Budgeting Tips When You Live Paycheck to Paycheck

paycheck to paycheck

It’s a reality that life’s expenses simply cannot be ignored or avoided regardless of our circumstances. Most people work hard every day to earn the money they need in order to meet those expenses. Some people literally live from “paycheck to paycheck”, scrimping by on mere dollars by the time they get paid again – only to have their entire paycheck GONE nearly as soon as it hits their bank account. Believe it or not, there is also a group of people who don’t even have bank accounts!

If your income is just enough to allow you to squeak by each month but you aren’t able to put any money into savings, your financial future looks bleak. You need to be able to put some money aside for retirement as well as emergencies that arise along the way. If you have children, you’ll also most likely want to be starting a college fund for them.

Don’t think you can do it? Try out some of the following tips to see if you can make your money stretch just a little bit further each time you get paid.

First, you need to know your total monthly costs 

When you have some free quiet time, sit down (with your significant other, if applicable) and set out to determine exactly what your total necessary monthly expenditures are. Be sure to include:

  • Living expenses (rent or mortgage) plus any HOA fees
  • Utilities (gas, electric, phone, internet, water & sewer, trash removal, recycling)
  • Cell phone bill(s)
  • Car payment(s)
  • Gas (for vehicle) OR
  • Public transportation fees (train, subway, bus)
  • Food (include groceries as well as any restaurant bills)
  • Prescription and OTC medications
  • Other

Once you are sure you haven’t forgotten any necessities that you pay for regularly, the total amount is how much you’ll need every single month. If you have money left over, you’re doing great! Stop spending it and start putting a bit of the surplus into a savings account every month. Look for savings accounts that offer the most rewards. You may also choose to start investing some money if you have a monthly surplus, even if it’s a small surplus. Make your money work for you.

Why is living “paycheck to paycheck” so risky?

Chances are good that if you’re reading this blog post, you’re not left with much (if any) surplus after paying all of your necessary monthly bills. The very definition of living “paycheck to paycheck” involves regularly running out of money before your next pay day rolls around. If you’re finding that you need to borrow money from a friend or utilize your credit card for daily living expenses when your paychecks fall short, you’re not alone. Over 60% of Americans report having lived “paycheck to paycheck” at some point in their lives.

This is a very dangerous way to live because you make yourself susceptible to significant financial damage, like skyrocketing credit card debt, foreclosure, payday loan debt (DO NOT TAKE OUT A PAYDAY LOAN), bankruptcy and worst of all: a rapidly plummeting credit score.

Tricks to make ends meet

Consider downsizing – Whether just temporarily or for the long haul, think about relocating to a living situation that is more affordable. If you own a home, consider selling and renting a small apartment while you build up a savings account. Alternatively, buy a smaller home, move to a less expensive area, shack up with family, or take in a roommate (or several). Use the extra money to pad your savings account and bulk up your retirement plan.

Shop around – Look for better deals on all of your utilities. You can shop around for the best energy prices, and regarding other utility companies – it never hurts to ask. Negotiating a lower monthly payment is very possible because most companies don’t want to lose a valuable customer.

Stop using Check Cashing services – If you’ve avoided opening a bank account because of the required minimums, take a look at your local Credit Union. They tend to have more reasonable rates and minimums. You simply must have a bank account in order to make sure that your bills are paid on time, AND if you’re cashing your checks through a Check Cashing service, you’re losing a huge portion of your money due to their exorbitant fees.

Make a budget and stick to it – It is imperative to establish the basic costs of your day to day living and to stick to that number. You may find that making your coffee at home saves you a lot more than you’d realized, and that switching to store brand toiletries results in pretty substantial savings! Clip coupons and read grocery store flyers every week. Only buy what you absolutely need if it’s not on sale or you don’t have a coupon for it.

Pay down your debt – We realize this one is potentially the most challenging to do when you’re just getting by. We’re here to tell you that it is possible to wipe out your debt. That’s right – if you’ve been paying a large chunk of money just to manage your credit card’s minimum payments – we can help you eliminate those payments altogether, giving you a much more solid financial footing to stand on.

