She's On The Money - I see it, I like it, I want it, I got (credit card) debt

Episode Date: March 3, 2020

PLASTIC IS NOT FANTASTIC! Join Victoria and Georgia as they chat common credit card traps, discuss why an astronomical number of Aussies are in credit card debt AND what the heck we are meant to do if we wind up in a debt so deep we simply don't know what to do.... Hold onto your hats lassies, this one's a goodie. Do you love the podcast SICK and want more SOTM? Of course you do! Join our Facebook page to share your money wins and money confessions, follow us on Insta for daily inspo to keep you on track and DEFINITELY subscribe to our newsletter, the written recap of the pod's key takeaways, including some bonus bits you won't want to miss... In a money mess and need help untangling the muddle? We've got you sorted - simply record your qualm and send it through to us at [e-mail] and you may end up on the podcast! Your podcast hosts are Georgia King and Victoria Devine. The advice shared on She's on The Money is general in nature and does not consider your individual circumstances. She's on The Money exists purely for educational purposes only and should not be relied upon to make an investment or financial decision. Victoria Devine is an Authorised Representative of Consultum Financial Advisers Proprietary Limited ABN 65 006 373 995 I AFSL 230323.See omnystudio.com/listener for privacy information.

She's on the money. She's on the money. Hello and welcome to She's on the Money, the podcast for millennials who want financial freedom. This episode of the show is brought to you by Australia's first ever smart bank, 86400. My name is Georgia King, a copywriter and TV assistant whose money smarts could definitely see some improving. And it would seem I am in luck, as I am as always, joined by Millennial Money's sweetheart, Miss Victoria Define. Hello, J.K. Hey, Keele.

Alrighty, so today on the show, we are going to be delving into the topical world of credit cards. The average Australian has $3,258 on their credit card. And whilst everyone says they're paying them off, the stats here are telling us that only one third of the debt on these cards gets paid off each month. That's a whopping $1,986 each and every single month that is getting our average Aussie into more debt. This topic has also been a very juicy one in our community. But before we dive right on in, Victoria, let's chat money wins and confessions. How did you go this week? I actually have a money confession for you guys this week. Over the last couple of weeks, we have moved offices, which is very exciting. But in our previous office, we had a coffee machine

in the kitchen which was brilliant and everyone in the yeah everyone in the office knew how to make really great coffee and moving I just didn't think of that as something that was a priority which it's not at this point in time but I didn't realize how expensive everyday coffees were going to be and so every day I'm now paying for coffees and I'm often finding myself paying for coffees for other people in the office because every time I leave to get one I just say hey does anyone else want a coffee because i feel bad if i'm just going and helping myself you know and so these coffee bills are actually starting to add up and i'm now looking at how to get a coffee machine in the office so maybe in a couple of weeks i could have a money win for you yeah fingers crossed um actually

just on that 7-eleven not sponsored guys they've started doing soy milk have they actually their one dollar coffee yeah i feel like that's really impressive i was very excited and it tastes pretty good at what point in time do you think they'll start doing oatmeal chris i'm asking a a little bit too much all right give it a few years sorry sorry guys that's also why my coffee orders are really expensive gee have you got a money win or confession for me this week i do guys mine's a money win so a few episodes ago i confessed that i had a i got a mikey fine which in victoria is the public transport fine for not tapping on yeah which was irresponsible so irresponsible i was a fool i'd done the wrong thing i got the letter in the mail this week

opened up the letter and what should be in there guys but a warning i got are you kidding i got let off you got a warning I got a warning because I hadn't had an offense in like three years or ever it's like 283 dollars I'm very impressed with that that is amazing I feel like I've been taking the mickey out of you for a little while about getting a mickey fine and now who's now who's looking silly it's me yeah no you're all right and now let's take a quick look at the Facebook community which was impressive as always Victoria did anyone stand out to you this week yes I actually have a favorite post mainly because I really resonated with it our friend Mary posted a little bit earlier this month and said if Jane Fonda can outfit repeat at

the Oscars then we can wear the same outfit to two different events ladies she says she's a proud outfit repeater over there and I couldn't agree more I think I think outfit repeating is one of my favorite things to do and I am quite known in my friend group for buying a dress and wearing it multiple times to multiple events yeah not caring who's at the event like there are no rules here they're no oh sorry sorry you guys you've seen this dress before no I love this dress I'm gonna wear it until it wears out I Jane Fonda oh yeah exactly and if I could be 82 and looking that sassy like I'm here for this she's the hottest 82 year old I've ever seen in my life gee have you got something as equally impressive I do mine is from Sunday who has written in basically all I

