Nicholas Aretakis, author of the soon-to-be-released book No More Ramen: the 20-something's real world survival guide.

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Getting "real world" advice has never been so easy. No need to schedule an appointment; jump in right now and get practical advice and proven techniques from Nicholas Aretakis, author of the book No More Ramen: the 20-somethings real world survival guide, in book stores and online in September 2006.

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Question:

Nicholas. My son has charged his credit cards to $20,000. He can not pay these off right now. He is going to school full time and working 10-20 hours a week. I want to help him organize his life. Stop the credit card issue but he does not make enough to support himself. Where can he get money to consolidate his bills and start living on a budget. Help!!

Answer:

Dear Concerned Parent:

This is exactly the type of behavior we wish to avoid by reading No More Ramen, but no lectures here. Let's consider a few options for your son, with # 4 being probably the requisite approach:

1. If he has built up any 401K equity, I would encourage to borrow up to 50% (which is often permissable) and pay down a portion of the principal, then he would be responsible for paying the debt back to his 401K plan, with a more reasonable interest rate and proceeds would go to his long term savings.

2. If he has any home equity, similar concept in 1.above.

3. Depending upon when he plans to graduate, he may qualify for a small loan to consolidate debt and take a more attractive interest rate- chances are that banks will not loan too much based on his present status.

4. Family assistance- you obviously want the best for your child, but how dependable is he and why did he amass this credit card debt- for sustinance or short term enjoyment? Would you be willing to pay off his debt completely and place him on a deferred payment plan? Is there anything in his future inheritance that could be "cashed in early" so he doesn't get off to his post-graduate life overloaded with debt? You don't want to completely "bail out" your son, as he may become crippled as a result, but you also don't want him to fail and confront financial obstacles so early in his soon to be independent life. He needs to learn a "hard lesson" and you may need to apply some "tough love". My suspicion is that the following options will be necessary: Help him negotiate the best finance rate to pay his bills- emphasize that his credit is not something to be taken lightly (share our charts on bad debt from No More Ramen) Review his monthly budget with him in detail- have him create an excel spreadsheet using the template we provide in No More Ramen.

Some options to consider:
1. move back home
2. take in a roommate
3. sell personal possessions (e.g. car, collectibles, etc.)
4. other options to reduce monthly non-essential expenditures
5. work additional hours, provided this does NOT interfere with academic goals
6. develop a reasonable time-line so your son has a goal
7. in summer breaks or recesses, have him step-up his earnings to accelerate pay-off
8. On special events (birthday, holidays, etc.), encourage family members to help pay down debt instead of gifts, gratuities and apply directly to principal of credit card debt If you would like to contact me further with additional questions, please do not hesitate to do so. I would encourage your son to read my book in it's entirety, and to avoid other pitfalls that contront 20-sometings navigating their way early in their adult lives.

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