isn't unheard of. I mean, with a 50, 30, 20 budget, ideally you'll have 50% covering your needs, but. But given how expensive the world is and mortgages and condos are, I think that you're doing pretty well, all things considered. So, Elizabeth, do you want to dive into savings?

[Elizabeth Ayola]

I do. And before I do, I'm not going to assume everyone listening knows what the 50, 30, 20 budget is. So 50% usually goes to your needs, 30% to wants, and 20% to debt and savings. All right, Shelby, so tell us what accounts you're currently saving in.

[Shelby]

So I have a high yield savings account that I opened earlier this year, maybe around June, in the summertime. Then I have a 401k through my employer, which also offers an IRA that I just recently started contributing to as of like a week ago. And then I have personal banking savings accounts that I use. So kind of like Sean, I have multiple accounts where I kind of automatically transfer things into because that is helpful for my mind. So I have those already pulled out of what comes through my check. And then I can use whatever balance is left there to start divvying up towards all of my needs.

[Elizabeth Ayola]

And you also mentioned in your budget that you sent over that you have an hsa, is that correct?

[Shelby]

Oh, yes, I do have that as well.

[Elizabeth Ayola]

So let's rewind a little bit since we're on the topic of savings. Do you currently have an emergency saving fund? Because I know that was a priority for you.

[Shelby]

I have one that I am building. So the high yield savings account is what I'm using to build up at least 3 months month worth of my living expenses. So right now I would say I'm about a fourth of the way there.

[Elizabeth Ayola]

How much do you need to save to get to three months?

[Shelby]

To get to three months? Let's see. I think it should be around 9,000. 9,000 is my goal for three months worth.

[Elizabeth Ayola]

And then how much are you currently saving in each of those accounts? How Much are you saving in your health savings account, your high yield savings account, your 401k monthly?

[Shelby]

The high yield savings is the goal was 200 monthly, but that's changed to 100 monthly. The HSA is 100 per paycheck. The IRA is $50 per paycheck. And remind me what the other one was. Oh, the 401k, I contribute 6% and then my employer matches three.

[Elizabeth Ayola]

I know you said that you want to save more, but in order to achieve, let's just round it off and say $10,000. Right. Which is three months worth of expenses for you. If you continue saving, let's say $200 a month, that would come up to you saving $2,400 a year. And it would take about four years, assuming you didn't take out any money for emergencies, for you to rebuild that emergency fund. So how are you thinking in terms of your time horizon of how fast you would like to rebuild your savings?

[Shelby]

The sooner the better is always great. Because I've never been a patient person.

[Shawna]

But I can relate to that.

[Amanda Barroso]

Yeah.

[Shelby]

I'm also very realistic person. And so I'm just trying to take a breather and say everything is temporary. Right. So all of like the supplemental work that I'm doing with the nannying, hopefully that's not forever. So the more I do that, the quicker I can achieve my goals and the sooner I can hopefully just have one job.

[Elizabeth Ayola]

That's right.

[Shawna]

And pay off your credit card debt.

[Elizabeth Ayola]

Shelby, based on the information you've given us, your monthly savings score right now is 11.71%. So it's shy of the 20% that's recommended in the framework. But again, you have different financial priorities right now. But we'll see later if we can bump that up to 20%.

[Shawna]

And one thing we should note is that your monthly debt payments are eating into your savings score. So you're putting a lot of money into these different goals and it might feel like you're saving a lot of money, but because of this credit card debt, you're just not able to save in the way that you want to, as you know well. So let's talk about your credit card debt. How much do you have? How many credit cards do you have? Talk with us about the story of your credit card debt.

[Shelby]

I believe I have about eight credit cards right now, but only four of them currently have a balance. So one of them is strictly for car maintenance repairs, and that one has a no interest for six months if the purchase is over 150, which every car purchase is over 150. So right now that card has a balance of $1,000. Then the other credit card that I just got this year, that one is about 1600. And that one also has a promotional interest rate right now of 3.99%. Until I want to say, February or March of next year. Then my two others. So one of them is my Southwest card. Yes. I'm a Southwest girly. Not super happy about all the different changes that have come up recently. That one is just under 4k. And then my other, which is just a. It's the Chase Freedom, which does have reward benefits on it. That one is just over 2k.

[Shawna]

And what are the interest rates on these last two cards?

[Shelby]

The Freedom is the highest, so that's the one I've been paying most aggressively. I want to say it's like around 27. And then, then my Southwest is the next highest, which would be about 20 to 24. And what's your credit score most recently was? 759.

