Talk Wealth to Me

#109 Warning signs of Stress Due to Credit Card Debt and What to Do About It

November 05, 2021 Felipe Arevalo, Chase Peckham Season 5 Episode 7
Talk Wealth to Me
#109 Warning signs of Stress Due to Credit Card Debt and What to Do About It
Show Notes Transcript

Life is hard! Life in the twenty-first century can be and is stressful for so many reasons. The 24 hour news cycle with thousands of different sources to get you information that may or may not be true, to social media that spreads lies and hate or pictures of people in their perfect lives.

One constant for stress for hundreds of years has been money. Adding to that stress for more than five decades however, has been credit card debt. Today's episode the Talk Wealth To Me crew discusses the warning signs of credit card debt and stress and what you can do about it. 

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Intro:

Welcome to Talk Wealth to Me, a safe space podcast, where we chat about anything and everything related to personal finance. The information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting, legal tax or other professional advice.

Chase Peckham:

Top of the morning to you, Phil.

Felipe Arevalo:

Hey morning Chase, how's it going?

Chase Peckham:

It's going great on this kind of dreary weird cloudy kind of just blah day.

Felipe Arevalo:

It's clearing out over here. So sunlight is coming,

Chase Peckham:

Oh it's It's very, very packed in fog over here.

Felipe Arevalo:

It's a kind of fall, you know, it's gotten to the point where it's finally consecutive days where it's crisp and cool out in the morning. And

Chase Peckham:

You like that, don't ya ?

Felipe Arevalo:

San Diego fall. Anyways. I like our definition of crisp and cool , uh, here in San Diego where it's like, Ooh, it's so chilly . It's 40 to 45 degrees. Um, I would not like it if it was, oh, it's so chilly . It's 30 out . you know.

Chase Peckham:

Yeah. That's a whole different deal.

Felipe Arevalo:

Yeah.

Chase Peckham:

It's not, it's not that cold.

Felipe Arevalo:

We don't get that kind of cold. So I do like our cold season.

Chase Peckham:

Yeah. Speaking of cold and, and chills, a lot of times people will start to feel the effects of stress in different ways. Um, and stress, you can get chills. Um, you can get , uh, that uncomfortable feeling. You can even get sweats. Uh, there's all different kinds of different , um, feelings that you can get from stress. And so many people that we have talked to and work with , um, have stress because of financial situations. And one of those top situations is credit card debt. And of course that is something that we work in , uh, in helping people get rid of it. And we've been doing it for decades. Uh , no matter how things change, you know, there was the great credit pay off , uh, you know, debt went down , uh, during the COVID pandemic.

Felipe Arevalo:

It's really something . Right .

Chase Peckham:

Which was crazy. Yeah. But we're starting to see that uptick again, we're starting to see people, you know, that the economy is getting better they're spending and there can be that fact when you start to look at your credit card statements and you start realizing, oh gosh, you know, we were doing so good in getting that balance down. And now it seems like it's creeping back up. We had no idea what happened, what changed. Uh, and so many people will be like all of a sudden just stressing out. And there are some major signs that credit card debt is causing you stress.

Felipe Arevalo:

Yeah. You don't always notice them though, when you're in this situation, sometimes you notice them when it's too late, if you're really paying attention, you'll notice them hopefully before the situation gets really bad. In my early twenties, I probably experienced these and just kind of brush them off as well. My excuse at the time was broke college student. This is how you're supposed to feel sometimes. And you know, it just accumulated to before when I finally looked at it and added it up and said, oh wow, I'm in a little bit of trouble here. Um, I should've seen the warning signs a lot, but a lot sooner

Chase Peckham:

For sure. And one of those major signs is that you just start to avoid the credit card statement and you just, I don't want to look at it anymore. And if that is the case, if that is something that you are starting to do, that is you need to start taking a look at it. Um , because looking at that statement as much as it might freak you out without doing it, how are you going to have any chance of paying anything off? You've got to come up with a game plan.

