Is it possible to get out of this financial hole?

In My Humble Opinion
21

Sometimes you can bluff these companies into lowering the monthly payment. Are they locked into a period of service? If not, then they should call Billing and say that they’re going to have to cut back, and ask how much just the internet service is…a lot of the time, the service rep will offer a retention bonus or plan, just to keep them on as customers.

As others said, close one or more credit card accounts.

Basically, they’re going to HAVE to either find some way to make more money, or find some way to spend less. It might very well be that they can’t find a second job, or overtime.

The first thing I always do when I am in a financial bind is to quit going out to eat, and to buy less expensive food to eat. My husband and I LIKE steak, for instance, but we’ll eat hamburger and meatless meals when we’re trying to cut back. Also, packing lunches to work will save a great deal. If they have a Starbucks habit, then they need to buy a coffeepot and ground coffee. And soda, whether from a vending machine, snack bar, at restaurants, or convenience store is a big moneywaster. Bringing a can of soda from home can save money, but cutting out soda altogether is much, much better. Homemade ice tea is nearly as cheap as water. Tap water is the cheapest and healthiest drink there is. Popcorn (not microwave popcorn) is a good snack, and it’s not as unhealthy as many items are.

To pay off the credit card debt, remember that when you’re in a hole, the first thing to do is to stop digging. Nothing more gets charged on the cards. Any extra money goes to paying off the card that’s charging the most interest. Some people will say to pay off the card with the lowest balance, for the psychological effect, but the way to get out as fast as possible is to pay off the one with the highest interest.

Unless they actually NEED a truck, they need to sell it and get a car with better gas mileage. Trucks generally drink gas at a much higher rate than cars do. If they have to haul stuff around on a regular basis, then they might NEED a truck. But trucks have become a high status vehicle for reasons which escape me, and they are expensive to buy, maintain, and fuel.

22

Is the credit debt increasing, or have they already stopped using their credit cards?

23

I disagree, she’ll be paying a lot more interest on the card than she’ll get in a savings account. If there is a true emergency she can (at a very last resort) put it on the card as she’ll have paid that money off.

24

Absolute nonsense. The truck and the credit card debt are likely the two biggest things preventing them from getting their lives in order.

As I said above, a reliable car can be had for well under $5000. The idea that reliable transportation must cost $20,000 is laughable.

25

This is…somewhat confusing. I think the term you were looking for is “insolvent”, but there is no requirement that a debtor actually be insolvent to file bankruptcy.

26

I have to agree with this. I know there is a psychological benefit to having money available to handle emergency expenses but mathematically you’re much further ahead paying off anything that has a higher interest rate than you could earn on your savings. If you can drag yourself out of debt WITHOUT reducing your credit lines that is. $1200 sitting in a rainy day fund earning no interest would be much more valuable on one of her credit cards saving her whatever her highest interest rate is.

27

It depends on the truck, now doesn’t it? My truck cost all of $15,000 when it was brand new, and it gets better mileage than some cars. Of course, it’s a small truck with few extras.

If they have a behemoth truck with lots of bling then yes, swapping it out might make some sense. If it’s a small truck with minimal extras then no, selling it might not be the best option.

We really don’t know. All we know is that it’s a “truck” but that covers a wide range of possible vehicles.

28

I get some cable channels and high speed internet for about $50.00 per month; that includes quite a number of HDTV channels. I use only a cell phone and not any kind of land line so that’s a factor. I look to the internet and reading for entertainment but I’m old and single. I think they could cut $50.00 to $75.00 per month without too much grief, depending on the services provided by the cable company.

29

You’re completely discounting possible psychological benefits. Given that the person in question is having severe anxiety over their finances that really is something to consider.

Dave Ramsay covers this probably better than I would, when he discusses paying off a low bill/balance entirely. In some cases it can give a psychological boosts that makes it easier to stick to the plan long term.