[Shawna]

That's pretty good. So I hate when people pay egregious amounts of interest and anything north of 20% is going to be in that category. And often, if you have a credit card that has rewards like the two you mentioned, the Southwest and the Freedom, any amount that you're paying in interest is going to wipe out the value of those perks. So one thing that I would encourage you to look into, even though these balances might feel relatively small, is maybe getting a balance transfer credit card where you can have a 0 APR period, often between 18, maybe even 24 months, depending on the card itself. So NerdWallet has roundups. We have refresh roundups every single month where you can look at the best balance transfer credit cards. That way you can just accelerate your debt payoff and pay less in interest and put as much money as possible toward really zeroing out that balance. It'll accelerate the amount that you're able to pay and how quickly you'll be able to get out of debt. Have you looked into this option thus far?

[Shelby]

Not too much. I have used a balance transfer credit card before in the past, and I actually do have one through Chase, but you can't transfer from one Chase card to another. Yeah, so the card that I got this year that does have that 3.99 promotional interest rate, they are also offering different promotional transfer balances. So I have considered that. I think there is one offer that is zero interest and there's another, a much smaller interest rate for a longer period. Of time. So. So it is something that I have thought of but haven't deeply considered.

[Shawna]

I would encourage you to play with a debt payoff calculator and see with these different interest rates, if you have a credit card industry that's like 27% versus 0%, how long it would take you to pay off debt with these different scenarios. So that way it can make these numbers and these different scenarios feel really concrete. That might be some good motivation too, because I want your money to go towards more fun things than paying interest to a bank. And transferring your balance might be the best way to do that.

[Shelby]

Maybe.

[Elizabeth Ayola]

So now we're going to go into your wants, Shelby. I think this is the fun part. You are very responsible. Looking at your budget, you have all these responsible things you're doing. What do you typically spend your wants budget on?

[Shelby]

I think most is experiences. So that would be like dinners, drinks, trips with friends. But all my friends are kind of in the same financial space as I am. Right. Because we're all living in this wonderful economy and state of the world, so. Or trying to all balance how many trips we're going on or how extravagant the trips are, how often we're going out to eat or maybe where we're going out to eat. But when it's someone's birthday, you know, all of that doesn't matter.

[Shawna]

Of course, after one margarita, who cares about your credit card?

[Shelby]

Exactly.

[Amanda Barroso]

Yeah.

[Shelby]

It's like calories don't count on your birthday. Neither does the budget.

[Elizabeth Ayola]

So I guess we'll now share the percentage of your wants bucket. So it's taking up 28% of your income. So in the 50, 30, 20 grand scheme of things, you're just below 30%, which is doing pretty good. You're pretty conservative in that way.

[Shawna]

I don't want to restrict fund in your life, Shelby, but I'm wondering if there might be a place or two where you could pull back a little bit on the wants just to funnel any extra cash toward your debt payoff, at least momentarily. I think you might be able to skirt that. If you end up getting a balance transfer card, your credit score should qualify you. That might be one way to avoid pulling back on your wants. But if you keep going the path you're currently on, doing just debt avalanche and paying these really high interest rates, you may want to consider pulling back on wants at least in one or two areas.

[Shelby]

I feel like I'm already giving as much as I can and have adjusted everywhere I could.

[Shawna]

Right.

[Shelby]

So that's what that's what prompted me to get supplemental income was because, you know, I was already working with what I had, but I need to have a little more to work with.

[Shawna]

So the question kind of becomes, where can you create slack in your finances? Because it is fairly tight currently, and I think based on what I've seen so far, the interest rate is probably going to be your best bet. It seems like you got into this debt because of household expenses. You weren't racking up vacations on them, correct?

[Shelby]

I wish.

[Shawna]

Except you don't, because that would be indicative of a worse behavioral issue around how you manage your money. So that's a good thing. So take some solace in that. You were going into what's maybe a more responsible form of credit card debt. But as you know, it's all too easy to slip into credit card debt. So just take some precautions to avoid going into more, as you know. Well, I don't need to tell you this, but I always have to remind everyone. Okay. So, Shelby, based on what we've talked about so far, what other questions do you have about how you might be able to improve where your finances are going, how you're managing your budget, what you're going to be doing around your debt payoff off? Any other questions?

