What to do when you have more expenses than income

Today’s column continues our series of up-to-date tips and reports, which will help a family prepare a reasonable, affordable financial plan with a goal of achieving financial freedom.

In the last two columns we discussed creating a family budget, tracking income and expenses, in order to take control of your money. If your budget shows that you have more expenses than income, it is easy to feel that you’re not in control. But if that situation occurs, there are ways to get out of trouble. What’s important to remember is that everyone has different priorities. You have to make the decisions that are right for you.

Generally speaking, it is probably most important to pay your necessary household expenses, such as rent or mortgage, utilities, and food, first. You need to pay your rent or mortgage to ensure that you do not get evicted or have your property foreclosed on. Think about the health and safety of your family when making these decisions.

Many utility companies, such as the telephone, electric and gas companies, have programs to lower your bill if you qualify. Contact your utility company to see what programs it offers if you think you need assistance.

If you can pay your monthly household expenses but are having trouble paying all of your loans, there are options for you to consider:

Paying off the loan with the highest interest rate first to save on interest payments.

Talking to your creditor. Your creditor may be willing to reduce your payments or change the terms to accommodate your situation. Some creditors might offer extensions, accept smaller payments over a longer period of time, or accept partial payments.

Getting credit counseling. A nonprofit organization that provides free credit counseling services can work with you to address your financial problems. A reputable credit counseling organization can advise you on managing your money and debts, help you develop a budget, and offer free financial education classes. Counselors discuss your entire financial situation with you and help you develop a personalized plan that will help you resolve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

Enrolling in a debt management plan (DMP). DMPs are not for everyone. You should sign up for a DMP only after a certified credit counselor has thoroughly reviewed your financial situation and has offered customized advice on managing your money.

Declaring bankruptcy. This is a last resort. Bankruptcy is a legal proceeding that adjusts the debts of individuals who cannot meet their credit obligations. Although bankruptcy eliminates most debts, certain back taxes, child support, alimony, and student loans must still be paid. With a bankruptcy proceeding on your credit report, you may pay higher credit rates and receive less favorable terms on loans in the future. Bankruptcy might also make it difficult to get a mortgage, open a bank account, or buy life insurance, because creditors can run a credit check to determine your history of past financial commitments. The law requires you to get credit counseling before you can file for bankruptcy. Bankruptcy stays on your credit record for 10 years.

Not having enough money to cover all your expenses can be stressful and overwhelming. It’s important to remember that there are solutions. The sooner you address financial worries, the more in control you will be. For example, if your expenses have gone up because your monthly rent has increased, first time home purchase with down payment assistance might be an option. Whatever your situation, consider possible solutions and reach out to reputable agencies that will work with you.

For more information, visit us on the web at www.nhsfl.org or stop by at 1600 Dr. Martin Luther King Jr. St. S., St. Petersburg.

NHS is a 501(c) 3 non-profit HUD-certified housing counseling organization. All services are provided free of charge. Partners include the U. S. Department of Housing and Urban Development (HUD), HomeFree USA, Florida Housing Finance Corporation, Florida Hardest-Hit Fund, Pinellas County Community Development and the City of St. Petersburg. The source for this article was the Federal Deposit Insurance Corporation’s Money Smart program.