Help with Debt and Retirement Savings – T Collins Answered

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Who can I trust for help with debt?

DFA reader T. Collins asked:

I’m lost, I don’t know where to begin, or whose advice to trust. I’m broke and 53 years old, spouse is 55.  We have not saved a dime for retirement.  When I had a little extra I wasn’t paying attention, I lost the business and lost the home.  I work full-time and also a second job, spouse gets SSI.  I’m in debt from credit cards, losing house, etc. and am renting now.  I can barely make everyday bills because I’m so poor.  I have to take money used to pay necessities to get started on this debt so I don’t end up living under a bridge.  I currently make $23,000/yr. – my spouse gets $9,000 after medicare payments.  I just woke up financially… can start a 401k?  HELP!

Debt counseling

Simply put… you need debt counseling, debt management, and financial education.  We could single out the subject of your debt or your lack of retirement savings, but I think the best decision is to steer you in the direction of someone who can help you on a more personal and on-going basis.

Do not feel bad, the need for debt counseling is not something you should be ashamed of, rather it is a common reality for many Americans today.  Our culture and education system have failed to provide most of us with the personal financial skills necessary to live a healthy financial lifestyle.  The reality of this fact is evidenced by the national credit crisis and record levels of consumer debt… among other things.  Couple our excessive culture with aggressive corporate marketing and our lack of individual personal responsibility and we have ourselves a perfect personal finance storm – and T. Collins is but one of many who suffer.

Where can we go from here?

T. Collins, you are not alone and since you did not give specific numbers and are just asking for general advice that is where we’ll focus our efforts.

Trustworthy debt counseling

We need to designate between two opposing business models that confuse the average consumer and erode confidence in debt counseling.

  • “For profit” debt settlement companies.
  • “Not for profit” debt counseling companies.

A trustworthy not for profit debt counseling company will typically offer to help you help yourself and will steer you toward debt settlement and bankruptcy only as last options.

The financial weapons you need, and the ones a trustworthy company will help equip you with are:

  1. Debt counseling – Trained counsel to help you better understand your situation so you can gain an emotional foothold and prepare yourself and your family for the road ahead.
  2. Debt management – Helping you find and work toward real solutions for your specific financial needs.
  3. Financial education – Helping teach you the basics of personal financial responsibility so  you can dig yourself out of the hole and avoid future troubles.

Specific people to contact for help

T. Collins, I will give you two organizations to contact, both of which are trustworthy and not for profit.

  • National Foundation for Credit Counseling – Look around the NFCC website making sure to utilize the Find a Counselor feature.  They offer debt counseling over the phone, the Internet, or in person so be sure to take advantage.
  • Green Path Debt Solutions – Visit their location page to see if they have an office local to you.  I have not had much interaction with debt solutions companies but this is one I can vouch for.

A few personal finance starters

You need to keep a written budget.  You need to live below your means.  You need to sacrifice your wants for your needs… there is no time to waste.  You need to work your tail off to earn as much as possible.  You need to spend as little as possible.  You need to destroy any credit cards you have and implement the cash envelope system to curb any bad spending habits.  Do not fore go necessities to repay debt, make sure the heat is on and there is food to eat, what is left over can then be split between creditors accordingly.  Do not focus on retirement savings now, focus on getting control over you situation then worry about your nest egg.

Think on these things and contact a counselor from one of the sources above.  Godspeed.

What do you think?

What are some tips I may have missed that T. Collins should use to gain control over his dire financial situation?

If you need personal finance advice… ask Matt Jabs.

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We accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. Our comments are an expression of opinion. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Any advice taken from this site does not in any way establish a client/adviser relationship.  We always recommend that you consult with a licensed, qualified professional before making any financial or investment decisions.



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1 Miranda

I agree that this reader needs to take control immediately. There really isn’t a good way to ease into the dramatic changes needed. You really have to just quit unnecessary spending cold turkey, and work on a plan to get out of debt.

2 Jizzo

“Do not feel bad, the need for debt counseling is not something you should be ashamed of, rather it is a common reality for many Americans today.”

Um, I appreciate your soft glove approach here, but at the same time, this fellow needs to acknowledge that he has done great wrong, he should feel bad and it is not culture’s fault or society’s problem. He spent more money than he made and he needs to acknowledge his reckless lifestyle.

I think you give great advice here, but perhaps go too far by making him feel like he hasn’t done anything wrong. Just my 2 cents.

3 Matt Jabs

Right below that statement is this one with a link to my position on our lack of personal responsibility:

“Couple our excessive culture with aggressive corporate marketing and our lack of individual personal responsibility and we have ourselves a perfect personal finance storm – and T. Collins is but one of many who suffer.”

Perhaps I could have directed more stinging blame toward T. Collins, but sometimes words of encouragement are more appropriate and constructive.

Also… it is T. Collins fault but is indeed also partially the fault of our culture. If the same person would have grown up in the depression I would wager that their situation would be different. Ultimately culture is but a collection of individuals, but swimming against the current of a creek is much easier than against a raging river.

4 Jason @ Redeeming Riches

With all due respect to Jizzo – I have to disagree. Matt did a good job of balancing help with identifying the problem.

From the way it reads, it seems like Mr. Collins is accepting responsibility for his past mistakes and is looking for HELP – not a shot to the gut after a punch in the mouth.

