Ask Bill your personal finance question

Debt, Income & Expenses Determine Your Financial Future

Cutting expenses, reducing debt, and boosting income are surefire ways to financial independence.

I had to go back to work after a divorce and death of our son. (I was a paraprofessional at an elementary school). I had enough resources from the divorce settlement to buy a mobile home on 3 acres, which cost me 59,000.00. This depleted my financial security, but did put a roof over my head. I was out of work for about 2 years, and then finally found a job as a school secretary, which only pays 19,000.00 a year. During this time, I relied on a credit card to pay my bills, and buy food. With a credit card to pay each month, and not a lot of income each month, I decided to go to a local bank and get a mortgage on my home to pay off the credit card balance. The loan after interest was 25,000.00. This was fine, but I still had to maintain the home, buy gas, etc. The loan payment was almost 500.00 a month which I have never missed a payment. This included the annual insurance premium. I did find another insurance that was cheaper, and now the loan payment is under 400.00 a month. I now still find myself using the credit card for gas, cloths, food, making a bill payment, etc. I now again owe the credit card roughly 18,000.00, and I have not missed a payment to them. However, here I am, with yet another credit card debt and paying off a mortgage loan that I got to pay off the first credit card balance. How do I get myself out of this mess? Would the bank give me another loan adding to the loan I now have with them to pay off another credit card balance? I do make more now than I did when I first started working, which I feel I can handle if I consolidate the two monthly bills and it will end the high interest rate the credit card has. The interest I am paying for the bank loan is 9%, which is a lot, but it is a small local bank. The interest I pay on the credit card is 14%. I live alone and this is my only income. My take home pay each month is 1200.00. Like I said, I am divorced, 58 years old, and did not further my education, so my question is this: Is there light at the end of this tunnel?

Read full question
Bill's Answer
(7 Votes)


Absolutely, yes, there is light at the end of the tunnel for you. I believe this because you include the hints to the answers you seek in your message. First, your challenge is to take charge of your situation and create a plan of action. I think you need a plan for spending, a plan for increasing your income, and a plan to deal with your debt.

I will start with the tough part of my answer first, the spending. I think you realize you spend too much based on your present income. Stop using your credit cards. Pay cash for everything to get an idea of where you are spending your money. Analyze every purchase. Obviously, I do not know your spending habits, but here are a few areas where people can cut costs:

  • If you have cable or satellite TV service, do you really watch the premium channels often enough to justify the cost? If you watch only a few shows, see if they are available online at and tell the cable company "goodbye."
  • You mentioned cutting insurance costs. Another place to save is on your vehicle insurance. Talk with your agent about raising the deductible or finding other discounts if you have a clean driving record.
  • If you own multiple vehicles, get rid of all but one.
  • Eating in restaurants is expensive. If you are in the habit of going out, think about preparing food at home and avoiding prepackaged meals, such as frozen dinners.
  • Drop your land-line and use only your cell phone or make calls over the Internet using a service such as Skype.
  • Are you buying items for yourself because you need them or because you feel that you deserve them?
  • Join a local group that focuses on personal finance. I have a family member who joined one at her church recently. She said being with others who wrestle with personal finance issues is helpful because, 1) she gains knowledge about saving and spending, and 2) she socializes with others sharing that interest.
  • Pay yourself first. Open an interest-bearing savings account and get in the habit of putting something, even a small amount at first, in that account before you spend your paycheck on anything else. If your employer offers this option, open a 401(k) account and have a small percentage of your pay placed in this account. Because 401(k)s are tax-deferred, if you have the correct percentage withheld, you will see zero difference in your take-home pay. Work with your employer's HR person to find the correct amount for you -- it will probably be around four percent.

Now let us look at the earnings side of the equation. Everyone wants to earn more. You have a job in the education field, so you understand education's importance to our society and the individual. You mentioned you are 58 -- so what? It is never too late to learn additional skills and make yourself more marketable. Community colleges offer an excellent value for students. Visit your local community college, pick up a course catalog, and make an appointment to talk to a counselor about your educational options and the needs of the employers in your area.

Finally, let us look at the debt. Given your annual income, carrying $18,000 in credit card debt is a tremendous burden. You may not find a lender willing to refinance the mortgage on your mobile home. Even if you do, that may not be a good idea if you 1) don't change your spending habits, or 2) increase your income.

You may want to consider debt negotiation, which is the process of negotiating with your creditors to either establish a new payment schedule at a reduced interest rate, or a lump sum payment that is significantly lower than the total balance.

Going this route will have a negative impact on your credit history. However, at this point, I think getting your spending under control, developing a plan for boosting your income, and removing your debt load are more important priorities than your FICO score. Start here to learn more about Debt Negotiation and Settlement Advice and Free Debt Help Services.

I wish you the best of luck as you develop and implement your plan. I know some of my advice might be in the category of "tough love," but I believe you have the insight to move yourself out of your situation. I hope this information helps you Find. Learn. Save.

Get Debt Help!
(7 Votes)

People also like to Read Team

Get all the information you need about voluntary repossession, be it a vehicle or a home that you considering for voluntary r... Read more >>


Get more information as to how wage garnishments work. If you are facing a creditor judgment, can help you save.... Read more >>

Mark Cappel

You may or may not be responsible for your deceased spouse's debts depending on which state you reside in. In community prope... Read more >>

Mark Cappel

When a person dies, his or her debts do not disappear automatically. However, the family is not responsible for the debts. Le... Read more >>

Mark Cappel

How to handle collection calls on 12-year-old debt. Your state statute of limitations and federal law set the rules collectio... Read more >>


1500 characters remaining
  • SW
    Jun, 2009
    That is a wonderful answer that must really benefit that poor woman (poor literally and figuratively). Always start with a budget and then make the decisions on what to do with financial products after your fully comprehend what your cashflows are.
    0 Votes