Maggie:
[0:55] I’m Maggie.

Taylor:
[0:56] Taylor.

Jewels:
[1:02] Jewels. in the preparation for this, it did make me think there’s probably an entire episode on like the state of student loans.

Maggie:
[1:10] Oh yeah. That’s a different episode, right?

Becca:
[1:10] Also an entire episode on like racial and class disparity when it comes to credit, and gender.

Jewels:
[1:15] Yes.

Maggie:
[1:16] And gender. Yeah. There’s a lot of upsetting things to talk about in relation to credit.

Becca:
[1:22] Okay. Yeah, I’m sorry. What year could we start getting our own credit cards?

Jewels:
[1:24] 1974.

Maggie:
[1:29] Well, apparently I read some comments that you could get credit cards before, but either… you had to answer a lot of questions that were inappropriate.

Becca:
[1:30] The banks were allowed to deny you access to credit without a male co-signer.

Becca:
[1:34] What?

Jewels:
[1:46] So while it technically was not illegal for women to have them, the institutions typically would not give it to you without a man.

Becca:
[1:54] This is the moment that.. all right. My parents were like getting married at this age and my mom couldn’t get a fucking credit card.

Taylor:
[1:54] This was like during our parents, our parents were alive for this. Yeah. Yeah. It’s insane.

Becca:
[2:03] This is insanity. And it’s crazy that we still think, oh everything’s equal now.

Taylor:
[2:04] Oh yeah, no, but until this like people will still argue, what is everyone complaining about? You have all the same rights, you’re just not working hard enough and you’re like really, really? Like we couldn’t even get credit cards to like buy things with.

Jewels:
[2:17] Lies. We were not even entitled to an individual bank account until the 60s. So that’s if you had the money, you couldn’t even have a bank account for it by yourself.

Taylor:
[2:30] Like literally every every decision had to go through your husband.

Maggie:
[2:37] But I did read it today that women in the year 2020, on average have a 2% higher APR on their credit cards than men.

Becca:
[2:46] That is some bullshit. I’m wondering if everyone has something that was like their main takeaway from research this week. I say that because in Julie’s notes, it said ‘Most Important’. But then I was like, oh, I have a most important too. And I put my most important in all caps, and I’m wondering if everyone had a most important. Julie, what was the most important thing that came out of your research?

Jewels:
[3:10] Okay, so the most important bottom line thing for me was a lot more personal and life applicable than a lot of the facts and stuff that I find really interesting. But is that debt is super, super common and it is not something to be ashamed of at all because there are so many different forces in our society and the way the economy is structured that push you towards debt or put you in these decision making situations where really, taking on debt like student loans may be the only option. And even if you are a responsible debt user because somebody actually educated you about how debt works and how credit cards work before you started using them, even if you’re responsible user, you can have life circumstances line up and things go wrong and once you start building up debt, you can really hit a tipping point where even if you’ve stopped adding to the debt it can continue growing at a faster rate exactly at a faster rate than you may be able to deal with. So it’s nothing to be ashamed of. And it is so much better to have honest conversations with your friends and your family about your debt situation because then they’re going to not only support you because it can be a long journey to pay it off, but then they also can understand more of what’s going on in your head when you’re making decisions, like, oh, so and so decided to skip brunch again this weekend, why isn’t she coming out to our girls brunch? But if they know like, oh you’re really working towards a goal of paying off this debt then they’re going to understand. It will be like let’s do brunch at our house this weekend, you know, and they can support you through those decisions and that’s a really small one, but a lot of people find themselves in high debt in their twenties and thirties. And that’s also when all your friends are having like destination weddings and want you to fly across the country or if you happen to be the woman who is in everyone’s bridal party and you’re having to buy a new dress twice a year. That’s really expensive and you’re dealing with debt and you don’t want to break the hearts of your friends, but you haven’t told them your situation. It just really changes your ability to make those hard decisions and have your friends understand what’s going on if you’re upfront about it.

Maggie:
[5:18] 100% love that that was your most important. And I also think that our podcast kind of started out a lot in that way.

Taylor:
[5:23] Yeah.

Maggie:
[5:24] Yeah. I mean I was in quite a bit of debt. Um, and I like, before our podcast definitely talked to Julie about it, and Julie was in a lot of debt too. So it was nice to have someone…

Jewels:
[5:28] Oh boy.

Taylor:
[5:32] I had never talked to anybody about my debt before our podcast.

Maggie:
[5:37] Yeah. But didn’t it like feel nice to get it off your chest and be honest about it?

Taylor:
[5:38] Yeah. And know that other people were also struggling with the same things.

Jewels:
[5:41] Right. Well and our debt had hit an all time high while we still had a lot of commitments we had made in advance to friends, world travel and all sorts of stuff that was really expensive and we were not honest about our debt situation. And I don’t know if being honest would have changed my actual going on those things because I don’t regret doing those at all. They definitely stretched out the debt process. But I think even just be able to be honest about it, you can make smaller tweaks. Even if you’re not cutting the big things, it would have made a lot of that much easier.

Taylor:
[6:16] And yeah, they even say and like that Explained episode I was listening to they talk about how you shouldn’t be ashamed of it because the game, it’s a game right? You are playing against the banks. The system is set up for you to lose. Banks literally run tens of thousands of algorithms and tests a year to find out how what is the most money they can get out of each individual – each individual. They will tailor situations to try to get the most money out of you possible and they’ll set up the system to literally they study psychology and they will use psychology against you to build a system that makes it almost impossible to succeed in.

Maggie:
[6:57] You know what I can’t afford? Running tens of thousands of dollars of experiments a year. So I think they’re going to beat me in that. Playing against a basta is unbeatable.

Jewels:
[7:08] Exactly. And the bank is just the big boss at the end. But the whole way along is like, oh, you got to go to college. But if you don’t have the family support for that, here’s your nice little student loan option. And you also have every retailer who’s trying to survive, make their own business survive. They’re also trying to tweak and optimize things. Like Target is a brilliant example. And then the social pressures, keeping up with the Joneses, scams. It’s so easy. Yeah.

Taylor:
[7:32] Scams that people get pulled into.

Becca:
[7:36] So easy. So Taylor recommended this show on Netflix. It’s a show called Explained and they have a whole series called Explained Money and there’s a whole episode about credit cards and the quote that I took was, ‘It’s easy to slip up. That’s not a personal failure. It’s how the whole game is designed and if you can internalize anything that is it. Like you are designed to be in debt. Everything you’ve ever learned about finance has been particularly tailored for you to be in debt.

Maggie:
[8:12] Well, and that’s not to say it’s impossible, like you can do it, but it is hard and you have to really dedicate time, energy, education, friends, support.

Becca:
[8:15] Yeah.

Maggie:
[8:22] Like you need all of those things to do it, like you have to like build a fucking team of support behind you in order to try and break even basically.

Taylor:
[8:30] And it’s like, yeah, it’s a daily thing. You have to work at it every day because you’re not, you’re gonna slip, you’re not going to be perfect every day.

Becca:
[8:37] And your education was tailored by companies that want to make money from you which basically segways to my most important, which is much less conceptual and more just like straight up facts. I had a conversation recently from someone a generation above me, two generations above me who at this point in life thought that carrying a balance on your credit card improved your credit score. It does not.

Taylor:
[9:05] I also thought that until recently.

Becca:
[9:08] That is my most important thing. That’s my most – you do not have to carry a balance on your credit card. It does not improve your score. It doesn’t diminish your score if you pay off your credit card every single month. Not at all. That is a weirdo myth that clearly is being propagated by people who can make money off of you.

Taylor:
[9:24] But it’s like a really yes, it’s a really widespread myth. I thought that until like this year, honestly, I was like, yeah, I mean you put like $1,500 like you know, debt. It’s like one of those weird things where it actually makes your credit better.

Becca:
[9:28] It’s not.

Taylor:
[9:37] Like, it’s a total lie. I had no idea. I had no idea.

Becca:
[9:38] Yes, it’s absolute bullshit. And I mean I’m, yeah.

Taylor:
[9:43] Because I just wasn’t financially, like I didn’t know, I wasn’t educated in those kind of things.

