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Ask the Readers: “Help! I’m Living on Credit!” Print
Friday, 2nd May 2008 (by J.D.)This article is about Ask the Readers, Choices, Debt
Jason sent me a question yesterday that neatly encapsulates a lot of the mail I receive, as well as rounding up some of the topics we’ve been discussing this week regarding life after school. “I’m living on credit,” he wrote. Here’s his story:
I graduated a year ago with a useless degree but what I thought was a good job. I had recently purchased a new car, but only had $8800 in student loans and around $3000 in credit card debt. I had planned to pay off my debt and keep my cost of living low, but my job slowed down until the hours were near nothing. Being naive I kept thinking things would pick up until I just had to quit and get a couple of temporary jobs.
I’m currently working at a great job with a great rate of pay, but it’s only 20 hours per week. I am in the middle of my clinicals to become a nurse’s aide and fully expect to be working in a hospital full-time by the middle of June with a pay rate high enough to allow me to aggressively destroy my debt. My question is, what should I do in the meantime?
I have looked at my budget and with all my necessary payments and only $100/month in food (absolutely no entertainment or extras) I am still in the red. I probably should have asked long before now but I can at least hope this question may help others, if you decide to post it on your website.
Jason’s concerns are not unique. After my presentation on Tuesday night, I spent some time talking with a young man from Alaska. He’s spent his last few summers working on fishing boats to earn enough cash to pay for school — he hasn’t had to take out any loans. However, he hasn’t earned enough to also pay for his living expenses, so he’s been buying the things he needs on credit.
“It’s hard to do some of the things you suggest,” he told me. “I was sitting next to two girls who were reading your handout. They thought the ’spend less than you earn’ advice was funny. They don’t earn anything, so that’s impossible. They can’t avoid debt.”
And neither can Jason right now, it appears. Or can he? What would you do if you were in his situation? What do you do when your income is so low that debt is unavoidable? When is it okay to deficit spend?
May 2nd, 2008 at 5:25 am
I don’t mean to be unsympathetic, but the answer isn’t that hard assuming that one is willing to prioritize avoiding debt and living within one’s means. First, sell the semi-new car. It was a dumb purchase to begin with, and now it really makes no sense. And it’s sad that the emailer was excited that he “only” had about $11,000 in other debt and then he chose to heap more on top of that in the form of a car. Get a junker car for now. Second, work extra to increase income. Even with the nursing training, it’s possible to work more than 20 hours, especially during weekends or off-hours. You can increase your income a lot by working a handful of extra hours doing lawn/yard care work, building decks or other things if you have basic skills, freelance consulting in your field of choice, or even a more menial hourly job. People used to live below their means in the US whatever those means were. It’s only recently that so many of us feel entitled to go into debt just because we are low earners.
May 2nd, 2008 at 5:28 am
Can Jason work more hours? His post indicates that he is only working 20 hours a week so I would say pick up some other part-time work (nights or weekends). On the other hand, it also sounds like he is in school so maybe he can’t pick up part-time work because of school commitments.
If he only needs to bridge the gap between now and mid-June can he get a short term loan from family. I know a lot of people are against family lending but my grandparents and my parents have helped me out (I paid it all back) when I was in school or needed to bridge the gap between school and job. Taking a loan from mom or dad (with a documented contract and some type of interest rate) would be better than living on credit cards.
May 2nd, 2008 at 5:34 am
I’m assuming that Jason is living on credit through buying things with credit cards (rather than getting education loans and using them to cover expenses), and that he has been making at least minimum payments on those cards every month. In which, he could should pick up the phone and ask all of the credit card companies for lower rates. Depending on the amount of free time that the nurse’s aide clinicals are taking, he might also want to look into getting another credit card that allows 0% balance transfers (but read the fine print as there is often a balance transfer fee).
There are a number of other details that were left out that could also affect Jason’s budget: Does he drive places that he could take public transit to? Has he considered getting roommates or, if he’s living in an apartment now, moving to a cheaper one? Does he have cable, high-speed internet access, or a cell phone that could be dropped?
However, to answer the questions that JD asked - well, I gave some suggestions on how Jason might avoid incurring additional debt. I would probably do exactly as he is doing in the same situation, and I think it’s one in which it’s okay to deficit spend - his income is only low because he’s not working full time in order to complete an education that will increase his earning potential. In his situation, his biggest worry is to keep the deficit spending to a minimum so that the debt can be cleared as quickly as possible.
May 2nd, 2008 at 5:35 am
I’ve been there, and it all worked out. The thing is, you’ve got to keep the debt as minimal as possible. No wasting money. None at all. And you have to have a plan for when things pick up.
And he’s not carrying a lot of debt, after all. I know doctors who make good money but who won’t be able to crawl out from under enormous student loans until after years of work. If he’s getting by that cheaply, he’ll be fine. Sounds to me like he’s managing his money well for the situation.
Education is valuable; therefore it’s not free. It’s an investment in your future. If you need that investment, don’t skimp on it. It’s worth a bit of well-managed debt.
Also, a lesson I learned in being a poor college student (who was married to a poor college student): Don’t skimp on good food. You can eat cheap and at least moderately healthy at the same time. It cuts down doctor bills, keeps your mood up, and helps curb weekly expensive food urges (usually for more bad food). I happen to think your health is worth a bit of debt, too.
May 2nd, 2008 at 5:49 am
You either lower debt or increase income. If I were in that situation, I’d start delivering pizzas. The schedule is fairly flexible and pay is pretty good. It is a good way to kill debt.
May 2nd, 2008 at 5:49 am
It sounds like Jason’s credit woes are short-term, anyway. If he can hold out until June then I’d say he’s going to be fine–provided he uses that extra income to pay down debt, and not to upgrade his lifestyle. If it takes longer than he thinks to obtain a Nurse’s Aide position then he needs to rethink the new car and make some other difficult decisions.
It’s always possible to shave the expenses down a bit more. Does Jason have cable? A cellphone? Can he move home with the parents or other relatives in the short term, to annihilate that debt?
In the end, I think it’s worth it for Jason to ‘invest’ in himself by finishing his clinicals and getting that better paying job—and by financing this with his credit cards.
May 2nd, 2008 at 5:53 am
Perhaps Jason, or the fishing boat student, should think about student loans. People don’t want to take out student loans, but they’re much more affordable (both short and long term) than living on credit cards.
I’m in repayment on my student loans, which I consolidated 5 years ago when I graduated. Because I consolidated and I do automatic withdrawal payments, my interest rate is 1.5%. That’s not a typo. I’d much rather be paying 1.5% after I’m done with school than 10%+ while I’m in school to be able to live.
