More Money Podcast - 184 Living Debt-Free with Shannon Lee Simmons, Author, CFP & Founder of The New School of Finance

Episode Date: February 20, 2019

I’ve got another repeat guest on the show, who first appeared on the Mo’ Money Podcast this time last year in episode 151 to promote her first book Worry-Free Money. I’m talking about the lovely Shannon Lee Simmons, and she’s back with her second book all about debt called Living Debt-Free. Since her first book was essentially the feel-good personal finance book we were all looking for, Shannon’s second book does the same thing for debt. There are so many negative emotions surrounding debt, such as shame and guilt. Debt is bad right? Well, guess what…real people have debt. And they shouldn’t feel shame or guilt for having it. Shame and guilt aren’t exactly motivators to doing anything, so why would we think making people feel bad about their debt will help them get out of it. Having a Positive Mindset for Debt Repayment Is Key Instead, Shannon shares stories and advice on how to tackle your debt by adopting a new positive mindset and asking yourself some of these helpful questions: What is your debt holding you back from in life? What kind of life could you have without this debt? What’s really important to you? What are your core life values? Having clear answers for these questions will help you stay on track to paying off your debt. Yes, strategies like the debt snowball and debt avalanche are helpful too, but from my experience and Shannon’s, people are more likely to get back into debt or stop their debt repayment plan because they lack positive reinforcement and motivation. By thinking with a more positive mindset, such as “What could I add to my life once I’m debt-free?” instead of being critical of your current situation like “You’re not as well off as your peers because of your debt,” you’ll be able to change your financial picture quicker than you ever thought possible. Not only that, you’ll be able to stay out of debt because you’ll have a clearer vision for your overall finances. Emergency Funds Are for Emergencies Recently, there was a question that popped up in my Facebook group asking whether it was a good idea to use Emergency Fund money to pay off debt. Shannon and I both agreed that Emergency Funds should be reserved for emergencies only, not debt. Lack of emergency savings is one of the main reasons people fall into debt. Something unexpected happens, like their car breaks down, they don’t have the money to pay for it, they use credit to fix their car, now their in debt and can only afford the minimum payments. To avoid this cycle, save up 3 to 6 months of your living expenses and put it in a high-interest savings account. Then don’t touch it until a real emergency happens. And once you touch it, make sure to pay that money back so it’s never empty. Shannon also suggest having two Emergency Funds. One is for real emergencies that you don’t touch unless you absolutely need to. One is more of a slush fund that you are constantly contributing to, but dipping into when you need cash for unexpected expenses (that don’t fall into the emergency category). The Only Way to Avoid Over-Spending with Your Credit Card There are only a few ways to avoid over-spending with your credit card. One way is to use debit or cash for all of your variable expenses, and just link your credit card to any of your regular fixed expenses like your cable bill, phone bill, and utilities. Or, if you do like to use your credit card for your variable spending, set its limit to the exact amount you’ve budget for variable expenses. Then, as soon as you make a purchase with your credit card, move money from your chequing account to pay off your credit card. That’s it! There really isn’t any other magic way to do it. Believe me, I’ve tried them and so has Shannon and these are the ones that work! For full episode show notes, visit https://jessicamoorhouse.com/184 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello, hello, and welcome to Episode 184 of the Mo Money Podcast. I'm your host, Jessica Morehouse. Welcome back to the show. And this is a repeat guest. I'm so excited to have back so soon. So about a year ago, almost to the day, I interviewed Shannon Lee Simmons, who wrote the fabulous book, one of my top recommendations for books, guys. So if you are looking for a good inspirational motivational book that you can literally just, it's a page turner. It's that good. It's just like a page turner. It's called Worry-Free Money. That is her first book that came out in 2017. Well, she within the year launched her second book called Living Debt Free.

Obviously, with that one, you'll know from the title. It focuses specifically on debt. And as she kind of explains in the episode, she did want to kind of go more in depth about debt in her first book. But basically, she could have just, it turned into a whole separate book because there's so much to talk about. And also, again, kind of like Melissa Leong's book, Happy Go Money, which is focused on financial literacy with a very positive

happy spin. That's exactly what Shannalee Simmons is all about too. She's very positive and motivational, no judgment, no negativity. And in her second book, Living Debt-Free, it's all about just not feeling guilty or bad or judgmental on yourself if you're living with debt and then taking action steps to get out of debt. I think especially, and I know this actually to be true because I work with clients one-on-one who are dealing with debt. There's so much personal shame and just embarrassment and guilt when you have debt. You just feel like, oh, I can't believe I'm in this situation, got myself here. What am I doing with my life? And there's so much external judgment too, right? I find in the personal finance world, sometimes there's two camps of people. The people that are all about, I'm in debt,