Becca:
[9:44] Well and that’s not, that is not on you because people have been saying that for years. Literally for years, that’s what everyone tells you, is keep a small balance on your credit card and that will improve your credit score. I just want to reiterate that it does not. Please don’t. If you have the opportunity to pay off your credit card or the last statements balance 100%, pay it off. It does not improve your credit score to not, and that is something that still exists.

Taylor:
[10:14] Yeah, well that just goes to show like it is a common myth that like a lot of people believe.

Becca:
[10:14] Can we guess who propagated this myth?

Jewels:
[10:24] Well not only that, but if you think about the fact that our access to our own information has gone up so much in the last 10-15 years, like our ability to just log into a website and check your own credit score, and not only see the score but have the breakdown where it’s like, oh your average age of accounts has a medium impact and your credit utilization has a high impact. Like it’s actually showing you what factors are figuring in. 20 years ago you didn’t have access to that information. It was super opaque.

Maggie:
[10:54] Like shooting in the dark.

Jewels:
[10:55] Yes. But now that we have access, I think the reason that that myth has sort of been dispelled is because there are enough people who are like credit card hackers who are running all the scenarios and actually testing it in real time and seeing that paying off their balance every month has not negatively impacted their credit score.

Taylor:
[11:13] One thing that I also thought was really interesting was how credit card companies about slash banks evaluate you as a credit card owner. Like you either pay off your debt, you’re someone who pays off your debt in full every month or you’re someone who constantly is behind, but they make money off of you either way, which I never really thought about because to me, I always just assumed if you’re someone that doesn’t pay off your debt right away and you’re accruing interest, that’s the only way that banks gonna make money – they actually don’t like people that pay off their credit cards. But what I didn’t think about is transaction fees. If you’re someone who uses their credit card every time you buy something, the shop that you’re buying it from pays a transaction fee. So either way they’re making money off of you. I was also, so this is embarrassing because I didn’t realize how compounding interest worked with credit cards because I didn’t have a credit card till I was like 26 and I was too scared to ever have one because I was like I don’t ever want to be in debt, I don’t know what, I don’t know how it works, whatever, I’m just not going to do it. And then the Chase Sapphire Reserve card came out and my brother was like you gotta sign up for this credit card, it’s fucking amazing. So I was like yeah, okay I’m gonna do that. So I signed up for this card because I wanted the $100,000 bonus sign up points and so that’s my first entry into credit cards. No one told me how compounding interest worked and I was pretty good about paying it off initially and then over time just like a little bit here and there, like I have more and more of a balance and I always wondered why I couldn’t climb out of the debt.
I was like, why does it keep, why does it feel like it keeps getting worse even though I’m paying it off, I’m just not paying off the full amount right away. Like I’ll pay off, say there’s like $2000 on the card, I’ll pay off $1700 so there’s $300 left over. But then every month, it just over the years it builds up and builds up and I’m like, how am I not? How does it feel like it’s getting worse? How am I not like getting out of it when I’m paying, I’m not paying off the full amount, but I’m still paying off like a good amount of it.

Maggie:
[13:10] Because you’re paying interest on your interest.

Taylor:
[13:15] Because I’m paying interest on my interest, which I didn’t fucking know. Like, how do I not know? How do people not know these things?

Becca:
[13:17] Because they intentionally keep it from you.

Taylor:
[13:19] That’s crazy. So if anyone doesn’t know this or realize this, I might be the only dumbass in the room that doesn’t know this. But like when you have a balance on your credit card, say you pay off, you have $500 on it, you pay off $300, the $200 that remains after the bill is due, they charge interest on. But, they charge interest on that interest. So say you have $13 on top of the $200 that you’re paying on interest the first month. The next month, They’re charging interest on $213. They just keep adding interest on to the interest. So that is why if you feel like you’re in fucking credit card debt and you can’t get out, and you don’t know why, you don’t know why it just keeps getting bigger. That is why. And like I had no idea for the first like 10 years of having a credit card. Well not 10 years but like five or 6 years.

Jewels:
[14:07] And the interest rates on credit cards are really high compared to most other types of debt. So I think the average credit card interest rate in the country right now is about 16% which is astronomical. Compounding.

Taylor:
[14:18] 16%? Compounding on money borrowed?

Maggie:
[14:23] Compounding. Yeah, it’s really not a good idea to hold credit unless you need to. But also I think we have been seeing a lot of negatives, but having good credit in this country at the least is extremely important. And we should maybe talk about that a little bit.

Taylor:
[14:44] Yeah. It opens up the opportunities to buy more assets like houses and loans. Yeah.

Jewels:
[14:54] Yeah, two different things here too. Like credit scores and debt potentially being quite different. But debt is definitely a very important tool at our disposal in modern society because it does allow us to pick up those assets and investments or fill in gaps that otherwise might leave us out on the street all of a sudden. So it’s a really good tool to have. But I was thinking today that giving us access to debt without teaching us about that tool is basically like giving someone a table saw. Table saws are great, they’re very useful and they will cut your fingers off very easily.

Taylor:
[15:29] It’s a good analogy.

Jewels:
[15:30] You know, it’s like, it’s a great tool and extremely dangerous and can have long term consequences.

Becca:
[15:38] It’s like giving someone a table saw with zero instruction manual.

Jewels:
[15:41] Yes. Yes, exactly, exactly.

Taylor:
[15:42] Or the one instruction manual you have is in fucking Chinese and it’s 50 pages long.

Maggie:
[15:43] And being like, I don’t know, ask your friends to figure it out. Or you have a friend with one finger left who’s like, oh, let me tell you about table saw.

Jewels:
[15:55] Oh, or it’s it’s a manual written by a lawyer on how to use the table saw.

Becca:
[15:59] Well I was gonna say it’s written by the medical lobby who makes money off of you chopping your fingers off. It’s like saying oh yeah use the table saw, don’t be careful, it’s inherent. You’ll figure it out. It’s totally fine. Anyway just call 911 if something happens, it’s not a big deal.
That’s what it’s… I mean seriously though.

Jewels:
[15:55] We’ll be waiting.

Taylor:
[16:26] It is, it is. You’re right.

Maggie:
[16:27] But like, I definitely understand like your trajectory a little bit becca because you just, like you said, we’re like, cash is not trash for a long time because getting into debt is very scary and no one fucking tells you how to do it responsibly.

Taylor:
[16:41] Yeah and 4 in 10 Americans are in debt right now. 4 in 10. That is almost half the country that holds credit card debt.

Jewels:
[16:56] Honestly it’s amazing it’s not more. And I think on the other side, like back to Maggie’s point about how credit can really be important, some of those people who are not in debt, it’s because they are lower income or they’re not deemed credit worthy. So it’s not that they’re doing great, it’s that they are being judged so harshly. They don’t even have access to it.

Taylor:
[17:19] I also think that includes minors. Like I think it’s like everybody and tiny babies.

Jewels:
[17:21] Good point.

Maggie:
[17:23] You know, who doesn’t have credit cards? Babies. Let’s change that immediately. You know, you know who needs a table saw? Babies.

Taylor:
[17:29] I wouldn’t be surprised honestly.

Jewels:
[17:31] That’s what I think about student loan debt.

Becca:
[17:34] Seriously.

Maggie:
[17:37] Can we title this episode, ‘You know,who needs a table saw? Babies.’

Taylor:
[17:39] Well, me and Becca were literally just talking earlier today about how insane it is that they don’t tell you these things. They don’t teach us. This is not part of our education. That’s not part of our curriculum even though it is literally built into the fabric of our country, the banking system and the debt system and the credit system. And they don’t teach us, they don’t teach you anything about it in high school or at any point in your public education.

Jewels:
[18:04] No, even when you are signing on the dotted line for student loans that can be in excess of six figures, no one is there checking to make sure you understand how interest works for that particular loan.

Taylor:
[18:08] And you’re barely 18.

Becca:
[18:18] Which brings me to my next point. I, okay, literally up until two hours ago, I thought if you deferred your student loans, that meant you didn’t gain interest on what you paid.

Maggie:
[18:34] I just cringed for you Becca, have you done this?

