Not Enough Money

by Gary Foreman

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Dear Gary,
The authors of some articles suggest that anyone can accommodate a budget to fit their needs and successfully reduce debt without drastically changing their lifestyles. I am a mother of four young children (all under 10) and am married to a wonderful, dedicated and hard-working man. I'm also attempting to go to college full-time. We have two children who require part-time childcare while I attend college. This amount takes up most of my student loan money, which I will eventually have to pay back. The problem we now experience is that even with tightening our belts and squeaking by on everything where we can, we still do not have enough money at the end of each month to eat without putting our grocery bills on credit. We are over-extended. We have had two cars "die" in the last year (after more than $6000 in repairs for both) and have exhausted all known resources to get ourselves out of this financial rut. I need a clear-cut, simple and precise answer where I will see results quicker than 10-15 years from now. I am going back to college because the inevitable chore of sending four children through college will soon be upon us. I quit working six years ago to stay home to raise my children and our debts have only grown. I am frustrated and tired of trying to figure out what to do.
DW in PA

It sounds like DW is in a very tough and frustrating place. And her frustration is understandable. Every mother wants the best for her children. Being unable to provide it is a real emotional challenge. Let's see if we can't come up with a strategy that would help DW balance the many needs of her family. I think that we can create a method that could prove helpful for other people facing similar circumstances. We begin with a question. Does DW have a budget for her family? It's essential to help her identify the problem. You won't find a solution without knowing how much money you make and spend. It's that simple. It doesn't need to be anything elaborate, just something so you know where your money is going.

Next, DW needs to take a look at her plan. Suppose that she takes the income and expenses and they fall short by $50 a month. Is the shortage small enough to be made up by scrimping somewhere? If so, you can begin to cut back to put your budget back into balance.But what if the difference between income and expenses is too great to make up with small lifestyle changes? Then it's time to reconsider your plan. Based on her question, I suspect that DW is in this place. She's tried the money-saving tips and there's still not enough money to cover their expenses. What next?

DW and her husband must prioritize their goals, and look at the big picture without any preconceived notions. In DW's case, she wants to keep their house, stay home with her children, provide food and clothing, and save for college education for her children. If they rank these goals, it will open communication and stimulate new ideas. When it comes to family finances, two heads are better than one. One person will suggest something that will trigger an even better idea from their spouse.

I'm guessing, but saving for the kids' college is probably the last item on DW's list. Not that it's not important, but feeding and clothing a family would come first. If nothing else, they're more immediate needs.

One way to look at it is to separate needs and wants. A need is just that: something we need to survive. Food is a need. Restaurant meals five nights a week are on the wants list. When you're in a financial bind it's absolutely essential to understand the difference and be willing to make sacrifices in the wants. Remember, we've already proved that we can't have everything we want. So it's just a matter of finding out expenses that can be reduced or eliminated with the least impact on our family. That's not to say it's an easy decision. It's natural for people to want to keep everything. But the reality is that we can't always have everything we want, no matter how good those things might be.

Student loan calculator iconCalculator: Home Budget Calculator

For argument's sake, we'll assume that saving for college is the goal that has to be postponed in DW's family. What would that mean to their life? From her letter, it appears that she's borrowing to go to college now so that she can earn more and pay for the kids to go later. What would happen if they tried a different approach? Suppose she just stayed home with the kids and forgot about her education. She wouldn't have any college expenses. The daycare costs would go away, too.

Let's further suppose that she took that savings and used part of it to meet any budget shortfall. The other portion could be saved for the kids' college or put into a prepaid college program that many states offer.

Yes, DW will earn less when she returns to the work force. But it's also possible that she could take the time currently used for studying to earn some money from home. The proper way to analyze the options would be to project both income and expenses into the future. We can't do that here because we don't know what type of job DW would have with or without her degree.

She might also want to reconsider what percentage of their children's education they plan on providing. Many families are opting for community colleges. Others expect their children to work while in college to help cover expenses. And many young people find that helping to pay for their own education actually helps them focus on a career path and make the most of the college experience.

One final thought for DW: It's a bother to put together a budget and analyze your income and expenses. It can be painful to realize that some goals might not be accomplished. But the constant pressure of not having enough money can be far more painful. It's probably easier to work through the issues and decide what's the most important things for her family. Thanks to DW for an interesting question. We hope she finds that combination of goals that will make her family the happiest.

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.

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