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Is your debt pay-off plan sabotaging your finances?
Probably.
But don’t worry, it’s a simple fix.
One of the most common misconceptions when it comes to focusing on getting rid of debt is that once you’re done paying back loans or other liabilities you’ll be happy. You’ve heard it before – “You’ll be happy when you finish paying off your debt.” But is this really true?
In this episode, we’re unpacking what I’ve found to ACTUALLY be true… Let’s do this!
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Resources & Links:
Net Worth Worksheet – https://aimeecerka.com/networth
Money Masters Inner Circle – https://aimeecerka.com/innercircle
Instagram – https://instagram.com/aimeecerka/
Full Show Notes – https://aimeecerka.com/07
Website – https://aimeecerka.com
Podcast KeyPoints
0:00 – Episode Sponsorship
0:55 – Have You Heard?
2:50 – Debt Payoff Plan
3:54 – Why Your Debt Pay Off Plan It Not Serving You
6:14 – What Do You Do Now?
8:00 – New Worth How To Calculate
10:18 – Tracking Progress Over Long Term
11:43 – Debt Roll Down Method
14:28 – Recap
You’re ready to take the first step and focus on your net worth. Now grab the Money Mindset Mastery Checklist so you can create an unshakable money mindset in just 10 simple steps!
Resources & Links:
Net Worth Worksheet – https://aimeecerka.com/networth
Money Masters Inner Circle – https://aimeecerka.com/innercircle
Instagram – https://instagram.com/aimeecerka/
Full Show Notes – https://aimeecerka.com/07
Website – https://aimeecerka.com
Read It! Is Your Debt Pay Off Plan Sabotaging You? – Ep. 07
This episode of the Your Money Your Life podcast is brought to you by Money Masters Inner Circle.
Do you struggle with stress, frustration and knowing what to do with your finances? Or have you taken action to create financial security for you and your family, but you spend so much time on and you still haven’t achieved that peace and confidence with your money?
You’re not alone. It happens all the time. And I’m here to help!
Inside Money Masters Inner Circle, you’ll receive bite sized implementable, up to date training as we work together to give you confidence, prosperity, in financial security, personalized to you, your goals, your priorities, and your values.
If this is something that you want to learn more about, text “inner circle” to 8179694653. And of course, the link is hanging out in the show notes as well.
______________________
If you heard the other experts talk about having to just pay off debt, or pay off consumer debt at whatever cost, or do what you can to cut expenses, as much as you can just to get out of debt…
… well, they’re not wrong, that you should get out of debt, BUT the way they go about it is entirely sabotaging you and your finances.
So, in today’s episode, I’m going to talk about the shift that you need to make. It’s a really simple shift, but if we don’t make this shift, then you’re sabotaging your finances as well. So, let’s do this!
Welcome to the Your Money Your Life podcast. I’m your host, Aimee Cerka.
After my husband and I faced three major financial roadblocks in the last six years, I felt like I wasn’t doing all that I could and I had let my family down. It always felt like life was a struggle like I had to work harder than everyone else. It just came easy to them, and I didn’t feel worthy of success.
Until, a coach helped me see the successes in our experiences instead of our failures. This allowed me to create and implement systems to grow our network by 200,000+ while spending time with my loved ones and on my priorities. Now I help motivated women create the happiness, family life, financial security, and long-term wealth they deserve.
If you’re ready to eliminate stress, struggle, frustration and guilt within your finances, you’re in the right place. Welcome, I’m so glad you’re here!
Welcome back to another episode of the Your Money Your Life podcast. I’m your host, Aimee Cerka. Can you believe it? We’re already on Episode Seven!
So, today we’re going to talk about your debt payoff plan and why your debt payoff plan isn’t serving you.
Your debt payoff is, is important. Let’s start with that.
It is important that we should be working to get out of consumer debt. There is good debt and bad debt to have, it’s smart. We still need to make sure that we’re maintaining a good credit score because unfortunately, with the way things are structured in life, we really have to have a credit score, and a decent credit score is going to open things up. Even if you’re not financing things.
Your credit score also affects other things like your insurance rates. Just so you know, side note there, right? But that debt payoff focus is not serving you, and let’s just kind of dive into why.
So, majority of the time you hear “pay off debt, pay off debt, pay off debt, do whatever you can to pay off debt, okay?” The reason it doesn’t work is really the mindset behind it. So, the thought process there when they tell you to do that, is because they’re trying to get you to make that progress within your finances as fast as possible.
