Home Budgeting 14 Tips on How to Budget When You’re Broke

14 Tips on How to Budget When You’re Broke

by Tara Robinson

It’s never simple to budget money, but it’s much more difficult when you don’t have enough to pay all of your expenses. You may be unemployed or working at a job that does not pay well enough to cover all of your expenditures. Either way, it’s important to change how you spend your money when you’re so short on funds. Follow these steps to learn more about how to budget when you’re broke.

1. The First Step Is To Make a Realistic Budget

budgeting when you're broke

Each month, you must know EXACTLY where your money is going. How much money is coming in and how much money is leaving?

Setting up and adhering to an accurate budget  is crucial for everyone, regardless of their present financial position, but budgeting is especially important if you are poor and frequently short on cash. You can do this easily with a budget template that you can find online or an online budget planner.

Maintaining a budget may help you prevent credit harm and other financial catastrophes, such as the necessity for a Payday loan.

Even if you’re broke, there are measures you can do to create and stick to a budget. If you’re spending more money than you’re earning each month, here’s what you should do: spend less and/or earn more. That’s all there is to it!

2. Be Proactive

Don’t wait until the collection agencies begin calling. They tend to be relentless and are not known for being considerate. They only get paid only when you pay, so you can see their priorities.

Call your creditors as soon as you see that you can’t make a payment. You might be able to work out some sort of an extension or get reduced payments for a while.

 3. Keep Tabs on Your Spending

What are your biggest expenses? Tracking your expenditures entails keeping track of every cent you spend over the course of a month. This will prevent budget leaks and may be as easy as writing it down on a piece of paper.

Take a piece of notebook paper and draw a line through the center of it. Label the column “Expense” on the left side. Title the column “Amount” on the right side. Then, during the month, write down the amount of everything you purchase. Go back to the previous month and keep note of how much you spent there. Put everything down on paper so you can see it all at once.

After you’ve kept track of your expenses, add them up and compare them to your budget. (Perhaps once or twice a week, I like to compare my expenditure monitoring and budget!) You should be able to identify precisely where you went wrong or overestimated your monthly expenditures. Make the necessary changes to your next monthly budget and resolve to be more precise from then on.

4. Stay Away From Immediate Disasters

Don’t be scared to ask for payment arrangements or bill extensions. Frequently, these petitions are granted because at times we may have unexpected expenses. If your biggest worry is eviction from your apartment, talk to your landlord, but, also, see if you can get extensions on any other expenses to free up money for keeping a roof over your head.

Let’s say your monthly rent is $650 and you’re $200 short. Your phone and cable bills are bundled together for $60, your energy bill is $100, and your mobile phone bill is $40. You may pay your rent now and avoid eviction if these bill payments are postponed until your next payday.

5. Cut Back On Your Savings Plan 

This could be the only time to stop saving part of your paycheck. The risk and repercussions of not paying your bills may be too high to cut yourself any shorter to account for your savings.

You’ve always heard to pay yourself first, but sometimes that’s not appropriate.

6. Negotiate Interest Rates on Credit Cards

If you have excellent credit, contact your credit card issuers to request a lower interest rate. You won’t know until you ask, since credit card issuers are unlikely to start a decrease on their own.

7. Don’t Go Overboard With Your Spending

You can make a budget when you know how much you spend each month. This is one of the essentials of knowing how to budget when you’re broke. I’m not going to go into the details on this since budgeting is the same whether you earn $1,000 or $100,000 per month.

You calculate your take-home income. You deduct fixed costs (things like your housing and car payments). You deposit money into a savings account. The remainder of the money is then divided up for other purposes.

I’d want to concentrate on one aspect in particular: putting money away for savings.

If you’re impoverished or feel like you’re spinning your wheels, conserving money is critical and so is preventing budget leaks.

Every money that can be spent will be spent until it is assigned another task, according to the first law of personal finance. Set aside a tiny part of your money as a budget for entertainment and search for low-cost or no-cost activities.

