Three things to avoid when money is tight

When it feels like your paychecks can never cover your bills, here are three things to avoid and what to do instead.

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Q: I am a single father of three teenagers. My wife died about five years ago, when my youngest was seven, and until recently I was managing. My parents or sometimes my sister helped out when they could, and that helped us get by. But since costs have risen so dramatically, we’re all in a bit of a pickle. The main thing that I could afford before is now a constant fight. I don’t make enough money to pay all the bills. What can I do? ~Jeremy

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A: The significant increase in the cost of living has affected almost every Canadian household in one way or another. Success at the grocery store or gas station is often the most notable, but higher payments due to rising interest rates cannot be overlooked. However, for families where money was tight before inflation set in, our current economic climate has only made matters worse.

When you feel like your paychecks can never cover your bills, there are some things that will make your situation worse very quickly. Here are three key things to know and what to do instead:

Count on credit until things get better

We can never know with absolute certainty what the future holds, and as the past three years have shown us, even our best guesses could be way off. Using credit and being in debt leaves us at the mercy of others. Creditors could raise interest rates, increase minimum payment requirements, impose fees or even reduce the amount of credit they make available to us. Also, if we rely on credit when money is tight, any available credit we have will often run out before we can start earning more again.

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7 tips for coping with the high cost of living and money problems

When we use credit to pay for day-to-day living expenses, the interest and fees added to what we borrow means that we may end up owing more than we realize faster than expected. If you need to use your credit cards, overdraft, or line of credit to make ends meet, supplement your income sparingly — and only for the really essentials. Describe a emergency budget with reduced expenses and track your expenses carefully. While it won’t be easy to choose what you want to cut back on, do your best to align your expenses with your current income level. This will make it much easier for you to get back on your feet.

Debt repayment mistakes that keep you in the red

Use payday loans when you’re really short on cash

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High-interest loans, like those you can get at payday loan stores or through instant cash offers online, might seem like a good idea when you really need the cash. right now. However, in a few weeks, when the loan and interest are due in full, you could be on your own; or worse. It’s almost too easy to ask for another high-interest short-term loan, and before you know it, you’re so in debt that the only way to make it from one payday to the next is to continue to take out short-term loans.

A short-term loan could be a viable option if you have a crucial bill that absolutely needs to be paid. But you can’t borrow to get out of a constant budget deficit. The only way to manage is to adjust your budget and planned expenses. Contact your creditors to ask if they can offer you payment relief. Do the same with each of your utility companies. Temporarily reducing fixed expenses while you look for ways to increase your income and reduce your expenses more permanently will make it easier to manage.

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One option to reduce your bills could be a debt consolidation loan. This would reduce your payments. Another option could be to refinance your mortgage. This could give you money for bills and other expenses. Each of these debt relief options comes with terms and conditions that you should understand before signing on the dotted line. Other Debt Relief Options may even suit you better. Contact a credit counselor in a non-profit credit counseling agency in your area to help you discover some of the lesser-known consolidation options. Once you have all the information, you can make an informed decision.

8 common money mistakes that will keep you broke

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Throw caution to the wind

It can be tempting to throw caution to the wind when our circumstances seem so overwhelming. For two main reasons, avoid using the reasoning that you already owe so much to justify additional spending. Creditors don’t see this in a favorable light if you need their help to restructure your debt. Plus, this kind of self-talk only reinforces your negative thoughts and feelings. Repeating the mantra that you have no money distracts your thinking from any more positive options that might advance your situation.

Rather than berate yourself for your situation or be embarrassed by your situation, use the energy you have left to determine your next steps. Figure out who you need to talk to about getting another job or more hours and/or a higher salary than you currently have. Take care of your essential obligations and keep your children safe and fed. Connect to community resources and take advantage of any help you may need. Anyone can find themselves in a difficult situation – make it part of your trip, not the destination.

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The bottom line on what to do when money is tight

When faced with a money problem, try not to let stress and worry cloud your judgment. Accept any help that is offered to you. When you’re back on your feet, you can return the favor or pay it forward. Make sure you take care of the essentials first, such as your rent or mortgage and housing costs, food, transportation to work and school, and medical expenses. Avoid further debt or blame. Instead, focus on the solutions and what you can do to cope with them on a daily basis. Prioritize your invoices and consider all your debt management options. Maybe it’s a time when you have to communicate your situation to your creditors rather than making payments. The well-being of you and your children is what is most important, it is where you must focus.

Related reading:

No Income, Low Income – Now What?

Money Tips That Avoid Getting Broke

How to pay off debt with no money

Scott Hannah is president of the Credit Counseling Society, a non-profit organization. For more information on managing your money or debt, contact Scott by E-mailCheck nomoredebts.org or call 1-888-527-8999.

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