Move Out of the Red and Into the Green

If you’re surfing the radio channels and come across a voice yelling, “I’m debt-free!” you have undoubtedly hit upon the Dave Ramsey Show. Featuring real people with real financial challenges seeking real help, the show offers “the same advice your grandmother would give, only we keep our teeth in.”

Granny and Dave Ramsey are not the only ones giving such counsel. Mary Hunt, Howard Dayton and the late Larry Burkett have been voices speaking similar words for a number of years. It’s a common-sense approach to money: don’t use credit, pay cash and live within your means.

Are people who pursue a debt-free life crazy? Aren’t credit cards, car payments and a mortgage (or two) part of the American dream? Not so, say many who desire to be free from debt.

Today’s families are seeking financial freedom for a number of reasons. For some, it’s the realization that while they make a good income, they have nothing to show for it. They conclude that finance charges are monies that could be funding kids’ college tuition and their own retirement. Others realize that debt limits their freedom to enjoy good things or to give generously to others. It’s an age-old truth that King Solomon penned quite eloquently thousands of years ago, “The borrower shall be slave to the lender.”

So, how does one go about living debt-free? Here are some of the “secrets” that others are using to dig themselves out of the hole.

Cut the credit.
Even if you pay off your credit cards at the end of the month, some financial advisors suggest ditching the plastic completely. By simply paying cash, you will save money. A Dunn and Bradstreet study calculated that credit card users spend more money, about 12 to 18 percent more, than shoppers who pay cash.

There is an “emotional experience” that occurs when you hand over those greenbacks. You have a feeling of something being lost, or spent. Using credit cards anesthetizes that pain. You don’t feel it – until the bill comes. By then, the money is gone. If you can afford to pay it off each month, you can afford to pay cash.

Set a budget and stick to it.
A budget is a self-imposed limit on how much you will spend. It makes sense that what you spend should not exceed what you earn. In fact, creating a budget that is less than your income allows extra funds to go toward paying down debt, saving for emergencies and building wealth.

Many families find that they are most successful at budgeting when they switch to an envelope system, where the allotted amount for each expense, such as gas, food, clothes, etc., is placed in an envelope at the beginning of the month. Angela and Darren Coffman of Kansas City, Mo., found this to be helpful. Angela comments, “When we decided to get out of debt, we cut up all our credit cards and switched to a cash-only envelope system. We were able to see then at every purchase how much money we had left in the budget. When we were out of money, we were done spending.”

Systematically pay off debts.
While keeping current with all your accounts, use extra cash toward one debt. Some experts suggest choosing the debt with the highest interest rate as the first to pay off. Others prefer the debt with the lowest balance so that you can see yourself making progress sooner. Either way, come up with a plan of action and get all family members on board. After the first debt is eliminated, take its regular payment as well as that extra income and apply it to the next debt. Continue this until all the debts are paid off.

Lawrence and Briana Almengor of Abingdon, Md., are doing just this. Briana explains, “We apply Lawrence’s increase in salary each year toward an extra payment to our car. Then once we’ve paid it off, we’ll apply any money we were putting toward that to paying down further and further my student loan.”

Discern between necessities and luxuries.
Summer homes, new cars, electronics, fancy sneakers ? there will always be something that the Joneses have that your family wants. But a want and a need are two entirely different things. It’s important to determine that difference as you prepare your family’s budget.

This was the biggest change for Mich and Diana Fisher in Natick, Mass. They started to teach this principle to their two sons and realized that the boys would learn better from example. Diana advises, “Don’t buy something right away. Sit back and think about it. Is it something you truly need?” Taking time before a purchase, consulting with other family members and even applying a waiting period will help you make wiser purchasing decisions.

Live frugally.
Digging out of debt involves delayed gratification and an adjustment in priorities. Some may view putting off new clothing or home furnishing purchases as a sacrifice, but it is a fleeting one. If you are tenacious, you’ll see the rewards in a short amount of time. Parents of three kids under 4, the Almengors are willing to live with older clothes or hand-me-down furniture to get a little closer to their goals.

