Ep. 35 | How to Get Out of Debt in Canada: A Step-by-Step Plan

Many Canadians are stuck under a mountain of debt. Some with no idea how much they owe, or how to get out. In this episode, Tré breaks down what to do right now if you’re facing serious consumer debt. From making your first net worth statement to choosing between the avalanche and snowball methods, this is your guide to regaining control.

Whether you’re a professional, business owner, or anyone dealing with high-interest debt, this episode helps you stop spinning your wheels and start taking action.

What you’ll learn:

• Why avoiding the numbers only makes things worse
• How to do a basic net worth and debt inventory
• When to choose avalanche vs. snowball for repayment
• The biggest mistake with car loans and mortgages
• Why lifestyle cuts and sacrifices are non-negotiable
• How to make debt payoff sustainable and final

Like what you hear? Follow, review, and share the podcast to help more Canadians take control of their money.

Website | Youtube | Linkedin

Transcript

Tre 0:00

Hello and welcome to the Plain English Finance Podcast. My name's Tre. I'm your host podcast is dedicated to helping you make smart financial decisions. That's the part I missed. I'm a certified financial planner and chartered investment manager. I'm a financial planner of TCU Wealth Management and Aviso Wealth. For more information, check out the show notes or listen to the first few episodes. So this is the second episode on the debt topic. Mm-hmm. And this one is. The first one was about the consequences of getting into debt and not being vigilant with debt. This one is talking about, so you're in it, what now? What do you do now? And I was actually thinking that I should have done this one with somebody else just because we've never been in the type of debt that we are gonna be talking about. Mm-hmm. So maybe once they hear this, if they are willing to sit down and talk about it.

Sierra 0:51

I'm trying to

Tre 0:51

about their journey,

Sierra 0:51

think who it is, but I can't figure it out. So,

Tre 0:55

Then let me know and we can do it and you can tell your story, but yeah. So full disclosure. Yeah. I've never been this type of debt. It's, I, this type of debt is terrifies me. So there's different types of debt. There's the, I am a month of. Income in debt, or there's the, I am two years of income in debt and that's very different. And I think the way that you'd approach'em is very different. Mm-hmm. But let's go through a few steps of what somebody would actually do, because that's kinda what I like to focus on, is what action can I take, what should you be doing? So you are listening to this and you're thinking, I am, I'm that person. I'm, I'm in debt. What do you think the first thing?

Sierra 1:34

The first thing would be to know how much debt you are in. That's kind of where I would start.

Tre 1:40

Yeah. So starts with a net worth statement.

Sierra 1:43

Ah. Still

Tre 1:44

Sit down, do a net worth statement. You cannot tackle, you can't even begin to tackle what you don't know.

Sierra 1:50

Yeah,

Tre 1:51

right. So to keep, keep it simple, like a simple net worth statement. Make sure you're recording how much debt you're actually in. So you have the numbers. It's amazing how I watch these shows on YouTube and stuff, and the people have no idea how much debt they're in.

Sierra 2:06

Yeah.

Tre 2:06

It's just

Sierra 2:08

How?

Tre 2:08

How that'd be keeping people, some people in hundreds of thousands of dollars of consumer debt and you're just like, that would keep me up all night. Like, I couldn't imagine. Uh,

Sierra 2:16

I've heard people say they're just not gonna pay it back. So that seems to be a I've heard that trending

Tre 2:22

Yeah, absolutely.

Sierra 2:22

Lately, which is that's not good. And I asked you at one point, it's like, what would actually happen? Because then if everyone's just claiming bankruptcy, then the money doesn't actually exist? You know, people aren't gonna get paid. And you were probably not anything good or you did tell me more. But yeah. Anyways.

Tre 2:39

Yeah, that'd be fun. But, the first step is

Sierra 2:42

do your net worth statement.

Tre 2:43

Net worth statement. Okay. What type of information do you think you would need to know About the loan?

Sierra 2:48

About the loan? Yeah, about the loans. You need to know the interest rate. Yeah, absolutely. You need to know like the terms of the loan. I would say.

Tre 2:56

Like what? Be specific,

Sierra 2:57

like repayment. How it's like how much, if you're paying, yeah, how much are you're paying. If it's a student loan, for example, there's different. Are you paying interest only? Are you paying principal off right now? Are you, you know,'cause you, if you're thinking of all of your debt is what I'm thinking. Mortgage is different. Definitely credit cards, you want to get rid of those,

Tre 3:20

but recording them,

Sierra 3:22

yeah. You would want your interest rates. Yeah. The repayment structure I guess.

