Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com.
Dear To Her Credit, I have gotten myself into a mess. I lost my job for two years. During that time, I ran up my American Express bill to around $20,000. I am almost 70 years old and cannot find work. I have only $1,100 a month in Social Security benefits coming in. I hope to find a part-time job, but even if I do, I can barely afford to live. What do I need to do? -- Elizabeth
Dear Elizabeth,
The first thing you need to do is make sure that you stop going deeper into debt. Every month that your expenses exceed your income, as you know, you get further in the hole financially, and it becomes harder to dig your way back out.
There are three basic steps to taking control of your finances:
Step 1. Find out where you stand. We know your income is $1,100 per month. Do you know what your minimum expenses are? You can use my worksheet to calculate your monthly budget. It's OK if your income minus expenses is a negative number right now. We'll work on that.
Make a list of your assets, such as your house, your car and other financially significant items. You can use this worksheet. Don't bother with household items that don't affect your finances.
Step 2. Find more resources. You're already looking for a job. You might try starting your own service business -- something that requires little or no investment that you could continue doing even if you find a part-time job. Depending on your talents and your health, you might want to tutor children in math, reading or music after school. Or perhaps you'd be able to provide after-school child care. If you're energetic, you could start a home or office cleaning service. Find something that is needed in your community, and you'll have better luck.
If your house is paid for, you may want to take out a home equity loan or a reverse mortgage. If you need a smaller amount, a home equity loan is a better bet because the fees are generally lower. A reverse mortgage is a longer term solution, but it can have high upfront fees. You should only get a reverse mortgage if you intend to stay in your house for the foreseeable future.
Look for things you can sell to raise some cash. Most of us accumulate too much stuff. Perhaps you can sell some things on eBay or Craigslist. If you have an extra car or RV, now's the time to get it off your insurance bill. Even if you just sell enough to make your American Express payments, that would help!
Step 3. Cut back on expenses. Look at your budget and decide what is really necessary. Because everyone's priorities are different, I generally avoid telling people what they can't spend money on. It can be a touchy subject!
However, some people have balanced their budgets by eliminating things like cable TV and prepackaged meals. Sadly, they may have to part with pets, especially if they have half a dozen of them. Eating out may become a rare event. And sale fliers and mail order catalogs need to go directly into the recycle bin unread.
If you have an extra room in your home, consider sharing your house with someone. Other people are in the same predicament you are in, and sharing housing expenses can make all the difference. It could be someone you know who is about your age, or consider a young person going to college. One advantage of a younger boarder is that she may be able to help with yard work and errands.
As you look at your talents to decide what you can do, you will also meet new people and find that you are needed. If you find a compatible roommate, you may enjoy the company. Finding a solution to financial problems can be a challenge, but it can also be rewarding.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: August 14, 2009
Three most recent To Her Credit stories:
Should one spouse take on full debt load? – A married couple with joint card debt wants to transfer the balance to a lower rate card. Should the better credit score spouse take on the burden alone? ...
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