Q:
Reader Anne writes:
“I have been following your site for a couple of years and it is such a blessing to us. We make $30,000 a year, my husband works and we also homeschool… and without you I would feel so alone in our very frugal journey.
Recently we have hit rock bottom with debt, car breaking down, medical bills, etc.. What are the first things we should do to get back on track and not go crazy, especially when the problems seem so big and you are already struggling? I’d love some advice.”
A:
I’m so sorry that you are feeling overwhelmed, but glad that the site has been an encouragement to you. I am not a financial planner, but I can tell you what we would do (and have done!) in your situation.
[UPDATE 2020: During the economic shut down we’re still using this plan for our finances, but we do currently have income coming in. If you have no/little income coming in, pay your utilities and check local food banks to feed your family. Call your mortgage company/landlord to work out a plan such as forbearance until you’re working again or have money coming in.]
Take Care of Essentials First
Many financial advisors will tell you to pay your credit cards to keep your credit score up. I personally like Dave Ramsey’s advice to take care of the “four walls”: food, shelter, transportation and clothing. In other words, take care of the basic needs of your family first, before you pay anything else.
Here is what that looked like practically for our family when things were the tightest:
1. Pay mortgage or rent– Dave says to buy food first and if your situation is so desperate that you can only afford food, by all means feed your family. We have found that if we take care of paying for our housing first, there are many other resources available for food, such as churches and food pantries.
2. Pay electricity and water-We always pay our utility bills next because we need to have power and water to keep things running in our household. If the bill is not due yet, you should still put some money aside to pay it when it is due.
For example, if the power bill is due in two weeks, you are paid weekly and you have money for groceries for the week, try to set aside half the amount of the power bill. If you can’t save half, at least save something toward it.
3. Buy groceries– After housing has been taken care of, we buy basic food. Check out THIS POST for a different way to think about your food budget and check out my Save Money On Grocery Series here for some ideas to lower your grocery bill.
4. Put gas in the car– If there is absolutely no alternative transportation (carpooling, taking the bus), put enough gas in your car to drive to work and the grocery store. All other driving should be limited if you’re in an emergency situation.
You mention that your car needs repairs. Maybe you can ask if any of your friends know how to work on cars and can help you out for a discounted rate.
If you have to use a mechanic, ask for references and ask them for options. Our mechanic was once able to make something work temporarily with electrical tape and an old part until we could pay for the full repair.
After you have taken care of the “four walls”, you can put money toward these priorities:
5. Pay other “essential” services– These are the services that are not life threatening, but are important. For example, if you need your cell phone for work, pay the cell phone bill. Pay you car insurance so that it is not cancelled. By the way, cable/satellite television is not an essential service.
6. Make your car payment– If you have money left, put some aside to make your car payment. For the long term, consider selling any cars that you owe money on and purchasing a basic used car. Try to make it with one vehicle.
7. Pay minimum payments– If there is money leftover, put it toward credit card payments. If we had no money leftover to pay off debt, we just had to trust that the money would come in at some point.
Credit card companies make a lot of “noise” (harrassing phone calls, etc.), but they have to get a judgment against you from a court of law before they can garnish your wages. Your credit score will be affected if you don’t pay, but your main priority is taking care of your family’s basic needs first, and then dealing with the credit card company when you can.
No matter how bad your situation is, NEVER, NEVER, NEVER borrow money from a paycheck lender! You are entering a trap that’s almost impossible to get out of. The rate of interest that they charge will keep you imprisoned to the debt until you cannot free yourself.
Cut Out All Non-Essentials
If you’re in a crisis situation, you need to cut out all spending except for absolute essentials. That means no entertainment, no eating out, no recreational shopping trips. There are many, many options for free entertainment, and you can also use the time that you normally spend on entertainment to make some extra money for your household.
If your situation is severe and it will take you a long time to recover, allow some small amount of “free” spending money in the budget so you don’t have a “blowout” and spend money that should be used for paying more important items.
