The McDonald family is just like plenty of other U.S. families today: husband and wife, three kids, a dog. They love hiking, playing sports and healthy living. And like plenty of Americans, at one point they also had a bit of a debt problem - $20,000 of it, actually.
When Michelle and Jefferson decided it was time to start tackling their debt, they began writing about their journey on their blog, See Debt Run. The experience changed everything for them.
"We were living paycheck to paycheck before, and ever since paying off our debt we have been able to jumpstart our retirement and our children's college savings," they said.
While they were initially worried that they'd be embarrassed about putting their story out there, the experience was actually rather cathartic and helped them connect with others in the same boat. Here, Jefferson and Michelle tell us about their experience and offer advice to others just starting on the journey toward reducing debt. Read on:
Tell us about See Debt Run. When and why did you start your site?
The site started in January 2012 when we were struggling under the weight of $20,000 in debt. We knew that we had to change the way that we were living to create some space in our family budget, and we decided to write about the experience as a way to keep ourselves accountable and focused.
What's your debt story?
We were able to pay off the debt in full in just over a year. We documented the experience in full on the site through the highs and lows. We went through our expenses one by one, finding ways to save money wherever we could. Even more important, we began to find creative ways to make extra money each month that we could use to pay down our debt total. All in all, it was a crash course in budgeting and general financial literacy.
What's been the most surprising lesson you've learned through the process of paying down debt?
How many others are in the exact same boat. Shortly after starting the site, we discovered a community of other people from all over the world who were on the exact same journey as us. These people commented on our articles, cheered our successes and offered words of encouragement when we had setbacks. We offered the same level of support to them in return, and we all shared tips and tricks with each other to help us meet our goals. I believe that this support structure ended up being a huge part of our success.
What's your best piece of advice to someone who is just starting their journey?
The most important thing for you will be to make sure that you don't take on any new debt. You can't dig your way out of a hole if there are shovels at the bottom to dig deeper.
To keep yourself from adding any new debt, you are going to need to have an emergency fund of a few thousand dollars in the bank. It will feel strange to put this money into savings INSTEAD of throwing it against your debt, but it really is an essential step. Emergencies and setbacks WILL happen. If you don't have an emergency fund in place, you will have no choice but to use your credit cards - and that IS NOT a viable option for someone on a debt payoff journey.
How has your experience with debt affected how you talk to your kids about money?
We were open with them about the journey that we were undertaking. They had to understand that we would be cutting back on the family's expenses and that there would be no family vacation until the debt was gone. We wanted them to understand the danger of debt and to see that it was preventable.
Since that time, we have made giving them a financial education a priority. We give them opportunities to earn and spend money on a regular basis, and we want them to understand the value of making and keeping a budget.
What are your current financial goals and what are you doing to work toward them?
We are currently working on building up our retirement nest egg. Since we both want to spend our retirement years traveling the world, we know that we need to have a significant amount in the bank. Michelle has started working again, and we put most of the money that she makes directly into savings.
We also are always on the lookout for new opportunities to make or save a little bit of money. Even though we are no longer paying off debt, we are still not above participating in a focus group or doing a little bit of web support for a company for some extra cash.
What have been some of the most reliable ways you've found to save money? What about the most unique ways you've saved money?
From the start, the biggest money-saving opportunity for us has been with food. We try to eat healthy as a family, which is more expensive and makes it more difficult to use coupons (which are almost always for boxed foods). This means that we have to be diligent with our meal planning and our grocery lists in order to keep costs down. We often split our shopping trips between box stores (like Target) and the local grocery store to achieve maximum savings.
What are some of your favorite money-management tools or resources?
You simply HAVE to keep a family budget if you want to get a hold of your family finances. Sites like Mint.com can aggregate your finances together from multiple places, making it easy to get a view of the whole picture. You can't really get started until you are willing to be honest with yourself about how you are spending your money, and getting this view is an essential step.
Sign up for Mint to start getting honest about your finances.