How to Pay Off Debt While Still Spending Money on What You Value
- Laurie-Anne King paid off $45,000 in debt before co-founding financial education platform Dow Janes.
- She and her co-founder Britt Baker teach their indebted clients to use the “aligned money” method.
- This approach allows you to spend money that matches your values while also getting out of the red.
Between college loans and credit card debt, Laurie-Anne King found herself in a $45,000 hole soon after marrying and merging finances with her husband.
The debt caused some tension in their relationship.
“We were facing months of not knowing how to pay all our bills and my husband was so unhappy with it,” King told Insider.
Because she’d never learned exactly how debt works, “it was kind of normal for me,” she said. “I didn’t grow up with a lot of financial knowledge, so I didn’t really get what the big deal was until he explained how interest rates work — how it either works for you or against you.”
When it comes to debt, interest almost always works versus She. It continues to accumulate over the life of your loan, causing your balance to continue to grow and ultimately leaving you in debt longer.
Realizing how costly it could be to bear an outstanding balance, King made a commitment to improve her situation immediately.
“I was able to get out of debt pretty quickly after accepting that I was in debt and that that had to change,” she said. Within a year of their marriage, she was debt-free, according to documents viewed by Insider. She made it thanks to a new budget and a different mindset, as well as some luck: “I was lucky in a way. We were in a car accident and received an insurance settlement that helped pay off about half of the debt.”
How the “adjusted money method” works: Spend your money in accordance with your values and reduce all other spending
Today, as a co-founder of financial education platform Dow Janes, King helps thousands of other women manage their debt so they can start investing and build long-term wealth. The crux of the debt-payoff strategy she and co-founder Britt Baker teach in their financial literacy course is what they call the “adjusted money method.”
Rather than focusing on cutting back and sacrificing certain things to get out of debt, this approach focuses on spending money that aligns with your values.
To do this, you must first understand your values and what you want your future to be.
Laurie-Anne King (L) and Britt Baker (R), co-founders of Dow Janes.
Courtesy of Elaine Drabik
Start by asking yourself, “How do you actually want your life to unfold and function?” said King. Then think about the role money plays in this vision. “Money is a big factor in what we can do. It affects everything from the type of food we eat to how much time we can spend with our kids, so really having clarity about what you’re actually aiming for is where this methodology kicks in.”
To figure out what you want your future to be like, you need to understand what is important to you and what you value in life. Maybe it’s working for yourself, or buying a house for your family, or traveling to gain new experiences.
Once you have an idea of what you want your life to be like, you can start working to get rid of your debt and achieve your goals. That requires a look at your numbers: how much of your paycheck are you saving? And how much do you do to need save to get out of debt? How much of your salary do you spend? and Where do you spend your money
“From that place you can create a budget that still honors your personal values and you will focus on spending better instead of just spending fewersaid King. It’s about spending money that aligns with your values and limiting everything else.
King’s strategy is similar to personal finance expert Ramit Sethi’s “Money Dials” philosophy. There are 10 “money sliders,” which are basically spending categories like travel, health, and experiences, that you can either adjust up or down. Sethi encourages everyone to check them out and think about which ones excite you. Then cut back on areas you don’t care about and spend guilt-free on areas you enjoy.
Saving money doesn’t have to mean living a life of deprivation or isolation. Rather, it’s about being clear about what you value, spending money comfortably and intentionally on those things, and then forgoing everything else.
When their clients start doing it, King and Baker have found that “people end up saving a lot more money than they did before, while also doing things they didn’t think they could do before.”
Also, it becomes a lot easier to stick to your budget when you give yourself space to spend some of your hard-earned money.
The aligned money method “doesn’t require you to sacrifice or make all of those short-term tradeoffs for a hopeful future payout,” King said. “You feel better now and your future self feels better too.”