I'm trying to get out of debt, those kind of, you know, debt crushers. And then there's the other side of the camp who are like these super frugal people and are a bit judgmental, I feel like on the debt crowd, which is ridiculous, because I feel like we're all in this life together, we all make choices. And sometimes we make mistakes. It is what it is. Get over it. Let's help each other out. Let's lift each other up so we can help each other live debt-free. So we're going to talk a lot about just some really good advice that she has in her book. If you're dealing with debt, you're going to love this episode. You're going to love Shannon. I mean, I love her. I think she's just the best person in the world. So you're going to love it. But

you're going to want to stick around to the end because I'm going to have some information about a contest because I'm going to give away her book too. Yay for book giveaways. So before I get to that interview with Shannon, here's just a few words about this episode's sponsor. This episode of the Mo Money Podcast is supported by the Canada Deposit Insurance Corporation, CDIC. Have you ever been told to be careful where you put your money because if your bank goes under, you'll lose everything? Here's the thing. That person has no idea what they're talking about. Thanks to the Canada Deposit Insurance Corporation, our savings are protected. You see, CDIC insures deposits at its

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Or visit cdic.ca to find their full members list. To learn more about how CDIC protects you and your savings, visit cdic.ca. Once again, that's cdic.ca. Well, welcome, Shannon, back to the podcast. It was like one year to the day almost that you were on my show for the very first time. I'm excited to have you back. And I'm pleasantly surprised that you already have a new book in the same year, like two books basically in one year. I know. I didn't plan it that way in the beginning.

It's just that's the way that it ended up happening. And it was very quick. I love both of these books. And I always wanted to write this other debt book. In my head though, it was like a year or two away, but then life just worked out funny. So here it is, two in a row. Yeah. So how did it happen so quickly? It just... So I had originally had an entire part of Worry Free Money that was a shame-free way to pay down debt. And it was a massive part. and my editor

was like this is a whole book in itself like no yeah it's like this isn't just a chapter yeah and this is a big concept you're tackling here and um so I had said like okay well when the time is right like I want to write this book um so you know putting it out there and they were all like yeah absolutely and then they called me in March, while I was still on the Worry Free Money, you know, book tour, so to speak. And they're like, so how about writing that book? So that it comes out January 2019. Or, you know, just at the very tail end of 2018. And I was like, really? And they're like, that's fast. And they're like, yeah, that's, that's what we that's what we want. And I was like, well, I will not

say no to an opportunity. And so that's how that happened. But I think that it was, I already knew so much what I wanted to say with this book. And I had so many ideas for it that had been percolating, um, well, well before that it, I mean, it it was intense don't get me wrong uh it was a really hard really hard time um but I would say that this book fell out of me more so like worry free money I remember percolating on ideas for like three years before I even put pen to paper to like yeah like I think I want to write about this this book fell out of me comparatively yeah do you do you feel like a lot of that is because you already had that first book out? So you're like, I did it. I can do it. I can do it again. Yes. The, the amount of self-questioning was way less. Um, I'd also, I have a great working

relationship with my editor and we weren't getting to know each other in this book. We already were a well-oiled machine. So I knew I could already hear her voice in my head as I was writing. I'm like, oh, that's not a thing that that's something that she's going to pick up on or I'll work around that. So it was also a lot smoother in the editing process as well, because I, I had already like leveled up that skill and we had a great working relationship and we weren't just kind of like getting to know each other, which, you know, for worry-free money, it was my first everything. So I was very nervous and timid and stuff. Absolutely. And honestly, this book, when I saw it, like, I think I saw it on Instagram, it coming out like, Oh, that's exciting. It does feel like a very

natural next step after worry-free money. Cause worry-free money is like kind of all things finance. And, um, I like that you came out with books specifically to debt. Cause as I talked to, you know, a lot of people in my audience or work with clients one-on-one, debt is kind of the main thing most of the time. They're like, no. I know I need to deal with my financial life, but debt is the most pressing matter. And that's all they can think of. So that makes sense that you need to have a full book just dedicated to that one topic. Yeah. And I think that it is just dedicated to that one topic. Yeah. And I think that it is just dedicated to

that one topic. And I think it's the way that it's kind of approached that were really excited me about trying to tackle that because so many people have debt and it doesn't have, it doesn't mean everybody has, you know, 80,000, it could be, it could be 8,000 or 2,000, but it's a topic of conversation that a lot of people are having and they're so frustrated in it. And some people are really like ashamed of it or, and it creates this emotional, you know, like it's, it's an emotional thing to talk about debt. And so if we can just clear that out of the way, it's all aspects of the word that we can move on to very exciting financial things as well. Absolutely. And I, I know recently there was an article,

maybe CTV or something, where you were quoted kind of talking about why we need to kind of shift our mindset and kind of talk about debt in a different way, which I really appreciated. And there was a part of the article, which I really loved, where you said, you know, most people don't get into debt because they're buying these luxury items. And most people like assume, oh, if you have debt, it's because you did something stupid. It's on you. You shouldn't have gone to Nordstrom or whatever. And it's like, well, no, if you actually know, like you do working with clients, most of the people don't get, you know, it's because they like splurged on one thing. They're like, oh, now I owe like a thousand dollars from this purse purchase. It's like, no, it's just life

