The Debt Free Guys
Episode 280
Episode Guide
Episode Summary:
Episode Timestamps
Episode Show Notes: ChooseFI Podcast
Episode Summary:
Living fabulously without financial distress involves meaningful financial conversations, awareness of spending habits, and the courage to change. With a shared journey through a combined debt of $51,000 in credit card debt, John Schneider and David Auten, hosts of the Queer Money podcast, illustrate the importance of confronting financial realities head-on. They emphasize the necessity of understanding personal values and desires, which serve as the foundation for financial stability and intentional spending. Their approach, termed the debt lasso method, integrates commitment, efficient debt management, and the leveraging of zero-interest balance transfers. Through this method, they highlight the successes from their financial analyses, which led them to reconsider lifestyle choices and focus on the true essence of happiness without the burden of credit card debt. By establishing a supportive community and changing spending patterns, they demonstrate how financial independence is attainable for everyone.
Key Topics Discussed
Understanding Debt and Its Impact
- John and David share their personal stories of accumulating $51,000 in credit card debt, despite having backgrounds in financial services.
- Key Insight: Financial know-how does not always translate into effective personal financial management.
The Reality of Travel and Lifestyle Choices
- The expectation to travel extensively without accruing debt is discussed, focusing on the importance of mindful consumption.
- Key Insight: Travel with purpose while avoiding debt hangovers is achievable.
The Debt Lasso Method Explained
- The debt lasso method includes strategies of commitment, efficient debt management, and finding zero-interest balance transfers.
- Commitment: Agree not to add more debt while paying off existing balances.
- Automating Payments: To prevent missed payments and increased interest rates.
- Monitoring Progress: Adjust payments as necessary.
- Key Insight: This method simplifies debt repayment through lower interest rates and streamlined payments.
Creating Community and Support
- Emphasizing the importance of community in achieving financial goals.
- Sharing personal financial struggles fosters support and accountability.
- Key Insight: Engaging in open discussions about finances promotes collective growth and understanding.
Actionable Takeaways
- Conduct a thorough spending analysis to understand your financial patterns.
- Commit to living within your means by setting clear financial goals.
- Engage in meaningful conversations about finances with friends and family.
Key Quotes
- "When you put that out there, you start to attract other people that want to have that as a goal in their life too."
- "You don't have to spend a ton of money to have a good time."
- "The debt lasso method involves lowering interest rates and consolidating payments."
Related Resources
Discussion Questions
- How can understanding your spending habits change your financial outlook?
- What role does community play in achieving financial goals?
Terminology Glossary
- Debt Lasso: A debt repayment method focusing on consolidating high-interest debt and maintaining low payables.
- Frugal Living: An intentional lifestyle focusing on reducing unnecessary expenses while maintaining quality of life.
Podcast Description
Join hosts Jonathan Mendonsa and Brad Barrett as they explore financial independence with their guests, revealing tools and strategies to achieve a debt-free life and design a financially sustainable future.
Timestamps
- Podcast Intro:
- Introduction of guests, John Schneider and David Auten
- Discussion on debt experiences
- Traveling without accruing debt
- Introduction of the debt lasso method
- Conclusion and final thoughts
- Podcast Extro:
Living Fabulously Without Financial Distress
Achieving financial independence and living a fulfilling life without falling into the traps of debt is an attainable goal. Building a sustainable financial future involves understanding your spending habits, engaging in meaningful financial conversations, and having the courage to change your lifestyle. Here’s how you can implement these teachings effectively.
Understanding Your Financial Reality
The first step in managing your finances is acknowledging your current situation. This is crucial if you find yourself in significant credit card debt. Start by conducting a thorough spending analysis to understand exactly where your money is going. Look back at your expenses for the past year. This can unveil patterns and areas where you might be overspending.
Actionable Steps:
- Perform a detailed review of your bank statements to categorize your spending.
- Identify areas where you can cut back. For instance, you might be surprised at how much you spend on dining out or entertainment.
The Debt Lasso Method
One effective strategy mentioned in personal finance discussions is the debt lasso method. This approach simplifies debt repayment and ensures a swift pathway to financial freedom. The method encourages consolidating debts and leveraging zero-interest balance transfers effectively.
Key Components of the Debt Lasso Method:
- Commitment: Promise yourself to stop accruing more debt.
