E183- Listener Questions About Debt

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Denis O’Brien [0:08]
Welcome to Episode 183. Listener question about debt.

Hey Money Clan, a very warm welcome to the Chain of Wealth podcast. I’m your host, Denis O’Brien.

Katie Welsh [0:20]
And I’m Katie Welsh.

Denis O’Brien [0:21]
So Katie, quite an interesting question today. And I feel like a ton of people struggle with this kind of thing. So I’m glad we had someone reached out and asked this exact question.

Katie Welsh [0:30]
Yeah. So quick overview of what we’re going to be talking about. We had a listener reach out to us because she is having a baby, which is really exciting. But they have some debt going on that they also want to get situated. And that, understandably, so if I was in the same position, I would be a bit questioning what I should be doing, because paying off debt is a huge goal. But babies are expensive. So how are you going to do both?

Denis O’Brien [0:59]
Well, the thing is in life goes on, you know.

Katie Welsh [1:01]
Yeah.

Denis O’Brien [1:06]
Figuring out how to nip this in the bud as early as you can is definitely crucial.

Katie Welsh [1:10]
Yeah, for sure.

Denis O’Brien [1:11]
Cool. Well, before we dive in, if you haven’t already, don’t forget to join our Facebook community, head on over to chainofwealth.com/group and come and say hi. All right, Kate, you ready to dive in?

Katie Welsh [1:23]
Yeah

Denis O’Brien [1:23]
Fantastic. Let’s do it.

Okay, so I’m going to hand over to you for the livers question to sort of read an article with people a little bit of background. So what do you got?

Katie Welsh [1:47]
Yes. So Emily reached out to us and she said, Hey, guys, I love the show. But I haven’t been able to listen in a while. We could use your help with some ideas and guiding. We have about 18,000 debt spread out before credit cards, and about 18,000 student loans. We have a toddler and a baby due in November. So diapers and doctor bills are kicking out on top of it all. We finally sat down and looked at our budget, there’s not really too much room for saving anywhere. My idea is to consolidate our credit cards into one. Can you see us on the right direction for that? I know, I’ve heard you talk about it before, but I can’t remember which podcasts. Thanks, Emily.

Denis O’Brien [2:29]
Yeah, so I think Emily faces the situation that a ton of people get themselves into, especially when they start a family. And that’s the bills keep coming?

Katie Welsh [2:38]
Yeah, well, and especially I think a lot of people start their family before student loans are paid off.

Denis O’Brien [2:44]
Right. And I think that’s a very big problem that the millennials have, in general, because of the high student loan balances. And everything seems to happen a little bit later in life. But if you don’t manage to pay off the student loan before you have kids, you’re gonna have to still think about it. And I’m glad ever leverage because there are ton of people in the situation

Katie Welsh [3:02]
Well, and her kids are so little. So she can really try to nip this in the bud before it starts affecting, like when they are getting cars and going to prom and big expenses like that. And I think having credit card debt is totally normal, too. Because what happens I know for me, when I moved out and got my first apartment, well, now you have an apartment, you need stuff to put in it.

Denis O’Brien [3:27]
That’s very true. So you

Katie Welsh [3:28]
get your your furniture bills, and you’re you know, you’re paying for new plates and dishes. And literally, I don’t think people realize when they’re living at home, how much they need when they move out of their parents house,

Denis O’Brien [3:42]
right. And it’s just general stuff. Like, it isn’t necessarily one thing. In particular, it’s a lot of small things. And they all add up really, really quickly. Yeah. And yeah, I couldn’t agree with you more. So let’s tackle student loans first. So what would you do if you had about 18,000? student loans?

Katie Welsh [4:00]
Well, I’m just going to go because Emily didn’t say that she was in public service, like a firefighter or a teacher or anything, right? Because my first reaction would be to try to get loan forgiveness. But if I was not able to do that, I think what I would do is I would try to consolidate them and refinance them to get a lower interest rate.