Tre 3:29

Yeah. So,

Sierra 3:29

and then

Tre 3:30

so interest rates. Yeah. How much you're paying. Like your payments.

Sierra 3:34

Yeah.

Tre 3:35

How long you're gonna be paying it for.

Sierra 3:38

Yep.

Tre 3:38

How much is owing. That's all you really need.

Sierra 3:41

Okay.

Tre 3:41

Okay. So you, you have a list, you write all those down and that way you know where you start. Mm-hmm. Now you kind of need to determine how bad is it? Yeah. Okay. So there's two categories of. Consumer debt, I guess that I would, I would consider first off, anything that is, any debt that is against a depreciating asset or no asset at all is when I say get rid of all debt, they're the categories. That's the category, right?

Sierra 4:09

So give some examples.

Tre 4:10

Student debt is one of them. Debt to go on vacation, is another one. Car loans another one.

Sierra 4:17

Wedding debt.

Tre 4:18

Wedding debt. Just like consumer debt that isn't credit

Sierra 4:22

cards.

Tre 4:22

Credit cards, yeah. All of that. Payday loans, all of that. All of that. All of that.

Sierra 4:27

Klarna.

Tre 4:28

Yeah.

Sierra 4:29

Everyone go pay off your Klarna right now after this episode go.

Tre 4:34

All of that stuff is considered, I would put in that category of. Bad debt. You need to get rid of it. Yeah. Okay. But there's high interest debt and then there's low interest debt. Yeah. Very big difference between the two. So

Sierra 4:48

That's why I was going to Oh, sorry.

Tre 4:50

No, go.

Sierra 4:51

I was going to say the other thing I would do is focus on the high interest.

Tre 4:56

Okay. Well, we'll get to that. Okay. Yeah, yeah. That's the next,

Sierra 4:59

That's why I was like, oh, I'm getting too far ahead maybe. And then you're like, go ahead, but sorry. Okay.

Tre 5:03

Um, so there is, so there's the two categories. What would some high interest debt be?

Sierra 5:09

Credit card. Payday loan,

Tre 5:12

Absolutely.

Sierra 5:14

Car.

Tre 5:14

If you were checking, if you're looking for debt and you see first off, anything above like 20%, yeah, that's, ooh, that's scary story. But anything that's double digits, high interest debt. So

Sierra 5:26

I would say anything like above.. Five

Tre 5:28

Double digits is easy to remember. Okay. And it's a good, it's a good place ish. Um, yes. So double digits. Anything double digits is high interest debt that you handle very differently than lower interest debt,

Sierra 5:45

Right.

Tre 5:45

Like.. Car loans,

Sierra 5:47

student loans,

Tre 5:48

student loans, things like that, that are definitely lower interest debt.

Sierra 5:52

And a lot of times if you have a line of credit or something, let's say, say you did house renos mm-hmm. Or those kinds of things, if you have it on some sort of revolving line of credit or loan from the bank, it's usually lower interest as well.

Tre 6:05

Absolutely. Yeah.

Sierra 6:06

Yeah.

Tre 6:07

Okay. So you have them listed out, you know what you owe, you know, the interest rate. You need to know how bad it is. So. How many, like how much income do you earn in a month and you're kind of looking to determine how many months, if you didn't have any other bills or anything, how many months it would take you to pay it off.'cause that kind of gives you a very good idea of how much is this gonna hurt. Okay. Yeah. If you are at the point where this is over a year. It's gonna be painful to pay it off because you'll need to drastically cut back your lifestyle for an extended period of time. Mm-hmm. In order to be able to pay this off, and you kind of need to sit down and determine. What you gonna do about it if it is something that you want to pursue, right? Because it, yes, it is great to pay off your debt, but there's a lot of people that just go through life and just,

Sierra 7:01

well, that's what I mean though. That's what seems to be happening.

Tre 7:03

Just end up declaring bankruptcy or whatever. And I'm not, I'm not saying that's what you should do. I'm just saying you need to have an a realistic idea of exactly how much trouble you're in.

Sierra 7:13

Yeah.

Tre 7:14

Okay.

Sierra 7:14

And what, that goes back to the principle one of the Tre principles that eventually we're gonna have on a whiteboard. I keep saying, but closing your eyes does not make the demons go away. Yeah. So if you're thinking to yourself, oh my gosh, I don't even wanna know. I'm telling you it's.

Tre 7:34

It doesn't change a number. You're not knowing it.

Sierra 7:36

If you don't wanna know. You want to know.

Tre 7:39

Yeah. Right.

Sierra 7:39

You need to know. Actually.

