NerdWallet's Smart Money Podcast - How to get out of debt: Interview with The Debt Free Guys

Episode Date: July 26, 2017

The Debt Free Guys, John Schneider and David Auten, reveal how they paid off over $50,000 in credit card debt, and the need for personal finance education in the LGBTQ community.

Hello, and welcome to NerdWallet's Smart Money Podcast, where we answer your real-world money questions in 15 minutes or less. I'm your host, Sean Piles. First off, my co-host, Dayana Yoakam, is out on assignment, and I have some special guests here in her place. I'm talking with John Schneider and David Otten, also known as the Debt-Free Guys. They host the Queer Money Podcast. Today, we're going to talk about how they paid off over $50,000 in credit card debt and how their relationship was both a good and a bad thing along the way. We wrap up the conversation with a discussion about the need for education and advocacy

around personal finance in the LGBT community. Let's go into it. John and David, thank you so much for joining me. How are you guys doing today? We're great. Thank you so much for having us. Definitely. Thank you. Of course. I'm so happy to talk with you. So to start off, let's just get something out of the way. Can you say who you are so everyone knows whose voice is who? Hi, I'm David. Hi, I'm John. Mine is the deeper, more masculine voice.

Okay, awesome. So you had a lot of credit card debt. You got out of it because you paid it off instead of filing for bankruptcy or going through a debt management plan, other options you had. Let's start at the beginning. How did you get into debt? What got you there? Well, those are two paths that eventually converged. When I moved out to Denver in early 2000s, my grandparents had given me $5,000 that I had in my savings account to help me get started in my adulting years. And within just a year after that, I had a $30,000 deficit.

Just getting set up at home, or what were you doing? Well, so a combination of things. When know, when I moved out to Denver, surprisingly at that time, the gay scene there was thriving. There was a place to go to almost every night of the week, I think, except for maybe Monday, which is when we all recovered. And you went there every single night of the week, except for Monday. I was out every night of the week. He was new to town. He was trying to woo himself a boyfriend.

That's how I found David, of course. But, you know, it was a combination of things. Because of the limiting beliefs I had when I was growing up, and obviously I'm gay, and so I had the experience of being bullied and picked on when I was younger, I kind of carried those limiting beliefs into my adulting years. And every weekend that I went out, I thought I needed a brand new designer outfit so that I felt better about myself.

So spending was a way to feel less limited, like you had some control. Yeah, exactly. And then in addition to that, I was new to Colorado and I was new to being an adult, and I felt that an adult had adult things. So I bought wall-to-wall, floor-to-ceiling pottery barn furniture. It's not cheap. All bought on credit cards. Not cheap at all.

And then I bought a brand new car with a down payment, also bought on a credit card. So I quickly amassed credit card debt. And so my things were more of the big expenses. Lifestyle choices. Yeah. And David was a little bit different than me. Yeah, I was much more a nickel and dimer. To be honest, my credit card debt started when I was 19.

My mother got me a credit card when I went abroad on a trip to England and Ireland. She told me it was for emergencies only. And as John likes to say, I never saw the back of an ambulance and I never saw the inside of a jail. Thank goodness that neither of those happened. But I also came back with a maxed out credit card because I thought that I had this extra money to spend, and I spent it. Your definition of what an emergency is may not have been in line with what your mom's definition of what an emergency is. Exactly. That's basically what started it for me.

But as we mentioned, I was a nickel and dimer. I was the kind of person who stopped every morning on the way to work and got a bagel and coffee. I went out to lunch every single day and hung out with people at happy hours, a little bit like John says, but I was not the person who was going and buying the $300 pair of jeans or the expensive... Like John was. Right, exactly. Good pointing fingers, people. Yes, which meant I sometimes looked down my nose at John because I thought he was being really bad with his money, but I was being just as bad with mine. In just a different way. So what I am interested in is kind of hearing

about when you guys got together, how did you discuss money or not? And at what point did you realize, okay, we both are in the same situation through different means. It's a problem and we need to address it together. Yeah. I like to say that we got together because of hormones and pheromones and not debt to income ratios and credit scores. Romance. Yeah. At the time that we got together, we had a combined tenure in financial services of 15 years. And we both, I think, had an idea that the other wasn't much better with our money than we were. But we didn't really talk about money a whole lot. And it wasn't a year until a year and a half later after we'd been together that we finally had our money discussion. Yeah. So really kind of the way that happened is John and I went on this trip into the mountains. We both knew that we were in debt, but we went, like John mentioned, we never discussed it with

each other. So we went on this vacation up to the mountains to see a friends of John's and we fell in love with a little town that we were staying in, a world-class ski resort town. And we fancied ourselves this idea that we could buy land and build a house up there as a vacation home. Sounds nice. Yeah, exactly. So on our way out of town on Sunday, we stopped at a real estate office and we were checking out property and had this whole idea in our head and we drove out of town and we passed this sign that said elevation 9,121 feet. We crossed over the top of the mountain and we started to drive down towards Denver. And we passed into the first town, elevation 8,500 feet. And our conversation went from buying land and building a house to being able to afford to buy a condo.

