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Budgeting: Reduced Income |
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More Ask Susan |
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At the beginning of this year, I began a career as a Realtor. Real estate sales is 100 percent commission and my income has dropped considerably but has the potential to increase dramatically. This month is the first month I have had trouble making my minimum payments. I have taken a second job to help out my financial situation. My question is do I need to pursue your assistance? - Michael
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Dear Michael,
Money Management International serves two purposes. We work to help consumers prevent debt problems from ever occurring and we’re there to help when it does. You have come to us at the right time.
Learning how to deal with an unsteady income is imperative to your future financial success. I recommend taking one of our online educational courses to develop a solid spending plan. If you still have trouble making your payments after adjusting your spending accordingly, you can meet with a certified credit counselor to discuss your debt repayment options.
Good luck with your new adventure,
The Advice Team
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I am a recent college graduate. I have just landed my first job, and I have a few financial concerns. I want to know what percent of my salary I should spend on rent, entertainment, etc. I have credit card balances and student loans to pay back. - Dennis |
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Dear Dennis,
There are some general rules of thumb. For example, it’s a pretty accepted fact that if more than 20 percent of your take home pay is going towards debt payments (not including housing), you’re probably in over your head.
I can also tell you that the average person spends 20-35 percent on housing and 15-30 percent on food. Not very helpful, is it?
The reason the huge range is because what you “should” spend depends entirely on what is important in your life. Each person’s priorities are different and so is each person’s spending plan. A family of six will have a drastically different spending plan than a single recent college grad.
The MMI website offers an online educational course designed to help you develop your own personal spending plan. You can find it at http://www.moneychoices.com/.
Good Luck and congratulations on your recent graduation,
The Advice Team
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I am in my early thirties and considering going back to school for a second bachelor's degree in nursing. For the two years of nursing school I will need to attend school full time. I may be able to work a little, but most likely only part time. But I have a year and a half before I would start this program.
At the same time, my husband and I would like to have a home of our own. Since the interest rates are so low, this is a very tempting idea.
Is it impossible to get an education and buy a new home? -Tami |
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Tami,
To determine if this is possible for your right now, you might want to try to live without your income for a few months. To do this, simply take your income and put it into a savings account, using only your husband's income to pay living expenses and bills. If it works, keep it up! The savings will come in handy for your education expenses and that new home's down payment!
The Advice Team
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I have been unemployed since December. Prior to that, I held a position paying a substantial amount of money. Because I have never been unemployed before, my wife and I are finding it very difficult to keep our heads above water. I have enrolled into college so I can obtain a higher level of employment but that does not take care of the immediate need to pay my creditors. We have tried to explain to them our situation but for some reason the calls just keep on coming. We have quite a lot of debt now and we just want to start from scratch. Bankruptcy is not an option because we really need a house with two small children running around. - Lee
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Lee,
There are several options for someone in your situation. First, you should meet with a certified credit counselor who may be able to assist you in negotiating with your creditors. You may want also want to consider applying for unemployment benefits or taking an interim job to earn some income until the perfect thing comes along. Is it possible for your spouse to enter the workforce?
You should also know that filing for bankruptcy does not mean that you automatically lose your home. Consult with an attorney for additional details.
Best wishes,
The Advice Team
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My husband was self-employed for several months but has lost the equipment he was working with. We now have gone from $1,600 a week to $650 a week. But our bills are still the same and include medical bills from one of our employees that was injured. The agencies that we owe are calling everyday and will not allow us to delay payment or lower the amount due. Is there anything that can be done? We want to pay our bills, but we can't at the rate things are now. -Nancy |
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Dear Nancy,
When your income decreases, but the bills don’t, you have to make a plan. Start with prioritizing. Separate needs from wants and eliminate unnecessary spending.
Remember that not all debts affect your family equally. Housing, utilities, insurance, taxes, food, health care, and vehicle payments are some standard "must pay" expenses. Ask for reduced payments on your employee's medical bills.
Check your resources. Is it cost efficient for you to go to work? Was there a replacement insurance policy on the lost equipment? Does your life insurance policy have cash value you can borrow against? What can you sell to increase cash flow?
Understandably, your creditors want to be paid. You can call a MMI counselor at 800-762-2271 to see if our payment arrangements will work in your plan.
Best wishes to you and your husband,
The Advice Team |
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My wife and I have worked ourselves into a debt of about $12,000. We have a combined income of about $85,000. We seem to have trouble getting caught up. Any suggestions or guidelines? My income has changed over the past two years. I was earning about $120,000, and we can't seem to adjust to the lower earnings. -Will |
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Dear Will,
It sounds like you did not adjust your spending to match new your income. This is easy to do since the “extras” you were used to may have become so commonplace that now they feel like necessities.
It is past time to sit down with your spouse and try to set priorities. Developing a new, realistic spending plan doesn’t have to be an unpleasant experience. It is all about perspective. I truly believe that people underestimate the wonderful feeling of having solid financial footing.
The Advice Team
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