And, if it’s a government loan (really the only way to go) they’re far more likely to work with you if you have trouble making payments than credit card companies are.
May 2nd, 2008 at 5:56 am
In the grand scheme of things, 6 more weeks probably won’t make or break him. But, as a previous poster mentioned, 20 hrs a week is not a lot of working- although he may be in classes if it is a clinical program. Cutting any unnecessary expenses for a month or 2 or selling personal items on ebay may help him to stop incurring debt. He needs to generate positive cash flow to get him to mid-june. Also, if he is paying student loans, try to get get them deferred for a few months, i believe it is quite easy (or at least it used to be when I did it several years ago for a while). If he is not in class, he should look for additional work. Many people with full-time jobs work 50-60 hrs a week.
-RC
May 2nd, 2008 at 5:58 am
I don’t think its Jason with the problem. I think the problem is with those two girls and their attitude about debt
May 2nd, 2008 at 6:12 am
well in my little sister’s case, she just bugged mom and dad and let them deficit spend for her!
my family is so broke.
(obviously not the solution)
May 2nd, 2008 at 6:12 am
If Jason is still in the middle of clinicals, which to me sounds like he’s still enrolled in school, he should qualify for federal subsidized student loans for up to $8500. This would be much better to use than a credit card, with interest paid by the government while he’s in school and up to 6 months after he graduates. He would definitely qualify for unsubsidized. Both loans have a fixed 6.8% interest rate right now. If that 6.8% is way better than his credit card, I’d even recommend taking out as much as he needs to pay off all his high-interest credit card debt so all he’s left with is federal student loan debt that is much more forgiving and flexible, like carrie said.
May 2nd, 2008 at 6:14 am
If he can’t squeeze another cent from his budget, I recommend he gets another job. Bartending, serving, loading boxes on a UPS truck overnight - all are jobs that pay pretty well and can lend themselves to an irratic student’s schedule.
May 2nd, 2008 at 6:14 am
I would take out student loans before I would rack up credit card debt. I lived on credit cards for a while, with good rates, and then as my balances got higher, they raised the interest rates (even though I always made the minimum payment on time), to the point where there was no way I would ever be able to pay it back. Credit cards are a noose around your neck - get in trouble, and they’ll just tighten it. I ended up doing Chapter 11 bankruptcy, and I hate banks to this day. I can’t stand to carry a balance on a credit card, though we do use them for the bonuses (I got a free iPod in December using my cash-back feature). As soon as the bill is available online (before it’s in my mailbox), I know how much I owe and the money is earmarked, but I don’t pay it until a couple days before it is due (I schedule it electronically). It’s my way of getting even with the evil credit card companies - use the credit cards, but don’t pay any fees or interest. Warped thinking, I know.
But I really, really, really would get student loans rather than live on credit cards.
May 2nd, 2008 at 6:14 am
With JericoHill on this one. Jason should do fine.
I question his choice of career though. If he already has a bachelor’s degree he might want to reconsider. He should go for a one year RN program if he has his BA/BS. It pays more (considerably if you believe a salary search) and access to government loans is a good thing.
Those girls irk me.
May 2nd, 2008 at 6:15 am
Well, Jason didn’t mention if his new car is paid for or not - but seems to imply that it’s not.
If a lot of money is owed on the car, the easy solution is to sell it and get a cheaper car - that you can pay for in cash, not through financing.
As for the girls - I don’t know why they can’t cover their expenses- but I also don’t know what’s so hard about spending less than you make. It’s very rare that it would be impossible. If rent is too much - find families in other situation and see if you can’t split it with them.
When money is that tight, its all about what you’re willing to do. And I doubt they’ve done everything they could.
May 2nd, 2008 at 6:15 am
First of all, I applaud Jason’s efforts to get through school without taking on huge student loans ($8800 is relatively low these days). That is quite a feat in these times of rising tuition. I was in a similar situation myself, working to pay tuition and not having much money for anything else. I turned to credit cards and it began a decade of using credit to finance life events. I would like to offer a hard-line stance and respond that it is never acceptable to “deficit spend,” but the reality is that sometimes a short period of deficit spending is required to reach a point of higher returns later.
I assume once Jason is working full time his income will come up and he can attack this debt. My advice would be to minimize all spending - I mean down to the bone. Go on a spending diet. Eat only meals from home. Find things to sell to raise cash when things get tight. Sell that new car and drive a beater until your finish school and are working full time. Consider a “mindless” PT job that wouldn’t interfere with school (pizza delivery, retail job, etc.). Only turn to credit as an absolute last resort, and limit yourself to one credit card with a resonable limit.
May 2nd, 2008 at 6:23 am
people of earth, education requires sacrifice. for some it will be financial sacrifice like having to go deep in debt, for others it will be time away from loved ones, and so on. and for a very small some there will be no sacrifice.
May 2nd, 2008 at 6:24 am
I think Jason is an excellent candidate for Dave Ramsey’s baby steps and other advice.
I would specifically recommend:
1- sell the new car and buy a cheap one with cash (you can always move up later)
2- save a $1,000 baby emergency fund
3- stay or get current on all debts
4- line up your expenses in order of importance: housing, food, electricity, car, etc., and pay them in order of importance
5- line up your debts, smallest to largest, and pay them off in that order
Regarding item #1, the point is to cut expenses as much as possible. From how I read the posting, the car is probably way too expensive for the income.
Good luck.
May 2nd, 2008 at 6:27 am
I hate to point this out to all of you, but Jason is doing Clinicals…that means he can’t get another job. He already has it. It’s just unpaid.
If he can get a stafford loan (it’s probably too late), then he should to tide him over till June. He should not look at alternative loans. They are a ripoff.
At this point, he has a month or a little more left. He needs to do everything he can to minimize spending, and if necessary, turn to family for help, if he can.
May 2nd, 2008 at 6:40 am
Sometimes people are just stuck temporarily and there isn’t much they can do. My advice would be to just spend as little as you possibly can until you start making more. Obviously the income isn’t covering the expenses, so keeping the expenses to a minimum would keep the debt to a minimum. then when the money increases you hit the debt hard, while still keeping your expenses to a minimum.
As for the 2 girls laughing about having no income - they need to go find a job, any job immediately. The problem with many people is they aren’t willing to take any job. They want the ideal job and spend months looking for it and doing nothing in the meantime to pay there way. They should be taking the first job they can find and then keep looking for a better one while earning as much money as they can at the time.
As for the guy from Alaska, it is obvious that he is a hard worker. he should probably look into working part time while going to school. I had many friends that worked on campus making good money with very flexible hours to help pay their way through school. Even going to school full time, working 10-20 hours a week should be doable for most people.
