This is a guest post from Jana at Daily Money Shot. DMS is a personal finance blog discussing money, family, relationships, pop culture, and everything in-between. Go visit Jana’s site and show her some love! You can also find her on Twitter and Facebook.
Anyone who’s ever paid off debt, tried to pay off debt, or even thought about paying debt understands one simple truth: getting out of debt is hard work.
Like losing weight, there is no magic pill that will make debt go away. To make it happen, you have to put forth the effort. You have to set up an action plan. You need goals, you need to measure your milestones and you need to track your progress. You need to be accountable to your debt and you need to find a way to stick to your plan. You need to do it safely and in a healthy way so that a) you don’t go crazy and b) it has the desired long term effect.
It’s a lot.
And if you’re a parent paying down debt? That presents its own set of challenges.
Kids come with their own agenda. They won’t tell you what it is but they have one. They expect things like food, safe and adequate shelter, seasonally appropriate clothing and hygiene products (seriously, could they be more demanding?). They also want books, toys, afterschool activities, field trips, music lessons, and really expensive electronics that they feel they just can’t live without. And for most parents, it’s really hard to say no. But as parents, especially parents who are working their way out of debt, sometimes we must say no.
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It’s the only way to ensure that they don’t repeat our mistakes. It’s also a way to make sure that they grow up with healthy financial habits.
But how do we do that?
Unfortunately, there’s really no one set of rules. How we get out of debt with kids in the picture will vary depending on the age of the kid(s), the severity of the debt, and how much that debt will impact the kids’ day to day lives. In my situation, my daughter had just turned 5 when we finished paying off the bulk of our debt; to include her in the plan would have been useless. But we did have to adjust our plan to make sure her basic needs were met. We often did without so we could give her what she needed. And that worked for us. But not everyone is the same as my husband and I. Which is fine.
But I digress. While there is no concrete set of rules for managing debt and kids, there are some guidelines that we all can follow, especially if your kids are older. For instance:
- Include them in the plan. Let them know that you made some mistakes with money and now you’re trying to fix them. Try to explain to them, in an age appropriate way, that you spent more money than you have and that you have to pay it back. After you think they understand (as much as they can), ask them what they think can be done to solve the problem. What would they be willing to give up or do without temporarily? What’s too important to let go? Use their input. Really, seriously and truly use their input. By including them, they’ll feel like their part of the solution rather than having it thrust upon them. And this will make it easier for them to accept their new situation.
- Ask them to help budget. This is a great opportunity to teach your kids about how to budget. It’s also a great opportunity to show them what happens when you overspend your paycheck or you borrow money that you have to pay back (loans, credit cards, etc). Enlisting their help in creating a budget affords them then opportunity to see what goes into running a household, and how much things actually do cost. Have them assist in meal planning, couponing (if you do that), and allocating money to different categories. This gives you a chance, as their parent, to see where their priorities are and to teach them the difference between wants and needs. And, like including them in the formation of the repayment plan, this will make them feel like they had a say in what happens rather than just having to deal with it.
- Make it fun. If you’re like my husband and I, your entertainment budget was the first to get cut when you got serious about debt repayment. We became quite adept at finding free and inexpensive activities to keep ourselves busy and amused when we just couldn’t sit in the house a minute longer. This is crucial when you have kids because they tend to get a little stir crazy (or you start to get crazy and need a change of scenery). Work with them to find cheap activities around your town. Ask them what they like to do and then come up with a way to do it for free. For instance, does your family like camping? Instead of going to a campground, set up a tent in your living room or backyard. Put on a talent show or a fashion show with items around the house. Use this as an opportunity to emphasize that fun doesn’t need to be costly.
Balancing the desire to give our kids the best we can while paying down our debt is an extremely daunting and tricky task. But with careful planning and a readjustment of priorities, as well as including the kids, it can be done.
Readers, how have you balanced raising a family with paying down debt?
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