Unemployed or underemployed and can’t make payments on your loans? You are not alone.

The American Banking Association recently released a report indicating that a lot of Americans are not paying their bills.

…delinquencies on consumer debt rose to a record 3.23% in the first quarter of 2009, up slightly from the previous quarter.

This number does not include credit card debt.

Similarly, the balances on those late credit card accounts rose to 6.6% of all outstanding bank card debt, marking another record high.

The reports shouldn’t be surprising. If you have no money or are making less than you did, paying bills becomes difficult if not impossible.

Don’t dodge bill collectors or anyone you owe. Be forthright and explain your situation or try to make some small payment if you can.

Prioritize your bills. Pay the essentials such as mortgage or rent, transportation to get to work and utilities.

You aren’t the only one. Ask for a restructuring of your mortgage, if you can. If it is true hardship you can ask to reduce the interest rate on your loan with no additional fees. Some income requirements may be imposed but remember companies also want their money too. Late payments and delinquencies also can mar your credit report but making some effort will be better than doing nothing.

I will gladly pay you Tuesday for a hamburger, in a cartoon this was cute. For a state in the 21st Century it’s not. California’s budget woes will make the state start handing out IOUs. This is a very dire situation. People who depend on that money can’t give their creditors IOUs. What can they tell their creditors or utilities? We can’t pay you because we’re not getting my money. Even though the money isn’t directly for government salaries the vendors who deal with the state won’t receive payments which are used for salaries and their own business expenses.

Some states are notoriously slow in making payments to vendors but regular workers always had priority. Who will be next if the state won’t be able to pay its creditors? Furlough days for government workers is the pejorative buzzword that has been going around. The small vendors and businesses that aren’t getting money from the state will contribute to the further decline in the money problems.

If an agreement is reached before 4 p.m. CST then the IOU would just be nothing more than a bad dream. Otherwise, those who deal with the state of California as a customer may have to face some budget woes of their own.

The state’s long-term bond rating is in jeopardy, as well. It already has the worst credit rating in the nation.

Fitch Ratings last week downgraded the state’s long-term general obligation bonds to A-, from A, and placed them on a negative ratings watch, signaling the company’s concern about California’s ability to solve its liquidity crisis.

Just like individuals, those with the worst credit ratings have to pay more to borrow money which will cost the taxpayers more in the long run.

“There’s no right or wrong budget,” says Leslie Linfield, executive director of the Institute for Financial Literacy. “The only rule is, don’t spend more than you make.” 

Don’t spend more than you make should be the budgetary golden rule. Saving money is important but when you have to cut out all of the little things that are important to you and you still haven’t made a dent in your finances.  Then maybe you need to look at the bigger picture.  Time’s article on How to Save Bigger also discusses that larger items take a good chunk out of your budget  - such as housing, food, and transportation. Saving on housing costs, such as utilities and appliances may save money, but cutting back on a small indulgence such as a cappuccino probably won’t make that big of a dent, suggests the author. 

It all depends on what you spend you money on. If you figure a cappuccino or latte into your budget or even dining out into your budget, then you will be able to manage. Other things such as housing are different. Though changing your living situation isn’t as easy and cutting back on your utilities or cable package going cold turkey doesn’t really work when you are budgeting.

A financial middle ground is what is needed – not spending too much, and not spending too little. Good financial sense doesn’t teach people to be miserly and to avoid buying themselves anything. Cutting down on larger items saves more money but at what expense. If you are saving money in one area to make your life more enjoyable in another without going into debt this works. The article also stresses that there is no right or wrong budget.

The increasing price of housing had made it difficult for some people to own a home. Factoring in the cost of utilities, taxes and other expenses that go into owning a home or condo the foreclosure market may be the best chance anyone has at owning a home.

There are risks of course that the person may not be able to get a loan or that their job may be phased out or lost. Though taking a chance and buying a devalued property could be a great opportunity for someone.

If you are considering buying a foreclosed property, try to find one that is not one on a block of foreclosed homes. The more there are together the greater the problem may be for the neighborhood. When there are only a few foreclosed homes in the neighborhood there will be more stability in the community.

The emotional trauma for some would make it difficult for a person to consider buying a foreclosed property from someone who possibly had to lose their own family home, not all foreclosed properties were family homes, some were owned by investment companies that went bust or couldn’t turn a profit. So, for people who think that they were “stealing someone else’s home” that isn’t always the case.

Just like any other purchase, make sure you know what you are going into. A bank owned property or REO may cost more but need less work done to it. Not all foreclosed properties are the same. There are those who will trash the house before they leave it, or that are vandalized while empty so there are some problems that potential buyers face but realizing that what you buy may not be move in ready or that you might be able to get more value than you could have afforded two or three years ago is what makes the foreclosure housing market appealing.

If you’ve got a decent income, changing your brand of coffee or being the last person in your zip code to buy an iPod just isn’t going to get you very far. To make a real difference, you are going to have to cross out a major line item. The private school. The house with the great address. A parent staying at home with the kids. Or the plan to retire early. These are not frivolous, spendthrift things. Responsible grown-ups can choose among them. It’s just that most of us can’t choose every single one of them. 

The columnist makes a good point about making choices. Although certain incomes cannot afford private schools. Though the salary may be covered, there are also other extras, such as fund raising events, and other expectations from the school. Buying a home in an area you cannot afford is what happened to many people. Though a person might be able to pay the mortgage; it’s the extras that make a difference. In the case of a home, taxes, maintenance, and utilities add up to large extras. Other choices, require big changes and additional strains on your wallet that you may or may not be able to make. 

If people are truly living within their means and make changes to their daily living they can do things. A parent staying home with the kids if both parents are making minimum wage is very difficult. Early retirement, without a sizeable nest egg is not easy to do.

The private school. The house with the great address. A parent staying at home with the kids. Or the plan to retire early. 

All of these items seem like luxuries, because having a house with a great address does not mean that there is a less expensive house, in a safe neighborhood with an address that is less chic. Private school is more costly than public school because of tuition and even with public school there are fees to be paid, fundraisers, field trips and other expenses. If some of the people were responsible and honest with themselves about money and what they couldn’t afford, then they might not have to make those decisions after they have become entrenched in a certain lifestyle.

Making reasonable choices that do not affect the quality of life for people is a personal decision. Taking a child out of a private school to make new friends, depending on the age of the child can be traumatic. Changing schools can be stressful depending on the child. 

Balancing your budget realistically means that when you buy a home, utilities increase, taxes increase even if you have a fixed mortgage, tuition increases just as cost of living if you decide to retire early.

I disagree with the author, little changes really will make a difference. Yet, sometimes you have to make the hard decisions up front.