May 2nd, 2008 at 6:46 am
I disagree Flaime, I did clinicals in college and held down 2- 20 hour a week jobs. I did one in my field ( I was studying to be a dietitian and the one high pay with flexible hours (waitress) it was not easy but Jason is very young and you can do a lot at that age. I take pride in those years and don’t regret the extra effort at all, he doesn’t have long to go. All this talk about student loans and the projected job - you never know for sure about the job and so taking on more debt isn’t the answer but if you get a part time job that is decent pay and flexible (several people have given suggestions) he can take his time finding the RIGHT job after his Clinicals are over. Good luck Jason!
May 2nd, 2008 at 6:53 am
I’m completely baffled by the two girls who laughed at “spend less than you earn” because they’re not earning anything. What on earth were they expecting to hear from this presentation - the next night’s winning lottery numbers? Secrets of alchemy that would allow them to turn dandelions from the park into pieces of gold?
Like other commenters, I’m concerned about the students who are proud of avoiding/minimizing student loan debt but are depending on credit cards for living expenses. Has all the media attention to the stories of people graduating from college owing tons of money on student loans scared current students into thinking student loans are so evil that they’re actually taking credit cards instead despite the higher rates, etc? Or is it a lack of planning, where they didn’t realize they’d be out of money until too late in the semester to apply for loans, but a credit card was just a phone call away?
May 2nd, 2008 at 7:09 am
I disagree with Flaime. He can get another job. It’s not going to be nice. In fact it is going to suck big time working 60-80 hours a week. BUT he only has to get through June. He’s going to have to work his ass off for two months. Plus, he won’t have time or energy to eat out, go out, or buy anything so he’ll cut his expenses in half while increasing his income. I’ve been in his situation; it sucks but it’s not impossible.
After getting another job, he needs to stop using the credit cards. You can’t fill in the hole if your still digging. It doesn’t sound like he has the money to really pay off his debts right now, but he can at least stop making it worse.
Selling the car is certainly an option, but he’s looking at such a short time frame, that it doesn’t seem like the best. He should definately re-evaluate whether he needs that car payment once he has a well paying job, especially if it isn’t paid for.
May 2nd, 2008 at 7:10 am
A couple things:
1. I really admire the young man I talked to after the presentation the other night. He knew that he was using credit, and he wasn’t happy about it, but he had plans to get rid of the debt. Also, from our brief conversation, it was clear that he was doing his best to keep his expenses low. “Sometimes I want to go to the beach with everybody else,” he told me, “but it’s just so expensive. I can’t justify the expense.” I have nothing but admiration for this guy.
2. Also, I don’t think the young women were laughing because they thought “spend less than you earn” was a bad idea, but because it seemed impossible to them right now, a sort of absurdity.
May 2nd, 2008 at 7:31 am
JD-your post raises an interesting question. My answer may sound a bit heartless, but it is based on the facts and cuts through the emotion. As much as you admire him, the emotional side only clouds the issue and gets in the way. The fact is that he is in a serious situation and needs to act decisively to resolve it ASAP.
You absolutely need to live within your means. The only time you don’t should be due to emergency (loss of job, injury, etc). Since his income is less than expenses, he needs to get a second job. No excuses. Pizza delivery is popular due to flexibility and pay. My advice would be to mow a few lawns instead. $25 for 1.5 hours of work is a deal.
Note: as someone who earned two degrees while working full time, I don’t have much sympathy. It can be done. It is hard and you have no social life.
Can he limp by for a few months? Maybe. What happens if his schooling stretches out? What happens if he miscalculates his expenses and runs out of credit before he graduates? Limping by is never the answer. Look up, find a solution, and execute.
He also needs to go to the library and pick up a Dave Ramsey/Suze Orman book. Read it, learn it, and apply your new found knowledge.
Other thoughts: can he sell the car and pick up a $500 used vehicle? Has he actually cut his expenses or only looked at it? Thinking something is easy, doing it is hard.
Keep up the great posts. I love you blog!
May 2nd, 2008 at 7:33 am
Hooray to finishing school!
If Jason is so worried about being in the red, he should consider picking up some extra income or selling the car (as others have suggested). I’m assuming that if he wasn’t worried, he wouldn’t be asking.
He didn’t share the rate of bleeding, so it’s hard to say what I would do in that situation. If he’s only -$400/month for the next six weeks, that isn’t so bad, but if he’s -$1000/month, that’s a different picture.
How certain is he of having a job in mid-June? If he’s got a signed contract already, then I’d just stay the course, assuming the -$400/month scenario. However, if he’s going to be job hunting in mid-June, I would look at the 2nd job for now and perhaps until he gets the full-time job.
I understand the irony the girls were laughing about. However, a friend of mine went to a fancy private college and spent what she had to to fit in, all based on student loans. The balance at the end was NOT pretty. When there’s no income and the debt is piling up from loans, sometimes it’s easy to have a “what the heck” attitude and go with the flow, instead of fighting like heck to keep the spending a low as possible.
May 2nd, 2008 at 7:36 am
Have we considered that maybe Jason cannot get another job? If he is American then fine…but if he is a foreign student then it would be a violation of his visa and he could get fired then deported.
If he is American then if he cannot get anothr job he could look at selling plasma. It is not much but he could pull in about $150 a month for that.
Try to sell things on ebay…does not always work but it is worth a try.
Definitely sell the car and get a cheaper one. You can get a point A to point B car for about $2k…if he really needs to have the car.
I agree with JD about the two girls point of view. When you have nothing it is ridiculous to have someone tell you spend less. Try to see what they could have been thinking.
May 2nd, 2008 at 7:42 am
Going to the beach is expensive?? How much does sunscreen cost nowadays? It’s an interesting comment - I live about 3 miles from the beach and going there is considered a cheap treat for my friends and I. I guess it depends which beach you are talking about.
I’ll just echo the student loan comments. Like Carrie - I too have a 1.5% loan. payments are $150 a month (that’s actually more than what they want monthly) and since I can deduct the interest from my income tax, I’m not really in any hurry to pay it off.
The rest of the advice in this column seems pretty sound. I lived through some tight times when I left my $40+K job and moved to FLA. Within a month I found a temp job for $11/hr. Eventually it went full time and the pay got much better, but between those times I lived on almost nothing. No cable, no cell phone, tiny apartment w/roomate, shopped at farmer market for produce, ate a lot of beans & rice (dried beans are cheap, store well and are very healthy). I’d say about the only thing I didn’t skimp on was a DSL line for internet since I was doing a lot of job hunting online and didn’t want to tie up the phone line if someone was trying to call.
