Debt-Reduction is a Joint Effort. It Takes Teamwork.

John Geltemeyer

We didn’t go into debt buying big ticket items, for the most part. Overwhelmingly it was a failure to track and plan.

We started as dual income no kids (DINK). We moved from a low cost of living area to high cost of living area. My wife retired from the military. We had 2 children. I retired from the military. I started a business.

At each one of these steps, we didn’t change our spending habits or review; we kept spending like DINKs.

One person was completely in charge of the accounts and bill paying, meaning one of us knew we were in trouble, and the other didn’t.

So, there we were: gross annual income of approximately $35,000. House payment of nearly $1000 a month. New car payment of $450 a month and almost $20,000 on credit card debt.

Our only good asset was that we had an outstanding credit rating, only slightly bogged down by our debt load.

The family needs to work together. You must become a thick-skinned and silent. Take responsibility. You were 50% to blame, no matter what. When your spouse says something that sounds like blame, shrug it off. Don’t accuse the other side of anything. You got into this as a team, you are only going to get out as a team.

You have to cut discretionary spending first. If you look first to cut your bills by getting cheaper plans or consolidating to get a lower monthly payment first, you’ll likely be right back where you started in less than a year.

Make a no kidding budget with a goal of understanding where every penny you spend goes. You may not be able to account for everything but you should try your best.

If you don’t, you and your spouse will begin attacking each other’s spending. In some cases you’ll be right, others wrong. However you’ll be fighting over it. You want to avoid that.

The top of the list should be all your discretionary spending. The next should be minimum monthly servicing of your credit card debts. Finally, non-discretionary things you may be able to negotiate lower.

When you do it right, the places where you are overspending will stick out like a sore thumb. In fact it might make you wince slightly.

Take your budget and show your spouse. Make no comments. When the spouse is finished ask “Where do you think we can make some cuts?”

If they try to avoid the discretionary area, gently steer them back.

No blaming. No getting thin skinned. If the spouse tries to apologize or blame, accept neither gracefully. You did this as a team, you’ll get out of it as a team.

A few areas to take into consideration that some people tend to gloss over.

Almost without exception the cost of any restaurant meal will serve 4-8 people at home. The more “ready-to-eat” a supermarket meal is, the more it costs. If you buy organics, research them, there are many foods that matter little as to whether they are organic or not. Pack a lunch to work. Convenience stores should be off limits.

You need to inventory your food. Plan weekly or longer meal plans. Make shopping lists that support the meal plan and inventory. Never buy off the shopping list. Work leftovers into your plan as they occur.

If both spouses work, both need to support the shopping and cooking of the meal plan.

Cable or satellite TV is a luxury, not an item to get a cheaper monthly plan for.

Once you have your discretionary items in line, then tackle insurance and other mandatory things to see if you can get cheaper plans. Cut out all frills out of your phone plans. Raise insurance deductibles.

See if your credit card companies offer cheaper rates. See if any of your loans can be refinanced. If it doesn’t lower your monthly payment, don’t do it. Avoid getting talked into rolling fees into new principles unless you absolutely need them to make a lower monthly payment.

When you are done with this exercise you should be able to come up with a plan that shows more money coming in than going out. You should then be able to show milestones where cards get paid off.

Christmas and birthdays will need to be scaled down affairs. Shop thrift stores and Craig’s list. Mom and Dad, you are now grownups. You don’t need toys at Christmas and birthdays. On these occasions give each other one simple gift that the other needs.

Once the plan is in place. Make sure you are both in 100% agreement. Sit down and calmly explain what is happening with your fiances to your children. Humans make mistakes. You’re human. Explain that you and mom made a mistake. Calmly and confidently explain what the family will have to do and for how long. This is important. If they don’t realize that you made a mistake overspending, they will eventually follow in your footsteps. They might just learn from you. If they know what is happening, they won’t panic when they see changes occurring. If they see you have a plan and are confident about it they will support your plan. If they ask of consequences of not paying, be honest. When you get stressed, and you will, you can explain it’s part of dealing with your current troubles.

If you have credit cards with non-interest fees, pay them off and cancel them. Make minimum payments on all but one card. Pick one card at a time to pay every extra penny you have into. Pay off the highest interests rates first. Knock out the debt one card at a time.

Formally meet with your spouse weekly to make sure you are both on your spending plans. Fess up immediately on anything that might be a surprise at the end of the month. Don’t blame, get back on track.

Make a monthly report that shows spending. Show increases or decreases in spending. Show credit card balances. Delineate the principles of your cards so that you and your family can see progress. Have small celebrations when a card gets paid off.

Using this plan we were able to pay off our credit cards and pay off our car loan early, in 16 months.

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