Untangling your debt

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When Money Ties You Up In Knots

Hey folks, it’s Ren here…

Did you know that the average American household carries $7,951 in credit card debt alone?

With today's high interest rates, that debt can feel like it's growing faster than we can keep up.

That’s why it’s so important we;

1. Manage our debts well

2. Seek the lowest interest rates we can

💡 Important Update for Our Readers

2 Cards Charging 0% Interest Until 2026

Paying down your credit card balance can be tough with the majority of your payment going to interest. Avoid interest charges for up to 18 months with these cards.

Learn More

Speaking of managing debt effectively...

I had an interesting revelation the other day while wrestling with my earphones.

You know the ones - they were perfectly wrapped when you put them away, but somehow morphed into an impossible tangle the moment they hit your drawer.

The more I fought with these stubborn cords, the more I realized - this is exactly how most of us deal with debt!

Think about it for a moment...

We start with everything neat and organized. Then life happens. We toss a few expenses here, add a little credit there, and before we know it - we're staring at a mess that seems impossible to sort out.

🔍 The Messy Truth About Debt

Let me paint you a picture of how most of us handle our tangled finances:

• Pull randomly at whatever's most accessible (hello, minimum payments!)

• Get frustrated when the knots get tighter

• Shove it all back in the drawer hoping it'll somehow fix itself

• Repeat next month

Sound familiar? You're not alone. But here's the thing about tangles - whether they're headphone cords or credit card debt - there's always a systematic way to sort them out.

💡 Breaking Down the Knots

Before you can untangle anything, you need to understand what you're dealing with. Let's look at the most common types of financial tangles:

The Quick-Release Knots (Credit Cards) Think of these as those surface-level tangles that look simple but can quickly become your biggest headache. They're usually:

• Easy to create - I know, I know; those pesky sales and new clothing lines just keep coming out!
  

• Quick to multiply. Before you know it, you’ve gone from splashing, to wading, to drowning in it.
  

• Expensive to maintain. Seriously, those interest rates are absolutely insane. 20+% in many cases, like what the? If you haven’t already done so, scroll back up and check out the comparison site above. You never know what you could be saving there!
  

• The first ones you should tackle are the ones that hurt the most.

The Stubborn Loops (Personal Loans) These are like those mid-level knots that take patience to undo:

• Fixed monthly payments (at least you know what you’re in for each month)
  

• Generally better interest rates than credit cards - A small sigh of relief there.
  

• Need consistent attention to resolve - Thankfully a little easier to manage than our CC friend above.

The Foundation Cords (Mortgages/Student Loans) Picture these as the base layer of your tangle:

• Usually longer-term commitments - 20-30 year mortgages are fairly standard.
  

• Often have better terms as they’re based on an asset that the banks can hock off to recoup their investment should the debt go south.
  

• May come with tax benefits - This is a topic for another time, but with investment properties, there can be some incentives there.
  

• Require a long-term strategy - Both the debt side and the investment side.

✅ Your Untangling Toolkit

Just like you wouldn't tackle a knotted necklace without the right tools, you need the proper approach for debt. Here's your financial toolkit:

The Full Spread Technique

• Lay out ALL your debts where you can see them visually - I know, scary right!
  

• Write down interest rates and balances of each from largest to smallest.
  

• Note minimum payments and due dates - be sure to note when payments are to be automatically debited. Nothing worse than forgetting a payment is due and your card declining when you’re at the checkout.
  

• Create your battle plan - I’ll send more goods to help you out with this side of things, but in short, figure out your most painful debt and look to try get rid of it first.

The Strategic Attack 

Choose your method:

• Debt Avalanche: Highest interest first (saves the most money). This repayment technique sees you pay down the debt with the highest interest rate first, then when the debt is paid, using the amount that was going towards that debt to ‘avalanche’ into the next and so on…
  
  The benefit of this is you can save more over the long term by reducing down the ‘cost’ of your debts.
  

• Debt Snowball: Smallest balance first (builds momentum). This is another great technique that sees you paying off your debts faster by starting with the smallest ones first.
  
  Once the first is repaid, you use the funds to snowball into the next one and so on.
  
  You can make some rapid progress with this technique.
  