Tre 7:41

You need to know. Yeah. You don't wanna know. You need to know. Yeah. Yeah. So you have this list of things to pay off. Okay. And you decide you do want to then pay it off. What do you tackle first? So there's two thought processes. There's the avalanche approach and two common ones. Avalanche approach and the snowball method. Mm-hmm. Do you remember what the snowball method is?

Sierra 8:02

I would guess I'm thinking of a snowball. You roll it. So I would say small first.

Tre 8:08

Yeah. So you start off with, this is the one that Dave Ramsey talks about a lot, which is you start with the smallest amount balance and you basically pay off everything. Pay that off first and then you roll it over. Yep. And pay on the next one, the next one, the next one, to give you kind of momentum.

Sierra 8:27

Because then you're like checking things off a list kind of. Yeah.

Tre 8:30

It's like it can, I think it's better maybe for human behavior behavior.

Sierra 8:36

It would feel more like satisfying to me. Like I only have one loan. I mean, that loan could be ginormous. Yeah. But if you, instead of saying, I have 16. Mm-hmm. Yeah. Or, yeah, I haven't even paid down one yet. If you're starting with the highest interest one, that might be discouraging. But I also think focus, like I get that, but I also think there's other ways to work around that through human behavior. Okay. Thinking so let's, dollar amounts or something. Okay.

Tre 9:01

So let's say you, you do have it. Now there's the avalanche approach. What's that?

Sierra 9:07

That feels like the one I would do, which is probably high interest. I would say whatever's costing the most to get rid of that as fast as possible. And then list them that way. Go from most impactful to least impactful. I don't know. Does that make sense? The interest that you are paying.

Tre 9:27

Yeah.

Sierra 9:27

Is that what it is?

Tre 9:28

Yeah, that's, yeah, that's what the avalanche approach is. Yeah. Start with the higher,

Sierra 9:31

You were giving me nothing, I'm like, highest,

Tre 9:32

highest interest. Start with the highest interest rate first. Yeah. That's the avalanche approach. Both are fine. Both of you paying off debt, but one is mathematically correct and that's the avalanche approach. It's just not human behavior, correct. Mm-hmm. You know me, I'm a robot, so I actually recommend a mixed approach. So any high interest debt you tackle first regardless, and you actually use any available low interest debt to pay down the high interest debt. So what I'm saying here is if you have a line of credit, like a home equity line of credit, and you're sitting there at 7% and you have credit cards, you take that line of credit, and you pay off those credit cards.

Sierra 10:12

Yeah.

Tre 10:13

You need to get out of higher interest debt, full stop. And you need to do it. Throw the kitchen sink at it. Yeah.

Sierra 10:19

As fast as possible.

Tre 10:19

As fast as possible.

Sierra 10:20

Progressive. Get rid of it.

Tre 10:22

Yeah. You get rid of it as fast as humanly possible. Because that's the stuff that will financially kill you.

Sierra 10:28

Yeah.

Tre 10:28

It's so expensive. You'll get to the point where there's people online where they're like, I've been paying my loans for however long and it's gone up because I haven't paid off any. Yeah, that's high interest. That's high interest debt. It will kill you. So once you determine, you have your list and you say, okay, this is the high interest stuff, this is the low interest stuff. High interest stuff is the first stuff that tackles, but how do you tackle it?

Sierra 10:54

How, what do you mean?

Tre 10:55

Yeah, so you know it, you want to pay it down. What? What's the next step?

Sierra 10:59

Well, that's where you look at what I was thinking, the terms and stuff. If it's a credit card, easy, you start

Tre 11:06

Okay, so next step is budget.

Sierra 11:09

Well, yeah, because you know, you're, like you said earlier, the income, how much is this gonna hurt? How many months? Figure all that out.

Tre 11:15

But that's so you know how bad it is. You don't know.

Sierra 11:17

Okay.'cause

Tre 11:18

what, what are your expenses? What are your, right. Right. So you need to sit down and do a budget.

Sierra 11:23

Yeah.

Tre 11:23

And the reason is, is because. The thing about debt is debt is you now paying for your past self.

Sierra 11:31

Yeah.

Tre 11:31

So that's you paying for your past self's lifestyle. Yeah. Which means in order to get out of debt, you need to reduce your current lifestyle to pay for your old lifestyle, which is very hard to do. Getting outta there is is very simple. Seika... is at the door sniffing.

Sierra 11:51

I got scared to be honest.

Tre 11:54

Yeah, getting out of debt is very difficult for that reason because it's the complete opposite of what you've been doing. What you've been doing up to this point is making it your future person's problem. Your future self's problem to pay for right now. Now you have to pay for right now AND pay for your past self.

