Every once in a while, I get an email from a reader that rips my heart out. Through a long series of choices and decisions and life events, they’ve reached a financial situation that’s almost impossible for them to dig out of. It usually involves children, a mountain of bills, and a job that doesn’t pay very much. Often, these people are hoping I have some sort of magic wand to fix their problems. The truth is, I don’t.
These emails are usually prefaced with the statement that most of the articles they’ve read don’t help very much. And they’re right. Most articles assume that you have significant leverage in your life, that there are many changes you can yet make to free up money and turn your life around.
But what do you do if it seems like there’s nowhere else to turn? You’ve already cut every corner you can, but there’s still a giant pile of bills sitting in front of you. Where do you go from here?
Here are nine options to look at when the going gets truly tough.
Sell your home
Most people blanch at this idea, thinking they could never sell the home they worked so hard to get. Quite often, though, it’s that very home that’s strangling your finances by saddling you with an enormous mortgage payment. It may be a good idea for you to look at lower-end housing until you can get your financial life straightened out. For example, renting an apartment can easily shave hundreds of dollars off of your monthly bills compared to house payments.
First step: Contact a real estate agent and get a realistic estimate as to what your house might sell for. Does that pay off your mortgage and (hopefully) some other debts as well?
Get a boarder
One opportunity to bring in some extra cash is to get a boarder, a person who will rent out an unused room in your home. One good place to look is at the local college, which often has students in need of housing. This can easily earn an extra $150 a month or so (or more, depending on your area) with very little interference in your day-to-day life (in fact, good boarders can often be a help with household maintenance). Another avenue is to see if there are family members and friends who may be interested in moving in with you and sharing at least some portion of the financial burden.
First step: Look for opportunities within your social network to find a boarder, whether it be a family member or a friend.
Take on a second job
One solution for the short term might be a second job. Many people work a normal job during the day, then supplement that with a second job in the evenings or on weekends. One of my friends has a job as a computer programmer during the day and a security guard in the evening, for example. It’s a good idea to find a second job that doesn’t tax you in the same way your first job does – for example, if you work a mentally challenging primary job, don’t get a second job that also taxes your brain or you’ll not do either job well. Remember, though, that the point of the job is not to finance your spending, but to dig you out of this debt hole.
First step: Do a tentative job hunt for work during your spare time, just to see what’s available. Good places to look are grocery stores and department stores who may need overnight stockers, for starters.
Start a side business
Another effective way to start pulling in some extra money is to start a simple side business that easily matches your skills. Let’s say you truly enjoy spending time with children, and you have free evenings. Why not put out the word to your social circle that you’re willing to babysit in order to help pay some bills? Perhaps you enjoy woodworking; why not look to that as a way to make something that others might buy? Make a few samples and show those to others.
First step: Canvas around your life for a way to make a few extra dollars in your spare time with things you already enjoy doing.
Sell your car
Ask yourself this: do you need your automobile to get back and forth to work? If the answer is no, strongly consider selling your car. Not only will this get rid of payments, it’ll also eliminate your auto insurance costs and your costs for your license plates as well. No gas. No maintenance, like oil changes. No repair bills. Those changes can make a huge impact in your monthly spending. And, on the rare occasions when you do need a car, you can just rent one for a short period of time.
First step: Look into opportunities for selling your car locally, either directly (meaning you manage the sale) or through a dealer in some fashion.
Cut out the unthinkable
Many people who have trimmed away all the fat they think they can trim away haven’t even actually started. You don’t need your cable box – that’ll save you $50 a month. Your cell phone? Another $50 a month – you can get a pay-by-the-minute phone for emergency uses. Do you need your home phone line? Do you need your television at all – after all, it’s a pretty big energy guzzler? Do you need ‘net access? If your gut response is “That makes life no fun!,” ask yourself if your debt situation is making your life fun.
First step: Start ditching services, and start by looking at everything short of electricity as non-essential.
Negotiate with your creditors
Quite often, many of the bills people face are for unsecured debt, which sometimes can be negotiated. Call the creditors for any debt you may have, tell them simply that you’re in dire financial straits and may be considering bankruptcy, and offer to negotiate. See if you can get a reduced payment plan or get some of the balance discharged. If you feel like the conversation is a waste of time, wait a few days and try again. Remain polite, no matter what – you’re essentially asking them to give up their business’s profit margin, after all. Remember to ask how any changes will affect your credit – if it really won’t change much and will negatively impact your credit, don’t do it and move on to another creditor.
First step: Identify your unsecured debts (medical bills, credit cards) and find contact information for some of them.
Sell your possessions down to the bare minimum.
Got a lot of DVDs or CDs? Sell ‘em – all of ‘em. Got lots of clothes? Cut your wardrobe down to the minimum and carry the rest to the consignment shop. Got a large collection of some form of collectible? Liquidate the whole thing. It’s going to be hard, I know, but this stuff is holding value, and that value can be used to help get rid of some debts and make it possible for you to sleep at night without the fear of losing the things that really matter, like your home or your mortgage. Ask yourself what’s more important, your home and your marriage or your Doctor Who Season 2 DVD set.
First step: Clean out some of your collections, particularly the entertainment-oriented ones. Sell the box sets on eBay and take the rest to a used media store.
Look into bankruptcy
Bankruptcy is sometimes the best option if you’re simply faced with far more bills than you can currently pay. This is often the best choice if you’re making a reasonable income and live in a mortgaged home. The biggest drawback here is that it’s a nuclear bomb on your credit report – you’ll essentially be starting from scratch with building your credit, and that bad credit will adversely affect loans you can get and your insurance rates. However, it does help eliminate most of your unsecured debt (meaning debt besides your mortgage and car loans).
First step: Contact a reputable bankruptcy lawyer and get a consultation. Bring in as much documentation as you can about your current financial picture (the current statements of all debts, estimates of all of your bills, and a list of all significant assets, for starters).