do in my spare time is read this page same girl we're loving that but on Sunday I decided to set a goal of $50,000 in 50 weeks so saving $50,000 that is impressive massive goal I had about $900 in my savings so I wanted this week to be my week two so to try and stay accountable I felt I needed to post here because you're all so supportive which you guys are I've decided to reach my goal for 50 weeks I will only buy secondhand or borrow if I can only eat at home as much as possible give up my eyelash extensions and stick on some falsies oh that's a big one pay insurance up front sell the things i've been meaning to sell for ages make my dogs food and cut their portions because they're overweight i only drink water or cordial no buying makeup do my own pedicures

instead of paying and swap beauty services that i offer instead of payment where i can impressive okay so now let's get into the main part of the show today 1.9 million australians are struggling with credit card debt and asic reports that we are paying 1.5 billion in credit card fees That includes annual fees, interest repayments, late payment fees and other fees associated with credit card use. Victoria, why are we getting ourselves in such a big credit card pickle? Whilst I love pickles, I do not love credit card pickles. Off the top of my head, I think that there are three main reasons for this that I can just identify here and now. The first is, and I talk about this all the time, like Morgan and I talk to people each and every single week about credit card debt.

and the first thing is that it's just really easy to do it is so easy to spend money on a credit card when you don't have anything associated with it like you haven't been given a set amount of cash to spend but in your head you know you've got a three thousand dollar limit that you can max out and whilst a lot of people are like oh I only put necessary things on my credit card you are going to according to statistics and research spend anywhere between 14 and 22 percent more just because you're using a credit card like you are often more likely to just go oh i'll just pop it on my card instead of making that same decision had you had cash so for example if you had 150 dollars budgeted for your weekly family grocery shop and you only had that 150 dollars in cash

or just on a visa debit card and you were really aware of how much money you had allocated to that shopping experience you could say yeah you are probably going to pay really careful attention to making sure that as you walk around the supermarket you're picking things that are in line with the budget that you have set whereas if you walk into the same grocery store with a credit card that has a three thousand dollar limit there's no immediate penalty there's no one keeping you accountable yeah so you're just doing your grocery shop popping whatever in oh look the vegan magnums are on sale again this week just throw it in the trolley there's only three per box probably should get two boxes yeah makes sense yeah um and you are likely to overspend without giving it much

thought at all and that's the problem credit cards actually promote unconscious spending and as a result we end up spending more furthering that actually g our friends over at finder.com.au which this isn't sponsored i just really like the stats on their website um they have a really cool chart that says that the average credit card purchase is $108.04. Whereas if you were purchasing on a debit card, you'd only spend $46.75. And I think that that just plays out quite well in terms of the conversation we're having right now, that you do actually spend more on a credit card than you do on a debit card. And I just think it's really unconscious. So many times do people come in to me and we do these hours of power and it's often with people who say all right i want to

get better at money i want to change my money story which is fantastic but often that is prompted by being in some form of debt or being in a situation that they no longer want to be in and we sit down with these people and not one person ever gets a credit card to get into debt like no one chooses that life no one says all right well i'm going to get a credit card because i want to spiral out of control and not be in control of my financial life no one does that we all get it for a really good reason and often solution to a problem exactly makes your life easier it's a solution to an immediate problem it makes our lives easier at that point in time and we often go oh but i'm going on a holiday and i want to feel secure or i have a whole heap of uni fees coming up and i

know that a credit card will mean that i feel secure like often getting a credit card comes from a really wholesome place yeah but it takes us somewhere we don't want to be so for me that's really important to point out. And the second point there is that using a credit card in a very similar way to our $150 grocery shop example, using a credit card has not very much pain associated with it. So if you think about how you had to, when you were little, hand over cash at the corner shop because you were given like $5 to spend on lollies or like $1 to spend on lollies in my case, you were really budgeting. You were thinking about how much of a value exchange you could get for the money that you were handing over like oh I could probably get like 10 ghost