Nowadays I still live frugally and enjoy it. I cut coupons, still shop at the farmers market, hit garage sales (bought a brand new breadmaker for $30 last weekend). I even started riding the bus to work about every other day.
I think part of the problem is that these are things everyone should be doing before they get in over their heads. It’s rare to see someone live under their means until they are forced to.
May 2nd, 2008 at 7:46 am
If you only have to get thru 6 or eight weeks until you get a real paycheck, either get a night job where they are always hiring like McDonalds or late night Wendy’s or your local beer joint bar-backing late at night or washing dishes.. In any event, get a part-time job where you also may get to eat for free.
Alternatively, suck up your pride and ask a friend if you can crash for a couple of months for closer to free than you are paying now.
May 2nd, 2008 at 7:48 am
Jason,
Nurse’s aide is a great opportunity. Be sure to find a hospital that will support your work towards an RN. My friend Peter did this straight from high school: Worked three years as a nurse’s aide and they put him through nursing school. Now he’s past his bachelor’s and on his way to his nurse practitioner degree!
I know this blog is all about how debt is poison, etc but I leave one exception to this rule: A student loan.
But not any student loan! I follow what I call the “Jude the Obscure rule of student loans”: Estimate the WORST case income scenario for your job after school. For a philosophy major, this is flipping burgers, self-doubt, cohabitation and ultimately betrayal. But for an RN, your worse case scenario is a pretty good clinic job paying, say, $30K. The rule says, 1) Take whatever the worst case (the “floor” to your wages) and 2) Make this number the max you will borrow (the “ceiling” to your student loans). So I would put $30K as a ceiling for total debt load after school, including student loans.
The hardest part of the Jude the Obscure rule is honesty about who you are and what your potential income is, but as an RN, it’s definitely a safe bet.
As for the car, ditch it and get a bike (I live in Chicago and ride all winter, so I can’t imagine your excuses are legit). Take the money and pay down debt to whatever rule works for you (snowball, high interest, etc.) Just keep working towards that degree, it will pay great dividends!
Alex
May 2nd, 2008 at 7:48 am
In general, when your income is so low that debt is seemingly unavoidable, there are 2 things you can do to try and mitigate the situation- increase income (working more hours, getting a better job) or decreasing expenses (getting a roommate, moving back in with parents, giving up a new car, cable, broadband, cell phone etc)
For someone who is not a student, they should be able to adjust their income/expenses to the point where they are able to pay bills and be able to buy food every month- if it’s a crisis situation or mitigating circumstances (new mother, disabled), public assistance may be necessary and will hopefully be available.
For someone who is a student, the situation is better because there is access to student loans, which should be used to their fullest extent rather than relying on credit cards.
May 2nd, 2008 at 7:55 am
I’ll tell you what I did, but Jason’s not going to like it. I joined the Army National Guard.
With a college degree - it doesn’t matter what his degree is in - Jason can join as an E-4 or E-5. He can earn enough in Basic Training and AIT, most likely, to eliminate his debt. Then when he comes home, he will only be doing the Army thing one weekend a month and two weeks in the summer, which would give him an extra 200 bucks or so each month. It would also pay for at least 60% any additional schooling he is interested in getting (in most states its 100%), offer him low cost health insurance, and he’d be able to get military discounts all over the place.
The downside, of course, is the risk of deployment. Now, he could choose to join the Air National Guard or Air Reserves, that way if he got deployed, it would only be for four months. Lord knows I wish I had gone that way sometimes, the Air Force just treats their people better, and their uniforms are way better (who’s bright idea was it to put all this velcro on the ACUs?). Or he could look at the only positive of a possible year long deployment to a war zone - one year of high, tax free income, no interest on bills, and free room and board. Its the least the military can do for putting you down in Iraq. He could also try out for the Army band, if he’s a musician. They NEVER deploy.
And jobs in the military are not restricted to Infantry jobs. I’m a journalist. I worked as a photographer and a writer for a base newspaper on my deployment, and occasionally I drove the civilian media around in a bus. Just about every job there is in the civilian world has a military counterpart. There are even military veternary assistants. No joke.
I hate to sound like a recruiter. I assure you, I’m not one. But it’s the solution that worked for me when I had a similar problem.
May 2nd, 2008 at 7:57 am
That is a tough situation. Jason probably will be ok in the future, because he is aware of his problem and willing to face it. It is too bad he bought the car before having the means to pay for it. My first suggestion is to find a second part time job. If that isn’t feasible, consider selling the car. Or, just hold out, as June is not that far away. It is a tough situation
I think those making fun of the girls are missing the point. In college you have no income, or maybe are making $7/hr working 10 hours a week. You can’t live on that without parental subsidy, taking time off to work between semesters, or whatever. Sometimes it is best just to get the degree and go start making $25/hr. While in college, the advice really is “spend as little as possible” but once you graduate, you should spend less than you earn.
May 2nd, 2008 at 8:12 am
PS As you are working around a hospital….post a humorous sign saying for instance.
‘Starving student will do anything for food…clean your yard, clear your gutters, walk your dog and pick up his poop hygenically, wash your car…anything a good son would do for you if he weren’t off at college working for someone else’s.
I use stray students all the time and am grateful for their help. They get decent cash pay (and maybe some food and beer) and I get small chores completed.
Come to think of it, where do you live?
May 2nd, 2008 at 8:27 am
I think the reader with the question and the person from Alaska have hit upon scenarios where short-term debt may be required. In 90% of cases, it really is a reasonable thing to expect that a new graduate’s income is going to rise. I think they should both re-evaluate their situation every few months. Maybe even find someone who can be a reality check, who can say “yes your expectation seems reasonable” or “welcome to fantasyland”.
People who read personal finance blogs can be a little strict about credit, and I understand that it can be a slippery slope, but the assumption that “I will be able to pay for this tomorrow even though I can’t pay for it today” is not always wrong. It just has a cost. Even Suze says that you might have to buy your first work wardrobe on credit, and that’s OK.
A new graduate is a start-up, a new career is a start-up. There are always start-up costs. When I was starting a business, no one questioned the fact that I was spending money that I didn’t yet have. An extreme set of choices could allow these people to not use the credit cards, but they also have an obligation to not be totally miserable. They should live their lives, not just survive. If people have a good need/want barometer, they can do this.
May 2nd, 2008 at 8:29 am
Jason, you need to earn more money. Get a couple part time jobs, nights and weekends or whatever. You can do this, but you actually have to do it. You also need to cut your lifestyle and get on a written cash flow plan (see my budgeting post a few weeks back for guidance on how to get started).