Sierra 12:14

Brutal.

Tre 12:15

Very brutal.

Sierra 12:16

You know what this, I always liken this to though is losing weight. Mm-hmm. And health. Because if you think about it that way, it's the exact same thing. You're, you've made decisions in whatever way most of the time, or you've put yourself into a precarious situation and now you're like, okay, not only do I have to lose weight then you like. Once you hit that weight, you're at the neutral starting point and then you build your strength and those things. It's not as linear as that obviously, because if you're working on eating healthy, you're probably gaining muscle and getting stronger any in between. But it is that point where

Tre 12:59

Unfortunately with finances you're not.

Sierra 13:00

Unfortunately. But it feels like similar where it's, okay, now you have to.

Tre 13:07

Make up for past.

Sierra 13:08

Yes, yes. Make up for past decisions in the current time, because if you don't, you're just your, your future self is still you. Later on you're just gonna be like, I wish I would've started five years ago, 10 years ago, whatever. Just get it done. I think that's the hardest part is just doing it.

Tre 13:26

Yeah. Very much so, because it takes a lot of sacrifice.

Sierra 13:29

Yeah.

Tre 13:29

So you have this list. You have your budget and you realize that based on your current expenses, you are cutting back and these are your expenses, that it's gonna take you five years, let's say, to pay this off. What then

Sierra 13:47

You, well, okay, so at your current income and expenses, I guess the way we do a budget is we have our kind of separate column for. What does it actually cost us to live? And then we have expenses that could technically be cut out. So do these people have those, I guess is what I would be looking at. Maybe you're not watching Netflix anymore. You know what? Like people, but that's the thing. The other thing is people sometimes think, oh, it's only$5. It's only$10 a month. It's only.. If you're in debt, I feel like it 50 cent bag at the store. No, you're bringing your own bags. That's how I view it. Every little.

Tre 14:29

I think there there is a balance because it needs to be sustainable. Yeah. But yeah, you are looking at,

Sierra 14:35

But I'm saying you going into it with that mindset where it's no, my goal, when you have that goal, it should drive you to every little thing should. Be towards that goal. If you're paying that off, it's like, no, I wanna make sure I bring my grocery bags with me. I don't know why I'm hung up on that, but anyways,

Tre 14:51

Yeah, I would I would say you need to, if you are, if it looks that dire, you need to be seriously thinking about cutting your lifestyle back in whatever capacity that is. Whether that means selling your home. Whether that means you downsize into a cheaper place to live, like whatever that means. You have to seriously downsize your lifestyle.

Sierra 15:14

Yeah.

Tre 15:15

Because it means that up until now you have managed to get yourself five years of discretionary income behind.

Sierra 15:23

Yeah.

Tre 15:24

In order for you to get out of that, you have to fix five years of mistakes. That means the next five years of your life, you wouldn't be able to make ANY, ANY changes Unlikely to happen. Yeah. So you need to be cutting back on the core stuff and you need to be focusing on getting your income up. You need to be going back to basics because that is a lot and it's, you will never. If somebody's out there that has done that, let me know because that'd be very impressed.

Sierra 15:53

Yeah.

Tre 15:53

But you would have to seriously make some deep sacrifices.

Sierra 15:57

Yeah.

Tre 15:57

In order to be able to do that. You start with the high interest debt, you have your budget. It would have to be a zero sum budget where every single dollar is accounted for.

Sierra 16:05

Yeah.

Tre 16:06

I still, if you have high interest debt, very different. If you have high interest debt, everything goes towards that. Throw the kitchen sink at it nonstop. If you are just dealing with low interest debt. I think it's very important that you still have spending money.

Sierra 16:20

Yeah, I remember you've said that before.

Tre 16:22

Yeah.

Sierra 16:22

Which I was like, that's so surprising. But it does make sense because once again, numbers on a sheet are one thing, and then being. A person with life and all that. Mm-hmm. Other stuff is, it's just not realistic.

Tre 16:35

No. So you can be cutting back, right. Yeah. You can be cutting back and saying to your friends, Hey, I'm not gonna be going out to the to the bar anymore on weekends because I can't afford to. But for you to say, Hey, I'm just not hanging out with you entirely. That's a little harder. What you could say instead is, let's do something at my place. Yeah. And much, much cheaper. So I still think it's

Sierra 16:58

let's cook, let's play cards. There's so many options.

Tre 17:01

There's things you can do, but if you leave yourself no money.

Sierra 17:03

Yeah.