And then we dropped elevation down into Boulder, which was about 7,000 feet, and our conversation changed to maybe we shouldn't be thinking about buying a place. We should just go up there on vacation from time to time. And finally, we dropped down into Denver, elevation 5,000 feet. We got out of our car, opened up the door to our place, walked down a flight of stairs into a basement apartment. And it was at that point where we had finally discussed with each other that we were financial messes and that this whole fantasy of being able to buy land and build a house was, in a sense, a load of crap. It's also a very apt metaphor that your heads were literally in the clouds at the top of a mountain. And then once you hit the ground and went below it into what I imagine was maybe a dark basement apartment.

It was so dark it never saw the light of day. Yeah, so you were confronted with your demons financially and you decided we have to do something now. Right. That's when we confessed to each other that we had $51,000 in credit card debt and we made the commitment to each other that this is not the lifestyle that we want and this is not going to change unless we do something about it. Right. And so how did you decide what to do? Each of you had together $51,000, but you had different debt loads. It was from different sources. How did you individually decide how to take on your debt and how did you keep each other

accountable? Yeah. So after we kind of hit that rock bottom, we had a, over the course of the next few weeks, we had some pretty deep discussions about who we were and who we wanted to be and why we were together and what our goals in life were. And we started to realize that while we enjoyed our carefree clubbing days and the expensive clothing and going to Einstein's seven times a week, they weren't really fueling or inspiring us. So we kind of figured out what it is that we really wanted. And when we're asked in interviews how we paid off so much debt so quickly, we often say we ultimately figured out what our why in life was, what our real goals in life were. And it was having that as our, I guess, sort of our beacon that gave us

the motivation and inspiration to pay off our debt. We had been together for a year and a half when we had this, we're having these discussions. We were fortunate that we were on the same page financially. We kind of hit the rock bottom at the same time and both came up with the goal of getting out of debt together. And we always saw our debt as combined, even though we couldn't get married at that time. And even though we probably wouldn't have gotten married at that time by then, had that been available to us, we still saw our debt as a combined challenge. And I don't think we really ever sort of separated each other's debt. And so we came up with a couple strategies to pay off our debt, and we worked on those together.

And it was being able to rely on each other that helped us stay on that path to paying off our debt. But, again, it was ultimately having the whys that helped us to pay off our debt. We realized that we wanted to save for a financially secure retirement because we might have apparently learned something in 15 years in financial services. But we also wanted to travel more than we had at that time. And we wanted to do it on cash and not credit like we had up until then. And then we did realize through the course of our experience that we wanted to give back to our community. Until then, we were more of the takers and not so much the givers. And we wanted to make sure that we helped change that. Yeah, right. So it seems like you two helped keep each other inspired and focused on your goals and align your priorities. I want to talk about how you

got out of that $50,000, $51,000. What was your method? I think that the first thing that really inspired us and drove us to make changes was that I did a complete analysis of all of our spending, every single penny of our spending for one year. I had a spreadsheet and I laid out every single credit card, every single debit card, checking account, savings accounts. Anytime we took money out, I tried to itemize it. A couple of things that were very apparent for us was the categories in which we thought we were doing okay in that we were grossly overspending. And that really helped us to see that although at the time we maybe thought that our lives were okay, but we wanted so much more, we were blowing it out of the water in some cases. So for example, we were spending money, we were blowing it out of the water in some cases. So for example,

we were spending money, we were spending $400 a week on groceries for two guys. At the same time, we were spending about that same amount of money eating out. There's no reason that we needed to be doing that. So the first- Between the two of you, $800 on just eating. Right, exactly. I'm 5'4", so I shouldn't be too round. Probably shouldn't be that much, yeah. Right. So I think that was the first big step for us. And that kind of put in motion this plan for us, as John mentioned, to kind of figure out what it is that we really wanted to spend our money on and what would bring us happiness. Because obviously those other things were not making us happy.

And so we started to spend money in areas that would help us to be happier. And that was kind of how we formulated our process. We have a book called Four of the Four Principles of a Debt-Free Life. And in that, we talk about basically the four things that we really focused on. The first one was being money conscious, and that's why the analysis, because we had no clue where we were spending our money. You have to know where being money conscious. And that's why the analysis, because we had no clue where we were spending our money. You have to know where your money is. Exactly. To pull it back so it's not just

falling through your fingers. Right. The second one is living below your means because no one ever gets rich spending more money than they make. It will not happen. It's not mathematically possible. Exactly. And the other one was cash is king. John and I clearly did not know how to spend properly with credit cards. So we said, well, then if we, you know, it's just like individuals with alcohol. You know, if you can't control it, then you can't use it, you know. And so we decided to give up credit cards for a time period until we learned how to spend properly. And then the last one was having a financial plan. We figured out what our plan was,

