This episode is sponsored by National Debt
Relief, a Better Business Bureau A+ accredited business with over 13,656 client reviews and
growing daily. They can help you reduce your debt to a fraction
of what you owe if you qualify. Get a free report comparing all your debt
relief options at nationaldebtrelief.com/HTA [♪♩INTRO] In part one of our two part series on debt,
we talked a little bit about different kinds of debt. In part 2, we’re going to talk about a couple
strategies to get out from underneath it. First off, though, I think it’s important
to take a moment to address some of the psychological responses that owing money elicits. Debt has a nasty way of making you feel fearful
and full of self-loathing, but neither of those responses are actually helpful. When you’re in fight-or-flight mode, you are
not equipped to analyze a situation and formulate an effective plan of attack. So, just like you wouldn’t let an alcohol-drunk
friend drive a car, don’t let an adrenaline-drunk you drive your brain. Do your best to stay calm, so you can be at
your best when you need to think critically. Remember, you are more important than your
debt, and if you’re struggling, you’re not the only one. So let’s dig in, get uncomfortable, and
talk about some strategies for dealing with debt. Strategy Prep: Create a Budget
The first step to any financial plan is to understand what’s going on with your money. Creating a budget is a way to take a look
at how much money is coming in, how much is going out, and where it’s going. Check out the description for links to a few
videos on creating a budget. Strategy One: Adjust Spending
Now that you’ve made your budget, one of the most theoretically simple ways to save money
is to adjust your spending habits. And yes, that is code for spend less money. Remember that there are a lots of people who
get paid lots of money to get you to spend more money, and they’ve got tools to make
you feel like you need stuff that you probably don’t. Your budget is a tool to help you recognize
some of those tricky money pitfalls, and it can feel empowering to identify them, and
cut spending in non-essential areas. Each adjustment you make can be one step towards
putting a little more of that debt behind you. However, no one who inhabits the real world
seriously believes that you’ll be able to buy a house or pay off large student loans
just by skipping avocado toast, no matter what some rich Australian guy says. Adjusting your spending is most likely going to work in concert with other strategies,
and doesn’t mean that you’re a bad person if you buy a latte every once and awhile. Strategy two: Create Additional Income. The flip side of adjusting your spending is
getting new income. This can seem kind of daunting, especially
if you’ve never done it before, but depending on your situation, side-hustling these days
can be pretty accessible. This can mean many different things. You can monetize a hobby like making jewelry
or painting, tutor students or teach english, drive for a rideshare service, run errands
for someone, or even start your own business. Just make sure you keep track of all the income
you receive, and the expenses you incur for tax purposes. That can bite you later if you don’t. Now the next strategy is less about trying
to pay more on your debt, and more about trying to arrange your payments so they do the most
work. Strategy three: Snowballs and Avalanches. If you have multiple sources of debt, and
can afford to pay more than the minimum payment on each, you are faced with the choice of
what percentage of your money to send where. Rule number one, research seems to indicate,
is to focus on one loan at a time. This applies to both avalanches and snowballs. In the snowball method, you pay the minimum
amount on all sources of debt, and use anything left over on the smallest debt. Once you finish paying off that debt,
add its minimum payment as well as the extra money to the next smallest debt, until you’re
putting all of those minimum payments and leftover money towards one large debt—a
magnificently large snow boulder rolling towards being debt-free. This strategy has the benefit of giving you
quicker milestones to celebrate, and a visible amount of progress made. However, it completely ignores interest rates,
so you might actually end up paying more money overall. The avalanche method is similar to the snowball
method, except instead of paying off the smallest debt first, you pay off the debt with the
largest interest rate first. This strategy has the benefit of reducing
the amount of interest you have to pay overall, but it isn’t necessarily as motivating as
the snowball effect, because the results are often less visible. If you feel highly motivated, or you have
a loan with an extraordinarily high interest rate, the avalanche method is probably the way to go. But studies have shown that the snowball effect
may have better long-term outcomes, because we’re human and we don’t always behave rationally. If you feel your motivation flagging, consider
knocking out a smaller debt first. So mix and match depending on your circumstances. They both have snow-based names so your metaphor
still makes sense. Strategy four: Ask an Expert. Avalanches and snowballs can only help you
so much if you have some extra money to put towards your debt. But what about if you’re barely making ends
meet or just making the minimum payments on your maxed out credit cards? If you feel like you’re not sure which path
you should take, it might be worth calling in an expert. Right off the bat, though, while there are
many credible and helpful services out there, there are also services that are unhelpful
and scams designed to take advantage of you while you’re feeling vulnerable. Before you dive into any service, make sure
you do plenty of research, and read everything carefully before signing. The Federal Trade Commission has a pretty
good guide for researching services, link in the description. Credit counselors will review your budget
and provide education about debt management. They may also suggest enrolling in a debt
management plan—a strict repayment schedule that may result in lower interest rates or
other benefits, depending on your individual circumstance. Some credit counselors charge for their services
and some don’t, so make sure to ask about it if you sign up. You’ll still have to pay back everything
you owe but you may be able to do it at a lower interest rate. And finally, debt settlement programs — like
National Debt Relief, who sponsored this episode—can also be a helpful resource. These programs charge you a portion of your
debt in exchange for negotiating with creditors on your behalf to reduce the amount you owe
and consolidate your debt into a single lump sum. You’ll have to see if your situation qualifies,
but if it does, you could pay back a fraction of what you owe in less time compared to making
minimum payments over the next ten to twenty years. Debt settlement is a good option if you’re
drowning in a large amount of unsecured debt. National Debt Relief recommends their program
to folks who have over $10,000 in unsecured debt—which is the kind of debt we talked
about in part 1 that doesn’t have collateral behind it. And remember, the very best thing you can
do to combat debt is to educate yourself, so just by searching Youtube, watching this video, you are already off to a good start. For this series we partnered with National
Debt Relief, a debt settlement program with a Better Business Bureau A+ accreditation
and over 13,656 client reviews from folks who are no longer drowning in debt thanks
to their services. They’re completely performance based and
charge no fees until their clients see their debt reduced, and offer a free savings estimate
that can show consumers how much they can save with no obligation. Visit https://www.nationaldebtrelief.com/HTA
to get a free report comparing all your debt relief options. So just like you wouldn’t let an alcohol-drunk friend drive a car, don’t don’t let an adrenaline-drunk brain… drive your brain… [laughter] Theoretically simple ways to heff—hevffhevff And they’ve got tools to make you feel like you need stuff that you probably don’t or to spend money when you probably don’t have to or even want to, you just do it because they’re so good at manipulation things… They’ve done lots of research on you. They’ve done so much. SciShow Psych: we talk about that a lot. We talk about that a lot. There’s a thing, there’s a whole—I probably shouldn’t do it but there’s a whole—like, we keep doing it. Like, I like these—these—where it’s like, “Here’s how it works… and why it works… and it’s still going to work” How much they s— [garbled] Visit https://www.national— Can I just say National Debt Relief.com? Ok
[laughter]