Breaking bad … habits

This Reader Story comes from Brian. Brian blogs at Debt Discipline, where he writes about his family's personal experience with debt and paying off over $109k in debt. You can follow Brian on twitter @debtdiscipline. http://www.debtdiscipline.com/

Some reader stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks with all levels of financial maturity and income.

We didn't accumulate our debt in one night, it just felt that way. It took years of overspending to rack up over $109k in consumer debt, but in the summer of 2010 we were out of cash and had maxed out all five of our credit cards. Our debt-to-income ratio had ballooned and there was no more borrowing that could be done.

As a husband and father of three children and the one handling the finances in the house at the time, it felt like the debt appeared over night as I told the family we couldn't afford a family vacation that summer. They were disappointed and I was embarrassed that I let it get to this point.

Out of borrowing options (which was the best thing that happen to us), it forced us to look for other options. I hit the Internet looking for information, hoping to find a get-out-of-debt-quick scheme that I had been overlooking for all these years and would still be able to salvage our summer vacation.

What I found was a number of personal finance blogs and a guy named Dave Ramsey. I read as much information online as possible and picked up a copy of Dave's book at my local library, which I read over a weekend.

I was shocked to find that there was no secret to being debt free, that the basic principles were common sense. Spend less then you make, keep a budget, have an emergency fund, and communicate with your spouse. These were all new to us. We typically spent more than we made, using credit cards to pay for things. We never had a plan and did not discuss our finances as a family.

Ch-ch-ch-ch-changes

That changed in June of 2010. We changed our bad habits, we stopped overspending, and we began communicating and began to work a debt snowball.

We made changes in our daily lives, as a family, to help repay our debt. We gave up items that I would call luxury items, things that were wants not needs. For example, I gave up Sirius satellite radio, my wife cut back on salon visits, and my children gave up GameFly.

We made changes in our food budget. We stopped eating out — even fast food would cost a family of five between $30 and $35 and a chain restaurant was a minimum $75 bill. Now when we do eat out, we enjoy it much more. We made better choices when grocery shopping. We don't buy as much food each week and wasting food is throwing money away each week.

We learned to say “No” often, to family, friends, co-workers, etc. If it wasn't in our budget, we politely said no. If someone pushed back, we would explain what we were working on with our finances.

We have made a point to include our three children, ages 14, 14 and 11, in our budget discussions. We want them to understand why we are making these changes and prepare them for their futures. We don't want them to make the mistakes we have made.

Paying it forward

We began to talk about our finances with family and friends. I'm surprised at how often people respond with their own tales of debt issues when we share our story. We often share as much information as we can, supplying resources like websites and books, also suggesting that they look at their own bank or credit union for additional information. Most financial institutions offer free debt/credit counseling.

We have purchased many copies of Dave Ramsey's “The Total Money Makeover” and have given them away as gifts. I have seen various reactions to people receiving the book. Some read it in just a few days and start making changes. Others have never opened them and the books are now collecting dust. It's not bothersome to see the book collecting dust; it's totally up to the individual to take action. For those whom I have helped, I'm glad that I have been able to provide valuable information.

It brings a smile to my face to know I helped them make a change in their own finances. Now they have information that they didn't have before. All I ask in return is that they pay it forward. When they finish the book, they pass it on to someone else and ask that person to do the same.

Fast forward 42 months and it's clear to me now that there are no big secrets to personal finance, no get-rich-quick schemes; most of it is common sense. That's not what I thought years ago.

With a little research and a little help, you can dig your way out of most situations. Taking it a step further, I have sat down with some friends and family to review their finances to give them my expert opinion. I'm half-joking, but I feeling like an expert now compared with where I was three years ago. I continue to read books, articles and blogs as we continue paying down our debt, increasing our knowledge as we go.

We have paid off $84k in 42 months. The repayment of our outstanding debt is just the first step in the process. It feels good to be on the right track and share this information with others. I would not change the last 42 months. The sacrifices have been so worth it. The entire family has managed. It hasn't always been easy, but we keep the end goal in mind of being debt free. Having a surplus of over $2k per month can really keep your family motivated too.

What have been your personal keys to your financial success? Have you done anything outside of the general/generic guidelines to reach financial success?

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Jessica
Jessica
6 years ago

I’m curious – does the $109k debt include a mortgage?

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Jessica

No…all credit card and personal loans.

Anonymous
Anonymous
6 years ago

Congratulations! That is a huge amount to pay down, and you are clearly very dedicated. Would you mind adding some info on whether you were able to save in addition to paying down debt? Did you do any retirement or education saving during this time?

