Money Saving Advice There's more than one way to get most for your money. For more than 20 years, Gary Foreman has worked to manage money effectively. He's been a Certified Financial Planner and Purchasing Manager. He currently edits The Dollar Stretcher Web site and several newsletters. His mission is to help people "Live Better for Less." The Dollar Stretcher: Coping with a Loss of Income By Gary Foreman Dear Gary, My husband has been out of work for 5 months. His income when he was working was double what I currently bring in. Needless to say, my checks are not paying the bills even with the unemployment he is collecting. I am starting to panic because bill collectors are calling daily and I cannot tell them when I can make payments so they continuously call at home and work. I feel like I am going to lose my mind! I am making sure that my house payment is paid, utilities, car insurance, but everything else (car payments, credit card bills, etc.) are getting severely behind. What do I do? Do we have any way of getting out of this mess? Any rights? Mary in WA Answer: Mary is in a very tough position. Any time that you have debt commitments and lose your job it's going to be very hard to avoid real trouble. What can she do to minimize the hardship and damage? Let's take a look and see what she can do. Mary can begin by telling the bill collectors to stop calling her. Federal law prevents them from calling if you ask them to stop. They will continue to send you mail requesting payment. Any late penalties and interest owed will continue to build. It won't help the financial situation, but should help reduce the stress. Next, Mary needs to evaluate their current position. A complete listing of assets and debts should be made. Calculate monthly expenses. Then figure out monthly spendable income. She may be tempted to skip this step. That would be a big mistake. She'll need this information to help figure out what to do next. Look for ways to reduce expenses. It's time to go into 'survival' mode. Anything that's not essential must be eliminated. No one likes to give up their cable TV, cell phones or bowling leagues. But, unless Mary's husband finds a good paying job in very short order, they'll be facing bankruptcy soon if they're not willing to cut every non-essential expense. If you have children, don't hide the fact that you need to spend less. You won't ruin their childhood. Don't scare them with talk of living under an overpass. But don't pretend that nothing has changed in your life. Hopefully, the expenses won't be more than 10 to 15% over her income. Some belt-tightening can save that much. Mary's case sounds worse. They'll need to consider making some serious lifestyle changes to bring income and expenses in line. One that can make a big difference is selling a second car. With only one person working they really don't need two cars. And even if they can only sell the car for what they owe it will still be a good move. They will have eliminated the monthly car payment. Not to mention the insurance, gas and maintenance. Mary should look for extra sources of cash. Do they have something that could be sold? Anything from golf clubs to antiques could provide some needed cash. It's not any easy choice, but they might need to sell their home and rent until the job situation gets better. Typically, you can't borrow your way out of debt. But if there's reason to believe that Mary's husband will find a good job soon they might want to borrow from a 401k retirement plan or take out a home equity loan. These steps will not solve the problem. They'll only postpone it. So don't borrow more money unless you're absolutely sure that the job problem is temporary. Another way to close the gap is to make more money. Mary could find a second job. Or her husband may need to be willing to accept work outside his profession. Mary doesn't say what type of work her husband does. But, if he hasn't found work in five months it's possible that he might never find a similar job. He needs to take a good, hard look at his chosen work. Perhaps it's time to try something new even if it does pay less. Another option to consider is moving where the jobs are. If he hasn't already, it's time to look for a job outside of their community. Once you've made adjustments to your budget it's time to contact all your creditors. Let them know that you've lost your job. Also offer to show them your budget and be prepared to commit to a minimum monthly payment. Remember that your creditors don't really want to force you into bankruptcy or repossession. They only do that as a last resort. So show them a willingness to pay and the ability to make a partial regular payment. Even if they turn you down, you'll do no harm by trying. If Mary has already tried all of this and still can't keep up with the bills, it's time to consider credit counseling. These non-profit organizations negotiate with the creditors on your behalf for a reduced payment plan. There are many excellent ones to choose from. Just contact them and ask a few questions. They'll quickly be able to tell you whether they can help. Finally, Mary could declare bankruptcy. Each state has different laws, but usually you can expect to keep your house and one car. Mary and her family are in a tough place. Unfortunately there's no quick, easy or painless solutions. She can't go back and undo prior financial commitments or keep her husband from being laid off. At this point she'll need to try to narrow the income/expense gap and hope that her husband can find a good job quickly. Also see: • Save money with water heater maintenance • More of Gary's Dollar Stretcher Columns Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher Web site www.stretcher.com. Contact Gary at gary@stretcher.com. 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