Tre 17:04

Which high interest debt? Heck yeah. That's the, that is the cost actual punishment for getting yourself in a situation. But for low interest debt, a lot of it is consumerism. So it's like the cars and the, and the stuff like that. And if you've looked at it and it's not bad enough that you need to be selling these vehicles and selling the boat, then, I think it's okay that you give yourself some wiggle room there.

Sierra 17:26

Yeah.

Tre 17:26

But it's important that you, during this time, you master the basics. You need to be setting yourself a budget and sticking to that, come what may. There is no, even in this range, there is no holidays, there is no like big vacations or none of that. No, you're still focused on getting rid of these debts that will put you further and further behind. Mm-hmm. Okay. Yeah.

Sierra 17:49

And I just wanna say it, there's a balance again for human behavior and you know, I'm against shaming people into, I feel like it's never, it doesn't work. If you want someone to change something to be like, you shouldn't have done this, and you know what I mean? Making them feel bad?

Tre 18:07

I think so. I think to a degree because they're the ones that suffer the consequences for it.

Sierra 18:10

For sure. So, but I think if you actually want changed behavior from people, you have to let them see the truth. Absolutely. Like that is the situation you're in. But also, it's not like the end of the world either. Like you were, like, no holidays, no this. It's, yeah, that might be true, but that doesn't mean you can't. You have to be creative. That's how I would put it. Think of other things to do. You can, I don't know, take a road trip to Regina. I'm just saying. like,

Tre 18:40

see, I I don't agree at all.

Sierra 18:41

Really?

Tre 18:42

Because, the timeframe isn't that long at that stage.

Sierra 18:45

That's true.

Tre 18:46

So, what's the timeframe? So you've, looked at the decision, most of that debt is, I can sell the asset. If I wanted to.

Sierra 18:53

Yeah.

Tre 18:53

So let's say you, you have too much car and you have a hundred thousand dollars vehicle and$120,000 worth of debt. Well then you go and sell the$100,000 vehicle, buy a$20,000 vehicle. Now you have$40,000 worth of debt. You can get done with that in two years. You can not go on vacations for two years in order for you to pay that off.

Sierra 19:14

For sure. I'm talking more about if it was. A long term thing, like you said.

Tre 19:18

But what type of situation for low interest debt would there be?

Sierra 19:22

Oh, I guess not. And like you said,

Tre 19:24

because normally low interest debt,

Sierra 19:25

It's high interest that is a big, big problem.

Tre 19:27

And low interest debt tends to be against assets,

Sierra 19:30

Yeah.

Tre 19:30

In some capacity, right? Yes. They're depreciating assets, most of them. But it's against an asset that you can sell to get out of this debt. So if you've made the choice not to sell your nice big camper van that's sitting there. Well, I mean, you go use the key better. You Go use the camper van now.

Sierra 19:47

That's what I mean

Tre 19:48

But that's where you have your spending money, right. to go do those type of things.

Sierra 19:52

That's true. Yep. You're right.

Tre 19:54

Yeah. I'm saying you can't be going on the river cruises that you wanted to do and put on credit card because you don't have the money to do it. That's crazy.

Sierra 20:00

Yeah, absolutely. I think we are saying the same things. I think I was just softening it again, you know me, I'm like. Is everyone feeling okay? We just, that's not always good. I admit to that, but

Tre 20:14

you have to own the consequences of your decisions. Absolutely. Very easy consequences to see coming. You have to own them. Yep. But, so once you've paid off your high interest debt, you then move on, you loosen the strings a little bit, and you move on to your low interest debt. The low interest debt I would tackle in the snowball method.

Sierra 20:32

Okay.

Tre 20:32

So get rid of the payments you want to. I almost want to extend out any payments as long as possible that you have.

Sierra 20:40

What do you mean?

Tre 20:41

So that you can put it towards, so for instance, let's say I had five loans and one was due within five years, seven years, eight years, and 15 years. I would want them all to be as long as possible so that I can choose where to put the money. Mm-hmm. Does that make sense? Yeah. So you, so I wanna minimize my payments. My forced payments so that I can, so if I have, let's say$3,000 a month to put towards debt, I want that$3,000 as much of it as possible to go towards the debt that I want it to go towards.

Sierra 21:16

Okay, gotcha.

Tre 21:17

And this comes into play for things like car loans is a common one. Let's say you have a three year car loan because you thought, if I have a three year, it'll be done as quickly as possible. But then you have credit card debt. Right? Mm-hmm. It's like, No, you should have a 50 year car loan if you can get it. But you should get it as long as possible so that you free up cash to put towards the other debt that you want to be putting it towards.