But the problem is those habits that you’re doing, they’re not sustainable, long term. That whole like we get on a diet, and then we fall off the diet, like, right? Who else has done that before? We went on a diet and within a couple of weeks we fall off.
Or maybe you successfully complete the diet, but after the diet period is over on whatever timeframe… you’re like, “Oh, I’m gonna do this for three months.” and after three months, the whole time all you can think about is your favorite sweet. Which would for me, would probably be like a bait treat. I’m not a chocolate fudge person but you know, like some cake or cookies, those are more up my alley, right? That’s what I would be thinking about.
So, when the diet ends, we end up eating all that stuff! And we’ve all heard the yo-yo effect, we yo-yo back from where you were. You lose all that progress and often end up in a worse situation than you were previously.
Now, why does this happen? Because what we focused on is what we achieved. So when you’re in that diet, and you’re focusing on what you get when you’re done with it, “where’s the treats, and all that stuff,” then that’s what we got because that’s what we focused on.
When you train yourself and you train your subconscious to focus on “get out of debt, get out of debt, get out of debt”, if you’re successful, because majority of people aren’t, then within five years, you end up back into debt to 75% and then back into debt within five years.
The reason is, because we’ve told ourselves, “Get out of debt, get out of debt, get out of debt, get out of debt”, when you’re finally out of debt, and if you succeed, your subconscious is still saying “get out of debt, get out of debt, you know, debt… But wait, there’s no debt to get into.” That’s when you go into debt again, just so you can try and focus on “get out of debt,” because that’s what you’ve programmed your subconscious to do.
So what the heck do we do now? Kind of feels like we’re setting ourselves up for failure?
Well, the answer is simple. The month that we put this into practice, we saw an increased return, that month, by making that switch. There wasn’t any extra income. The income that we were putting towards our debt payoff stayed the same, but we saw an immediate increase in what we were doing and the results we were receiving within our finances.
You ready for what the switch was?
We focus on your net worth, because your net worth is the long-term game.
As you pay off your debt, you’re going to improve your net worth. As you increase money in your savings accounts, as you increase your investment portfolio, as you invest in a cryptocurrency, as you do whatever add value in your life insurance policy. All of these things all positively affect your net worth.
So yes, as you continue to use, (for most of our clients, we use a debt roll down method for our debt, and that’s the one I use personally) … So, as you continue to roll down your debt, you’re going to make that progress and your net worth is going to increase.
So, it’s not the board just forgetting about our debt, it’s still there, it’s just not our focus, we are focused on the abundance, that we have. The abundant part that we are looking to grow, we cannot focus on a negative thing. Like even when you say debt, you can hear the negative energy behind it.
So, focus on your network. As you pay off your debts, you’re going to improve your net worth. As you grow your assets, you’re going to improve your net worth. It’s a really simple switch, but it’s so game changing.
If you don’t know what your net worth is your net worth, just a quick overview, is your assets minus your liabilities equals your net worth.
So for example, if you have a vehicle, I think most of us probably do have vehicles, the asset part of the vehicle would be how much the vehicle is worth. Kelley Blue Book, (so great. it’s normally what I use to calculate the worth of my vehicle), how much you still owe on it is the liability, which helps show if that’s a positive asset for you or if you’re upside down on it.
Credit card debts, medical debts, all of those things are liabilities. Your mortgage is a liability. The value on your house be considered an asset for our net worth perspective.
Now, cryptocurrency one that we had forgotten about until recently was the value on our rings. I have an insurance policy on our rings, but has been nice rings and the renewal notice came in the mail and it was just kind of like wait a second, like this asset that we wear on our hand it still has value to it because of the diamonds in it so, it’s still part of our assets and then we’ll look back and add it. The furnishings in your home are technically part of your assets.
Now I have a plug and play worksheet for you. I’ll make sure the link is included for you in the show notes if you want to check out and grab that net worth worksheet. It’s really simple. I mean, it’s literally the one that I use.
I think it works but the part that I want you to get is that your debt payoff is not serving you, okay? We need to focus on our net worth.
So let’s see, we’ve made the switch to focusing on net worth. You’re going to calculate your net worth. If you’ve never done it before, this is something that I also recommend we do on a monthly basis as part of your month in process.
If you get stuck and need to see momentum, this is a great thing to check on because especially once you’ve started to do it, you’re going to see the momentum faster. And when you were stuck in that negative place, the best thing to do is see the progress that you’ve made.
