Think paying off your debt fast means you are finally getting ahead? It doesn’t. Not if your credit card is still acting as your safety net.
In this episode, I introduce the first debt identity in my Debt Identity Series: The Safety Net User. If you have ever used a bonus, tax refund, stock payout, or balance transfer to rush your balance to zero, only to end up right back in debt months later, this episode is going to feel uncomfortably familiar.
I break down lump sum debt payoffs and why they never seem to help you stay on track. You will learn why zero is not a plan, why paying off debt quickly is not the ideal solution, and why creating savings is the only way to stop the cycle for good. We talk through predictable expenses, fake emergencies, interest reframes, and the emotional urgency driving your debt decisions.
I walk you through the exact shifts you need to make if you want your next payoff to finally stick.
Listen to learn how to break the Safety Net cycle and rebuild your financial stability…
[01:14] What defines the Safety Net User
[03:22] Why lump sums feel like the answer
[06:20] The problem with rushing to zero
[08:46] Why zero is not stability
[10:41] The interest reframe that will change everything
[14:17] Five questions to uncover your patterns
Tune into this episode of Money Files to learn how slowing down your debt payoff can help you build real savings, break your patterns, and finally stay out of debt for good.
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 hearing about the Safety Net User identity, check out Episode 158: Ditch the Fake Math: How Your Spending Habits Impact Your Budget. It is a powerful companion that will help you understand the mindset keeping you stuck and how to shift into true financial preparedness.
Transcript for “[Debt Identity Series] The Safety Net User: How to Break the Cycle of Returning Debt”
Intro: Hi, and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work everyday 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: Welcome back to Money Files. Today we’re diving into the first debt identity in this series and that’s called the Safety Net User. This identity explains the pattern a lot of high earners repeat for years. And once you understand it, you’ll see exactly why your past debt payoff attempts haven’t stuck and what needs to shift going forward. So if you are someone who relates to this identity, you talk to yourself about wanting a large sum of money to finally pay off your debt and being able to get ahead. So that might be like one of the things that you think would make the difference for you. Like if I just had a large amount of money, if I just got $60,000, I’d be able to pay off all of my debt. And it might be something that you think about, or it might also look like an action that you’ve already taken.
Maybe you’ve been in a position where you’ve gotten a big bonus and you were able to clear off your credit card, or you got a tax refund and you were able to take the tax refund and clear out a credit card or a portion of a credit card. You might have access to stock with your company. And so you’ve cashed out your stock, you’ve put it towards your credit card, or maybe you’ve even done something like a balance transfer. And the moment the money hits your account, the focus becomes getting the balance to zero. And there’s an urgency towards clearing off your debt. And for a moment you get relief. And then there’s this sense of like, okay, great, like I finally have everything together. And then what happens is life happens. You have a car repair, you have a home expense, a medical bill, maybe something happens with the kids, there’s travel or the holidays.
And because you don’t actually have savings or a buffer, your credit card becomes your safety net. And so that’s the pattern that we’re actually going to be looking at today in this episode. So safety net users are focused on getting out of debt quickly. The urgency to be at zero is really, really strong. Like the things you tell yourself about getting your debt to zero and you want to escape from being that person that’s in debt, right? And it could be really any amount of debt. It might be $5,000 worth of debt, it could be $50,000 worth of debt, but you don’t want the identity anymore of being in debt. And so paying off your debt quickly is not the same as being financially prepared. So that’s the key distinction that you have to make for yourself because you are worried about getting to zero and that’s your main focus. But you getting to zero doesn’t mean that you are more stable.
You are hopeful that it means that you’re more stable, but you’re not actually creating stability because you haven’t planned for that. And zero also doesn’t mean that you’ve thought ahead about the next 30 days, the next 60 days, or even the next 90 days and what’s coming up for you. Zero doesn’t mean that you’ve addressed the reason that you actually have debt in the first place. And zero just means that at that exact moment when your credit cards go to zero or they go from $50,000 to $10,000, that it’s just that moment. That’s the only thing. There has been a visual decrease, but there hasn’t been a shift internally to keep you from getting back into the cycle and you haven’t actually set your life up to continue to either pay down your debt or to continue to remain at zero.