Felipe Arevalo:

Well, and in the world of automation, it makes it so much easier not to look at your statement if you wanted to avoid.

Chase Peckham:

For sure.

Felipe Arevalo:

Because you can automate your minimum monthly payment, which you don't want to get in the habit of making just the minimum payment, but you can do that and have it just be where your credit card just takes the least amount of money necessary. And you get to move on with your month until next month statement comes out and with everything being digital, you see how many emails do we get on our Gmail, where it's just like another home Depot sale or another this sale . And you just kind of, and it would be very easy to be like new statement available for your card, swipe, delete, and never actually opened it. If you had your automated payments set up, you know, and didn't really have to physically go in and make the payment, even on the app or write a check like you would have back in the day. It makes it easier to just kind of set it and forget it and keep swiping and keep overspending.

Chase Peckham:

You know, it's interesting that you say that because as we're staring at my computer screen here, I have a reminder that just came up and says to pay my Alaska card. Uh, so I've got to do that today. And if I didn't have that reminder , uh, that that could have been an issue. And I, and as much as we tell people all the time that, you know, using a credit card to build credit , uh, is a real , it's a good thing. It's, it's, it's a really great way to do that, but you can forget how much, many monthly payments that you put on there. Because a lot of like for us, we mentioned an Alaska card. We want to use the card when we have big payments or things that we pay for monthly, so we can get the miles or we can get the rewards that you can get from those credit cards. But it's very, very easy to forget all the different monthly obligations that you're putting on some of those cards.

Felipe Arevalo:

Right.

Chase Peckham:

And if you're spending the cash out of your bank account, when you should be taking that into account, that, you know, the cash, even though you're using your credit card, it should be used as cash. That's a slippery slope. I mean, that's how we could, that debt can go up very, very quickly because you're not paying it like it is coming out of your bank account.

Felipe Arevalo:

Right. And if you start falling into the habit of , uh, you know, I'm a little over it's okay, I'll get it next month. And then that makes next month harder. And then you might go a little bit over again and like, I'll take care of her next month. Or I got three paychecks coming out on this month or, you know, oh, well, I'll get it. When I hit my tax return or whatever it is,

Chase Peckham:

That's a dangerous move.

Felipe Arevalo:

Then you're pushing it way out. And it potentially can become to a point where, you know , you're not addressing the issue. You're just kind of putting off the situation for a later date where it might be worse than if you just put a stop to it.

Chase Peckham:

Which is going to increase the affirmation distress . Uh ,

Felipe Arevalo:

Right.

Chase Peckham:

So as much as it can be taxing, you've you, can't we talk about it a lot in this podcast. And in other places is you got to create a roadmap for yourself. And if you don't know where it is, you want to go, how do you create your route? You can't.

Felipe Arevalo:

Right and your starting point,

Chase Peckham:

hat's right. You've got to know where your beginning

Felipe Arevalo:

Where are you starting your road trip from and that's whatever your financial situation is right now. And I always tell people, calculating your total debt and calculating your net worth and things like that are not going to make it any worse. It is what it is.

Chase Peckham:

Right.

Felipe Arevalo:

It's just a matter of whether, you know, how much debt you have or you don't. And that's where the, you know, it's, it's scary though, people rather.

Chase Peckham:

It is scary, but hiding from it's just going to make it worse.

Felipe Arevalo:

It's going to make it worse down the road.

Chase Peckham:

So what to do, would you rather just, okay. Pull the bandaid off, right. We tell them, okay, if you take a long time and it's still there, it's never going to heal, but if you just rip it off, it'll be a lot easier. Um, even if you have hairy arms like me, you know, it'll hurt, but at least you're ,

Felipe Arevalo:

You get it over with.

Chase Peckham:

Yes, you're getting it over with because it's, it's inevitable. You're going to have to do it.

