Eila dropped a line this week to get advice on how to tackle her debt. She and her husband are trying to turn things around, but they’re overwhelmed by medical bills. They’re hoping GRS readers can offer direction. Eila writes:
How do I prioritize my medical bills? I have about $8000 in medical debt that’s broken up into $300 here, $200 there, $1000 over there, etc. The bills are to different medical centers, doctors and hospitals — and they all want their money today. Some are already on my credit report. One isn’t even willing to work with me on payments. I haven’t even called back because I don’t know where to start.
I’m really trying to make the debt snowball work and stop living paycheck-to-paycheck while building savings ($20/paycheck), but I have questions:
- How do I make these payments on 15 medical bills? Can I only send $10/month to each? What if they won’t accept anything less than $50? (Or in one case $120?)
- If I were to make $10/month payment, can they still put a negative on my credit report? If it’s already on my credit report, will making payments help?
How do I prioritize? Help!
I wanted a little more information about her financial situation, so I asked Eila to share her budget with us. She and her husband live in Colorado. They earn between $4200 and $4400 per month after taxes. Their expenses total $4252 per month — and that doesn’t include the medical bills. Here’s a rundown of their current spending:
- Mortgage: $1170
- Food: $600 (for a family of four)
- Car: $485
- Credit cards: $455 (minimum + $50 debt snowball)
- Utilities: $386
- Medication: $360
- Gas: $280
- Loan: $275
- Insurance: $146
- Miscellaneous: $75 (school, entertainment, etc.)
- Savings: $20
On top of this, the family has fifteen individual medical debts totaling just under $8000. They’re able to throw $50-$150 per month at these debts.
So how do you prioritize medical bills in a situation like this? I don’t know. I have no experience with this sort of thing. When I was tackling my debt, I had a handful of very large obligations. Eila has many small debts. I’m not sure my approach is right for her.
My inclination would be to pay the smallest bills first, to eliminate as many as possible as quickly as possible. Sure, that means the largest bills are being neglected, but I’d rather have just one or two grumpy creditors than a whole bunch. But I’m not sure this is the right approach.
Have you struggled with medical bills in the past? How did you prioritize them? What would you do in this situation? How is handling more than a dozen small bills different than tackling a single large debt? Where should Eila and her family start now that they’re ready to put their financial house in order?
Update: One commenter reminded me that Gerrold Mundis has an excellent book that addresses this subject. Eila may want to pick up a copy of How to Get Out of Debt, Stay Out of Debt, and Live Prosperously.
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I know the question is re: prioritization, but first they need to lower their expenses. Their grocery, gas and utility bills seem awfully high. I’d find a trustworthy, frugal and honest friend to give honest feedback on their spending. As for priorities, secured debt should be paid for first (car and home). Then unsecured debt. I’ve heard that medical bills should be last because they typically are seen by creditors as more forgivable when your report is being reviewed later. That doesn’t mean they shouldn’t be paid, but that they are the lowerst priority. Once you are paying on them, pay the lowest balance first and get it paid off, then move on to the next highest.
But really, they need to get their spending under control. Be drastic. Do things you’d never dreamed of doing before (rice and beans; ride the bus, sell the car, sell the house).
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Most of her spending are true obligations that she can’t adjust in order to put more money toward these debts.
It is a hard decision, but she needs to sell her car and buy a used one for cash, or get a night job. Either one would free about 500 per month.
Faced with these choices, I’d sell my car rather than take a second job.
Good luck.
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$485 a month for a car is a lot. I would look into changing that (getting a reliable used car, carpooling).
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Well, when I saw the list, the red flags to me were $485 car, $455 credit card and $275 loan which totals $1,215. Had they lived within their means like I do, they wouldn’t have any car payments, credit card payments or loan payments, and wouldn’t be having this problem. I suggest they read the book “Your Money Or Your Life.” There are too many people willing to drive older cars without payments, and who are able to avoid accruing a balance on their charge cards with monthly incomes much less than theirs.
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I have to echo the sound advice of post #1 as this is the most-tried-and-trusted practice:
When trying to pay-off debt in a snow-ball sense, pay off from lowest balance to highest in order to gain that momentum for debt repayment. Now in regards to the actual debt repayment problem, there are only two possible scenarios: increase your income and/ or lower your expenses. This will likely free up some extra money to be placed on those unfortunate medical bills.
