Hard work pays off

Jennifer McDonough was downright giddy. We were meeting at a Chinese restaurant to discuss how she and her husband, Bob, paid off more than $100,000 in debt in less than three years. A sit-down restaurant!

There was a time when the McDonoughs spent $600 a month on Friday night pizza, Chinese food on Saturday and Sunday Mexican night for their family of six. Now they haven't been out to dinner but four times since 2009, when they realized they were living well beyond their means and needed to rethink their lifestyle and priorities.

Like many Americans in the 2000s, the McDonoughs got swept up by the waves of easy credit. They sold the home they owned on the East Side of St. Paul, and bought a lake home in Lindstrom with no money down. The payment was half their income, but they figured the value would only go up. They bought a boat and a hot tub. They replaced old cars. They bought nice gifts, the boys played hockey, and they ate out -- a lot.

They were living paycheck-to-paycheck, using most of two decent incomes to keep up with debt payments. They never talked about money and had no idea how much they owed.

Then in 2009 their son Robbie was diagnosed with Type 1 diabetes. Determined to help find a cure, Jennifer found a clinical trial for Robbie in Denver. But they had no money or credit for a plane ticket.

"It's like we just woke up," said Jennifer, 41.

That's where Dave Ramsey came in. The once-bankrupt real-estate-investor-turned-financial educator has a course called Financial Peace University, and the McDonoughs' church was offering to reimburse the $99 course fee to congregation members who completed the online program.

The couple was reluctant. "I certainly didn't want someone telling me what to do with my money," Jennifer said. But after the first lesson, Jennifer was hooked, going through a course that was supposed to take 13 weeks in 10 days.

It took Bob, 47, a little longer to get on board, finding Ramsey to be "abrasive."

First they tallied up their debt. They'd maxed out a credit card with a $14,000 limit, taken out $46,000 in a 401(k) loan, owed $3,000 on a line of credit, $5,000 on a boat, $25,000 on a van and $68,000 on a second mortgage.

Every month they were spending $1,000 more than they made. They crafted a bare-bones budget for a lifestyle nothing like the one they'd known.

They took their credit card statement, drew a red line through it and wrote "Last McDonough Visa bill," then stuck it to the fridge. Jennifer came up with the idea so the family would "remember where we had crawled out from and where we were going."

It was hard to adjust. The first week of the program, Bob went out for lunch every day. "I was so mad," Jennifer said. The couple who never fought about money had their first fight.

But after the first bill was paid off, Bob was hooked. "It's empowering," he said.

They sold an extra fridge, a composter, the boat and other items on Craigslist. They sold the van and bought a $600 Buick to replace it.

They instituted a gift moratorium, turning down invitations to weddings and parties with gifts. They stopped buying clothes. They pulled the kids out of hockey. Family restaurant nights were history. "[The kids] understand the concept of money now," Bob said. "They kind of celebrate in our victories and kind of know the long-term goals that we have."

The couple also worked. All the time.

Both Jennifer and Bob work at 3M. Then at night, Bob would clean offices. Jennifer worked for the YMCA and the Census Bureau on weekends. They've participated in several research studies. Jennifer wore a heart monitor ("they're itchy"). One test paid $150 but required Bob to get his chest shaved. The two still deliver pizzas. In 2010, they had 10 W-2s between them. "Once you start getting that momentum of paying it off, you'd do anything," Bob said.

Every penny of that extra income went toward debt paydown. "Those little snowflakes hitting that snowball," Jennifer said.

Snowball? Jennifer is referring to Ramsey's debt snowball plan. List your debts from smallest to largest, no matter the interest rate. Pay the smallest debt first, then use the money freed up from that debt payment and put it toward the next bill.

Today, the 401(k) loan is repaid, they have $1,000 in emergency savings, are working aggressively to pay off their second mortgage and donate 10 percent of their income. "Our kids have become awesome givers," Jennifer said.

A German documentary crew followed them around for a 2012 TV show. Jennifer blogs at fieldofdebt.com and is writing a book about their financial journey. She travels with several used copies of Ramsey's "Total Money Makeover" book with her, just in case she gets into a conversation with someone about debt.

And in three years, "we're going to take a helluva vacation," Bob said.

Kara McGuire • 612-673-7293 or kmcguire@startribune.com Twitter: @kara_mcguire