Denis O’Brien [4:19]
Yeah, I would say like I wouldn’t, I’m not sure if I would go the loan forgiveness route, just because it’s 18 grand, it’s not actually a ton of money. You know, I would save high balances, definitely for sure. But 18 grand, I would say it’s doable. Now, the thing is, is that whether you’re in a position to pay off that 18 grand will dictate what you should do, I think. So if you’re in a position where that 18 grand, you know, you just don’t have enough money right now and you’re spread too thin and everything else, I would sort of not prioritize the 18 grand, what I would do is I would say, number one, make sure you’ve refined assets, get the best rates, like you said, to be in a good position where you know, you’re happy and like the rates is as low as you can get it. And then I would just kind of maintain it for a while, I would focus on paying down the other debt first, because that’s 16,000 in like her credit cards and everything else. Like I would say that that probably is the that’s what you want to start chipping away first, because that’s probably going to have the high interest rates.

Katie Welsh [5:19]
I think that’s good advice. So pay off the credit card first. But just organize your student

Denis O’Brien [5:23]
loans situation rots, sir like get it into maintenance mode, I’m not saying defer and stop paying it all together, maybe just make the minimum payments for now on the student loan until you have the credit card under control. Okay, then with regards to the credit cards, depending on how many cards that have spread over our trying to get them onto one caught on was close to one card as possible. And I’m not sure if Emily had opened up new credit cards or what the current status of them is that if she opens up a new credit card, she can potentially get a signing bonus. So the Tommy buns will give him a little bit of money. Some are going to be a ton of money, it’s going to be like 100 200 bucks.

Katie Welsh [6:05]
Can I stop here? Because I just want to make sure I’m following your advice. So organized with student loan, have them at a low interest rate, and then pay them off over time. Yep. And then really focus on the credit card balance. And you’re saying to try to get all the credit card balances onto one card, Rob. So either open up a new credit card, and put all that debt on one rock. Or she could take the maybe like the least amount of debt on one card, transfer all of them into one pot.

Denis O’Brien [6:44]
Yeah, so the reason I suggested a new card is because Emily’s gonna want to try and get a card that has zero percent balance transfer, and then free interest for the first like 18 months or so. So do you have a car that you could not see super recommend that maybe just shoot a name out there? I actually don’t have one Kate’s I think that she’s gonna have to shop around. And look, I do know that there are cards available outfit that do have a zero percent balance transfer, okay, that you also need to make sure that you meet the minimum. And just be careful that there’s no fee on transferring that money as well. Because very often there’s a fee associated with moving it, but you can get a zero percent card. And you can also often find records that are free, you do need to check around for those. So don’t just jump on the first call that you see zero percent APR, like look around and figure out if the balance transfer is free as well. So say she’s got 16 grand, and she managed to get a card with maybe a $10,000 limit. She transfers all her stuff that’s not zero percent APR and let’s say it’s for 18 months, okay? Okay, that means that she’s got 18 months to pay back that $10,000 before she starts paying interest, oh, crafty. But here’s the kicker. If she doesn’t manage the paid order off, in that timeframe, she’s going to get hit with all the interest for that period of time. So when you are taking out a strategy like this, you want to make sure that you’re able to pay it all off within that promotional period.

Katie Welsh [8:13]
Okay. So when she opens up that credit card, she needs to vow to herself that it will be paid off within that year time frame. Exactly. She has to do that. Okay.

Denis O’Brien [8:23]
Yeah. So critically important that you paid off within that promotional period. I would say like, you know, okay, the thing is, like, when you start a new family expenses are going to be high, right, you know, and women, she has all these expenses coming in. Like she said, she has a toddler and a baby, June there’s diapers and doctors and everything. Lovely daycare, and bodega is coming soon, I’m sure. So, I would say that, you know, she also wants a credit card, that can get her some points on that money that she’s going to be spending anyway. Okay, so potentially, you know, just a general credit card that you can maybe random expenses on. So the doctors bulls may be some kind of an HSA account that she may be utilizing for that. So that’s not really a credit card, but for diapers and stuff like that, definitely, you can be using a credit card and getting some points on that,

Katie Welsh [9:12]
and perhaps even buying in bulk. So she could get a little bit of a cheaper deal for them.

