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Ask Dave

From Survive to Thrive

Jim is a 38-year-old single father. He went bankrupt two years ago. He has $10,000 in student loans, $3,000 in medical bills and a $107,000 mortgage. He's making $30,000 a year. Dave offers Jim some options.

QUESTION: Jim in Nashville is a 38-year-old single father. He went bankrupt two years ago. He currently has $10,000 in student loans, $3,000 in medical bills and a $107,000 mortgage. He’s making $30,000 a year. Dave offers Jim some options to get this situation under control.

ANSWER: There are two sides to this equation: the income side and the outgo side. On the outgo side, you don’t have a lot of debt and you don’t have a huge house payment. But with a $30,000 income and a 12-year-old, your plate is definitely full. You’re not being a big, wasteful person. Obviously the student loans survived the bankruptcy, so those and the other debts are what you have to deal with now.

There are two things that someone can always do when they are facing this situation, regardless of their numbers. The first thing is a detailed budget, which will always make you feel like you got a raise. There is a lot of money spent eating out, so you have a new hobby called cooking.

It saves you a ton of money—about 80% of what you spend eating out is not for the food; it’s for the service, the overhead, the lights and that kind of stuff. You can eat at home for around 20% to 25% of your eating-out bill. Doing a written plan will help you to discover things like that. It will cause your money to stretch, so you’ll feel like you’ve gotten a raise.

The second thing is to increase your income, and you need to do that. There are two aspects to that. Number one is the dreaded part-time job, which is tough to do with a 12-year-old when you are a single dad. Maybe there’s even something that you guys can do together as a small-business idea on the weekends. Maybe pick up a couple of yards to cut or something. If you added $1,000 to your income a month, that would be huge.

The long-term aspect is this: A question you must ask yourself a lot between now and the end of the year, every morning in your prayer time, is, what you want to be doing when you are 48? If you are in a family business and feel some obligation to your father, you don’t need to anymore. You have an obligation to your son that supersedes your obligation to your father.

If the family business does not give you the opportunity to make $60,000 to $90,000 in the next five to 10 years, then you’ll have to make other plans. I have a family business, and I would not ask my children to stay here and starve with me, especially when they are trying to raise my grandchildren. That obligation is not there. That obligation is in your mind, and if it’s in your dad’s mind, then he has issues.

The two options that come into play there are one, do you need to leave, or two, what can we do to this business to get it jazzed, jacked and moving to where you want it when he dies or you make a better income. Either you need to leave or go in there and make something of this business to where you can make two or three times what you’re making so that you have a place to go with this.

The question to ask yourself every morning is, what do I have to do with my life so I can double or triple my income in 10 years? That may be a career change or some education. It may be a business model change with this family business. I don’t know what it is, but you have to address it. You can’t just sit there and wake up years from now still making $30,000 and say that you can’t figure out why you’re still broke. You are broke because you’re making half the national average on income.

You can only make $30,000 go so far. You need to make it go as far as it will go. Then you need to decide what the part-time and/or full-time changes you have to make within the business, or decide to leave the business for the good of your future and your son’s future. You have to sit down with your dad and tell him you need to do some things or try A and B so that we can get your income up so you can afford to stay, because you can’t just stay there like a rat in a wheel forever.

The 12-steppers say, “Continuing to do the same thing over and over and expecting a different result is the definition of insanity.” So don’t do that. Try something different. Do something that you’ve never done before—that way you’ll get things you’ve never gotten before. That’s an essential part of this.