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When ya got more bills than money

Bad news: bills never stop coming. Good news: you can slide on a few.

Being an adult is a lot of fun -- we're on our own, setting our own rules, moving to new cities, setting up our own households. Well, here's the pin in that balloon: you have to pay for it all while working an entry-level job.

Your mailbox is probably similar to mine. Even after you paid your bills last month, new ones keep arriving. If you know you're going to run out of money before you run out of bills, it's time to make a few changes including tightening your belt. Well, consider the alternative: asking mom and dad for a loan, or moving back in with them. So . . . for the sake of your pride and hard-won independence, read on.

"There are some bills you can slide on," says Mary Hunt, founder and publisher of Cheapskate Monthly, based in Paramount, Calif. "The electric company won't turn it off right away. But you have to cover the basics." First, pay your rent or mortgage. Yes, you can get kicked out if you're late. Rule No. 2, pay your car payment. You don't want to deal with repossession, and most likely you need the car to get to work.

When dealing with credit cards, utilities, car insurance, medical bills and loans, Hunt suggests sending a partial payment to each of your creditors -- and include a short note to explain that you are behind now, but will meet your obligation. If you have a large bill that you couldn't pay even if you sent them a whole paycheck -- such as a medical or car repair bill -- contact the company about setting up a payment plan that works with your current situation. Businesses will be more patient about waiting if they know they'll get their money eventually. The key is to communicate.

"But then don't gripe if you're charged a late fee or if it shows up on your credit report," adds Hunt. "After all, you were late." In other words, be an adult about the situation.

Student loan hell

A large financial obligation that haunts many of us is student loans. I found that getting a break on these can be enough to get you through a tough time. Thankfully, loan servicers are aware that recent graduates are strapped for cash.

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"It's real simple if you pick up the phone and call. There's no need to be nervous about it," says Fiona Adams, a communication specialist at Sallie Mae, the country's largest loan servicer, based in Reston, Va. Sallie Mae offers deferments, forebearances and alternate repayment options. But don't get too excited: it's not a totally free ride. While there are no fees for these services, interest does continue to accrue. So when you return to paying, the balance will be higher.

I can vouch for the ease of this process. By filling out a simple form, I once got a forebearance for two student loans for 12 months. Less than a year later, after I got some other bills paid off and received a pay raise, I started sending in payments again and actually finished the loans early, including that damned extra interest.

Jingle bills, jingle bills

Avoiding debt can be especially tricky at the holidays. You want to give gifts to all your new friends and fly home for the holidays. Hunt explains, "It's a volatile time of the year. Gifts, ski trips, family functions -- these are things that pull on emotions and make it easy to justify going further into debt. You really need to get creative."

One reader idea on Cheapskate Monthly's Web site suggests playing the Pantry Game. Eat the food already in your pantry and fridge. Other than produce and dairy, don't go grocery shopping; survive on what you already have. Of course, this only works, guys, if you actually have food around for eating at home. In that case, stop eating out and go grocery shopping. You will save money, and you can then use that cash to spend on Christmas. In fact, Hunt promotes shopping with cash as the best way to avoid debt year round.

"Paying cash can save your neck. Most people find they slash about 30 percent of their day-to-day spending when they use cash," she adds.

Having to hold and give away your actual dollars keeps you literally in touch with your money, possibly making you stop and consider the purchase. Using cash is not as convenient as flashing that plastic -- but as Hunt says, convenience can get very expensive.

Big bad wolf at the door

If your situation gets bad enough for bill collectors to start hassling you, keep the following in mind. According to a federal law known as the Fair Debt Collection Practices Act, bill collectors cannot:

  • Contact you at inconvenient times or places.

  • Threaten you with violence or use obscene language.

  • Discuss your credit problems with your family and friends.

"Many times the debt collector is a third party, and they may have insufficient information about the debt. They will use strong-arm tactics to get the money," explains Robert R. Blair, a bankruptcy lawyer in Selma, Ala. Bill collectors will threaten everything from garnishing your wages to sending the sheriff to your house.

"You can't go to jail for not paying debts," Blair reminds. To protect yourself from a harassing bill collector, Blair suggests asking for their name, address and who they represent. Then write them a letter (sent by certified mail) saying that all future contact with you must be through the U.S. Mail, and be sure to mention that Fair Debt Collection Practices Act. This shows the collector that you have some idea of your rights, and legally they have to stop being big bullies.

Earning your independence

So you've got a little breathing room on paying your bills. Don't relax too much. This does not give you free rein to keep spending willy-nilly. Sorry. Now is the time to cut back and/or earn more with a second job to get your personal finances under control. That's as exciting as a root canal the day before vacation. In fact, waiting for that legendary rich uncle to die seems like a better option.

I assure you financial responsibility will be more pleasant than the constant fretting about your electricity being cut off or years of problems due to a lousy credit report. And once you have your checkbook back in black, you can be smug and stop reading lectures like this.

My advice

Establish a budget. Basically figure out a plan that will have you spending less than you earn. Log on to MasterCard's Creditalk Web site for information on calculating a budget.

Eliminate clutter. Throw out files that are more than a year old, especially receipts and checks for non-deductible items, expired product warranties and documentation for paid-off loans.

Organize papers. Even if it's just a simple accordion file, having one place to file and keep your financial records and bills will make your life much easier.

Keep bills in plain sight. Find a spot on your dresser or kitchen counter for an open box to place all unpaid bills, some stamps and your checkbook. If it's in your face, you're more likely to take care of it. A bonus is you can also throw in paperwork that is worth money -- such as health insurance reimbursements and refund forms.

Stick to a schedule. Pay your bills at a scheduled time each week or two, such as every other Thursday night while watching Friends. Taking care of these bills regularly will save you on late fees, and avoid draining your bank account once a month. Balance your checkbook as soon as your bank statement arrives to make sure you are on track with your budget.

-- Posted: Nov. 3, 1998


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