Tackling Debt When Bills Exceed Income

by Reader Contributors

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Does there seem to be more month than money? Here are some helpful tips for tackling debt when your bills exceed your income.

Dear Dollar Stretcher,
My question is about tackling debt. We have incurred a lot of debt. My spouse is currently unemployed, and therefore, our income is currently $48,000 per year. Our cars are paid off. We have exactly $1,000 in savings.

Between all of the monthly bills, we are falling short around $300/month. I’ve read every book and go to this site weekly, but somehow I can’t seem to get ahead. Any suggestions?

What’s The Best Way To Tackle Debt When Your Bills Exceed Your Income?

We are always providing information on tackling debt here on The Dollar Stretcher. But sometimes it can help to hear from others who have walked in your shoes. So we reached out to our readers for their tips and advice for what worked for them when tackling debt and what did not. You can read on for their many helpful responses.

And you may also find the following articles helpful:

Hard Work Pays Off

“L” wrote that her and her husband had $300 less money than month. My husband and I were in the same boat and we found an easy, wonderful solution that gave us much more than $300 a month!

We trade off shifts driving for Uber. Sometimes we drive in a bigger city about an hour’s drive north of us because there are so many more driving opportunities available. Since driving would allow your husband to make his own hours, he would be available for job interviews as they come up.

Not a glamorous job, but it helped us to take big chunks out of our debt payments, plus gave us the extra we needed just to survive.

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Focus on the Important Things

Financial problems are never easy to deal with or talk about. Unfortunately, many families can relate to smaller incomes, lack of raises, and even termination from jobs.

My husband left his job a few weeks ago after years of office turmoil and relational problems with his boss. Here are some ideas we’ve used:

  1. Establish a habit of giving to your church and/or others less fortunate than yourselves.
  2. Save/accumulate money for annual and/or large bills in another account. This prevents you from pinching off of money you’ve set aside for future bills.
  3. Create a written budget. Don’t leave your financial well-being up to memory. Write down, discuss, and decide how you will spend your money together. One thing that has helped my husband and I is eliminating spontaneous personal purchases from our family account. We get a miscellaneous spending allowance so we can save and/or buy those things we need or want. He doesn’t complain when I want a dress, and I don’t complain we he buys tools. The debt cards stay at home except when I shop for groceries or we go to a doctor’s appointment.
  4. Create a family wish list. Each year we sit down and discuss the needs for the year. Typically it’s a list of 5 to 10 things that we plan to purchase throughout the year for home, yard, etc. There’s no rush to go spend a heap of money all at once. We just watch for sales and buy throughout the year. It’s a great feeling when the list is all checked off and everything is paid for!
  5. Organize your bills in one centralized location. My husband bought a simple letter carrier device to house our monthly bills. Each slot is numbered 1 – 5 to cover the maximum number of weeks per month. As a bill comes in, he places a due date on it, and puts it in the slot nearest the actual due date. He always pays the bill before the due date and notices don’t get lost or forgotten.
  6. Be comfortable and enjoy your home, but use wisdom. Turn off lights, do laundry and shower in cooler temperatures, don’t water the grass everyday during the summer, turn off ceiling fans when you’re not home, use low watt bulbs, and watch movies/T.V. together instead of having one on in every room. Help your entire family be accountable for financial waste. (See 32 Ways to Save Money on Your Utility Bills.)
  7. Cut the fat. Cell phones, Internet fees, extras on your home phone, and cable are luxuries. If things get too tight, cancel those services until you get back on your feet. (See What Are You Willing to Give Up to Win Financially?.)
  8. Carry your lunch and avoid spontaneous dinner dates with family and friends. Meeting your spouse for lunch at home or in the park can be fun and even romantic. Don’t let family or friends talk you into going to dinner when you know you can’t afford to spend the money. Plan your Sunday menu on Saturday, and make eating at home a pleasure again. You save money and you’ve got a great excuse for declining to eat out.
  9. Clean out closets and drawers. When you go through your clothing piece by piece, you can get rid of things you haven’t worn and find garments you forgot you had. This will pacify your desire to go shopping.
  10. Be honest with the children. Children can sometimes make you feel real guilty when they don’t get to do or buy things they want, causing additional stress to you and your spouse. Schedule a time to talk about how the finances will effect them (camps, sports, activities, movies, allowance, etc.).
  11. If you’ve had a good paying record, many companies will work with you during hard times. Ask for a later billing date, set up payment plans, and cancel extra features. The most important thing is to communicate.
  12. Swallow your pride. Some job offers won’t lead to a career, but they will help to pay the bills. Your hobby may have to support the family for a season. The wife may have to go back to work a few afternoon or evenings a week to make ends meet.
  13. Remember that this too shall pass. Every couple that I know has had times when life was hard. Focus on those things that are most important, such as your marriage, your children, your family, your health, and your future!