drops for a dollar or yeah how good were they or I could get like some fizzes but fizzes were 20 cents each so like you as a child were thinking about the value exchange of your dollar whereas nowadays when we have credit card there's absolutely no pain associated with that whereas when you are given cash you are put in a situation where you are thinking about how much money you're going to get back. Because you hand something over and someone hands you back something worth less. And that's never something appealing. So I don't want to give you a $50 note and break it and only be handed back $5 in change, especially if it's in coins, like that hurts. But I think it's really important to point out that when you use a credit card, there's absolutely no pain

involved. And whilst we are very tap happy, we talk about having debit cards and we tap all the time often with a debit card there's also a different mindset so we know how much is on our debit card because when it runs out our tapping won't go through you know we'll be in a position where we'll be declined and that's kind of embarrassing so often a lot of us know what's on our debit cards but we only ever think of our credit cards as a limit we can spend up to so we are far more likely to tap on a credit card and think about it as a future us problem yes but as I've said 600 million times, that's absolutely not a wild overestimation. If you live fake rich now, you'll be real poor later. And if you put yourself in a situation where you're making it

future you's problem, future you is still you and you need to be looking after her. And if you are not looking after her, you are going to be far, far further back than you ever wanted to be in the future. And that third point that I wanted to touch on is actually my favorite point to talk about and that's instant gratification versus long-term gratification and a credit card gives us instant access to be able to buy whatever we like and live the life we want back to that fake rich real poor example it just enables us to make decisions that we haven't sat on i talk about this a lot in our facebook group and i'm a very big believer in putting 24 hours between you and your spending so it's more about making conscious spending decisions does that mean if you really

want to buy the new pair of shoes you decide you want it and then wait for that period and then you're good to go yeah okay just making sure that you really do want that and it's not something that frivolously exactly because it's so easy to go out with your girlfriends on the weekend for breakfast and see a pair of shoes that you really like and just go oh i've had a really good weekend i'm going to purchase them yeah whereas if you say look i can purchase them if i think about this purchase for a little bit longer i really want it if i really really want it and if you can stretch out that time delay as long as you can it's even better yeah so like I say put 24 hours between you and your spending because that's a really easy tangible thing for people to do whereas if you

could put a month between you when you're spending you're going to be in an even better position and often when I'm talking to clients they will say oh I really want this new dress and I'll be like that is so great tell me in a month that you still want that new dress yeah and more often than not they're like oh I'm a bit over it yeah it's not new anymore I've seen it on Instagram a couple of times it is not something that I need to purchase it's not worth the $200 it might cost me yeah your rational mind exactly that's in there so the longer time period that you can put in between you and your spending the more likely you are to actually not make that purchasing decision yeah we're not talking about necessities here we are obviously talking about discretionary

spending and on shopping and brunch and clothes and whatever else we are definitely not saying oh put 24 hours in between you and buying hand wash yeah no not not eggs maybe not coffee like let's not stretch this out too much but I think it's really important to actually put some time between you and your spending when you are talking about making some purchasing decisions that maybe aren't aligned to your bigger financial goals yeah I think it's also more satisfying as well when you've delayed you just feel better for not having just done it yes yes I actually more personally I often use spending to reward my behavior and that is absolutely not a good thing to do but I know that if I've worked really really hard and there's something that I really would

like to purchase I'll often say to myself well I can have that if I achieve this this and this and I'll often make it a really big hurdle for me to get over so when I do get something I'm like oh I got this because of exactly xyz yeah and I think for me that makes me feel good but also puts the importance back on spending because in this day and age I really feel like spending on clothes and shoes and things that we don't need is really normalized. Well Instagram I guess is to blame for that as well. Exactly and we've spoken about it on the podcast before but it is actually not normal to have a new outfit every single weekend to go out. It is not normal to actually need a new dress every single time you go to a new event and it's not reasonable to expect of people and whilst I

absolutely appreciate that sometimes we are in positions where cool a new dress is going to make me feel really great yeah like can't we shop our own wardrobes or our friends wardrobes before we start making decisions like that so you said earlier victoria that no one gets a credit card with the intention of accruing bucket loads of debt not that i'm aware of anyway weird why why are we struggling to pay off our credit cards there are so many reasons for this i think that people are often too optimistic about their future behavior yeah we don't actually factor in life events and unexpected expenses too many times have i heard people say oh but when i'm older i'm going to earn more money or i'm going to get a pay rise or i'm going to save later and i just feel like