Felipe Arevalo:

Right.

Chase Peckham:

One of the other big issues that we talk about with, with stress and realizing that you could be , um, in trouble is that you downplay or lie to your partner about how much is on said credit card, or especially if you have your own credit cards and you're responsible for paying them individually, and you're not communicating with your partner , um, that can be significant danger.

Felipe Arevalo:

Yeah. Yeah. And we've seen it in , in the past with, with people who just have a credit card that the other person's not even aware of. And, and, you know, credit card debt got a little out of hand and they're like, I'll just get another credit card balance transfer. And then all of a sudden, you know, they're sitting there and like, well, we don't have a card from ABC bank.

Chase Peckham:

Right.

Felipe Arevalo:

And then they're sitting , they're like, well, you know, you might not but remember that car repair I said that I'd take care of. Well, you know, it's on ABC bank card.

Chase Peckham:

Right.

Felipe Arevalo:

Uh , you know, and , and that's a very dangerous, slippery slope as well. You know , we started keeping things, keeping those finances from that significant other.

Chase Peckham:

Yeah and your you're probably trying to avoid being yelled at, or, you know, feeling guilty. Um, but you're going to feel guilty on your own anyway.

Felipe Arevalo:

Right.

Chase Peckham:

And what's really important is to know that if you can , the most important thing for a healthy marriage in general, we're obviously not a relationship podcast, but so much of personal finance is in communication. And 50% of come in divorce and financial reasons are the major culprit for that.

Felipe Arevalo:

So in a way we are.

Chase Peckham:

Sit down and have a meeting, right. Sit down and think, okay, we're in this together. I might have screwed up, but you know what? We all screw up. Um, but it can get worse. And if you think you've got to do it on your own, and then you're hiding and then you're lying and it can only make that stress so much worse than it needs to be. And a lot of times just like talking to a therapist, just the fact that you have the conversation and it's no longer that burden on your shoulders, that you're trying to keep quiet. Uh, it can help dramatically and relieving that stress and knowing that you're not alone in it and that together you can put it, you can do something about it.

Felipe Arevalo:

Yeah, I agree. And it's something where that you mentioned that line of communication. It's funny. Last week I put together a presentation that we're going to do for residents at Lincoln Military Housing,

Chase Peckham:

Yeah.

Felipe Arevalo:

A local, a military housing.

Chase Peckham:

great organization.

Felipe Arevalo:

In San Diego or all over Southern California. Um, and one of the things they requested is can you put ideas for how to set up what to look for, what to do for your financial date nights? So we should actually do an , an episode on that coming up here on like, just fun little things you can do to prepare for your financial date night and make sure that it's the most effective thing possible.

Chase Peckham:

Right and it's right for you. But that's important that you do take that time to discuss all of those situations, because ultimately it can affect so much of the decisions that you're going to make financially and going forward, a few things come up and you want to be able to do something. If you, all of a sudden, you've got $30,000 in credit card debt that the other didn't know about, that's a big problem that needs to be fixed because it's not going to get better. And.

Felipe Arevalo:

Right.

Chase Peckham:

The chances, you know, we get contacted a lot and people want this quick swift fix. Like you're just going to donate 30 grand.

Felipe Arevalo:

Doesn't work.

Chase Peckham:

Right. Doesn't work. You got to , you got a job to do.

Felipe Arevalo:

Right.

Chase Peckham:

And it's, it's always easier to go down that path with somebody else. Um , besides the fact that misery loves company.

Felipe Arevalo:

Yeah. Or there's that, but some people have that very , um, external , uh, external, I'm gonna mess this up. External locus of control, where they kind of feel like it's out of my control, but your finances are very much in your control.

Chase Peckham:

Yes.

