Brian’s Journey Out of Debt
In the summer of 2010, Brian, a loving father and husband, struggled to break the news to his family: they could not afford a vacation that year. They were whopping $109,000 in debt! Brian felt he had failed his family and was let down by the poor financial habits, overspending, and lack of dialogue about finances with his wife. The family had hit rock-bottom and knew things needed to change.
Initially, they thought about borrowing more or consolidating their debt to reduce monthly payments. Unfortunately, their debt-to-income ratio was so high they were unable to borrow more money. Instead of looking for a quick fix, Brian turned to the internet for advice. Although “get out of debt quick” schemes were nonexistent, he discovered a wealth of personal finance blogs and resources like Dave Ramsey. These resources became the stepping-stones of their debt repayment journey, and they made plans for a debt snowball.
Their credit union offered a free service called a debt management program (DMP), which assisted consumers facing credit card debt, housing debt, or bankruptcy concerns. These programs compile your monthly payments and pay your creditors on your behalf. The goal? Pay back each creditor in full, but with a lower, negotiated interest rate. Equipped with newfound knowledge and their DMP, it was time to embark on the journey and change their daily habits to prevent falling back into old patterns.
Tackling a debt of their magnitude was all about making some personal and family changes. They cut back on non-essentials, like satellite radio and video games. They stopped eating out, instead choosing to make meals at home, reducing food wastage and saving money. They firmly said “no” to any expenses not in their budget, even if it was awkward at times. They also involved their three kids (aged 14, 14, and 11) in budget discussions as a way to impart valuable financial lessons, so they could avoid their parents’ mistakes in the future.
Over the course of 42 months, their sacrifices started to pay off, as they managed to repay $84,000 of their debt. It’s not always been easy, but keeping their eyes on the end goal to be debt-free helped them stay motivated. Brian admits he wishes he had understood the importance of being debt-free sooner but is grateful they are less than a year away from achieving that goal now.
Brian shares his family’s experiences and lessons learned from handling and paying off over $109,000 in debt on his blog, Debt Discipline. You can keep up with Brian’s ongoing journey by following him on Twitter @debtdiscipline.