that is unrealistic it's actually quite unrealistic you're right often people actually spend what they earn more often than not when i talk to clients i talk to people they are spending exactly what they are earning so regardless of what that is whether it's fifty thousand dollars a year or five hundred thousand dollars a year i guarantee you people find a way to spend the money that they have coming into their account and i have seen this so many times and i think that so many of you would be really surprised to go wow how does someone who has an income of five hundred thousand dollars spend that believe me they can that is and we've talked about this g on the pod before that is called lifestyle creep where as your income increases your lifestyle increases

as well so I gave the example a couple of months ago that as your spending increases you go from purchasing supermarket makeup all the way to purchasing makeup at Mecca and justifying more expensive products more expensive experiences and actually just putting yourself in a position where your lifestyle costs more doesn't mean that you're happier it doesn't mean that anything is actually better. It just means you're making different, more expensive decisions. So you go from a cheap car to buying a really expensive car. You're still getting from A to B and you haven't actually realized the impact that purchasing that car has taken away from your ability to create a future life. So it's not me saying, hey, you shouldn't be spending money. It's actually, hey, are your

spending behaviors actually in line with your values and the things that you want to achieve over your life so the thing with credit cards is that for each and every single credit card that you have you need to be able to pay that entire credit card off each month so that you're not accruing interest so it might be 30 days it might be 45 I'm not going to argue on semantics here but for you to be able to pay off your credit card and have no interest accrued you have to be doing that from your surplus income every single month so that is after you've saved after you've invested after you've put food on the table just to pay your credit card off you need to make sure that if you've maxed out you actually have that two thousand dollars one thousand dollars

five thousand dollars free and available to put on the credit card to get rid of it and i think that that is something that we don't actually think about when we get credit cards like at no point has anyone turned around and said hey victoria if you're going to get a credit card just make sure that the credit card limit you have is only your surplus cash like what oh well I can only have $400 surplus cash. Okay, well, if you're going to get a credit card, that's probably what your credit card should look like. Right, and then it's like, what's the point?

Exactly, what's the point? Well, you're just going to get into debt and that is exactly how people get into debt because they get their $2,000 credit card and a new credit card is incredibly shiny, it is incredibly appealing and David Jones is just down the road and like, I've just got this credit card,

I've been working really hard, I deserve a new pair of shoes and I think that people run really quickly to put money on their credit card especially in the first instance of getting them and i know a lot of people are listening to this relating to this because it is so common but then we actually don't have the surplus cash to pay it off so we pay off the minimum and then we go into a position where we are paying off the minimum each and every single month but we aren't actually getting into the capital of it and paying down what we actually owe and that is how it compounds completely out of

control have you seen it go completely out of control with any of your clients absolutely and they're not clients now I'm going to give an example here of someone who didn't actually want to come on as a client because they weren't ready to actually face that issue but we were talking to someone who had come in and we had a couple of meetings with them and we created this complete debt reduction strategy but as a couple they were in a hundred and sixty thousand dollars worth of credit card and personal debt so we're not talking like oh I've got fifteen thousand on my credit card they had a hundred and sixty thousand dollars spread between them and when they came in to me they were like oh we've got some credit card debt and I was like yep no

problems yep we all start somewhere and they didn't actually know the sum of what they were in debt to they couldn't articulate to me what was going on I said how much credit card debt have you got and the wife said look I think it's about twenty thousand dollars and the husband was like yeah and I've got a ten thousand dollar credit card and I was like okay no problems like can you start sending me the statements then and I'll just make a spreadsheet we'll just get on top of this so we can start smashing it down and the statements kept coming in and then there was another card and there was another card and then there was a personal loan and then there was another personal loan and we looked at their situation and it was honestly heartbreaking

because they were living a lifestyle that they once had so they once had the capacity to spend that money right but when they moved they changed their jobs they changed their lifestyles into a lifestyle that wasn't actually aligned to what they were earning yeah so i think in the end they actually had a situation where they had an income of a hundred thousand dollars between them that was the money that was going into their accounts each and every single year yeah so total hundred thousand dollars and then they had ninety thousand dollars every year in credit card repayments to pay so they only had ten thousand dollars of surplus cash for food that for their fuel for their rent for their mortgage for two of them and they had children and so every single time that