A side note, another thing that I check or track on my net worth sheet that I can’t remember if that’s on the actual one that we’ve included, I’ll have to check this, but I track our progress over 30 days, 60 days in 90 days.
So sometimes, you know, we have a rough month. And it’s not even necessarily that it’s a rough month, it’s that we used that financial security and those assets and the things that we put away to take care of things that we needed to. We were able to do that, like that’s a big thing, putting a couple months ago, we had to put about $2,000 into one of the vehicles on car maintenance.
We were able to do that because it was set aside in the auto savings fund, but technically, our network took a hit of $2,000 because that cash was no longer sitting in that savings fund. You see how, sometimes it might drop for a little bit, but if you’re looking at what the progress was over 30, 60, and 90 days, you’re gonna see the true progress of how far you came.
The one that I use is in Excel, it’s an Excel spreadsheet. There is a tracking from year to date, how much progress we made. I have to say the numbers pretty crazy. I don’t even know that I could have imagined that knowing where our income is at now, if our income had like, skyrocketed, okay, maybe.
But we actually took like an income cut this year, and how much progress we’ve still made because of the systems we put in place. This was game changing.
And then let’s kind of briefly talk through what a debt roll down is, if you haven’t used a debt roll down before.
So, there’s a couple of different types of debt payoff methods out there. What a debt roll down is, though, is we’re going to list all of our debts in order, from smallest to largest is typically, the better way to do it, you can do it either way, but smallest to largest, I think is the easiest for me to explain like this.
What you’ll do simply is make your normal minimum monthly payment on everything.
When you pay off that smallest debt, you’re going to take the amount that you were paying on that debt, and then you’re going to apply it and apply the normal minimum monthly payment and the second smallest, plus the amount that you have played on the smallest. So, we’re rolling down the amount here and continuing to grow. It’s going to kind of create a snowball effect.
Just a quick note, if you can add extra money to your debt roll then each and every month, that’s fantastic.
Another great use of that would be to do like one-time payments when you receive like IRS refund, the stimulus checks, those type of things, or maybe you’re getting a disbursement of some other some other kind. So using a percentage of that to pay off debt, can be a great idea.
I’m sure we’ll talk all about the best use of tax refunds, a little closer to tax return, time, it’s a really smart thing to do. But if you have two debts that are similar in the amounts that you owe, always list the one with the higher interest rate first.
And sometimes, I kind of move things around because, like medical debt, doesn’t have interest charged on it. For me, I would rather pay off the one, if it’s similar, I’d rather pay off the one that has the interest on it than I would the one that doesn’t. And I also will take into consideration monthly payments there. But it kind of varies, right?
Like all personal finance things, it varies and it depends on your personal situation and your personal preferences, your personal priorities, all of those things, right? I feel like we say this all the time, like this is the situation, but I don’t know, it really depends on what’s going on. And that’s not to just be vague, it’s really about making this situation work for YOU.
Because it isn’t a cookie cutter system, that’s not what we’re selling here, there are people out there who do sell that and that’s fine. But for me, I want to be able to have finances and a life that’s aligned to my values. And that’s why this show is called Your Money Your Life, like that is the whole point of this here.
So, I think that is it for today!
Just a brief overview, we talked about how your debt payoff plan was not serving you, that focus on your debt payoff plan wasn’t serving you. We talked about making the switch to your network, how to calculate your net worth and then briefly talked about your debt, how to set up a debt roll down, the debt roll down method and how to utilize that in your finances.
So today I want to hear from you, send me a message on Instagram, once you’ve listened. Do you know what your net worth is? Have you calculated this before? Is this something that you’re going off to do? What did you find?
A lot of times we’re either pleasantly surprised and we’re motivated to go do more, or maybe it’s kind of terrifying and then we kind of get the kick in the pants that we need to go get to work and figure something out.
So once you’ve figured that out, or your net worth is at if you’ve done this before or not, send me a message on Instagram @aimeecerka. I can’t wait to hear from you, and we’ll see you next time on the Your Money Your Life podcast. Bye for now!
Thank you so much for listening to the Your Money Your Life podcast. My favorite place to hang out is on Instagram. You can find me at @aimeecerka. Send me a message or post a screenshot and tag me! I love hearing from podcast listeners.
When you’re ready to master your money, go to https://workwithaimee.com. You and I will work together to ditch financial stress and struggle for good with a customized plan that works for you, your goals, your priorities, your life. I’ll see you next time on the Your Money Your Life podcast.
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