Becca:
[18:36] Okay. So first off, yes. Second off, I have blacked out the first few years of paying off student loans I think. Okay. They made it so unclear. I am 32 years old, luckily I’ve paid off all my student loans at this point, so water is under the bridge. But I genuinely thought that those years when I was working for a non-profit or working for the Texas government when I was getting paid $1,000 a month, that my loans were deferred, and that it was just a little pause button until I was able to afford paying them. I didn’t realize that I was actually paying interest on those loans was accruing and literally, what does the word deferred mean?

Maggie:
[19:17] It means you don’t have to to pay it right now, but you still are going to owe, for it.

Becca:
[19:26] We won’t charge you a fee for paying, in addition to your interest, but you are accruing interest.

Maggie:
[19:33] Yeah.

Jewels:
[19:35] It’s basically like we’re not gonna charge you a late fee. But we’re going to keep racking it up in the meantime.

Becca:
[19:35] That is insanity.

Maggie:
[19:38] Yeah, exactly.

Jewels:
[19:39] So I ran some calculations today.

Taylor:
[19:46] I love when Julie says this. This point in the podcast. It always happens at some point in the podcast. I ran some calculations. I want that on a crop top.

Maggie:
[19:48] Julie runs calculations every day.

Becca:
[19:50] You’re gonna be fucking upset is what’s going to happen.

Maggie:
[19:58] That could be the back of the crop top. Exactly. You’re gonna be fucking upset.

Jewels:
[19:59] I need this shirt.

Taylor:
[20:00] I ran some calculations. You’re going to be upset.

Jewels:
[20:09] Yeah. Okay. So I ran some calculations based on when we were in school. So the interest rates when we all started college were almost 7% on student loans. So if you had to take out $30,000 a year for four years and I’d say compared to cost of living now, if you’re a student who’s having to pay your tuition and your room and board, I don’t even know if that covers it anymore at state schools. But let’s say when we were in college you could have got away with $30,000 a year for four years. That means the total loan that you were taking out was $120,000. But the entire time you’re in school it was accruing, you’re adding $30,000 each year. By the time you graduate, it’s already up to $183,000. And then let’s say you have to stay in deferment for another year after graduation because you’re just getting started in your new career. You’re having trouble finding a job or…

Maggie:
[21:09] Or you’re getting unpaid internships.

Jewels:
[21:19] Exactly, or you’re even taking a paid job, but it’s not enough for you to be able to actually start paying your loans.

Becca:
[21:17] Like $1,000 a month at the Texas Legislature, for instance.

Jewels:
[21:19] That is insane. That is insane.

Maggie:
[21:23] I volunteered for a year too, so it’s like my loans weren’t deferred while I volunteered, for America.

Becca:
[21:29] She volunteered for America. Was that when I thought you were a park ranger?

Maggie:
[21:36] For America. My loans were not deferred.

Jewels:
[21:36] Um, yeah. So if you have to stay…

Taylor:
[21:43] Thank you for your service, but go fuck yourself and pay your student loan.

Jewels:
[21:45] Yeah. Thank you for your service and your money because all of the student loan debt is, well, it’s like all federal loan money now. The government’s making so much money off of us and then they’re just funneling it back into the universities through subsidies. Okay, so if you stay in deferment for one year after college, you now owe almost $200,000 just for the privilege of paying $120,000 for the four years you were in school.

Becca:
[22:13] Also, sorry if you got a liberal arts degree.

Jewels:
[22:16] Because that’ll be in deferment for a while and you will never catch up with the interest on interest.

Taylor:
[22:25] This is what you need to do. Quit your job, become a day trader, start trading those penny stocks, get something going, pay off that debt. Yeah, that’s insane. I was going to say that reminded me in college when Obama… someone needs to explain this to me. You know, there’s like institutions that loan money versus the federal government and he basically made it to where it was easier to loan it from the federal government versus like higher, and it was like lower interest rates, versus higher interest rates through like private, uh, companies. Do you, do you guys remember when this happened?

Becca:
[23:01] I don’t remember. I remember he would forgive student loans if you put in 10 years in a non-profit, which if you’re a listener who’s put in 10 years a non-profit, please tell me if he did that.

Jewels:
[23:10] Okay, so this is a program and of the people who have tried to actually get their loans forgiven, it’s like 2% they actually forgive.

Becca:
[23:17] Yeah.

Maggie:
[23:19] Another Planet Money episode about that specifically. The failure rate of people actually succeeding in getting their loans forgived – way higher than people succeeding.

Becca:
[23:32] Um, well, also as someone who was in non-profits for like six years, the idea of surviving non-profits for 10 years is pretty shocking.

Taylor:
[23:42] And at the end of it then being like, oh by the way, you owe us $300,000.

Maggie:
[23:46] That’s part of it, that some of them are like, I wouldn’t have stuck it out that long. It was really hard and challenging and like, took an emotional toll on me, but I did it for this reason and then that didn’t pay out.

Jewels:
[23:58]I could have got a higher paying job and started paying my debt back. But I took the lower paying non-profit job and I stuck it out for 10 years and my loans quadrupled in that time.

Maggie:
[24:11] I could be wrong about this, but I think that there is ironically a non-profit that was made to help those people, I could be just making that up because it is such a dark thing to think. But like part of me thinks that might be true.

Jewels:
[24:32] Even if we give the benefit of the doubt to people who initiate some of these programs, I think humans, I’ve always, I’ve always pitched that like the history of humanity as a book should be called ‘Unintended Consequences’. Because this is a great example of that. And another unintended consequence was when credit scores became a thing, it was intended to create one system that they could look at to rate creditworthiness because before, banks just did it, however they felt so typically….

Taylor:
[25:06] Like a handsome white man who’s got his head on his shoulders, let me give you some money.

Jewels:
[25:07] Exactly. Yeah. You’re a family man with a job and you’re white, we’ll give you money, but you’re a woman or you’re a person of color, we’re not giving you money. So that is literally what they did. So they came up with the credit score system and unfortunately that is now, it didn’t change necessarily the outcomes. It just has now programmed them into the credit score system.

Becca:
[25:33] Okay, actually, let me, can I take a couple steps back? Can we all zoom back to the first time we got a credit card?

Jewels:
[25:36] Yes.

Becca:
[25:41] Can you, we’ll start with Julie. Can you just talk us through the experience of your first credit card, why you decided to get it and the experience of getting it?

Jewels:
[25:42] I have no memory of this.

Becca:
[25:50] Wow, Julie actually blocked out for 5 years.

Taylor:
[25:57] Applied for like 18 credit cards.

Jewels:
[25:58] Well we literally have a spread… like luckily we’re through like the credit card debt payoff, we have no high interest bearing debt at this point. But we literally would have a spreadsheet with all of the credit cards, business and personal and there were many, and the interest rate and the balance every month as we’re like chipping through them. That way, we could also prioritize paying off the highest interest rate ones first. But I have no idea. My first credit card… like maybe it was through the normal bank, associated with my regular bank account so that if I had an overage charge or something, instead of charging me an overdraft fee, it would just add that to my credit card balance or something.

Becca:
[26:40] So was your, was your first credit card prior to being married?

Jewels:
[25:58] Oh yeah.

Becca:
[26:40] So, I only have one credit card. I had a debit card for a long time. This circles back to Becca’s fear of spending money and therefore having credit. But I remember very distinctly I was planning a trip to LA to visit Taylor when she lived in LA, and she was like, you need to put this on a credit card so that you can earn points and I was like, mmm, I don’t know. But she convinced me. So I bought, I bought a credit, I got a credit card.

Taylor:
[27:13] Oh my God, I didn’t know I was the one that convinced you to do that.

Becca:
[27:15] You were. Yeah. Well it’s funny because at the same time when I was visiting you in LA I was also reconnecting with the Velkys for the first time post college. Where, so we knew each other in high school and then in college we met up once to smoke hookah on the porch of, that place, that hookah place on the drag. Kazbah. Where they taught me to smoke hookah with bubbles, which I still do to this day because it’s a lot of fun. And um, I reconnected with them like six years later.Like I wanted to go to South East Asia and/or Canada, I don’t remember. And we met up at Elaine’s pork and pie to discuss it. Anyways I don’t remember the situation.

