December 05, 2004

• Once you've eliminated interest, which is the major killer, then you have to work on income. Can you manage to take a regular job for a little while? Maybe something part-time that will just help you get a leg up on what you have to pay off? Do you have anything you can sell off to get rid of some of the major portions of the debt? For living expenses, can you take in roommates? Move into lower-cost housing? Do you have a university in the area? They will sometimes do medical experiments in exchange for money, but the greater the discomfort or danger, the greater the money, so you have to decide what each of those is worth to you. What are you buying for food? Don't skimp on nutrition, but you might be able to cut down costs by learning some good cooking techniques, especially if you're not afraid to eat the same thing over the course of a week. Is your living area as well insulated as it might be? Is your heating unit maintained as well as it might be? These are major causes of energy loss. But, in general, if the expenses are down as far as they can go, you need to bring up the income. It's a pain, but there's good money, if poor working conditions, in things like the food service industry. Once you can reach a point where you have money saved up and a decent amount of extra income to replenish your saved money once you use it for the inevitable emergencies, then you can ditch the side work. Alternately, once your contracts pick up enough that you no longer have to do that sort of thing, you can feel much more comfortable. Hope this helps a bit.
• There's also the question of whether bankrupcy is an option. It is not an easy choice, but for someone who is young, without assets and deep in debt, it is still an option. In Canada, I believe it is 7 years before your credit record will be clear (please correct me if I am wrong), though there were talks on not letting you declare bankruptcy on student loans (because so many students were). Sometimes, I think we are afraid to consider this because of the shame, and the limitations it puts on you, but the laws were put in place to help those with crushing debt. There may be ways to save that you might not be aware of - I actually talk about this a lot with my friends, since we are graduate students trying to save to pay for research in addition to living expenses. I have a certain amount taken out of my pay check every two weeks by my bank. It's small enough that I don't miss it. My mother always suggested 10-25%. More and you are too tight, and then less likely to actually save. Sandspider makes good points about food - you can buy food in bulk, food from farmers' markets, food directly from distrubutors, without sacraficing nutrition. What you save in money you trade off in time - many unprocessed foods are cheaper than processed. If you have a freezer, you can buy fruits and vegetables in season, and then put them down yourself for eating in the winter. Depending on what you like to eat, being more vegetarian can be cheaper. I happen to really like beans and chick peas; I also break up all meat into serving sizes of about 4oz (which is the healthy way anyways). But all these little things will probably not be enough - you need a serious decrease in expenses or increase in income. Roommates or a border might be an option, depending on your living situation, as might more work. Avoid piece work if you can - it's usually a scam. (My mother kept trying piece work to bring in a bit more money, and if she even got paid, it worked out to cents an hour.) If you live in a town with a large university, graduate students make good tenants - they are older and quieter than undergraduates (same goes for mature students), and nerdy, so no big parties. My hopes are with you.
• Besides looking for ways to reduce your costs - getting a roommate, finding a cheaper place to live, buying cheaper food - you should be trying to find ways to bring more money. Can you charge more for your consulting services? If you don't know it can't hurt to ask. Undercharging can be just as bad as overcharging since it may make it look like you don't value your own work. If you're in IT you ought to be able to do something additional on the side like remove viruses and spyware from people's computers or design websites. Is there some other job you could be doing with your skillset that would bring in more money? Apply for a better job. It might even make sense to go even deeper into debt to go back to school if it'll mean a significant increase in your income. Also invest. Even if you're paying say 7% interest on your loan, you might make as much as 12% average from a good mutual fund, and even out your deficit that way.
• This is helpful. Thank you. I've been so focused on reducing costs that I haven't thought about ways to increase income. Working more will probably help.
• It sounds like you've done the easy things to cut expenses, and I have no idea what your situation is... but just on general principle, I wouldn't say you're out of options for reducing costs. Can you sell your car for a cheaper one, or a bike? Does your budget include money for new clothes, that you could buy at Goodwill instead? What are your major budgeted expenses? Most energy companies provide free energy efficiency audits, which might show you some good places to start cutting your utility bills. A surprising amount of electricity can be sucked up by "vampire" appliances that draw a current even when they're turned off - try unplugging your TV, stereo, etc. when you're not using them, or plug things into a switched outlet or power strip that you can turn off. Clothes dryers are also big energy eaters - it's worth putting up a clothesline, outside or in the basement, even if it's cold the clothes *will* dry eventually. The Tightwad Gazette is a good resource for cost-cutting tips - don't buy it, of course, pick up a copy at the library.