 

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How to Tackle Debt as a Married Couple

nj debt relief

Marriage is about two people joining their lives together. Making the decision to spend the rest of your life with someone also means sharing financial decisions and taking care of debts together. Both parties may be entering the marriage with student loans, credit card debt, or personal loans. While in New Jersey you are not legally responsible for debt your spouse accrued before your marriage, you will become a financial team with your spouse. This means helping each other tackle debts both from before and after you say “I do.” Here are some tips on tackling marriage debt and subsequently reducing the financial stress in your relationship.

While ideally you should enter into a marriage with a full understanding of your spouse’s financial situation, it is never too late to sit down and have the money talk. Overcoming debt together requires open, honest communication about what you bring to the marital table financially. Don’t just talk about your debts, talk about your goals, too. What will paying off this debt allow you to do as a couple? Setting financial goals together will allow you to both motivate each other and hold each other accountable.

It’s important to keep in mind that you are in this together. After marriage, individual debt becomes “our debt.” Couples who have the most success tackling debt together tend to face their financial situation as teammates. Focus less on who brought more debt to the table and more on how each of you can contribute towards the goal of paying down the debt. Instead of only focusing on your debt individually, you will be able to stretch your money farther. Paying off debt when you’re working with two incomes will be easier than doing it alone.

Learning how to budget for two people (or more if you have children) will be very important to paying down your marriage debts. Don’t assume you and your spouse are on the same page about sticking to a specific budget. Sit down and determine how much money is coming in and out of the household on a weekly and monthly basis. You should both have a good understanding of your living expenses, debts, and financial goals. Be honest with your spouse about any financial difficulties you might be facing and see how you can fit this into your budget as a couple. After you know what your shared budget is, you will be able to come up with a realistic plan to pay off your debt.

Once you have a budget in place and a plan to pay off your debts, make sure you keep the conversation going. Check in with each other to make sure the budget you set is still in line with your financial realities and that you are making progress towards your goals. Like marriage, paying off debt is a long-term commitment that requires a lot of dedication and flexibility. Be patient with yourself and your partner as you take on the task of ridding yourselves of debt.

Make tackling debt together part of your goals as a couple. Financial difficulties are the leading cause of marital stress. If you have been struggling to pay down your debts and it is creating a strain within your marriage, it may be time to seek outside help. Veitengruber Law offers debt solution services to help you manage your debt and get back on track to financial health. Don’t hesitate to reach out to us for a free consultation.

Should I Use My Emergency Fund to Pay Off Debt?

pay off debt

Most financial advisors recommend having at least three to six months savings in an emergency fund at any given time. An emergency fund can be helpful in getting through the expensive curveballs life throws your way. Unexpected car maintenance, the sudden loss of employment, medical emergencies, and unforeseen home repairs are examples of events for which you may have to use your emergency fund. Sometimes, though, it can be tempting to use this money for expenses that aren’t necessarily true emergencies. If you have a big pile of debt, it may seem like using your emergency fund to pay down the balance is a good idea. Here are the reasons why you shouldn’t use your emergency fund to pay down debt, and a few exceptions where you might want to consider it.

The simple reason not to pay off your debts with emergency fund money is that most debt is not an emergency. This fund is specifically meant to cover unforeseen costs and expensive emergencies. Cars loans, student loans, mortgages, and personal loans all tend to have set, predetermined monthly payments. That means this debt is controlled and you know what to expect every month. As long as you can meet those monthly payments and expect to be able to continue to pay on time, there is no reason to dip into your emergency fund. Paying off your debt over the agreed upon timeline is not, after all, an emergency.

While it may seem like you have all this debt looming over your head, you have to remember that your emergency fund is specifically there to handle the unexpected. Your monthly car payment is not going to have the same impact on your financial stability as sudden and major car repairs from an accident. Where will you be if you use your emergency fund to pay off your debts only to find yourself dealing with a major financial emergency a short time later? Since you never know when a mishap like this will occur, it is best to save the emergency fund for actual emergencies.