they would spend money it had to be on a credit card because they didn't actually have any access to any money to spend in cash so what what are you meant to do when you get to that spot you actually need to see a financial advisor you need some debt counseling like you actually need to get out of that deep hole my god it's it's not just a deep hole it is a it's a heartbreaking hole it is one that you are in that you can get out of like it is absolutely possible to get out of that situation you just have to be committed to getting out of that situation and make some really tough calls so the call for that client or that couple was to actually sell their family home which they thankfully had enough equity in that if we completely sold that home they would be able

to extinguish most of their debt and then then have a few extra payments that they needed to make which would be manageable over the next five years so they could be 100 debt free and not have to declare bankruptcy because if they declare bankruptcy you lose your assets anyway so they were in this position but at that point in time they just were not ready to commit to the change and sometimes you just can't help people who aren't willing to help themselves i referred them to a number of financial counsellors and I definitely check in occasionally to make sure that they're okay but sometimes there's just not much I can do if that person is not willing to help themselves. So is the only way you can get out of a debt that large to sell your family home

is that our only option? These guys were actually really lucky to have an asset that had enough equity that would allow them to get out of that debt so now I'm not saying hey if you're in debt go sell your home and get out of it that way you do actually need to seek advice and this is only coming out of me doing some pretty serious analysis and sitting down with a mortgage broker and actually working out what their ability to get out of debt is because we looked into you know debt consolidation we looked into every single option available to them that because of the level of debt no bank was willing to touch them they were not willing to refinance them so we had to do something more drastic. So if you're in a situation and you actually don't have access

to capital in an asset like a home, then you do need to seek alternatives. And if you have debt and you have a home, that does not necessarily mean that you need to get rid of your home to get rid of debt. That is a really drastic example that I really wanted to bring to light here because I think that people go, oh, look, I'm in $30,000 worth of credit card debt. It's not that bad but over time credit card debt spirals out of control and we start to feel out of control and we bury our heads in the sand and we don't do anything about it while our debt gets worse I always jump up and down about how great investing is and I talk about how on average money doubles every seven to ten years and that's really exciting and people get so excited about

that but the same happens for debt just in reverse so your debt will compound every seven to ten years. So if today you're in $10,000 worth of credit card debt and there's interest accruing on it in 10 years, I can pretty much guarantee that that debt is going to be sitting at $20,000 if you're not doing anything about it. And that's absolutely not taking into consideration that a lot of credit cards have 22% interest rates. Like your debt could double in a couple of years, not 10 years. I sound very desperate when I'm talking about this and that this is a massive issue but it is like too often do i see young women who have turned 18 and got their first credit card and it is a means of freedom to them that this freedom card ends up getting

them in a lot more trouble and doesn't give them freedom at all hi there you've reached the shoes on the money mailbox do you have a money problem you want help solving do you have a money dilemma you just want to chat about victoria is here to help every week we'll be playing your questions to help make sense of a money mess you may have found yourself in. Make a quick recording on your phone and send it through to podcast at shoesonthemoney.com.au and you might find yourself on the show. But for now, here's today's listener question. Hey, Victoria, I have a credit card that I'm really struggling to pay off. Keeping up with the interest payments is hard enough, let alone paying it off completely. What if I just don't pay? What can happen? Can I be sued? Thanks, ladies.

Victoria, I'm handballing this one straight over to you because I don't know, can you be sued? I don't have a credit card and I'm thankful that I don't. Because you're a smart, smart lady, G. I'm just scared of them. And I think rightfully so after this episode. Yeah, look, I feel like this episode has been a little bit of a scare tactic, you could say. But no, what happens if you can't pay them? A lot actually happens.

And there are a number of consequences associated with that. Also, if you miss subsequent payments, you could actually be paid late fees each and every single month that you miss them. And those actually compound. those fees are added to your balance they end up accumulating interest as well so it's just one thing after another you know how saying that credit card debt compounds yeah it compounds far quicker than you thought it would yeah some credit card issuers will actually let you waive those payment fees after your first violation or if you contact them and say hey i'm really sorry

