Help! I can't afford my life

Slash expenses

Her first task is to get her expenses in line with -- and ultimately lower than -- her income so she can pay off debt and save a lot more for her not-so-far-off retirement.

• To that end, Jane needs to sell her condominium sooner, rather than later. Or she needs to get a roommate who can reduce that overhead.

• She needs to cut her utilities, but she's locked into a high electric bill because everything is powered by electricity, including the heat.

• Ideally she would also dump her cable/Internet plan or find a cheaper way to go (maybe cable without the Internet).

• She can probably get a cheaper cell-phone plan and probably should cancel her land line.

• Her grocery bill is far too high for a single woman, especially since her live-at-home son buys most of his own food.

Pay off debt

Her next task, when she frees up some cash, is to pay off her credit card and that whopping personal loan.

• Jane only has $2,648 in credit card debt, but she was late with a couple of payments and the interest rate is now 32%. Paying this off is a priority and putting more than $125 a month toward her card is vital.

• She might need to put her condo on the market now, even if she doesn't technically need to repay the loan for another 15 months, because it could take that long to sell.

Secure her future

Right now Jane is only contributing 2% of her paycheck, which her company will match, to her 401(k) and has saved only about $5,000.

Given her age, she should save 10% or more of her income.

Moving toward solutions

Despite the odds not exactly being in her favor, Jane has wasted no time in finding solutions. I was impressed.

• Her boyfriend was so concerned about Jane's predicament that he offered to share living quarters with her. They are now negotiating when that might happen (perhaps in about four weeks) and how to split the bills. Jane notes that this arrangement could cover most or all of her shortfall.

• Although Jane is stuck with a condo that runs entirely on electricity, last week she called in a friend who is an electrician to install better thermostats and give her advice about making the unit more energy-efficient.

• She has decided to cancel her land line and look for a cheaper cell-phone plan.

• Last month she began looking for a better-paying job.

• Because Jane has been using the personal loan to cover living expenses for four months -- she also used a chunk of that cash to settle old medical bills -- she only has about $5,000 left. If her boyfriend moves in, she can use those funds to pay off her credit card. If he doesn't, she will need that money to live on while she sells the condo.

Jane has a long way to go to get her finances straightened out. What makes her a terrific addition to the Women in Red is her level of commitment.

What I find time and again is that making a financial plan has little or no bearing on reality. It's what people are willing to do that counts. Jane is ready, willing and already taking action.

To weigh in on Jane's situation, please join the discussion on our message boards.

Published Sept. 12, 2007

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