Keeping up with the Donats
N.S. family finds secret to being debt-free
It was panic time. Elementary school teacher Meghan Donat and her husband Morgan, a self-employed massage therapist, had just moved into their $275,000 dream home on three acres outside Bridgewater in southern Nova Scotia.
It was February 2013, shortly after the big Christmas shopping season.
And the Donats were finally in that 3,000-square-foot, two-storey house on its quiet cul-de-sac with their two young daughters. Everything was great. Except the bills.
The couple had moved into their new place before selling off their other house and were still carrying a $140,000-mortgage on it. Their new home also came with a mortgage that, with the interest payments and fees on it, would cost them $308,000.
It was a lot of debt for the couple whose combined revenues were just a shade under $120,000 annually.
“We started freaking out,” admitted Meghan. “We panicked.”
Faced with that mountain of debt, the Donats did exactly what financial experts advise. They sat down at their dining room table and began to put together a household budget in earnest.
Debi Peverill, a chartered accountant who teaches a course called Budgeting Essentials at Saint Mary’s University in Halifax, says many people are quite simply unaware as to where their money goes.
“The biggest mistake most people make is they don’t keep track of their expenses,” said Peverill.
The Donats broke down their expenses into 17 categories, including groceries and the mortgage but also gifts, investments, entertainment and even lottery tickets. Going through that exercise gave them a certain amount of relief.
Things were not as bad as they seemed.
“We were pleasantly surprised when we got the real numbers,” said Meghan.
Since she made extensive use of credit cards to collect points, Donat was able to get a good sense of her spending by going back over three months of credit card statements.
In her course, Peverill advises students to track every expense for at least a week. A month of tracking ex- penses is even better.
According to financial experts, everyone should budget and have enough in savings to cover at least two months of living expenses.
“It is hard to stick to a budget,” said Peverill. “They have to have a goal to forego what they’re giving up.”
For the Donats, that goal was to be mortgage-free in five years. It was an ambitious target.
But they did it. Admittedly, it wasn’t easy. Meghan used so many money-saving tips – and tricks to make a few bucks – during those five years that she was able to write a book about her household budgeting knowhow. It’s called A Penny Saved Is A Mortgage Paid and it’s available as an e-book on Amazon.ca for $5.
None of the strategies the couple used is particularly difficult to understand.
“Everybody can do it if the why you’re doing it is very clear,” said Meghan.
By watching every cent and carefully budgeting – something that takes Meghan about five hours every week – the couple was able to plunk down an additional $3,000 or so every month for five years on top of their regular mortgage payments. That’s $36,000 in extra mortgage payments every year or $180,000 over the five-year period.
Add to that the roughly $10,000 in appreciation on the sale of their old house and the about $60,000 they had in equity built up over years of paying that mortgage, and the Donats were able to be completely debt-free this year.
And they did it while installing a 26-foot, above-ground pool with a deck in their backyard.
The pool, they bought. The deck, Morgan built himself using wood recycled from his father-in-law’s old pool deck.