Maggie:
[27:57] This story is blowing my mind Becca

Becca:
[27:58] So, I was planning a visit Taylor in LA. She told me to get a travel credit card at the same time was I met up with the Velkys to discuss I think Southeast Asia. And they were like you need a travel credit card. So just I decided to get a credit card. I don’t remember.

Jewels:
[28:13] Three tiny devils all appeared on Becca’s shoulders at the same time.

Becca:
[28:17] Stop hoarding your cash and get a credit card.

Taylor:
[28:20] And that must have been right after I got my credit card, because that was the first card I got was a travel card. And I had just gotten it when I was in LA. So I was probably like, yeah, on that ‘credit card 100,000 point high’ and was like, ‘get a credit card!’

Becca:
[28:24] Yeah, so mine was definitely a lower, lower risk card than that and I still have it. I’ve had one credit card my entire life.

Taylor:
[28:41] Which credit card is it?

Becca:
[28:46] It’s Capital One Venture Card. And it’s been fine. It’s not like an exceptional card but it’s not bad by any means. I get plenty of like, especially during Covid they’re like sure you can get travel points for eating out. I don’t know, just fucking spend money, that’s all we ask.

Taylor:
[28:57] You left your house that counts as travel now.

Becca:
[29:02] Exactly. Like literally. Um, anyways I guess what I’m saying is I got my credit card at the end of 2016. I’ve never had to pay any interest because I’ve always paid the last statement’s balance. And that is something that they don’t tell you and I only did out of fear, not out of knowledge, there is nothing like, understood about that choice. It was instinctively out of fear. So I think that a lot of people pay their minimum, assuming that that’s going to save them from additional fees and all that saves you is from your late fees. It doesn’t save you from the interest that you accrue.

Taylor:
[29:47] I didn’t know that for years. I would pay, I would pay more than my minimum. I’d be like I’m doing good I’m paying like $500 off of this $2000 bill. Like thinking that I was paying way above my minimum. I’m not going to get charged with a late fee. And I didn’t because I thought they just made their money off late fees. I had no idea I was getting charged interest on all of that and then compounded interest. No idea. It’s insane.

Becca:
[30:08] So I when I was writing the notes up for today’s episode I was like, I wonder what everyone’s APR is because I didn’t know my own APR and it took a lot of intentional digging to figure out what my APR was.

Taylor:
[30:16] I had to email my credit card company to ask them what my APR was because it’s no where on my credit card, no where. It’s listed nowhere.

Becca:
[30:22] You have to click the faintest font and I had to click around to find my APR. My APR is 22%. Which is a really high APR.

Taylor:
[30:39] Wow. And you have good credit.

Becca:
[30:39] Well I have exceptional credit and my APR is 22%

Jewels:
[30:40] Whoa.

Becca:
[30:50] I’ve again, due to fear not knowledge, I’ve never played interest on my credit card because I paid the entirety of the past month’s balance. But if I had unknowingly just skipped a month I would have been paying 22% APR.

Maggie:
[31:07] So credit cards can also put a little statement in their, whatever clause that if you miss one payment your APR jumps. So you could have 16% APR, miss one payment, for the rest of the time you hold that credit card. So you miss one payment and like the terms change.

Becca:
[31:24] It is such bullshit.

Taylor:
[31:28] Wow, I should go and find all my APRs again because yeah, they make it so hard to find and not just that, you know, so there’s certain cards when you sign up, it’ll be like 0% interest for 18 months, right? So you can put, you know, you can transfer a balance that you owe to that and you won’t be paying anything on it for 18 months. I did that when I, when we first started this podcast and I’ve mentioned it, I did that with like, I think $3,000, I was like, okay, let’s just get this off of my balance so I’m not paying interest on it, put it on a 0% interest, even though they charge you a fee of like 2% or whatever. So I had to pay like $400, it’s still cheaper than the interest I would…

Maggie:
[32:04] 22%.

Taylor:
[32:06] Than 22%. I’m still paying less by paying that fee than I would have in interest. All that to say, when we started this podcast, I decided to figure out when that 18 months was up because I was like, I know it’s been like about a year, I don’t really know exactly when. So I went online and I signed into the account and I could not find anywhere on the website. I spent an hour looking. An hour. I had to call them because there’s literally nowhere listed on that website when my 18 months is up. Anywhere.

Maggie:
[32:32] They don’t want you to know, they don’t want you to remember.

Taylor:
[32:43] So like when you sign up for these cards, it sounds like a great deal. But then they are banking on the fact that you’re not going to remember 18 months from now that that exact day, the 15th of whatever is when when you’re going to start paying that APR. So, after that when I called them and they told me the exact date I calculated out how much I owed and how much I’d have to pay every single month to pay it off, and I auto draft now from my bank account to pay it off every month.

Jewels:
[33:12] Brilliant, brilliant.

Taylor:
[33:14] It’s not cheap either, it’s like $300 and something dollars every month which I would never think to pay otherwise.

Jewels:
[33:12] Good thing you checked now and not like three months out when you’re like $1,000 a month for the next three months.

Taylor:
[33:14] Yeah, so and it’s, I cannot wait for the day that that balance is gone because that’s going to be $300 that I don’t have to pay any more that can go towards like medical expenses or other credit cards or whatever else. But yeah, it was like insane, the amount of effort I had to put in to find out what I needed to pay them every month to pay them off on time. It was crazy. And once I’m done paying that credit card off, I’m cutting up that credit card and throwing it in the trash. Like I’ll keep the bank account open.

Becca:
[33:58] And why why are you keeping that credit account open?

Taylor:
[34:01] I’m keeping it open because as we’ve learned, closing out accounts negatively affect your credit, which is insane.

Becca:
[34:04] Which is the most bullshit thing ever.

Taylor:
[34:10] You could try to be responsible and say, okay, I paid off this credit card, I don’t need it. I have another credit card, I’m just going to limit myself to one or two credit cards and that will negatively affect you and your credit, because you have to have credit to build credit.

Jewels:
[34:20] Yeah. So it affects, well it affects your credit score primarily in two ways. First of all it lowers the amount of credit available to you. So your credit utilization percentage will go up because if if all of your credit cards put together was a 10 grand allowance and you had $3,000 in actual debt on them then you’re at that 30% utilization rate. But if you go ahead and shut down a $5,000 credit card because it’s all paid off, all of a sudden you have $3,000 out of $5,000. So you’re at 60% credit utilization rate which is going to affect your credit badly. The other aspect that it affects is the age of credit history. So what they do is they take all of your credit accounts available to you and they average how many years you’ve had those accounts open and they want you to have a really long credit history. So if you shut down one of your accounts, that’s your older accounts, all of a sudden your credit history age is a lot less. So they’re like, oh, historically you just really haven’t been a credit user as long as we’d like to see.

Taylor:
[35:27] Which is bullshit because I’m sorry – there’s definitely a paper trail showing that I had a credit card that I closed.

Jewels:
[35:31] Yes. They could be smarter.

Taylor:
[35:32] It’s bullshit. And what sucks is that I hate the idea of having an open account somewhere in the world that I’m not actively or your tracking. Because what if I get fucking, what if someone steals my identity and now they have this credit card that they can use in my name. You know, just some, shit like that like drives me insane where I’m like, I really hate, it’s like digital clutter and I fucking hate digital clutter and I just want it all to be gone and just have like these three things that I use, but I know that that’s going to fuck me over if I do that. So it’s like I’ve done it with another credit card that I never use anymore. I opened it to pay for something specifically. I chopped it up and I threw in the trash and it’s still, like that account is still out there. I just don’t use it.

Jewels:
[36:11] Right, but it’s something you’re responsible for sort of tracking and making sure nothing happens to.

Taylor:
[36:14] Yeah.

Jewels:
[36:16] So a couple strategies for this is if you actually can look at your accounts and figure out which ones you’ve had open the longest, and then prioritize paying off your younger accounts, because if you close those then it’s not gonna affect your age poorly.

