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What To Do When Your Budget Does Not Cover All of Your Expenses

By Erik Folgate

You don’t need to feel ashamed or down on your luck if your budget is busted. You’ve taken the first step to financial recovery if you’ve taken the time to write down a budget and stick to it. Here are a few tips on what to do when your budget doesn’t cover all of your expenses.

Prioritize Your Life and Money

The first thing that you need to do is prioritize your expenses. Write down the most important expenses. The basic necessities should ALWAYS go first. Do not pay a single dime to any other bill until you have paid the rent/mortgage, utilities, food, and transportation. You could even throw clothing in there, since it’s a necessity to be clothed, but usually most people have enough clothes to hold them off for a while. Once you have paid these things, then you can move onto paying other bills. One important part to this step is figuring out what bills can be taken away that are not a necessity. If you are finding yourself in a situation where you can’t pay all of your bills, then the cable, cell phone, gym membership, and any other “luxury” expense needs to be cancelled. Remember, it’s only temporary, and you can the precious cable turned back on once you get your life straightened out.

Create Extra Income

The best way to get yourself out of the hole is to go to work! It’s a full proof way to make extra money. Again, this is only temporary, but for a few months you need to be working two or three jobs to clean up the mess that you’ve made and possibly pay off some bills to help give yourself some breathing room. You can check out my Careers Section and Entrepreneurship Section to gain some helpful advice about ways to make extra money.

Identify the Financial Thorns In Your Side

Some people in this situation may have a thorn in their side in the form of an adjustable rate mortgage or a large car payment. If you are house poor, then seek the counsel of a financial advisor or a mortgage broker that you trust to seek advice on what to do about your home. You have two options. Either you refinance your mortgage, or you sell the house. Now, most people don’t want to pick everything up and leave their home, so refinancing is a good option if the cost to refinance does not outweigh the savings for refinancing your mortgage. Try finding a company that will refinance your mortgage into a fixed-rate loan without tacking on any points or origination fees. If you’ve got a huge car payment and you KNEW that you shouldn’t have bought the car because you couldn’t afford it, then sell the car. Get out of that car as fast as you can. If you aren’t upside down on the loan, then use the money you make off of the car and buy an ugly car with a lot of life left in it. Identifying the financial thorn in your side will help give you some breathing room and free up a substantial chunk of your income.

The most important thing to remember is that you are not alone. Getting behind on your bills can be extremely frustrating and overbearing. Take the time to clear you head and put together an organized, systematic plan to get your head above water. If you consider these three tips, you’ll be well on your way to getting ahead of the game and putting yourself in a position to pay off debt and start building wealth!

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://storiedmoney.blogspot.com story

    Great commonsense post. I always list my expenses in order of how important to me they are, so I can draw a line if need be. Fortunately I’ve been able to stay ahead, so I add extra things to my list like “retirement,” “Christmas fund,” and “extra debt payment,” so I still have somewhere to draw the line.

  • Eric

    Those are always tough situations. I once thought I had everything together with my finances. My wife’s money was just for savings, vacation, et al. When she left her job, suddenly we found ourselfs having to cut out so much we didn’t realize we were used to. Eating out, large bills that came through and other things we hadn’t realized but we were using her income to cover or pad. We’ve found the lifestyle change has been pretty hard to get used to. Good post!

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