Twila in Columbia, South Carolina

You Are Not Alone

First of all, you should know that you are not alone! I was there myself. As a single mom in a divorce, I got all of the bills!

First, call your credit card company and explain the situation to them. Do not take a “no” from someone who can not give you a “yes” in the first place. Speak to someone close to the top. By doing this, you can get your interest lowered, possibly even stopped, for a period of time.

Next, take a look at your student loans. I had about $20,000 worth of student loans when I started out. Once again, you need to contact them and explain the situation. They will send you a form, and if you meet all of the qualifications, you will be able to defer your payment for a period of time. The interest will still accrue, but you will not have to make the big principle payment every month. Then use part of that principle payment that you would have sent in and put at least 1/2 on your credit cards to get them paid off.

Check to see just how your money is getting away from you. Do you really need premium cable channels? By just having the basic stuff, you can save quite a bit.

Check with your bank on disability/death insurance. I was able to cut about $40/month on my car loan this way. You don’t really need this on your car and possibly not on your home. This is tacked on to pay off the loan in case of your death. Before doing this with your home, see if your life insurance policy is enough to cover the cost of your home and a little extra. If so, take it off of your house as well. My new husband and I did not get it with the home we just purchased as we both have life insurance policies that would cover the cost of the home and some extra. However, don’t cut your spouse short here. If you can’t do this or don’t feel comfortable with it, then by all means do not cut corners here.

Check on those memberships to health clubs. My husband had one when we first got married. It had been taken out by payroll deduction for sometime and he forgot about it! We saved $25 per month by catching this.

Look into automatic deduction for your bills. Sometimes companies or banks will give a discount to people who pay this way. It is faster and easier for them, and they are guaranteed payment. I pay a couple of my bills this way, including my student loan. I received a quarter of a percent discount for paying this way on my student loan. Every little bit helps!
Sarah F.

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Bring in Additional Cash

Cutting costs can go a long way when trying to make it on one income, but sometimes it’s really necessary to earn more money when you have significant debts to pay off. If that’s the case, then you may need to be creative in figuring out ways to bring in additional cash until your spouse can find a permanent job in his/her profession. At the same time, though, you don’t want your spouse to take a job that prevents applying and interviewing for the position he/she is really looking for. We’ve been through it, and here are a few ideas we’ve found:

  1. Drive for Uber or Lyft. It won’t make you a fortune, but it’ll bring in enough cash to keep you going.
  2. Work as a seasonal temp. Check with temporary agencies to see which ones represent large companies and seasonal attractions. They place people often to cover heavy workloads and employees on vacation. You can even contact some of these employers directly (especially very large ones) to see if they keep a rotational temp list of their own. And if a really big interview comes up, you can always turn down the day’s work.
  3. Sell yourself. No, we’re not talking anything illegal here! But, most people have more valuable skills than they realize. Sit down with your spouse and make a list of all the things he/she can do. In many cases, it’s not necessary to be a master of these skills, since your spouse has time to do everyday things that other people might be willing to pay for. Professional shopping, in-home cooking (make dinner in your client’s own kitchen), tutoring, garden care, and many other options are available because clients simply don’t have time to do these things themselves. And, as above, your hours will be flexible. (See Could What You Know Make You Money?.)
  4. Sign up as a substitute teacher. Even during summer months, many schools and daycare centers have a tough time covering classes on short notice. During the school year, most are desperate for competent substitutes. Very few require teacher certification. Some require a bachelor’s degree in something (anything), and many don’t require a degree at all. In all cases, if you do a good job, you’ll be invited back often. You don’t want to refuse assignments too frequently, but you can always turn them down if a good interview comes along.