that happens and being unprepared. Do you want to kind of talk a little bit about, cause I know the great thing about your books is you, you talk about like real people and their situation. So people reading can be like, Oh, I can identify with that. Or I know someone like that. So what are some of like the typical ways people get into debt? Like the real ways people get into debt. The real ways. Yeah. Um, I completely agree. I, I've never heard anyone say, Oh man, I can't wait to be in debt. So if somebody's in debt, it's because something has happened, right? And so most of the time, it happens like the threshold to go from a person who doesn't have debt to a person that does have debt is often because of something that was not in your control. So your cat got sick,

or you had to go back to school, or there was a leaky faucet that needed a plumber, and it was $1,000 that you didn't have like stashed, right? So usually to go from no debt to debt is something that was definitely a trigger or a tripwire, as I call it, but one that isn't that was sort of out of your control, like you had to spend to get your way out of it, or else there would be some sort of big consequence. And so, or, and sometimes that can even be something like my sister's getting married, destination wedding, and I'm the maid of honor. So I'm going. But again, that to somebody is just as, that doesn't mean that that person was living the high life. Like they didn't want to miss their sister's wedding. Like it's totally different. And then, so I guess that's what, it's not mindless at all. That's when it happens in the first place.

It's the opposite of mindless. In fact, I would say it's so thought about, it's overthought about, and then the person beats themselves up. And then what happens though, is that if you kicked off a debt loop, now you have this hangover, so to speak, of whatever it was that happened to you. And now you have less money every month to kind of survive, to survive your day-to-day life. And then, so not only do you have to pay the minimum, you also have to pay the extra on top to pay it off. And then inevitably life will throw some curve balls at you.

There'll be something else. And then it can go deeper and deeper. And so I've often noticed at the beginning, it's things like someone getting sick, taking care of someone vulnerable, going back to school or like professional development, family obligations or social obligations that feel like a need. It's not a want to, you know, for example, be in the wedding, right? So those are the reasons that people are, I'm saying this in quotations, overspending or whatever. And then where the mindless spending that everybody loves to pounce on when they're

talking about people with debt, typically that'll kick in after a sustained and prolonged period of time that you've been carrying debt. And that's that like, you know, effort moment where if you've already got $4,000 online and credit, what's another 400. That's when that creeps in, because you feel like there's no point in tackling this. I'm never going to be able to pay it off anyways. That's interesting how you frame that. Cause yeah, I think a lot of people expect that people get into debt because of that mindless spending, but really that mindless spending is almost like a symptom or, or just something that you kind of do after you already get into debt. Cause like you said, no one wants to get into debt. No one plans to get into debt because of that mindless spending, but really that mindless spending is almost like a symptom or, or just something that you kind of do after you already get into debt. Cause like you said, no one wants to get into debt. No one plans to get into debt,

even if they don't, you know, it's just, yeah. And I think I'm really glad that you kind of talk about that because a lot of the people I talk to, like you kind of hit the nail on the head. That's exactly why whenever I'm like, how did you get into debt? It's not because, oh, I went on a shopping spree or I just eat out too much. You don't get into debt because of that. It's because of something big. And then they're just kind of like pile on. They're like, whatever. Like everyone's in debt. It's, it's normal. Uh, and, and they also can't see a way out. So like, well, I guess this is it. I'm just going to keep on attacking on debt. It doesn't matter. Yeah. It's that, it's that acceptance of the, the idea that there's no point in trying. Right. And so, so that's when, that's when mindless spending can keep you in debt. It doesn't get you into debt. It can keep you in debt. Yeah. And I've even heard people say too, that they can't imagine.

And I've like, it's shocking how many people in debt say this, but I, you know, I can't imagine my life outside of debt because I've been in debt for so long as if it's like, Oh, it's such a luxury for people to be debt free. I'm not one of those lucky people. I wasn't born rich or I wasn't, you know, born with privilege. So this is my life. And I hear that too, actually. And in the book, I actually say that specifically in one of the anecdotes, because one of the clients I was talking to was debt free for the, I was, I was asking him to like, imagine what being debt free was like. And he's like, I don't even know who I am without debt. Because it started from the moment he went into university. And it just never, I mean, he was like, late 20s at that point.

And it just, it was always there in some form or another. Right. So there was always a hangover from school. There was always a hangover here. Then there's always a little bit of a stubborn credit card that just never goes away. It's like, it's always just a part of my life. So that is a cool thing to start visualizing. Like, what is my life like without this thing that I've been saddled with for so long, you know, and getting excited about that and not in a way that feels shameful. Like think about what you could be doing if you didn't have this, like not exactly. Yeah. It's like, that's not, that doesn't, that crap doesn't work.

I feel like it's been around for so long and that's being someone who's only dealt with debt a little bit. Um, when I was in my finished university and I still had a student loan and still like that was required so I can finish my schooling and get my degree without that loan, I wouldn't have been able to afford, uh, to finish my degree. I had so much guilt because of that, because of all the, you know, articles and books that were out there about debt and just like the language that they used. And it could be part of it just that I'm a millennial. And there's a recent survey that came out of maybe a month ago talking about how millennials think about money or feel about money. And part of it was they don't like being shamed. I'm like, yes, so many of us, especially younger

people are over this narrative that it's like, we're terrible. Oh, I think also millennials just get a lot of flack for being awful, entitled, lazy, la la la. And so tacking on, and also you're in debt because you're the worst. It's like, well, no, I needed it for school or I needed it to buy a car to get a job and all this stuff. It's just, it's a narrative that I'm so glad that you're trying to, uh, to change because as I know, talking to people, it's like, it doesn't work. Like the shame game does not work. It's not effective. It doesn't motivate people.