Sierra 21:43

Right. Yep.

Tre 21:44

And this applies with mortgages as well. Let's say you're in this situation and you have other debt and you have a mortgage, and you've been paying on your mortgage for 15 years, so you have. 10 years left your mortgage, you should be reamortizing that out to 25 years so that you can put all of that extra cash towards the other higher interest debt. And then once you've paid off the higher interest debt, then you can go fix your mortgage and you can say, okay, now I've done it. I can put it back down to

Sierra 22:13

whatever,

Tre 22:14

whatever you want to put it towards.

Sierra 22:15

And that, I feel like, again, that's almost like a mind shift thing because I think. You might be hung up on oh, but I, I wanna know that I'm gonna pay off my house in 10 years. But you don't realize you're spending your money on interest, so you might as well, you're gonna get that money back if, or like you're gonna keep more money if you pay off that other.

Tre 22:39

A lot of people struggle to look at their financial picture. As a whole.

Sierra 22:44

Yeah. That I, yeah, I'm seeing

Tre 22:46

Because I had, I had a client they're very well to do, very intelligent and got like great clients and they were doing something similar where his goal was to pay off the mortgage as quickly as he could, but then he went and got a car loan that was much higher interest rate to pay off. But then he was still gonna finish his goal of being mortgage free. And it was like, no. that's not. Hold up. Yeah. You're wanting to be mortgage free because it's some goal that you've set for yourself.

Sierra 23:16

Yeah.

Tre 23:18

Not debt free. Like you, you need to look at it holistically and think, this is how much debt I have, this is what I'm paying an interest overall. I want to reduce that as much as possible versus it being on a, just because you want to be able to say you mortgage free. Does that make sense?

Sierra 23:33

Yeah, a hundred percent. And I was gonna say, again, I don't know who these people are and like absolutely no offense meant, but a lot of times people will tie it to almost being able to say those things. You wouldn't go around being, oh, I'm almost car loan free. Like people don't say that, I guess, or I am car loan free. I don't know if people say that, but people do say I've paid off my house. That's a big accomplishment sometimes.

Tre 23:57

Yeah. I don't, I don't think it was necessarily that. I think it's more like to say it to yourself maybe like it's a goal that you had. Yeah. A lot of people have had

Sierra 24:04

That's true, too. Like maybe not to other people, but even like you said to yourself to have that thought in your brain like, I did it and I get that too, but. You're right. It's not all about.

Tre 24:15

You just have to look at it holistically.

Sierra 24:16

Yeah.

Tre 24:17

So what step was I in? So then you've paid it off. Okay. Now you have to understand, again, you can now loosen the strings even more, but you have to understand that you're now at zero. You're now one. And that you need to keep the same mentality to put yourself in a situation where that can't happen again. And this is the bit that a lot of people will struggle with because, and I'm saying that's why I say you can loosen it a little bit, but you still need to maintain the same type of discipline until you are ahead enough that you're in a good spot, that you have a fully funded emergency fund, and you have savings in an investment portfolio that's accessible to you, and you have. If you do have any retirement savings that you need to catch up on, you have caught up on that so you can retire when you want to and meet your other financial goals because if you're in that situation, it's likely that has all also been left.

Sierra 25:12

Yeah, and I was thinking, I think we talked about this in an earlier episode where once you hit that zero mark and you're debt free, you're still kind of in a. Scary situation because you're one emergency away from

Tre 25:29

Absolutely. Yeah.

Sierra 25:30

Going back into debt. Yeah. So maybe that's another way to look at it. A lot of people want to celebrate that, and I think celebrating those small things is great, but not having that as the final destination, almost like you need to have a, yeah, like you said, I guess I'm just reiterating it differently. I'm paraphrasing

Tre 25:49

and I think a lot of people, they do learn so much about themselves going through the debt. That journey to drag themselves out of debt. Yeah. So I do think that a lot of people will understand where they went wrong by this point and do significantly better. Yeah. And this is also the part where once you, when you've been like slaving for debt for years and years of your life, and suddenly you don't have those payments, you feel like. You are rich. Honestly your paycheck comes in and nothing's going out. Thousands of dollars aren't leaving for the boat payment and the car payment, and it's like, oh, what do I do with all this spare money? You suddenly feel like you can do more. Yeah. And it's you can, right. That's, that's the,

Sierra 26:39

that's the point

Tre 26:40

the point you, you can, but you also need to make sure that you are putting yourself in a situation that you can do everything else as well. So that means being diligent and putting some aside and, keeping the good habits that you've built. So that's the core of it. Like paying off debt is very easy from a, to say and everybody knows how to do it. It's very difficult to do.