There are, however, a few exceptions. An “emergency” will change in definition from individual to individual. Having kids or pets, owning or renting your home, owning your own business, and the stability of your employment are factors that will likely impact what you consider an emergency worthy of tapping into your emergency fund. This also goes for determining whether or not your debt is an emergency. Unmanageable, high-interest credit card debt, for instance, may count as an emergency depending on your specific circumstances. If you find yourself struggling to pay your monthly bills and are facing down the consequences of late or missed credit card payments, this could be enough of a reason to dip into your emergency funds.

Before you panic and deplete your emergency fund to pay off debt, think about why you have this unmanageable debt in the first place. The reasons behind the debt can also be a determining factor in whether or not to use your emergency fund. Was the debt unavoidable or due to some unhealthy spending habits? If your unhealthy habits are behind the debt, it may not be the best idea to dip into your savings and emergency fund. Understanding the reasons behind the debt is the first step to changing those habits and avoiding similar mistakes in the future.

Even in the event that you do determine debt to be a financial emergency, it is not a good idea to completely drain your emergency fund. You are better off leaving your emergency fund alone (or continuing to build it) while you make the minimum payments required on your debt. Debt-swapping, or replacing your high-interest debt with a lower-interest option, should be considered before dipping into savings. If you are able to pay down the debt a decent amount, you could justify using a small portion of your emergency fund to finish paying off the debt, but even this should be a last resort.

When it comes down to it, emergency means emergency. Being honest with yourself about your financial situation is the first step to proper money management. It takes a lot of hard work and discipline to build up savings or an emergency fund. Don’t let that hard work go to waste! At Veitengruber Law, we can help you come up with debt solutions to stay on top of your financial situation so you don’t have to consider dipping into your savings.

What if I Can’t Pay Back my Personal Loan?

personal loan

Personal loans, unlike student loans, mortgages, or auto loans, can be used for almost anything. If approved, you receive a lump sum that must then be paid back in monthly installments. From big purchases to home renovations to consolidating debt, a personal loan can be a useful financial tool. But sometimes, as with anything else, “life happens.” Unexpected financial difficulties like a pay cut or medical expenses can disrupt even the most carefully planned budget. When a financial set-back occurs, it can be difficult if not impossible to keep up with bills and payments. Often, it is loans and credit cards that are the first payments to be put off. What do you do if your situation has changed since being approved for a loan and you can no longer make payments on your personal loan? Today we’ll give you a few examples of steps you can take to remedy the situation.

While most people are reluctant to talk to their lender in the event of a financial set-back, this is often the best thing you can do. In fact, most lenders will respect a proactive approach to handling the situation and appreciate your dedication to paying back the loan. The sooner you make your lender aware of the problem, the more likely they are to work with you. On the other hand, simply ignoring missed payments can result in an accumulation of late fees, collection efforts, a drop in your credit score, and even default. If there is a valid reason you cannot make the payments, your lender should understand and work with you to find a mutually agreeable solution.

Once you have taken steps to make your lender aware of your situation, they may be willing to revise the terms of your loan to make monthly payments more manageable for your new financial circumstances. Lenders who are willing to negotiate will look at your expenses, other debts, and income to determine a more realistic monthly payment. So while the total principal of the loan will remain the same, payments can be made more affordable. The solution might even be as simple as changing the monthly due date of the payments to a time when it does not conflict with other bills. You may even be able to negotiate a deferment on your payment—it doesn’t hurt to ask!

If your lender does not work with you to revise the terms of your loan and is still demanding on-time payments, you will have to find different ways to make the payments. Consider areas in your budget you could cut back on, even if it is only until you’ve paid back the loan. Determine which expenses are necessities (like food, utilities, transportation to work, etc.) and which are extra. If it is possible, try selling high dollar items, like a second car. You may even consider doing side work or getting a part-time job to help offset the cost of the loan payments. Explore all of your budget-revising options to avoid missing payments.

