Brian Brandow had accumulated more than $100,000 in debt and was living paycheck to paycheck. Here’s how his family tackled their debt and became debt-free.

Our story started when my wife and I first met. We had a long-distance relationship for several years, which meant large phone bills and hefty travel expenses. It was money well spent because our budding relationship turned into love and we were soon married—but the foundation of overspending was already built.

We purchased a house and started a family and soon fell into the trap of spending without thinking. Our purchases always involved the use of some kind of credit: We had a mortgage, a home equity loan, and when we didn’t have cash to cover a shortage or an emergency we used a credit card (credit cards, really).

We Didn’t Have a Plan

This cycle of overspending and living beyond our means went on for more than 10 years. As our income grew, so did our spending. Yearly salary increases meant we could spend more on vacations and dining out—increasing minimum payments on credit cards didn’t faze us because we had extra income to cover it.

My logical explanation was I work hard, so I deserve it, and my family deserves the best. Financing a vacation with credit cards seemed like a good way to get what we wanted when we didn’t have the cash to afford it. My reasoning was I would make more money next year and be able to cover it and we always had enough cash to make the minimum payments.

In 2010, while planning our summer vacation, I was faced with the realization that we could not afford it—although I was earning a six-figure salary. Our debt-to-income ratio had ballooned tremendously and not a single one of our five creditors would increase our credit limit so we could afford our typical family vacation.

We had no cash or available credit. We had accumulated $109,000 worth of consumer debt and were living paycheck to paycheck with no cash savings. How could that be? The answer was pretty simple: We never had a plan for our money. After a long, hard look at our spending habits I realized we needed to make a change—and this change would have to be a family affair.

We Started Investing in Ourselves

I began to research personal finance information to find the secrets about getting out of debt quickly and starting to build wealth overnight—the things that no one ever taught me in high school or college. I found a number of helpful personal finance blogs and a guy named Dave Ramsey.

Armed with all of my newfound information on personal finance, I had to break the news to the family that there would be no summer vacation that year and we needed to make some major changes. Eventually they understood that if we made the changes now, when our debts were paid off and we accumulated some savings, we could afford any vacation we wanted. It would just take some short-term sacrifices to meet the long-term goal.

With that we began to change our behavior.

Here are some commonly used steps we found useful when organizing our finances:

  • Realize you need help
  • Seek guidance from a financial planner or research reputable sources that cover financial planning (or do both)
  • Make a plan for your money (a budget)
  • Immediately stop building new debt to help stabilize the situation
  • Save a cash emergency fund (at least $1,000 to prevent you from using credit again)
  • Begin to categorize purchases into “wants” and “needs” to help you spend less than you make.

We used Dave Ramsey’s “Debt Snowball” method to pay off our debts and started paying down our credit cards by paying off the smallest balance first. We kept paying the minimum due on all our other cards, but applied our surplus income to the first card we wanted to pay off. Once we completely paid off our smallest amount, we rolled its payment to the next smallest balance.

We repeated that model until all our debts were paid. As we paid off each balance, our income increased, because another credit card payment disappeared, so we could pay more debt off and climb out of debt faster. It helped us build momentum and stay motivated to see our balances eliminated one by one.

Once we started the process, it was easy to maintain—it felt like common sense.

We Built Our Plan

We built our plan in the form of our first budget. We saved receipts for three months to help us understand where our money was going. We quit eating out—that was one of the first things to go. We gave up subscriptions to satellite radio and GameFly and replaced that with trips to our local library, which provides plenty of free activities (including movies and music).

We involved our children in the money discussion. We wanted them to be aware of the situation and understand the changes we would all experience. One of the first teachable moments we had with our children involved the ice cream truck. Ice cream is our family’s favorite dessert, but a trip to the ice cream truck could cost us up to $12—depending on who participated and what we purchased. My wife and I explained to our children that we could no longer take trips to the ice cream truck, but for the same amount of money for a single visit we could get ice cream from the grocery store that would last us a week. They were happy to switch—they were also happy they didn’t lose their favorite dessert in the process, of course.

We had a great staycation that summer and did a bunch of free and local activities. It wasn’t our usual travels, which typically involved a cross-country trip to California and a $2,500 price tag, but we still had fun. We found that it didn’t matter where we were as long as we were spending time together.

Altering the way we were accustomed to spending money was probably the most difficult part:

  • We learned to say no to impulse buys
  • We questioned if each purchase we made was a want or a need
  • We only used cash or debit (and absolutely no credit cards).

We had a modest $1,000 saved in an emergency fund to protect us when life happens (e.g., when cars break down). My wife went back to work, which helped increase our income and the amount of money we could use for debt payoff.

Our Plan Worked

The first three months were tough, but over time the new spending behaviors became second nature. We managed to pay just over $2,000 a month toward our debts and in slightly more than four years we were completely debt-free. It was a proud moment for us—we had reached the finish line and met our goal as a family. We celebrated by dining out, and then started saving an even larger emergency fund.

We have cleared a path for our future and, in the process, we taught our three teenage children about careful spending along the way. When our children receive money now, they don’t have the impulse to go out and spend it immediately. They think about how their finances can be used responsibly.

We Discuss Money as a Family

Recently we gave all three of our kids some money to go shopping for clothes. They compared prices and eliminated options that were too expensive and each of them left the store with new clothes and money in their pockets.

My wife and I have found that the key to discussing money with kids is making sure we frame the conversation around a topic they are interested in. We recently had a great family discussion about smartphones. The kids were interested in how much a smartphone costs and all the expenses that go along with owning one.

We converted our home from one where money was never spoken about into one where our finances are discussed openly, and everyone understands the value of a dollar.

Brian Brandow blogs at DebtDiscipline.com.

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