How to Get Out of Debt as a Family
Get the whole family on board with paying off debt to make the journey quicker and more meaningful.
What We'll Cover
- How to get your kids involved with paying off debt
- The debt snowball strategy and debt avalanche strategy for paying off debt
- Tips for making your family debt payoff journey a fun one
Have you made the decision to get your family out of debt and stay out of debt forever?
If that’s you, then congratulations!
The first step to getting out of debt is making the decision that you don’t want to live with monthly debt payments for the rest of your life. Now that you’ve got that hard decision out of the way, the next thing is to get the entire family (including the kids) on board with your debt payoff journey. Here’s how to do it.
Get the Whole Family on Board with Paying Off Debt
Sure, getting your spouse on board with your debt payoff plan is obvious, but should you really get the kids involved too?
Absolutely.
Behavioral researchers from Cambridge University discovered that parents should start teaching their children about finances as early as three years old. Now of course you don’t need to show your three-year-old how to balance a checkbook quite yet, but getting your kids involved with your family’s financial goals is a great way to start the money conversations.
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Create Financial Goals as a Family
When it comes to creating financial goals with the family, it’s important to create the long-term goals with your spouse. These goals may include when you want to retire, how much money you’ll need to live off in retirement, and what kind of nest egg you’ll want to have when you hit your later years.
However, sharing long-term financial goals with your kids may only put them to sleep.
Once you and your spouse have created your financial goals together, the next thing is to invite the kids to the kitchen table and ask them about some of the things they want, or want to do, as a family — aka “family goals.”
This may be a vacation together, a new swimming pool, a bigger house, or anything else to get the kids excited about working towards one common goal as a family.
Pro tip: Once you all land on that one family goal (or goals), write it down and hang it up for the whole family to see.
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Create the Family Budget
Now that you all have an end goal in mind, it's time to create the family budget.
You may be wondering if sharing the family finances with the kids is a good idea or not. The truth is, sharing things such as your income, your expenses, and how much money it takes to run a household each month will do more good for your kids than you could imagine.
Yes, your kids may be able to figure out how much money you make, but they’ll also learn how much money you pay for things that impact them. Show them how much groceries cost, the utility bill, cell phone service, and how much you spend in gas while shuttling them around town to their friend’s house, sports activities, and even to school.
When your kids begin to realize how much everything costs, you might notice they start turning off lights when they leave a room, closing the door when the air conditioner is on, and maybe even pass on asking for a snack at the grocery checkout.
Create a Debt Payoff Plan
Once you’ve created your money goal (or goals) as a family and you have your budget ready to go, it’s time to create your debt payoff plan.
Instead of just throwing a little extra money here and there towards your debt, let’s take a look at two proven debt payoff strategies that will help you knock out your debt as quickly as possible.
The Debt Snowball
The most popular debt payoff plan is the debt snowball strategy. This strategy works so well because it ignores the math and focuses on our behavior when it comes to debt.
Wait, ignore the math — that doesn’t make any sense, right?
Well, financial experts (and the banking industry) know the reason we get ourselves into debt isn’t because of our poor math skills. Instead, they understand it’s our own behavior with money that allows us to continuously go into debt.
No one ever opened a credit card offer in the mail and said “Look honey, we can carry a debt balance at 21.0% for the rest of our lives.”
When you change your behavior with debt, the debt will eventually go away.
Create Your Debt Snowball
To create your debt snowball, line up all of your non-mortgage debt from smallest balance to largest balance, and disregard the interest rates.
Then, make minimum monthly payments on all of your debt and attack the first debt with every extra dollar you can. Once you pay off that first balance, add the old minimum payment that you were making on that first debt to the next debt. Now, attack the next debt with as much force as possible.
Everytime you pay off a balance, the debt payment from the smaller debt will snowball into your next debt, and so on.
The reason the debt snowball works so well is because you’ll be knocking that smaller debt out quickly, giving you a quick win. This feeling of accomplishment will then help you focus on the next debt on your debt snowball list.
When it comes to the last and largest balance, you’ll be taking all of the minimum payments from the previous debts and making massive payments to knock out that last debt much quicker than you thought was possible.
Debt Avalanche
Another great debt pay off strategy is the debt avalanche. The debt avalanche is perfect for those who cannot get away from ignoring the math when it comes to debt payoff.
