How realizing your dreams can motivate you to get rid of debt

Real Estate

David Auten and John Schneider were trapped in an hour-and-a-half car ride home.

After spending a weekend in the Rocky Mountains with friends, the Denver couple were fantasizing about one day owning a vacation home. However, they soon realized that they were saddled with $51,000 of debt.

Like many Americans, they said their spending habits were reckless and out of control.

They were spending $400 a week on groceries, as well as $400 a week going out to dinner, the pair told CNBC.

Then they had an aha moment.

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“It took us quite a while to actually get to the root of that problem,” said Schneider. “Ultimately we realized that we were seeking validation that we didn’t get in our childhoods by buying things that we couldn’t afford as adults.”

The couple knew they needed to reduce their spending but didn’t know were to start. Instead of talking about the amounts they owed or what they feared might happen, Auten and Schneider focused on their aspirations and goals. This allowed them to define their values and only spend money on things that would bring them closer to their goals.

Still, there was that nasty $51,000 in credit card debt, which was costing them $10,000 a year in interest.

They considered two popular methods for paying down debt: the snowball and avalanche models.

Snowball and avalanche

Using the snowball method, the consumer pays off bills in the order of smallest to largest to build momentum and change their spending behavior. With the avalanche method, the consumer pays down the debt with the highest interest rate before tackling bills with lower interest rates.

However, Auten and Schneider wanted to reduce their interest costs as quickly as possible. They developed what they call the “lasso method,” which as the name suggests works a lot like a lasso, whereby you consolidate your debt.

“Lasso your debt into preferably one location where you can get a lower interest rate,” Auten said. “That allows you to pay off your debt faster. “

Two and a half years later, Auten and Schneider were debt-free. Today, the happily married couple co-host the Queer Money podcast and are a top-rated gay money blog.

Check out What entrepreneurs like Daymond John and Ryan Serhant learned about money from summer jobs via Grow with Acorns+CNBC.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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