The Right Direction Starts With the Right Decisions

Over the years, I've found that people end up in financial trouble not only because they don't have enough money. It's also because of poor decision-making.

The following is an edited transcript of an online chat with people who needed to be pointed in the right financial direction.

QI am separated, with two young sons, and my husband lost his job about five months ago. I am solely supporting myself and my children and am finding it difficult to cover all of our expenses. I have stopped dining out, I bring my lunch, don't have cable, etc., but my income just doesn't cover the monthly bills. I think I have to cut back my Thrift Savings Plan contribution to 5 percent or possibly less. I currently contribute 10 percent. There really isn't anything more I can do to cut expenses. Do you agree about reducing my retirement contribution?

AI do agree. I would cut out your contributions completely for now.

Although I'm a huge advocate for saving for retirement, you need the money right now so you don't go down financially. Even when there is an employer match, I would urge you to cut back on investing for retirement until you can figure out how to make your income match your expenses. For example, can you move to cut housing costs? Can you get a roommate? I know people don't like to do that with kids, but at least explore the option, perhaps with a close friend or relative.

Also, have you explored everything to keep your marriage together? Even without a job, having your husband help at this point could allow one or both of you to get a part-time job. And he wouldn't be paying for the cost of his separate living expenses. Just asking.

We're in a position to refinance our home at a lower interest rate, and we need a new roof. You usually advise against treating your equity like an ATM, but what about needed repairs? It's very unlikely we can set aside $7,000 to $10,000 in cash without wiping out our emergency funds. My husband and I are journalists, so our jobs are on the line these days with the awful economy. Any suggestions?

Here's how I would approach this decision. Find out how much it costs to fix the roof and whether not fixing it would create major damage to your home. In other words, is this something that can wait or be fixed more cheaply for now? If you are unsure about your job situation, I wouldn't deplete your savings. So in this case, if you absolutely need the roof done, pulling that money -- and that money alone -- out of the house equity during the refinance is acceptable. Try your best, though, to find another way to pay cash to fix the roof.

I have a friend who lives in the District who really wants to buy a house in Maryland to move her children to a better school district. She has a good job making decent money, at least $45,000 to $50,000 a year. She has credit scores between 500 and 700. She does not have money for a down payment. She has some credit card and student loan debt. I have suggested that my friend rent in Maryland until she is ready to buy. What advice would you give her?