JD, you’ve taught us well
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Making speculation on the $360/mo for medications. That leads me to believe the medical bills are not one-offs and there are chronic conditions being treated. If that’s true then expense restructuring seems absolute paramount in avoiding future medical bills from piling up.
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In my experience, medical providers are fairly easy to work with regarding time payments and generally don’t even charge interest. This family needs to protect their credit rating by negotiating their medical bills. It can be done, and as previous posters have noticed, they have some room in their current spending to cut. And I’ll bet the $485 for the “car” is two cars (still high), maybe three, depending on whether the insurance line item is for auto insurance or not.
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I agree with Jamie (#1) and Brian (#2): it looks like reducing expenses should be a much higher priority than the order in which the medical bills are paid. Right now, their expenses eat up close to 100% of their monthly income. A family of 4 with more than $50,000 take-home can probably sock a lot more away than $20 per month, and pay more on its credit card debt and medical bills. I’m not saying it’ll be easy, but it can probably be done.
And good on Eila for making the decision to get the family finances in order. That’s a tough thing to face.
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Basically, all creditors will give you a hard time about paying them first. It’s what they get paid to do! You have to set your budget, lower expenses as much as possible, and realize that you can only do your best. You are worth respect and once you have confidence in yourself, you won’t be afraid to call the creditors back, explain the situation and let them know what you can do to pay them back.
If something is already on your credit report, then they pretty much have done all they can do to bring you down, so sending them a little money at a time, what you can afford, is what you should do. If they send you to a collections agency, even better! A collections agency will be much more likely to accept smaller payments at a time if you keep your promise and send what you said you would. In my experience, the original creditors seem to send things to collections a lot faster than they should and then only recoup a small percentage of what they are owed just so they don’t have to deal with it. (I had a radiologist send my account to collections after 30 days!)
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– Sell the *expensive* car, buy a clunker (if you have to have a car loan, it’s better that it’s $50 a month, and not the outrageous $485/mo. YIKES.) savings: at least $400
– Buy less processed foods if possible, go generic where possible. savings: around $100-$200
– Utilities seem a bit high. Set the AC between 78-80 in the summer (or keep it off and use fans) and the heater 68-72 in the winter (or keep it off and use a small electric heater in the room you’re in the most). Cancel cable tv. Downgrade phone to cheapest plan possible, buy phone cards if you use your land line only, or ditch land line and go cell only, cheapest plan. savings: at least $50
Throw all money saved from the above at the medical bills, equal parts to all bills (ie, if you save $500 each month from the cost-cutting ideas, and have 15 bills, send $33.33 to each bill, each month. As smaller ones get paid off, larger equal amounts go to remaining bills)
That’s what I’d do, at least.
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I pretty much agree with most of the posted answers so far. Most importantly, take care of your food, shelter, utilities and transportation as frugally as possible (beans and rice, sell the car and ride the bus, wear lots of sweaters instead of turning up the heat). After that, I would pay on the medical bills last. They don’t charge interest! If they go on your credit report, then so be it for now. Eventually you’ll dig your way out of the hole. We’ve been there.
And I have to respond to Sandy E (#3): you are not helping by being condescending and telling them what they should have done up to this point. Obviously, by reaching out for help, they’ve realized their mistakes.
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Would it be possible to take out a loan to consolidate the bills? Also, have you contacted all of the different places you owe money to and explained the situation? If it were me, I would make sure to keep all of the different billing depts informed.
Lastly, have you tried cleaning out the closets and having a garage sale? That might help take care of some of the bills.
Also, please note what other commenters have mentioned – this budget is not sustainable, you need to cut expenses and start repaying credit card debt, or else future roadbumps will be problems like this.
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Tough situation – your big debt load is making things quite difficult (as you have probably figured out).
I don’t have an answer about the medical bill priorities but I would say that in my opinion you shouldn’t be paying any extra amounts on any of your debts if there are other bill minimums not being paid.
You said you are doing an extra $50/month on the credit cards – I think this money should be going towards medical bills since you are not meeting the minimums there.