Taylor:
[36:26] Oh I didn’t think about that. Yeah.

Jewels:
[36:31] And then also before you start closing things, if you’ve paid it off and you have your credit utilization at a good point and your credit score looks good, call the credit card that you want to keep and ask them to raise your limit. Because without you actually putting more debt on there, they may just raise the limit up, which allows you to close.

Taylor:
[36:39] Oh and that kind of cancels out. That’s really smart.

Jewels:
[36:50] Yeah, so get them to raise it enough so you can stay within your 30% utilization and then shut down an account.

Becca:
[36:58] So what I was learning over the course of the week was that they say to have like fine credit, keep it under 30% utilization. So if you have a $10,000 limit on your credit card, definitely keep it under $3000. Which like, LOL at the fact that they give you a $10,000 limit when they’re like just kidding, don’t go over $3000 or your fucked. But really, they’re like to have great credit, you have to keep it under $1,500. Which I thought was really interesting and really fucked up. The system truly is designed to encourage you to spend more and to fuck up your own credit so that you have to pay more to buy more. It’s all fucked up. If you have the opportunity to pay off every month do it. If you have the opportunity to keep it under 15% utilization, you’ve got to do it to maintain your rate.

Taylor:
[37:47] Remind us what utilization is again just so….

Becca:
[37:50] So like if you, when you look at your credit card statement it says you have X amount available to you. But I think mine is $10,000. You want to keep it under $1,500 a month, ideally.

Taylor:
[38:02] Of what you owe, of what you’re putting on there.

Becca:
[38:03] So, like recently my credit card statement went down, my credit score went down 14 points I think a couple weeks ago because usually I keep my credit card balances around $1,500 every month that I pay off. And it jumped to $1,900 because I think we’ve got some flights or something. And that dropped my credit score 14 points. Which when you’re looking to qualify for a loan for a house, makes a really big difference and it’s just shit that you’re not told about, none of this is told to you. And also $1,900 out of a $10,000 limit is not that much, especially when you pay it off every balance. And I mean the system is truly rigged against you so you have to keep that in mind at all times.

Jewels:
[38:49] And your credit score is super dynamic, it can change from day to day multiple times a month, so don’t panic if you see it change.

Becca:
[38:55] Right. For us, and obviously some of us are… came into this podcast group in different areas, like different points along our timeline of financial development. But it really helped knowing that there were other people who were just trying to figure out their way along. And I think that’s the whole point we put at the start of this podcast of like, if you need encouragement to know that you’re not, like even if you’re like absolute square zero, like we’ve all been there, obviously.

Maggie:
[39:24] We’ve been at negative square.

Jewels:
[39:27] Way negative.

Taylor:
[39:31] Just check my bank accounts.

Becca:
[39:32] Yeah, right, there’s like nothing shameful. Whatever square you’re at, and we’re there with you and like now is a perfectly fine time to start your financial independence journey.

Taylor:
[39:40] It is literally never too late until you are dead in the ground.

Becca:
[39:47] It’s literally never… people start after they’re retired.

Taylor:
[39:51] Oh yeah. There are people in their 60s and 70s being like ‘I should start investing’. Like any age, any age.

Jewels:
[39:57] Especially for women, often times the real wake up call comes in middle age after divorce, in financial ruin. And it’s like at that point, these women have to pick themselves up and figure it out from scratch and not just from scratch from a very bad position, emotionally and financially. And they figure, you know, women are amazing, they figure it out.

Maggie:
[40:17] Man, Elizabeth Warren, I don’t care if you love her hate her, makes some really strong points about that exactly in her book, ‘The 2 Income Trap’ – highly recommend.

Becca:
[40:28] What is her educational background?

Maggie:
[40:32] I think she’s a lawyer. But I could be wrong? Or an economist, one of the two. But yeah, she talks about how in divorces in particular, women often end up worse than men and how that has impacted the American economy, and how even education is influenced by that, which is crazy. It’s like such a domino effect of things that I hadn’t thought about before. So I don’t know. I think it’s important book to read. It is very political depending on your point of view, I still recommend the book. Just don’t read the book with rose glasses on like Elizabeth Warren but I think as Becca mentioned earlier with any politician, you need to listen to it with a grain of salt. So I agree with most of what she’s saying, but some of it is very extreme. But some of the points in that book are worth hearing, especially.

Jewels:
[41:34] It sounds like she’s probably making a political argument for some of the initiatives she wants to push through, even if you disagree with the way she wants to treat the symptoms. Her breakdown of the symptoms in the situation right now are still probably valid.

Maggie:
[41:43] Yes, a perfect way to say it Julie, thank you. But a lot of it is about how women are affected a lot differently than men, especially in divorce situations, which I think is a very valid point because divorce is a very prominent thing in American culture.

Jewels:
[41:55] Yeah.Very much.

Becca:
[42:06] If only… I wish that it just wasn’t legal, that we just couldn’t divorce.

Jewels:
[42:10] Marriage?

Becca:
[42:12] It would be so nice if we could go back to where women couldn’t leave their husbands, no matter what. I’m tired of female autonomy. Okay? Call me old fashioned.

Taylor:
[42:19] Get rid of being… actually I don’t even want to be able to open up a credit card without my husband’s approval. Take it all away. I don’t want it. No, thank you.

Maggie:
[42:29] I don’t want to. I want to call you modern fashioned.

Taylor:
[42:34] I was just going to say one more thing about the, what we’ve kind of been talking about with like, you know, basically personal responsibility versus like education, stuff like that. When I’m looking at my relationship with money over the years and throughout my life, to me, money was something I never fully understood. I feel like I had pieces of the puzzle. You know, like little things, like my brother would like be like, hey, you should open up a credit card, this is how credit cards work or whatever. Well, he didn’t explain how they work. Hey, you should open up a credit card so you can get the benefits, whatever. Or my dad mentioning the stock market to be, but never actually like being like, hey, this is a way that real people make money. And I never had the full picture, which I think was part of the problem. Like I understoo little things like, oh, credit cards can help you if you do it right. Oh, the stock market can help you if you know anything about the stock market. I had little bits of information, but there was never a full picture for me. And I feel like maybe a lot of other people feel that way too about anything to do with making money and finances and credit and stock market and everything. It’s like this huge umbrella things and knowledge that you have to basically make your life career trying to understand. And it can be very scary and overwhelming and you don’t know, you’re always scared of getting scammed, you’re always scared of losing money. And I get it. That is what I wanted to say.

Maggie:
[44:10] You’re right, though, it is a lot, it is a full time job.

Jewels:
[44:14] Yeah. Over the course of your life you’re handed all these little tools but very rarely does the person handing it off to you, sit down and say this is what this is, this is how it works, this is what’s good about it and this is what’s bad about it. No one does that.

Maggie:
[44:30] And here we are, Vaginance being those people for our five listeners.

Jewels:
[44:32] Hello!

Taylor:
[44:35] Yeah, we love you, thank you all of our friends who listen.

Jewels:
[44:43] Okay, so I did want to break down the two most important ways you can quickly improve your credit score. Number one – pay your bills on time because even your utility bill, if you miss a payment on that and it goes late, that can affect your credit score. So any of your recurring bills and your minimums, make sure that you’re paying those on time. Number one most important thing. And then, figure out your credit utilization rate. You can check your credit score. Sometimes they have a breakdown depending on how you’re accessing it. Or even if you use a service like Credit Karma to sort of keep an eye on it, it’ll tell your credit utilization and then start chipping away at your credit card debt and get it under that 30% mark. If you do those two things you will see a dramatic increase.

Taylor:
[45:30] Within months, it seems, yeah, like pretty quickly.

Jewels:
[45:32] Oh yes. Yeah, basically within weeks of getting it under that 30%.

Taylor:
[45:37] And Julie tell us why we should care, why should we want good credit?

Jewels:
[45:41] So you should definitely want good credit. Even if you do not plan to be taking out mortgages, loans or credit cards. Even if you don’t plan to use credit, your credit score can be used by landlords and employers to judge you. So you might be trying to go get a job and your employer can pull your credit score and judge you based on that and say oh well this person doesn’t pay their bills on time every month so they’re probably not going to be a good employee even if it has nothing to do with your job. Like you might not work in finance but they may judge you based on your credit score.

