Debt can make you feel anxious and shameful. As a six-figure earner, I know how tempting it is to put all of your focus on paying off credit cards or loans. But when you are only working at paying down debt, you lose sight of all your other financial goals.
In today’s episode, I share the five main reasons I tell my clients to look beyond paying off debt. I explain how creating a budget that incorporates debt payments is an essential tool for financial management. You deserve to enjoy life and spend money on what brings you joy. Every extra dollar you earn should not go towards paying off debt. Financial freedom starts with intentional spending, knowing your numbers, and leveraging a budget that works for your lifestyle. Paying off debt is only a small factor in creating financial freedom.
During this episode, I share reasons why paying off debt should not be your sole focus and what to do instead:
[07:55] Paying off credit cards isn’t the only marker of success
[09:00] Focusing on paying down debt overshadows intentional spending
[10:08] There is no plan for what to do when debt is paid off
[11:05] Miss opportunities to invest in yourself
[12:00] What you SHOULD be doing: the importance of budgeting
If you are ready to learn how to think beyond paying off debt, tune into this episode of Money Files!
Are you ready to start asking for help with your finances? Apply to work with me, and let’s start working towards your financial goals.
IF YOU LOVED THIS CONVERSATION ON 5 REASONS WHY YOU SHOULDN’T ONLY FOCUS ON PAYING OFF DEBT, CHECK OUT MY EPISODE ON HOW TO BREAK THE DEBT CYCLE BY UNDERSTANDING YOUR SPENDING HABITS!
Transcript for “5 Reasons Why You Shouldn’t Only Focus On Paying Off Debt”
Intro: Hi, and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work every day with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hello and welcome back to another episode of Money Files. Happy October. I cannot believe that we are already in Q4 of this year, like we are in the last 90 days of the year. And I feel like it went by really quickly. And I feel like at this time of the year people kind of start transitioning into thinking about what’s coming up. Like you’re going to have Thanksgiving, Friendsgiving, there’s fall festivities, and there’s going to be New Year’s and Christmas or any other holidays that you celebrate. And when I think about where people are with their finances, they are getting ready to enter one of the most expensive times of the year because I think there’s a lot of unpredictability because you’ve said yes to a cookie bake off, you are getting ready to host a Friendsgiving, then you’re going to buy two plane tickets because you’re going to go visit family for the holidays.
In addition to that, you want to get people gifts. And so like this is the year where people, or time of year where people can start to talk about, okay, well with my November paychecks I’m going to do. And then they start talking about what they’re going to buy. And I want to help you get out of that paycheck to paycheck cycle. Like if this year you said you wanted to get better managing your finances, or this year you paid down some credit card debt, but you feel like you’re back into debt, like, I want to help you and I want to help you right now. I don’t want to help you in January, I want to help you right now because it’s going to help you experience the next 90 days completely differently. It’s going to help you actually be able to go into one of the most expensive times of the year and have a plan.
You’re going to have a plan for your current paychecks. You’re going to have a plan for the money that’s in your bank account. You’re going to have a plan for the money that’s coming to you, whether you’re getting a bonus or you’re expecting some type of lump sum of money. Like that’s the beauty of the work if you start the work right now. And so you’re going to be able to experience the last part of the year completely differently. You’re not going to go into January with additional debt and telling yourself, okay, I’m just going to figure it out. You can go into January just knowing that you have financial peace of mind. I always love my clients that start with me in October and November. I love all of my clients, but when they start with me in October and November, they really get to see the impact of having a budget and making intentional decisions about how they want to spend money. So if that’s you in terms of like, yes, Keina, I want to go into the New Year being able to know that I know how to manage my finance that I can manage them confidently. Keina, you read, you’re clearly in my emails, you know I got a bonus coming up. I want to help you experience all of those things differently.
I don’t want to talk to you on December 22nd when you’re like, okay, Keina, I’m trying to figure this out. No, I want to talk to you now because it’s going to help you experience the rest of the year completely differently. So go to my website or you can go to the show notes and you can apply to work with me. I have consults open on my calendar and I have some times where you can actually get started working with me in the next week. So that means that we are going to be able, like you make the decision today, we are going to be able to get on a call and then in the next week literally we are going to be working on a budget together and deciding what are your next steps in terms of how you want to spend your money. So I want to tell you that because I feel like this last part of the year is where we start making a lot of decisions. And I would love to help you make those decisions when it comes to your finances.
You don’t need to print off all your bank statements and have out a whole bunch of different color pins. Like we are going to actually dive in and do the work together. So you don’t even need to know where to start because I’m going to show you exactly where to start. And on our consult I’m going to talk to you about what your challenges are, what you feel like is unique for you. And I’m going to give you a three step process for what we’re going to work through and it’s going to be directly aligned to your goals. So all of my clients, they have different goals and so I help them achieve their individual goals. But we are going to move into today’s episode. And today I want to talk to you guys about why you shouldn’t just focus on paying off your debt.