Make Some Extra Money
Speaking of making some extra money, check out my posts:
How to Make an Extra $400 This Month
The comments on my 5 Ways to Make Extra Cash post here are very helpful, and any little bit of extra money that you can bring in will make a difference!
Ask for Help
It’s humbling to go to a food pantry or to ask someone for their help, but sometimes it’s necessary. When you’re back on your feet, you can help someone else.
I remember one Christmas early in our marriage, when our son was a few months old, we had medical bills from his birth, my husband was making very little money and we had just bought our first house. The previous owners were supposed to fix our heating system, but didn’t, so we were sitting in a cold house with no way to fix the problem.
Our mortgage company sent us a box of toys and other gifts, friends brought us food, and some how we made it. I felt embarrassed that we needed the help, but so happy to receive it.
Pray
If you’re spiritually inclined, pray about your situation. Ask God for help and for wisdom about what steps to take next.
I know that God answers prayer, and you can read a few of our stories here.
You may be feeling overwhelmed right now, but don’t give up hope! Remember that these drastic measures are only temporary until you can get things moving again in the right direction. I truly believe that things will get better for you!
Read How to Handle a Money Crisis part 2 HERE.
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photo credit: posterize, FreeDigitalPhotos.net
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I have to say i am suicidal this morning.
I am 54 years old and I have negative $40 in the bank. I was sued by a credit card company for $2400 which I had used to pay medical bills; I could not get to court – a 30-mile round trip – nor could I pay the mandatory mediation fee so the judge found in the favor of the bank. I have sold everything of value I own; my phone has been off for 3 weeks because I couldn’t pay the bill. I have moved to a rural area because cities are expensive and at my age I do not want a stranger living with me.
I see no way out and I see no future for myself. Obama was a disaster, I am far worse off than when I voted for him.
Next life, I guess…this wasn’t hasn’t worked out to say the least. I worked my whole life to amass savings and an IRA – all gone since the crash of 2008.
Bottom line, wages do not pay enough to live on, and the poor are so busy responding to one crisis after another that we frequently get overwhelmed and don’t know which crisis to address first. Weekends are spent alone; everything costs money. I don’t drink or use drugs – maybe I should – if I was an alcoholic I could probably get some sort of special treatment, but I played fair and square with my system, and now i have nothing.
I hate our system and I hate that I constantly have to deal with not enough money, not enough money, not enough money.
There is one way out and that seems to be the pills.
I am tired and fed up and discouraged and angry and hopeless.
And there are perhaps millions like me, who believed in the American dream, who worked full-time jobs 7 days a week their whole lives and now we’re old and getting older and the Good Fairy isn’t coming with her bag of money.
Would have been nice to have a house, children, a little put away for my old age. Nope.
Next life, I guess…
Hi Fred – Thank you for reaching out. I am touched that you would take the time to let me know what is going on in your life. I am so, so sorry that you find yourself in this predicament. I hear you and understand that you are very discouraged, lonely and frustrated. I don’t pretend to understand exactly how you are feeling and I don’t have any easy answers for you, but may I encourage you with a couple of ideas?
When our family was facing homelessness, our first priority was finding some way to make some income. I know that may be difficult in your situation, but I believe this is your immediate need. Could you look at local job boards and newspapers, apply to deliver pizza or work in a store where you live? Take any job so that you can earn some cash quickly.
Additionally, if I were you I would seek assistance. Find out if there is a food bank in your area or if local churches offer assistance to the poor. Finding relief for your basic necessities is paramount for you.
Long term I encourage you to find a way to give back. You may think that this idea is impossible and that you don’t have anything to give, but I am certain that there are homeless shelters and other opportunities in your area where they need you. Maybe you could tutor underprivileged youth or help an elderly person with their yard work. Reaching out and helping others in the midst of your great need will really help you. I pray that you can find support near you, and please do not give up hope.