One other thing to consider is to try to earn some extra money somehow – part time job, odd jobs in the neighbourhood whatever. Don’t get taken in my any online scams however. This might be difficult but it would only be temporary – once you get things under control then you should be able to scale back or stop earning extra money.
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I’m assuming a consolidation loan is out of the question for whatever reason, and your attempts to get the various creditors to work with you have failed. As such, your credit score really isn’t that important right now. What do you need it for (unless your mortgage is about to come up for renewal or it will hurt your loan)?
I’d probably get rid of the little medical bills first. Your credit report is already well on its way to being shot, you can’t make all the minimums, and you don’t have a lot of money in your budget to throw at the problem. My guess is that with that much in medication, and two little people, it is difficult to earn more money. The car seems high, but you’re probably stuck with it – though you should check. Food at $600 might be reasonable depending on where you live.
I’d stop trying to snowball the credit card debt. That $50/month would really help to get rid of those $300 and $500 payments. And if the monthly minimum for the card is $400, it’s going to be a while before its paid off and you can focus on other bills.
For those bills that have minimums which are too high for you to cover, when you get to them use ING to save the money over a couple of months, and then make lump payments.
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A couple of years ago I had the same problem. I found that while they say that they won’t except anything less than $xx a month, they usually will take what you send (all of mine did). I sent $10 a month to every bill and any “left over” money to the smallest bill. I then used the snowball method to eleminate the rest of the bills.
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As someone has already mentioned, I’m pretty sure there are laws about this, at least in most states. In my experience, creditor of a medical nature are required to work with you, at least on making reasonable payments. In fact, from what I’ve heard (no experience here), if you are making any kind of regular payment to them, they’re supposed to leave you alone (as far as credit reports, harassing calls, etc. I’d still pay off anything secured first (the car, etc.)
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@ #10 — I don’t want to be an enabler. Sometimes tough love works the best.
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And you crazy Americans still are protesting about health care reforms!!! So what happens now if you get sick and you can’t afford it?
The Australian system with an English NHS style ‘free’ minimum cover (at a cost of 1.5% tax on salary) for everybody, but still with a very active Medical Insurance industry. If you earn over a certain amount and do not take out insurance, the government taxes you roughly the equivalent cost of health insurance – stopping the ‘free’ service from getting too overcrowded.
Most people from the rest of the world cannot understand the heartless approach to your health care system, but then cannot comprehend why people are protesting so much about changing it.
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Other commenters have pointed out the high monthly expenses, so I won’t go there.
My apologies if my assumptions are wrong, but I haven’t been in this type of situation. Anyway, I would caution against getting a loan to consolidate the medical bills because right now (1) there are no interest charges and (2) they are unsecured. Most people consolidate by taking out a HELOC or tossing them onto their mortgage, which makes them secured and thus the bank can take away your home if you default.
This is purely psychological, but I would try to pay off the smallest amount first. It gives you a sense of accomplishment to be able to knock a creditor off your list, even if they are the smallest one.
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As far as prioritizing, I agree that I’d pay in order of my relationship to whoever the bill is from (primary care physician first, some specialist I’ll never meet again last).
As to the specific questions…
1) I would either get in writing a payment plan from each of the debt owners and pay them like a 0% interest loan in your debt payment plan. If they won’t accept a payment low enough, don’t pay them. You don’t have the money. They may take you to court, but there’s nothing you can do about it right now. Remember, though, that these people work on commission. Send a letter straight to the company asking for a lower payment plan. They may accept.
2) As long as the debt is in collection, it’ll be on your credit report. I’m fairly confident it’ll even be on there for a number of years after you’ve paid it in full (with a note stating such). However, the good news is that most lenders do not give much weight to a medical bill in collection.
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Also, if the bills are because of something beyond her control, like her insurance agency failing to pay out on a valid claim, she should contact the credit bureaus. She can’t get the charges removed (unless they were made in error), but she can append a short (100 word) statement explaining the charge, which might help influence future creditors.
