Jen, 49, takes care of her father, who has a terminal illness.

If she wasn’t living with her father, she’s not sure how she could afford her bills.

“My dad doesn’t charge me for rent so that is why I don’t have living expenses,” Jen said. “My mom died five years ago and I felt bad. My dad was paying for everything so I would start helping out with groceries and other stuff, but still would buy things for myself and hence got myself into major debt.”

Her seven credit cards have a total balance of $29,000.

She realized her father won’t be around forever, and it was a wake-up call.

Jen has saved $28,000 in her 401(k), $9,800 in a mutual fund, and she has $300 in savings and $100 in checking. She lives paycheck to paycheck on her $44,000 annual salary.

Jen hopes she can retire in her 60s and “just afford to live,” but she knows her debt is a deep hole to climb.

That’s why she’s asked for help from NJMoneyHelp.com.

NJMoneyHelp.com asked Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge, to help Jen come up with a plan.

Mott said the credit card debt Jen has accumulated over the years will make her retirement goal a difficult one.

She recommends Jen contact a credit counseling service as a first step to understanding what options she has to pay off the debt. These organizations can provide budget and debt counseling and may be able to set up a debt management program by working with Jen’s creditors.

“While some credit card companies will negotiate with consumers, it can often be more successful for a debt counselor to try to get reductions on interest rates and payment plans established,” Mott said. “Reducing the interest rates and being able to increase the payments will help get Jen out of the hole she has created by overspending and building up her credit card balances.”

Jen is currently making minimum payments of $1,225 per month on the seven cards with balances.

Mott said it will take close to two-and-a-half years to pay off the cards at that rate. Plus, Jen is paying almost $3,600 per year in interest. That’s money that would serve her far better if it was going towards retirement. Mott said.

She said Jen may want to consider suspending her $233 per month contribution to her 401(k) so she can apply the amount to her credit card payments, Mott said.

“It should be restarted immediately once the cards are paid off, but the additional dollars would reduce the time to pay off the cards by six months,” Mott said.

While Jen is looking for a program that can offer her assistance, she must put all the cards away except one, and that one should be for emergency purchases only.

“This may be challenging, but she needs to stop adding to the balances and begin to understand what her available income will support, otherwise she is likely going to repeat the same pattern once the cards are paid off,” Mott said. “This is going to prevent her from saving and looking to retirement.”

Having control of her spending will become even more important once she enters retirement and like most retirees, finds herself living on less income than when she was employed, Mott said.

Mott recommends she look to the National Foundation for Credit Counseling (NFCC), which provides certification for counselors, program support and standards for its members. Mott said it will help her find an agency.

She can also find a list of approved counseling agencies on the New Jersey Department of Banking and Insurance website.

CASH FLOW

Jen needs to start using an online budgeting app or software program to track her actual expenses, Mott said. This will help her get a better feel for what she spends each month.

“This will be especially important if she is no longer living in her father’s home and her costs for essentials such as rent, utilities and food prove to be much higher than they are currently,” she said. “Tools such as Mint.com and Quicken make it easy to develop budgets and track spending.”

For the moment, Jen should consider using just a debit card for purchases or a cash allowance to meet her weekly needs, Mott said.

The amount that is available would be determined by taking her net monthly paychecks and deducting the fixed expenses such as her car payment and the credit card bills. This net cash flow will give her an idea of what she can spend each week on non-discretionary items such as food and discretionary expenses such as restaurants, she said.

BANKRUPTCY

While bankruptcy is a big step, it’s one that Jen can discuss with the credit counseling organization she chooses, Mott said.

“There are no hard and fast rules for determining when an individual should pursue this route to eliminating debt, but there are some guidelines that can be considered,” Mott said.

For example, Mott said, it may be appropriate for someone whose debt is more than 50 percent of income, if the time to pay off the debt will be five years or more, or if the value of assets is less than is owed.

The two most common forms of bankruptcy are Chapter 7, in which the debts are discharged, and Chapter 13, which is a reorganization of debt with a three- to five-year payoff timeline.

Mott said an individual’s credit report will list a Chapter 7 bankruptcy for 10 years while Chapter 13 remains on the report for seven years.

SAVING FOR THE FUTURE

Jen’s monthly payment to credit cards is $1,225 per month, and that adds up to $14,700 per year.

When the debt is paid off, those funds should become a source of future savings. Mott said it would significantly enhance her financial picture.

“Building an emergency fund, increasing her 401(k) contributions and opening a Roth IRA are all options that could be considered with the excess cash flow she may have once the credit card debt is behind her,” Mott said.

Jen has both a 401(k) through her employer and an inactive IRA.

She contributes $233 per month to the 401(k) and receives an employer match of $116 per month.

At age 67, her Social Security benefit will be $1,753 per month, or $21,036 per year.

From the Social Security payment, Mott said, Medicare premiums will be deducted so she’ll net less each month.

Were she to consider filing at age 62, Jen’s payment would drop by 25 percent to $1,231 and she would receive only $14,772 each year. Taking early Social Security is not an option she can afford to consider, Mott said.

Looking at Jen’s expected living expenses when she’s no longer living in her father’s house, Mott estimated the cost of an apartment in her area to be $1,470 per month.

“Based on the budget she provided, her living expenses would come to $33,000 per year in retirement, which seems low by New Jersey standards,” Mott said. “As she works with a budgeting app, she may find that this figure needs to be adjusted, especially when she is living on her own.”

With Social Security providing $21,000 of income, Jen may need to consider part-time work while retired in order to meet her budget needs, Mott said.

“Even with market appreciation in the investments she holds in her retirement accounts, the balances are not likely to grow to levels that will provide a significant amount of additional income to her,” Mott said. “Being able to convert some of the credit card payments to long-term savings should be a top-priority for Jen.”

Money makeovers offered by NJMoneyHelp.com should be treated as general advice about personal finance and money decisions. Before you make any changes to your personal financial plan, see a professional who can consider your entire financial situation. If you’d like a free money makeover, email .