Here’s the thing folks. If you say you can’t live on less than you earn because you don’t earn anything, but then you go and spend on credit cards, there’s a problem here! Cut the lifestyle! Stop going to movies, out to eat and “hanging out” with your friends in places that cause you to spend money (like, bars and shopping malls). There’s no excuse except sheer laziness to take charge of their situation. This is especially true of young people, college age. You haven’t even lived long enough to become cynical and lazy!
May 2nd, 2008 at 8:33 am
He’s young, single, keeps his expenses down, he has a good head on his shoulders and a plan/desire to start aggressively paying off debt in…SIX WEEKS…when he thinks he’ll be starting a new job. Sounds like he’s doing the best he can. If six weeks starts to become longer, he can sell the car. His priority should be to finish up his education and get a job. If there is an OK time to use a credit card, this is it. Temporarily living on credit…i.e. buying food or paying for an emergency…is one thing. Funding your ‘lifestyle’ on credit is something else entirely. It would be ideal if he could get a night job or whatever…but I’m sure he can make it through the next 45 days.
May 2nd, 2008 at 8:38 am
Everyone has said some good things, and not so good things. Jason definetly needs to increase his income. Consider donating plasma, I know it sounds goofy, but where I go I make $240 per month and spend about 14 hrs per month in the clinic. It works out to $17 per hour and you can go whenever it fits into your schedule. Also the money that is given isn’t taxed so it feels like $312 ($240×1.3) per month even though its $240. Just a practical idea to get money in your pocket.
May 2nd, 2008 at 8:42 am
Sometimes it makes sense to temporarily go into debt- for example taking loans for college can be a great way to boost your future earning potential.
During school you probably CAN’T spend less then you earn. However, that doesn’t mean you should spend irresponsibly either- the more debt you take on the harder it will be to pay it off. The key point is that after your training is done you should get a job that will cover the debt and the years without an income. If you can’t reasonably do that, then you are setting yourself up for financial hardships.
That DOESN’T mean you shouldn’t go to college for a lower paying field- just be smart about it… Can you go to a less expensive school? Can you cover it with some work? Can you finish early?
Where you get the money will also make a huge difference. Taking a student loan at a low % rate is FAR better than credit card debt at 20%! Getting grants or scholarships is even better!
>He’s spent his last few summers working on >fishing boats to earn enough cash to pay >for school — he hasn’t had to take out any >loans. However, he hasn’t earned enough to >also pay for his living expenses, so he’s >been buying the things he needs on credit.
Actually, I think he SHOULD take out some student loans rather than taking credit card loans. Both are debt, but one has much lower rates and better terms (i.e. deferrals).
The same argument applies to Jason… He should be able to get himself out of his debt, but he should look into the possibility of a better loan- it could save him thousands of dollars. The real key is that once he gets a better position he has to NOT increase his spending and pay off that debt!
-Rick
May 2nd, 2008 at 8:59 am
I don’t understand what he’s complaining about.
If it’s student loans, it’s called Leveraging.
If it’s credit cards, it’s called Stupidity.
Get a different job, climb out of it somehow over time, and quit blaming your “useless degree.” No degree is useless.
DEBT is not the problem; where you focus it is what matters. Going into debt for my education was the best thing that ever happened to me. I wish others could understand the same.
May 2nd, 2008 at 9:02 am
Welcome to capitalism, now lets all go back to talking about how to take advantage of it for those who can… you can’t get ahead and worry about poor peopl at the same time…
May 2nd, 2008 at 9:09 am
Years ago I was bemoaning the student loan problem. My mom set me straight by suggesting I think of them as my small business loan. If I were to open my own business I would still be paying off those necessary items to operate my business. I’m still paying off my student loans but they were necessary to for my education. These loans made it possible for me to be employable in my field. I still groan at them but I’d rather have the loans and have a job than be without either of them. I realize this is not a strict either/or issue but there are tradeoffs in life.
May 2nd, 2008 at 9:27 am
When you don’t earn anything you shouldn’t spend anything. Why don’t these kids have their parents around to live with and be a bridge between college and working full time. Who gets through that transition quickly? Nobody! It takes a year or two at least.
You should always live at home after college to bridge the gap and not spend money until you have some. This credit-is-ok-to-live-on with-25%-interest-rates idea is nuts, it will come back to haunt you every time and it is near impossible to get out of once you’re in it with a small income that doesn’t cover expenses as it is.
I think the advice to these kids is go home, live with parents or relatives for free, don’t buy big stuff until you have an income. Being young sucks monetarily, you have to wait to get to the point where you can make enough to afford to live on your own and do things you want.
In Jason’s case a second job would be helpful like waiting tables or bartending since those are flexible hours. Getting to live back at home with the folks would help a lot too.
Also, accept that being cool is not possible while not spending money. Just let it go because it’s impossible to be popular and frugal at the same time, and the debt will hang over you much longer than those “friends” will be around.
May 2nd, 2008 at 9:39 am
I love the naiveté of some of the posters “get a student loan or use credit cards” seems to be the general consensus. As a student I had to do BOTH. Our student loans in Canada were $3000 for one semester; and one semester’s tuition ran around $2500, leaving $500 for expenses from September to December. And that is living in a very expensive spot (Vancouver, Canada). I worked two jobs (total of 20 hours a week), had student loans and still had to rack up some credit cards. Those jobs were pretty decent paying jobs as I already had a few years admin background under my belt; and keeping up a schedule while in full-time courses of a 20 hour work week is not easy, at least in my academic-intensive university. The perfect situation for that spot would have been to have zero work hours outside of school, as that would have left me ’sanity’ room.
The biggest issue that Jason maybe didn’t see is the value of his degree; especially a BA from a recognized univeristy, they say that you won’t get the financial recognition until about 10 years after you graduate. I learned that the hard way - my friends who got their degrees in four years graduated and about 10 years after that I started to see the benefit of their degrees, so that moved me to go and finish mine. Which is why if you can get them government loans I think are an amazing idea. You can take a while to pay them off, and hopefully in the mean time your salary will jump up.
It is a financial sacrifice, but I think you have to make it if you want to bump your earning ability, and no matter what, it does pay off. But I am not of the opinion that students should starve themselves going through school, or live on the streets just to afford their education. There has to be a standard of living for students as well - if people knew the horrid conditions that some students lived in in order to ‘afford’ their education, I think the system would change drastically.
May 2nd, 2008 at 9:46 am
And just in replying to the fella above me - not everyone can live at home, and not everyone has the support of their parents financially or emotionally.
