The Debt Adviser By Steve Bucci • Bankrate.com

New job, lower pay, same debt

Dear Debt Adviser,
My question is concerning finances. I'm under a lot of stress because of debt and a money shortfall. When the debt was accrued the money and the finances were up to par. Now that I had to change jobs my income does not match my debt and everything is getting behind. Please help.
Patricia

Dear Patricia,
I am sorry to hear about your change in job status. You have joined the ranks of the ever-increasing pool of underemployed people. Due to corporate layoffs, the dotcom bust and company mergers the job market is flooded with educated, qualified people and there are not enough positions to go around. Adding to that stressful situation is the fact that many people, like you, have had to take lower paying jobs to try and stay afloat financially and the incomes from those jobs are not enough to support both present living expenses and past debt loads.

So what can you do about your bills now that your income has been reduced? Unfortunately, the short answer to that question is to review expenses and bring them into line with your new reality. Start by writing down all your current expenses. Next, review what your income will cover. Then comes the hard part: Determine what you will have to change to make ends meet.

Suggestions for reducing expenses include:

• Shop, cook and eat at home. (Don't forget the coupons!)
• Reduce or cancel cable television service and extra phone lines.
• If you received a refund from the IRS last year, reduce this year's remaining withholding by that amount.
• Delay clothing and shoe purchases.
• Use some creativity and come up with free entertainment options. Most cities have free museum nights, community theaters or family activities in the park. I use my local library for free videos, DVDs and books.
• Save on utilities by raising the thermostat in the summer or lowering in the winter. Savings can add up quickly even if the change is only a degree or two.
• Review your insurance coverage and make certain you have only the coverage you need. Pay attention to deductible levels. If you have some money in savings, raise them.
• Sell your second vehicle or trade in for a lower priced vehicle.
• Consider moving to a less-expensive apartment or purchasing a less-expensive home.

Communicate right away with your creditors. Before you are late with a payment, let them know your situation. Pay your mortgage and utilities first and then prioritize your other expenses. Your unsecured debt should be last on your prioritized list. If you do not have enough income left to pay your credit card bills, ask your creditors to lower your interest rate or place you on a hardship program.

Below are some Do's and Don'ts for those experiencing financial difficulties due to underemployment:

Don'ts

• Don't add to your existing debt. It is tempting to cover gaps in income and expenses with credit. Avoid that temptation and instead change your spending habits and lifestyle.
• Don't avoid your creditors. Communicating with your creditors is very important and could save you money and heartache. Be honest about your ability to pay and try to work out a payment plan.
• Don't stress about unused skills. If you are not currently using the skills from your previous employment, they will not disappear. Look for ways to apply your skills to your new job.

Do's

• Do look for opportunities to advance to a higher paid position at your current employer. You may be starting lower than you would like, but with experience and effort you may move up quicker than you think.
• Do consider consolidating your debts to a lower rate card or an equity line if that makes sense.
• Do enjoy your current position and try to learn something new. Your job may not be what you would prefer to be doing, but new experiences are an opportunity to learn new skills and possibly something new about yourself.
• Do update your resume and continue networking and job-hunting. You never know when you will meet the right person or send in your resume at just the right time.
• Do communicate with immediate family members about your current financial situation. Children and spouses will be more understanding and willing to make financial sacrifices if they know it is necessary. Tell them you will be cutting back this holiday season and that they should reciprocate.

With a little thought, effort and pulling together you might be surprised at how quickly you can realize a positive change in your financial situation. If you are overwhelmed, call a reputable credit counseling organization for budgeting help. If they try to sell you on a debt management plan or consolidation without doing a full budget with you, call someone else. Please feel free to write back and let me know how things are progressing.

The Debt Adviser, Steve Bucci, is the president of Consumer Credit Counseling Service of Southern New England. Visit CCCS for additional debt advice or click here to ask a debt question.