Create Your Debt Avalanche
To set up your debt avalanche, line up all of your debts from largest interest rate to lowest interest rate, make minimum monthly payments on all your non-mortgage debt, and attack the first debt with everything you have.
Once you knock out that first debt on your debt avalanche, roll that monthly payment into the next debt, and continue down your debt avalanche until all of your debt is completely wiped out.
The one problem you may run into with the debt avalanche is if your first debt is a large one. A large debt when you’re just getting started means you won’t see or feel the win of wiping out a debt right away. When this happens, you may lose the motivation to see your debt payoff journey through to the end.
How to Make Paying Off Debt as a Family Fun
If you really want to get the whole family into your debt payoff journey, you’ve got to find ways to make it fun. Here are our best tips for enjoying the debt payoff process.
Make it Visual
A great tool to help get the entire family on board with your debt payoff journey is to make it visual. It’s time to get creative with your debt snowball tracker so the entire family can follow along with every dollar you will all pay down together.
Whether that’s creating something that hangs on the wall or on the refrigerator, just make sure it is front and center for the entire family to see and be reminded of daily.
Squeeze the Budget
You, your spouse, and your kids have created the family budget and now understand how much everything costs. You’ve also seen how much debt you need to pay off, which means it’s now officially time to start taking action.
The first step to finding extra dollars to throw at your debt snowball is to squeeze the budget.
This requires all hands on deck. As a family, decide on what you’re all willing to sacrifice in the short term to reach your long-term goal (or goals).
Does this mean less meals at restaurants, a pause on cable TV, or creating a plan before going to the grocery store? Whatever you decide to do, remember to keep in mind that these are merely small sacrifices today to reach the larger goal in the future.
Sell Some Things
Have you squeezed your budget to the point of no return? Great job!
Another great way to throw extra money at your debt snowball is to turn your stuff into debt-payoff-dollars.
In today’s world, there are endless possibilities to sell your stuff online. With apps like Offerup, eBay, and Craigslist, you can sell anything and everything you own with a few pictures and clicks from your cell phone. Have an old cell phone sitting in a drawer at home? Turn that old cell phone into cash with Buyback Boss.
Also, when the kids start worrying about selling their stuff, remind them they can always go back and get more stuff after the debt payoff journey is over, and only when they pay with cash.
Create a Side Hustle
If you're unfamiliar, a “side hustle” is a way to earn extra money beyond your normal means of generating income.
The good news is right now there is someone who has a problem and they are willing to pay you to help them fix that problem. Maybe they need you to deliver them fast food to their home, pick up dog droppings in their backyard, or they may even want to rent your car from you.
The sky's the limit when it comes to pursuing ways to generate extra income each month through side hustle ideas.
Celebrate Small Wins
The last piece to successfully getting out of debt as a family is to celebrate the wins along the way.
For example, when you knock out that first debt on your debt snowball, take the family out for ice cream. As you move further down your list of debts, create a celebration for each one along the way.
These small celebrations help keep everyone motivated and on track when going through your family’s debt payoff journey.
Key Takeaways
- Sharing your budget with your kids can help them understand the bigger picture better and maybe help them be more conscious of their own habits.
- The Debt Snowball strategy allows you to get a quick win by tackling a small debt first.
- With the Debt Avalanche strategy, you’ll pay off your debt with the highest interest first.
- There are plenty of ways to make debt payoff with your family a fun journey. Create goals together and celebrate every win along the way.
Unfortunately, Americans are going in the wrong direction when it comes to debt. According to Debt.org, by the end of 2022, Americans owed an all-time high of $986 billion on credit cards, a $130 billion increase in 12 months.
Debt takes hold of our income and robs us of our ability to build wealth. When you choose to include your entire family in your debt payoff journey, not only are you getting everyone on the same page, but you’re instilling sound financial habits in your children. The long-term result isn’t just a life without debt payments, but the chance to influence your children’s healthy financial habits as well.
By Chris “Peach” Petrie,
Founder of Money Peach
Chris “Peach” Petrie is the founder of Money Peach. Money Peach partnered with OneAZ to provide free financial education to members across the state. To learn more about OneAZ’s partnership with Money Peach, click here.
APR = Annual Percentage Rate
