• Home
  • About Me
  • Connect With Us!
  • Featured In
  • Work with Me!
    • Bloglovin
    • Facebook
    • Instagram
    • Pinterest
    • Twitter

The Good Enuf Mommy

  • Parenting
  • Marriage
  • Education
  • Blog Tips
  • Eating Well YYC

Get Out of Debt After Having Kids

in education, parenting on 21/08/17

Many parents wonder how to get out of debt after having kids. Today’s guest post by Jacob Evans offers some excellent insight into how to avoid the debt trap and what you can do going forward to minimize the impact.

Get Out of Debt After Having Kids With These 4 Strategies

Many wonder how to get out of debt after having kids. Four easy strategies to avoid getting into debt and how to get out of debt.

The Burden of Debt When You Have Children – and How to Avoid It

Being a parent should be a joyous time, but financial woes can put a damper on expecting or raising a child. Millions of families experience anxiety and worry about debts they owe, from mortgage balances and credit cards to student and auto loans. While debt is often a means to an end, making large purchases or unexpected bills easier to manage from a monthly cash flow perspective, carrying consumer debt when a child is on the way or already in the picture can be overwhelming.

Without a realistic strategy to repay debts and the interest that builds up over time, it seems impossible to set aside for a child’s long-term financial needs. Paying for his or her future education, covering daycare costs, and managing the surprise expenses that go hand in hand with having a child are difficult when debt is part of your financial picture.

Whether you’re a current or prospective parent worried about your debt load, there are ways to manage your financial obligations while also providing financially for your child.

Frugality is Key

Planning ahead of time is one of the best steps you can take when a baby is on the way. Evaluating income versus expenses each month and creating a budget that works for your household is a necessary part of the process. Crunching these numbers provides a reality check for how much is being spent on debt and other living expenses each month, and how much is left over to expedite paying things off. If cash flow seems too tight to squeeze out any additional dollars to put toward consumer debt payments, consider reducing the following common monthly expenses to make frugality your goal:

  • Dining out: this category of spending is often where most families well exceed their budget. Think about ways to reduce or altogether eliminate the dining out bill, like planning a menu for the week, preparing meals in bulk in advance, or taking lunch to work every day.
  • Household extras: items like cable, cell phones, and gym memberships may seem necessary in life, but each adds up to a pretty penny every single month. If you can’t live without these amenities, contact your provider and discuss options for reducing the monthly charges either temporarily or permanently.
  • Entertainment: if you find that you’re spending a significant amount on movies, music, or other entertainment each month, give yourself a hard budget for this category or swap the activities out for outings that are free. Reducing or eliminating this amount before the baby comes can provide a little extra to put toward debt.

Many wonder how to get out of debt after having kids. Four easy strategies to avoid getting into debt and how to get out of debt.

Consider Restructuring Your Debt

After the budget work is done and reducing monthly expenses complete, it may be worth taking a closer look at what debt is owed and the interest rate associated with each. A major player in the inability of some households to fully get out from under the burden of debt is interest accumulation. When a balance remains unpaid on revolving debt, like credit cards, the minimum payment barely moves the needle on the principal balance, if at all. The same goes for student loan debt when an income-based repayment plan is selected. Restructuring these debts may prove to be beneficial in the long run if interest is piling up each month.

For credit card debt, consolidating high-interest-rate cards with a zero-percent balance transfer offer or a low-interest personal loan may be a smart move. Eliminating or greatly reducing the interest charges each month allows each dollar paid toward the debt to work that much harder, helping you get rid of the debt for good quickly.

For prospective or current parents with student loans, refinancing into a private student loan with a longer repayment period, a lower interest rate, or a combination of the two helps ease the burden on monthly cash flow. Before embracing consolidation or refinancing as a viable option, however, it is important to understand the terms of the new debt you will be taking on and the upfront and long-term costs associated with each.

Use Extra Income Wisely

For households with extra income each month, utilizing what’s known as the snowball method for debt repayment is a smart method to eliminate debt quickly. Through this strategy, debts are listed from smallest to largest along with the minimum payments due. The minimum payments are made on all debts except for the one with the smallest amount owed – this is where the extra income should be focused. Once the smallest debt is paid off, the next smallest debt is the focus, with extra money put there. Studies have shown that following the snowball method for debt repayment works well in expediting the process, due in part to the motivation that comes with paying off the first, smallest balance.