Thanks, Kimberly-
On your advice, I posted in a “FREE!”ground on Facebook on Friday, “Free leaf raking for elderly or disabled.” I ended up filling 7 bags of leaves for this lady who answered who just had a hip replaced. It was fun to give something away to a stranger and I really did a good job and got a blister and took a bath.
So let the money roll in, please! 🙂
Not suicidal today; more like anxious. Listened to some motivational recordings awhile ago, gonna call Mom soon. (She is 93!)
Bless you and here goes nothing, see you! XO
FRED
I am SO happy to hear this Fred! I know that it must be a relief to feel better and I pray that you will quickly find a way to make some income and that things will start to turn around for you. Thank you so much for keeping me updated! 🙂
Hey Fred – Just checking in on you. How are you doing?
Hi, Kimberly-
Thanks for checking in. Feeling great – spending the week with my girlfriend, who lives a time zone away, but with whom I speak and text daily and who knows how overwhelmed I get. I cooked Thanksgiving for us and we gave thanks for all our blessings, and then this morning I made her breakfast in bed. There is nothing like doing something for someone else to bolster your spirits.
Anyway, the rent is due in 5 days and I’m pleased to say I have it, so that’s a good feeling. We brainstormed ways, too, for me to earn extra money, which I am already getting cracking on this morning.I didn’t mention I work full time, 7 days a week, so that’s why it’s frustrating when the bills don’t get met, you feel like a l-o-s-e-r.
Re: “I feel like killing myself,” please disregard my drama, i would never do that, one of my oldest and dearest friends for over three decades did that three weeks ago, another reason I am more on-edge right now.
I hope your Thanksgiving was wonderful, and that goes for everyone reading this, too.
xoxo
I am so, so happy to hear this — and especially that you decided not to hurt yourself! It’s not drama when you feel desperate and hopeless, but suicide is devastating in so many ways, not to mention that the world and your girlfriend would have to go on without you. I am very sorry that your friend decided to end his life. I pray that God will comfort you and his family and friends in ways that only He can.
You are such an encouragement! I love that you reached out and helped others even when you were so down, and that helping others ended up helping you. That has been my experience as well. And YAY for having the rent money!!!!!
Thank you for being so honest and transparent here. I know that your words will encourage many of my readers, just as you have encouraged me. Please keep in touch and let me know how you are doing.
Blessings,
Kimberlee
I love this story Esther. What a great reminder!
God is good, I have never gone hungry. I grew up living hand to mouth. There were times my parents didn’t know where our next meal was coming from then God provided. My parents never told anyone but it was odd. People would bring things to church, extra produce from their garden, food from their fridge that was on the verge of going bad, extras from a party the night before. They didn’t know but they had food they didn’t want to spoil and knew that we as a large family would be able to eat it before it went bad. I once ate these peanut butter and jelly rolls for a week straight and then there was the time we ate Krispie creams for 36 hours straight. My mom made lots and lost of soups and pancakes and potatoes and did things with corn meal and beans and eggs. My Dad was a paramedic so a few times in his career when something was on the county line and both countries responded to a wreck caused by a deer and one county took the injured person to the hospital there was this freshly killed, not too badly damaged dead deer left lying there, Dad would take it home and we would have venison, road killed venison, but it was meat for our table, and as long as the spleen was un-ruptured and it was a fresh kill it was good. God sometimes provides in odd ways like manna from heaven for 40 years straight. Food from ravens beside a trickling stream in a drought, a flour jar that doesn’t empty till the drought is over, a small jar of oil that pours till debts are all paid.
I am so inspired by you Kimberlee, I’ve become “addicted” to your blog, hahaha.
Thank you so much for all the great info, you’re a great wife, mom and friend who is doing a wonderful job!!!
Thanks so much Marianne! I hope it’s a good addiction. 🙂
Before you get into the car ruminate on this thought “Is this trip REALLY necessary?” This was a popular billboard slogan during WWI as they were trying to conserve fuel. I found while trying to get out of debt there were many times that I did NOT go somewhere when I thought about this slogan as I realized EVERY time I drove somewhere I was utilizing gas AND placing wear and tear on my car.