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Anonymous

We have a small emergency fund in place for the unexpected. We were saving toward retirement but have put it on hold for now and are using that extra money for debt repayment. Once complete we will fully fund a 3-6 month emergency fund and restart retirement savings.

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago

Thanks Nicole. We are looking forward to the point in the near future were we can made the extra cash work for us instead of giving it away each month!

Financial Samurai
Financial Samurai
6 years ago

Nice job paying off the debt Brian!

May I ask what kind of consumer stuff did you buy with the debt? Also, how much of the debt was interest that accumulated over the two-three years?

It would take me about 9 years to get to $100,000 in CC debt if I maxed my credit cards out today because the two personal cards i have only have a total of $40,000 in credit. Did you have a particularly high income or net worth or were the credit card companies particularly generous?

Thanks!

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago

Sam – We kept chasing lower payments and preformed a number of debt consolidation plans, while we continued to over spend. We were using credit card to cover shortages for groceries at the end of the week to big ticket items like 3-4K vacations. It was a complete mess. My wife and I were not on the same page with our money for over 10 years that lead us to this point. Our household income is well over six figures, we just were not using it correctly, and the creditors just kept extending our lines.

Matt YLBody
Matt YLBody
6 years ago

Once you realize that almost half of what you do is based out of habit you can recognize trouble areas and the ch-ch-ch-changes can be significant. Keep up the good work.

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Matt YLBody

Thanks Matt! Just wish I have 14 years ago, not just 4. 🙂

Anna
Anna
6 years ago

Make sure to do a Debt-Free Scream on the show when you are done. This story is inspiring. Just think about what you can do after it is paid off! Congratulations again!

Adnan@www.lifesbit.com
6 years ago

I like the idea that personal finance is all about common sense. Really, if we put little bit of effort and attention on how we spend money and where it goes, it can solve most of our problems. Also including children in discussion regarding money help them to grow as more responsible individuals. Really like the approach of snowball..

Emmy
Emmy
6 years ago

I never get sick of hearing stories like this. It gives me hope that I can stay strong and do it too!

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Emmy

Neither do I Emmy! Other peoples stories always help keep me motivated. Good luck!

akoilady
akoilady
5 years ago

I’m reading older posts and found this. I want to add that reading this type of story IS very helpful for those of use just beginning our Money Makeover.

Brian @DebtDiscipline
Brian @DebtDiscipline
5 years ago
Reply to  akoilady

Good luck on your journey. Let me know if I can help in anyway.

Dee @ Color Me Frugal
Dee @ Color Me Frugal
6 years ago

I think it is awesome that you are including your children in your budget discussions- hopefully that will translate into them becoming more financially aware and perhaps be able to avoid some of the same pitfalls. Great job!

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago

Dee this is one of the most important things to my wife and I. We want to teach them better and hopefully they will never known any of the issues we’ve faced.

Hillary
Hillary
6 years ago

Great job!! We love Dave Ramsey in our house!! We are 3 months away from debt freedom and are anxious to build up our emergency fund and work on retirement, college, and paying off the house!!! We probably could have gone a lot faster, but I’m still grateful we discovered Dave at the start of our marriage. It’s peaceful knowing your money is working for you.

Steven
Steven
6 years ago

So are you going to call in and do your debt free scream? I see Dave Ramsey has been your guide through all of this, what other advice have you used along the way from others?

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Steven

Steven I have found so much great information on personal finance blogs like GRS. There are so many individual stories out there like mine that keep me inspired. I think we will call in Ramsey and do a debt free scream. Anytime I hear others do them it brings a smile to my face because I know that’s where I want to be. There are many variations on being debt fee, but overall spending less then you earn, having a budget, emergency fund etc are common sense type stuff that I use as my guide.

Tonya
Tonya
6 years ago

I agree that there are a lot of great personal-finance sites and gurus out there. I read them all and pick and choose what works for me. I like Dave Ramsey but am a little put off by his focus on “wealth.” I’m a single mom school teacher; I just want to be comfortable and don’t care about being rich. But again, everyone has good info and you can cater your own plan to your own individual situation. Mary Hunt at DebtProofLiving.com is a personal favorite of mine, though I glean info from the classics (Richest Man in Babylon) to… Read more »

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Tonya

Totally agree Tonya. The millionaire Next Door is another one of my favorite books.

Kelsie
Kelsie
6 years ago

Congrats! For us the hardest part was to keep going after the first year. You’ve been at it for a while. Keep going and finish strong!

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Kelsie

Thanks Kelsie! We are in the home stretch and it feels good!

Adnan
Adnan
6 years ago

Sharing individual stories and the way ordinary people get out of the situations like debt is really inspirational. I honestly do not believe in snowball technique however, it is still used by many successfully. What is wrong with snowball technique is that when you pay minimum on other credit cards you are actually incurring more costs by intentionally slowing the payments on few debts and hastening the payments on others.