And for the safety net user, I need you to shift from wanting to have the identity of someone who’s not in debt to shift to someone who falls in love with the idea of saving money. You might be thinking like, Keina, what? What do you mean? But I need you to fall in love with being a saver because it’s going to help you slow down. I want you to fall in love with staying out of debt. I want you to fall in love with being financially prepared. I want you to fall in love with having money set aside before you actually need it. I want you to fall in love with feeling in control of your decisions. I want you to fall in love with understanding your patterns. I want you to fall in love with paying off your debt in a way that actually keeps you out of debt because you have to love preparedness, so much that you’re willing to slow down the payoff.
And it doesn’t mean that it’s going to be forever, that you have to be slow, but you need to be slow long enough to break the cycle because when you’re actually slowing down, you’re going to actually look at things that you haven’t looked at before and you’re not just going to be solving for the number that you see on your credit card statement. Because we need to build long-term preparedness so that way you can actually stop going into the debt cycle. And it’s going to cause you to have a lot of thoughts about what you think is best. But we want to deal with the shame that you actually have around your debt. So think about it like this, if you get that $25,000 bonus and you immediately put it all towards your credit card, yes you’re going to be at zero, but you are also going to have $0 in savings, which means that you’re going to have $0 of a buffer.
And it means that you have no plan for expenses that are coming up in the next 30, 60, or 90 days. So when your car needs, $1,200 of repairs, or when the holidays come and you need $1,500 for gifts, where’s that money going to come from? It’s going to end up coming from your credit card because you don’t actually know where else to pull it from. And then you’re going to be right back in debt and you’re going to start having a conversation with yourself about like, oh my goodness, like there’s something wrong with me. Here I go again, I have this like deep rooted thing going on with my debt, but it’s not even deep rooted, it’s just that you haven’t slowed down enough to make sure that you’re actually prepared. That is simply it. And you are telling yourself a bigger story than what it actually is because there’s also this emotional involvement.
And in order to break out of this cycle, we have to look at how you’re currently talking to yourself about your debt, how you’ve gotten into the debt. So for safety net users and thinking about fake math, I find that a lot of people that are in, that I would describe with this debt identity, they might talk about their debt. Like, oh my goodness, well Keina, those were emergencies and I couldn’t plan for them. And that might be true that some of the things were emergencies, but what I find for most people is that they are things that are very predictable. You put a car repair on your credit card and you might be telling me like, Keina, how was I supposed to know that my car or something’s going to happen to my car? You drive a car. So you have to prepare for something to go wrong with your car.
You own a car, you got to prepare. If you have kids, you are going to prepare for what is happening with the kids.
You are not going to know everything, but because you have certain sets of circumstances in your life, you should start to notice that there are certain trends. Year over year there are certain trends that cause you to go into debt. So it could be dental work, it could be home maintenance, pet expenses, annual subscriptions, camps for the kids or school breaks that you have for the kids, holidays. And those are things that when we look at your calendar, they’re happening every single year. So yes, it’s an unplanned expense, but it’s not an emergency. And what you’re doing right now is when you know something goes wrong with the car, you’re telling yourself, oh, okay, something’s happened with the car. Let me set aside $600 from this check.
And then when you go and take the car in, it’s a $1,200 repair and now you’re like, see there’s a $600 gap and I can’t do this. And you’re talking to yourself about how you can’t prepare. Even when you try to prepare, you can’t prepare. But the real issue is that you can’t prepare. The real issue is that you are planning reactively and you’re planning in the short term. And so you are not thinking about your car year round. Your car isn’t just an expense that’s always in your budget. So I would tell this person that’s telling me about this year $1,200 car repair, I’d be like, great. So last year it sounds like you spent about $1,200 on your car and let’s save about $150 a month, every single month and let’s put it in an auto maintenance fund. So one, it doesn’t feel like such a large sum of money. And two, when something happens to your car, you’ll have a little pot of money set to the side that you can actually get the repairs or you can figure out, what needs to happen.