I work with a number of clients that have credit card debt, they have personal loans, they could have debt from a PayPal loan. There are just a lot of different places where their debt can come from and their debt is the thing that really stresses them out. I mean, they may have gotten into debt because they just have gotten in a habit of swiping their card or they could have gotten into debt because there was like a unique circumstance where life changed really quickly for them and the only money they had available was to use their credit card. And so there are different reasons that people can be in debt and I don’t want you just focused on paying off your debt. I know that if you’re listening to me and you have debt, then you probably want your debt paid off.
I completely understand and I want you to achieve that goal. But today I’m going to tell you why I don’t just want you solely focused on paying off debt. I know that debt can make you feel really anxious. It can make you feel like shameful because you feel like you shouldn’t be in debt like all of these thoughts. But if you’re just focusing on debt, the reason I don’t just want you focused there is that if you’re just focused on debt, you won’t actually consider your other financial goals in this process of paying off debt. So like you could go too full throttle and just be focused on paying off your debt. So like yes, you’re going to achieve the goal, but you won’t actually know how you got there. And when I’m thinking about how it shows up in your actual life, you could go all in on paying off your debt. And so you’re debt free, but then what happens is you don’t actually have any savings or you have minimal savings.
Like I see this a lot of the times where people will come to me and they’ll be telling me like, hey Keina, I don’t have any debt. And they also maybe only have like a thousand dollars or $500 in savings. And so they’re very proud of not having debt, but they don’t have any savings. And I need there to be a balance there. I need you to have a balance there because there’s a life that you desire to lead. And if you’re just focused on being debt free, it’s like, okay, well what happens when there’s a situation that happens? Your car breaks down, there’s a roof that needs to be replaced, whatever that is. If you don’t have savings because you’ve been so focused on paying off debt and you lost sight of your financial goals, then you are going to put yourself into debt because you were so focused on paying off debt.
The other piece here is when people are really focused on not having debt, is that I watch people pay their credit cards off each month and they use that marker as their marker of success because they’re paying off their credit card each month and they feel like, okay, I’m debt free. I always ask them like, okay, but what else? Like what else do you want to show for your money? What other financial goals do you have? And I think it’s great that we have a focus on being debt free, but also I want people, especially the clients that I’m working with, like so many of my clients are the first in their family to make six figures.
They’re the first in their families to go to college. They’re the first in their families to be homeowners. And so I need you to be able to complete the sentence of what else?
I need you to have a vision because you making six figures, like isn’t the end goal, you being debt free isn’t the end goal. I want to expand how you’re thinking about what’s in front of you financially. And then the last thing in terms of like when you are just focused on paying off debt and you’re not considering your financial goals in the process, then you can also, you can be mindless about how you spend money. So because you don’t have debt, you give yourself permission to spend and you’re not being intentional like how you want to spend your money. And I’m saying that because remember this is under the umbrella of like you not considering your financial goals in the process.
So I have a belief, just because you pay off your credit card each month doesn’t mean that you’re good with money because there definitely are certain benchmarks that you should be reaching when you think about I’m making $200,000 a year, me and my partner together, we’re making $400,000 a year. There are some things that you want to be able to say, hey, this is what our retirement looks like, or here’s what our savings accounts look like. Or we can cash flow an expense without a problem. Like there are definitely some benchmarks or some milestones that you want to be able to accomplish. And so if you are just focusing on paying off your debt, you’re not going to consider your other financial goals in the process.
Another reason I don’t want you to just be focused on paying off your debt is that you won’t have a plan for when you do pay off all of your debt. I see a lot of people that are throwing lump sums at their debt. And so technically you’ve paid all of your debt off, but it’s like, okay, you paid off your debt, but now what? Like we have to get to this now what piece? I need you to get to the now what piece for yourself because there’s something that you believe paying off your debt will create for you. And don’t just say financial freedom. What does financial freedom look like? Does it mean that you will be able to buy a car? Does it mean that you’ll be able to buy a house that you love? Does it mean that you’ll be able to put your kids in private school? Like what’s that then what, when you think about paying off your debt?
And then the third thing in terms of like me not wanting you to just be focused on paying off your debt is like if you’re just focused on paying off your debt, you’re going to miss opportunities to invest in yourself right now. Paying off debt can be very important. And I don’t want to say like, hey, this podcast is not about, hey, don’t go pay off your debt. But it’s getting you to not just be solely focused on paying off your debt and rushing to pay off your debt because If you’re rushing to pay off your debt, like I said, you’re going to miss opportunities to invest in yourself right now. You’re going to miss the opportunity to build an emergency fund, you’re going to miss the opportunity to contribute to your retirement. You’re going to miss the opportunity to save for what some of you may know of as sinking funds, whether it’s home repair or being able to decorate your home, whatever that is. But you’re going to miss those opportunities if you’re solely focused on paying off your debt. So you are like, okay Keina, so what am I supposed to do?
And this comes back to the skill that I teach, which is budgeting. I want you to have a budget. Your budget is, it’s a frame, it’s a container for you to make decisions through and with. If you follow me on social media, a couple weeks ago I did a story and I was talking about like as a six-figure earner we often think that budgeting is about restriction, but your budget isn’t a punishment. I’m going to say that again. Your budget isn’t a punishment. It’s not a consequence. You didn’t do anything wrong. You are budgeting because you’re a six figure earner and you have financial goals that you want to achieve. You are making six figures because you desire to create a very intentional life for yourself. You’re making six figures because you’re like, hey, I want to be able to help my parents.