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Adnan

Adnan – do you have any other suggestions?

Adnan
Adnan
6 years ago

I believe the more safer approach will be to save, accumulate interest on it, cut back expenses and than pay. You cover both things i.e. you will have an automatic emergency fund and opportunity to pay your debts in one go..

Tonya
Tonya
6 years ago
Reply to  Adnan

I believe a big part of this battle is psychological, and paying off a debt can be SUCH a huge lift emotionally! I believe that’s why these plans focus on paying off the smallest debt first, to give us that emotional boost. It’s like going on a diet and seeing the results gives you that much more motivation. (And yes, I see LOTS of correlations between budgeting and dieting!)

a
a
6 years ago
Reply to  Adnan

Maybe I misunderstood your intent but it sounds to me like you’re advocating paying minimums and setting excess funds aside as savings and then paying your debt off in one big chunk once your savings exceed your debt. I did a combination of this and the snowball method myself, when I was getting out of debt because I wanted the security of having the savings. I would pay off my smallest debt in full once my saving allowed me, thereby increasing my cash flow but allowing me a savings cushion in the meantime. I had a “high interest” online savings… Read more »

John P. Evans
John P. Evans
6 years ago

I think that saying no to family is the hardest part. Thank you for sharing this story as it does help encourage people like me to make the difficult decisions in order to make the right ones.

Jennifer
Jennifer
6 years ago

Congratulations, Brian and family. I love your story. 11 years ago I was in huge consumer debt like you and I created a plan, very much like the debt snowball and it worked. Today we have no debt other than our mortgage, six figures in the bank, plus healthy investments and retirement balances. Our house will be paid off in 2.5 years and life is so much better. Once you work hard to dig yourself out, you vow to never let yourself get in that position again. It’s amazing to think back when we had negative net worth and compare… Read more »

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Jennifer

Thanks Jennifer! Love to hear success stories like yours, they keep us going. I’m hoping ours will do the same for someone else!

Nate
Nate
6 years ago

Habits are my FAVORITE topic in personal finance. I literally lost 80 pounds and took my income from 38K to over 200K in less than 5 years – simply by changing my habits.

Research has confirmed that 40-45% of what we do everyday is habit (auto-triggered responses that reside in our basal ganglia).

So the magic happens when we re-programmer our brains with new habit!!!

The habit of embracing (and loving) change alone will take most people further than they ever thought possible.

You guys are so awesome for taking control of your lives (and money)!!! Excellent post!!!

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Nate

Thanks Nate. Couldn’t agree more. Along with our budget and spending I have changed my eating habits too. I’m down 40 pounds in the last 2 years! It’s about discipline!

Nate
Nate
6 years ago

40 pounds?! WOW!! Good for you!! It’s really interesting the correlation that occurs between losing weight and getting out of debt… It’s almost like our minds goes into efficiency mode (with the finances) and that bleeds over into other areas of your life (“do I really need to eat that extra serving…? I could take it to work tomorrow”). tiny tweaks lead to massive outcomes. You are a perfect example of that. Interestingly – the fun part is right around the corner for you guys (and you have no idea!). Once you have the emergency fund in place and the… Read more »

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Nate

Thanks again Nate! We are looking forward to the times ahead!

Nate
Nate
6 years ago

11 months from reaching your debt freedom goal?!?! ROCK ON!!! The finish line is in sight; put gas on the fire baby!!!

🙂

You guys are so awesome.

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Nate

Thanks Nate! It feels awesome!

Kristin Wong
Kristin Wong
6 years ago

Congrats, Brian! And thanks for sharing your story! When it comes breaking bad habits, I think communication plays a big part. “We never had a plan and did not discuss our finances as a family.” I think that sentence is very telling. If you don’t address a bad habit, it continues to simply be some automatic thing you do without much thought. Talking about it puts it out there–forces you to look the habit in the face and come to terms with it. “We changed our bad habits, we stopped overspending, and we began communicating…We began to talk about our… Read more »

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago
Reply to  Kristin Wong

Thanks Kristin! Communication has been a big, big key for us. We are a much better working as a team then 5 individuals.

Jane
Jane
6 years ago

Great story, thank you for sharing Linda!

We’ve all been there, to some degree or another. For me, I can’t stress enough the need to do not only a monthly budget, but to figure out your net worth each month. It’s an eye opener as well as a great measure of your progress.

Brian @DebtDiscipline
Brian @DebtDiscipline
5 years ago

I have published a follow up post, Bad Habits Broken at my Blog.

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