But it can’t just be that when an expense comes and it’s in your face that you’re trying to solve for it right then because you aren’t actually experiencing emergencies, you just don’t have money saved so everything feels like an emergency. And that’s what’s causing you to continue to be in this cycle of debt. As I’m thinking about the safety net user as well, and I’m telling you to slow down, you are going to fight me on the fact that like Keina, there’s all this interest and I’m going to be paying all this extra interest. So you understand that math, right? Like you don’t want to pay more money for the debt that you’re in and you want to be mindful of that because you have enough like knowledge to know that you don’t want to be paying interest. There’s a $300 interest payment, a $200 interest payment, but I want to give you a reframe that I think is going to change everything for you.
Let’s say that it costs you an extra $600 in interest this year to actually pay off your debt, but that interest, if we change how you’re thinking about paying off the debt, is actually an investment. It’s a very, very cheap lesson, because that interest, if we’re slowing down, is going to help you build savings, it’s going to help you be prepared for the next thing that’s coming up. So you’re going to have the buckets like the auto maintenance, the kids camps. You’re going to have those things set to the side and you’re going to actually break the cycle. What you’re going to notice is that instead of looking towards your credit card when something comes, you’re going to start looking toward the savings account. And so although it might feel like I’m paying more interest, your credit card balance is going to be going down because you’re also not going to be adding towards your debt. So you have to see those interest payments as an investment opportunity, as an opportunity for you to learn how to get out of the debt cycle.
So you are buying yourself stability, you are buying yourself preparedness, you’re buying yourself new relationship with money, you’re buying yourself the end of this cycle because you’ve already done this before. You’ve already paid off the debt with a lump sum of money and what happens, it goes right back up. So although it might cost you an extra $600 in interest, it’s not going to cost you an extra thousand or thousands of dollars because of the fact that you’re in this cycle over and over and over again. So if you’re paying off your debt and getting back into debt every six months, how much interest are you paying over the next five years? That’s the question you got to ask yourself. And it’s probably thousands of dollars. But if you actually slow down and you build your savings, you actually create a system and then pay off your debt in a way that actually keeps you out of debt you may pay a few hundred dollars in interest this year, but you’re never paying that revolving interest again.
And so that’s the trade off that you actually have to talk to yourself about and that you have to accept as an investment in your future self. It has nothing to do with you being a bad adult or being bad with money. So it’s a shift in the language, because if we don’t ever address the problem, then you’re going to continue to do the same thing over and over again, which is just creating more frustration and shame on your part. So if you are identifying with this, you’re like, okay, Keina, maybe I’m on board. I am totally the safe net user. I want you to go through and ask yourself some questions. I actually really encourage you to write it down. I think seldom do we actually sit down and respond with pen and paper. And I think it allows a different shift within your body. But the first question is what were the last three times you got back into debt? So just think about it and think about your debt payoff cycle. Look at those last three times you paid off debt and you got back into debt and answer what happened? Like what was the specific thing that got you back into debt? What triggered it? And was it truly an emergency or was it a predictable expense?
And going through this is going to help you identify patterns as you write this down. You might see that it’s, oh, it’s always the car or it’s always the holidays or it’s always the summer when the kids are out of school. And so you are going to start paying attention to and identifying your patterns. Next question I want you to ask yourself is what yearly expenses always feel like surprises? So it could be holidays, could be the kids’ camps, home repairs, pet bills, car maintenance, but what’s happening annually, that’s like the cyclical thing. And if you notice that it’s happening every single year, even if it’s not something that feels like it should be an annual expense, I think about vet bills for the most part because I have a lot of clients that have animals and there’s something that’s usually happening to the animals. You might feel like, dang Keina, but no, your dog needs an emergency fund. Your cat might need an emergency fund, if that is the thing that’s causing you to always use your credit card, if it’s the thing that caused you to get back into debt.
It goes back to question number one where we’re talking about what’s the pattern, right? And so your yearly expenses might look a little different than someone else, or maybe in this bucket I would also think about maybe you’re divorced and there is something, maybe there’s an attorney fee that you always, like you have to take your partner to court. It’s not an ideal situation, but you notice a pattern of it happening. Maybe it’s happened the last two years. I would say let’s make that an annual expense. The hope would be of course, right, that we’re not having to continue to pay an attorney, that you and your partner could find resolutions outside of court. But if that’s the type of relationship that exists, let’s just plan for it so that way it doesn’t stress you out. If it goes away, then that’s money that you get to use for something else. But don’t ignore it just because you hate that it happens because it doesn’t make that expense zero, it just makes you use your credit card.
