Personal Finance 

Five Tips for Budgeting When You’re Broke

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BudgetingOne of the most dispiriting things in life is to realize that you don’t have enough money to meet your bills and obligations. For most people, this situation arises when a job is lost, or hours are severely cut. For others, an unexpected financial catastrophe, such as a hospital stay, contributes to this state of affairs. Even if you have an emergency fund, you might not know how long it will last — and it might not be sufficient to cover your financial needs over time.

If you find yourself broke, or about to become broke, it’s a good idea to overhaul your budget as quickly as you can so that you minimize the damage to your finances. Chances are that you will have problems, and that your credit might even be impacted, but with careful budgeting and a good plan, you can reduce the negative consequences. Here are 5 tips for budgeting when you’re broke:

1. Prioritize Your Bills

First of all, know what absolutely has to be paid — and when. If you plan to keep your mortgage up to date, and avoid losing the house, you have to make mortgage payments. Take a look at which bills are essential to you. Secured items should receive a higher priority than unsecured items. This means that if you want to keep your car, the auto loan needs to be paid before the credit card payment is made. Decide which items are most important, and make an effort to pay those first.

2. Cut, Cut, Cut Your Spending

You have to be brutally honset about what constitutes needs vs. wants. When you are broke, it means that you need to be ruthless in cutting your spending. Look at your regular expenditures, and find ways to cut your spending. Get rid of subscriptions (TV can be a huge money leak), and be honest about what you really need. We have reached a point in society where many things that were once considered luxuries are thought of as “needs.” Re-evaluate your spending and get rid of the unnecessary costs.

3. Figure Out Payment Plans

Next, figure out a payment plan for each of your bills and contact your creditors. You can ask for extensions and deferrals if you are in hardship. Many student loans come with hardship deferrals that can help you avoid making payments until your finances improve. You can also contact your creditors and present a payment plan that reduces your payments for a specific period of time. Even bills owed for utilities can be negotiated. Call and ask about hardship programs and bill payment extension. Figure out what you can afford to pay each month, and then make the calls explaining your situation. Negotiate credit card interest rates, and late fees in order to further reduce costs.

4. Take Advantage of Community Resources

There are community resources available for those in need. Food pantries, soup kitchens, and thrift stores can help you get what you need for free or for a reduced cost. You can check in your community, or ask the leader of your church congregation for suggestions. Chances are that your community can help you weather this tough time. (Just remember to give back when you are back on your feet!)

5. Look for Ways to Boost Your Income

Finally, look for ways to boost your income. This can including selling items that you no longer use, as well as finding other ways to make money. You can look for ways to make quick cash, such as through plasma donation, or you can look for a more long-term income source. Start a side hustle, or consider taking on another job, or doing odd jobs. The important thing is to try and create a situation that will help you improve, and get beyond this rough patch.

(Photo: redjar)

{ 11 comments, please add your thoughts now! }

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11 Responses to “Five Tips for Budgeting When You’re Broke”

  1. Charity says:

    …and don’t forget to Freecycle…YES!! I said, Freecycle. Freely give and receive from folks in your community. And for goodness sakes, share! We don’t have to buy eerything we need. Folks, sharing is actually legal, and I am yet to meet a neighbor that bites. Just ask… you’ll never know… Try it… you might like it! ..:)

    • Matt says:

      What are you getting from you neighbors? I don’t think it’s cash to pay your mortgage or bills. I let my neighbor borrow a ladder all the time but I don’t think that helps him pay his bills.

      • Shirley says:

        I have used Freecycle several times and highly recommend their service. I have seen it used to find a used refrigerator for a tightly budgeted young family who needed one. Children’s clothes are a common topic. Items both large and small, are offered and requested every day and I’m sure many of them help to ‘save the budget’.

        By lending your neighbor your ladder, it perhaps helps to keep his budget in line since he doesn’t have to buy one. 🙂

  2. Ray says:

    Be careful when looking for side ventures online. There are many get rich quick scams online. Even many of the online survey rules somehow manage to disqualify you at the very last step. They may seem enticing especially if your broke, but always use due diligence and if it sounds too good to be true, it probably is.

    • Scott says:

      I was going to write the same thing – be careful and stay focused. Responding to a tattered flyer taped to a telephone poll that says you can make $10k a month working from home is NOT a good idea.

  3. Matt says:

    Good ideas in the article but at that stage your just buying time before your economic demise and eventual bankruptcy. The only thing that can help is getting a new job or getting healthy fast.

  4. Bruce says:

    1. Consider getting a super high deductible for your health insurance Shop all your insurance policies, I knocked about 900.00 a month off my blue cross by going to a 10,000. deductible. Know that you can negotiate with credit card companies they often settle for 20 to 30 cents on the dollar. But you must be late several months, and they will call you every day, but you can change your telephone number and then cut a deal. they will 1099 you at the end of the year and all the money you didn’t pay them will be treated as income by the irs.
    I ended going with a consumer credit counselling service I cut my payment in half, the interest rate is around 5.5 % I will pay off 100 % over 5 years. After i made the deal i learned that the CC companies will go lower on the rates 1-2 % i think. But it was too late for me.

  5. If money is truly tight, then all the logic in the world won’t help much. You need to face the fact that you will need to sacrifice – shut off your cable, stop eating out and going to the gym, sell your BMW or let your leased Lexus run out and buy a used car. But most people don’t really consider those to be options.

  6. Anonymous says:

    Jim, you are comming to strong with your messages. I will take but give me a break, please !!

  7. broke a$$ says:

    What happens if youre truly and utter broke. i mean dead broke. i mean no money what so ever , no car to sell and get a cheaper one. no car what so ever. no money to even eat.? whats the plan than, cuz most of these ideas involve you already having some type of money, to get to a pantry, or get here and there. i dont even have a bike. .so where do i start ????

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