How to Budget when your Money is Running Out

We’ve all been there, probably more than once. I know I had to learn how to handle money when my budget was running out in the school of hard-knocks. But, when your money is running out, it’s easy to react emotionally. Some people freeze and do nothing, others by ignoring the issue, others by spending more as their form of therapy.

My goal is to help alleviate some of that panic or discouragement with some tips that I learned the hard way… So you don’t have to.

How to budget when your money is running out – in 8 simple steps

1. Take a deep breath. This is only Temporary.

This step might seem more mental than practical because it is. But it is supremely important. With most everything in life, when we lose hope, we stop fighting. When we lose sight of the bigger picture, we stop pressing forward. Don’t give up. Take 30-60 seconds, take some deep breaths, clear your head and believe – know that this is only temporary. When your money is running out, this step is the last thing you’ll want to do. But that’s why it’s first.

We can do most anything, even things we hate, if we know that it is temporary. Remember that. It will not be like this forever. Take a deep breath.  The point is, allow yourself a moment to clear your head and change perspective.

2. Go on a “Spending Freeze”

I’ve had to say this at different times in the past with my husband. One of us would look at the numbers and notice that things weren’t adding up. When this happens, put the brakes on. Completely stop spending until you find out exactly where you are.

Imagine you are a pioneer family heading west. You think you are headed in the right general direction, but maybe you stopped paying attention for a while and the horses just kept plodding on. Once you realize something is not right, stop those horses dead in their tracks. Get out your compass, track the sun, and get yourself pointed in the right direction again before you spend another penny. Don’t buy another coffee, don’t give your son a quarter to put in the gumball machine. Just stop and get your bearings.

If you don’t budget with cash, what this also does is give your debit card charges time to clear in your checking account. This spending freeze allows the dust to settle so you can find out exactly how much money you have to work with.

3. Find out the EXACT amount you have in your Checking Account

Once you’ve started your spending freeze and the outstanding charges have all cleared your account, see exactly how much money you have in your account. When your money is running out, you need to know what you’re going to do with what you have left.

On a side note,  budgeting with cash takes so much of the guesswork out of sticky situations like this. It can actually prevent some of them from happening too. If you’re wondering how to start, I’ve got your covered, learn how to start a cash budget here. I highly recommend it.  🙂

4. Total up the outstanding bills you have remaining this month

This step can be discouraging! You have to do it, though. Total how many bills you have left that are unpaid for the month, or until your next payday. Ask yourself some questions:

1. Do you have enough to cover them all with what money I have left?
2. If not, how much short are you?
3. Could you partially pay any of them?
4. Are any of them late already?

5. Double check for “Blind Spots”

Once you figured out whether you have enough to cover all of your remaining expenses or not, double and triple check for anything you could have forgotten.

1. Do you have any bills that are on auto-draft you aren’t taking into account?  (Sign up for AskTrim and they will check and cancel any unused auto-drafts for you for free!)
2. Are there any quarterly or irregular bills due?
3. Are there any music/dance/sports lessons or bills that need to be paid?

If you’re going down to the last penny and one of these bills ‘pops out of nowhere’, you would regret not checking before hand. This step could help you avoid an overdraft fee and more money problems.

6. Prioritize your expenses and Spend in that order.

The reality for some of you is that you may not have enough to cover all of your expenses this month. If that happens, what bills do you pay and what bills do you wait on? I have a full list of my bill priority recommendations in The Personal Finance Planner, and a whole lesson on it in The Financial Renovation eCourse. So, if you already have The Planner, you can check it out in there, and if you’re in the eCourse, take a look in Module 4.

But if you haven’t had the opportunity to get yourself The Planner or jump in The Financial Renovation yet, here’s a condensed version:

You are going to need to prioritize your bills based on 3 criteria: Need, Responsibility, and Necessity.

1. Things you Need to survive are things like bare-bones groceries and water.
2. Responsibilities would be things like child support
3. Necessities are almost indispensable, like electricity, heat, and transportation (gasoline, minimum car payment)
4. After those bills, you need to put expenses that you can have your wages garnished for if they are delinquent, like student loans, and IRS debt (child support is also in this category, but more important).
5. Bringing in the rear (but also very important) are insurances, credit card minimums, the internet, cell phone packages and so on.

Now that you have an organized your spending plan for when your money is running out, start systematically paying your bills with intentional and extreme focus until you can create some more breathing room.

7. Try to diagnose what got you there in the first place

This isn’t to bring condemnation, but just to objectively evaluate what things maybe you could have done differently to help keep this from happening in the future. Adjust for the next month, or better yet, take some steps to begin Prospectively Budgeting. It could change your life.

8. Revisit Step #1 and Don’t Lose Hope.

Having to figure out how to handle money when your budget is running out can be very stressful and emotional! If that stressful and overwhelming feeling of discouragement starts to flood in again, just take a break. Take some deep breaths, and remember it will not be like this forever. You can do this!

I’ve been there myself – running a $1,000 deficit per month. It is NOT fun and it can be depressing.  The only thing that got my through was setting these bite-sized goals and having hope!

I share this quote in my book The Recovering Spender “When the pain of staying in debt is greater than the pain of changing your spending habits – that is when you will make the change for good.”

So – I leave you with a question today.  Are you sick of tired of running out of money every month?