Dear Lifehacker, My family is seriously stretched thin for cash. Our credit cards are nearly maxed out and we wiped out our savings when my husband was laid off and then we had expensive medical bills. What can we do to get money fast and back on our feet again? Thanks, Nearly Broke
First of all, we're sorry to hear about your predicament. This is an unfortunate situation that can happen to anyone, whether it's because of a lost job or another misfortune. It's time to go into financial survival mode. Here's a three-step plan to help you focus on the most important things now: preserving the money you still have as much as possible and finding other sources of income.
Step 1: Take Stock And Prioritise Your Spending
Take a deep breath, then take a hard look at your income, expenses and debt, if you haven't already. For your debts, separate them by those that are tied to collateral (your house or car loan, for example) and those that unsecured debts (credit cards, medical bills, any other loan that doesn't have a collateral).
Which Bills to Pay First
When money is really tight there are some bills you can let slide for a while, and others that you should keep on paying if at all possible. The ones you should pay first are the ones that would affect your family's health and security the most:
- Rent or mortgage payment.
- Essential utilities: gas, electricity, and water
- Child support: If you stop making those payments you risk losing custody rights and could even end up in jail.
- Income taxes: Never mess with the ATO.
- Car payments: If you get behind, the lender could take your car and your credit rating will be affected as well.
- Any other secured loans.
Even some of these are negotiable. Many utilities have schemes to adjust payments in times of hardship, for instance.
Although it's not the best tactic, paying just the minimum on your credit cards can help you get by; just make sure you put the cards away and stop using them.
Cut Your Existing Bills
You've probably already done this, but just in case, go through your budget and ruthlessly strike out everything else that absolutely isn't necessary, such as pay TV, gym memberships, and other non-essentials.
Step 2: Trim Your Most Expensive Spending
Housing: We spend the most on housing, transportation and food, so these are the first categories you should scrutinise to save more on. Although moving might not be an option right now, it's something to consider down the line. Perhaps consider renting out a room of your home if necessary.
Transportation: Do you really need a car for work or the second car? Using public transport could save you thousands.
Food: It's possible for a single person to eat healthily on $25 a day, and multiplier effects mean families can get by on an even lower per-person budget. Eat food with the densest nutritional quality, like brown rice and beans. Learn to cook like a peasant.
Step 3. Find New Sources Of Income
Sell stuff: Selling stuff you don't need, such as jewellery or old electronics, can give you the wiggle room your family needs while searching for a new job.
Find temporary work: The most important thing to do, though, is to be relentless in looking for income. Even small tasks like babysitting, tutoring, or running errands can help you stay afloat. You might sign up to a service such as Airtasker, for example, to do simple tasks in your neighbourhood.
Hopefully you'll bounce back soon. Don't forget to keep active and take care of yourself during this challenging time.
Got your own question you want to put to Lifehacker? Send it using our contact form.