I just responded to a question from a new reader on my About Me page, but it was such a pull-at-my-heart question, that I wanted to share it as a post, too. I’m sure Jeff can’t be the only one going through this – and maybe this discussion will help others as well.
Here’s what he asked:
My wife showed me your website, she subscribes to your daily updates. I read your Jewish Dave Ramsey series and had a few questions. I welcome responses from other readers as well.
I think you mentioned Dave Ramsey’s advice to first get your income more than your expenses, then to get current with all bills before setting up an emergency fund. We are stuck at income vs. expenses and have been for many years. We have deficit of $1,000s of dollars monthly, and have been burning through savings accounts and even retirement accounts. Now there is nothing else to burn and bills are falling behind. Income is as high as possible. Expenses are not as low as possible, but even cutting expenses would not be enough to cover the deficit. How do you or Dave Ramsey or your readers suggest getting out of this predicament?
Thanks in advance,
And here is what I answered (with some more extrapolation):
Just to be sure I’m understanding correctly – are you saying that you’re spending thousands of dollars a month more than you take home? If this is the case, then yes – you are probably right that cutting your bills, even by 20 or 30%, likely won’t make up the difference.
When there is this big of a discrepancy, I think you absolutely must look at the big-ticket items: mortgage, day school, cars (if you have loans/leases) and any other big bites that you have every month.
Yes, you still need to cut your lifestyle. No more keeping up with the proverbial Joneses. I’m talking groceries – your menu plan needs to be centered around beans, rice, pasta and peanut butter; clothing – stop buying it; kids activities – stop participating in them. But you also need to accept that a larger move is probably necessary. Literally and/or figuratively.
I know that this is horrible to hear (I feel bad saying it!), but odds are, if you are dealing with a monthly deficit in the thousands, you already know this anyway – at least in your heart of hearts.
Each month that goes on like this will require another year or more of PROFOUND sacrifice to dig yourself out of. If you don’t make changes right now, you may well end up bankrupt. Without a house (foreclosed) or a car (repossessed). Make these decisions now – for yourselves – before the bank makes them for you.
Yes, I’m talking about getting radical, which may involve all or some of the following:
- selling your house and moving to a new city, which is more affordable (this post on How much do you need to earn to live comfortably has some good insights in the comments section)
- selling your house, staying in town, but moving into a small apartment, even if that means all of your kids have to share a room temporarily
- getting second jobs
- selling stuff – not garage sale stuff (although that will help), but cars, boats, jewelry, artwork, etc.
- and yes, pulling your children out of dayschool.
If the monthly deficit is not a short-term problem but a long-term reality (as it appears to be from your comment), you are facing deep and, I’m sorry to say, painful changes.
But there is a silver lining. You will have each other. You will be a family, with integrity, self-respect and – most importantly – each other! Your wife, your kids – this is what matters. Everything else is extraneous.
Once you start making these changes, you can move forward. The direction will be different and the landscape may be unfamiliar, but you will be together – as a family, living in a way that allows you to look at yourself in the mirror every single day! I promise you – it will be worth it!
What do you all think? Do you think this advice is spot-on? Way off base? Do you think you could make these kinds of changes?