That is a great idea Larabelle, thanks!
May I add to your suggestions for the 4 things to tackle first when handling a financial crises:
Check with your utility companies and see if they have special programs and/or rates for those with low incomes. Many of the companies do and that can save a significant amount of money.
Keep track of Everywhere You Drive for a month. Log every time you get in the car – where you go and what you do. You may be surprised at how often you run to the store for something you forgot or get in the car 3 different times to run errands that could have been dovetailed and all done at the same time and within the same distance.
Even check with your landlord or mortgage holder and see if they have any opportunities for reducing your payments. Many of them would rather help you temporarily than loose a good tenant.
Great ideas! Thanks Sheena!
Hi, I am an Accountant with some background in financial planning and I just wanted to comment that your advice is excellent. Of course, it would be ideal to make your minimum monthly credit payments so as to keep your credit rating but I accept that in some situations it is not realistic. Basic necessities need to come first. I would also like to suggest also that if you have credit card debt in this situation, the first thing you need to do is cut up those credit cards otherwise you are tempted to use them. Your advice about NEVER using a paycheck lender is spot on.
Another piece of advice if you are overwhelmed about your financial situation, take an hour and sit down and write out a budget. You don’t need any training and you don’t need anything fancy. Just put on paper what you need to pay now and once you get it written down, things will look clearer and you can start to prioritize it as described in the blog above. Maybe put the current situation on one page and the “budget”or plan on a second page. If you have a significant other, you should do this together. Again, it doesn’t matter how you do this but the point is to give you a complete picture of your current financial situation and a plan for managing it. It will also help keep you on track and accountable.
And on a final note, accept any help you can. Someday you will be able to pay it forward but for now, accept it graciously.
GREAT advice Anita, especially about cutting up those credit cards! Thanks for taking the time to comment.
One question please. Is the statement concerning credit card balances correct that if you cannot pay there isn’t anything they can do about it? I think I have been served lawsuit judgements against me in the past. Thank you in advance for clarification.
You are correct Billie. I had heard that they cannot collect the debt because there is no collateral, but I did just read that they can pursue a legal judgment and garnish your wages. It is usually a long process before that happens, but it can happen. Thank you for bringing that to my attention, and I corrected the post.
Excellent advice. I spent many, many months with zero income, living off of the little I had saved and with a little help from friends. I stripped my spending down to only essentials, food, filtered water to drink as I live in an RV, food for my pets, gas for work, my cell phone and car insurance since I rely on my automobile, cell phone & computer for employment, my RV payment, some inexpensive grown girl libations and that was about it..
I’m still not completely out of the woods, but will be within a few months and am thankful that I was able to keep myself fed and sheltered while I weathered this storm. It takes commitment and creativity. I have been TV free for nearly a year now and occupy most of my time outdoors, walking the dogs, reading, knitting, socializing with those in similar situations with upbeat attitudes for support and to share ideas on surviving.
Bluer skies are on the horizon. Blessings to you for giving awesome advice and hope to those in desperate situations.
Namaste,
Ms. Minimal
Good for you for taking control of your situation and turning things around! We are tv free as well, and it makes a huge difference in our quality of life. Thanks for taking the time to comment. 🙂
Sure what you are saying, the only difference is that many people get the advice but few come to the reality of practicing it, a family can adjust to live and trust God on a shoe’s strings budget provided there is agreement between the couple, or and other members of the family in case of children who can understand the situation, with much practice and endurance adjustments will come and a family will be better placed to deal with their finances practically,this is a better advice
Jacinta Mwicigi
Such a good point Jacinta! It is sooooo important for the husband and wife to be in agreement about the finances.
Asking for help is ok. Especially if you need government help. That is what taxes help pay for.
Very encouraging Kimberlee. You are blessing many with this sound advice.
Thanks for sharing. Great tips and priorties that so many people get lost in the shuffle!
That is wonderful advice. thank you so much for sharing your plan. It sounds perfect to me!