My reasoning is that, true, you’re not paying debt off faster if you put the additional money into a rainy day fund but it makes it easier to not add more debt if something comes up.

Let’s say their transportation (either current truck or a replacement vehicle, to avoid arguments over that) needs new tires. If they can pay for the new tire(s) up front it’s done. It’s paid for. But if they don’t’ have a rainy day fund then they’re adding more debt and they will be paying interest on those tires for a long time. Sure, you can say they’ll have freed up space on a credit card by then, but then they’ll see a balance they lowered go up again - and that is likely to be discouraging. Also, you want them to get out of the habit of using credit cards as much as possible. That means find a way so you don’t need to use them.

Truth is, there’s more than one way for them to get out of that hole. They could cut the cable TV, put the money away until the emergency fund reaches $1000, then apply the $100 to debt service. Or they could alternate months - this month to savings, next month to the cards.

Since we can’t know all the details of their situation - such as what sort of truck and the monthly payments, for example - we can’t really be sure anything we suggest is the correct thing to do. And you also have to consider that you’re dealing with people here - it’s easy to tell someone else to give up their transportation and depend on others, to live on nothing but rice and beans, whatever, but you’re not the one who has to live the plan. Because it’s going to take years for them to pay everything off whatever plan is devised must be sustainable, it has to be something they can actually stick with over the long haul. The goal isn’t to pay off debt as fast as possible, it’s to actually pay it off. A plan they can stick to that doesn’t pay debt as fast as some other plan is better if it’s easier for them to stay on it.

So, fine - if they want to keep the truck they may have to give up cable and eating meat most days. If they decide cable is more important maybe it will be easier for them to give up the truck. Frankly, I don’t know. Just don’t be too kneejerk in giving advice. EVERYTHING suggested here so far does have a downside, even if minor. These folks need to look at all possible alternatives, but they don’t have to *accept *all of them.

30

Get rid of cable, eat more rice (one of the cheapest foods around), cancel the cards.

31

You would appear to be the only one being ‘knee jerk’. Everyone is aware they need to balance, what works best, for them. These are just, off the cuff suggestions, as requested, for them. NOT a personal attack on you or your awesome truck or the choices you’ve made. Geez, chip on shoulder much?

32

Yeah, actually, just a bit.

As I’m in dire financial straits at the moment I am continuously bombarded by well meaning individuals who issue advice that borders on commands as to how I should live my life, with little or no regard to the details of my personal situation. Such as “dump your truck” or “get rid of your car” or buy the cheapest-ass food regardless of whether that’s actually going to maintain our health or not.

So, yes, I do tend to get a little concerned about people zapping off advice to others.

I’ll attempt to restrain my defensiveness in the future, if it makes you happy.

The truth is, the situation described in the OP, while serious and uncomfortable, isn’t nearly as bad as the circumstances of a lot of people I know. Even if they aren’t saving at the moment they ARE, apparently, managing to pay all the bills. It’s really a matter of improving a manageable situation, and erecting some safeguards against the sort of unforeseen things we’re all prey to.

By the way, no, my truck is not “awesome”. That was sort of my point. Not all trucks are “awesome” in the sense of comparable to a “BMW” as someone mentioned above. Maybe it’s just my “if it ain’t broke don’t fix it” approach - if they can make the truck payments and it’s reliable don’t be too hasty to discard it.

33

What, you mean, like this…

34

That’s what I was wondering, too. If they are still using the cards, OP, do you know what they’re using them for?

For example: the Other Shoe and I are carrying some significant CC debt, but that’s because we were both out of work at the same time for a while. So, yes, we were using our cards, but for things like food. (We both have this terrible addiction where we like to, um, eat every day.) So at that time, advice like “freeze your cards!” would have resulted in starvation.

Even if were were eating just rice, scurvy be damned.