Taylor:
[46:15] So that will affect the kind of job you can get and how much it’s going to pay you.

Jewels:
[46:18] Exactly. And then also when it comes to landlord, you can be going to try to rent a house or an apartment and the landlord may choose to not rent to you because you have poor credit. And that means that you’re at risk of not paying your rent every month. Or they can demand an excessively high upfront deposit to compensate for the risk that they’re taking on based on your credit score even if you’re not a credit card user. So you definitely want to build up some credit and keep an eye on that score and have a good score.

Taylor:
[46:50] And I’m going to go ahead and guess that that affects where you can live in the quality of your life. If you’re living in maybe not a great area, because you can’t afford a better apartment. So it can literally affect your life in every way.

Jewels:
[47:00] Mhm.Yes.

Becca:
[47:05] You know what I think is weird bullshit? That your FICO score can be between 300 and 850?

Jewels:
[47:11] It’s a really weird range.

Becca:
[47:12] It’s a weird range, and 650 – 850 is a reasonable number and then 300 – 650 is red zone. Like you’re not considered for anything. It’s like someone telling you that the people they’ll date, they rank between an 3 and an 8 and they’ll only consider 6.5 out of an 8. And you’re like why do you even rank them to the 3 then? What ranking system is this?

Jewels:
[47:40] Uh, that’s a great point.

Maggie:
[47:43] Uh so I remember it’s something I wanted to bring up, which I thought was really interesting and I wish I could find the original tweet. But it was definitely a tweet that I read a couple months ago that was about this woman, who her brother in law I believe was in jail. Don’t know the reason why, but it was, what can you do for your family members who are incarcerated? And she put her utility bills in his name and added him as a like authorized user on her credit card. So that when he got out of jail, his credit score was good enough that he could build his life on his own. I will try harder to find the original tweet because I know it linked to an article that was like, other things you can do to help your incarcerated family members, which I think is an important thing to be educated about. I personally have had friends incarcerated and had no fucking clue what to do about it. And it was very scary and sad.

Becca:
[48:46] Not necessarily even family members incarcerated, but also family members in extreme medical debt or going through a divorce and have fucked credit because of that. Like lots of reasons that people close to us could have fucked credit.

Jewels:
[49:00] Or if you’re starting building credit, trying to build up your credit score from scratch, that can be really difficult. It’s a lot easier to build up credit once you have some credit history. But two main ways to do that, like Maggie mentioned getting your name added to a utility bill of the place you live at is great because it increases sort of that on time payment record that goes into your score. And the other thing you do is you can get a secured credit card. So basically, you get a $500 credit card from the credit card company but you give the credit card company $500 upfront.

Becca:
[49:39] Mhm.

Jewels:
[49:40] That way they have a deposit like a security deposit in case you don’t pay it back because you have no credit history, so they don’t trust you yet. So you basically pay the credit card in advance and then you get to use it and pay it off and build up that credit history and then eventually you can convert to an unsecured credit card like your normal ones, but they’ll give a secured credit card to you with no credit history.

Taylor:
[50:03] So there is hope, there’s hope that you can change your life even if you’re in shitty circumstances.

Becca:
[50:09] And another offering for those that are starting from zero is the credit building loan. You can get those from credit unions and other banks. Where it’s literally… it’s really cool. It’s very sexy. It’s a loan that’s designed just to help build your credit where you essentially are like taking out a loan from yourself and then you’re paying back that loan through the credit union. At a there’s like a 15% APR generally, and like a really nominal administrative fee, like $9 to take out this, it’s called a credit building loan. If you have a bank or credit union, ask them about it. Credit building loan. Where it can be like a really small amount, and you’re taking that money out from yourself and then you’re paying it back. So it’s all your money but it goes to the credit bureau and it builds your credit and that’s what it’s designed for, literally just designed for your benefit to build your credit. I think it’s really sexy. I think it’s really wonderful.

Taylor:
[51:12] I didn’t know about that, so you’re literally, they’re just basically charging you a fee to help you do that. That is really interesting.

Becca:
[51:13] Yeah. So if you’re starting at zero, which many of us are, for various different reasons, take a look at credit building loans.

Taylor:
[51:30] Take a look, take a look at me now. How does buying a house affect your credit? Because I feel like we touched on it but I still don’t fully understand.

Jewels:
[51:37] For mortgages, luckily that does not impact your credit utilization but it gives you the opportunity to have on time payments against a really large debt.

Taylor:
[51:47] Mhm.

Jewels:
[51:47] So that’s a positive credit accounts.

Maggie:
[51:48] This is a complicated answer Taylor, you asked a hard question. I don’t want to answer that, it’s hard.

Taylor:
[51:50] I’m sorry.

Jewels:
[51:51] Yeah, it does not… it definitely does not nail your credit. Like you would think a massive debt would. Now when you get a mortgage there will be a hard pull on your credit and those sort of stay on your credit report for a certain amount of time before they fade away. So you don’t want to be like I’m applying for a credit card and a car loan and a mortgage all at the same time because you’re going to have three hard marks against your credit, which freaks credit companies out because they’re like, oh should I give them this credit based on their current utilization if they’re also applying for all these other things because I don’t really trust the number I’m seeing in the report.

Taylor:
[52:27] Right, sounds like they’re going balls to the wall right now.

Jewels:
[52:29] Right. The other thing I wanted to touch on was this idea of good debt versus bad debt and what that really means. And oftentimes what you find is it’s actually somewhere in between. But bad debt is that high interest debt that people tend to max out and then the interest builds up and you end up in this debt spiral. So that’s oftentimes your credit card debt. And then another type of debt that’s typically seen as bad would be car loans. And the reason for that is because if you go and buy a brand new car you get a loan against the value of it. Oftentimes nowadays they’ll give you a 0% down so they will give you a loan for 100% of the car amount. But as soon as you drive it off, the car is only worth 80% of that amount. So if you change your mind and had to sell the car, you may sell the car and still be saddled with leftover debt from that loan, which sucks.

Taylor:
[53:20] Mhm. Yeah.

Jewels:
[53:22] So that would be something that could potentially bad debt. Good debt would be something like a mortgage because it is asset backed. So the house you got the mortgage on, the bank believes should be worth the amount of money they gave you to buy it. So if you ended up having to sell the house, you don’t end up still having mortgage debt left after. Doesn’t always pan out that way, you still have to make a good investment. But that is one of the types of things that is typically seen as good debt because over the life of that loan, especially, these are really long term loans like 30 year mortgages by the end of it, the asset is usually worth a lot more. So these are appreciating assets, as opposed to depreciating assets like cars.

Taylor:
[54:04] Fingers crossed, I’m so nervous.

Jewels:
[54:09] And we put some really great mortgage math breakdowns on our Instagram.

Taylor:
[54:13] They’re amazing. I was like, blown away.

Becca:
[54:14] So fucking hot.

Jewels:
[54:17] Math, math, math.

Becca:
[54:18] It’s gotten a lot of compliments.

Taylor:
[54:19] But it was so like easy to understand though too. It wasn’t like complicated. Like when I first pulled it up I was like uh jeez, I have to read this.

Jewels:
[54:22] Juuulie.

Taylor:
[54:19] I was like, god, I gotta… but I was like, I was reading it and I was like, oh this is actually really easy to understand, that’s great.

Jewels:
[54:30] Yeah. And they’re definitely simplified and don’t take into account certain things, but it’s sort of, you’re comparing apple pie to apple crumble and we’ve just taken the apples out and that’s sort of what we’ve compared. And I think it’s a good illustration of the fundamental principles behind.

Taylor:
[54:53] We’ll get all into that, next episode with our first fucking guest. I’m so excited to have her on.

Maggie:
[55:03] Gotta buy another microphone.

Taylor:
[55:06] Oh yeah. Oh my God.

Jewels:
[55:09] I got it all. We’re ready.

Becca:
[55:10] We could have easily just leaned.

Taylor:
[55:12] Yeah, we could lean in, we could lean.