It just makes people feel like crap. And we're guilty about enough stuff in our lives. Let's not add, you know, some guilt for, you know, debt too. Yeah. I feel like it is demotivating. So one of the things that I've seen on the front lines is that, so that kind of like shaming and, um, you know, how much interest are you paying and all that kind of stuff? I call them scare tactics, right? So they work to a degree. So you hear someone say, think about how much interest you're wasting. You're going to spend this much in interest

that actually can motivate someone to jump into action or to start looking on the internet to Google, how do I pay down debt fast? Like fear works really well in a moment to kind of push someone to take notice. And so I think that the scare tactics are good for that spark of, Oh God, I've got to do something about this. Yeah. It doesn't last. And that fear doesn't pack enough of an emotional, motivating punch for the long run. So it often leads to really super aggressive, unrealistic debt repayment plans, which set someone up for failure. Yes, I have to be debt free in six months. This person on the internet did it. Yeah. And so like, and so when you fail, if you make a debt repayment plan, and you fail at it, you feel like garbage, because you so like, and so when you fail, if you make a debt repayment plan and you fail at it, you feel like garbage because you're like, I'm already feeling blue about my finances. And now

I still can't even do it when I'm trying really hard to. So there's that piece, the aggressive plans that are so unrealistic. And then I also think that it's hard. I think that we don't talk about that enough. It's really hard to pay down debt. It's hard. Yeah. It doesn't. So like, I always say to people that paying down debt is a form of savings. It's a whole mindset perspective shift. Often people will come into my office and they'll say, I'm tired of paying down the past. I want to start building a future. And they don't see paying down debt as building a future. They see it as mistakes that they made, and they're just dealing with the consequences,

right? But if we take all of that emotional stuff off the table for a second, we just look at the numbers. Your net worth is everything that you have minus everything that you owe. So anything that is increasing your assets or decreasing your liabilities or what you owe, so to speak, is improving your net worth. But seeing your savings account go from zero to a thousand dollars feels a hell of a lot nicer than seeing your student line of credit go from 19,000 to 18,000. It is the net same thing for me as your financial planner. I don't care. That's an amazing thing to build your future either way.

And so it's harder to pay down debt and to stay motivated. And the big thing for me with this book and with my clients is like, fear works only so far. And then you're going to have to keep choosing the annoying thing to do again and again and again. What happens in month eight? What happens in month nine? Because sometimes people are going to pay down debt for like two years, maybe three or four. So can you be motivated long enough? And so what are the other ways that we can motivate you to keep choosing to stick to it, even if you've been thrown a curveball, fallen off their plan,

and you got to get back on the horse and ride it. So I just think that fear and shame with debt, I think people still love to go there because I think that it is that initial rush of adrenaline to get moving. But I disagree that over the long run, it's motivating. In fact, I think it's the thing that makes people stop opening their bank up. Oh, 100%. That's why they put their head in the sand, so to speak, and just don't want to deal with it. And I think those are the people that probably come to you being like, I need help. I've ignored it long enough. I can't ignore it anymore. Yeah.

And it's the lack of wanting to face it because the fear and the shame is so real that even kind of looking at it or mapping it out is really, really scary because you're so afraid of what it's going to say, right? Like how long is this going to last? And it's sometimes it's easier and it feels more comforting not to know. So you kind of mentioned people need to kind of move away from having fear as their motivator. What are some more kind of positive ways, some kind of ways that will actually sustain them through like a couple years of debt repayment? Yeah. So I think that permission to live your life, I think that is a

motivator. So often again, with these overly aggressive, unrealistic, as far as I'm concerned, debt repayment plans, one of the things that is unmotivating about it is how much of your life you have to sacrifice in order to stick to whatever this ridiculous plan is. So a lot of people don't even start them because in their mind, they assume that that's it. They're never going to be able to like grab a coffee. They're not going to be able to buy a pair of pants. Like, like, there's such an extreme version of what they expect that they're going to have to do to pay back debt, that it's easier not to even begin. So I think that the real motivating is like permission to, to live your life, even while you're paying down debt. So I'd rather someone put an extra $100 on

their credit card every month on top of the minimum payment that and actually do it for the period of time it takes to pay it down. Instead of for four months, put 500 a month and then just give up altogether. And then just rack it back up again, right? It's that whole cycle that is so self defeating. And so that realistic plan is super motivating. And I think the second thing is being emotionally motivated by it, by a positive emotion, not necessarily just by fear. So we had, we already kind of touched on this actually. But you know what, I often ask people, you know, what is this debt holding you back from besides the interest that you're paying? Like, what is it about this that's making you so upset? And what could your life be without it? And asking it from a place of possibility rather than a place of shame and blame. So because I say this in the book, a lot of times when people come in my office, and I asked them about their debt, they start, they put their hands on their chest, and they, like, they don't even know they're doing it. And there's this oppressive body language that comes with it