So as you’re looking at those yearly expenses, put down a dollar amount as well. So when you go to actually plan, you can think about, okay, the car this last year, the last couple years has been about $1,500. If I think about my oil changes, I might add another $500. So I have a $2,000 auto maintenance opportunity and how can I take this $2,000 and plan for it monthly? Like that’s what you should be doing.
Question three is, what do you believe about saving? This one’s really important because you might not know that you have a belief about whether or not you can save or what savings are for. So just asking yourself, do you tell yourself you’re not a good saver? Do you think you don’t make enough to save? Do you see saving as a skill you can build, but your beliefs about saving, they matter more than your income. Because the stories that you tell yourself are going to impact your ability to save. If you’re telling yourself, see something always happens, then you’re probably going to have a negative relationship with saving money and you’re going to think that there’s no reason that you should save. So it’s just nice to be on to yourself in terms of whether or not anything comes up for you around your beliefs with saving money.
Question four is what comes up when you imagine having a thousand dollars saved or $10,000 saved? Does it feel impossible? Does it feel boring? Does it feel wasteful? Maybe it feels out of reach. You can close your eyes for like 30 seconds and just think, like if you had a bank account and you could see it and it had $10,000, what do you think about it?
Where do you feel any sensations in your body? It’s emotional work that you need to do here for your capacity to save. Oftentimes I find that this can be like a worthiness issue. You maybe not feel like you are someone who deserves to have money, maybe other people haven’t had money. And so we have to change how we talk to ourselves about our worthiness of having money saved. If it feels like, I could never do that. We have to talk to ourselves about how saving money is a skill and how we talk to ourselves about what does it look like when I have to dip into my savings to pay for something and talking to ourselves about, but that’s why we’re saving money so that we aren’t using our credit card and we are using our savings in order to pay for this thing.
We can also talk to ourselves about the fact that our patterns with our money, that’s only data. It’s telling us that we just need to save in a different way or account for a different expense. It’s not a judgment or an indictment on you and who you are. And so that’s the emotional work that has to be done there. Question number five is what are you afraid will happen if you don’t pay off your debt right now? And this question reveals your urgency. Maybe you’re thinking about like your credit score won’t improve or maybe you want to be able to buy your house, or you want to prove something else to yourself. Maybe you’re afraid of what it means about you having debt, but I want you to hear that if you don’t fix the reason you get into debt, you won’t be able to stay out of debt and you won’t be able to have the stability to sustain the life that you desire to build.
So yes, maybe this is about you wanting to improve your credit score so you can buy a house, but if you continue to get in debt and you’re in that house, how do you think you’re going to manage the expenses that come with home ownership? You’re going to end up creating more stress for yourself. So maybe it takes you a year longer than you plan to buy a home or six months longer than you plan to buy a home. But imagine being in that home and you not having this relationship with debt. How freeing is that going to feel, knowing that you are going to have thought about the expenses that also go with home ownership? Like those are the things that we have to think about when we are rushing to get to zero with our debt.
So you’ve asked yourself and you’ve done this like internal investigation and I’m going to tell you some steps that I want you to have in place before you decide to pay off your debt in a lump sum. So the first thing that I want you to have, is I would say create a thousand dollars emergency fund. And this is not the Dave Ramsey a thousand dollars emergency fund. This is for you to create that identity that you are someone who can save money to start that identity, but also it’s going to give you a thousand dollars for your next unexpected expense so it doesn’t go immediately towards your credit card. Then my next goal for you, and I like this goal for all of my clients as well, is to hit one month of savings. Because I think it’s really important, especially with the cost of living right now, a lot of my clients live in high cost of living areas, and this is going to give you some breathing room.