- Quick Wins: If possible, pay off smaller debts quickly to build momentum.
- Consolidation: Move high-interest credit card debt to accounts with lower or zero interest.
- Automation: Set up automatic payments to ensure you never miss a due date.
- Monitoring: Regularly check your progress and adjust payments as needed.
By centralizing your payments and reducing interest rates, you can significantly shorten the time to debt freedom.
Building a Supportive Community
Financial independence and debt management become more manageable with the right support. Engage in meaningful money conversations with friends and family. By sharing your financial goals and struggles, you will likely attract like-minded individuals who can offer support and accountability.
Action Items:
- Seek out community groups focused on financial literacy, whether online or in your local area.
- Discuss your financial goals openly with close friends; you might inspire them to embark on their own financial journey.
Embracing Frugal Living
Living on a budget doesn't have to be synonymous with deprivation. Embrace frugal living as a way to upgrade your lifestyle without overspending. Here are some effective strategies to implement:
Fun Alternatives to High-Spending Activities:
- Explore local parks, museums, and events that offer free entry or low-cost activities.
- Organize potlucks with friends instead of pricey dinners to foster community while saving money.
- Take advantage of discount nights at local venues to enjoy entertainment without draining your budget.
Remember, the essence of enjoying life is not how much money you spend, but the quality of the experiences you share with others.
Changing Your Spending Habits
Changing spending habits is central to achieving financial independence. Start considering what you truly value in life. When making decisions about spending, continually ask yourself, “Does this purchase align with my goals?”
Tips for Shifting Your Mindset:
- Avoid impulsive purchases by implementing a waiting period before making significant buys. This can help separate genuine needs from fleeting desires.
- Set financial milestones, and reward yourself with low-cost or free activities when you hit them. Celebrate progress without the financial hangover.
Conclusion: Take Control of Your Financial Future
While facing financial challenges can be daunting, it’s essential to know that change is possible. By adopting the debt lasso method, fostering community support, embracing frugal living, and committing to positive spending habits, financial independence is within reach. Remember, your journey towards financial wellness can be both empowering and liberating.
Start today by assessing your spending, connecting with your community, and implementing these strategies for a sustainable financial future. With commitment and the right mindset, living fabulously without financial distress isn't just a dream—it's a reality that you can achieve.
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The Debt Free Guys - John and David
Website: Debt Free Guys
Podcast: Queer Money Podcast
What You'll Get Out Of Today's Show
Is it possible to live fabulously without being fabulously broke? The Debt Free Guys say you can.
After a year and a half of dating, John and David finally came out of the closet to each other regarding their finances. Between the two of them, they had $51,000 in credit card debt even though they had 15 years of experience in financial services helping others with managing their money.
Starting with the first credit card his parents gave him for emergencies, David began a 17-year run carrying credit card debt. Instead of reserving for emergencies, he viewed it as a source of side money and never understood the value of paying it off.
Despite never paying the balance off, his credit card limits kept increasing. After accumulating a significant amount of credit card, he began having trouble making even the minimum payments. Once, when his parents wired him money, it was immediately garnished from his bank account because he had failed to make payments. And yet he still didn't learn his lesson.
Both John and David came from a time when it wasn't okay to be gay. As a result of being a part of a marginalized community, many parts of society sent the message that they couldn't be who they were. The baggage they carried, as a result, manifested itself in various ways, one of which can be financial challenges.
Prudential conducted a study that showed there is a sexual orientation and gender identity pay gap. A university study has also shown that simply being gender non-conforming can limit you from getting a job or being promoted.
As a result, gay men sometimes seek validation through their clothing, bodies, cars, houses, and vacations even if they have to finance it.
The LGBT community hasn't traditionally fit the image of retired couples financial services companies market to. The community hasn't been encouraged through representation to think about their finances.
The premise of the Queer Money Podcast is the get the finance conversation started which is what any community needs to start moving toward financial security. They challenge the community to think about what it is they truly want in life despite how they are told they should look, act, and want.
It was the trap they had been living in. Although they were making decent salaries and experts in money, John and David weren't living according to their values.
After having the discussion, they decided what they wanted was to be able to retire comfortably, travel without accumulating credit card debt, and give back to the LGBT community in a way that didn't penalize them.
