I hope that you are never in the position where there’s not enough money to pay all of the bills, but sometimes the unthinkable happens. It may be the result of a job layoff, a period of disability or illness, divorce, or just poor financial choices. If you’re about to tune me out because you don’t think this applies to you, please read on! You may have a friend of family member that could use this important information now or in the near future.
The most important thing to remember in a situation when there’s not enough money to go around is pay your necessities first: Food, Shelter, Transportation, and Clothing. If you have these four things taken care of, you’re in a better frame of mind to make the proper decisions to deal with the budgetary shortfall.
First, before you buy anything else, buy food! Do not pay Visa before feeding yourself and your family. Yes, your menu is going to be more of hot dogs and mac & cheese than steak and lobster, but be sure your family is fed before you spend a dime elsewhere. This also means spending your food dollars wisely at grocery store and eating at home. If you can’t afford to pay all of your bills, you should NOT be eating out at restaurants.
Second, take care of your shelter, which includes paying the house payment or rent, home owners insurance, and the electric and water bill. (PS, the cable bill is NOT a necessity, so you may need to shut it off temporarily.) It’s very hard to remain calm and make rational money decisions if you’re worried about foreclosure, eviction, or the lights being turned off. Unfortunately, I have seen people get this backwards. They will be current on all of their “little bills” (various credit cards, student loans, medical bills) but be behind on the house payment. Please do NOT make this mistake!
Third, make sure that your transportation is taken care of: car payment, auto insurance, fuel, and necessary repairs. It’s hard to get to work to earn a living if your vehicle gets repossessed or you lack money to buy gas to put in the tank. Maybe you are lucky enough to have access to good public transportation that you can utilize. Be sure to reserve enough money for a bus or subway pass before you pay the Home Depot or Victoria’s Secret credit card!
Fourth, if you or your children really need clothing, then spend a reasonable amount to take care of your needs. Most of us have plenty of clothing to get us through six months to a year of living on a bare-bones budget if we had to. However, if your child’s tennis shoes are being held together with duct tape, by all means, go buy your kid some reasonably priced shoes before you pay the past due bill to the dentist.
When your household is in a negative cash flow situation, you need to take action to “stop the bleeding.” Things to consider: Can you or your spouse work some overtime, get a part-time job on evenings or weekends, or monetize a skill or hobby? Can you look for a cheaper housing alternative? Is your car payment more than you can afford? Can you trade your vehicle in for something with cheaper payments? Can your family make due with one car instead of two? Do you have a “luxury item” with (or without) a payment attached to it that you can sell to free up some cash, such as a boat, motorcycle, or ATV?
Remember, when there’s not enough to pay all of the bills, be sure to take care of your neccessities first: Food, Shelter, Transportation, and Clothing. Then take a hard look at your expenses and income to see what actions you can take to balance your budget.
Coming soon: What To Do When There’s Not Enough Money to Pay All the Bills, Part Two. I’ll be discussing how to take what’s left over after taking care of your necessities and paying your remaining creditors.