i didn't mean that and pay quite promptly like often there is a level of flexibility there if is your quote first offence. It will negatively impact your credit score if you don't pay off your credit card. So if you're really good at paying off your credit card it's not going to impact it here nor there but in saying that there is a absolute myth in the industry or in Australia that you need to have a credit card to create a credit score and that is entirely incorrect. So here in Australia you do not need a credit card to create a credit score you actually just need to be really good at paying your bills on time and making sure that you're not getting into debt and having no credit card actually looks better in Australia than having one does

and I think that this negative perception or this myth has actually come from America where you actually need to build a credit score and going into debt and having personal loans and having credit cards actually helps you create a credit score in America whereas that is not the system in Australia at all and I think it's actually really important to bring that up here because you just said something about credit scores and I was like um no actually not the case at all what do we need credit scores for is that to buy houses yeah so they look at it when you purchase homes things like zip pay actually show up on your credit score so that is a form of debt credit cards show up on your credit score the amount of times that your score the amount of

times that your credit score has been checked shows up on your credit score so it can be a negative if it's been checked too many times and things like getting a new phone plan will check your credit score so each and every single time you sign up to something or sign up to a new debt or a reoccurring direct debit often your credit score will be checked so just be wary of those things we can talk about it on a later podcast it is literally a whole new ball game and probably a podcast worthy of consideration but definitely don't need to have a credit card to increase your credit score and it can actually negatively impact it when we actually get them because we think it'll be a positive thing and it's just not the case okay now for the fun stuff what good

would a money podcast be without the pervy bits? It's time for Money Diaries. Let's get into it. I'm 26 and evolving and I work as an associate within the financial technology services industry and I have a on and off relationship with money, something that I'm working on bettering. Today's Money Diary is from a 26 year old who's gotten herself into a little bit of a pickle with a credit card and a few personal loans. My current money situation is fairly scattered. I've managed to create a fair bit of debt, some of which comes from a business that I created about two and a half years ago. In addition to that, I have also got a credit card, I have a personal loan, a loan which is shared with my ex-business partner and all of that sort of

creates a debt of about $48,000. Okay, so now we know what she does, let's get into the juicy stuff. How much does she earn and how much is sitting in her bank account right now? Currently got about $1,200 sitting in my bank account. In terms of how much I earn, I'm earning about $70,000 and superannuation is on top. And what exactly happens to that money after it's deposited into her account? Once the money hits my account, a lot of it is contributed towards a lot of the repayments. So credit card repayments, which are at a minimum at the moment all of my loans so a $380 a fortnight into one of my personal loans I have another one which is $200 a month and then in addition to that I also have

another personal loan which has a repayment of $100 and $475 in that shared loan that I spoke about earlier. In terms of what I have left for spending I do currently live in a minimal way so because of the amount of debt that I've got I think my goals over the next two years are focusing on completing the debt and I do spend a bit of money on petrol going out I also have a terrible habit I'm a smoker so between all of those I do have a little bit left over which unfortunately as a part of one of my current money habits I tend to spend on good things like Sephora, skincare and makeup and perfumes. I have a bit of a perfume obsession as well so I do tend to have a lot of my money go that way as well. Okay then so how does she feel about investing? Does she invest and if so how?

It's something that I really wanted to do so prior to my business I did have a fairly good relationship with money. I found myself saving a fair amount and investing was something that I'd always look forward to. I did spend a lot of my earlier years traveling so prior to the business although I saved a lot of money I also spent it on traveling. I've been to Europe, I've been to America, I've been to Europe twice actually so that was something that was always at the back of my mind but I felt that I was so young that I could sort of start investing later and unfortunately it hasn't been the case so far however it is in my near future goals to start investing and building wealth that is further lasting than just the next couple of years. So really focusing on

long-term goals. What about debt? Let's learn a little bit more about her credit card and personal loans. I have a personal loan which is sitting at about $24,000. In addition to that I have a credit card which is totaling $7,000. I also have another personal loan which is sitting at $4,500 thousand dollars and then in addition to that I also have a personal loan with my business partner which at half is sitting at about fifteen thousand. I also have a store credit card which I quite foolishly bought to get an Apple MacBook Pro which I probably didn't need at the time but I wanted one anyway and that has about two thousand dollars remaining on that as well. So my total amount of debt is sitting at forty eight thousand dollars. When I applied for my first loan it was

