Dear Mary: After 10 years of marriage and tons of unwise decisions, my husband handed the finances to me to handle. I have never done this before. We have mountains of bills and $900 in the bank. I don’t know where to start. Please help me. I feel like I am drowning. — Gladys
Dear Gladys: First, you need to separate facts from feelings. There will be a time later to address emotional issues and how to develop financial intimacy in your marriage. But for now, pack up your feelings and put them on a shelf. Develop a mindset that you’ve been called in to perform a financial rescue for a complete stranger.
Take a deep breath and write down all of your bills. Include the “bills” for basic food, gasoline and necessary medications, if any, to survive until your next payday. Divide these bills into two lists: Essential and nonessential. An essential expense is a serious obligation that, if not paid, could produce severe, even life-threatening consequences. Follow this rule to figure out which bills should get paid first:
Do not make payments on nonessential debts or expenses when you have not paid essential ones — even if your nonessential creditors are breathing down your neck.
Now prioritize your bills as follows so that the most essential come first. This is the order in which you should allocate the $900 you have on hand.
1. Family necessities. This means basic food, necessary medication and health insurance.
2. Rent or mortgage. Being late with a mortgage payment or rent could mean eviction or foreclosure.
3. Utilities. Pay the minimum required to keep essential utility services.
4. Car payments. If a car is necessary to keep a job, the payment is essential.
5. Child support. Paying child support is absolutely essential or you go to jail.
Other secured loans. If getting the item repossessed would be devastating, pay this bill next. Otherwise, consider it nonessential.
7. Unpaid taxes. If the IRS is about to take your paycheck, bank account, house or other property, you need to set up a repayment plan immediately.
These are bills you can let slide for a while because the effects of not paying will not be devastating. You still owe the money; you’ll pay late fees and you will damage your credit score. But in the big picture, a blemished credit report is easier to live with than being thrown out of your home or having your car repossessed.
8. Student loans.
9. Credit cards.
10. Personal loans.
11. Medical, legal and accounting bills.
12. Other unsecured debts.
It’s time for your family to move into survival mode. This means absolutely no spending at all for anything that isn’t critically essential.
Determine that you will live on the food you have in the house already, supplementing with milk and produce as necessary. Start planning for ways you can raise cash — a garage sale, working extra hours, selling larger items on eBay and so on.
Please read my book, “Debt-Proof Living” as soon as you can (check your local library). Soon you will know how to manage a paycheck. Join us at DebtProofLiving.com. There you will find support, encouragement and friendship with people who understand because they are or have been where you are now. Knowing you are not alone will give you the hope you need to keep going.
I know things look bleak right now. And that will change quickly. Just don’t let your emotions run the show. Make decisions based on principles, not feelings.
Remember tough times never last but tough people do.