In my case, my dad was in a royal legal battle against his employer for his disability, so he had zero income for two years. And emotional tensions were tight in my home, so I had to leave, and I did at 17. And I’m not the only one.
There is this gap of people, who are poor, versus very wealthy, those middle classers, whose children really can’t afford to go to university. Do they then not go? Or do they stay at home until they can make enough at the local burger barn to pay for their educations? In Canada right now, where minimum wage is $8/hr and tuition for a 4 year degree would run you about $60,000 plus lodging, etc, that would be a lot of flipping burgers.
May 2nd, 2008 at 9:53 am
I have to say that I have no sympathy here. It is a matter of simple personal finance. If you have enough intelligence to go through school, you have enough intelligence to learn about budgeting and income/expense management.
I’ve been in a similar tight squeeze through graduate school. I just finished medical school and was entering a three year JD/MBA program (Yes, I have three professional degrees - MD/JD/MBA). Talk about limited income and huge amounts of debt. I knew this was a precarious situation so I learned about investing. Ultimately I used leverage (including some student loans) and my wages from clerking/internships for investments in futures and forward contracts. Through studious research and judicious timing I managed to not only create enough income to live off during my JD/MBA days, but I also paid off the debt for all three degrees.
The point here is that if you take the time to learn you can find a way to make money. The funny thing about all of this is that I never ended up practicing law or medicine. I’ve since retired (34 yo) from my school-days investments. However, I never would have reach this point if I hadn’t been saddled with the law, medical, and business school debt to begin with.
May 2nd, 2008 at 9:54 am
First, Jason should ask for a forbearance on his student loan debt. He might not get it, but if he does, that should ease some of the strain in his budget.
I was in a similar situation to Jason when I first moved to Vancouver… except I was still in school (so I didn’t have to repay my student loans) and I didn’t have any credit card debt.
The first job that I got was part time at a taco bell. I made it work by having a roommate, eating the bare minimum to keep me alive (my food budget was $30 a month), working any hours I could get (sometimes 15 hour shifts) and buying NOTHING unless it was absolutely necessary (toilet paper). I stopped buying toothpaste, I cooked beans from scratch, I took home as much leftover food as I possibly could from family functions, etc.
And I didn’t HAVE to go into any kind of credit card debt. When you break it down, all you really need is food, shelter, and transportation to your source of income. When you break it down, twenty hours a week at minimum wage is enough to cover it all if you don’t live in luxury apartments, don’t have a car payment, and don’t buy expensive food.
May 2nd, 2008 at 10:02 am
When I was in college in the ’70s it was necessary for me to pay all my expenses myself, and in those days college kids did not get credit cards. I worked as much as 30hrs a week and the school I went to was and still is notoriously demanding.
I have no bad memories of sacrifice; I had lots of friends (many of whom were in the same boat), and I felt that my work schedule forced me to be more disciplined in my studies. And I do not think of myself as extraordinary in any way.
Jason and Alaska sound like hard-working guys in need of good advice (please take out a student loan before going into credit card debt!), but if those too girls were my daughters they would be working.
May 2nd, 2008 at 10:20 am
I think a lot of people here have a binary view of how Jason should dictate his life. I mean, he’s obviously completed the first few steps of financial independence by being aware of the dangers of financing his present by gambling his future and by looking for ways to combat that upward creeping… he’s already football fields away from the typical college student. Read Your Money or Your Life, the Millionaire Next Door, read all of the PF blogs.. trying to suddenly change every single circumstance financially just doesn’t work… being more mindful day to day does.
Wait it out, minimize expenses, sell some stuff (the car?) and don’t incur new debt. Yay!
May 2nd, 2008 at 10:22 am
To Jason,
Get the student loans anyway! It’s a much lower interest rate than credit cards. When I went to college, a took out a couple of loans to live off of, even though I’d worked enough in the summer to be able to pay tuition.
My husband, who had a free ride, did the credit card method. Five years later, we are agressively trying to pay off that credit card, but it’s not easy. And the rate is extremely, extremely high.
Meanwhile, we want to pay off my student loans (down to $6,000 now), but it’s not as dire.
May 2nd, 2008 at 10:39 am
Chicago Gal: Why live with parents? Why not move into a crappy apartment with roommates and work any job you can until you can “get through that transition”. My parents told me flat out I would have no guaranteed support after my fourth year of college - well, I ended up two classes short of my degree. (Disclaimer: my father did buy me a junker car so I would have some transportation to search for a job. I was responsible for insurance and all maintenance, however.) I searched desperately until I got a job (one month after classes ended); I used my savings to pay the first two months’ worth of rent. I made enough that first summer (working full time) to pay all my expenses AND to save up enough to pay out-of-pocket for my last two classes in the fall. I continued to work part-time for the fall semester (making just enough to pay rent and eat); thankfully, the company hired me on full-time after the semester ended. But if they hadn’t, I would have been out there pounding the street and looking for a job, even if it meant working at a gas station to pay my bills.
Other than that, I agree with what you say. Especially “When you don’t earn anything you shouldn’t spend anything”.
May 2nd, 2008 at 11:44 am
For one thing, he shouldn’t be repaying those student loans yet. He should get a financial hardship deferment; interest will accrue, but it shouldn’t be too bad over the course of a year.
And then all those other things people said.
@margaret — tuition was also 1000% lower in the seventies. Today it would be damn hard to do at a state school, and impossible at a private school, you have to admit.
May 2nd, 2008 at 11:51 am
Spend less than you earn makes sense if you’re earning. But perhaps the idea should be rephrased as - Earn. Then spend less than that.
It is far easier to put effort into making money (as long as you are willing to work) than to figure out ways to cut a non-existing budget. The girls didn’t need a talk about how to spend less than they earn and they probably knew that. They needed a talk about how to earn.
May 2nd, 2008 at 12:31 pm
@ Ryan: I don’t know if advising this guy to use “leverage” or to open derivatives accounts is the best advice. Maybe someone with your sophistication can benefit greatly, but I think the other (simpler) ideas would go further and without nearly the risk.
But kudos to your investments, it’s a great testament to your intelligence. Don’t work hard, work smart!
May 2nd, 2008 at 12:53 pm
Getting a $500 car is really bad advice. Such cars and unreliable and how will Jason finance the inevitable repairs? Cars have to pass inspections and such.
I drive a beater myself, but it cost $5500, not $500 and I still have repair bills. I can imagine how much it would be to repair a $500 vehicle. Money. Pit.
May 2nd, 2008 at 1:02 pm
Not all $500 cars are lemons.