One last thought: I hope Eila has health insurance! If she does, she could look for a legal aid agency; their folks might be able to help her figure out if her insurance company ought to be paying for these bills. (If she doesn’t have insurance, it’s almost certainly worth looking into with over $300/mo of medications and regular doctor visits, even if she doesn’t face an emergency! Either way, looking into separate prescription drug plans might also provide a little bit of budgetary relief.)
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I’d re-evaluate the $600/month on food and apply the difference to the medical bills.
Ours is a family of 4 and we typically spend less than $300/month on food, and never more than $500. Our kids are small though, so I don’t know what really happens to that budget when teenagers enter into the equation.
When finances have been tight, we’ve tightened our meal budget temporarily to great success. Eating a lot of rice and beans, pasta, soups and tacos helps.
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Have you looked into debt consolidation? This seems like the type of situation that calls out for it.
I have to say that, having just dealt with a minor health scare with my son (he’s fine now) and sitting here waiting for the ER and doctor bills to start arriving, it’s frightening how quickly even a relatively inconsequential health problem can deplete an emergency fund.
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Do they have room in the house to take in a roommate? If the two kids have their own rooms now, maybe they could bunk up and share a room to free one up as a rental. That would generate income. Are the kids old enough to babysit or deliver newspapers or anything so they can contribute to the household expenses?
I think all the earlier posts about reducing expenses (especially the car payments) are great, but it’s also useful to think of ways to increase income.
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Good grief, Sandy (#16). Telling someone what they should have done in the past isn’t “tough love,” it’s rude and condescending. It’s as bad as telling a pregnant girl that she shouldn’t have gotten pregnant. It does NOTHING to help them NOW.
For the actual question… creditors would almost universally rather be paid than not be paid. They will take any money you give them, and will give you notice and notice after final notice. Talk to as many of them directly as you can, and they will be willing to be patient with you, as long as you show you are making a continual effort.
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There is some great advise here…
I think that I would reduce my c/c payment down to say, $150? then up the amount you can pay to each medical creditor.
Go snowball!
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Based on your month credit card and car expenses (maintenance + gas + payment + insurance?) it looks to me like you have consumer debt that’s at least 80% of your combined annual income, maybe 100% or more. Given that, bankruptcy is probably a good choice for you. My advice would be to talk to a financial counselor about this before doing anything else. If you did try to prioritize you bills to pay them off it would take over 7 years. Then, you need to factor in the new medical bills and other expenses that you won’t be able to pay during those 7 years. How long will those take to pay off? Compare this to the around 10 years that it takes to get a clean record after bankruptcy.
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Thanks for the great comments so far, everyone. I’ve updated the post to indicate that Eila lives in Colorado.
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Ma’am, might I suggest that you find some kind of advocate or professional advice that can help you. Googling around, I found this article that talks a bit about the laws that govern health car collections: http://ezinearticles.com/?Medical-Billing-Rules&id=1086210. I also saw some advocacy groups, but can’t comment on their legitimacy. but here’s a PDF of the fair debt collection act mentioned in the article: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf
It sounds from the very brief searching that no matter what they say they have to accept your best effort payment. Perhaps you can find someone specific to your area who knows more.
JD, shame on you for being lazy. I took three seconds to find an article that at least looks like it has some useful advice a few more to find a fed govt. link with information.
You put yourself in a position of helping others with this blog, so it’s only right that when people ask you important questions that you don’t know you at least TRY to find some kind of reasonable answer.
You could use your clout as a well-known blogger to perhaps contact someone who knows the laws surrounding medical billing. You could ask a lawyer who specializes in this area for a few generalized quotes on how to handle this situation in exchange for a plug. You could do SOMETHING other than “ask the readers” which obviously didn’t generate much useful information.
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@Geoff (#19) The main issue we “crazy Americans” have with the proposed health care reforms is that we don’t want a “panel” of people that could care less deciding if we can have a medical procedure performed or not based on our age, general health, social standing, likelihood of lawsuit, or a thousand other factors. At least with the current system we have the freedom to CHOOSE to have a procedure performed.
Secondly, most of us realize that ANYTIME the government gets involved the costs GO UP and we think there is a better solution out there.
