Hey party people! I hope you are doing well. I’ve been writing up a storm this week and have been busy organizing the blog tour for The Road to Financial Wellness.
I’m so happy to be working with others that are also passionate about personal finance and spreading the message of financial empowerment.
I recently had the opportunity to chat with Andrew Schrage, who is also passionate about personal finance. He is co-owner of the wildly popular blog, Money Crashers. I got to talk to him about paying off debt and avoiding the comparison trap. I hope you enjoy!
1. What tips do you have for people who are sick and tired of paying off debt?
Create mini goals along the way of achieving your ultimate goal of living a debt-free life, and reward yourself when each one is reached. Staying motivated is one of the major stumbling blocks when paying down debt, but if you treat yourself to a meal at a nice restaurant each time you reach a benchmark, you’ll be able to stay on track.
2. Do you believe in the debt snowball or avalanche method?
The debt snowball method is best for folks who need the motivational boost of crossing smaller debts off their list first and then attacking the others. For people who don’t need this psychological lift, using the debt avalanche strategy where you address your debts in order starting with the ones with the highest rate of interest, saves you more money in the long run. It all depends upon your personal preference.
3. What are the first three steps people should take AFTER they get out of debt?
Commit to never carrying a balance again. Live by one simple rule – if you can’t afford to pay for something by the time the bill comes in, then you just can’t afford it. Get going on creating an emergency fund. Start with an initial goal of one month’s worth of living expenses and make your ultimate goal at least six months. Use an online calculator to find out where you stand in terms of your retirement savings, and ramp up those contributions as necessary. Get yourself on a budget, reduce your monthly bills, and send in the surplus to your retirement fund.
4. What’s the biggest money mistake you have made?
My parents did a good job of educating me on the importance of smart money management and how to do it from a rather early age. It took me a bit of time to get on a personal budget once I graduated college, though. I probably should have done that sooner, and I also should have begun saving for retirement at an earlier age.
5. How can people say no to the Joneses and be happy with who they are?
Stop worrying about what other people think as to whether you own the latest smartphone or have a 60-inch curved TV in your living room. Live by your own rules. If you’re happy with your current electronic arsenal and those items are functioning fine, stick with what you have. Remember – you’ll be a lot better off in the long run with a solid emergency fund set aside, little to no credit card debt, and having your retirement goals within reach, compared to living from paycheck to paycheck
Andrew Schrage is the CEO and co-owner of MoneyCrashers.com, a financial education website dedicated to educating its readers and subscribers on ways to better handle their finances. The topics covered include how to create a personal budget, reducing and eliminating credit card debt, saving for retirement, the importance of an emergency fund, and much more.
- Talking About Money and Mental Health - September 12, 2022
- Dear Debt, We’re Better Apart - June 27, 2022
- Announcing The Mental Health and Wealth Summit - May 4, 2021
13 comments
I always assumed that the Avalanche was the fastest payoff and the snowball’s advantage was the motivation factor. When I finally started running scenarios for us, I learned that the difference between methods for us resulted in payoffs in 5 years, plus or minus a month, depending on the payoff method used. It was not a significant difference (though interest paid did vary wildly). I encourage people to run scenarios but be honest with yourself – if you need the quick payoff to keep you motivated, no matter what the numbers say for the end results, the debt snowball is the way to go!
Live by your own rules is sage advice! I think when we let others influence us, we are on a slippery slope of spending.
Great interview! I think having mini-goals also works when you’re saving towards a big goal. It can be frustrating to save save save for a big purchase such as a house or retirement when the reward is far off. It is important to recognize the little wins along the way!
Staying motivated is key, great advice to reward yourself along the way once smaller goals are met.
Motivation is what will keep you going!
I’m a huge proponent of the snowball method of debt repayment. It’s like the Zig Ziglar quote, “People often say that motivation doesn’t last. Well, neither does bathing, that’s why we recommend it daily.”
Haha nice!
Loved reading this and perfect for the Road to Financial Wellness tour. Only question for Andrew: Would promising to never get into debt again include even, say, buying a house if it made sense for you financially?
I ask purely out of curiosity.
Not all debt is created equally. For example, student loans and mortgage are 2 of the “better” forms of debt if they are used for the right reasons and you are in the right financial circumstance to pay them off over time according to the loan framework. If buying a house and taking out a mortgage is the right next step for you and your family, I would research the opportunity in depth and not shy away from it if it makes sense.
You know I love interviews! Live by your own rules is great advice, for people will think you’re weird because you’re climbing your way out of debt. My rules…my way.
Yes! Glad you like the interview 🙂
Agreed that the debt snowball or avalanche method comes down to an individual’s own mindset and personality. The snowball method worked well for me although I appreciate that the avalanche method is a more financially sound approach. Great interview!
Glad you enjoyed! I am using the Avalanche method, because the interest on my grad loans is just crazy.