that I, I see so often. And then I'll point it out to them. I'm like, look what you're doing with your hands right now. They're like, Oh, I didn't even notice. But when they talk about it, they pull their hair, they push down on their shoulders. It's like so uncomfortable. And this could be people who are highly professional, great paying jobs. And, and they feel like they shouldn't have debt. Like they're like, I make a good living. I've got lots of things, good things in my life. And I still have debt and like, think about people who don't have all this stuff. And what am I doing so wrong? And why am I screwing up so much? Like what wrong with me so there's this what's wrong with me kind of mentality um the example one of the examples I use about finding motivation is like okay so what is this what what who could you be without this debt right and so people often will just like light up when they start talking about it well I could be you know um it stresses me out

so much that I feel like sometimes I'm a bad parent. It leads to lots of fighting with my partner and like my kid sees that like, okay, so like that's an intrinsic motivator, not wanting to fight in front of your kids that has absolutely nothing to do with interest. That is super important, right? Like that's something that makes you sit up and say, I don't want to be this way anymore. Right. That is not about math or numbers. Right. So it's part of

my job is to find that intrinsic motivator for that person. And then we make some sort of like reminder that in those moments when they're about to swipe their card, they can be like, Oh, remember important to me. Yeah. Remember, I actually don't want to do this for reasons that are so far beyond my personal finances, right? Like it's for my life. It's not for my money. It's for my life. Exactly. Exactly. No, I think you put it really, really well. I have a interesting question. So recently I have a Facebook group and someone posed this question to the group. There were some interesting answers. So I had to hop in there to be like, I don't know if these are some great answers. But someone was asking, hey, I have credit card debt, but I also have an

emergency fund. Should I use my emergency fund to pay off this credit card debt? What would you say to someone who kind of poses that question to you? Oh, that is such a great question. And there's a lot of ways to approach this. So the first blanket thing I'll say is that everybody's situation is different. But if you want what I would do, my sweeping generalization, I absolutely believe that emergency funds should be intact even while paying down debt or being built simultaneously, even a small amount like $50 into a slush fund while you're paying down debt because emergency funds keep you out of debt. That's their sole purpose in life. They are not improving your net worth. They are not your long-term savings. It is

literally there so that when life throws you a curve ball, you don't need to use that to bail yourself out. So while you're on a debt repayment plan, if all of a sudden your breaks need fixing and it's a thousand dollars and you've got a couple thousand dollars sitting in a slush fund and you don't have to break your the motivation that's happening with your debt repayment plan to bail yourself out the sense of control and confidence that that gives you in your finances and how you run your money is like, there is no price tag. There is no amount of interest that, that I would pay that, that would take away from that confidence and that boost like, Oh my God, the plan is working. Like it's working. I didn't have to take on more debt. So I totally believe it. The only thing I would say, because I'm also a fan of

lump sum payments onto debt as the best way to kind of slam your debt out of the water is how big is that emergency fund? Right. So, and what do we actually need it for? So if we've got one with like $10,000 sitting in a checking account, I'm probably going to take a bunch of it out and put it onto debt and just leave the bare bones minimum of that emergency account or that buffer that is there so that you don't take yourself to zero. And if there are some curveballs over the next couple of years, like you can handle it. Yeah, no, that's exactly what I basically said. I'm like, it's from like, yeah, because we've talked about this a lot. When you just look at the numbers, yeah, logistically, it makes sense. You're paying higher interest than

you're earning um you know just having cash sitting in a checking your savings account so why not just use that and pay off your credit card yeah logistically that makes sense however the reason people get into debt usually is because they don't have an emergency fund and so it's just you can't just be like oh yeah use that cash that you have to pay off your debt it's like yeah but and i think also a lot of people they just don't especially people who have really never experienced a big life emergency. Uh, they're just like, Oh, I'll probably never use it. This just seems stupid to have cash hanging out there. Or people, a lot of people to think that, well, I've got a line of credit and credit card for that when they

have an emergency. I'm like, that is the worst thing you can do. But it's, I feel like that's also an idea, maybe not so much the credit card, but definitely a line of credit. I know lots of people have that idea that is for a safety debt. I'm like, it's debt though. It's still debt. Yeah. And I think I completely agree. I hear that too a lot that the line of credit is definitely the emergency account. And like, first of all, if you've got a line of credit, you should be consolidating your credit card debt like stat. Totally. Let's lower the interest rate immediately so looking at that so now it's not open and free anymore right or maybe a portion of it is not and second of all there's so that debt and saving and the behaviors that go with that is so complex and so

you need emotional wins or else it's yeah or else you're not going to keep going right and so liquidating everything and paying it down it's about so much more than just what you're not going to keep going, right? And so liquidating everything and paying it down, it's about so much more than just what you're saying, comparing that interest rate to what you're getting in a savings account or something. So I definitely am a big fan of taking those emergency accounts and using them to keep us out of debt and avoiding lines of credit as being our emergency account because there's something