Know Where Your Money’s Going

I’d like to offer some suggestions for this reader. At one point, I was in a similar boat. The tips I’m going to offer come from what was suggested to me and they have helped me immensely.

First of all, track your current spending for at least a month. If you don’t know where your money is going, you’ll never know if and where you can cut back. Once you know where your money is going, start looking for things you can cut without causing serious hardship:

  1. Do you really need digital TV or can you live with basic cable or a streaming service? Better yet, can you deal with using an antenna for a while?
  2. Rather than buying sliced meats at the deli for lunches, you should buy your meats in bulk and slice them yourself. Instead of buying sliced turkey at the deli for $4.99/lb, I buy a whole turkey breast at BJ’s for $1.99/lb. I bought an electric slicer on eBay for $6. (See 10 Ways to Save on Meat and Poultry.)
  3. Look into freezer cooking. You’ll be able to fix your meals much more quickly, which will help you to avoid eating out as much. When I first started my debt reduction, after tracking my expenses, I found that I had spent more than $700 in one month just on dining out! Now thanks to freezer cooking, I eat out maybe two times per month. The reason for the difference is that I found it too inconvenient to make dinner and do the dishes every night. Now I just pull a meal out of the freezer before I go to work, and when I come home, I just pop it in the microwave.
  4. Can you lower your heating/cooling costs at all? I used to have a programmable thermostat. In the summer, it would turn the temperature up to 80 degrees about an hour after I left for work, and then about an hour before I got home, it would go back down to a normal temperature. In the winter, it would do the opposite and turn the temperature down to 55 degrees after I left and back up to 68 before I got home.
  5. Be sure and get on the utility company’s budget plan. It’ll be a whole lot easier to manage your budget when you have a set payment.

Now that you’ve found places to cut back, find a good spreadsheet to help you manage your debt reduction plan. A good one will allow you to track your expenses from pay period to pay period. Whatever is left at the end of each pay period should be carried forward to the next pay period. I created an Excel spreadsheet that does just this. With this particular spreadsheet, you enter the date of your next paycheck and your normal take home pay on the “General Information” tab and then go to the “Budget Sheet” tab and fill in your expenses. If your expenses are ever more than your income for that pay period and the balance left from the previous period combined, then the “Balance Carried Forward” field turns red.

There are different schools of thought as to which debts you should focus on paying off first. The one I follow is that you should focus on paying of the debt with the highest interest first. As soon as the debt with the highest interest is paid off, take the money that had been sent to debt #1 and add it to what you currently send to debt #2. Once debt #3 is gone, take the money that you’ve been sending to them and add it to debt #4. And so on. (See Debt Repayment Strategies: The Snowball vs. The Avalanche.)

Refinance Your Home

Has the house been refinanced at the new lower rates? That alone can save quite a bit of money on the monthly bill. My husband and I also used a group that combined our credit card debt and got us better rates and lower payments. You can also call and have your school debt deferred for a short time if you have not done that before. This would give your husband time to find a job.

If it is a hard market, you might look at moving. We lived in a large city in Kansas and could not find jobs. My husband found a good job in a small town in Nebraska.

Cut Out the Nonessentials

When we were in debt and needed to manage money, we cut out all the nonessentials. For example, we were paying $45 a month for cable, but there is a $13 per month alternative.