• All excellent stuff above. One other thing to consider - don't worry about it too much. You said you were down to one low rate monthly payment, if you can handle it then just let it be and pay it off in the long run.
• Cutting expenses is good, and for food, the cheaper things like pasta, beans, rice, oatmeal, veggies, etc. are also healthier. Now as to income, think in the long term. Be absolutely sure that the customers you work for are totally satisfied. You want clients to tell others how good you are. You might be surprised how grateful people will be when you bail them out of a tough spot, so always be ready and willing to help others. Make good friends, not just in the line of work you do, but everywhere, and be pleasnt to even the most disagreeable people. They will remember you.
• Second the Tightwad Gazette. Get the Complete edition of the three books in one, and read it all, even if you don't think this or that bit of it applies to you. It really overhauls your approach and shows you ways to cut expenses you might not have even thought of. The author's approach is that living frugally is not a deprivation, but a lifestyle change that frees you from debt and stress. Plus she includes a lot of examples and reader letters showing how people in dire straits were still able to rework their lives to dig out of debt and save. She makes it seem so easy (and when you get into the mindset, it becomes easy). One of the best and most useful things for me (and I absorbed it slowly over a few years, but reading the Gazette book finally kicked it into high gear) was learning how to grocery shop cheaply. I was amazed at how much money it freed up, and believe me, we weren't spending like crazy before that either, or living on convenience food, but something as simple as switching supermarkets cut our food expenses by a third to a half alone. It makes it hard for me to watch other people shop and waste money! You don't have to be a great cook to do a lot of easy, cheap things yourself at home. Another thing the book stresses is that there's maybe ten big things you could do to reduce your expenses - and of course you should look at your housing expenses, your transportation expenses, your food bill, etc. because those big changes will free up chunks of cash and you'll feel the effect right away - but there's many many little things you can do every day that will be a dollar here, a dollar there that in the end will add up to so much. No matter how much you feel you're doing, you almost always can do more, and to me at least, that takes away the hopeless/helpless feeling. Once you get into that frame of mind it finally seems like you CAN overcome the mountain of debt in front of you, and that's quite empowering.
• One of the most important rules about coming out of debt is not to invest any disposable income until the debts are paid off. The exception to this, of course, are tax-free retirement accounts where your employer contributes to the plan. I don't know about Danish tax laws, but in the US you should put as much of your income as possible into a 401k where your employer matches your contributions. Also, remember that every dollar you save is the same as $1.50 earned. ($1.50 less roughly 33% in income taxes = $1.00 - your tax rate may vary.) It sounds like you'll probably have to increase your income, but certainly do everything you can to cut down your expenses first.
• SELL YOUR CAR! sellyourcarsellyourcarsellyourcarsellyourcarsellyourcarsellyourcarsellyourcarsellyourcarsellyourcarsellyourcar! ....and before you EVEN open your mouth to complain and whine, i have one word for you...BULLSHIT! there IS adequate public transit almost everywhere in this country, most of which is tax deductable or subsidised through the workplace. I get my bus passes (in L.A. no less) for 20 DOLLARS A MONTH! that's my transportation budjet...20 bucks a month... you could be saving THOUSANDS every year (plus whatever you get for your car) AND help the environment and fuck the oil companies and yaddayaddayadda... of course, if you want to keep burning innocent iraqi civillians in your gas tank just so you can drive yourself to the poorhouse, be my guest...
• That was certainly...passionate.
• Now, I'm normally the first to jump on the pedestrian bandwagon (especially since I don't actually know how to drive), but I do recognise that for many people outside of major urban centres or who must commute, this is simply not possible. (This is something I worry about, as there are many people, especially the elderly and disabled, as well as teens and the poor, who cannot drive, and they can become trapped without adequat public transit. I would love to see good public transit everywhere, including rural areas, but that is, of course, a bit of a pipe dream. Not that pipe dreams are bad....but I digress... If you are in a place where there is public transportation, I would encourage you to find out whether it is suitable for your needs, as you can indeed save a ton of mulla by being carless. The gas and insurance really does add up - and public transport is often better than people think (my friend's parents always take the TTC in Toronto, but they do live on the subway line). But only you know whether you will be able to work, shop, etc., without a car where you are.