Sierra 27:03

Like calories and calories out. Same idea.

Tre 27:06

Same. Yeah, exactly. The all ideas,

Sierra 27:07

money and money out

Tre 27:08

It's just very difficult to do, but it only works, not only works. I am a robot. I believe it only works properly with good systems and structure in place. If you do not have safeguards, if it is easy for you to go and break your budget, if it's easy for you to go spend more, if it's, if you make things, if you make the wrong decisions, easy to do you're only making it so much harder on yourself.

Sierra 27:31

Yeah, absolutely. So I agree with that. It's like you've, and especially if. You're prone to those behaviors, you know that about yourself because you're in the debt. So make it.

Tre 27:43

Make it hard, do,

Sierra 27:44

do it backwards, you know, like do all the hard work up front instead, because you're making it harder for yourself at some point. Mm-hmm. It's all hard.

Tre 27:51

Yeah. Everything's hard. It's, everything's hard. Very difficult to be in crippling debt. Yeah.

Sierra 27:55

And sometimes people think oh my gosh, it's so overwhelming to do all that work up front. If people have never done a net worth statement and a budget, like I get it, it can feel like a lot but you're doing all that work at some point. It's just. Do it now so that your future self will be happy and not how your current self is feeling about your past self.

Tre 28:15

Exactly.

Sierra 28:16

Does that make sense? Yeah.

Tre 28:17

Yeah. I'd say it's a completely different way of thinking, which is why I think it's also so difficult. Yeah. Because it is. It is a complete flip on the way that you see and treat your money and your finances.

Sierra 28:29

Like realistically, you said it already, you've gotten yourself into this position, but now. For hopefully the rest of your life you will change. Mm-hmm. And I think that's another thing that's really hard and scary for people is like you, your behavior has to change. Yeah. And that is again, the hardest thing for people. Everyone's completely capable of it, but it is very difficult for sure in anything.

Tre 28:56

I find a lot of people lose friends and stuff over this type of big changes. Yeah. Because you are what you perceive as valuable shifts.

Sierra 29:06

Yeah.

Tre 29:07

Where you are now wanting freedom and you're wanting like

Sierra 29:10

peace

Tre 29:11

Yeah. And it's just very different than maybe what the friends that you had that helped you get into this mess that may be very different than what they're pursuing. And it's, it's sad to say that that's just the reality of it is, yeah. You are the sum, was it the sum of the closest three people you surround yourself with or something like that? Mm-hmm. So it's like you wanna make sure that you surround yourself with good people, but that's a completely different topic.

Sierra 29:35

Yeah, just to put it into perspective. Like, all that being said, is it easy? No. But you will feel so good when it's gone. Mm-hmm. So do it. Just do it.

Tre 29:47

Absolutely. Yeah.

Sierra 29:48

And there's so many things to help you and like

Tre 29:50

There's so much, there's so much.

Sierra 29:51

I think another thing that people get, again, we've already talked about this, but people get a little bit overwhelmed because it's like you have so much information available to you, but when it's something that's already kind of like weighing on you

Tre 30:03

mm-hmm.

Sierra 30:04

Then you start researching and you're like, oh my gosh, what?

Tre 30:07

There's so many different parts to do it. Am I talking, listen to this guy, they hear this episode that like, how does he now budget?

Sierra 30:12

Yeah.

Tre 30:12

Do I need to do it like him and like for this to work? It's like, no. What you do need to do is budget.

Sierra 30:18

Just do something.

Tre 30:20

Do something.

Sierra 30:20

Do something. Don't get stuck in analysis paralysis.

Tre 30:23

Yeah. Because, because

Sierra 30:24

Just take action.

Tre 30:25

Absolutely. Because if you, if you do it my way, there'll be a little bit of cash building up in a, in a house account that isn't going towards debt. And you'll be there thinking, well, I could put that towards debt. And it's like, you absolutely could. Either way is going to work. Do it Dave Ramsey's way where he tells you to go do noodles, do it that way. Eat Ramen noodles. Oh, he's like,

Sierra 30:45

I was like, are you getting confused with Gordon again? I was like, that's really what I thought. I was like, do noodles,

Tre 30:51

no go. I like Eat Ramen noodles and that's it. Like he's very like, I. Again, I think there's a balance. I think your health is also very important, but there's a balance. But I You have to do something. Yeah. If you look at the numbers and you say, and you can, because it's very easy to do the math. If you're a hundred thousand dollars of debt and when you do your budget, you see that you have$10,000 extra left over. A hundred thousand divided by 10,000 is 10. You're looking at it saying, it's gonna take me 10 years to get out of this debt forgetting interest. No, this is, I have to change something. If you're in that type of situation, that's way too much of consumer type debt. Right. And I'm not including your mortgage in that. That's different and up for debate on its own. I'm just talking about that bad consumer debt where it's against a depreciating asset but the most important thing you said, it is action. You need to do something. So it doesn't matter whether it's my way of budgeting or to anybody else's way of budgeting, as long as it's a way that works for you. Do that.