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Some are saying get their expenses under control implying they are “out of control” and there was another response to “live within their means like they do”. I find that insulting, noone knows what their medical conditions are. Medical conditions can impact other costs BESIDES direct medical costs. Being sick or having a chronic condition brings a host of difficulties into your life. Even if all it does is focus your attention away from finances for a while that would still have a big indirect cost. I would not call their spending “out of control”. Maybe they can find places to cut more but that doesn’t mean they have been reckless.
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Answer, Part II: This family can’t hope to repay their debts in four years with their current income and expense. They must make some changes to one or the other or both. The best solution, if it’s possible, is for one parent to get an additional job. Temporarily boosting income will pay this debt faster than any savings they could find in their budget. I also like the idea of increasing income by renting a room in their house as mentioned by someone above.
If they must cut spending, they need to find at least $500/mo more to pay their bills within one year. They should look at how to cut their food bill. The utilites seem really high compared to ours and I wondered if it includes cable, which could be cut. Could they cut cell phones or internet access? Reduce use of gas, electric and water? Are they in a position to reduce gasoline expense by making changes to carpooling, walking, biking? Could they sell their car(s) and buy a cheaper vehicle with the proceeds? Whether they can do any of these things will depend on their specific circumstances, but my point is that everything should be considered for reductions.
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Sandi E – This comment was totally uncalled for: “Had they lived within their means like I do, they wouldn’t have any car payments, credit card payments or loan payments, and wouldn’t be having this problem.”
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First of all Eila, I want to wish you and your family best of health. I know it must be hard. I had an outsized medical bill once due to an injury, and that really put a dent in my medical bills budget.
Second of all, PLEASE get rid of your $500/month car! If you’re making $4,400 after tax, that means you’re only making around $70,000 a year to feed a family of four. Based on my 1/10th rule, you should financially be more inclined to drive a $7,000 car. A $500/month car sounds like a $30,000+ car. Please correct me if I’m wrong.
Your car is your biggest waste of money, and is your #1 FINANCIAL KILLER. I don’t think 8 year old economy cars cos $275/month for gas either. Other than that I see nothing else you can really cut out of your budget. Maybe you should check out my spin on The 10 Cheapest Cars To Own By Edmunds and trade down? However, even here, your income should be above $135,000 to adhere to the 1/10th rule.
I’m really glad this example was highlighted, given the government just torpedoed 691,000 individuals to trade in their reasonably fine $4,000 clunker for a $25,000 car (average american car price).
Your solution is simple Eila. Once you right-size your car, just pay off in full using the debt-snowball. Saving $20/month puts your family in peril. View your car as the DEVIL that’s risking your family’s health and survival.
If it gives you any encouragement, the average income of three of my closest friends is around $300,000-$400,000, and the average cost of their car is around $18,000…. the one who makes the most ($400,000+) drives a $7,000, 9 year old SUV!
Happy Friday!
RB
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Hospitals and doctors do not want to send you to collections. They would rather you pay them back slowly than deal with getting pennies on the dollar for what they are owed. All you need to do is call up and say “Hey, I /want/ to pay my bill but I need to do it over time. Can we set up a payment plan?”
Most healthcare providers will let you pay your bills very slowly. Healthcare payment plans are usually interest free and let you pay your bills over a long period of time. In most situations as long as you are making some sort of payment you are golden.
Yes, other expenses in your budget could be trimmed significantly, but this is a big step especially in that it buys you time to sort things out.
Finally, never ever ever EVER pay medical debt with a credit card or loan. It’s MUCH easier to deal with a healthcare provider as a debtor than it is with a credit card co or a bank.
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@Chris #30 Um, we already have “a “panel” of people that could care less deciding if we can have a medical procedure performed or not based on our age, general health, social standing, likelihood of lawsuit, or a thousand other factors.” Its called HMO.
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Hardly anyone has answered the original question. I also don’t know a good answer. Would your insurer have a good answer? Your doctor’s receptionist? You might have contact with someone in-the-know about these kinds of issues. Or they might at least know someone they could refer you to.
I would definitely agree NOT to consolidate. This debt is unsecured (they can’t confiscate anything) and there is no interest.
I like the idea of paying them all a small amount per month (sounds like you could only promise $50/15 bills = $3.33 per bill month) and throwing any extra at your lowest bill. Definitely call them all up and keep them updated on your situation. Say what you will be paying each month, and when a new bill becomes the lowest, give them an update.