Denis O’Brien [9:16]
Yeah, definitely. And especially that there’s a toddler and a baby, you know, you probably are at that point, that’s okay. You can probably kind of see how how far along it’s going to be

Katie Welsh [9:24]
Yeah. All right.

Denis O’Brien [9:26]
Okay, before we chat a little bit further, I think now would be a great time to take a break and say a quick thanks to our sponsor. Education really is at the forefront of everything we do here at chain evolve. And that’s why we absolutely love the Great Courses. Plus, the Great Courses Plus is an awesome streaming service that has a library of over 11,000 videos with tons of content that is super, super valuable. This content is given by lectures from world renowned universities and even the Smithsonian. They also have a great mobile app, the Great Courses Plus has recently partnered with China evolve, and we’re giving away a month of free access. One of the courses that Kate and I have really been into lately is the financial literacy. finding your way in the financial markets course, is absolutely great. It talks about how everything works in the financial market. And it really dumbed it down in such a way that anyone can understand it, whether you have a finance degree or not. If you guys would like to claim an offer of one month for free, you can head on over to the Great Courses plus.com slash wealth. That’s the Great Courses plus.com slash wealth, the Great Courses Plus way great learning happens.

Katie Welsh [10:41]
Okay, so we talked a lot about how Emily or anybody in this situation, could consolidate and prioritize their debt pay off, especially when having a new family around brought. And she said there’s not a whole lot of room to cut the budget down, which means she’s obvious we made a budget. And it’s pretty on point. Yeah. So the way I see it, Emily really only has one option. She needs to make more money,

Denis O’Brien [11:12]
right?

Katie Welsh [11:14]
So I was thinking during the break, what could we say to help in this situation? Because if you’re reaching out to a podcast, and you’re listening to financial podcasts, you want some help. So I’m trying to think of what Emily could do in her little bit of spare time because she has a toddler. And we don’t have kids, but I have been with friends who have toddlers, and they are exhausting. And especially if you’re pregnant, then you’re even more exhausted,

Denis O’Brien [11:42]
right? So my first idea is to become a VA. Okay, so I thought the exact same thing, I thought it was a perfect sort of job for her in her spare time. So firstly, what is a va?

Katie Welsh [11:54]
Good question. a va is called a virtual assistant. And now what that is, is somebody you are working for somebody who has a business, whether it’s an online business, whether it’s an actual business, but it’s something that you can do in the after hours for an hour to and you can collect some extra cash from that. So that could be anything from if you are into Pinterest, all those beautiful pins that you see when you’re going through looking at thing. People make those. And they’re not hard to make at once you get the hang of it, it’s really not hard. And if you have a question on how to make that we do have really great courses that we could recommend for that. So you could become a Pinterest VA, you could become just like a scheduler of sorts. I know a lot of people who they VA just for small websites, and they do things like creating backlinks or they write posts or something like that. It’s really easy to find a good VA job. But where would you find them?

Denis O’Brien [13:06]
Yeah, so I’m gonna say Facebook. And the reason I say Facebook is because Facebook is has got a community of like over a billion people. So there’s almost anyone that you you know, like, want to chat to you. They have a Facebook profile, they’ve been on Facebook. But I’m not talking about mindlessly scrolling through a newsfeed. What I would suggest is joining Facebook groups where there are people looking for such services. And just to pivot on your points. You spoke about sort of doing stuff for websites. So essentially bloggers, so if you potentially join like a blogging community, you can sort of say on the community, Hey, guys, I am looking to be a VA, and this is what I want to be doing. And you’ll be surprised at how many people will reply to you and want to give you a try.

Katie Welsh [13:53]
And I know it’s you’re probably thinking to I have no idea what a backlink is. I don’t know how to make a Pinterest pin. I don’t know how to do anything this, I’m going to clue you in on a secret. If you are a hard worker and you are reliable, people will teach you.

Denis O’Brien [14:09]
Yeah, that is so true.

