Dollars and sense: Go back to basics to live on less income
2:25 AM, Apr. 23, 2011

Written by
Sara Gilbert

While there are indications of the economy starting to make a comeback, there are still many people out of work or underemployed in our area and unemployment numbers still are above 9 percent in Colorado. This means many may need direction and help with living with less income. Here are some tips that can help you survive on less income.

The first step is to build your budget. As simple as it sounds, it is imperative that you sit down and list what income is coming into the household, be it from a spouse, severance pay or unemployment.

Once you determine what income is available the next steps include:

» Subtract your priority expenses from your income. List food, shelter, transportation costs (car payment, gas, bus fare etc.), utilities and secured loans (boat, camper etc.). Pay these first.

» Now, start subtracting all non-necessities. These are expenses that you can live without for the time being, such as premium TV channels, Internet, second phone etc.

» Next, determine what expenses can be eliminated. Have a family meeting. Make sure everyone understands that expenses need to be reduced until a new job is secured. Cut TV down to basic. Go to cell phone only and eliminate the landline.
Pack school lunches. Sell the boat if you can live without it. This is not a "one size fits all" as each family has unique needs and wants.

» Determine how much you have in savings. Determine the monthly shortfall in your budget. If you have $3,000 in a savings account and your budget is short $250 per month, your savings will run out in 12 months.

» Call your secured loan companies. Tell them you lost your job and ask if they will allow you to put two months of payments at the back of the loan. Often they will charge the interest only or charge a small fee to do so. This will give your budget a couple months to find work without falling delinquent.

» Meet with a free HUD certified housing counselor to help you contact your mortgage servicer to see if you can make a smaller monthly payment, until a new job is secured. GreenPath counselors can help with this or check out www.hud.gov. Don’t pay for this service as free qualified help is available.

» Call your student loan servicers and explain that you have lost your job. They may offer to defer up to six months of payments as a hardship forbearance.

» Determine how much you can afford to pay on your credit cards. Contact your credit card companies. Tell them you lost your job and ask if they will reduce the interest or lower the monthly payment. Be careful you do not commit to an amount you cannot afford. By doing so you are simply putting on a band-aid and not stopping the bleeding. Green-Path can also help you communicate with your creditors.

» Consider dipping into retirement only as a last resort. This is your financial future and times may be even tougher when it is time to retire.

After you have reviewed your home budget, it may be in your best interest to contact a nonprofit credit counseling agency for a free session with a financial counselor. They can help you balance your budget and explore your options.

GreenPath (formerly Consumer Credit Counseling Service of Northern Colorado) helps build budgets for all people, no matter how long they have been out of work. GreenPath is also a HUD-certified housing counseling agency that can help you explore options to possibly lower your mortgage payment.

Sara Gilbert is the Colorado group manager for the local GreenPath (formerly Consumer Credit Counseling Service), 1247 Riverside Ave., Fort Collins.