David says that even in the financial services industry there is a facade and although the experts know what they should do, they are hiding the truth about who they really are. Even for those who know the tricks to save, it can be hard to put it into practice.
When you don't tell the truth about who you really are, you don't seek assistance or help to become the person you are pretending to be.
While their credit card debt was at $51,000, John and David were spending $10,000 a year in interest payments. They believe that like them, most people who have similarly high credit card debts have a spending problem, not an income problem.
The first step is to sit down and have the conversation with yourself, your partner, or your family about what it is you want your life to look like.
The second step was eye-opening. John and David performed a spending analysis tracking when every penny spent had gone in the previous year. They had been living like rock stars, spending money on dining out, happy hours, designer clothing, and travel yet they didn't think their quality of life had been that great.
They finally realized they were financial messes when walking into their dark, basement apartment right after considering buying land to build a vacation home on in the Colorado mountains. They questioned where their life was going and confessed their debts to each other.
Figuring out what they wanted took three to four months, the spending analysis took a weekend, and it was two and a half years to pay off the credit card debt.
Unfortunately, after paying it off, they reverted to old habits and racked up $6,000 on reedit cards again. Realizing they were on the wrong path again, they corrected course and paid that off in several more months.
The spending analysis showed that with several small tweaks, they could recoup a lot of their spending. Grocery and dining out costs were cut and when going out with friends, they tried to do it without spending much money so they could maintain the social aspect of their lives.
John and David knew that if they could not have fun during the process of paying off debt, it would not last.
When confessing why they couldn't spend on activities like before, they found the friends they told were completely fine with it. For some friends, it created an opportunity to have their own money conversation, while other friends did drift away.
One of the strategies John and David used was to look for free or inexpensive actives they could do on the days they wanted to be social with others. They were blown away by the number of free and fun activities they found in the city of Denver. Learning that you don't have to spend a ton of money to have a good time changed the way they thought about having a good time. They called it the NSE for Not So Expensive.
John and David believe that when you put it out that you are saving for your financial goals, you begin to attract other people who want to have that goal in their life too and build a community of people supporting the lifestyle you want to create.
Another tactic John and David used were Milestone Rewards. They would stash away a small mouth of money to have some fun with as a reward when they had met a goal, such as paying off a certain amount of debt.
After completing the spending analysis, they realized it would take four to six years to pay off their debt using the snowball or avalanche methods. They knew they needed to do it quickly or they would get bored.
It was the high-interest credit card debt preventing them from paying it off quickly, so they came up with the debt lasso method.
With the debt lasso method, they lowered their interest rate to as low as possible and consolidated the credit card debt to as few locations as possible.
The debt lasso method has several pieces to it. You have to commit to not adding more to your card balances and commit to paying a specific amount every single month toward the balances.
Next, similar to the snowball method, if you can pay one off in full in a month or two, do it and get the quick win.
Then use the lasso process to pull all of the balances into as few locations as possible at as low-interest rates as possible.
Then everything should be automated. When monthly payments are automated, you'll never miss a payment which is when interest rates will be raised.
And finally, monitor your accounts so you know when a card is paid off and move payments to the next account or make extra payments when you can.
The snowball method works on emotion and has you pay off cards with the lowest balances, one after the other. In contrast, the avalanche process has you pay off the cards with the highest interest rates first.
Using the debt lasso method, they did have to pay approximately 3% in balance transfer fees, but they shaved years off the repayment plan saving more in interest payments.
Because John and David each had good credit, they were able to consolidate the debt from two to three high-interest cards each to 0% interest for 12-18 months cards and continued to roll the debt to 0% interest cards as needed while paying down their debt.
On the Debt Free Guys website, they have created a calculator to estimate how long it will take to pay credit card debt off using different payoff methods. They encourage folks to pay the most money toward cards with the highest interest rates.
John and David say that while 0% credit cards may not be plentiful right now, they've found that credit card companies will often send out 0% offers when a credit card's debt has been paid off because they know you likely have other credit card debt. Just be sure to understand the fine print to avoid any unpleasant surprises.
It is incredibly helpful for partners to be in the same state of mind when it comes to paying off debt. It's also useful to find a tribe of people who are doing it or an accountability partner.
The Debt Free Guys have a weekly call named Money Therapy included with their credit card payoff course.
To join the community and get the debt lasso calculator, go to debtfreeguys.com/choosefi.