The goal of the budget is to put every dollar to work.

8. Look for New Ways To Make Money

If your present budget is unbalanced or you’re just scraping by, you may need to consider working overtime, obtaining a second job, or switching to a higher-paying one. Job that pays more is often available, but the nature of the work is unappealing. You may have to choose between being miserable at work and being unhappy with debt.

9. Prioritize

Life is all about priorities like basic living expenses. Look at how much money you have available and then prioritize your bills accordingly. Your mortgage, insurance, food and basic utilities normally come first. For example your cell phone budget, food budget and clothing budget are some priorities that you need to look into.

Credit cards are usually the last ones.

Consider the ramifications of not paying any bills and make a decision.

Do this step after you’ve contacted your creditors. Your decisions may be different, depending on their reactions. Now is the time to cut all your unnecessary costs mercilessly. Austerity has its time and place, and now is the time.

10. Cut Unnecessary Expenses 

Do you need to reduce your coffee consumption? Or how about going to the movies? Or do you have a lot of rotting food?

Starting with things you won’t miss, such as switching vehicle insurance companies for a lower cost or decreasing your fresh food purchases if food spoils before you can consume it, all cuts should be made first. Eating out is much more expensive and is what causes budget leaks, so think about how much and how frequently you need to do it.

11. Avoid Relying On Credit 

If cash is short, it is common practice to start using credit cards to cover for a paycheck. The cost of this money may be extremely high, so it is difficult to remove this debt later on. Don’t fall into the trap of viewing credit as a viable solution.

Consider how much you’re normally able to save and then project how long it would take to pay off this new debt. You already have more debt than you can handle. It doesn’t make sense to add even more to the equation.

12. For the Time Being, Disregard the 10% Savings Rule

When you’re living paycheck to paycheck, putting 10% of your salary into a savings account may be difficult. Prior to beginning incremental savings, make sure your budget is in order.

If you’re fighting debt collectors, having $100 in a savings account makes little sense. Your piggy bank will have to go hungry until you can get your finances in order.

13. After You’ve Put Your Budget in Writing, Go Through It Again and Again

I know it seems like a lot of effort, but the best approach to budget when you’re poor is to write everything down this will also help you remove any budgeting errors that you may face. Begin with your income and work your way through all of your expenditures.

You may do this on paper, in Excel, or using budget software programs like like Quicken or Tiller. You can even automate the process using free budgeting software tools.

It doesn’t matter whatever technique you choose as long as you practice placing your budget wherever you can see it.

Each sum you mention should be reasonable. It’s conceivable that if you’re not realistic, your budget will go off course, creating extra difficulties.

When you first start living on a budget, you’ll want to review it on a frequent basis, this will help you get budget ready. Maybe you glance at it once a week or once a month to check on your monthly expenses. It’s the act of monitoring, not the interval, that counts.

Look for areas where you may need to make changes when you review your budget. You want to simplify things so that you can remain on track with your money. You may even discover that you don’t need assistance paying bills as a result of this technique – all you need to do is keep track of your expenditures.

14. Take Control of Your Debt

Consider how different your budget would be if you didn’t have debt to worry about. Make a list of your debts and then figure out how you’ll pay them off. The Debt Snowball Method is a straightforward method to begin.

Start by paying any extra money to the bill you owe the least, then roll that payment and any additional money into the monthly payment for the following item on your list until it’s paid in full. Continue until you are debt-free.

Final Thoughts

In stressful times like these, it’s easy to succumb to your anxiety and not take action, but understand that this course of action will only make your challenges greater in the future as you go forward with your budgeting journey.

This, in turn, will teach you how to not be broke and become budget savvy. Hopefully, this article has taught some of the basics of how to budget when you’re broke.

Take a deep breath and make every effort to get your finances back on track. When you truly concentrate your attention and energy on solutions, you’ll be amazed at how much you can achieve.

Prioritize your bills, increase your income, and make a new budget. Things will be better before you know it.

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