The Personal Finance Brain Trust Tackles – Trying to Make Ends Meet But Still In Trouble

This weeks personal finance brain trust question was one that I received online.

My wife and I are both working, paying rent and land payment (have been trying to sell it), 3 kids and other debts and bills we are struggling from pay to pay and never get ahead. We have also borrowed money from family to help, but are still in trouble.

What can we do to ease the pressure.


WC – A 27-year-old writer living in Chicago and writing about personal finance through The Writer’s Coin.

This is the type of question that really gets to me. This is a case where money-saving tips and tricks come up short. This isn’t about cutting corners and saving money, these are situations that require life changes.

Gradual but drastic changes in how people live their lives. As Eminem so eloquently put it in the movie 8 Mile: “Do you ever wonder at what point you got to stop living up here and start living down here?”

It’s easy to cut corners and maximize a budget when you’re cutting things like movies and dinners out on the town. This question hits at the core of problems people have around the country: much more serious problems that require bigger changes.

It’s going to be hard, but my advice for this person would be to drastically change the way he/she handles their money. It may not be fun, but you have to stop living beyond your means, and if you’re “struggling” you shouldn’t be living at the level you are right now. Follow Eminem’s advice.

Patrick Bryan – Living in Northern Ireland, Patrick helps people in a very different environment and economy but yet, mush is universal and much is the same. Visit Patrick’s Northern Ireland blog on debt.

It is difficult to fully answer your question without more information and the first thing I would encourage you to first carry out an income and expenditure analysis.

Keep track of all your spending for at least a week but preferably 30 days.

Hopefully this will show you where your money is going and perhaps suggest ways to economise. It is amazing how much we can all spend on little things like newspapers, magazines, coffee etc. All of these are small expenses but can quickly add up to a lot of money each month.

Of course if your shortfall is high each month then more drastic action might be called for. It seems to me that you might have to give up on your dream of being a homeowner for a while. If you are struggling with rent and a land payment then by the time you develop the land you will probably end up with a property which between mortgage payment, taxes and maintenance will cost you more each month than renting. I have seen too many people over the past few years struggle to be a homeowner in order to build equity, only to end up repossessed because they can’t afford the running costs.

Now could be a good time to offload that land cheaply, put your finances in order and perhaps even put away some rainy day money in a zero risk readily accessible deposit account.

Patrick – Patrick writes two excellent blogs, Cash Money Life and the Military Finance Network.

The first thing you want to do is create a master list of all your income and all your regular expenses. With this list you will then determine if you have enough monthly income to cover everything. As you list your recurring expenses, look for ways to reduce them such as dropping cable or satellite TV, stopping monthly subscriptions, etc. You can also look to further reduce expenditures by buying generic products, reducing your utility usage, etc.

After you have cut expenses, look at the paper again. If the expenses side of the paper is larger than the income side of the paper, you are still in a losing situation. The only solution is to either cut more expenses or bring in more income. You may be able to cut recurring expenses by requesting rate reductions from creditors, reducing luxuries, and selling items that have recurring payments (such as the land or a car). To bring in more income you can try working overtime, taking on part time work, starting a side business, or holding a garage sale to sell unneeded items and make extra cash.

The only way to get ahead of the curve is to bring in more income than your current monthly expenses, there is no other way.

Steve Rhode – A personal finance blogger and founder of the Myvesta Foundation, a global scoial enterprise that helps people find solutions for money troubles. You can ask Steve your debt related question through GetOutOfDebt.org and he’ll help you for free.

When everything has been cut to the bone and there is no other expense to cut, that’s when you should start looking at benefits you may be entitled to. Government benefits like food stamps (now called SNAP), food allowances for women, infants and children (WIC) and health benefits like Medicaid should be there in your time of need. You can see this previous answer for more information on these benefits and others.

Maybe you’re feeling like you are too proud to hunt down those benefits. But you’ve paid into those programs through your tax dollars all this time. If you are in need, don’t let pride stand in your way of feeding the kids.

You should really take a good look at bankruptcy and see what debts you can get rid of in bankruptcy. Since the land won’t sell you can either reduce the price way, way down to move it, let the land go back to the finance company and include any residual debt owed on the land in your bankruptcy, or let your bankruptcy lawyer try to negotiate down what you owe on it so you can include it in the bankruptcy but keep it.

I’m really concerned about the borrowing from family to help make it. You’ve noticed that’s not working so in reality all you are doing is just going further into debt but to a different person. It is not solving the problem.

Getting out of debt is hard, difficult and sometimes damn near impossible, but it is not rocket science. If you can get your basic expenses to fit within your income, with a buffer to save a little in a savings account and get by, that’s what a basic budget should look like. If you are trying to pay down debt on a new spending plan or budget then you’ve got to trim down your expenses so far to include your basic expenses, debt repayment, and savings.

The pressure is intense and debilitating but it is not going to ease until you start to put a plan in place to resolve this situation. The pressure you are feeling is the force that builds up between the wall of reality and the wall of demands as they move closer and closer to each other. Once you alter your financial existence or eliminate your debt through bankruptcy, then the relief valve will open and the pressure will decrease.

You will find that your best solution will probably lie in a combination of these actions. That might be, cutting back, bankruptcy, benefits and then focusing on building a new financial life and putting money into a savings account.

J. Money – You’ll enjoy the blog Budgets Are Sexy for a look inside the life of one blogger and how money impacts it.

Oooh, tough one 🙁 First off, i’m sorry to hear that you’re in this situation, that’s def. not fun – especially when it involves a family. I do, however, give you mad credit for reaching out and looking for solutions! Now, do i have a solution? Yes, actually i have a few, but without any specific details it’s pretty broad. And I’m afraid none of it’s all that new or exciting:

1) Track all your $ – Find out where every single dollar is going! (not where you *think* it’s going, but where it *is* going)
2) Make more cuts – Go down this list of expenditures and decide which are necessities, and which are “likes”. Cut out the “likes” for now, and focus on the needs. You can always go back once this passes.
3) Create a budget – After you’ve made some cuts, or before even, come up with a REALISTIC budget. This is important for a number of ways, but mainly to help you track your progress each month.
4) Have c/c debt? – Try consolidating and/or asking for a lower interest rate. It won’t pay it off, but it sure would lower the amounts you owe each month!
5) Bring in more money – A bit obvious here, but it’s imperative at the rate you’re going. If you haven’t already, try asking for a raise at work – you may get shot down, but it’s worth a try. If that doesn’t work, consider looking around for the next step up, or in the meantime even looking for a 2nd job that one of you can take. It’s not ideal, but it may be necessary.

Again, it’s sorta hard coming up with specifics w/out more details, BUT i can promise you that if you give all 5 of these a shot, you’ll have a much better chance coming out of all this much sooner 🙂

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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