Jewels:
[55:12] I did want to talk about the fact that I think student debt is possibly the most predatory type of debt we have in this country.

Taylor:
[55:24] Let’s get into it.

Jewels:
[55:25] Because it targets young people who probably have not had a credit card or a car loan. So they have no experience with interest bearing debt. No one explains deferment and there’s no credit check oftentimes for student loan debt.

Taylor:
[55:42] Really? I didn’t know that. That is that is insane.

Jewels:
[55:44] Correct. So they will just give it to you.

Becca:
[55:46] So I thought, well because you’re 17, why would you have a credit? They’ll give you anything because it doesn’t matter.

Taylor:
[55:51] That’s true. Yeah, wow, that is so fucking predatory.

Jewels:
[55:51] Right. And then it disproportionately affects people of color because students of color just at a very general statistical level oftentimes in this country have less financial support from their family because their family has been subjected to the systems of this country. But college is a requirement if you want to change your status in our society. So college is not optional. You have to go, but you don’t have anyone else contributing money to support you. So you have to take out more student loan debt and at the end of the day you’re going to get paid less than people with the same degree.

Taylor:
[56:33] It’s so fucked up.

Jewels:
[56:34] It is crazy. So you are saddled with more debt. They typically charge you a higher interest rate and you’re going to get paid less at the end of the day, especially if you are a woman of color.

Taylor:
[56:43] Oh but no Julie, the game isn’t rigged at all. It’s just all about working hard and you just didn’t work as hard as everybody else. Such fucking bullshit.

Jewels:
[56:46] Yeah, statistic that blew my mind was that black graduates have a higher default rate, meaning that they, their loan went into default – this is very bad – than white dropouts.

Taylor:
[57:06] They had more access to resources to pay for it as fucking dropouts than people who actually had jobs and were like trying to pay off their debts? That is fucking crazy.

Jewels:
[57:08] Right. Or had completed their college degree. Makes me so crazy. Makes me so crazy. Oh, and there’s no bankruptcy protection on student loans. So you can get in crazy amounts of credit card debt or mortgage debt and get yourself in a bad financial position out of decisions you made.
But you have bankruptcy protection which allows you to wipe that debt out and start from scratch. But student loans will follow you to the grave. They do not get wiped out by bankruptcy.

Becca:
[57:46] You were 17 years old when you decide to go to college and no one tells you, ‘hey, by the way, this is what’s going to happen financially, to you.’

Jewels:
[57:47] By the way, if you do have student loans that you are struggling with, call your loan provider and ask them about income based repayment because this might be an option where basically they scale the amount you have to pay every month to your income. So if yeah, if you have just started your career or your career changed because Covid happened and maybe you had to make a career change and your income dropped, they can potentially adjust the amount you have to owe every month to your income, which can allow you to catch up or stay on top of it. This is a better option than going into default. It’s not the right decision for everyone, ideally just crush your student loans as fast as you possibly can, pay way more than the minimums, but know that there are some other options out there if you need them, and the loan provider is not going to be forthcoming and telling you that that’s an option.

Becca:
[58:48] I have a question. So I’ve seen a lot on Instagram, I follow a lot of like, especially female financial Instagram accounts, and a lot of them are advocating, ‘Hey, during Covid, your student loans were deferred. So spend the money you would have spent paying off student loans on other things like investments or other debt. Did those people understand that they were accruing debt when they were making those statements?

Maggie:
[59:22] I feel like no.

Becca:
[59:33] I had literally had no idea until today that deferred student loans accrued interest, zero idea. And I’d like to think of myself as a relatively educated person.

Maggie:
[59:35] I only knew this because I have a friend who’s been deferring his loans for a long time and told me that he’s been accruing interest and that’s how I learned it.

Becca:
[59:42] And he knew?

Maggie:
[59:43] No, he looked at his statement and was like, ‘shit, I owe fuck ton more money than I thought I did’ and figured it out that way. And then told me about it and I was like, oh shit, that’s fucking crazy man.

Becca:
[59:45] Well, I just think it’s really fucked up that like they’re like, hey guys, we know Covid has been a big burden on everyone. Go ahead and defer your student loans until X date. But deferment doesn’t mean anything except you’re just accruing interest.

Jewels:
[1:00:10] And it sounds personally to me, having fought our way out of a lot of debt and being in a position to invest now, there is no way I would ever recommend to someone to hold off on paying their debt and instead make investments because that debt holds you back way more, it tends to be at a much higher interest rate, especially with the compounding interest.

Taylor:
[1:00:33] And we’ve talked about this too before.

Jewels:
[1:00:35] Yeah, I am a big advocate of focus on your debt first. It’s a little bit different if you’re looking at like, housing debt.

Taylor:
[1:00:43] I never thought about this way until you had said it Julie. Having debt, you are paying more interest in your debt than you are making back in investments. So like say you get a 10% return…

Maggie:
[1:00:55] Yeah, it was like the beginning of the podcast when we’re like, pay off your fucking credit cards man.

Taylor:
[1:00:57] Yeah. Which I never thought, because I was like yeah let’s invest, fuck my credit card blah, blah, blah. But that’s dumb because well, it’s not informed because if I’m getting a 10% return on my investments, which is what, average right?

Becca:
[1:00:58] That’s generous.

Jewels:
[1:01:11] That’s pretty high. For your index fund, that would be pretty high.

Taylor:
[1:00:57] Okay right. Say I’m getting a 10% return my index funds which is like pretty fucking good.

Maggie:
[1:01:12] It’s very high.

Taylor:
[1:01:19] I’m paying 22% in fucking interest, in APR on my credit card, which one is higher? You know, I mean how am I really, how are you really going to break down the steps, and like chip away at it?

Jewels:
[1:01:30] The credit card, yeah the credit card debt is costing you more than the investments are making you. And even if you have a 14% credit card, which is pretty good, you’re still losing money.

Taylor:
[1:01:33] Yeah you’re still losing money. So with that in mind, say you have somebody that has student loans, credit card debts, a loan out on a car and a mortgage. How do they even begin to tackle this debt?

Jewels:
[1:02:02] Becca nailed it. Rank all of your debt by the interest rate and pay the highest interest rate debt off first.

Taylor:
[1:02:03] Right.

Jewels:
[1:02:09] There are two methods proposed….

Taylor:
[1:02:09] But that’s a simple way to say it but when it comes to like mortgages…

Jewels:
[1:02:13] Well typically your mortgage is going to be your lower interest rate debt anyways. But most likely it’s going to shake out with credit cards, and you need to rank your multiple credit cards by their interest rate and then it will probably be student loan debt or your car loan depending on what year you were in school. Student loan rates are a lot lower now than they were when we were in college. Um, your car loan interest rate right now tends to be about 5% or 6% and then mortgages are below that right now.

Taylor:
[1:03:00] There you go, that was beautiful.

Jewels:
[1:03:01] But if you had an 18% mortgage, like some of our parents did back in the 80s, then you would definitely want to pay that mortgage off very quickly because that’s like buying a house with a credit card.

Taylor:
[1:03:06] Yep. That happened to my mom when they bought their first house. They had like a 20%, they thought that was a deal.

Becca:
[1:03:14] My parents too.

Jewels:
[1:03:14] So crazy. Yeah. What a deal.

Becca:
[1:03:19] Well, because I remember she described it to me. They used a term, it might have been balloon? Balloon payment was like all the rage.

Jewels:
[1:03:23] A balloon payment? So at the end they could just go, you owe it all now.

Becca:
[1:03:32] Yeah. It was really, really low upfront. So the idea is like, hey, you’re young, you don’t have a lot of money, you’ll more money later. And then it balloons up and then your fucked.

Jewels:
[1:03:37] That is crazy. I didn’t know mortgages were ever done like that. I mean I’m familiar with balloon payments for other things. Like if you take out certain business loans, sometimes it can be in that balloon structure, but for a mortgage?

Taylor:
[1:03:58] And they were probably still paying a fraction of what houses cost now.

Jewels:
[1:03:59] Oh my gosh. Well thank God, or else all of our families would be bankrupt.

