DOLLARS AND SENSE

Common sense answers to questions on personal finance

by Joe Plemon 

Q: Joe, my husband and I are behind on a couple of credit card payments and now the collectors are calling us.  They are starting to get nasty, but we just don’t have enough money coming in to pay everyone.  What are our options? 

A: When there is not enough money to pay everyone, you must set your priorities.  But in order to set those priorities, you must get your finances organized.  It is essential that you and your husband immediately work out a detailed cash flow plan, showing all the money coming in and all the money going out.

              Examine that budget to see what you can cut.  Do you have a big car payment?  Sell your car, buy a beater and use that new cash flow on debt.  Cut out cable TV, eating out and vacations until this mess is cleaned up. Are you still using credit cards?  Give them plastic surgery.

            If you still have a shortfall, you must prioritize your bills.  Groceries, house payment, utility payments and car payments come before unsecured debts.  When you can’t make a payment, send the credit card company a copy of your budget and explain that you are planning on paying them as soon as you get your income up.  Then, go find a second or third job until you get these people out of your life.

            The collectors have the right to call you, but understand their tactics: they are trained to evoke emotion (usually fear or anger) because they know that you will not act rationally when your emotions are in control.  Tell them that you will talk to them once every two weeks.  If they call more often, remind them of the two weeks rule and hang up on them.  You are in control of your life, not a collector.

               Once you get them out of your life, learn from this experience and never let it happen again.