You can also save money on your car insurance bills. Call your insurance agent and make sure that you are getting all the appropriate discounts, such as discount for an anti-theft device and a good driving record. Inform your agency that your husband is not driving his car as far because he is not commuting. You can additionally lower your payment by increasing the mandatory deductible. If your deductible is only $250, push it up to $500 or $750. You will be responsible for paying this deductible only if you are at fault for the accident. (See Is Raising Your Insurance Deductible a Good Idea?)

Call the credit card companies to ask if they’ll reduce the amount of interest they are charging you. My mother does this frequently and they usually accommodate her. You can also apply for 0% interest on balance transfers, which works out well for several people I know.

Since you have your house, have you thought about taking on a renter? If you have the room, it might not be such a bad idea because it would generate additional income.

I was in a similar situation. In addition, however, my credit was ruined and I had about 15K in debt. It took 2 1/2 years, but I was able to pay everything off, clear my credit, and buy both a condo here and a home overseas (my husband is foreign). We are now looking at purchasing a rental property here and opening a business. It is always difficult while you are in the middle of the mess, but there is a light at the end of tunnel. I am confident that everything will turn around for you. Just keep your chin up and smile!

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Relentlessly Pursue Freedom

I understand the way you feel. Overwhelming debt is just plain overwhelming! About three years ago, we were up to our eyeballs in debt, but we have managed to get out.

In your case, let me first give you the praise you deserve for having an emergency fund of $1,000 in place! Having that safety net will save you from going more in debt when things come up, such as car repair. You can take it from your emergency fund instead of a credit card, which unfortunately is what many people will do. So, first off, don’t touch that emergency fund, unless there is a real emergency! (See How to Know When to Use Your Emergency Fund.)

Secondly, it is wonderful your cars are paid off! Keep those babies running and well maintained and drive them into the ground. Stay motivated to get out of debt, and don’t be tempted to think you need a new car. If you are serious about getting out of debt, your present cars will work out just fine.

List out your debts from smallest to largest, which includes a $48 store card balance all the way up to a $105,000 student loan. Pay them off one at a time starting with the smallest one. Contrary to popular belief, you should disregard interest rates. You need some quick wins! The immediate success of paying off the smallest debt first will give you the motivation you need to stay at it. Tackle the smallest debt first, and get it out of your life forever. Then move on to the next one on the list.

Now, make a budget. The Dollar Stretcher website will give you limitless resources on how to make a budget. The key is to make a budget and take it very seriously. We lived very frugally and counted every penny. We were determined to get out of debt no matter what. For us, it meant such radical things like no Christmas travel to our family that year. That was hard to explain to family and very humbling, but we had a goal and we had to do it. When making our budget, we spent every penny that would come in that month on paper first. Every penny went towards paying off that first, smallest debt.

You can do this! It feels impossible at this point, but you are doing the right thing by relentlessly trying to figure out how to get out of debt. The freedom that has come since we got of debt ($21,000 in 8 months!) has been incredible. I will never go into any debt again. To some, my life is a little wild because we simply won’t get a credit card, will never buy a car unless we pay cash, and we just don’t spend our money like most. I wish others could understand that this way of living has afforded us opportunities to travel, opportunities to pursue careers we love, and a peace of mind that simply is not present when there are unpaid debts hanging over your head. Keep up your quest. It is a noble and honorable goal you are after. As William Wallace said in Braveheart, “freedom!”

Reviewed January 2023

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Since one of the biggest hurdles to achieving financial independence is debt, subscribers get a copy of Do You Have Too Much Debt? A Checklist and Solutions for FREE!

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Subscribe to get a daily dose of money-saving content aimed at helping you get better with money, fix your finances, and live better for less.

Since one of the biggest hurdles to achieving financial independence is debt, subscribers get a copy of Do You Have Too Much Debt? A Checklist and Solutions for FREE!

We respect your privacy. Unsubscribe at any time.

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