35

CABLE AND INTERNET AND PHONE

$125 per month is for all 3. I should have said that it’s $25 for the phone and $100 for the internet/cable. She has already talked to her provider. If she gets rid of just the TV, she will only save about $10 per month. If she gets rid of TV AND internet, she’d save about $100 per month. This is because of the particular plan she signed up for. I had the same thing happen when I called my provider about cutting costs. She would be completely ok with getting rid of 1 but both will be a lot harder. I’m pretty sure she’d do it as a last resort though.

THE TRUCK

They got the truck for a very specific reason. After one too many near collision experiences, they got 4WD. They already had smaller, less expensive cars. It’s also very difficult to get out of their neighborhood in the snow without 4WD (this I know from personal experience, I almost didn’t make it out one day). In addition to the 4WD, the truck is reliable and since they both have to be at work at the same time, having a vehicle that is reliable is very important. And, public transportation is a joke in their town.

CARPOOLING

Unfortunately not an option. They don’t go in at the same time as everyone else. He has to go in earlier and she’s stuck going with him so they let her punch in early too. I highly doubt their employer would let a third person punch in early and I even more highly doubt a third person would be willing to go in early without being able to punch in.

CREDIT CARDS

I’m not positive but I think she has 3 cards with a total balance of about $14k. She also has $4k in debt that’s not credit card. I will definitely recommend that she talk to them about lowering interest and payments in exchange for closing the cards. I didn’t know this was ever an option. I wonder if she does. Is there someone specific at the credit companies she should ask to talk to? A credit counselor or something?

FOOD

This one should actually be easier for her. She doesn’t have as many mouths to feed as she used to. I wonder if she has looked into freezer cooking. She has a chest freezer and a Sam’s membership. Hmm. I bet she is having trouble adjusting to buying food for fewer people. I’ll see if I can find a weekend to go help her stock her freezer with home cooked meals.

They don’t go out out to eat. I know of one occasion in the last 4 years when they actually went to a fast food place and that was only because I wanted to.

CELL PHONES

This one is really annoying. They had cell phones. She realized how much she’d save by not having them so she got rid of them and got the way less expensive land line. So the cell phone company sent her a $700 cancellation bill and told her she had 2 months to pay it or they’d send her to collections. She asked if they’d accept a payment plan and they told her absolutely not. I’m not sure what the status of this one is right now. I told her to let it go to collections because a collection agency will let her make payments.
ALL THE OTHER SUGGESTIONS

Thank you very much for the suggestions. I will let her know about them. I’m sure we can find a way to make life easier for them. The biggest issue right now is breaking through the depression and negativity to make HER realize that.

36

Are they overwithholding on their income tax? i.e., do they get a tax refund every year? If so, they should fix that.

37

As far as I know, they don’t use them any more and they pay the minimum. Of course paying the minimum doesn’t do a damn thing to actually reduce the debt.

The main cause of her credit card debt (gambling addiction) is a problem she has been fighting for about 6 months now. She is doing very well but the debt is still a problem she has to overcome.

38

I have no idea. I’ll ask. They do get tax refunds every year but they’re both single parents.

39

Just my quick take on this sentiment:
There are those who are deeply in poverty, without a doubt requiring the assistance of food banks and what-not. Then there are those on the brink. The folks in the OP seem to be in the state where if a major car repair is needed, they’d fall off the edge and go into poverty.

In that situation (post repair), they become a MUCH larger drain on social services, as opposed to reaching out for social services before they go under.

In other words - yes, they may hate going to a food bank, especially when they feel they can afford not to - but if they think about it from the point of view that they are correctly using their safety net at a time when it is needed in order to prevent sinking further, then they are doing what they can to help not only themselves long term, but everyone else who makes charitable donations. I’d rather people use social services to keep themselves out of dire circumstances, giving them a necessary timely boost, as opposed to using those services as a permanent life-line after the self reliance ship has long since sailed.

40

I don’t even know if there is a food bank in their area. I’ll recommend it to them.