In the event you still cannot afford to make the payments on your loan, don’t assume all hope is lost. When you’ve done all you can do to remedy your finances and you’re still struggling, it is time to reach out for professional help. At Veitengruber Law, our team of experts has years of experience dealing with difficult lenders and assisting borrowers in getting back on the right financial track. We will negotiate with lenders on your behalf to find effective solutions for real financial relief.

We understand that not every debt problem is the same and we will work diligently to come up with a customized solution for your specific situation. Bankruptcy is not the only solution to unmanageable debt, although it may be the best solution for your circumstances. Our team will perform a holistic financial analysis to help you make informed choices about your financial future.

How will my Spouse’s Debt Affect me?

When you meet someone new, finding out their credit score is typically not your go-to first date conversation starter. In the whirlwind of new romance, money matters tend to remain ignored. It is often much later in the relationship—after a couple has already become financially entwined through marriage or the sharing household bills—that financial issues come to the surface. You may be surprised to find out your spouse has accrued a substantial debt that you had no idea about. When facing this startling new information, it may be difficult to know how to move forward with your partner. Here are some tips to dealing with a spouse who has debt.

1. Hold Off On Making Judgements

In situations like this, emotions can run high. You may feel lied to or betrayed by your partner for concealing their debt. Breathe through your initial reaction. When people feel attacked they tend to shut down or become defensive. Keeping an honest, open space for communication with your spouse will allow you to move forward to fix this problem together. This also goes for making judgements about their current financial choices. If you see your spouse making consistent efforts towards paying off a debt, don’t chide them for their purchase of a new pair of shoes. Paying off debt is a process that you cannot expect your spouse to complete overnight.

Keep in mind that debt accumulates for many reasons and a past debt does not necessarily mean your partner cannot be financially responsible now. Maybe they were overzealous with their first credit card or are struggling with student loan debt. Unemployment, divorce, and medical expenses can also add up quickly. Don’t judge too harshly until you have the full picture of your spouse’s debt.

2. Get the Details

The amount of debt your spouse has makes a difference, so it is important to know the exact number they are currently working to pay off. How your partner is paying off the debt matters, too.  Is the repayment situation short term (over a year or two) or long term (5-20 years)? If it is a long term repayment plan, you can expect this debt to impact your life together for years to come. This is also the time to check your spouse’s credit report with them. This will give you the full picture of any late payments, high balances, legal judgements, or bankruptcy filings they may have.

3. Know When You’re Liable

Many people assume that once you get married, you automatically take on your spouse’s past debt. This is not true. Your credit histories will remain separate for any debts or financial troubles that occurred before your marriage. New Jersey is a common law state, meaning that even after marriage you’re only responsible for debt accrued in your name.

This changes once you open joint accounts, apply for joint credit, cosign on loans, or include your spouse on an account as an authorized user. These actions will show up on your credit report and you will be responsible for the debt. If at any point your spouse cannot make payments, even if it is on debt they personally accrued (after the date of your marriage), you will be responsible for the full payment of the debt.

4. Decide How You’ll Make Purchases Going Forward

Your spouse’s debt, and its impact on their credit score, may make it difficult for you to make big purchases together for the duration of the repayment period. Depending on how much debt they have and how low their credit score is, you may be looking at taking on the full weight of big purchases for awhile. You may be hesitant to apply for joint credit, cosign, or add them as an authorized user on your accounts. Have an honest conversation about how you will make big purchases together going forward.

At Veitengruber Law, we know the stress of large debt can create a lasting impact on marriages and families. Our experienced legal team can help you sort through the debts and create a future path that looks bright. Our comprehensive approach to resolving debt problems can help relieve the stress on you and your spouse.