If you make $10,000 a month, you can’t go work at McDonald’s to pay your bills. And I had clients that experienced a furlough, like you can’t just magically find $10,000. That can feel like a challenge. And so having a month of savings, I would say is your next goal, just to make sure that you have some breeding room and can cover your essential expenses if need be. Third thing that I want you to have or to think about is creating a 30, 60, 90 plan. And that is looking ahead to see what is on the radar in the next 30 days. What’s on my radar in the next 60 days? What’s on my radar in the next 90 days? So if you’re getting this bonus or lump sum of money, what are the things that you’re going to need to pay for that aren’t in your regular bill cycle?
So if you know like, oh, my property taxes are actually due in the next 60 days, and I would generally just take it all out of one paycheck and that’s going to be $1,500 and it’s going to impact your cash flow. So I would want you to set aside that $1,500 from your bonus so that way you already have that money set aside. If you know in 90 days, oh, over the next 30, 60, 90 days, I have some trip deposits that I need to pay. Well, you already committed to the trip, let’s make sure that we have $600 a month going to those trip deposits. So it’s $1,800 total because we don’t want that to go on your credit card because you haven’t actually prepared for it. So we have to think about looking ahead. I’m doing this with a client right now who’s getting a bonus from her job and she works for herself and she’s thinking about moving an employee from part-time to full-time. And so she has some debt that she wants to pay off, but I’m also, we’re looking at what are the things that are coming up for her because she’s talking about wanting to move her employee from part-time to full-time.
We’ve also talked about, we probably want to use some of your bonus to build in a buffer so you can actually pay salary. And we don’t want that to be a stressor when in March of next year you want to bring her on full-time and you feel like, maybe your cashflow isn’t up to actually pay her full-time from the jump. So it’s thinking about what are those strategic things that I know are going to stress me out and I want to take, this is when you actually want to connect with your financial stress, if you will, so that way you are thinking about how that money needs to go and support you. And then the last thing is having a strategic debt payoff plan. So when you do the things in this order, then you can be thinking about, okay, how much can I actually pay off? I have some money, I have a little bit of a buffer. I’ve thought about some things that are going to come up in the next couple of days, or not the next couple of days, the next couple of months.
And so now you can start to aggressively pay down the debt because we’re going to have thought about the things that are going to set you back. And now getting to zero can be a focus. And yes, all the money that you had for your bonus, it’s not all going to be able to be put towards the debt and maybe you have some leftover, but that can be, now it’s how you’re looking at your budget to help you support paying off that debt. And the goal is that debt decreases month after month, but you’re actually not adding to it. So it’s the slowdown effect. So for my safety net user, when you shift out of the identity of being a safety net user, you are going to experience changes in your debt. You’re not going to rely on your bonus or your windfall anymore to save you. You are not going to feel like you’re starting from scratch every 6 to 12 months, and you’re not going to be surprised by the same expenses year after year.
The beauty of also going slower, if you know that you have this annual bonus, it’s actually going to feel like a bonus the next time that it hits. That’s the beautiful, beautiful part that you’re not paying attention to. So maybe, like I said, you have $10,000 left over and you’re like, Keina, I can’t pay this off in a year. Well, the next time your bonus hits, you’re going to be able to pay off the rest of that. Plus you’re going to have extra because you are going to have figured out why you were in debt and you’re going to be able to also contribute towards other things that bring you joy and that money is going to be able to be used for fun and not just paying for your past mistakes and your past purchases. So that’s what’s happening when you go through this process and you have to keep that as your north star and tell yourself a different story. Otherwise, it’s going to feel like, no, I need to just pay this off quickly. Because like I said earlier, that is more important to you than actually having prepared this.
So if you resonated with this episode and you’re like, oh my goodness Keina, this is me. I want you to make sure that yes, I like go through the questions and then think about, making your checklist, but also if you need support, you’re like, Keina, all this sounds great, but how do I do this, I want to accelerate this process? Apply to work with me one-to-one. Like this is the process that I take clients through and helping them change their relationship with debt and creating a new lifestyle for themselves. When you hear my clients talking about paying off $10,000 worth of debt and feeling good about it, this is the work that we’ve done through our coaching session. So you can go to my show notes or go to Wealthovernow.com and you can apply to work with me there. And stay tuned for next week. I’m going to talk about the status keeper. So have a great week and I will talk to you later.
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.wealthatrene.com/appointment and let’s get started.