Diana Fisher has reduced her grocery spending by using the services of For a set fee, members receive helpful information about what is on sale and what can be discounted through couponing.

The Coffmans were so successful at their frugal living that they paid off close to $100,000 in less than three months. Angela explains, “I learned to feed my family [of five] on $180 a month by working in neighboring gardens for extra produce, foraging edibles from the yard, bartering labor for fresh milk and eggs from neighboring farms, shopping creatively and cooking completely from scratch.” Angela has even created a Web site,, to help others creatively apply frugality to their own lives.

Work extra hours.
For some families this may mean working as much overtime as possible, taking on a second job, or having the stay-at-home parent go back to work for a season. Consider the things that you know and enjoy doing or that will fit your family’s life. This may entail doing yard work, delivering pizzas, teaching music lessons, tutoring or performing handyman tasks.

Tami Lawler, a stay-at-home mom in Ventura, Calif., started her own business to relieve the pressure of debts. This change meant “life had to get more organized,” Tami says. Planning and preparing meals ahead of time for nights when she was gone, getting the kids accustomed to Dad handling the bedtime rituals, and Dad regularly doing household chores to compensate for mom’s absence were incorporated into their way of life. In the end, it was worth a little sacrifice for the freedom they desired.

Sell stuff.
Shopping may have helped land you in debt, and shopping ? someone else’s ? may help you out. Clean out closets and bookshelves of unwanted or unused clothing, books and other household items. Yard sales, consignment stores, and Ebay are excellent avenues for earning extra funds by selling your discards. Consider selling any financed vehicle and replacing it with an older, used model for which you pay cash.

Re-evaluate your housing.
For Devin and Jessika Leonard of Santa Barbara, Calif., selling their house in an expensive market freed them from debt. They liked the feeling so much that instead of purchasing another home, they chose to rent a duplex from family at low cost. Despite pressure from others to buy another home, Devin says, “We are currently very happy and unburdened. Jessika’s parents bless us with low rent and babysitting, and we bless them with yard work, fixing things, helping them and providing safety.”

Pass on a new way of living and spending.
Probably one of the best dividends of pursuing a debt-free life is the financial heritage you pass on to your children. It may take several forms: a large monetary inheritance, a fully funded college education or simply (and perhaps most importantly) the knowledge of how to live in a financially responsible way. The credit card companies already market to teenagers, and the toy aisle features plenty of pretend plastic cards. Rather than let your kids fall into the bondage of debt, prepare them to make do with less, to prioritize purchases and to delay gratification.

One Kansas family recently took their kids to the bank to pay off the balance on their home ? about 20 years earlier than most. Susan, the mother, says, “We talked about what an accomplishment it was, how hard Daddy works to provide for us, and how carefully we try to spend our money. People at the bank were very excited and congratulated us, so [the kids] knew it was something special. I don’t recall a lot of conversations about handling money when I was a child, but I think that day made an impact on our children and will be something they remember.”
Angela Coffman comments about their experience. “We had to move from valuing things to valuing people,” she says. “We learned to enjoy spending time at home with our children more than going to dinner and a movie. Our children benefited so much from our shift in focus. They were spared the materialistic attitudes Darren and I were fighting to overcome.”

These families and many more are pursuing freedom. They desire a life free of payments, interest rates and money worries, and they’re willing to get a little dirty to achieve that goal. Digging your family out of debt may involve a few sacrifices, but eventually you’ll hit pay dirt — in the pocketbook and in personal happiness.

Jessica Fisher is a wife, mother of five and freelance writer who lives near Kansas City, Mo.

Helpful Web Sites

Valuable Reading
Debt-Free Living by Larry Burkett
Debt-Proof Living by Mary Hunt
Debt-Proof Your Kids by Mary Hunt
Financial Peace by Dave Ramsey
Miserly Moms by Jonni McCoy
The Total Money Makeover by Dave Ramsey