• Hybrid Approach: Combine methods based on your situation. Depending on what your debts look like, you can deploy a hybrid approach.
  
  A mid-size debt may require higher repayments, so putting more energy into that can free up extra capital which can be offset on the higher interest debts etc.

To help you understand this process a little better and get a sense of how the figures might play out in real life, I’ve put together a free training you can check out below.

Before you rush off though….

Please understand this is a product tutorial for my Debt Snowball & Avalanche Tracker. 

Whilst you DO NOT need to purchase it, you can get a great understanding of how to apply either the debt snowball or avalanche technique to your own situation.

Please check out the video here.

🚫 Warning Signs Your Approach Isn't Working

Watch out for these red flags when it comes to lowering your debt…

1. You're making minimum payments but balances keep growing - This could be a sign you’re still spending like a mad-person possessed. Sometimes we need to put on our big adulty britches and make a few sacrifices.
   

2. You're using one card to pay another. Been there, done that. Recipe for stress and heartache from my experience. I’m not judging either by the way and it’s important for you not to judge yourself either.
   
   Just take stock, then figure out how you’re going to move forward.
   

3. You've lost track of total debt. Look, this happens more than you’d think. Again it’s nothing to judge yourself on, just recalibrate and get back on track.
   
   As Peter Drucker mentions - “You can’t manage what you don’t measure.”
   
   Or in other words, the first step towards creating a situation we want with our finances is measuring where we’re currently at.
   

4. You're avoiding opening statements. I get it…Totally sucks when you’ve opened one expecting to have made a dent and it’s just a giant hole where your credit limit used to be.
   
   However, part of this process involves taking stock of where you’re at, taking accountability of your spending and keeping an eye on your numbers.

🎯 Success Strategies

Let's talk about what actually works:

The Power Hour Set aside one hour each week to:

• Review your progress - don’t be shy about this part.
  

• Track your payments - even just manually writing down what’s likely to come out of your account can help you get ahead.
  

• Update your plan as needed. This may not need much adjustment, but you still need to keep an eye on it.
  

• Celebrate small wins - this part doesn’t get enough airtime. It’s so important for your confidence and to keep on track.

💭 A Fresh Perspective

Here's something most people don't talk about: getting out of debt isn't just about the money. It's about:

• Reclaiming your peace of mind. Letting go of the ever-closing pendulum swinging above your head has MASSIVE ramifications on all aspects of your life.
  

• Building better habits. We all know or at least have heard that discipline and delayed gratification helps us lead more productive, happier and healthier lifestyles.
  
  Once we have a sense of control of our finances (even in a tiny way), we can sigh a sense of relief as that energy flows into other areas of our lives.
  

• Taking back control. We may like to deny it, but self-empowerment is one of the greatest freedoms we have.
  
  When we’re hampered by debt, we feel a loss of control. By simply acknowledging (without self-judgement) the truth of our current situation, we instantly start to feel more empowered.

Think of it this way - every payment you make isn't just reducing your debt, it's buying back your freedom.

One untangled knot at a time.

🎯 Your Action Steps This Week

1. Do a complete debt inventory - write it them out and order them according to their repayments or interest components.
   

2. Choose your payoff strategy - there’s no wrong answer here. The goal is empowering you to take control.
   

3. Set up one automatic payment - Like plucking an eyebrow, yeah it hurts a bit, but so does mountains of debt.
   

4. Remove one spending temptation - do you really need that cool thing that’s suddenly on discount? Sleep on it and see how it looks in the morning.
   

5. Schedule your weekly Power Hour - Don’t be afraid of your finances. Be afraid of not knowing what your current position is.

Remember: Just like those tangled headphones in your drawer, your debt didn't happen overnight.

But with patience, the right tools, and a solid strategy, you can and will sort it out.

To your financial freedom,

Ren

The content in this newsletter is for informational purposes only and should not be considered financial advice. This is general information and does not take into account your personal financial situation, needs, or objectives.Budget & Balance and its contributors are not licensed financial advisors. We aim to provide helpful general information, but we cannot provide personalized financial advice.Before making any financial decisions, we strongly recommend consulting with a qualified financial advisor who can provide advice tailored to your specific circumstances. Past performance is not indicative of future results, and any financial strategies discussed may not be suitable for everyone.