their kids to private school and college. For most couples, the only way to cover the mortgage, car loans, and other debt is for both spouses to work, and still they are stretched too thin. Recognizing some of these early warning signs of financial trouble identified by the National Foundation for Credit Counseling (NFCC) could prevent you from suffocating under mounting debt:
- You’re behind on the basics, like the mortgage or rent and utility bills.
- You’re using credit to buy items you should be able to buy with cash, like groceries.
- (You may say you’re using the plastic to get frequent-flier miles or rewards points that the card offers. But if you’re not paying that credit card bill in full each month, you’re paying way more than that airline ticket or stereo would be worth.)
- You’re skipping payments on one debt to make payments on another.
- You’re receiving overdue notices or telephone calls from bill collectors.
- More than 25% of your take-home pay is used to pay back credit card debt.
Don’t just suffer; take action and get help. Follow the NFCC’s advice: Call creditors and let them know that you’re having problems. Explain your situation and what you’re doing to pay off your debts. Depending on the creditors’ policies and on your credit and payment histories, you may be able to negotiate the terms of your next payment or a lower interest rate. Remember, your creditors would rather keep you as a customer than lose you to bankruptcy and foreclosure.
BUDGET COMMANDMENT III:
THOU SHALT LIVE ON ONE INCOME, NOT TWO
You can learn a lot from single mothers. Single mothers have to get by on one income. They have to take care of at least one, sometimes several, dependents. It can be tough living on one income in this economy. Yet more than one-quarter of the nation’s 73.5 million children live with one parent, and about 5.6 million moms stay at home, according to the 2005 Family and Living Arrangements from the U.S. Census Bureau. If you’re a two-income family and you can manage to live on one income, the path to your financial dreams will be that much easier.
Whether you’re newlyweds or have been married for years, the best way to budget is to plan to live on less than you both earn. If both of you are working, try to pocket one paycheck. Try using one income–probably the higher one–to pay the mortgage or rent and other household expenses, as well as car loans, childcare, food, and all other bills. Direct the second income to savings. But don’t skip contributions to retirement plans. If it’s impossible to pay all of the bills and contribute to a retirement plan on one income, then dip into the second income, but make sure you are saving as much as possible of that money for retirement for both of you, as well as for emergencies (in case the sole breadwinner loses his or her job).
The decision to quit a job and live off of one income shouldn’t be made