In June 2010, Brian Brandow was planning a summer trip for his family when he noticed something alarming: All five of his credit cards were maxed out, and he had no available cash.
“I went to my wife and said, ‘We can’t afford a vacation. We have to do something about our finances,'” remembers the Long Island, New York-based father of three. “We make too much money not to be able to afford a vacation.”
At the time, Brandow was working as an IT manager bringing home about $US120,000 a year, and his wife was taking care of their then 8-year-old and 11-year-old twins. That summer, they had a staycation, and Brandow started gathering information about his situation.
His family was $US109,000 in credit card debt. “It wasn’t any one thing. It was really just our lifestyle,” he explains. “We didn’t have a good handle on money and overspent for a number of years. We lived paycheck to paycheck, using credit to cover ourselves. I remember always having a credit card and using it for whatever I needed.”
Brandow says his parents taught him financial basics like balancing a check book, but he doesn’t remember learning about credit and debt. So he set out to teach himself about money.
“I hit the internet and started looking for information,” he recalls. “There had to be some secret out there I’d been overlooking for years, some get-out-of-debt-quick scheme they forgot to tell me in college. I came across Dave Ramsey, and since I didn’t have any cash, I went to the public library and picked up his book ‘The Total Money Makeover.’ I read it in three days.”
That book kick-started the family’s journey out of debt. First, they cut up four of their credit cards. Then they called up the remaining company and had their credit limit dropped to $US1,000.
He made an Excel spreadsheet and wrote down every single little expense the family had each month and cut out luxuries like the satellite radio he enjoyed on his commute to work and the kids’ subscription video game service. They stopped going out to eat immediately.
The kids got involved, too. “One of the first things I remember talking to the kids about was the ice cream truck,” says Brandow. “Ice cream is their favourite dessert, but if we got ice cream for the five of us it could be $US10. I told them, ‘We could have ice cream just tonight for $US10, or we could take that same money and go to the supermarket and you can have ice cream all week. What would you like to do?’ They said, ‘Let’s go to the grocery store!'”
Brandow also realised their local credit union offered a debt management program, and he gave them a call. On their behalf, the credit union called their credit card companies, consolidated their debt, and reduced the interest rate. “On one card, the rate was 18.5%, and they were able to reduce it to 1.5%,” explains Brandow, “so a lot more money was going to debt as opposed to interest.”
Brandow’s wife also made a major change: She went back to work in retail, increasing their household income to about $US160,000 a year.
Over the course of the entire repayment, their average monthly debt payment was $US2,100. In 2013, Brandow started a blog, Debt Discipline, to document their progress, stay motivated, and remain involved with the online personal finance community.
During this process, they maintained an emergency fund with about $US1,000, which covered the dishwasher and the car breaking down. However, when Brandow’s wife got in a car accident and had to have surgery that took her out of work for a year, they rolled her medical bills into their overall debt repayment.
“Our income was reduced, but we were used to making changes within our budget and we had a plan,” Brandow remembers. “Our main concern was her health, so we just managed within my salary at the time. When she went back to work, we increased our payments again.”
Coincidentally, the settlement from the accident’s lawsuit came in just when they were wrapping up the debt payments, and they diverted that money straight into their emergency fund in order to cover three to six months of living expenses.
Ultimately, it took the family 50 months — just a little over four years — to completely pay off their debt. “It feels amazing,” Brandow says. “We look back as a family and wish we would have done it 10 years ago. We sit with our kids at the dinner table and talk about money and budgets because we so want them to start their financial lives on the right foot.”
The family will go out to a nice dinner to celebrate, and take a big trip next year for the twins’ 16th birthday. Brandow is now focusing on building retirement savings and the kids’ college funds, and hopes to work with the school district to help implement some sort of financial education program for kids and teens.
“I never wanted to say that we couldn’t afford a family vacation or go out to eat once a week or once a month,” Brandow says. “We work too hard and make too much money not to be able to afford the things we want, if we’re smart about how we spend our money.”
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