Not having enough cash to pay your bills is stressful, especially when you don't get paid for another few days. Here at Your Money Line, we have seen participants in almost every situation imaginable, and yes, we’re even here to help you know what to do when you run out of money. Have you ever run out of money and weren’t sure what your first step should be? Check out these 6 steps to guide you through it.
#1: Prioritize Your Spending
One of the first things you need to do if you consistently find yourself running out of money is to do a spending inventory. A spending inventory allows you to see where you are spending money and identify any patterns.
Prioritizing your spending definitely isn’t the sexy or fun answer, but neither is being broke. As you go through each of your purchases, you need to ask yourself if the purchase you made was a need or a want. You will need to be honest with yourself for this one because you can justify just about anything. “I ran out of money, and it was hard, and I just got paid, so I deserve to treat myself” isn’t a solid justification to continue the paycheck-to-paycheck cycle. Trust me, just because you can justify something doesn’t mean you should. When we cannot meet our financial obligations every month, you must eliminate all the excuses and see your spending for what it really is.
#2: Pay your most important bills and let the ones you can do without go
To decide which bills you will pay and which ones you will have to do without, you have to make a list starting with the essential bills. As you decide this, you need to make sure that your safety and well-being are taken care of first, including:
- Your shelter, whether that be rent or your mortgage, you need to make sure you have a clean, safe place to live. We recommend you don't spend more than 25% of your income on housing. If, at this point, you notice you are spending way more than that 25%, you can make an effort to find a more affordable living situation. This may not be the immediate solution, but it could be important for your long-term success.
- Food. You have to feed yourself. Period. You may not be eating steak, but you need to eat.
- Utilities. What is included in utilities will depend on your situation. You need to keep the lights on and the water running. If you work from home, you would include your internet here and your cell phone if your work depends on it.
- Transportation is necessary if you depend on it to get to work or take your kids to school or daycare. Included in your transportation cost should be insurance and gas. Please note, if you don't make your car payment, they could repossess your car.
Child support can often be forgotten or put on the back burner but it shouldn’t be. Paying your child support is not only an obligation to care for your child but it can also lead to some pretty serious consequences when not paid.
What if you can’t pay the bills?
So you have prioritized your spending, and you’ve made a list of the bills you know you have to pay, and you may still be thinking, what do I do if I can't pay the rest of my bills?”.
The general rule of thumb is to communicate with your service providers early and often! Ask them if they have any assistance programs or if there are other things they can do to work with you.
You will need to identify which of your debts are secured and those that aren’t. Secured debt is debt that has an asset tied to it, like your home. Unsecured debts are things like your credit cards. You’ll notice your credit cards aren’t listed in the bills you must pay every month. Why? Because they aren’t going to come and take the stuff you bought with that credit card! You are going to get a late fee, and your credit score is going to be affected. You may even get a nasty letter from them, but know that your necessities come first.
#3: Cut down on your spending
At the end of the day you really only have 2 options, you either need to increase your income or decrease your expenses. There are plenty of ways to creatively cut back on your expenses even when you feel like you have already cut out everything you can.
1- Refer back to your spending inventory and first look at all of those “wants.” What patterns did you notice? How can you hone in on those patterns and either eliminate them, replace them, or reduce them?
2- Call your utility companies like your phone and internet, and try to negotiate for a lower price. We all know there is someone out there paying less for the exact same service you have.
3- Get creative with your transportation. Look, I get it. I live in an area with high crime. I’m not about to go jump on a city bus, BUT you could talk with coworkers that live nearby and carpool to work. You could get really intentional when you run errands so you cut back on any back tracking. If you are a 2 car household consider going down to 1 car.
4- Shop from your pantry and freezer first, oh, don't forget your fridge too. We all know there are some veggies in there that are about to go bad! But in all seriousness, we waste so much food and therefore money. This can be eliminated as well as reduce your immediate grocery bill by taking inventory of what you have and planning your meals around that.
5- Are there any expenses you can share with others? This could look like sharing streaming services and splitting the bill. It could also look like sharing your internet with your neighbor (if you are in an apartment or close proximity to your neighbors). Get creative and think outside the box.
#4: Consider government benefits
When you are running low on cash there are plenty of government benefits you can apply for if you meet each programs income requirements. Typical ones to consider include: WIC, SNAP, and Medicaid.
There are other ones that are often over looked such as the LiHEAP (Low-income Home energy Assistance Program) that can help cover your home utility costs. This program also protects you from having your utilities shut off during certain times of the year. Contact your local 211 number to learn about government benefits in your area.
#5: Make some extra money
It seems like nowadays with inflation being so high, people running out of money is a normal topic at the water cooler. You may have even thought “I’m running out of money” yourself. We are all feeling the squeeze, but there is a solution.
As I mentioned before, if you can’t cut your expenses any more it may be time to increase your income. When you have run out of cash, making extra money can be easier than you think, especially when you are just looking for something to make ends meet.
Consider signing up for a ride sharing service like Uber or Lyft. If you love animals you can watch other peoples pets when they are at work or go out of town.
Do you enjoy shopping? Becoming a personal assistant or participate in opportunities like instacart could be an option.
If you prefer to stay at home there are still plenty of options as long as you have a computer and reliable internet. There are lots of people, including small businesses, who are looking for virtual assistants.
There is always the option to sell stuff. You likely have things laying around the house, in your garage or even in your closet that you don't use anymore. Some of them could even sell for a pretty penny. We used to have a standing water dispenser, you know one of those you usually see in an office. We never used it and decided to sell it…We made over $100 on that thing! You can easily sell things on Facebook or on other apps like Nextdoor or Offer up.
A word of caution, when you are running out of money it may not be the best time to start working for a mutli-level marketing company or starting a crafting business that requires upfront cash to get going.
#6 Avoid borrowing
When things get stressful and people run out of money they try to look for the quickest solutions. It may seem like borrowing money is the best option but it rarely is.
We want to avoid borrowing money from our family and friends. While it may be a convenient and the less expensive option, it could come at the expense of your relationship.
We have all heard how important it is to avoid payday lenders and title loan companies but you will also want to avoid online cash advances. Because it's 2022, there are lots of apps that will let you borrow smaller amounts of money but they also often come with a high price tag.
You may be tempted to swipe your credit card and there are times when you may have to use credit to put food on the table but we should be doing everything in our power to cut expenses and increase our income before we do that.
It can be frustrating when it feels like payday never comes around because as soon as it does your bank account runs out of money again. When we can create a plan and gain the discipline to stick to it, big changes can happen. Our Financial Guides here at Your Money Line are helping employees just like yours overcome the struggles of living paycheck to paycheck. To learn more about how we can help your organization and to demo our product visit our contact page.