 

 

Common Causes of Debt and How to Avoid Them

nj debt relief attorney

Almost every household in the USA carries at least some debt. The simple explanation for debt is that you spend more money than you make, but there may be some less obvious factors that have contributed to your accumulation of debt. Taking the time to think about how you got into debt could help you avoid similar mistakes in the future. These are 6 of the most common causes of debt and how to avoid them:

1. Loss of Income

The sudden loss of a steady income can quickly lead to debt and financial troubles. You may be laid off, fired, or experience a decline in your personal business. You may need to take time away from work or leave the workforce completely to care for a child, an aging family member, or attend to your personal health needs. After the sudden loss of income, you may become overwhelmed by everyday expenses, and debt can easily build up.

One of the best ways to defend against this kind of debt is to build an emergency fund. In times of financial health, live below your means and put any extra money into savings. An emergency fund should be able to cover at least six months of expenses, so even if your income declines unexpectedly you will have the financial support you need to get back on your feet

2Medical Expenses

As one of the leading causes of bankruptcy in America, medical costs can easily push someone into debt totaling tens of thousands of dollars or more. With expensive treatments and high premiums, even those with health insurance can struggle with medical debt. When facing medical expenses, people will turn to savings or even credit cards to pay for their care. Since you can never predict what your health will be like in the future, it is best to take precautions now to prevent medical debt. Enroll in a good health insurance program. Even if paying for health insurance will cost you more now, trying to pay out of pocket for a medical emergency in the future could be financially devastating. You can also plan to include potential medical expenses in your emergency fund.

3. Expanding Families

The cost of raising a child is estimated to be around $250,000.00 from birth all the way through to adulthood. So, even if you feel you have plenty of extra money, having a kid can quickly change that. The new financial responsibility of raising a child can also be affected by the need for childcare. Paying for childcare can be so expensive that it can be cost prohibitive, causing some cases families to live on one income so one parent can stay home to care for the child(ren).

Whether you are a single-income or multiple-income home, the expenses of raising a child can quickly add up. Start saving before you have kids and prioritize saving throughout your child’s life. Prepare yourself by investigating the best childcare options for your specific financial situation before having children. Ideally, wait to have kids until your income will support adding a little one into the mix.

4. Divorce

A lot of financial changes take place after a divorce. With each person going from two incomes to one income and the added expenses of alimony, child support and legal fees, getting divorced can be very expensive. When facing divorce, it is important for couples to look critically at the financial impact of their decisions.

Often, the more amicable the split, the less likely it is that the divorce will have disastrous financial consequences for both people. If couples can agree to work together financially through a divorce, they can lower their legal costs and normally find more mutually agreeable results. Working through an arbitrator or divorce mediator can further save money on legal fees that accumulate when working within the court system. By working together, couples can come up with a solution that is financially best for everyone involved.

5. College Costs

For many young people today, crippling college debt has become the norm. Student loans add up quickly and sometimes recent graduates are not prepared to make the loan payments they accumulated getting their degree.

As a parent, you can help your future college graduate by starting to save for their college education as soon as possible. If you are student facing the expense of college alone, there are ways to reduce your student loan debts. Make smart choices about the schools you attend. Private schools may have the name or the prestige you think you need, but remember they offer the same degree that you will be getting from a state school. You also don’t have to start college right after high school or go to college full time. Working before and during college is a great way to offset expenses.

6. Lack of Insurance

Both in the case of individuals and businesses, not having adequate insurance can send people scrambling during an emergency. Home owners insurance, car insurance, and medical insurance can all make a huge difference when disaster strikes. Insurance is an essential aspect of financial planning. Take the time to understand your insurance policy. What does it cover? Would that coverage be enough to get you through an emergency? Being uninsured or under-insured can land you in huge debt if you are faced with a sudden unfortunate event.

 

It can be easy to fall into debt. Taking the time now to analyze your financial situation and plan for the future can reduce your risk of falling into the above debt traps. No two people have the same debt problem. At Veitengruber Law, we offer individualized debt management services to help you get back to financial health and security if you have occurred debt that you can’t seem to shake. We can also help you set up a plan to avoid accruing debt in the first place. Call us today at 732-852-7295 for your free debt management consultation!