what we wanted to do, where we wanted to go. And so we set a three-year timeline for us to pay off our credit card debt. And we paid off our debt in two and a half years. That's very fast, considering how much you had. It reminds me of how we talk about debt and then getting out of debt at NerdWallet. We really recommend that if someone can't see a way to pay off their debt within five years, and they have debt that is greater than 50% of their annual income, they should consider looking into bankruptcy or a debt management plan if they have credit card debt. Did you consider going to a bankruptcy attorney or going through credit counseling? Yeah, I actually went through

credit counseling for a period of time and I failed abysmally. Why is that? Because a lot of people fail. I want to know what happened. Yeah, it wasn't the, I don't think it was the company who I was working with. I don't think it was their fault. It was my fault. I didn't have my why at that time. All I knew was I wanted to get out of debt, but I didn't really have the motivation or the inspiration to do what it took

to make the sacrifices that were required to actually get out of debt. It wasn't until, like I said earlier, that I had that, you know, we had those whys that we kind of had the motivation. And that's why when everybody asks that question, we always say, figure out your why first. Because until you have that, you know, as Jim Rohn says, when you know what you want and you want it bad enough, you'll figure out a way to get it. Clearly, I didn't want it bad enough when I was working with that company. So it ended up costing me more money than it should have. All right, great. So I know that you guys have also been focusing recently on helping people in the LGBT community manage their finances and become more informed in this regard. I'm wondering if you can talk with me about your endeavors here, how you're approaching helping people in the LGBT community and what your goals are. As John mentioned, originally it was a desire to give back to our community.

And there's a number of ways that people give back. And at first, our process of giving back was just that we had more money, so we would give money to our community. But we also feel that there's a lot of ways that our community can lift itself up. It's very important that we become strong individuals so that we can be a strong community. And one of the key pillars to being a strong individual in that strong community is being financially strong. Right. The freedom that provides you.

Exactly. Well, and the simple fact that debt and financial distractions, they will take us away from our community. If we have massive amounts of student loan debt that we are not paying off or we decide to buy the perfect home. And because of that, we have to spend more than 50 percent of our income to put towards our home. Or we have just this crazy lifestyle that so many of us tried to live because we're trying to keep up with Mr. and Mr. Jones. If we have that, we won't have time, money, or energy to give back to our community. And it also can limit what people themselves can do. If having an emergency fund of $500 means the difference between being stuck in the situation that you're in right now

and being able to get up and go and make a new life somewhere where you would find more acceptance or have more opportunity, that in itself is incredibly powerful. Absolutely. One of the things that John and I try to highlight when we're speaking to individuals, either through our podcast or through public speaking, is that our community still has a lot of things to fight against. There are laws at the state level. There are still federal laws that prevent us from being able to live out our lives completely. And so we need to be more protected and more secure. And so the way that comes is by taking care of our finances. Right, exactly. If there is one thing that each of you two would suggest that

LGBT folks listening who might need some financial help do first, what would that be? You know, I think my first recommendation would be there's a stereotype in our community that we're all upwardly mobile, white, successful gay couples. And that's simply not the truth. That's simply the stereotype or what media puts out there. But there are a lot of challenges that our community has, especially when you consider transgender women. We just heard a statistic the other weekend that transgender women on average earn $10,000 a year. So they have some real serious concerns that we need to start talking about. We need to start being more inclusive in our discussion of what LGBT finance looks like, and we need to start to consider those

who don't necessarily meet the media or the stereotype. I think that one of the other things that I would probably highlight is that there are so many people in our community who are doing more and are successful, and there are great examples for us to follow. Don't cower or hide behind the fact that you're LGBTQ. Don't say I deserve less because you deserve an amazing life, but you have to put forth the effort to go out there and get it. No one's going to hand it to you. You're

not going to win the lottery, no matter how many times you play. I mean, it's just not going to happen. It's a day-to-day grind that's not very romantic. Right. But the rewards of making progress, of moving forward, and being able to help yourself and then help our community is amazing. The joy that John and I have in being able to do that is something that we want everyone to share in. Great. All right, guys, that's just about all we have for today's episode. But before we go, here are a few quick takeaway tips. First, it seems obvious, but know that debt is complicated. The best way to get out of it depends on the kind of debt you have, is proportion to your income, and whether you think you can pay it off within five years.

But the same four-step process can be applied to just about any debt. The first step is knowing how much you have, add it all up, make a spreadsheet, do what you have to do to totally lay it out so you understand what you owe. Next, assess your cash flow and figure out how much you can put towards your debt each month. Third, determine the path to take. You might want to do a DIY approach to paying it off, look into consolidation, or maybe debt relief. Some combination of those might work too. Lastly, track your progress. Paying off debt can be a slog, and seeing how you're doing can keep you focused. And that's it for today. You can get more on this at nerdwild.com slash podcast.

Do you have a money question of your own? You can text us or call us at 901-730-6373. That's 901-730-NERD. Or you can email us at podcast at nerdwild.com. And a brief disclaimer to wrap things up for our lawyers here. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors.

This information is provided for entertainment and educational purposes. And with that said, until next time, keep it nerdy.