Sierra 31:53

Realistically, yeah. Again, we're so hung up on optimizing things that you might be spending all this time being like, okay, which method should I use? How do I get rid of the debt? Get rid of this debt fast, close the laptop. Look at whatever's in your account and stuff. Just start putting money towards something. Do it in smaller chunks, I guess. Like the research. I mean, if you can't do it all.

Tre 32:16

Yeah. I would

Sierra 32:16

it's just like an optimization.

Tre 32:18

It's hard. I don't know whether, I would quite agree just because you need to make sure you're putting it in the right places. So I think it is better that you

Sierra 32:25

For sure. But I think if you're going to spend three months researching,

Tre 32:30

Yes. Okay. Yeah. I think we're talking about extremes though. Yeah.

Sierra 32:33

I guess. Yeah. These are all, yeah,

Tre 32:35

yeah.

Sierra 32:35

I'm disagreeing a lot on this one and I You should probably listen to him'cause I dunno what I'm talking about. I'm just trying to make it interesting.

Tre 32:44

Yeah, no, I'm, I'm just saying it's, I think it is worth you thinking about it a little bit beforehand, making sure you're targeting the right ones. Like it, line of credits are great to pay down with all your excess cash because you can just reborrow it if you absolutely need it. Like those type of things. I think it's very.

Sierra 33:02

Yeah, for sure.

Tre 33:02

Easy. Heck, you just use the envelope method for budgeting if you really are struggling where you just have cash for everything, right? Like there's ways that there's things you can do. The big thing is everybody's got an excuse. I can tell even when I'm talking to somebody, the people that will follow through, like I do pro bono planning and stuff sometimes, and you can tell because some people will, they'll come up with an excuse for everything that you're recommending, and then other people will say something and then they'll immediately come up with their own solution. It's like, okay, the person that's coming up with their own solutions are looking for solutions to their problems. Looking for ways to do it versus looking for obstacles and things that stopping,

Sierra 33:39

like ways out of doing it. Stopping them

Tre 33:41

ways out. Ways out of doing it, reasons it wouldn't work for me, reasons, it's for this, for me, I'm different, right? It's like you have to take an honest look at yourself, see the numbers and start. Working towards it.'cause nobody's gonna do it for you. So Yeah. Unless you get lucky and it's the government. Okay. Anyway, we will, next episode. I don't even know what the next episode is about.

Sierra 34:06

Well, you'll just have to wait and find out. It'll be, we'll do a surprise this time. Okay. Yes. Because people wait,

Tre 34:12

it's, it's not because

Sierra 34:13

we don't have the laptop readily available. I know what it is. No, definitely not. You just have to wait and see. Yeah.

Tre 34:18

It's all part of the allure. Anyway, uh, if you have any feedback or anything like that, or you have a story to tell about how you did it. Lemme know. I, yeah. That's interesting. This has been an interesting one for people to listen to other people who have done it.

Sierra 34:30

I was gonna also mention,'cause we had talked about this and we haven't actually brought it up on the podcast, but we had talked about having people on the podcast to, for different topics I guess. If people like, where should they, should they just contact you directly?

Tre 34:45

Yeah, email me. Yeah.

Sierra 34:47

If they wanna Hey, I have a good story. And we'd also talked about making it anonymous. Anyways, yeah, I just wanted to bring that up.'cause I was like, oh, I wonder if people would like that, which I mean. Apparently people tell you what they like all the time. I just haven't really heard much about it, so I'm like,

Tre 35:03

Yeah, sorry. Anyway see you in the next one.

Sierra 35:07

Okay, bye.

Tre 35:08

Bye.

35:09

Thanks for listening to this episode of the Plain English Finance Podcast. Trey BYO, certified Financial Planner. Chartered Investment Manager is a financial planner with TC Wealth Management and a Visa wealth. You should always consult with your financial, legal, and tax advisors before making changes. This podcast is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell at any securities. The views expressed are those of the individual and are not necessarily those of a Visa Financial Inc. Mutual funds and other securities offered through a Visa wealth, a division of a Visa Financial, Inc.