awful. So, okay. Think about what an emergency is. An emergency is a scenario that is unexpected and stressful by its very nature, right? That's why we're calling it an emergency. It's never something good. We're not talking about a fun emergency here. We're usually talking about something that like, oh crap moments, right? So there's something really unsettling to somebody who's carrying debt or anybody really, for that matter, to bail yourself out of an emergency with debt, because now you also have a financial hangover for that, including and on top of your other debt. So now you have double whammy to pay back. and it's going to sit there like a lump. And every time you log into your banking, reminding you about whatever it was

that happened to you. And I think that's why sometimes certain debts can also carry a lot of emotional baggage, right? So like if it was a horrible breakup and you had to like move all of a sudden, it was totally unexpected. And now you have a couple of grants sitting in a line of credit. Every time you log in, you're going to look at that and be like, that's my ex's fault. Yeah. And like that can't set you up for a win. Yeah. Yeah. Yeah. 100%. I think maybe people also get confused because you've kind of talked about this. What an emergency is. Some people are like, oh, that means when, you know, my car breaks down. It's like, or it could be if a family member dies and you

need to buy a flight across the country like i think a lot of people don't quite know how to define an emergency but like you said it's like it's like an unexpected expense that you need that cash to pay for now like and you don't want to you know get into debt for it so it can take a lot of i kind of think of them as like two, there's like emergency emergency, which is like job loss, someone's sick, like that kind of thing. And then I call it like, I call it slash, which is like where you kind of stash money to be spent on the spikes in your life,

like your car or your leaky faucet or like whatever, the friend's wedding or whatever it is, like those spikes that are inevitably going to come. So do you kind of recommend then like having two different emergency funds? Like one? I personally do. Yeah. I have one that is literally called emergency and it's been topped up and not touched for a few years. And then I have one that's called

slush and man, that thing gets used because we'll build it up and then use it and then build it up and then use it and then build it up. And I never know what it's going to go towards because life, like life is random. And there's often things that I, you know, I didn't expect to drop my phone in the lake last year, but that happened. Okay. So like, you know what I mean? So there's, there's things that there's no rules on that slush fund. It's like, whatever it is that my daily life can't pay for, I'm happy to use that money in that account. And then I have my other one, which is like mad money, which is like, do not touch until doomsday. Right.

So how much do you recommend to put, like if you're to kind of give percentages or amounts, how much would you put in an emergency fund, the one that you do not touch and the slush fund? Yeah. So for me, I calculate out if me or my partner if one of us it's unlikely that both of us would lose our jobs well I run my own business yeah like let's say fell on hard times right yeah at the same time so I've worked out like how much would we need to float to crack the nut and eat

so to speak if one of us lost our job for an extended period of times, like maybe three to four months before somebody else got employment or whatever was it, someone was able to go back to work or whatever. So I have that amount of money in there, which for our family is about five grand. And then we also have a little bit of extra emergency fund because we also have a kid and car and like their stuff. So we have $8,000 in our emergency fund account, but that's for me, somebody else might need three grand. So you know what I mean? Like it totally depends. And somebody else might need 10 to 15. Like it depends on your life. But I think that somewhere between zero to like, I think mine's a bit high,

but like zero to five, I even think is like good mad money. You know what I mean? And then in my slush fund, we put us a, like a few hundred bucks in there every month and it gets spent, but it builds quickly. And then it's like, we blow it to zero and then it builds quickly. And then we blow it to zero. And because I'm assuming you have like those automatic contributions going in there, you hardly even notice money is going into that account. Right. So not to like name drop my other book, but like I super use the hard limit spending strategic banking plan. Actually it's in both books because I'm so obsessed with it. So Matt, my husband and I, we both kind of live out of this joint check account where we put all the money we're allowed to blow to zero every payday. And that's where we live. And so we just, we only use that slush account when things that are out of the realm of our daily life that we can't really pay off

with the money that's in our spending account. And then we'll pull the money over and just pop it in there. Yeah, I like that. I also know, I think you talk about it in this book about just creating different banking systems. And again, that's also could be a reason why people get into debt. They just don't have a very good system of moving their money around. Do you want to talk a little bit about what are some good systems? Because that's, again, that's the thing that I've done for myself. I've tried a lot of different things and figured it's something else that worked for me. And then I help clients do that too. And it's, I feel like it's not really talked about in most books, but I'm like, it's kind of the key thing to get your money organized for yourself. Yeah. I think the rest is details after that, because if you've got a

good cashflow structure, then the money is going away. And then just take somebody like you or I to direct it in all the various places, but you can know everything that there is to know about ETFs and brokerage accounts and insurance premiums and all this stuff. But if you don't have enough money to pay for those things, then it's all moot anyways, right? So the cash flow game that I love is, and I talk about this in both books, and I'm so passionate about it. If I ever write a third, I'll probably talk about it. Probably not, because I'm beating a dead horse. But like, the big thing for me is that separation between the money you can and cannot spend every pay period. If you're self-employed, you kind of create that for yourself by, you know, stashing up your self-employment money and then kind of drawing it out on a monthly basis if you're able to do that.