[Shelby]

I know we talked about the HSA, the 401k, the IRA that I recently started, and then the high yield forgot to mention. I have just a couple other savings accounts through two of my banks. So one of them is a credit union. That one, I save $50 per paycheck, that's 100 monthly. And then I kind of just throw in extra there whenever I can. So I have my larger lump sum go to my primary bank where I primarily do bills, and then I have my credit union is where I do like smaller savings, but also that's more like my play money. So the primary savings that when I put in 250 monthly. So I forgot to mention that my question is, and I bet you guys would never recommend this, but what are your thoughts on like temporarily pausing savings? Right. Or doing minimal savings so that way that money can go towards the more aggressive debt repayment?

[Elizabeth Ayola]

That is not a terrible idea when you have high interest debt to pay. But something that we do suggest is that you at least get your 401k match. Are you getting that with your employer currently?

[Shelby]

Yeah, I do believe so.

[Elizabeth Ayola]

And then you at least have $1,000 in your emergency savings fund. But obviously three months, three to six months is ideal.

[Shawna]

Yeah. I don't hate the idea of pulling back I would caution against pulling back entirely just because we want to see you making progress on your savings goals. I think that might be something to consider more seriously if you aren't able to transfer the balance of your credit cards to a zero interest card, because, I mean, I don't know exactly how much you're paying in interest each month, but you might find that the amount that you are saving in interest, if you can transfer the balance would be amount about the amount you would sacrifice from your savings to put it toward your credit card debt. So just run some numbers there. But savings are so important to prevent you from going into debt again or even further in the future. As you know, something could happen to your condo tomorrow and you might have to pay for it. So it's just the best key to long term financial resilience is your saving.

[Shelby]

Okay, here's another question. So let's say I do look more into the balance transfer. I haven't done it in quite a while, but I can't remember if you're able to transfer balances like from multiple credit cards into one or does it have to be a one to one?

[Shawna]

It depends on the card. But you can transfer often multiple cards onto one card.

[Shelby]

Okay, if I did do a balance transfer and it was only one card, what are your thoughts on transferring the balance that is lower but has the highest interest rate versus the balance that is twice as high but has a smaller interest rate?

[Shawna]

Yeah. Remind me again of each interest rate. One's 27, one's 21, is that right?

[Shelby]

Yeah, it's not very far off.

[Shawna]

I think it'd be worth running the numbers to see how much you would pay in interest over the life of each debt. But kind of back of the napkin mental math. It seems like you would probably save the most money by transferring the higher balance, even though there's a slightly lower interest rate. But ideally you could get a card where you'd be able to transfer multiple balances onto one new card and that shouldn't be too hard to find.

[Shelby]

Yeah, I'm pretty sure that the credit card that I got earlier this year still has a transfer balance option on it. So I'll look more into that. So that way I'm not having to open up a new line of credit and I'll go from there.

[Shawna]

And that's the 3%, I think.

[Shelby]

So it's around that.

[Shawna]

Yeah. Way better than 27. Well, Shelby, thank you so much for being so open with us about your finances here. Maybe we can have a follow up conversation when you have your debt somewhat more resolved about how much you're saving for retirement, because that's a whole nother can of worms that we don't have time for today. But I would love to talk with you about that in the future. But in terms of spread of accounts, you have a good variety there, so congrats on that.

[Shelby]

Okay, thank you.

[Shawna]

Also, listeners may be able to hear that my cat has entered the picture. He is meowing on my lap as I'm recording this picture.

[Shelby]

Maybe you've got an opinion.

[Elizabeth Ayola]

Yeah, I know. Maybe she has something to say about Shelby's budget.

[Shawna]

All right, well, thanks so much for coming on.

[Shelby]

Thank you for having me.

[Shawna]

And that is 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-Nerds. You can also email [e-mail] if you.

[Elizabeth Ayola]

Enjoyed our conversation and you're interested in getting a financial strategy tailored specifically to your needs, then you may want to consider working with a financial planner like Sean. You can get matched with a financial advisor for free using nerdwallet Advisors Match, and you can find a link on that in today's show Notes. Follow Smart Money on your favorite podcast app that includes Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. And also, if you want us to go through your budget and help optimize it so you can reach your financial goals, then fill out the form in the show description.

[Shawna]

Here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

[Elizabeth Ayola]

This episode is produced by Tess Viglund. Hilary Georgie helped with editing. Nick Karismi mixed our audio. And as always, a big thank you to Narda Wallace editors for all the ways they help us.

[Shawna]

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