Ask The Get Out of Debt Experts Budgeting & Budgets

I’m Just Getting By and Not Getting Ahead. – Tristan

“Dear Steve,

I recieved my first “pre approved credit card” at the age of 17. I didn’t think that someone under the age of 18 could have a credit card, but I guess I was wrong! Hey, I was working fulltime and making good money so what the heck! I did ok for awhile but I was SO responsible that I wound up taking on more than I could handle. Best Buy card for new PC (college), credit card to purchase engagement ring, etc.

I am now 25 years old, married (not to the woman I went in to debt for a ring for), have a 4 year old son, a salaried supervisor position (after only 4 years employment), and I really want to get my fincances on track. On top of the credit card debt early in my adulthood, I have accrued some student loan debt, medical bills, utility co.’s, etc. It’s all so overwhelming I don’t even know how I could track down all my ‘debts’ to make an attempt at reconciliation. I have also taken on whatever debts my wife has. She has mostly medical bill and alot of student aid.

I do know that I need some sort of budget counseling. I am very good at making budgets, but I always feel like I am in a crisis situation in some way and I never can stick to it. In my defense though, money is very tight for me. I gross 37,500 a year. This doesn’t seem like bad money to me. My wife has worked off/on but due to some medical and emotional issues she is currently unemployed and will probably stay that way for some time.

My expenses at home are fairly high. I pay 675/mo rent, approx. 175/mo in utilities (elect., water, sewer) sometimes more sometimes less, 120/mo for phone/cable/internet, 60/mo car ins. I am driving an old buick that sucks gas, gas for my wife (visits her sister a couple times a week), food, cigarettes (we are smokers), and other necessities for a family of 3.

I am already working on cutting expenses. I am signing up for some smoking cessation classes, and I am going to seriously look for more affordable housing. I can also cut out some things like cable, etc. I am aware that I could be saving myself a little bit of money in these areas.
I have approx 1000 dollars a month in “bills”. I bring home $1100 every two weeks. That means basically one of my paychecks is accounted for every month for bills. The remaining 1100 is spent on food, gas, etc. 275$ a week is plenty for a family of 3 to live on. This would leave me no room for much of a hiccup however. I feel like if I could get all of my ‘living expense’ bills caught up to $0 I could stick to my budget every month.

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All these things compounded with the letters, phone calls, etc from debt collectors that is constantly hanging over my head is too much to handle. I don’t want to file bankruptcy, I want to be able to get an auto loan sometime in the near future, maybe buy a home…I don’t want my credit to be destroyed before I could even build it up. However, on my current budget it would be very difficult for me to make a large payment to a debt consolidation firm.

I apologize for the rambling length of this message, I just wanted to give a clear picture of my situation.

Based on the information given in my description above, what would be my best course of action to a)try to maintain a budget and finding ways to do so and b)what can I do about all my past debt?

Thank you so much, I look forward to your response.

Tristan”

Dear Tristan,

It sounds like you unfortunately fall into that wide band of people that make enough to get by but not enough to get ahead.

You are really faced with a dilemma in deciding which is more important, to repair the past or fix the future.

It sounds like you’ve already talked to a credit counseling group and discovered that your monthly payment in a debt management plan might be the same as what you are paying now and that doesn’t give you any breathing room.

I think what you’ve observed is that you don’t need an interest break as much as you need a payment reduction.

The only way to get a payment reduction with any legal protection to avoid lawsuits and wage garnishments is through bankruptcy.

Without bankruptcy your choices are going to be to either increase income and/or reduce expenses. For example, like stopping smoking, or maybe seeing if your student loans are eligible for the IBR (Income Based Repayment) program.

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I would imagine that the reason the “budgets” are not working for you is that they are based on what you would like to spend versus what you actually spend. The only way to craft a meaningful plan on how to spend your money is to track actual expenses for a month or two and then use that data to make some educated decisions on how you would like to spend your money. Otherwise a budget will only be an exercise in futility and defeat. You’ll make a budget and not be able to keep it.

If you want more help in creating a spending plan you can download my free book Eliminate Your Debt Like a Pro.

As part of how you spend your money currently you need to factor in putting money in savings. It is important to build up your emergency fund or saving account while you are digging yourself out of the hole you are in. Without cash for emergencies and unexpected expenses will wind up back on credit and quickly erode any progress you made getting out of debt.

So bottom line, if you feel you have already cut expenses to the bone, you are just making it month-to-month and you are currently unable to save, you really need to find a local bankruptcy attorney and go talk to them.

One point of view is that you have a moral obligation to honor your promises and pay your past debt back. Another point of view is that you have a moral obligation to properly care for your wife and daughter moving forward.

So, let me ask you, is the plan of attack for you to fix the past or make the future safer?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.




About the author

Steve Rhode

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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