Even if he has to pay for a $1,000 repair bill, the car then only cost him $1,500 versus the price of a new one. He can pay for that by using the monthly payments he’s currently putting towards the new one.
That’s still the better buy, unless he constantly has to put forth very large repair bills.
May 2nd, 2008 at 1:03 pm
I agree that it would be a good idea to figure out how to earn more — even if requires doing something crappy for a while. Or get help from family. I have a hard time asking for help, but the couple of times I did ask my family for help, it worked out. And I felt even better when I paid them back!
May 2nd, 2008 at 1:10 pm
mamacita - I was only talking about expenses outside of tuition - rent, food, books, transportation, entertainment, clothes. There’s no way 30 hrs a week of minimum wages would pay tuition at a private college even in the 70s!
I do think it is harder now (and honest I don’t really think of myself as heroic; I have happy memories). I don’t know the whole story for those two girls, but I think they need to get jobs. I’d be curious to know what exactly they were expecting to get from a personal finance seminar.
And props to JD to talking to college students about this stuff. It is so important, and if your parents don’t teach you it is really hard to get it straight.
May 2nd, 2008 at 1:35 pm
@Ryan
I’m sorry if this sounds harsh but you’re either the smartest dumb person or the dumbest smart person.
“(Yes, I have three professional degrees - MD/JD/MBA). ”
“The funny thing about all of this is that I never ended up practicing law or medicine.”
So you went through an estimated decade of post secondary schooling and debt and aren’t using 2/3 degrees.
What were you trying to do? Run and operate in a doctor’s office where you can represent yourself in malpractice suits.
May 2nd, 2008 at 2:11 pm
All this advice about $500 cars? Who sells a car for $500? You could sell any car for parts for more than $500. The person who’s selling a running car, even if it needs repairs, for $500 bucks is a fool and needs financial advice even more than Jason does. You could donate a car that doesn’t run to a charity and get more than a $500 tax break as a result.
Come on, honestly, how many $500 cars do you think there are on the market? I just traded in a car that needed several thousand dollars worth of repairs done and got two grand for it. If someone is selling a car for $500 when they could get the same kind of deal I got, they’ve got problems. The dealership even towed my car away.
But besides that point, a used car isn’t practical for everyone either. Besides the out of pocket cost of repairs, break downs usually mean missed work, which means missed pay. So say he has 1000 worth of repairs (which, I might add, is hardly enough to replace a clutch, let alone take care of any major repairs), but he also misses a day of work, you’re acutally looking at a loss of 1200 dollars or so (thats how much it would be for me to miss a day of work). But car repairs usually take longer than a day, and too much missed work can put a persons job in jeopardy, so you don’t want to be dealing with repairs too often.
Why not instruct him not to get a car at all, and try for a carpool or for public transportation? Thats WAY cheaper than a car is, and its probably just as reliable as the cheapest used cars, if not more so.
Honestly, I think he’d be better off spending $500 on a really good bike and biking to work than he would be buying even a $1000 car. The bike won’t need repairs, wont have fuel costs, and riding it will make him healthier, so it will save him on health care.
May 2nd, 2008 at 2:17 pm
I second Jessica’s suggestion of getting a bike in lieu of a beater car. It may or may not be practical for Jason (we don’t have enough detail to determine that) but on the whole it’s an excellent suggestion for young (and not-so-young) folks to supplement (or even replace) a regular car. If you do still need a car, driving a lot less is a huge money saver - especially with rising gas costs. Getting around on bikes and public transportation can also be a great opportunity to exercises your discipline, creativity and planning. Very good skills to have in life.
And even if you’re bike does need repairs (blown tire or whatever) they’re going to cost much less than typical maintenance and repairs for a car.
May 2nd, 2008 at 2:32 pm
I am dealing with two rather different ‘earning less than you spend’ scenarios. I should mention at this point that the rent is absolutely rock-bottom, the car is paid for and has 100,000 miles, and we don’t eat out.
1) My partner has a seasonal job, and work has dried up. He has applied at every bottom-of-the-barrel, floor-mopping, burger-flipping job he can think of, but nobody’s hiring. He’s learned the hard way that he needs a BA to get by, but he can’t go back to school until the fall. Any suggestions for jobs underneath the barrel that he could look into?
2) I have a chronic, episodic illness. I was in a PhD program that offered me a monthly stipend, but I am too ill to participate right now, so I have no income. I am also too ill to work (because most jobs do require that you show up on a regular basis). Disability takes a minimum of six months, IF you get it, and I plan to be in better health by then. Besides begging support from family, is there anything I can do to fill the gap until I’ve recovered enough to get a job?
May 2nd, 2008 at 3:10 pm
I’m the Jason of the story and really appreciate the suggestions. I have been planning on selling plasma (I got a tattoo one year ago this month), and I wasn’t even aware I could get a deferment for financial hardships, or whatever it’s called. I’ll look into that.
To shorten my life story, I haven’t been able to get more than 20hrs/wk since October because of a number of extenuating circumstances. I could go into them but they’re boring and unnecessary. That is changing Monday and I appreciate the suggestions, esp pizza delivery. I did think student loans were horrible and if I’d have known I was going to accrue credit card debt I would’ve taken out more student loans, but one always hopes they won’t. I am living with 2 other roommates, going back home isn’t an option. It’s a 30 miles roundtrip to work and a 20 mile roundtrip to clinicals, so I do think I have an excuse to not bike. The public transportation in my city is almost non-existant, so that’s not an option. The only things that can change in my budget is 1) my car 2) my cell phone 3)PT job as of next week 4)selling plasma as of next week. I’m in the process of phasing out my cell phone and exclusively using Skype, I will be looking for a PT job soon and will be selling plasma soon. I could sell my car now and buy a junker, fix it up, and later buy a better one when I can “afford” it, but doing that would throw away what I have thusfar invested in my car, and I hope to be able to afford my current car in a few months. I think selling it would be a waste at this point. I absolutely agree I should not have bought it when I did, but things where different then and I thought things were going to turn out different. I’ve learned a lesson to never count your chickens until they hatched, and even then, don’t count your chickens. However, I am counting on being able to afford my car payments in the coming months, so perhaps I didn’t learn a lesson, or perhaps I learned a better one?
