Saving when you're barely surviving
I am a husband and father of two young toddlers. My net pay is just enough to scrape by every two weeks. With health insurance premiums well over $400 per month, my net pay is only enough to cover the bills. Every time I set aside money, I end up having to use it all for some unforeseen expenditure, and then some with credit cards (whose balances continue to escalate). Where does one in my situation begin to save?
-- Underfunded Mike
Your question is one of the more difficult issues in personal finance.
How do you work toward the future when you're having trouble getting
through the week?
The key is to keep spending less than income. Easier
said than done, but that doesn't mean it doesn't need to be done.
Spiraling credit card balances aren't the answer. Credit cards just
postpone the problem and have you spending money on finance charges
that should be going toward meeting your family's needs.
Differentiate between what's necessary and what's
nice in your monthly spending. Cutting out cell phones (or alternatively
land lines), cable TV, dinners out, etc. brings down your monthly
nut. Bankrate has a budget
work sheet that you can download to put together a monthly spending
plan. Talk to your employer's personnel department to see if there
are ways of reducing the health-care costs while keeping family
coverage. Taking advantage of flexible spending accounts to pay
for medical costs with pretax dollars is one possible way of accomplishing
The other side of the equation is to increase income.
Take a second job, or a third. Don't think of it as forever, just
until you can get the credit card balances down and build a bit
of a cash cushion. If your wife doesn't work, perhaps she should.
my spouse work, too?" calculator will help with that math.
The answers aren't easy, but you've got to ramp up
income, throttle back on spending or both to get to the point where
you move past paycheck-to-paycheck living and get to the point where
your income is also building toward your family's future.
If you've worked through all this and still can't
see a way, it's time to ask for help. Your state government might
be able to help with health-care insurance for the children, for
example. A Bankrate feature, "Finding
help in hard times," has some other ideas, too.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."