Not every method of debt payment works for every household, but soon-to-be and current moms and dad have an opportunity to speed up the process by following one or more of these methods. Start with an in-depth review of monthly expenses, and cut costs where it makes sense. Follow up by considering ways to restructure your debt with the intent of lowering the interest rate or extending the repayment term. Finally, if extra income is in play, use the snowball method to gain traction and keep it up until your debts are paid in full.

 

4 Strategies to Avoid Debt After Kids

Jacob runs Dollar Diligence where he blogs about debt repayment, saving money, and side hustles. For more advice and content, follow him on Twitter.

 

17 Comments

« Back to School Hacks You Need to Know
Summer Skin Care for Kids: Pro Tips from a Pediatric Dermatologist »

Comments

  1. Emily Smith // The Best of this Life says

    August 21, 2017 at 8:41 am

    These are powerful and actionable strategies to use! We are a pretty frugal family, paying attention to what we spend our income on and making our dollar stretch. We choose a lot of free activities to do with the kids as well and are saving for family travel in the future, rather than going all out when our kids are little and content playing at the park and doing crafts!

    Reply
    • goodenuf says

      August 21, 2017 at 1:35 pm

      Good for you! That’s fantastic!

      Reply
  2. adventures says

    August 21, 2017 at 10:59 am

    I completely agree with your points. It’s difficult to control the debt when they are first born, but afterwards – it’s all on mom & dad to control the spending and budget appropriately. You have a good handle on this and hopefully others will take your advice. It’s so easy to slip into the “I deserve this” attitude and begin to reward yourself too much!

    Reply
    • goodenuf says

      August 21, 2017 at 1:35 pm

      It’s definitely worth it to look a little closer at the finances and cut the excess wherever possible.

      Reply
  3. cvnxena says

    August 21, 2017 at 11:09 am

    This is something we are dealing with at the moment with our second and these are some fantastic tips!

    Reply
    • goodenuf says

      August 21, 2017 at 1:34 pm

      Thanks! Glad you found it so helpful!

      Reply
  4. Terri Steffes says

    August 21, 2017 at 4:19 pm

    Yes, and my weakness is impulse buying. I need to have something in place where I have to wait 24 hours after I think I want to buy something to gauge my buyers remorse. 🙂

    Reply
    • goodenuf says

      August 21, 2017 at 6:39 pm

      Right? Luckily now most companies have a clause for that so legally you can!

      Reply
  5. tiarasandtantrums says

    August 21, 2017 at 10:54 pm

    My husband and I were both older, established and had zero debt when we met and married. We started out in a great place and never have had to worry about these issues.

    Reply
  6. Crystal says

    August 22, 2017 at 10:14 am

    We’re doing the debt snowball and have paid of thousands this year! I can’t wait to be out of debt!

    Reply
  7. TheMrsTee says

    August 22, 2017 at 5:19 pm

    Really great tips and strategies!! My husband and I are still recovering from debt created by having 6 Kiddies and not planning in the best ways.

    Reply
    • goodenuf says

      August 23, 2017 at 7:30 am

      Wow! That’s a lot for anyone to manage though I’m sure!

      Reply
  8. withkidsandcoffee says

    August 22, 2017 at 6:26 pm

    Some really great advice in this piece that I know a lot of families will benefit from. I’m a huge fan of the snowball approach to paying off debt, too. Seeing stuff start to disappear entirely is such a motivator.

    Reply
    • goodenuf says

      August 23, 2017 at 7:28 am

      It definitely is!

      Reply
  9. Amy Desrosiers says

    August 22, 2017 at 8:40 pm

    To stay out of debt, we try to only spend what we have. I stay away from credit cards and only use them when I have the cash at home.

    Reply
  10. amandahrosson says

    August 22, 2017 at 11:13 pm

    I don’t have any kids yet but these strategies can be so useful to anyone! It’s so important to be financially aware!

    Reply
  11. toughcookiemommy says

    August 23, 2017 at 10:25 pm

    Using extra income wisely is so important. Sometimes, when we have a little extra money, it burns a hole in our pocket and we don’t spend it wisely.

    Reply

Leave a Reply Cancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.