As we approach the end of the year, it is time to start thinking about your relationship with debt. If you’ve paid off debt only to fall back into it, feel ashamed about your financial situation, or are ready to break free from the debt cycle, this episode is for you.
Today, I’m focusing on building personal debt awareness. This episode isn’t about creating a debt payoff plan or managing your finances; it’s about uncovering your unique debt story to understand how and why you’re in debt.
I’ll guide you through a three-step framework that begins by challenging common beliefs about debt and exposing ways we justify accumulating debt. Then, I’ll provide a series of questions to help you explore your feelings about debt and ultimately make peace with it.
Your financial journey is about understanding your relationship with money. So take a moment to reflect on your debt, embrace your story, and learn how debt awareness leads to a healthier financial future.
Learn how to build personal debt awareness by following these steps…
- [01:15] Justifying debt: common beliefs that keep you in a debt cycle
- [03:12] Understanding your debt story
- [06:30] Recognizing how you feel when your debt increases
- [08:06] Making peace with your step
Tune into this episode of Money Files to understand your relationship with debt and how awareness can help get you out of a debt cycle.
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 Understanding Debt: How Awareness Breaks the Debt Cycle, check out my episode The Legacy of Financial Coaching: How Coaching Helped Lynae Invest in Real Estate.
Transcript for “Understanding Debt: How Awareness Breaks the Debt Cycle”
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: Hello and welcome back to another episode of Money Files. So today I actually want to talk to you guys about debt. I feel like the end of the year sometimes we start looking at our debt to see like, how did I get back here? Or you might have a bonus coming up and you’re like, I’m going to pay this debt down. But I want this episode to be for you, especially if you’ve tried to pay off debt before but you realize you’re back in debt or maybe you have shame about being in debt. You look at your debt and like you can feel emotions and sensations throughout your body. It’s not even something you want to talk about. The thought of like disclosing it to a partner or a loved one makes you feel a lot of shame or maybe you’re in a place where you feel like, okay Keina, I am ready to get out of the debt cycle or you are just in a place where you want to actually understand your relationship with debt like this podcast is going to be for you.
So what I find when working with clients, especially when it comes to what is usually what I refer to as the debt cycle, people are in and out of debt, is that there’s a common set of beliefs that people have. They feel like they don’t make enough money, they feel like they’re not good with money or you feel like, something’s always coming up and then there’s this big thing that happened, that caused me to go back into debt and you are just frustrated with where you are. But you see your problem with debt, like I said, through one of those vantage points is like you’re either, you don’t make enough money, you’re not good with money, something’s always coming up or something really big happened and that’s why you’re in debt, like you can justify your debt.
No matter where you are, the thing that I want you to understand before you get into a space to actually successfully pay off debt is that I actually need you to have personal awareness and I need you to understand your debt. This episode actually has nothing to do with you creating a debt payoff plan or throwing money at the debt. I actually, I need you to build a relationship with your debt. I need you to understand your debt because in understanding your debt you’re going to know how to take care of yourself through this process. And I know that there’s a lot of stuff about like, you need to pay off your debt. It’s high interest, you need to pay off your debt. You shouldn’t be saving all this money. You should be throwing your money towards paying off your debt.
And if you have followed me any amount of time, you should know that I do not believe in you taking a lump sum of money and putting it towards your debt, especially if you don’t have an understanding of your debt and you don’t have personal awareness about your debt. Because the only thing you’re going to do is create more space for you to get back into debt. And so the first thing I want you to do is I actually want you to take the time to understand your debt story and you are like, Keina, what is my debt story? I want you to ask and answer these questions for yourself, but asking yourself, like if you even, I had a client do this on the call the other day, it’s like I want you to draw yourself a timeline and just ask yourself like when did this cycle of debt start? When was the first time I incurred debt? Where am I now? How long have I actually been in debt?
When was the last time that I actually paid off my debt and how did I pay off my debt? Like that’s a really great question to ask yourself because you might start to understand like, oh, every single year I’m paying off my debt, but then six months later I’m right back into debt. That is so important for you to understand your story because if you know that’s the pattern that you have, it’s going to be the one that you can be really mindful of as you go to pay off your debt in the next year, in the next two years. Like I said, if you know that that’s your cycle and understanding like why you went back into debt, that’s another question you want to ask yourself.
So like what caused you to go back into debt? It’s not good enough that you’re just like, I’m back in debt. Like what’s the actual thing that caused you to go back into debt? It’s very different if you went back into debt because you’re like, I had to use my credit card for attorney fees to get out of a bad relationship. That is a much different thing than I am back into debt because I had to go to Italy with my friends. One, I’m like, you were using your credit card for an experience and the other one I’m like, oh, your credit card was saving your life. And those are two different stories to be telling yourself about debt and two different understandings for why you’re in debt. Both of them are very valuable as you think about like what do I need in order to be able to stay out of debt but it can provide a little bit more color and provide a little bit more clarity.
When I was talking to my client who we were going through like her timeline of of money and we were actually looking at her debt and I’m like, your debt saved your life. I was like I’ve worked with other women who are divorced just like you and one of my clients calls this like, this right here is like my freedom debt. And so you can talk to yourself bad about it, but like this was your freedom debt. This debt helped you buy furniture. This debt helped you pay attorney fees. This debt helped you get into a new relationship. This debt helped you find your confidence. And so we are reshaping her thoughts about the debt, we’re paying off the debt, but just reshaping why she’s in debt because in the past she’s just telling herself like, oh my goodness, like here I am, I’m in debt again and like this is just who I am. I’m just someone who’s in debt. Whereas when she can go in and actually understand, oh this debt is actually from a very specific time in my life and I know exactly how I got here, it’s a lot more empowering.