• Why does <small> only nest to two levels? /amused
• jaypro22, in what world do you not pay income tax on money that you pay into your debt? ...assuming that's what you mean. I can think of a lot of examples of times where you want to invest while paying your debt off besides the obvious registered retirement savings plan one. You owe money on a house. You'd be paying money for accommodation anyway, it just doesn't make sense to postpone investing until your house is payed for because that day will never come. You owe money on a student loan. You're probably paying an unusually low interest rate on this money, so you should pretend the money doesn't exist as much as possible. You're a consultant. You must have a financial cushion in case of bads times if your a consultant. This need should override all other financial concerns because if you're unemployed and owe money already, the bank isn't going to be enthusiastic about loaning you more. In this case you'll want a low-risk investment, and one that you have access to whenever you need it.
• As someone who lives in a major metropolitan area with public transportation, let me just mention that going car-less and taking Metro is not always the best idea financially. The Metro rates in DC have been increasing over the last few years and it would cost me more to commute from VA to my job in MD than it does to drive. I'm self employed so there's no chance of the cost being subsidized by my workpalce. Sure, I'd save on insurance and gas, but I'm not near a Metro station and would be paying bus fare, for cabs once Metro is closed (doesn't run 24 hours like some cities), etc. I think it would work in some cities but is not the solution for everyone.
• What JayPro22 might be referring to is certain types of debt. I don't pay taxes on the interest on my mortgage or home equity loan. But I didn't get that he was saying what you thought he was saying.
• Jaypro22 - your referecne to danish taxes confused me until I re-read my post. I'm in the US, was just paraphrasing a Shakespeare quote...
• Just out of curiosity I did the calculations for taking Metro just to and from work, and my cost would be $240 a month. Given that I pay about $60 a month for gas and $72 a month for insurance, this doesn't seem like a cost effective solution. I know there's wear and tear on the car, but once you add Metro fares for all other travel, alternative travel to visit family out of state, and cab fare, having a car is cheaper. As a self-employed person I could write off a portion of that cost, but can also write off a portion of my car costs.
• there IS adequate public transit almost everywhere in this country, most of which is tax deductable or subsidised through the workplace. Not true. I grew up in an area with no public transportation. I live in a city now with a transit system, and my (very large) employer does not subsidize it in any way for employees.
• Sooz - you have amazingly low gas and insurance costs - you are very lucky. In CT insurance is a couple of thousand a year, which is why so many students "live" in other states, and just visit for 12 months of the year. They have no choice. That said, in Toronto, I paid $100 CND for an all-you-can-ride monthly pass, on a system which was 24 hour (I miss my TTC). There is great disparity between access to public transit.
• jb - you are absolutely right. Fortunately I have a very good driving record which keeps my insurance low. I honestly don't know how lower income people afford Metro in this area. I thought the whole idea of public transportation was to provide for those who can't afford a car (and all the costs associated with it) but around here Metro is out of the question for many.
• I'll admit I'm curious, Sooooz - why so expensive for Metro use? Do you need to take like, 5 different trains to get there, or do you have to pay for parking or something like that?
• Cabingirl, I'd need to take an express bus to the Metro station ($3 each way, altho I could get a transfer for the ride home) and it would cost $3.90 for me to go from the Arlington station to the Silver Spring station, transferring once at Metro Center. Another $3.90 to get home, and that's about $240 a month. The minimum fare on Metro now is $1.35, up from $1.10 not that long ago. $1.35 to go as little as one stop. Outrageous.
• I agree, that is outrageous. You could save something by getting a weekly pass, but even so. Yikes.
• What Sooooz said. I live in the same general vicinity as she does and she speaks the truth: Metro is a viable alternative for those who need to zip around inside the District or for those whose employer will pay for travel. And that's pretty much it. Otherwise, it's cheaper to sit in 90 minutes worth of traffic (each way). /derail (no pun intended)
• sexyrobot: Sorry, you're FOS and don't know much about the West. Public transportation is NOT available here. Boise has buses which run limited hours and taxis--with outta-the-world fares. Boise is also 50 miles away. There's a commuter van that runs during standard work hours (too late for me to catch) and even if it did leave earlier, it doesn't go thru to the other side of the city, which means I'd spend a total of two and a half hours from van to buss commuting ONE WAY. I'm not giving up five hours of my life. Oh, and the van lot is four miles away--with no hitching post to tie my horse to for the 13 hours I'd spend away during the day. I think driving is a reasonable option here. J.Doe: A friend of mine just counseled me on doing a resume. She stressed HARD on the idea that I should hire a professional to review what I'd worked up. She suggested working one up, then taking it in to be tweeked. By spending $100 dollars, she obtained a job that paid $25,000 more a year that she NEVER in her wildest dreams expected. Since talking with other folks that have used a professional resume service, she's found out that many people can benefit. Maybe you, too?