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Chapter 3: Building and Sticking to a Budget
Book I
Taking
Charge
of Your
Finances
buy insurance for you, but the insurance will be very expensive, so the
total amount of your monthly mortgage payments will increase.
Federal student loans. The IRS can collect what you owe when you fall
behind on your federally guaranteed student loans.
Your health insurance, if you're responsible for the payments. Keeping
up with your health insurance is especially important if you or a family
member has an ongoing health problem. Without insurance, an expen-
sive illness or accident could push you into bankruptcy.
Medical bills. A growing number of healthcare providers, including
hospitals, are getting very aggressive about collecting on their patients'
past-due accounts, even suing patients in some instances. If you owe
money to a healthcare provider, contact the provider to try to work out
a plan for paying what you owe.
If one of your unsecured creditors turns over your debt to a debt collector,
no matter how much the debt collector may hound and threaten you, do
not give in to the collector's demands if paying the unsecured debt means
you won't be able to pay your priority debts or living expenses. In Book III,
Chapter 1, we tell you how to deal with debt collectors.
Examining a Budget Surplus
If your monthly spending and income comparison shows that you have
money left over each month, don't break out the champagne just yet. You
may have a surplus because you're not paying some of your bills or you're
meeting some of your obligations by using credit cards. If this is the case,
you must still reduce your spending so your income covers all your bills and
living expenses each month.
A key aspect of getting out of debt is not using your credit cards. We certainly
understand that sometimes you may have to use a credit card to pay for a
financial emergency if you have no extra money in your budget and you have
nothing in savings. But you should resolve to pay off the amount you charge
as quickly as possible -- the next month, if possible. And you should try not
to charge anything more until you've wiped out the new credit card debt.
You may also have a surplus because you're paying only the minimum due
on your outstanding credit card balances each month. You'll never get out of
debt that way! If you have any surplus in your budget, use it to accelerate the
rate at which you pay off the balances, starting with the highest-rate card.
