In Wednesday’s Budgeting Basics post, guest poster Rifka talked about the “Kulam b’Minus” mentality. In response, a reader named Tzipi asked:
Everything you said makes perfect sense, but the question is, how do you get out of the minus? We have all our numbers written out, we know what we owe, and to whom we owe it to, but we just can’t dig ourselves out of it. We’ve cut EVERYWHERE we can possibly cut, but the problem is, after we pay all of our bills each month, before we’ve purchased the first morsel of food or anything else we might need, the money is gone and we have to revert back to the credit cards to put food on the table. Using coupons and shopping wisely has cut our grocery bill way down, and we live very frugally, but we just don’t know how to dig out to get out of the minus. I’d love to cut up the credit cards and never touch them again, but that would literally mean we wouldn’t have food on our table. Any advice?
I started to respond to Tzipi’s question in the comments section, but I quickly realized that it really deserved its own post. I know she must be scared to death. I can certainly understand the horror, shame and uncertainty that she faces.
If you are Tzipi – or you know exactly how she feels – let me first suggest that you just stop for a minute and take a breath. You are a good person, no matter what kind of financial mess you are in right now. And you will turn this around.
The most important thing is to cling to your husband, your children (if you have them) and yourself. Everything else is extraneous.
As for tachlis, what to do, I suggest that you triage. I realize there are many specifics of your situation that I am not privy to, but the following is what I would do if I found myself in the crisis you described.
(Some of this advice may be hard to hear, but your comment read like an SOS to me, so I think you are probably open to hearing it.)
First | Increase your income.
You are starving, dear one. If you can’t feed your kids without credit cards, you are starving. So, priority #1 is to get your income up.
I’m sure there are 100 reasons why this won’t work, or that won’t work, but the bottom line is food is not negotiable. You and/or your husband are going to have to take on some part-time jobs. Work opposite shifts if you need to to avoid child-care costs.
It will be extremely hard and you will be exhausted. But this is only going to be temporary. Right now, though, you desperately need more income.
At the same time, start looking at your five-year plan. What can you do, career-wise, to change your income-earning trajectory. Do you need to change jobs, get some more training, advocate for a raise? Five years from now, you need to be earning twice what you are today – so now is the time to set a plan in motion to make enough money to more than just survive.
As I’ve said before, when we decided to get out of debt, I took on a pile of freelance work. I hustled my tush off and got five new clients the first month. I worked three times as many hours for only twice as much pay, but I earned an extra $1000 a month – which was enough to bring us past the point of breaking even.
A friend recently told me that they are getting out of debt. Since she has a baby at home, and another one on the way, she has decided to start babysitting. She is watching one more little one during the day, and taking care of two after-school kids in the afternoon. Together, she’s bringing in an extra $1200 a month.
Second | Sell Stuff
At the same time that you are increasing your income, you can bring in a short term infusion of cash by selling stuff. Take a HARD look around your home and figure out what you can sell. If it’s not bolted down or breathing, it’s fair game.
Strip your life down to the bare essentials. You won’t have to live like this forever – I promise.
Third | Set new priorities, because someone isn’t going to get paid.
I believe you that you are living as modestly as you can. But take one more look. Are there any sacred cows in your budget? Challenge every assumption.
If the answer still is that there is *nothing* you can cut from your budget, then it’s time to face a hard truth: You can not afford to pay all your creditors right now.
Something is going to go into default. You simply can not continue to pay your debts if it means you aren’t feeding your family.
It’s time to repriortize the budget. The #1 item – the thing that gets funded before all else – is feeding your family. Not AFTER the creditors are paid. BEFORE.
I’m not taking brisket and salmon. I mean basic sustenance. Enough food so that no one is hungry.
#2 is your utilities. If you don’t pay those, they get shut off. Who cares if you’re current on your credit cards if you don’t have lights. Now, utilities does NOT include cable. It may not even mean phone. But basic heat, lights, and water must be budgeted. Conserve and reduce as much as you can, but pay your utilities second.
#3 is rent or mortgage. If this category consumes more than 25% of your take-home pay, it may be time to seriously consider a change of location. Drastic times do call for drastic measures. But either way, you need a roof over your head – and for the time-being that means paying the rent/mortgage that you signed up for.
#4 is transportation. You need a way to get to and from work. Whether that’s bus fare or gas money. You don’t need to be driving all over town running “errands”, but you do need basic transportation.
After those four things are funded (Dave Ramsey calls them the four walls), you can start filling in everything else. I’m not telling you to throw your bills in the garbage and pretend they don’t matter. When you stop paying them, you will eventually get sued.
Being sued will be unpleasant. Extremely unpleasant, even. But not feeding your family is worse.
I am so sorry for all the heart-ache you are no doubt in right now. Please believe me that this, too, shall pass. But for right now, you need to cling to the life-raft that is your family. Together, you need to focus – with laser-like intensity – on those things that are truly essential.
Reprioritize your budget so you are taking care of basic necessities. Sell as much stuff as you can. And do everything in your power to ratchet up your income – both immediately (part-time jobs) and long-term (a clearer career plan).
Thoughts? Questions? Disagreements? Let’s talk crisis budgeting in the comments section! (Please remember to be kind and constructive in your comments.)