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Five Tips for Budgeting When You’re Broke

One 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 [3], 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 [4]. 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 [5], 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 [6])