Felipe Arevalo:

It's not to say that it's easy. Um, you know, and, and yeah . Sometimes life happens that causes you to spend money on things. We don't want to spend money on. It happens to all of us, but it's something where you're very much in control of your finances and the way of getting out of your finances. Like you said, there's no easy fix. It's not, I hope I win a lottery. It's let me come up with a plan. Um, you know, obviously if you win the lottery, that's gonna take care of the , finances.

Chase Peckham:

It will.

Felipe Arevalo:

That's not likely going to happen. You know, what's more likely is you put in the effort and you come up with a plan and you get yourself out of you know credit card debt.

Chase Peckham:

Yeah. And if you're one of, if you don't know, if your spouse doesn't know that you're spending $50 on those lottery tickets every month.

Felipe Arevalo:

Scratchers.

Chase Peckham:

When you could be putting that 50 bucks towards the credit card debt,

Felipe Arevalo:

Right.

Chase Peckham:

Buying, you know, buying what we , I buy them , but I don't buy them in these giant bulk. It's like you re you're you're, you're trying to get hit by lightning here. Uh , you know, I'm not there. You don't want to go spending a financial , uh , large financial amount in that situation.

Felipe Arevalo:

Yeah. Well, you know, Sarah, she's been at Debtwave for , uh , 15, 16 years or something like that.

Chase Peckham:

Before me.

Felipe Arevalo:

And in all that time. Um, I think she's had one person she's helped thousands and thousands of people and , and her thousands and thousands, if not tens of thousands of credit card, debt, payoff stories, but she's only ever had one person win the lotto and pay off their debt. Um, and 16 plus years of constant,

Chase Peckham:

How many Clients and how many thousands and thousands of dollars, hundreds of thousands of dollars, millions of dollars in paying back that ,

Felipe Arevalo:

Yeah, that's not really the game plan there. And it wasn't like they wanted millions. It was just like they won, you know , thousands of dollars and were able to pay off their debt. But that's not the, that's not usually the winning formula. The percentages are low .

Chase Peckham:

Yeah. I mean, I th I think what we were trying to get to here is, is that, you know, with the pandemic, with lots of different , um, situations, we can feel stress. And , and a lot of times the stress can create , um, different symptoms to where you feel like in your body, you might, you know, my heart's racing or I'm sweaty, or I feel a little , um, like I'm in a fog. I, you know, it can, it's enough, stress builds up over time, it's going to affect your mental health. Um, and, and so exercise, and those kinds of things can really help that. But a lot of times people are so stressed out because of things that they're just not aware of. Uh, and as bad as we talked about pulling the bandaid off and taking a look, that is, that is where the beginning and the healing starts. So if you realize that, you know, I'm normally a very , uh , relaxed person, I'm really good, but now you're snapping at the kids that you wouldn't normally be snapping at your short , uh , things are making you upset when they wouldn't normally make you upset. You get frustrated by somebody, quote unquote ,

Felipe Arevalo:

Bad drivers.

Chase Peckham:

Yeah, cutting you off the freeway. And you're yelling at them. You know, there's a chance that something else in your life is bothering you. And you need to take a look at that. Um, and the F and the , the financial stresses, it can come up in so many different ways. Um, and you need to, it's, it's, it's trying to take as much control over that situation, as you can, like you mentioned, you can take control of your financial situation.

Felipe Arevalo:

Yeah.

Chase Peckham:

You just have to make difficult decisions.

Felipe Arevalo:

It's, it's something where a lot of times though, it's, you have to realize it first,

Chase Peckham:

Well yeah if you're just ignoring it.

Felipe Arevalo:

It something where, you know , if you keep pushing it off and you keep, you know, you can go years pushing off the debt burden and , and taking in that stress, but at the same time, not taking actions to solve it. And that can just kind of, there's some, we don't need more stress. We're generally have enough stress already as, as just everyday people. Um, you don't need to add the financial stress if you can avoid it. Um , but you know , it's definitely there and it's definitely something where catching it, or at least going to make it easier to get out of credit card debt. It's easier, no matter how much money you have, it's easier to pay off five or 10 grand than it is to pay off 30.

