So, you’re broke. We’ve all been there. So what do you do now? You’re barely making ends meet and you don’t even know if you can afford to buy groceries this week.
I get it. I totally get it.
Setting up a budget when you’re broke is probably the best thing you can do for yourself.
The basic budgeting steps are essentially the same, but your spending and expenses may look a little different.
So where do you start to get back on track?
Step 1 – Assess your financial situation
You can’t change the decisions from the past, that led you to the financial state that you’re in now. BUT you can change your decisions from here on out. So, the first thing you need to do, is figure out how much money you have coming in versus how much money you have going out.
Grab your bank statements for the last 2 months (paper, online, or otherwise), a pen, paper, a calculator, some music, and a stiff drink, if you need!
Separate your expenses into categories
Why do this?
Because it will help you lay the foundation of your budget.
You first need to write down your income – your salary, child support, dog walking services you do… Anything that brings in consistent money should be on this list.
The next thing you need to do is write out all of your expenses. Include monthly bills, such as : cable, internet, car payment, yes, even your Spotify subscription.
These are called fixed expenses. There are amounts that don’t change month to month.
Next, add in your variable expenses. These are expenses that you have that may change from month to month. Like groceries, gas, eating out, shopping habits, etc.
You can see a real life example and template of a budget HERE!
If your outgoing number is higher than your incoming number, that’s okay! Mine was, too, when I first began budgeting!
Next is the hard part…
Face your debt head on. Add it all up, and write it down on your paper. You need to see where you stand in terms of debt so that you can pay it off and get your life back!
Separate your debt by the minimum monthly payment for now and add it to the bottom of your fixed expenses.
Don’t worry about your savings right now, we just need to get you back on your feet. Savings will come later.
Identify your problem spending.
Do you really need that $4 iced coffee, every day? Probably not. Did you need that new pair of boots last week? Again, probably not..
You will probably have to cut your leisure expenses until you get caught back up. It’s not very fun, but it’s important.
So now that you’ve added up all of your expenses and spending habits, you need to cut where you’re spending more than you’re bringing in.
Reduce your spending.
Take a look back at step #2 and take notice of the problem spending categories. You need to cut these in order for you to make more than you spend.
Maybe have one coffee a week instead of 7. That alone will save you $96 a month! NINETY SIX DOLLARS A MONTH!
Where else can you cut spending?
Map it into your budget. Instead of your coffee spending being $120/month, reduce it to $25/month. Take that extra $75 and put it toward debt or past due bills.
You can also put that extra cash into a sinking fund account so that you can pay yourself first and not have to worry about unexpected finances in the future!
Other things you can cut out are cable (by switching to Netflix), internet (by using your phone’s data), or eating out (by cooking more meals at home).
Increase your income
You can get a second job, or get some money on the side by walking your neighborhood dogs or selling stuff you no longer use. If those don’t sound appealing to you, then you can also check out my post 5 Legit Ways To Make Money (From Home) Doing Things You Already Do.
The last and MOST important step…
Update your budget regularly
Expenses are constantly changing. By regularly updating your budget, you can keep track of every little bit of extra money you have.
Use extra money to pay down your debt, put it into savings, or treat yourself for all your hard work (just don’t treat yourself too often)!
Did you find this article useful? Please let me know in the comments below and share with your friends!
[If you liked this, you may also like…]