We Are Living Paycheck to Paycheck and We Don’t Know What to Do. – Cynthia

“Dear Steve,

We make about $5,000 a month, there are five of us. Try as we might we cannot save any money. We are living paycheck to paycheck. We don’t know what to do. We have no credit cards and our rent is $850 and the car payment is $380 and then all your standard living bills.

Please Help!


Dear Cynthia,

Well the good news appears that you don’t seem to have a lot of debt from credit agreements, the bad news is that you can’t make it on the income that is coming into the home.

Making $5,000 a month and what you get to keep after taxes, well that’s two different things, isn’t it?

In a situations like yours it seems that a solution like bankruptcy might be helpful to eliminate your car payment but then you’d be left without a car. So how helpful is that really?

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

So what’s left, plenty. The key components to overcoming this issue are to either increase income and/or reduce expenses. For the sake of this answer let’s assume that you have already trimmed expenses to the bone and that three of the people in your home are children. Increasing income may be tough to do so how can we find support and assistance – benefits.

People are often afraid or embarrassed to look to government benefits to help them get by, but you know what, you’ve paid taxes into supporting benefits for others and now it is your turn to check into your benefit eligibility. If you are eligible for benefits then you can get assistance on the rent, get some money for food, and possibly qualify for medical care, if you don’t have it already. For links and more information on benefits available see this previous question, “Holy, Divorced, Disabled and Desperately in Debt“.

Because of your family size and your income you may be eligible for some assistance programs. Here is information about the 2008 HHS poverty guidelines.

We Are Living Paycheck to Paycheck and We Don’t Know What to Do. – Cynthia

After looking at the figures I realized that I wasn’t sure if they were before or after tax income. So I went looking for the answer and surprisingly it is both. Huh?

Are the poverty guidelines before-tax or after-tax? Are they gross income or net income? What definition of income is used with the poverty guidelines?

There is no simple answer to these questions. When determining program eligibility, some agencies compare before-tax income to the poverty guidelines, while other agencies compare after-tax income. Likewise, eligibility can be dependent on gross income, net income, or some other measure of income. Federal, state, and local program offices that use the poverty guidelines for eligibility purposes may define income in different ways. To find out the specific definition of income (before-tax, after-tax, etc.) used by a particular program or activity, one must consult the office or organization that administers that program.

Some people are going to wonder if trying to save money while living on some form of benefits is unethical. Absolutely not. Saving money is a savings account is responsible. It helps to protect you in case you run into an unexpected event that you can’t pay for since you have no credit cards for that emergency. While I doubt that you’ll be able to put a lot into savings, every little bit tucked away in your savings account is going to be precious.

So Cynthia, my bet is that your answer to making it through the month and saving a bit is going to lie in checking out what benefits you are eligible for to give you a bit of breathing room. Let me know what happens, please.

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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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