a traveller's credit card from American Express and I remember they offered me I think it was like $7,000 and I was like you know what I can get $7,000 what am I going to spend this money on and I thought you know what I'll get a $450 credit towards flights and that kind of thing because it's a traveller's card and I thought this is great I can go to Europe I'm 21 and I'm about to travel and there was like a level of excitement but then there was always also that worry that okay I'm gonna have to pay the seven thousand dollars back but I think we often say this to ourselves it's a future me problem which is exactly what I did. The tipping point for me was the recent changes that I've gone through having moved away from the business I think it

really forced me to look at my current situation and find ways to better myself I think I found time which was incredible because it meant that I could sit down and really reassess where my life was going as someone who's 25 or above I think we start questioning where we see ourselves in five years where we see ourselves in 10 years and I think I realized that I just didn't have any clarity on it I wasn't totally happy with my career in the past because of the business and the commitments in terms of time I've let go of a lot of opportunities within the past two years as well so not being happy with my career knowing that I've got all this money that I have to pay I found myself in a situation where I started questioning what I was really doing and what

the purpose was of me working nine to five, coming home, not having a lot of money to enjoy life but then also watching all that money leave my account. I think it really made me reassess where my financial situation will be in the future and just how much I'd strayed away from what my goals were as a 21 year old me. So that was sort of the tipping point in terms of moving forward and really evolving. So currently I am in a situation where debt consolidation is not an option. I know that the only way that I can really get out of debt is starting to essentially save as much money as possible and starting from the smallest to the largest in terms of loans. So say for example the store credit card that we spoke about was sitting at about two and a half

thousand dollars there. I know that I could probably over time continue putting more money in there and hoping to get that two and a half paid off so I could move on to the next one and then eventually getting myself in a position where debt is no longer a thing. Does she have any good money habits that she's especially proud of? About six months ago I created a terrible habit of driving into the city so I was spending $25 a day which is $125 over five days just because I didn't want to catch public transport. A Mikey costs about $148 a month and I was spending $125 a week so things like that I didn't realise just how much they added up. And what about her worst money habit? One of my biggest habits is buying fragrances. I've got over 40 fragrances none of which are

under $150. How would today's money diarist rate her own relationship with money if she had to give yourself a grade? I'm sitting at a C and aiming for a B+. Being a C at the moment I think it would be really important to cutting those habits such as after pay, such as relying on my credit card, such as spending the money that I could probably spend towards repaying a loan on little things that I'm going to use today or rack up at the back of my closet and not use in the future and I think that's what's going to get me to a B+, just really working towards walking away from all of this and creating a sustainable future for myself my god Victoria I do not envy this person's situation no but you know what I really like that she's actually taking steps to get out

of it and I think that's really positive yeah because as much as it is so overwhelming like $48,000 worth of debt is a lot of debt to be in and she's lovely she's absolutely delightful and I think that it is such a story here to be like the nicest people get in a lot of debt as well it has nothing to do with you being silly or not educated it just happens to the best of us and I think that we just need to be educated in not getting there and she needs to work on making sure that she is debt snowballing her way out of there because she's not in a position where after getting in all this debt she can actually be debt consolidated. She's spoken to a broker and she's not actually able to consolidate that debt into something else so she needs to be debt snowballing

her way out of their ASAP. And what is debt snowballing? So it's one of my favorite things to talk about when talking about debt. I'm surprised it hasn't come up yet. It's a strategy of debt reduction. So it's where you pay your debts off in order of the smallest to the largest and you kind of gain momentum as you knock out each balance. And I think this is really important because if we can list all of our debts and we start at the smallest, regardless of what the interest rate is, mind you, it actually gives us short-term motivation because we're more likely to reach a goal sooner to knock something off the table than we are if we just are smashing down the biggest debt with the biggest interest rate and whilst that sounds a little bit backwards in terms

of actually you know good quality financial advice you could say because obviously if we put our debts in order of the greatest interest rate down to the lowest interest rate that's called debt avalanching that's actually that's got a that's got a name as well that's actually a thing I prefer debt snowballing because it gives us the motivation to keep going and more often than not people who debt snowball get out of debt quicker victoria this whole chat has been quite enlightening and terrifying if i'm being honest maybe because i don't love credit cards i don't know if you're getting that vibe though well would you say then that there are any redeemable qualities to having a credit card or should they're pretty shiny no they are no that's absolutely not it i think there