Chase Peckham:

Yeah.

Felipe Arevalo:

And if it's going downhill, you got to catch it as soon as possible to make an easiest plan to pay it.

Chase Peckham:

And it can seem like you have that. There's no way out of it. Like, you feel like your interest rates are super high. Uh, I'm paying the minimum payment because that's all I can really afford. And it seems like my debt is going up versus going down. Even if you're not quote unquote using your credit cards anymore , um, it can feel like a runaway train.

Felipe Arevalo:

Right.

Chase Peckham:

So where do you turn? And one of the most important things that I would tell anyone is ask for help, look for somebody that knows what they're doing. And if that's seeking out of a financial professional , uh , if you have a certified financial planner that you're working with , um, if you don't a lot of people, don't , uh, the , I think that certified financial planners are basically just there to handle portfolios. And in the , in a lot of cases, that is the case, but there are great credit coaches out there. There's personal financial counselors. Uh , talk, just talking to somebody with looking at a budget and figuring that out. You can find a consumer credit counseling company out there, like DebtWave, credit counseling , um, like the many others, it's a very regulated industry. Um, but it could be a very good way to pay back that debt in one, a relatively quick manner , um, into, with less interest rates. And that kind of can take that pressure off.

Felipe Arevalo:

Right.

Chase Peckham:

But look, take, take, you don't know, unless you look out for things, and that can be stressful too, because you don't know what is the right thing. And that's why asking around and in interviewing and meeting with these people , uh, can really help that.

Felipe Arevalo:

Yeah. Do your reviews, do your, you know, go on websites, look at people's, you know, feedback and things like that. And, or maybe even talk to someone who finances is a hard thing to talk about. So you wouldn't necessarily go up to your buddy and say, Hey, man, I , I remember you had credit card debt, how'd you pay it off because you there's a chance. You don't even know that your buddy had the credit card debt. Um,

Chase Peckham:

Right well that's not something that people are going to go out and just discuss. I mean, it's embarrassing. And, you know, for a lot of people, that's a personal thing. I mean, that's, I mean, how many people have we met with and sat down in front of, and literally those couples, you know, one of them, or both of them know that, okay, something's going to come out today that I've been hiding and they're just at that point. Right.

Felipe Arevalo:

Yeah.

Chase Peckham:

And we always know, okay, well, you know, I've got that gambling, offshore gambling that I've been betting and I'm really trying to, you know, but that comes off the credit card, you know, those are , do what, I didn't know that, you know, so that's something that, You know,

Felipe Arevalo:

Or like, what's this collections account. Um, yeah, it says it was a cell phone provider from a couple of years ago. I thought you paid that. Um, just kinda , we just switched.

Chase Peckham:

I forgot.

Felipe Arevalo:

Paid termination fee. Uh , I thought, I thought we didn't have to pay for it or whatever it is. I just.

Chase Peckham:

Or just didn't want to pay for it.

Felipe Arevalo:

Or didn't want to pay for it. Right. Um, or even worse when it's like, did I give you money to pay for that?

Chase Peckham:

Absolutely and a lot of these places are free. You can go get help for free. I mean, a lot of the organizations are typically non-profit organizations. They, they, you know, that's, that's something that we recommend highly. And if you look at some of the feedback that we get from people just talking about how much more relaxed people feel that they've got this in it, they've got an in control. Now,

Felipe Arevalo:

There's a plan.

Chase Peckham:

There's a plan they're paying it off. Absolutely. Without question.

Felipe Arevalo:

You see that finish line, whether it's, you know, two years down the road, three years down the road, whatever the plan is when you didn't have that plan, there's no end sight. Yes there's . So regardless of if it's, you know, 2, 3, 4 years down the road, whatever it is, at least you have a finish line that you're racing towards. And I think that adds so much, so much motivation to go for it because now I see the finish line. Now I see where my efforts are going to lead, as opposed to, I'm just throwing money at these things, but it's not getting any better.

