I get it. That crushing feeling weighing on your shoulders… that underlying stress and anxiety you feel in your body every time you pull out your card to swipe a transaction. You’re thinking about your debt MULTIPLE times a day. It’s stressful… it’s overwhelming… it’s frustrating.
Society has conditioned us to think that debt is the ULTIMATE BAD and that our number one priority should be working to pay it off as fast as possible… but after founding Moola Financial with my husband (who is a Smith Manoeuvre Certified QAFP) and over a decade of working with families to overcome their financial challenges as an Accredited Financial Counselor, I can honestly say that MOST of the time… THIS IS BULLSH*T.
I’m not saying DON’T pay off your debt. I’m saying that most of the time putting all your cash toward your debt payment is a bad financial decision. You have to consider your overall financial plan FIRST.
Your debt repayment strategy will change depending on HOW you accumulated that debt in the first place.
Let’s say your debt was a result of a kitchen renovation… or maybe you put a suite in your house. Firstly, you increased the overall value of your home (woo equity) but MORE IMPORTANTLY, you did not accumulate this debt because of poor planning or poor purchasing decisions. This debt is not a habit-based problem. Sometimes the best way to manage this debt is to roll it into your mortgage or a HELOC. Other times simply making the payments over time is best. Either way, it’s not a looming terrible PROBLEM debt.
IF you accumulated debt over time and it seems to have just creeped up and up, without you really knowing how… or if you decided to go on a vacation but had to put it on the credit card because you didn’t have the cash to pay for it… or if you find yourself having to take out a small loan because the car broke down and you weren’t expecting it… this is all habit-based debt.
In other words… you paid for something without having the cash to back it up.
Therefore, in order to fix this debt and stay OUT of debt in the long term, you MUST have cash for your next purchases.
You can’t pay off your debt without having cash for future-you.
You can’t get out of debt without having savings.
Your savings and your future-you accounts CANNOT become your last priority.
They need to be your FIRST priority. BEFORE DEBT.
Let me say this again: If you got into debt because you didn’t have the cash for the things you bought… the answer is that you need to save cash for the things that you want in the future.
TO GET OUT OF DEBT, YOU MUST SAVE CASH FOR THE FUTURE.
In the Pretty Money Club, we use my simple system called “Bank Account Budgeting.” We create a budget plan (if you have never created a budget with me before, you need to take my 5 day budget makeover so that you make a budget that will actually work this time) where you open a bank account for each category of your budget. A handful of these accounts are going to be for FUTURE YOU.
Future you = home and car maintenance, kids sports registrations and summer camps, dental appointment balances, birthdays, weddings, vacations, retirement savings, major future purchases… etc.
Then… you set up AUTOMATIC transactions so that on pay day whatever amount of money you have decided you need for those accounts will transfer in.
You won’t have a debit card for these accounts… so in order to spend the money in them, you’ll actually have to transfer it out to your spending account.
VOILA. You will have cash on hand for your future needs. Meaning you’re not going to be putting ANY of those purchases on credit.
Another thing to consider before putting ALL your money onto debt repayment is INVESTING.
Every single person needs to be investing their money to make their money work for them. There are NOT enough hours in the day for us to constantly be trading our time for money.
If you aren’t reaching your goals or living the lifestyle you want to be with the income that you currently have… you have to increase your income. And for most of us… we don’t have a ton of extra time on our hands. Sure, you could pick up a side hustle and work a few extra hours to boost your income… but creating PASSIVE INCOME is a much better alternative. One of the ways that you can do this is by INVESTING.
If you are someone who thinks that investing in the stock market is akin to gambling… it’s probably because you don’t feel confident in making the right investment choices. You need more information before you’ll make a decision. No problem. You can learn. In fact… I’m going to be talking A LOT about investing with my in-crowd. Wanna be in the loop? Get on my weekly e-mail list by downloading my free budget template. I send out bite-sized, actionable content that will help you become the BOSS of your money. OR follow me on social media. (Instagram = prettymoneyclub) (Facebook = Lindsay Plumb Money Coach) OR you can read my e-book on investing. It’s a GREAT way to learn to pick your very own first stock.
Now… let’s talk about when you have no choice but to make debt your first priority.
If you have accumulated so much debt that you have lost security in your ability to keep food on the table or a roof over your head… then yes, your debt needs to be your first priority; however, you likely will not be able to tackle this problem with a simple debt repayment strategy. If debt has taken control of your life and it feels hopeless, you need to speak with a professional insolvency expert and talk about bankruptcy or a consumer proposal.
I have members in the Pretty Money Club that have navigated this process with huge success. They come out the other side with a solid financial plan in place… and their lives are changed for the better.
If debt is causing stress in your life, reach out and get help. The first step is a simple conversation. We will chat about where you’re at and come up with solutions together.
It’s easy to get in touch with me. Send me a DM on Facebook or Instagram, or e-mail me: email@example.com