Taylor:
[1:04:05] Oh, for sure. No one would buy houses. If I had to pay 18% interest on my house, I would literally not be able to buy a house. Not be possible.

Jewels:
[1:04:07] Yeah it would not be possible. So yeah, the two main strategies for debt payoff, are snowball and avalanche and a lot of people (Dave Ramsey) like to recommend the debt snowball. So if you have like a $10,000 credit card and a $2,000 credit card, take the one with the lowest balance. So ignore the $10,000 one for now and just focus on paying off the $2,000 credit card. And they argue that this is great because of the psychological benefits of seeing that you have paid off an entire account that you had.

Becca:
[1:04:49] Which is valid.

Jewels:
[1:04:50] Which is valid and it’s been very successful for a lot of people and I think it infantilizes us.

Maggie:
[1:04:57] And Julie don’t like it.

Becca:
[1:04:54] And also fuck Dave Ramsey.

Jewels:
[1:04:57] Yeah, fuck that shit, fuck Dave Ramsey and fuck infantilizing people and shaming them about their money.

Taylor:
[1:05:07] What does infantilizing mean?

Maggie:
[1:05:09] Like making them feel like an infant.

Jewels:
[1:05:09] Yeah, infantilizing like talking to you like you are a child, like you’re too dumb. Don’t worry, don’t look at the math, just pay the smallest one first because you’ll feel better at the end of the day.

Taylor:
[1:05:19] Their methodoloy’s basically, like if you see that you’re paying more, like you’re getting less and less in debt from this smaller amount, then you will feel like you’ve achieved more than chipping away at the larger amount.

Jewels:
[1:05:38] Which is true that psychological effect is totally valid but it may also be cancelled out if you are aware of the math and know that you are in fact paying more money and taking longer to pay off your debt by using that strategy. So my preferred method, my preferred method and the one that Zach and I used to get out of a ton of credit card debt is called avalanche. And that is where you rank your debts by the interest rate and you start with the highest interest rate one.

Maggie:
[1:06:09] Which mathematically is a much smarter choice.

Jewels:
[1:06:10] Way smarter.

Becca:
[1:06:11] Yeah. Imagine that Dave Ramsey when he tells you what to do, like pats you on your head in a really condescending way. And imagine what we do is like smack you on your ass in like a really affirming, empowering way.

Taylor:
[1:06:29] Everyone listening imagine us collectively slapping you on the ass.

Jewels:
[1:06:32] Okay, so in avalanche basically what you’re doing is you’re paying off the most expensive debt first. The one that’s costing you the most to hold. And what that does is once you’ve paid off your most expensive debt you can take the same amount of money and put it towards your next debt, that’s cheaper debt and you’ll pay that off even faster. And it creates an avalanche instead of a tiny snowball building up.

Taylor:
[1:06:57] I would also like to note that when I was in massive credit card debt, my original method was the snowball not knowing these terms. I was like I’m just gonna pay off my lowest ones first. I’ll pay off like the two credit cards that only have like $300 and $400.
And then I paid off both those credit cards and I feel really good about myself because I paid off those and now I just have this one lump larger some on the other credit card. I did that for years not and I never got me out of debt. And it wasn’t until fucking y’all told me that that was dumb and I should pay off my highest interest first that I actually was able to get out of debt and pretty fucking fast.

Jewels:
[1:07:34] Okay, so I will say yes, badass, you’re amazing. And a hybrid method is actually something that I’m a fan of. If you have a really small debt that you could just pay off now, or within the next three months and you’re going to feel better about it because you have one last thing to track, do it and then go for your highest interest rate because the difference at the end of the day isn’t going to be that much.

Taylor:
[1:07:53] Right. But when it comes to chipping away at like $20,000.

Jewels:
[1:08:03] Right? Well, if you…

Maggie:
[1:08:04] Not if you feel good over here.

Taylor:
[1:08:05] I actually literally before, right before we got like, I came to record, I paid off like two grand on my highest interest credit card.

Jewels:
[1:08:09] Fuck Yeah.

Taylor:
[1:08:13] Because I was like, I watched that episode of Explained, I was like, I gotta get my credit card debt down, like immediately. I was like $2000 – boom!

Jewels:
[1:08:24] Yes, that is amazing.

Becca:
[1:08:26] What we want you to know is that the game is designed for you to be in debt. That’s how it’s designed. So if that’s where you are, that’s completely fine and we’re going to help you get out of it and just like, don’t feel shame about it. Talk about it. We want to hear about it. Your friends want to hear about it because your friends are there too.

Taylor:
[1:08:49] Your friends are all in debt. Don’t believe them. It’s 4 in 10, 4 in 10 are in debt.

Becca:
[1:08:49] Your friends are in debt. I’d like that crop top, very much.

Maggie:
[1:09:04] As long as on the back it says you’re going to be upset.

Taylor:
[1:09:09] Oh my God.

Becca:
[1:09:10] You’re going to be upset. We did the math.

Maggie:
[1:09:11] You’re gonna be upset. That should be the title of this episode.

Jewels:
[1:09:12] You’re going to be upset.

Taylor:
[1:09:15] Speaking of crop tops. Becca came home today with not one, but two matching Dawson’s Creek crop tops for me and her that we are currently wearing and we will take a picture to post.

Becca:
[1:09:26] You’ll see it on our Instagram and you won’t comment.

Maggie:
[1:09:30] You’re going to be upset.

Becca:
[1:09:35] You’re going to be upset. Um, so thanks for joining us tonight. I’m Becca.

Maggie:
[1:09:36] Maggie.

Taylor:
[1:09:37] Taylor.

Jewels:
[1:09:38] Jewels.

Becca:
[1:09:35] And we’re excited that you joined us. Please like, subscribe. Go to our Instagram @vaginancepodcast, go to our website vaginance.com. We want to hear your thoughts. We’d like to hear your positive feedback, and privately we’d like to hear negative feedback. No need for the public to see that.

Taylor:
[1:10:03] Tell us your APRs, you know. Let’s get sexy.

Becca:
[1:10:06] Um, but really, tell us if you knew your APR and like didn’t have to look it up.

Maggie:
[1:10:10] Don’t look it up. Take a guess at what your APR is.

Becca:
[1:10:12] Yes. And then see if that’s true.

Taylor:
[1:10:12] That’s how we should start games. Like who has the highest APR gets to go first.

Maggie:
[1:10:17] If you’re the closest….

Becca:
[1:10:20] Wait, did I win?

Maggie:
[1:10:21] Wait, if you guess Maggie’s APR correctly, you get one crop top that on the front says ‘Julie Made a Spreadsheet’ and on the back says ‘You’re Gooing to be Upset’.

Jewels:
[1:10:35] I ran the numbers.

Maggie:
[1:10:35] I ran the numbers. You’re going to be upset.

Taylor:
[1:10:36] Wait, is there is there like a good financial, like board game, that’s fun?

Becca:
[1:10:45] Monopoly.

Jewels:
[1:10:45] Urgh.

Maggie:
[1:10:45] You know, Monopoly was created as a satire.

Jewels:
[1:10:51] Well, it was a teaching mechanism to teach how terrible capitalism is, yes,.

Maggie:
[1:10:54] How bad having a monopoly is, how horrible it is for everyone.

Becca:
[1:10:58] Is that why they called him Mr Moneybags?

Jewels:
[1:11:01] And it is a capitalist success.

Maggie:
[1:11:04] And then it became hugely successful. But the whole point of the game Monopoly was to show how bad owning monopolies is for other businesses.

Taylor:
[1:11:13] And also created by a woman, and stolen by a man.

Maggie:
[1:11:17] Other interesting Monopoly facts. Because I know them, um Monopoly was really popular during I think World War One. And as like ah, care packages to the troops, they would send Monopoly boards on basically bandanas, and on the back side was like maps for the areas that they were in so that prisoners could escape. Yeah, so they would send Monopoly games to prisoners. But really they were secret maps.

Jewels:
[1:11:51] Okay, that’s cool.

Maggie:
[1:11:51] Yeah, that’s super cool.

Jewels:
[1:11:57] Too much, she said.

Becca:
[1:11:59] Too little too late.

Taylor:
[1:12:00] Yeah.