The other thing that I want you to do while you’re thinking about understanding your debt story is like what were your feelings when you noticed your debt was increasing again? So just notice like if you paid your debt off within the last year, the last two years, did you even check in with yourself about your debt increasing or is it just something that maybe you don’t look at until the number gets really big, you don’t look at it until it’s $3,000, $5,000. Like you just tell yourself that you can handle it or like what actions did you take or did you not take as your debt was creeping up? Like maybe you spent more on your credit because you just were like, here I am again, it doesn’t matter. Or you continued to ignore the debt. Or maybe when you paid off your credit card, one of the actions you took is you cut up your credit cards but then you got them to send you a new one. Like just be really honest, like what did you notice as you got back into debt?
How did you get here? And answering these questions for yourself or maybe your credit card, like you paid off your credit card, but then what happened is your credit card turned into a personal loan. So maybe your debt actually shifted, it shifted personalities if you will. And so it changed from a credit card to a loan. Like those are just important things to know for your own personal debt awareness. So now that you have your debt story and you understand the story of your debt, this is the most important part. I actually want you to make peace with your debt. This is one of my favorite exercises that I do with clients that have been in debt because I think debt has a lot to teach you. And I don’t think that this is something that sometimes people think about. Like maybe you have had a history of debt and I want to say that’s okay, that you have the ability to be able to change that you don’t always have to be the person that’s in debt.
You can become the person who knows how to pay off debt and stay out of debt. You can become the person who knows how to pay off debt and leverage debt. My client Lena, if you listen to her episode a couple episodes back, like she intentionally took out a loan to buy a property, she took out a home equity line of credit. I would say she has a really good relationship with debt now. Whereas when she started working with me, she was in $10,000 worth of consumer debt for things that like God only knows what types of things that they were, but now she can say, I have debt that’s bringing me an income, debt that’s paying itself off from month to month because I have tenants and I’ve chosen to invest in real estate.
That’s why it’s important to actually make peace with debt because you might actually want to take out debt at some point in time and if you’ve never made peace with your relationship with debt, it can hinder you from being able to take a financial risk that could actually make you more money. So to make peace with your debt, I want you to answer the question like what has your debt afforded you? For some of my clients debt will afford them the opportunity to work with me. I’ve had clients that have put their coaching on a credit card and they’ve paid it off while also paying off their other credit card debt and saving money at the same time. And so just look at your debt and ask yourself, like what as your debt afforded you? The client that I told you earlier that’s been going through a divorce, she said, actually I got some life coaching with my debt and she’s like, literally Keina, that saved my life.
It got me out of a really bad place that I was in. I was like, great so your debt saved your life. Like let’s color that in, that your debt saved your life because that’s really important when we think about your debt and what opportunities it’s afforded you. So I want you to think about the things that your debt as afforded you, but I actually want you to write a letter to your debt and I don’t want you to do this passively. And you’re just like, oh, let just like think about it. Like actually get out a piece of paper, get out a pen and write a letter to your debt. Like what have you learned from your debt? What opportunities has your debt afforded you? I was thinking about years ago when I was like, I’ve been in and out of the debt cycle, I was thinking about my debt and I wrote a letter and I think my letter would sound something like this. It would say:
Dear debt, like thank you for the experiences you funded me with my family and my friends over the years, but you’ve also taught me what I value with spending. I’ve noticed that there’s never an all out expense that takes me out, but it’s the day-to-day purchases for plane tickets, home furnishings, dining out, groceries, Target runs and excursions. I got a credit card at 18 to build my credit and my limit was about $500. I managed you well and then my limit increased over the years and I became more comfortable having my numbers out of sight. If I’m honest, credit card money kind of feels like fake money. I got good at justifying little expenses and my debt threshold crept up. I grew dependent on the tax refunds to clear the debt and would rinse and repeat the strategy year after year. So I want to break up with you once and for all I know it won’t be easy because you always seem to come through with the solution just when I need it. I know why you linger. I’m committing to planning for the things I usually put on cards no matter how big or how small. You’re holding me back from other dreams I have like building my emergency fund, saving for the down payment on a home. Thank you debt for all of the things that you’ve taught me, but we’re going to have to break up.
So it could be anything, like my personal reflection when I was in and out of the debt cycle. I can’t tell you that my debt was saving my life. My debt was not saving my life at all. My debt was definitely going to help me keep up with the Joneses and trying to fill the gap for me having a teacher salary and my friends making more money than me and me wanting to hang out with them and me not being able to really save from month to month. And so when I couldn’t afford something in cash, it was going on my credit card and just even my reflection on, oh, it was so interesting, like my threshold for how much debt I was in crept up, especially as my limits started to creep up. It was $500 and it was a thousand, then it was $3000. And so I became comfortable with having these bigger thresholds. Just walking through this process of understanding your own story and being able to make peace with your debt is going to prepare you to actually develop a plan to be able to pay off your debt once and for all to also develop a plan that will allow you to save money and pay off debt at the same time. I actually just had a client, we celebrated her, she’s been working with me for a year and she has paid off $30,000.
Some of it is a personal loan, some of it is a credit card. So she’s paid off over $30,000 worth of debt and she has also saved $10,000 since working with me. She has $10,000 in an emergency fund, but like we’ve been through this process of helping her understand why she’s in debt and helping her maintain a lifestyle that is going to keep her out of debt. So she’s done this work and you can do the work too and put yourself into a place, especially when you have a coach that provides that accountability and a place for you to be reflective. You can get out of the shame cycle of being in and out of debt. So thank you so much for tuning in and I hope you really take the time to sit down, get to know your debt and explore like what your debt brings up for you, and then write a letter to your debt, even put it in a place in a year from now, six months from now. Reread that letter as you’re still going through the process of paying off your debt. Alright, thank you so much and tune in 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.