Dave Says: Not Much Money Left at the End of the Month

Dear Dave,
I’m a 25-year old, married and we have three kids. We owe about $100,000 on our house, with monthly payments of a little over $800. We also owe $8,000 on a car and have hospital bills totaling $1,000. Our total monthly bills are about $2,000, while my take-home pay is only $2,100. We’ve also got no savings. What can we do to keep from going under and losing the house?
--Chris

Dear Chris,
Wow, things really are tight. You’ve got too much house for your income – way too much. Selling a house is painful, but if you don’t get your income up immediately with a new job or extra jobs, you’re going to have to sell. Your car is pretty expensive, too, for someone making less than $30,000 a year. If I were you, I’d consider selling it, too, if you’re not able to increase your income pretty quickly.

I’d sit down a write out a game plan to just get vicious about it and attack that debt. First, get a beginner emergency fund of $500 in place. Then, just go crazy - have a yard sale, pick up an extra job and live on a really tight written budget. If you do all this, I think you could have the hospital bills and car paid off and be debt-free except for your house in a little over a year.

You guys have been doing what lots of folks do. You’ve spent your lives just rolling along, living without a plan, then suddenly you both look up and, whoa, we can’t breathe!
-- Dave