Even if some of them are being unreasonable, that doesn’t mean you can’t make a good effort. And I’ve heard many times that a) communication and b) actually making an effort can make a very big difference in how things get reported to the credit agencies.
If you haven’t already, you could also check your bills and make sure there aren’t any mistakes. My mom audits hospital bills for a living and it is sadly common to find errors. She once found a charge for three artificial knees; surely the person had no more than two knees that needed replacing! I found a related website here:
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@Chris (#30):
Yes, in the current American health care system, one can “choose” to have a procedure performed — if one’s insurance company will authorize the procedure and/or if one has enough money to pay for it. Those (rather poor) choices will not necessarily or even likely disappear with the introduction of nationalized health care.
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Ivy (#30) wrote: JD, shame on you for being lazy. I took three seconds to find an article that at least looks like it has some useful advice a few more to find a fed govt. link with information. You put yourself in a position of helping others with this blog, so it’s only right that when people ask you important questions that you don’t know you at least TRY to find some kind of reasonable answer.
Ivy, this is a fair complaint on this post. I didn’t make an effort to research an answer for Eila. Right or wrong, this was intentional.
I knew that I wanted this to be an “ask the readers”, one that generated reader suggestions based on reader experiences. It’s true that I could have Googled for answers, but so too could Eila. I was more interested in real-world situations.
I do like to think, however, that in most cases I provide a lot of legwork on my posts. My “U.S. budget” post (and the upcoming tax post) took 12+ hours of work, for example. I’m not always guilty of being lazy. Usually I spend too much time, in fact!
But on this post, I chose not to do any research.
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I didn’t read any of the comments – So forgive me if I’m repeating anything – But the monthly expenses for food seem very high! Do they eat out a lot? My household of two adults probably only spends $100 per month for food. We brown-bag our lunch. We don’t eat out a lot because we actually prefer home-cooked meals to resturants and fast food. I would say to look into finding a grocery store like ALDI or another discount grocery store. I also find a lot of great buys for groceries at Target stacking coupons and promotions. I think with very little effort, they should be able to slash their food expenses dramatically. That would free up more money to throw at those other bills.
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Urgh. Let’s not turn this into a debate about health care reform. It’s an interesting topic to be sure, but not one that’s going to help Eila. She has to work with the system the US has now, not one that may or may not come into being.
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What’s the payoff timeframe for the car(s)? Is the payoff amount more than what the car is worth on the used market so she’d have to bring money to the table when selling?
If you’re looking at another 3+ years of car payments and can come out $1500 or $2000 ahead on selling it, then I’d say sell it and buy something used and boring but reliable enough for day to day use.
If you’ve got about a year or less on the loan to go, I’d probably just go ahead and keep making payments on it, knowing that you’d then have a paid off vehicle that you’d probably get at least another 50,000-80,000 reasonably trouble free miles from.
If you’re $5K underwater on the car, I’m not really sure what you can do to make it better.
In terms of groceries, I know that chronic health issues can often make certain dietary patterns necessary, and you can’t necessarily go down to a beans and rice diet. But you can still probably cut down expenses there- any national to regional supermarket chain these days puts their weekly sales flyers on line. Look at what they’re lowering on prices on for the week and use that as a basis to meet your family’s food needs. Also, do some research on what different stores charge for your usual pantry staples. Sometimes the places that have a reputation of being expensive actually come in significantly cheaper on certain items than the discount grocers.
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@Ivy
After reading through all of the answers here, I feel that my inclination was correct. Any answer I would have provided in the actual post would have been of marginal value. I just don’t have experience with this, and my “book learning” on the subject is limited.
GRS readers, however, have a broad range of experience, and they’ve provided some great suggestions. (As evidenced by the many “greatcomment” highlights I had to create!)
I know that intentional laziness may still seem lame to you, but trust me that sometimes I do this intentionally.
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I suggest her or her husband get second jobs. Unfortunately, I don’t see much else she can do. As far as who to pay first… probably the ones who are demanding money the most (the ones that already are in collections).
