“How Can I Budget When I’m Broke?”

It’s relatively easy to make and stay on a budget when you’re flush with cash. If you’re broke, it may be because you didn’t have a budget that reflected your earnings. But it’s never too late to start budgeting, which ultimately could help you keep from being evicted, from increasing your debts or from ruining your credit score.

Avoid disasters

Don’t be afraid to contact your creditors and ask for payment plans or debt extensions. They will often grant these. If you’re facing eviction, contact your landlord. Discuss your problem with him or her. See if you can free up money by getting extensions on other expenses.

Review your due dates and credit card payments

Organize your bills in terms of which one or ones must be paid first. Next, create a payment schedule based on your paydays. If some of your bills are already late, call your creditors to see how much you could pay now to get back on track. When you talk with them, be honest in terms of what you think you can pay.

Don’t try to save 10%

For now, you should ignore that 10% savings rule. Trying to tuck 10% of your income into a savings account can be very difficult when you’re living from paycheck to paycheck. Don’t start incremental savings until you balance your budget. While sticking $100 in a savings plan might feel good, it just doesn’t make sense if you’re trying to fend off debt collectors.

Analyze your spending

There is online budgeting software and even apps for smart phones that can help you track your spending and organize it into categories so that you can make adjustments. If you do your banking online, you should be able to categorize your money for expenses such as food, utilities, dining and transportation with just a few clicks of the mouse.

Negotiate better interest rates

If you still have a decent credit report, call your credit card providers and try to negotiate reductions in your interest rates. You will have to ask for these as your lenders will never contact you and offer to do this voluntarily. Better interest rates mean lower monthly payments. And lower monthly payments mean you can get out of debt faster.

Slash unnecessary expenses.

Do many of your groceries end up getting spoiled? Do you have to have all that coffee? Do you need to go to the movies three or four times a month? The cutbacks you make in your spending should begin with the items you won’t miss much such as reducing your purchases of fresh food. Eating out will cost you even more money, so make sure you know how much and how often you really need to do this.

Journal your new budget

Monitor the progress you’re making in your budgeting by logging all your spending for a month. Jot down everything you spend in a notebook or use a budgeting app on your phone or software on your PC. Make sure you track every cent.

Make adjustments as necessary 

Review your spending for the past month. If you find your budget isn’t where it needs to be, adjust your spending. Look at where you are over budget and decide where you can make cuts. You may even be able to make changes in items that you would think of as basics such as utilities, rent or groceries.

Find new sources of income

If you find that there is just no way you can balance your spending versus your income, you will need to look for new sources of income. You might be able to work overtime in your current job, get a second job or even a new job that pays better. You may find that there is a job that pays more but that it’s unattractive. In this case, you will need to decide whether it’s better to be unhappy with debt or unhappy at work.