We also don’t know the whole situation here – the recession has wiped out a lot of unsuspecting persons who thought that business would always go on – when left without a business or livelihood we tend to pay more attention. Should he have prepared in the summer for the winter drought? Sure!

But, perhaps we should take Jesus’ approach with the woman caught in adultery who was about to be stoned to death..he told the Pharisees that “he who is without sin cast the first stone”, but he also told the woman to “go and sin no more”.

We’ve all made mistakes – it’s good that Mr. Collins’ is realizing that and now it’s time to help.

Matt did that. Kudos.

5 ChristopherFM

Dug up another resource that T. Collins could look into:
http://www.choosetosave.org is the social media-friendly arm of the Employee Benefit Research Institute; several retirement calculators can be found there, including a 401k payroll deduction.

I’ll add that if he decides to find a debt counselor, make sure they’re fee-only. As Matt said, finding a trustworthy company is a must — don’t want to run into those guys who try to upsell you.

6 Deacon Bradley

I sympathize with T. Collins situation and thanks to Matt for the thoughtful response. I think what T. Collins has here is an income problem. All the negotiating in the world is not going to get this household making more than 33K a year. Paying down and settling old debts will be much easier with extra income and allow for some savings for the future.

T. Collins may feel like it’s too late, but I can assure it’s not! Start doing things now to get your income up. Be reading books to improve yourself. Spend some time identifying potential jobs and make a plan to get there. I highly recommend Dan Miller’s book “48 days to the work you love” to help do these things and be moving towards some money.

7 Debt Free Coach-James

Hey Matt,

Thanks for the great information. You hit it right on the head and along with the biblical wisdom anyone can turn their situation around.

I would say to T. Collins that even though you are in this situation you still have energy left to do something about it and when you get determined and focused, Providence will help you get out of the situation.

A couple of things to note as well.

1. Work on the habits of spending-This takes consistent improving. Don’t get down if you make a mistake, just get back up and get at it again.

2. While spending less, find ways to increase your income more.

3. READ. This can’t be stressed enough. Even if you don’t have the money for it, with Barne’s and Noble stores, or Borders, everything you need to know to turn this situation around is at your fingertips…for FREE.

Well you might have to pay for the coffee. ;-)

Hope that helps,

Matt, keep up the good work. I’m going to make sure to give you a mention on my blog and book mark you in the social area.

More people need a resource like what you have here.

James

8 Robert Espe

I understand Mr T’s situation very well. When I first got married, my wife and I only had $800/month to live on. But 3 short years later, I’ve paid off my wife’s debts, and I have money in the bank.

One clarification. You said you are losing the house, and renting, is your primary residence currently in foreclosure?

Understanding what needs to be done is easy. Actually accomplishing it is difficult. I have sat across the table listening to people in tears over their financial situation, only to encounter them at McDonald’s the next day. You have to decide if you are willing to do what it takes to be free financially.

All the advice given so far is good. I would add first that you just need to forget about retirement for the immediate future. It takes 20+ years to save for retirement. This means it is not impossible, but it won’t happen as soon as you expected. You are in the same place financially as someone in their 20′s, you will need to accept that, and then start living like it.

You do not really have a big income problem, and you are not poor. You make about as much money as the national average. If you feel poor, it is because you overspend. You said you have two jobs. Congratulations, that is an excellent first step. However, I would suggest that if possible, your wife get a job. That would be a simple way to increase your income by 50%-60%. I’m assuming you don’t have children at home any more, so that shouldn’t be a problem.

If you need more time (to implement Deacon Bradley’s advice), consider scaling back sleep. Most adults only really need 5-7 hours of sleep to function reasonably well. It may not be fun, but it will spur you on towards greater debt reduction. Don’t eat out under any circumstances. Better to be a little hungry for 6 hours than to pay premium price for prepared food. Also consider adjusting your grocery list. When first married, my wife and I had a grocery budget of $100/month. You have to eat more starches (potatoes, rice, pasta), legumes (split peas, lentils, beans), and veggies, and less meat, milk, cheese, and eggs (usually the most expensive foods). http://www.drMcDougall.com is an excellent resource for free recipes. Even if you don’t philosophically like the diet, it is nutritionally sufficient and a great way to save money.

Finally, if you used home internet to access this site, consider cancelling (along with cable, any cell phones, and any other monthly bill you can get rid of), and using the public library (I did this when I didn’t have extra money). It’s a little inconvenient, but every little bit helps, and you will have more time.

Break things down into attainable goals. Write them down, and tackle them one at a time. I am debt free, but I have a savings poster (it’s made of regular paper) on my wall to check off as I meet my savings goals each month.

9 David H.

To me Mr. Collins should stop paying his credit cards immediately. His FICO is already going to be jacked because of losing the house. If I were talking to him then I would recommend letting those cards go in default. He needs to concentrate on getting his INCOME up. Forget frugal living. The man makes $23k a year. This is what Dave Ramsey calls the “shovel to hole” ratio. His hole is quite deep, but his shovel is too small to make any headway. He needs to get a 2nd and a 3rd job or get his wife to take a second job. In the future when his income is higher and he wants to negotiate with the old creditors to pay his debts then he can worry about it then. He needs to focus on food, shelter, lights, and water. Once his shovel is big enough then he can start thinking about retirement.

10 FinanciallySmart

Wonderful advice and I hope that he go and seek counseling. Mismanagement of money is what a lot of us does but the redemption is when we acknowledge the mistakes and work on making it better.

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