Sorry I couldn’t be more help…
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I agree that you should first contact your medical creditors and explain your situation. They would prefer to deal with you. Once they give it to creditors, they get a very small portion of what can be collected, so that’s not the most attractive option to them (or you!). Try to work out a plan involving as many of the creditors involved. You’re in a tough situation and have my sympathy. Good luck!
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Spend less or earn more, why not do both? Either way, this is going to require a lifestyle change for the entire family. Turn off the TV. You’ll avoid advertising and have time to… get a part time job. You can sell Avon, babysit, start an alterations business, mow lawns, or get a paper route. Use your imagination. Get the whole family involved in your new frugal lifestyle. Kids really respond well to this and it will be a priceless gift to them to learn these skills at a young age. Go to the library or online and read every book and article you can find on frugal living. Make it your new hobby to save money on EVERYTHING. I believe your food budget can be reduced. Cook from scratch. See if your area has a gleaning club. Buy bread from a bakery outlet. Plan meals to avoid expensive quick dinners or fast food. Shop with a list and stick to the list. Don’t bring your children to the grocery store to avoid impulse buys. Drink more water (less soda). Check for programs like Walmart to see if you can get any of your prescriptions for $4 a month if that is less than your copay with insurance. We save $36 a month with that program, that’s $432 a year! Also, ask your physicians if they can provide you with samples of your medications. Make a big chart to put on the wall to track your progress. Then the whole family can see where their efforts are going. The bottom line is to save on everything you can. Ask yourself, “Do I really need this? If yes, how can I get it free, borrow it, buy used, or save money on purchasing it?” A few dollars here and there adds up to big bucks to put toward your debts. Once your debts are paid, keep up the frugal lifestyle and build your savings account so that you will have a cushion for your future. You will be amazed at what you can accomplish! Be patient and enjoy the process.
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I havent read the replies posted earlier before me.
But, this is what I had done when I got an emergency room bill for $2500 in a different state where I was vacationing in Seattle. I was a graduate student then, with crappy insurance. When I got a bill this high, what I did was to contact the administrator of the hospital. That did not work. So I was told to contact a social service worker who served at the hospital. She was awesome. She asked me to draft a letter addressin to the hospital and explaining my real financial scenario. She asked me to include my family situation, my salary and my insurane details and explain why I cannot pay the bill or whether a monthly interest free payment plan could be made available.
They received the letter and waived off the entire balance! So try doing that, it sometimes may work!
Secondly, the mortgage + utilities alone total to 37% of their total income. That is a lot, in my opinion.
Focus should be on reducing electricity, gas etc.
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Eila: I strongly recommend you take the Dave Ramsey Financial Peace University class. There is a section for this VERY situation, with form letters to send to your creditors and everything.
If you don’t want to spend the $100 to take the class (which I totally understand), the run down is this:
List all your past due debts. For the sake of example, lets say you past due debts are as follows:
#1 – $200
#2 – $100
#3 – $2700
#4 – $1800
#5 – $1000
#6 – $2200
These add up to $8000. Let’s say you and an extra $70 this month to pay (if you’ve taken the suggestions above, you should have much more). Pay each creditor their portion of the $70 based on how much you owe. So, creditor #4 above is owed $1800, which is about 22% of the total past due debt. Therefore, they get 22% of your $70, or $15.40.
Will they be happy with this? No. All creditors want all their money now. But, it is fair. Call them and explain that this is what you will be sending. It is all you have, and you are trying to be as fair as possible. They will try to get more out of you, but ignore them. It’s just their job. No one will take you to court if you are paying. But, if you choose to pay some and not others, the one’s you don’t pay will eventually take you to court.
Make a spreadsheet of your past due debts each month, and how much you have to give. Mail this spreadsheet to each of them with a check for their portion.
It goes without saying that you should do everything you can to increase your income and decrease you outgo so you can get back on track and on with your life. But, while you are fighting off the wolves, this tactic should keep you out of court, and give you some shred of peace of mind that you are doing the best with what you have.
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Please, those of you who recommended debt consolidation, please don’t recommend something unless you really now what it entails. Debt consolidation usually involves excessive fees and many DC companies are crooked. It’s an industry rife with ripoffs, so please don’t go this route.
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