I woke up the other morning, and realised I was broke. It’s not something I was expecting. I achieved a lot of financial goals this year but, with a big investment to be made in my business, I had a lot of financial goals achieved and very little money left over for anything else. It might make me intellectually happy, I thought as I rummaged through a rather disappointing fridge, but so would a new dress and shoes. So, when the broke times come, what are some ways we can get our budgets back on track? And is it possible to save? Inspired by an article on Investopedia.
Stem The Tide
The first thing to do is to stop bleeding money. Cancel any subscriptions you feel are unnecessary- pay TV, website subscriptions, magazines. If you can’t pay a bill on time, call and ask for an extension or a payback plan so you’re not paying late fees and interest, as well as avoiding unnecessary damage to your credit report.
Know The Scene
When we feel broke, we tend to lurch from crisis to crisis without any overall plan about how we’re going to improve our finances. Sit down, and work out every bill you need to pay over the next six months. Work out which bills need to take priority, and put it all on a calendar on your fridge. Next, look at debt repayments. And, lastly, your income. When you’ve written it all down, you’ll have a fair idea of what’s coming in and out for the next couple of months.
Credit Card Distress
Credit cards are one of the main culprits in undermining our finances. Sit down and look at your credit card. Are you able to pay over the minimum rate? If not, there are a couple of options and you need to investigate taking one of them, else you’ll never get on top of your credit card debt. One, look at a balance transfer. Two, talk to your bank and pay interest only for a couple of months until you’re properly set up. Three, convert your credit card debt into a personal loan. The advantage? You’ll have a set amount to pay back every week and be able to budget around your debt. Be sure to lose the credit card in every one of those scenarios.
Increase Your Income
Perhaps easier said that done, but certainly worth a try. Discuss a pay rise with your employer, or working extra hours. Ask around if anyone needs a babysitter/ gardener/ dog-walker. Check out options online for extra income.
And What About Saving?
Personal finance experts are divided on whether it’s worthwhile trying to save when in financial distress. If you can’t pay above your minimum repayment on your credit card, you’re losing money. I would pay above instead of saving. If you can’t pay your bills, likewise. If you’ve over-extended and are short of disposable income, rest a bit easier on the savings for a while. In an ideal world, we’d all be saving 10% of our income all the time. Until we’ve realised financial security- low debt and an emergency fund at least- it might be better to concentrate on those goals as opposed to recklessly investing in savings. For myself, I’m concentrating on bolstering the contents of my refrigerator this week. Not an ideal personal finance goal perhaps, but a crucial step in the right direction.