How to Budget When You’re Broke

When you’re living paycheck to paycheck, it can be difficult to get excited about budgeting. Indeed, budgeting seems like the least of your worries when you’re broke. However, this is the time when you really need a budget more than ever. Putting together a spending plan can help you re-evaluate your expenses, and help you establish priorities. And, more importantly, a budget can help you break the current cycle and move beyond being broke.

Take Care of the Most Important Items First

The very fist thing you need to do is go through your bills and figure out what is most important. Your first step is to avoid looming disaster. If you are going to be evicted, the first thing you need to do is to make sure you can make a housing payment. You might not be able to pay all your bills. Don’t ignore them. If you can’t pay your bills, contact the creditor or the company and explain matters. Find out if you can set up a payment plan to cover the costs, or if you can defer payments.

Prioritize your bills, and work out a way to make sure that the most important items are covered first, and figure out which things might need some time to work out. Realize, though, that anytime you skip a payment, or pay late, or pay only a portion of what you owe, you are putting your credit score at risk.

Look for Things to Cut from Your Spending

There are some estimates that the average household wastes between 10% and 15% of its income each month. If that is the case, then there is a good chance that you have money available — if you look for it. Go back through your bills and other spending. Are the places to cut back? Could you cut back on cable, on subscriptions, on eating lunch at work, on visits to the vending machine, on impulse purchases at the grocery store?

Create a Plan Based on Your Income

Now that you have figured out which items must be paid, and which spending is unnecessary, it’s time to put together a plan based on your income. Look at when you are paid, and how much you are paid. Look at the due dates for your bills, and how much they cost you. If you are paid twice a month, allocate money according to pay period, covering bills according to which pay period they fall into. If you run out of money before you get to the less important items, realize that you won’t be able to spend money on them.

Look for Ways to Earn More Money

Finally, when you’re broke, you need to consider ways to earn more money. Look for opportunities to start a side hustle, get a part-time job, or find other methods of getting some quick cash. Like all things money related, you need assess you situation, and honestly evaluate where you are at — and how you got there. Then you need to make tough spending choices to bring your expenses within your income.

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Comments

  1. says

    Planning my shopping trips works great for me. I find that when I go into the store for one item I end up spending more just so I don’t feel like I wasted a trip. But when I make one trip for all of my groceries I tend to watch my wallet more.

    • says

      I agree…..all the small “extra” spending ads up at the end

  2. says

    I agree that the last thing you want to do is have looming disaster, and by this I mean bankruptcy. Setting a budget, and eliminating things that you do not need should be your top priorities. Try to make at least a minimum payment on your important bills and do not default on your house. Cutting out your “wants” is such a good savings tool. If you do this for a while, and come up with a small savings from it, eventually you can reverse your financial problems and occasionally be able to purchase some of these wants again! Just some food for thought..

  3. says

    Interesting article and good advice, especially when so many people are struggling to make ends meet. I agree, focus and determination are key. I write an investing blog http://www.seeitmarket.com and touch on similar characteristics. Holding yourself accountable and avoiding the things you don’t “need” are key.

  4. says

    The most encouraging part of this post was realizing that I actually do most of the things you suggested. Of course I could always scale back. Unfortunately, I can’t be as much of a cheap skate as I could when I was single. I love my wife ;-)

  5. says

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