a number of good things associated with credit cards and if i'm being completely honest i do know a number of people who are using credit cards in a really practical way yeah however that is not the majority right now we are talking to the majority of people i know people exist who are using credit cards for every single one of their purchases each and every single month and they are they're getting points and they are getting a whole heap of really great returns for that but it actually doesn't work for the normal average Australian because we are more likely to get in debt and it's all about mindset it actually comes down to psychology and it is not a good idea for 99.95% of our population to have a credit card I'm not dismissing the fact that

there are people who use them constructively though so please don't get me wrong I know people who do and I would be naive to say that I don't have one because I run a business and I use a credit card to cash flow my business to make sure that I am paying the invoices that are coming in and making sure that I am on top of the business income because when you run a business not everyone pays invoices when they are meant to so I need to make sure that I'm actually doing what I said I was going to do so don't get me wrong I'm not saying that they are 100% negative but I am saying they are worse for you than they are good for you the negatives outweigh the negatives far outweigh the positives so you mentioned the points and rewards victoria are they actually worth it in

any measure well it depends on how you're using them obviously the more you spend on credit cards the more points you make but i think you'd actually be quite surprised at how much you have to spend to actually earn enough points to make it worth it yeah at slightly above average spend of twenty four thousand dollars a year on a credit card means that you aren't really breaking even on a points system really so like i am i've done my research and i understand this to the nth degree there's a really great article on the canstar website about this and i think if you just google canstar are the rewards on credit cards actually worth it it will come up yeah but if you spend twenty four thousand dollars on your credit card each and every single year the returns after

fees for cash is about 111 dollars that's it your general returns are 113 dollars and you will get a total of 159 dollars worth of frequent flyer points it's not really worth it is it no because i feel like people aren't taking into consideration the credit card fees and how much it actually costs you personally to have a credit card because you are spending more and it makes it more accessible and i'm not talking about oh i accidentally slipped into a store and bought a you dress I'm saying you're more likely to say yes to that extra coffee you are more likely to get that side of avocado with your brunch you are more likely to spend money just incidentally along the way we're not talking about going on spending benders we are talking about going out and just

accidentally spending a few dollars here and there that over the long term really really adds up so yes it's actually crazy how much it doesn't actually add up but in saying that a number of people have hacked the system and there's a website called Points Hack that I've been on a number of times and it's really interesting to see the different offers and how people are actually you know getting free flights or doing this or doing that but to me that's a lot of effort and a lot of work yeah that I could see you concentrating that energy into something else to generate money like can you not go and sell some stuff on Facebook marketplace and you know get that income from there without having to go through this convoluted credit card hack point

trial thing where you end up forgetting to cancel the credit card and you end up with an annual fee I think it's really important to actually see it as okay well that's the value exchange there could I get a better value exchange somewhere else could I go and do a few hours of freelance work could I go and pick up a side job could I do this could I do that and actually think of ways to generate income because points aren't the thing that are going to make you wealthy I have never seen one person come to me and say hey Victoria I'm actually really wealthy and I go wow have you done it and they say I did it through credit card points it's not a thing and you know what if it is I'll do a whole podcast on it please step forward what would you say the main takeaway for today's

episode is Victoria if you have a credit card you are always a month behind if you are spending a lot of money on it and you need to be paying off your credit card you are living in the past instead of creating a future you are spending money on paying back a debt instead of spending money and putting it somewhere where you can create wealth and I think that that's my main take away because you are actually living in the past and you are not pushing yourself forward you are taking away future usability to create wealth and as you all know i am wildly passionate about creating wealth and what that actually means so for every time you are paying five hundred dollars back on a credit card it's five hundred dollars that you are not putting into an investment that

can help create the future that you want and that is all we have time for today but before we head off let's quickly wrap the boring but important stuff the advice shared on she's on the money is general in nature and does not consider your individual circumstances she's on the money exists purely for educational purposes and should not be relied upon to make an investment or financial decision and fear not we promise victoria divine is an authorized representative of consultant financial advisors proprietary limited abn 65006 373 995 afsl 230 323 and thank you to the lovely ryan john our audio king for whipping our wild chat into the podcast you love we would love it if you joined us in our facebook group where g almost 55 000 women keeps on growing

i know share money tips and tricks every single day free of judgment search she's on the money on facebook and join if facebook's not your thing you can also find us on instagram we're at she's on the money aus see you guys next week see you bye Thank you.