Reader question: How do you survive a rough patch?

This week, I’m going to take a look at a few of the longer questions that have been languishing in the reader mailbag. These questions were too long for a regular mailbag post – and deserve a longer answer – but are well worth discussing on The Simple Dollar.

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    What do you do when your expenses swallow your income?
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Alice writes in with a tale about an excessive amount of short term debt:

I was married to a man who spent every penny he thought was available – and if he didn’t know of any that was available, he spent more – with no regard of how we were going to pay bills or buy groceries. I read Dave Ramsey and got excited, knowing that we made enough to cover bills and save and have some free money each week. As soon as I mentioned the “B” word (budget), he balked, yelled and pretty much threw a fit saying that he felt like a kid on an allowance.

Because of many bad decisions, we had terrible credit. When it got to the point where we had to have a better vehicle, we had to have my mother put it in her name so we (she) could borrow the money to pay for it. We also agreed to make the payment on her car and used her old car as a trade in on the newer ones. He would spend money from our checking account via the debit card and never tell me, so when it was time to pay bills, there was no money left. If he ever worked over time, instead of paying more bills with that increase in cash flow (my idea), he would want to spend more – since he worked hard for that money (his idea). I was also working on finishing my degree and my classes were free. We were so behind on our bills, that there were many semesters that I took out student loans just so we could make it through. If there was ever a time when the money was tight, I typically ended up putting our groceries on my mothers credit card – for which I would give her the money when I could.

We ended up getting a divorce and losing our house to foreclosure. He is paying about 12K that was still due on the second mortgage, and a few very small doctor and hospital bills, maybe around $2K. I ended up with two hefty car payment (yes, I do have my car, though) – on which I owe more than either of them are worth. I am paying (or trying to pay) on my mothers credit card bills (which probably total around $15K – not all groceries, mind you) and have a hefty balance of student loans – about $36K. So much of what we owed was in my name due to the student loans or in my moms name. Even if I thought bankruptcy were an option, it’s still not since the bulk of the amount owed is either not in my name or is in the form of student loans.

I make fairly good money, but my paycheck has recently been garnished and will be for another six months or so. Right before that happened, I made an agreement to pay off an old credit card bill in three months. First payment of $300, with two subsequent payments of $275 for a total of $850 – when the original total owed was $1,450. I have tried and tried to find part time work for evenings and weekends. Either they are wanting more availability or someone younger or they just think I’m over qualified.

Since the garnishment, my paycheck is $1,709 a month. I just recently started receiving child support of $450 per month. I have the following bills:
Rent $600 – which is extremely low for the area. I got a great deal from someone I attend church with.
Car payments $505
Car Ins $135 – for my car only, but high since it has a lien against it.
Renters Ins $15
Cell phone $170 – I pay for four phone lines: mine, my moms and my two teenagers – with no home phone.
Electricity $100 – In the summer, I had the thermostat set to 78 so that we wouldn’t use the A/C any more than absolutely necessary. In the winter, I put it on 67 for the same reason.
Water $30
Moms credit card $300
My credit card $45
Credit card agreement $275 (only two more months)
Internet $45 (necessary for school work or getting work things done from home) – we have no home phone service or TV
Food $300
Gasoline $150
As for the student loans, they are in forbearance for another year and a half.

Before the garnishment started, I was just squeaking by and now am pretty much devastated with the level of debt. At least for the next six months. How do people survive things like this? I thankfully did start a separate checking account at another bank for the child support deposits and I have been able to use that for food and gas for the month. If I scrimp on food, then I have enough left over for any small incidentals that the kids might need.

I had to purchase new tires last month and that wiped out my small savings. My paycheck is gone as soon as I get it, or before that you could say and I only get paid once a month. I’m on salary, so no overtime pay is available.

I do not have any idea what to do.

If you run the math on Alice’s bills above, you’ll find that it adds up to $2,670, while her monthly take-home is $2,159. This means that, for the time being, she’s spending $511 more than she’s bringing in each month.

In two months, the credit card agreement will end, but that will still leave her with a $236 monthly shortfall. In six months, her wage garnishment will end and she’ll be back ahead of the game.

The tough question, though, is how to handle this six month period. From what I can tell, Alice’s solution lies in going through her expenses and cutting some of them out.

The first thing I spy that can be cut is that $505 monthly car payment. You need to get rid of that car as soon as you can and get a low-end model that will just serve to get you back and forth to work. Are you underwater on the car? If you’re not, take it to a dealership and see if you can negotiate an arrangement that leaves you with a fully paid-for old car that will work for the time being. Not only will this eliminate or drastically lower your monthly payments, it will likely reduce your auto insurance as well.

I would hold off on the payments on my mother’s credit card, too. $300 a month on your mother’s debt when you’re struggling this mightily is not a wise choice. I do admire you for stepping up to the plate and helping your family, but when that help is causing you to drown, you’ve got to cut back. You’re not going to be able to help in the future at this rate, so pull back on that $300 a month until your finances recover a bit.

Look into public transportation as an option. If you’re in an area where $600 rent is considered a huge bargain, you’re likely in an area that has some public transportation available. Find out if you can use this for some of your transportation needs, which will reduce the gas usage and maintenance on your car.

Visit local food pantries to supplement your food requirements. Food pantries exist to help those in hard times who want to help themselves, and that certainly describes you. Stop in, pick up some food for yourself and your family, and trim your food spending a bit. If this makes you feel guilty, pledge to donate to the pantry when your financial situation is better.

Keep in mind as you’re making these choices that you’re addressing a short term situation. In six months, you’ll return to a situation where your income significantly exceeds your expenses – you’re making moves to help you get through this rough patch.

Keep your chin up. Things will get better.

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