In the past few years we’ve seen many companies downsize and go out of business. The housing market crashed, the stock market crashed, and many people lost their jobs. Unemployment rates have slightly lowered but are still high. And, there are many people working jobs in which they are overqualified and underpaid.
Many people have been faced with one huge financial problem: not enough money to pay the bills. Since I was divorced about a year and half ago I know this feeling all too well. Going from a dual income household to relying on yourself is tough.
There are many months over the past year that I’ve barely been able to cover all my bills. I’ve learned a lot during my first year as a single mother. And I know how to get creative as far as a budget is concerned.
If you’re one of those people not getting paid quite what you deserve or having trouble making your money stretch to the end of the month, here’s how to budget when you’re broke.
Pay for the Necessities First
We all have basic living needs. These needs are food and shelter and should come first in a budget. Once you receive your paycheck the following expenses should be paid first:
- Rent/Mortgage Payment
- Gas/Transportation Costs to Get Back and Forth to Work
- Water Bill
- Electric Bill
You probably have a stack of other bills but these four things need to be paid before anything else. Sure, your credit is going to drop if you pay your credit card bill late but that’s still a better situation than letting you and your kids go without food or baths.
Prioritize Other Bills
If you have money left over after paying for the necessities you need to prioritize everything else. Next on my list would be paying for childcare, my phone bill, and car insurance.
If I had money left over after that I would make the minimum payments on any debt I had.
Here are a few possible bills you may still need to pay:
- Phone Bill
- Car Payment
- Car Insurance
- Credit Card Bills
- Cable TV (You should cancel this if you’re broke)
You need to prioritize these by importance in your life. If you drive to and from work I would suggest that you pay your car insurance. If you pay for childcare while you work you should also pay this.
Take Advantage of Minimum Payments and Grace Periods
If you’re not able to pay some of these non-essential bills on time take advantage of minimum payments and grace periods. Your car payment and car insurance probably has a grace period.
When you’re broke and living paycheck to paycheck you should only be paying the minimum payments on you credit cards. Period. Any extra money that you have left over would be much better used in an emergency fund.
Apply for Assistance
One thing that hurts most peoples pride is applying for government assistance. If you’re living on the edge financially and barely covering all your bills you need to apply.
Government assistance in the form of food stamps, child care, housing, a cell phone, or even cash could be the difference between you sinking or swimming financially. Push your pride aside. Only taking a few months’ worth of government assistance will relieve some pressure from your life and allow you to save up a little emergency buffer. Consider asking your employer about incentive awards as well.
Work on Increasing Your Income
I’ve been in the position of barely scraping by even when I cut my expenses back as far as I could. If you’ve been living on a tight budget then I am sure you’ve already cut the frills out.
When there is nothing left to cut back you have to look for ways to earn more money. You can do this by working more hours at your current job, looking for a new higher paying job, or starting your own side business.
You can also give freelancing a shot. Freelancing can work for almost everyone. If you have a special skill set you can freelance.
The only way to change your situation is to earn more money. This probably means looking for a new job or starting your own business.
You are the only one who can change your situation. If you’ve barely been able to cover your bills it’s time for you to make a change. In the meantime pay the necessities first, prioritize everything else, and get creative. Don’t be embarrassed to accept government assistance – it may be the help you need to pull yourself out of this slump.
What other tips do you have for budgeting when you’re broke?