How to Budget your Money when you’re Broke

by Sam Burgoon on October 4, 2012

How to budget while being broke

Running short on cash can make you cut expenses and re-consider how you handle your finances. If you constantly run out of money, you might need to budget accordingly. Learn how to budget your money to reach your financial goals and reduce debt when broke.

Cut Unnecessary Purchases

Do you spend a lot on coffee? Do you splurge while shopping for clothes? Start by cutting expenses on things that you won’t easily miss like getting a cheaper auto insurance policy or switching cable providers for a better deal. If you like to dine out a lot, consider eating at home for substantial savings.

Pay Important Things First

Check all your bills and receipts for needed services or products to cut. Prioritize all expenses by knowing which ones must be paid first, like home rental or mortgage fees. Food is also necessary, so be certain to update your shopping list with quality and nutritional items. Even if you are unable to pay all your bills, keep a clear record of your financial obligations.

Know that missed payments may incur hefty penalty fees and higher monthly payments depending on the type of account owed. For credit accounts, avoid hurting your credit records, which can cause future loans to be declined or only approved at a higher interest rate. Once you have figured out which bills to pay first, check if any services or products are still needed.

Create a Plan Based on Your Income

After you know which bills you must pay first and recognize where to cut expenses, it’s time to budget. Check all income sources and calculate how much money you have left after expenses. If you still don’t have any money left, consider cutting down expenses even further. Distribute your income based on your payment schedule like monthly or bi-weekly paychecks. Test the new budget for at least a month, making changes for later budgets as you see fit.

Contact Lenders and Utility Companies

If you are unable to pay your bills, call your lender or utility company for new payment plans. Explain your tough financial situation and look for ways to manage your debt or obligations directly with the creditors. Most lenders will assist you if you show willingness to cover your payments. Negotiate lower payments with extension plans based on your new budget.

Search for Extra Income

Look for ways to make more money when broke. Search for job opportunities, even part-time jobs, to get some cash and increase your available income

Being short on cash requires strict budgeting and dedication to maintain finances from getting even worst. Use sound management skills to keep away from a financial disaster. Maintain financial stability by knowing how to budget at all times, regardless of the issue.

Photo: Images of Money

About

Sam Burgoon is a social media marketing executive for several personal finance websites. He has a degree in business administration and marketing and has previously worked for companies like Bank of America and Oracle.