Here’s some advice for those in college to avoid my situation: spend lightly. We all know it’s difficult to make real money in college, though a lucky few do. It is possible, however, to spend lightly. If you still don’t want to do that then take out student loans, and when you graduate make those payments tiny so you can actually afford them. Double and triple the payments when you can, but they need to be at the bottom of your priority list. Get a job (or at least a conditional contract) early in your final semester. The fast and easy way to establish credit is to get a credit card, and you need credit to rent an apt, but cut it up after you have established credit. That was my problem, after I established credit I kept using them. And don’t buy anything big unless you can afford it at that very moment (not in a month or two), and systematically reduce your wants. The best way to reduce your want is to reduce your TV watching. I’ve thrown mine out entirely, which saves me one more bill and keeps me from wanting to see the newest movie or whatever. It can be life-changing, it has been for me, and I will never watch TV again. As one person above said, eating well is not something you should sacrifice to the god of the budget. Learn to eat well and eat cheaply. And learn to cook, it’s cheaper and better for you.
Again, thanks to all the advice and good luck to those who are in my situation, or find themselves heading that way. Honestly, it ain’t so bad, but it could be better, much better.
May 2nd, 2008 at 3:20 pm
I would say definitely sell the newish car. There will be plenty of time for those later. Perhaps even consider using public transportation for a time just to tighten the belt, since not having a car means you can cancel the auto insurance policy, too. Especially if you just have to get through June. There will be plenty of time for the new car later.
In the meantime, put the word out among family and friends for a good used car, even a junker. Better to drive a junker now and get the debt paid off faster, than to have a newer car, and have debt hanging over your head for years to come.
In the meantime, I’d suggest getting another job part-time job. Trying to get out of that much debt is going to require sacrifices somewhere…sleep, social life, Cable, magazine or newspaper subscritptions. Cut out every possible thing that is not absolutely essential to your survival, and put that money directly towards those debts. It sounds extreme, but it serves to cause you to stick to it with the goal in sight.
My husband and I still drive junker cars and only just got cell phones a couple of years ago (we’re in our 30’s), because we couldn’t justify the expense when we had lots of credit and student loan debt hanging over us. Now that our debt is finally getting paid off, we’re seeing that light at the end of the tunnel. And it’s a great feeling.
May 2nd, 2008 at 3:28 pm
I’m really surprised at the viciousness of some of the comments. Dude knows he’s in trouble and is asking for advice–not a bailout.
As several have said, this appears to be a short-term situation and will likely work itself out as long as he stays focused once he has his nursing degree in hand.
One thing I would recommend is looking into student loan deferment while he’s in school. If he’s taking classes through an accredited institution, depending on the loan, he could be able to move back into non-payment status and quite possibly not accrue interest. Also, if he can convince them of the financial hardship, he could put the student loan into a grace period where he won’t be required to make payments, but the loan will accrue interest.
Just a suggestion to help minimize the damage before he’s on solid footing again.
May 2nd, 2008 at 3:35 pm
I agree with the bike idea, but I stand by my point that buying a junk car is an absolutely horrible idea. Everything that Jessica said about that is correct.
My hubby bought a $2300 car. Worst decision ever! We’ve spent way too much on repairs. Enough to buy a better $5500 car.
I’m a big fan of cheap cars and no car payment, but you have to buy something with some quality to it. My $5500 Toyota comes with repair bills, but is generally reliable.
May 2nd, 2008 at 3:42 pm
Sara , you probably qualify for food stamps and perhaps a small welfare check depending on where you live.
Also there might be unemployment payments attached to your job if you are laid off due to health you might find that you are covered.
You have worked and paid taxes and these services are there for people in a bind.
May 2nd, 2008 at 3:53 pm
Bear in mind that the young man had a decent paying job that dried up beneath him, leaving him high and dry with the new car payment. Should he sell the car now, probably losing significant value of the car, probably the good warranty and new car reliability instead of deficit spending now for a month or two (presumably)? The car payments may seem like a millstone around his neck right now, but I think he should suck it up for a couple months, deficit spend in a controlled fashion knowing he’s going to take some lumps short term, and make paying down the resultant debt his first priority once he finds the nursing job. If he decides to deficit spend, do so with the lowest rate CC he has available, and make sure he doesn’t miss a payment or pay late.
May 2nd, 2008 at 3:55 pm
actually, if geography permits, get a cheap 3 speed bike , park the car and cancel the insurance for a couple of months. That has to save you a couple of hundred or three.
Selling the car would be a big waste.
May 2nd, 2008 at 4:54 pm
I think a lot of people on this blog don’t understand how new cars work, or they wouldn’t be suggesting he sell his new car.
You see, the minute you drive off the lot, the value of the car goes down, and continues to go down every day you own it, even if you don’t drive it. But you still owe what the car was worth when it was still on the lot. That means you can’t sell it for the amount you owe on it. If Jason were to sell his car, he would still owe money on a car that he no longer owns, probably several thousand dollars. He is upside down on his car. Selling it would not only be a horrible idea, but it would probably be impossible.
May 2nd, 2008 at 8:09 pm
I’d be interested in seeing the rest of Jason’s budget… if he’s working a part time job with a “great rate of pay” and only plans to spend $100 a month on food (way to be frugal there), how could he be using up his entire income? How much is a “great rate of pay?” $40 an hour? $50? How much is rent? Can he move to a cheaper place?
May 2nd, 2008 at 10:26 pm
AJ - The government doesn’t pay out if you’re not working. My partner lost his food stamp benefits when he dropped below 20 hrs/week. And I don’t get unemployment because I wasn’t laid off, and I had only been in the PhD program a few months before I fell ill. But thanks for the suggestions, they’re worth looking into for others in similar situations.
May 3rd, 2008 at 7:01 am
I think you should keep the borrowing to a minimum, know its _temporary_, and just let yourself off the hook. You are investing in your future income by getting educated, and if your living expenses have to be borrowed, think of that as part of your student loan.
The stress and beating yourself up won’t help. When you work full-time, you’ll be well-practiced at living frugally, and you can pay down your debt quickly.
May 4th, 2008 at 9:56 pm
we’re also hanging on until the job thing becomes possible… except we have almost a year to go before that happens.
we slashed unnecessary expenses. cable tv went, the cell phone plan was decreased (we are rarely together and use our phones like walkie talkies), diet was cheapened, internet plan decreased (need for school), etc.
if we’re hit with an expense above and beyond our plans for the month (pets get ill, etc) we’re stuck using credit for now. i hate it, but that’s how it has to work for now.
the goal for us is not to remain debt free, but to maintain our status and not collect more debt between now and the day we get jobs. i cut any expense i had to cut, to make that work for our recurring monthly expenses. the irregulars… sadly we have no other way to pay right now. i just try my best to avoid those.
May 16th, 2008 at 9:42 am
It’s okay to deficit spend (get into debt) in the short term like for education or living expenses as long as it leads to a long term strategy to increase our income and thereby pay off our debt. Basically you are using leverage (debt) to maximize your future potential.