Katie Welsh [14:11]
Yeah. Because I know, we’ve had guests on before where they have hired a VA. And part of their arrangement was free like education. And the girl is teaching her VA everything she knows to really build her skill set. And she’s also getting money on the side from it. So it’s like a win win. And then once you really become comfortable with it, you can pick up more clients. And it doesn’t have to be like eight hours a day, it could be one or two hours at night after you put your kids to bed.

Denis O’Brien [14:43]
Yeah, so like, just to give you guys another idea of a kind of VA work that you can do. Kate actually is a VA in a sense as well, I am and what she does is she ships books for an author. And you know, like, effectively she does in her spare time. It’s like, what maybe an hour a day sort of thing. You know, and it’s literally work from anywhere. So she could be sitting at home, she could be sitting in a coffee shop, wherever it is, she’s able to make a little bit of extra money each and every day. And over a couple months, you’ve made several thousand dollars,

Katie Welsh [15:13]
it was pivotal in helping me pay off my student loan. Yeah, so and when you say work from anywhere, it really is work from anywhere. When we were in Africa for a month, I took my laptop and a couple and it’s not It wasn’t an everyday thing. But every couple of days, I would check in and see if there’s anything that he needed. And it is many times I’ve said a blessing from God, what would that be a job?

Denis O’Brien [15:38]
Yeah, but I mean, it just goes to show like how you know, creative you can get in terms of the type of job that you can do. And realistically, I know you said earlier that it’s a win win if people get trained, it’s actually even more than one because the person training you will teach you exactly what they want. And that is so important as someone that is running a business as being able to say gulped to the VA, because you’re not coming with this, you know, pre-determined work ethic and your way of doing things and everything else. You can be trained and you’re open to learning. And I honestly think that learning at any points in like your life is a critical thing. And I know we spoke earlier during the sponsorship round about the Great Courses Plus. And that’s exactly what it is, as well, you know, it’s learning. And if as long as you’re constantly learning, you can really teach yourself new skills and make a lot more money. And Kate, let’s be real. It’s not the nine to five that really counts because you have fixed expenses. No, but it’s true. You have fixed expenses every month. It’s anything extra that you’re able to put away. That’s really going to help you pay off debts like say for a house, you pay off your car, whatever it is, you know, that’s actually how you’re going to almost like, what’s the word? get ahead. Yeah, I was looking for some kind of a boulder metaphor.

Katie Welsh [16:58]
Or very let down with that. Have one other suggestion. I don’t know. Emily’s situation. I don’t know what her job is like or anything. But this is an idea that I’ve had for myself when I have kids. Now I’m a teacher. We don’t even need to talk about teacher salaries. But we can talk about daycare costs,

Denis O’Brien [17:21]
right? And they’re huge.

Katie Welsh [17:23]
And everybody cringes every person I talked to cringes when they talk about daycare. My idea for myself, Emily and if you want to borrow it, go for it. I would quit my job. I would stay home was my baby. And then undoubtedly you have a co worker or a friend or somebody you know, that also needs daycare costs. And of course, you have to get like a licensing and everything if you will make this really official. So definitely go jump through all the hoops. But then you can start bringing in your own and taking care of other people’s kids. And I think that’s a win win for a few weeks. You’re helping people out his even if you make it a little bit cheaper. that’s helping people. Your home was your baby. And chances are because it’s in your home, and it’s only a couple of kicks. People aren’t going to be getting sick like what they typically Yeah, that’s true. But it is probably most definitely a lot of work because you’re with kids all day long. But that’s just another idea that I’ve thought about. Yeah, definitely.

Denis O’Brien [18:29]
So just to summarize, you know, sort of try and consolidate and refinance and he did that you can utilize button load but all zero percent bands, transfers and promotional periods on your credit cards, and also try and see if you can somehow bring a bit of extra money coming in.

Katie Welsh [18:45]
Definitely.

Denis O’Brien [18:46]
Cool. Well, we’ve absolutely loved hanging out with you guys and we’ll catch you next time on another episode of Chain of Wealth.

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