And if you're an employee, it's quite simple because you have a regular pay schedule. But figuring out what are your fixed costs, all the things that you have to pay whether you like it or not what are those short-term savings for our emergency or a splash fund what are those meaningful savings and those are the things that if we're talking in the context of debt that's this thing i call your magic amount which is the amount of money that goes on top of your minimum payment that actually pays down the principal that's why i call it the magic amount because it's where all the magic happens right That's the key between keep staying in debt and moving forward and paying it down. And so that's why I say it is a form of savings. It is a form of meaningful savings

because it's improving your net worth. And then everything left over is you're spending money. And I actually like to take that money and separate it and put it in its own checking account. And that's because I always have a very clear indicator of what I can and can't afford. So if it's like three days before payday and there's like $70 in there, then I have to eat what's in the fridge. You know what I mean? And so we are still in a situation where I still rely on that as my indicator of decision making. Because when we have money coming in and out everywhere from every which way, sometimes we're using debit, sometimes we're using this credit card, sometimes we're using that credit card.

We never really know what we can and cannot afford. It's very unclear. And if you buy $40 for, you know, takeout pizza, you're like, should I have beat myself up about that? Or can I afford it? It might be fine, but I have no, I have no idea. And so having a cashflow strategy, every cashflow strategy should indicate to you, you cannot afford this and you can. So at least if you're going to spend that 40 bucks, you know, am I making a decision that is outside of my means or is it totally fine? So do you kind of have the idea that it is preferable to use kind

of your checking account or your debit account to do your kind of, you know, variable spending and keep, cause I found just like, no matter what, even, and usually excuse I get from people, why they use their credit card so often is like the points. Oh, please. Um, yeah, I use a credit card for most things too. What I do, and this is like a weird thing that I tell everyone to do. And I think it works. I've been doing it for years. Um, so I have the app on my phone where I have my credit card and my um bank and so I also like points and I also love the convenience of a credit card right so if I spend something on a credit card that night while I'm brushing my teeth and I say that because I've linked it with the

routine in my life I shut the door I don't have a toddler running around. Everyone is gone. It's just me brushing my teeth. I pull up my app and it says pending transactions for the day, $102. And I physically moved $102 from my spending account onto the credit card so that I've used the card. I've paid back the exact amount. And that checking account is still a representation of what I have to go to zero until the next payday. Okay. So that sounds like a hard habit to start for most people that are just like, you know, cause it's, so it basically like you have to check your credit card every single day. You have to, or else, or, and if you're not, if you don't want to be that, if you want to use it and if you're like, that's not a thing I want to do, then use debit and don't want to be that if you want to use it yeah and if you're like that's not a thing i want to do then use debit and don't worry about it yeah yeah yeah okay yeah that makes a lot of sense

debit is wonderful in the sense that it's electronics you can track it wicked um you don't have to carry wads of cash around with you and you're spending your own money you're not borrowing so there's no fear ever of getting a credit card bill that you're like oh yeah no i feel like yeah just like thinking about like, yeah, that is literally the only way you can, you know, spend your only way. Yeah, it's the only way you can use your credit card and not be surprised. I suppose the other way would be I've never done this. But I suppose the other way would be okay. So let's say that you had a monthly spend your spending account of two grand or something like that, that you could blow to zero on whatever it is that you wanted. I'm just using big numbers here for, let's say it

was a couple. I suppose you could make the credit card limit match whatever that was so that you could use the credit card all month and then it would stop you when you reach the limit, which you know is also the limit in your checking account. Maybe that's the other way to do it. That's an interesting way too. What do you think? And I'm not sure what you think about limit, which you know, it's also the limit in your checking account. Maybe that's the other way to do it. That's an interesting way to, what do you think? And, uh, I'm not sure what you think about this, but, um, some people have, uh, come to me and be like, what do you think about basically prepaying your credit card? Or like, you know, instead of having that debit, just putting that $2,000 already on the credit card. So you can just use it and it goes to zero. Yeah. I think that that is also a way that you could do it. Right. So you put it down there and

you just kind of rack it back up. But I think that the problem also a way that you could do it, right? So you put it down there and you just kind of rack it back up. But I think that the problem that you're running into there is that, so let's take that example. So let's say that on January 1st, I took that $2,000 and put it all on my credit card. I still have the problem of needing to track where I'm at because I don't want to spend more than $2,000 on my credit card. So really, I feel like it's the same problem that I would have the other way around, right? I still need to stay within this $2,000 limit and I don't really have an idea of where I'm at through the month. Okay. Last kind of question. I know this is part of your book. You kind of talk about,

you know, some things that people may have to do if they're in deep debt, which is, you know, unfortunately, fairly common, consumer proposals, bankruptcy, you know, at what point does someone know whether they can do it themselves or work with like a financial professional to help them or kind of go like the consumer proposal bankruptcy route? When do you know when you're at that tipping point? I think that, you know, because you've tried the other two first. So I think you've tried and failed on your own. I think you've maybe sat down with a professional and tried to map out a sustainable plan, and it's not working as well. And I think that you have an income. So you have the ability to actually do something like for a consumer proposal, for example, or credit counseling, you have an income that you're actually able to do it but the burden of the debt is so great that you continue to sink

in and i think one of the big flags for maybe even bypassing like do not pass go and like maybe go right to a big source if you're paying for your fixed expenses with debt i think that's a major indicator that you're into a little bit of hot water. Because we can't get out of our rent. We can't, we can't choose mindfully about our cell phone bill, right? Like, you know what I mean? Like, once you've signed a contract, like you're in. And so if you're borrowing to pay rent, or to pay your mortgage or to pay stuff, I and it's not a short term thing. Like I have this thing I call a controlled burn where sometimes in your life,

it makes sense to borrow just to survive. But I'm talking like there's no end in sight. Like this is the way that it is. And you're sinking further even though you're actively trying to stop. I think that might be an indicator that like you might want to talk to somebody because the amount of debt is the problem.