Chase Peckham:

Eventually. I mean, you pay off that debt and you start figuring out that certified financial planner is going to help you.

Felipe Arevalo:

What am I going to do with this money?

Chase Peckham:

Right. And then all of a sudden, you're , you're creating that portfolio that you never thought that you were going to have.

Felipe Arevalo:

Yeah. You're able to start saving and investing. And then, and then you start seeing interest rates work for you as opposed to against.

Chase Peckham:

Yes. That's always a good thing. Where interest rates are starting to creep up. So if it's working for you, that's a good thing.

Felipe Arevalo:

They are exactly, that's a good,

Chase Peckham:

It's not good for debt.

Felipe Arevalo:

It's not good for debt or home buyers or car buyers or anything like that. But, you know, in , in on , if you're able to put money away, they can work for you.

Chase Peckham:

Without question yes.

Felipe Arevalo:

You know, the S and P 500 is kind of on a little run upwards. And, you know, so you can get, have you, the trick is to get the interest rates working for you, as opposed to against you.

Chase Peckham:

Yes.

Felipe Arevalo:

And that's gonna create a whole new financial paradigm where now you don't really mind the interest rates going up, especially if you've already made your bigger purchases or whatever, but you can start, you know, and , and even like car buying, maybe you start saving for that next car purchase. So you can gain interest on your car, on your savings while you wait and then purchase the car outright, or put in a much bigger payment down payment so that you don't have to pay the interest on the loan two years down the road, or whenever it is that you get that car. So there's so much that you could do, if you, once you eliminate that debt, then it becomes personal finances becomes a little more fun.

Chase Peckham:

Yeah, It does. And it can be.

Felipe Arevalo:

It's a lot more fun.

Chase Peckham:

It's a lot more fun when you're not paying back creditors. Yeah. I mean, bottom line, this is what I have that discussion. If you're in that situation where you, you know, there's that little, that little story that you got bottled up inside you , um, and you know that you've got to tell it , uh, it's the best thing to do is just face it, rip that bandaid off. Just if , you know, have that conversation, it will be probably difficult at the time, but for the long run that you'll relieve that stress, that at least you're going in the right direction and ask for help, look for, you know, there's a lot of, there's a lot of different options out there that can help you if, if they're not non-profit , if , uh , they say, you know, what, only pay half of your debt. You know, we can just be a little wary of situations like that.

Felipe Arevalo:

If it's too good to be true. It's usually too good to be true. You get that feeling.

Chase Peckham:

You get that feeling that is right. That is very, very, very true , uh, that absolutely.

Felipe Arevalo:

Although, there are legitimate programs, like sometimes like a debt management plan where someone who's been paying huge payment amounts in huge interest rates, that payment is, you know , that plan is a legitimate plan and some people might look at it and say, well , that's too good to be true, but so just do your research because sometimes depending on how long you've been struggling with that, a legitimate good option for you may seem like it's too good to be true, but it, there are programs out there that , you know , that can help.

Chase Peckham:

Yeah, absolutely. Absolutely. And if it's a debt management program, it's in consumer credit counseling, a lot of people think that those are separate things. They are not. Um, but that's a tried and true practice that, and it's not for everybody, you know, that may not be right , but for a lot of people , uh , they pay back their debts in full, they're not going delinquent. Uh , they get lower interest rates and they can pay it. And it's just the idea of, you know, and the one great thing too, is, is they might have five credit cards and they're just now making one payment. And then that credit counseling agency is dispersing it to all those individual creditors. So you're really not stressing out that you're making, writing five checks or making five clicks to different websites.

Felipe Arevalo:

Right one due date.

Chase Peckham:

So that is a really important thing right? So there's lots of options out there. And, you know, the first step is just, i s having the conversation. And a s you can relieve that stress

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