I want to be able to travel, like you have some goals. Even if you haven’t articulated all of them, there’s a reason that you decided to make good money. That didn’t just happen by chance. And so that’s why you want to have a budget because the budget is going to be your frame that you get to make decisions through. So your dreams and your budget are going to create your reality. So you’re going to have your dreams, your budget, and you’re going to create your reality. Like that’s what I’ve done with budgeting is to take one budget at a time and just expand how I think about my life. I was able to buy a house. I was able to start working for myself. I did that one budget at a time because I was thinking about my dreams. I was thinking about, okay, what are the numbers that make sense here and how can I make this my reality?
And in having a budget, when you are focused on paying off debt, you are going to incorporate your goals of paying down your debt, but it’ll also help you think about all the other things in your life that are important. Like I know you want to pay off debt because you want to be able to spend that money elsewhere. But what happens when you don’t have a budget and you pay off the debt is then you’re like, oh my goodness. Like we don’t have debt anymore, but we still don’t know where our money’s going. Like that’s a real scenario. I work with those clients too that they’re like, yeah, we don’t have any debt and we make multiple six figures, but we don’t know where our money is going. And so that’s why if you’re in a cycle or a process right now where you’re paying down debt, I want you to have a budget.
Remember, it’s not a consequence, but I want you to have a plan for paying down your debt so that you have the intended impact in your life. I have clients right now that are really great at making money and they are like, Keina I’m just going to make the money and pay off the $50,000 worth of debt. I’m going to pay off the $5,000 worth of debt. And I stopped them. And I’m asking questions like, okay, what else does this mean. If you pay off this debt, I want to know where did the debt come from. Why do you have the $50,000 worth of debt? And I’m getting them, one, I’m getting them to slow down because I want them to realize that although they can pay off this debt in a lump sum, I want them to identify why they were in debt.
I want them to make sure that they’ve accounted for the reasons that they were in debt. Because if you go and spend the $50,000 and you put it towards your debt, and then you realize that you didn’t actually incorporate that expense into your budget and it comes back up in a month from now, now you’re going to be back into debt and you’re going to be frustrated and it’s because you didn’t have a budget to help you think forward, to help you actually make plans. And so that’s why we can’t just be focused on paying off the debt because we’ll miss these opportunities to invest in ourselves. We’ll miss the opportunities not to go back into debt. And I want everything to be laid out. So you know like, okay, this is my game plan and I know exactly the steps I’m going to take as I’m paying off debt.
So when you have a budget, you can pay down your debt. And what’s beautiful is you can leverage a debt payoff plan and you can also build your savings and you can invest at the same time. Like all of those things can be happening. And so it’s like you are taking care of yourself in multiple ways. You’re like, alright, I’m going to build my savings to make sure I have money saved in case anything happens. I’m going to pay down my debt so I actually am able to experience that financial freedom. I’m also paying attention to my 65 year old self and I’m investing. But you get to have all of these things going on at once so that when you actually do pay off all of your debt, now you get to just go back into, or not even just go back into, you get to lean into the plan that you have and you get to take, let’s say you were paying a thousand dollars off a month towards your debt, now you get to take that thousand dollars and you get to think about like, okay, what goal do I want that thousand dollars to feed?
Do I want it to feed my savings goal? Do I want it to feed my investment goal? Do I want it just to feed something that’s really fun for me? Like you get to ask different questions, but along this journey, because you weren’t just focused on debt, you are going to have acknowledged who you are as a person and what your financial goals are. So everything that I teach and I support clients with in my five month coaching partnership, I want them to have their own back when it comes to actually implementing in terms of the goals that they want to create. So in this case, I’m talking about the goal of being debt free. I want you to be debt free, but I want you to know what being debt free means. Do you want to be debt free with a six figure savings account?
Do you want to be debt free with a $7 million portfolio? Do you want to be debt free with the ability for one of your, like if you’re in a relationship and you are thinking like, okay, I have a partner that is going to have a year maternity leave, can that happen? And so I want you thinking beyond just paying off your debt, I want you to really be thinking about your financial goals. So that is the podcast for this week. And if you are in a place right now, whether you’re debt free or you are paying off debt, I really want you to think about like what’s the, what else? Like what happens after you pay off your debt? What do you believe that will create for you?
How do you see yourself spending money? And then the challenge is like when I’m creating my budget, how do I incorporate some of those things right now, even if it’s just the name, new car fund, it could be $0 that you’re putting towards it each month, but you’ll have your eyes set on the fact that like that’s something you want to actually be able to incorporate after you pay off your debt. And so it’s preparing you to move forward with traction so you know that your actions are serving a bigger purpose and a bigger goal. So thank you so much for tuning in and if you would like to take this work deeper, go to the link in my bio, apply to work with me, and I will talk to you guys next week.
Outro: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
