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Almost Broke

By Gary Foreman
Dear Gary,
My husband lost his job unexpectedly. I'm pregnant, have a small child at home and work two jobs. We just went through all our savings due to a car accident and birthday season. We have sold one of our cars and are looking to sell the other and just use our third which is a reliable junker. We have also turned off cable, computer, and extra phone lines. We don't eat out or buy unneeded things. We are at minimum luxuries.
At our current rate in two months time we will have our car repossessed and our utilities turned off. What can you recommend to help me get up on our feet and start from scratch to create savings, pay bills, and keep off the streets?

Stressed and her husband need to work together. They're in a tight spot and don't have much room for error. They'll also need to recognize that money problems like this are a fertile ground for divorce. Now is not the time to be blaming each other for the problem.

They'll also need to move quickly. Those two months will race by.

Hubby should file for unemployment as soon as it's available to him. He also  needs to be very serious about his job hunt. All day, every day until he finds work. Fortunately it's a good time to be looking for a job with unemployment at historically low levels.

He may need to take a lower paying job. Anything that brings in more than unemployment is a plus. When you're supporting your family, any honest job has dignity.

They will also want to find out what government programs are available. The number for the Federal Information Center is 800-688-9889. Specifically check out WIC (Women, Infants, and Children).

If Stressed is a member of a church or other religious organization she should let them know about her needs. Even if she's not a member, let them know. Many have food pantries, day care and other aid available. They might even have some contacts to get Hubby a job.

Selling an extra car is a good idea. We'll assume that it's the one requiring payments. Stressed should also look to see if they have anything else of value that can be sold to raise cash.

At the same time that they're looking at ways to bring money into the home, Stressed and her husband will need to clamp down on spending. All spending. When you're facing eviction, cutting luxuries isn't enough. You need to cut everything that's not essential.

Stressed needs to contact the people they owe. Sometimes creditors are willing to work with debtors who are having a tough time. Even if it's only to say 'we can't pay our bills' it's better for Stressed to go to the lender rather than have the lender come to her.

Among the people that she'll need to speak with is their landlord. An honest, open approach is usually the best one. If they can't pay the rent they have two choices. One, is to let the landlord evict them. It will probably take months, but that will hurt their credit rating and could be pretty uncomfortable.

The other option is to find other cheaper housing. Perhaps even move in with a friend or relative until Hubby's job situation improves. The landlord will probably break the lease to avoid the costs and hassle having to evict them.

One area of the budget to watch carefully is food. It's the largest expense after housing and transportation. How you shop and cook can make a big difference. Stick to simple, healthy, home-cooked meals. Basic ingredients are not expensive. Avoid prepared foods.

Stressed doesn't say whether they have credit card debt. If so, they'll want to speak with a credit counseling agency. Often they can reduce interest rates and minimum payments. To find a reputable agency look for one who is a member of the NFCC (National Foundation for Credit Counseling) or AICCCA (Association of Independent Consumer Credit Counseling Agencies).

We can all learn from Stressed's difficulties. The unexpected happens. People have babies and lose jobs. If your financial plan assumes that nothing unexpected is going to happen, you'll be in trouble when it does.

Debt is especially cruel when you have problems. Payments that seemed manageable suddenly look impossible. Never commit to making payments without having an idea of what you'd do if the unexpected occurred.

Short of finding a rich uncle, there's no easy way for Stressed to get out of this corner. They're going to have to do a number of things right to get back on their feet. Hopefully years from now they'll be able to look back at this time and marvel at how they got through it.  

Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website <> and newsletters. If you wish you had more time or money, you'll find hundreds of ideas to help stretch your day and your dollar. Visit today!  

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Category:  Money

Related Links | BudgetingCreditDebt |
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