And the one thing about a consumer proposal is typically if you're dealing with a licensed insolvency trustee, they might be able to negotiate with your creditors and actually get the amount that you owe down. So they'll put you on a payment plan after that. But again, it is an extreme scenario because it does affect your credit and all of that kind of thing. But I also think it's a wonderful gift to a lot of people who might be thinking and can't stop. There's no shame in it. It exists for a reason in Canada. It's a tool in our toolkit. Absolutely. Well, thanks so much for taking the time to chat with me once again. I hope you're here one year later with your third book. Because I love all your books. I know. I'm definitely taking some time off my brain. Fair enough. But I'm super proud of both and I'm so in love with this last book. So thank you so

much for having me on to talk about it. You're so welcome. Where can people find more information about you and your new book, Living Debt Free? The best place is newschoolfinance.com. That's kind of the hub, you know, all roads lead to Rome. So if you click on the books link, you'll go to the books. Um, there's also audio books there, which is pretty exciting. Very cool. And if you want to have an appointment, you can go there. And then we also have online courses. So it's kind of like the big hub for all things. Absolutely. I love your online courses. They're the best. So yeah. Well, thanks again for joining me. And yeah, I can't wait to tell everybody to read this book. And that was episode 184 with the fabulous Shannon Lee Simmons. Make

sure to check her website out, shannonleesimmons.com or her new school of finance website, newschooloffinance.com. There's more information about her financial planning practice and her online courses on that website and also more information about her book. Um, so make sure to check all of that out. Also check out these show notes for, for more stuff on what we discussed in this episode at Jessica morehouse.com slash one 84. Um, I just have a few words about this episode sponsor, and then I'm going to share some very important details about how you can win a copy of Shannon's book. This episode of the Mo Money Podcast is supported by the Canada Deposit Insurance Corporation, CDIC. Did you know that if you bank with a member of CDIC, your eligible deposits with that bank will be protected

up to $100,000 in each of CDIC's seven different categories. So if you had $100,000 of eligible deposits in an account in one name and $100,000 of eligible deposits in a joint account, your entire $200,000 would be protected at the same financial institution. That being said, CDIC does not insure stocks, bonds, mutual funds, or other investments. Just cash and term deposits like GICs with original terms to maturity of five years or less. There's quite a bit to know about how CDIC protects you, so why not test your knowledge with their free trivia challenge at depositinsuranceendurance.com. Or to learn the ins and outs of how CDIC works so you can feel

confident about the safety of your savings, visit cdic.ca. Once again, that's cdic.ca. So if you want to win a free copy of Shanley Simmons' new book, Living Debt-Free and Why Wouldn't You? Why Wouldn't You? It's amazing. You can either go to the show notes, jessicamorehouse.com slash 184, or you can go to the contest page, jessicamorehouse.com slash living debt free. And there will be all the info you need in order to enter the contest and be in the running to win a copy of her book. Yeah. So that'll be amazing. I'm also still running my contest to give away a copy of Melissa Leong's new book called Happy Go Money. And more information will be in the show notes as well. JessicaMorales.com slash Happy Go Money is also the contest page. So enter both. Why not? And you can get a good book.

But even if you don't win, go out and buy these books. Let's support these amazing women authors because not only do they write amazing books, but we need to support our authors. We do. And another way you can do that also, too, if you don't have the funds at the moment to buy any books is go to the library, request that book, and they'll get it in there. And that would be good. A couple other things I want to share with you. First off, if you live in Toronto, I'm going to be doing a free workshop at the Riverdale branch of the Toronto Public Library. It's all about how to start a side hustle. So if you want to be there to see me give this workshop and also be able to ask me your questions live, you can find more information on

the Toronto Public Library's website, but it's all going down on March 6th, 2019, this year. So I hope to see you there if you live in the Toronto area. Next, in case you don't know, and you know, maybe you just learned about my podcast and you're just learning all these things, I've got a free Facebook group called the Money Life Balance Facebook group. All this information can be found on my website. There's a whole community section that talks about my Facebook group, my book club, which I haven't done one for a little bit, so I'm going to have to do another one soon. I run my own events called the Millennial Money Meetup, hoping to do some more very soon.

And also, I list all of the workshops and webinars that are booked for this year. So you can grab tickets or find out more information so you can be there. That is it for me for this week. I look forward to seeing you back here next Wednesday when I have a fresh new episode for you. Have a good rest of your week. I'll see you back here next Wednesday. This podcast is distributed by the Women in Media Podcast Network. Find out more at womeninmedia.network.