by Hillary Patin

How to Get Out of Debt as a Family

There are many success stories out there of families getting out of debt, but how do they do it? If you’re aiming for your family to be a debt-free success story, you’ve come to the right place. It won’t be easy, but it will be worth it. Here’s how to get out of debt as a family.
how to get out of debt as a family

1. Identify why you and your family want to be debt-free

Don’t skip this step. It may seem frivolous, but it’s not. When times get tough, remembering the benefits you’re working toward by getting out of debt will help you continue forward. Generally, becoming debt-free leaves you with more money, financial freedom, and a sense of inner peace.

While these benefits are a great starting point, it’s even better to get specific. Maybe you want to use that extra money to save up for your child’s college fund, you’re behind on retirement savings, or you want to take that dream vacation or buy a house. Maybe just imagining what it would feel like to have the burden of debt removed from your shoulders is reason enough.

Whatever reasons you have, make a note of them. Maybe even write them down on a sticky note and put it somewhere you’ll see it every day, like on a mirror or in a drawer. Talk to your family to see what benefits they see by getting out of debt as a family, and get everyone on the same page. Whatever you do, just make sure you know specifically why you and your family want to be debt-free before starting the journey to getting out of debt.

2. Recognize the mindset you need to be successful: Getting out of debt is a challenge to take on, not an unsolvable problem

This is what makes the difference between those who get out of debt and those who don’t. Thinking about getting your family out of debt as a challenge that you and your family can conquer will take you much further than thinking about debt as a problem. Getting out of debt is possible. You just have to figure out how to get there.

Make sure you and your family start out and continue with the mindset of “How do we get out of debt? What do we need to do to make this happen? I can’t wait for the day we stop making loan payments.” If you find yourself constantly thinking things like, “How did we get into this debt in the first place? Was it worth it? It feels like we’re going to be making loan payments forever,” then catch yourself. Refocus your thoughts on the benefits you’ll get in step one to help reset your state of mind.

Of course, there will be highs and lows, and it’s OK to experience those lows when times are tough. But in order to be successful in the long term and get rid of your debt once and for all, you and your family need to believe it is possible and believe that it’s worth it.

3. Financial reality check: Find out where you stand

On to the nitty gritty details: Figure out where you stand financially. Analyze your spending habits and income from the past few months to figure out your family’s unique situation. Calculate how much per month your family spent on necessities (rent/mortgage, groceries, bills, loan payments, transportation) versus how much was spent on unnecessary things.

The easiest way to do this is to subtract monthly necessities from your monthly income to see how much money is left over. Without making any major lifestyle changes, this is how much extra you can afford to put toward your debt every month. Be honest with yourself and your calculations. If you and your family are serious about getting out of debt, and sooner rather than later, you might have to make some drastic lifestyle changes.

4. Figure out how fast you want to pay off your debt, and what needs to be done to make that happen.

Now that you know how much money you could be putting toward your debt from step three, calculate about how long it would take you to pay off your debt with that extra money using online student loan calculators, credit card calculators, auto loan calculators, and others. Remember, you’ll pay the least amount of interest over time and pay off your debt fastest with the avalanche method.

Next, decide if that’s soon enough for you and your family. For instance, if you calculate that paying off your two cars, student loans, and credit cards would take your family 10 years living only on your current necessities, and that sounds too long, it’s time to take it one step further.

To pay off debt faster, you and your family have three options: lower basic expenses, make more money, or both.

Lower basic expenses: For instance, you can lower basic expenses by downsizing and moving closer to work, which would save on monthly rent/mortgage payments as well as transportation costs. You can also strip down to one car, or even no car at all if you live in an area where biking or busing is feasible. You can even find ways to cut the cost of groceries and cut out bills altogether, like your cable bill. While some of these changes may seem drastic, it’s worth calculating to see how much faster you could be debt-free if you made these changes in the meantime.

Make more money: You can make more money in three ways: sell things you already own, make more money on the side, or make more money at your job. * Selling things you already own will only get you so far, especially if you don’t have any big-ticket items. However, if you downsize your living situation, this will be added savings regardless.

  • Making more money on the side is a very possible and sustainable way of getting your debt paid off faster. The hard part is finding what to do and getting started—after that, it becomes part of your routine. You could use your car to become part of the sharing economy with companies like Lyft and Uber, tutor online or in person, be a middleman for goods on sites like eBay, create goods to sell on Etsy, or pick up a freelance job based on your skillset. There are many flexible options out there.

  • Learning how to negotiate for a raise is well worth the time investment. Over the years, it could make you many thousands of dollars, all from a one-time conversation. Always come to the table with research on your market value to make your case, and practice, practice, practice. Be as prepared as you can be ahead of time to make that one conversation go as well as it can.

5. Make a spending plan and stick to it

Once you’ve decided how fast you can pay off your debt and what you need to do to make that happen, make a spending plan cough budget cough and stick to it. If you’re trying to get out of debt fast, sticking to a strict, envelope budgeting system is probably best. See how Will P. used Simple Goals to help him envelope budget digitally and pay off $24k in debt in under a year.

If you’re serious about getting out of debt as a family, start with step one today. Once you and your family are out of debt, we at Simple would love to hear about it.

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