Irregular income and erasing credit card debt

Every week, I get at least a couple of letters from readers whose situations prompt them to start out saying something like “I’m so embarrassed to ask, but …” Then they pour their hearts out, often lamenting what they believe to be their own stupidity and ignorance. Nothing could be further from the truth!

The only stupid questions are those we don’t ask because we’re afraid of what others might think. It warms my heart to know that so many of my dear readers find my inbox to be a safe place for their most embarrassing questions.

Q: My husband has two jobs — he is an artist and a salesman. He earns commissions from both, so we never know what our income will be. I work part-time and am paid hourly. I’m so embarrassed to admit that I have no idea how to go about setting up a budget. Is our situation impossible?

A: The mistake many who live on “mystery means” make is to spend whatever amount of money they earn as they earn it.

They multiply a good month’s income by 12, call that their annual income and set their lifestyle accordingly. Then they starve during the lean months, allow all the bills to go past due and hope a good month will follow soon.

The secret to living on an uncertain income is to determine the very minimum you need to live each month. Now put yourselves on that salary. No matter what comes in during a month, only pay yourselves that set amount. And if it’s not enough to pay the bills, what you have may be a hobby, not self-employment.

Q: I recently found a website that promises to take our credit card debt and get it erased. They can do this because it is technically illegal for banks to issue credit cards. So this company takes your debt, challenges it in court and legally dissolves it. I am skeptical but hopeful. Is this legal?

A: I don’t know what is more shocking: that anyone would suggest such a thing, or that you entertain that it might be legitimate.

Of course this is not legal. Don’t believe it for a second. It is one in a long list of internet scams that will hit you up for a big fee and leave you holding the bag. By the time they’ve fleeced your finances, you’ll be in default on your payments, and then you’ll be in even worse trouble.

My best advice is to stop looking for loopholes and shortcuts. Get busy getting out of debt — the right way.

Q: I have Ready Reserve Overdraft Protection on my checking account. I dip into it occasionally. I typically repay the entire balance within a week or two, but every few years, I may pay it off over a couple months because I used a larger amount. My fiance is threatening to close our shared account because of this. He claims that every time I use it, the bank reports it to the credit agencies and he gets a ding on his score, even if I repay it before the billing cycle is complete. Is this true? Is this different from other lines of credit?

A: It all depends on how your bank handles its business. Some banks do report to the credit reporting agencies, or CRAs, while others do not. If your fiance says this bank does, why are you doubting him?

Can we talk just the two of us? Listen to me: An overdraft account is not a savings account. It is not your money. It’s not even a credit card. It is emergency protection — very expensive insurance — like fire insurance, something you have but hope you never have to use. Using it on purpose, with intention, is unconscionable. But worse, every time you use the overdraft, your fiance loses faith and trust in you. That’s huge and something I hope you will think about.

Mary invites questions, comments and tips at mary@everydaycheapskate.com, or c/o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of “Debt-Proof Living,” released in 2014. To find out more about Mary and read her past columns, please visit the Creators Syndicate webpage at www.creators.com.

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