Greg’s household is operating at a deficit of over $1,000 a month and he has several debts in collections. Looking at his budget we found over $500 going to eating out and membership dues as well as other miscellaneous (read: nonessential) spending. A household in this bad financial shape needs to commit quickly to fitness plan. Greg is ready to cut down on spending (first, finding out where all the money is really going) to erase that monthly deficit. I also asked him to consider having his mother-in-law to take care of the kids so his wife can work as well (this has worked for my brother for nine years). But he was less likely to consider the drastic, but efficient, move of selling their home for a small profit and renting for a few years until his credit is in shape and his finances are ready to again take on homeownership.
Sometimes the path to financial fitness can follow a combination of prescriptions—we must factor the human elements beyond the math. It’s difficult to move a family of five so if by bringing more money in and finding more money in the household budget will allow Greg and his family to stay in their home, their path to financial fitness may be slower, but more manageable, and that much more likely to succeed as a family.
*Watch On The Money every night this week at 10p ET to see someone new get inducted into our Financial Fitness club*