Beating Broke

Personal Finance from the Broke Perspective

What to Do When You Have More Bills Than Income

By Leave a Comment

It can happen to the best of us—we have more bills than income.  Every person’s situation is unique.  Maybe you lost your job, or you had a medical emergency, or you just went through a divorce.  The situation doesn’t matter.  What matters is that you find yourself in a desperate position.  Rather than panicking or ignoring the problem, know that there are strategies to implement to get yourself out of this position.

More Bills Than Income

Steps to Take When You Have More Bills Than Income

The process of getting out of this situation isn’t quick, but finding your financial footing again can be done.

Write Down Your Financials

The first step is to take an honest account of where you are.  How much money do you have coming in?  How much debt do you have?  What are your monthly payments and bills?

Cut Ruthlessly

Now that you have your financials on paper, you need to cut ruthlessly.  What do you pay for monthly that you can slash from your budget?  Start first with subscriptions like DisneyPlus, Netflix, Amazon, etc.  You can get those services back once you no longer have more bills than income.

Next, look at categories you can’t eliminate but can reduce.  We all have to eat, but we don’t have to go to a restaurant to do so.  If you’re not already cooking all of your meals at home, now is the time to start.  Also, make a plan to shift the type of food that you’re eating so you can lower your grocery bill.  Now might be the time to eat some beans and rice and vegetarian soups.

Learn how to lower your electric bill.  Turn off appliances and devices that you’re not using at night.

Consider switching cell phone providers so you don’t have a high monthly cell phone bill.  You might want to move to a lower cost provider like Ting or Tello Mobile.

In short, cut or reduce everything you can.  Then, you’re on to the next step.

Prioritize Payments

More Bills than Income
Photo by Scott Graham on Unsplash

If there’s not enough money even after slashing your expenses, there’s not enough.  Once you write down your financials, list your bills in order of importance.  Think survival here.

Survival Expenses Should Always Be Paid First

Bills and expenses that you likely want to be sure you pay every month can include:

Food,

Clothing,

Utilities,

Housing,

Transportation

The most important goals right now are to feed and clothe yourself as well as keep the lights on (along with the heat or air conditioning) and maintain your house and car.  Without the latter two, keeping and getting yourself to work is very difficult.

Keep in mind, you’ll still want to be conservative in these categories.  You won’t be eating fancy meals and you won’t be buying designer clothes.  You’ll spend the minimum you need to get yourself fed and clothed.

Expenses to Pay with the Remaining Money

After you’ve done looking at your spending priorities, look at how much money you have left.  You may find that you have many more bills to go and only a little money left.  That’s okay.  You knew you were in this position, and now you’re writing it all out and making a plan.  This is empowering even if it feels terrifying.

Let’s say you have four debts remaining and you only have $250 leftover.  Spread that $250 between each of your remaining debts.  For instance, let’s say your four debts have these balances:

CC #1: $10,000

CC #2: $3,500

CC #3: $5,000

CC #4: $1,500

At this point, don’t pay attention to the minimum payment.  Instead, add up all the debt, in this case, $20,000, and figure out which percentage of debt each is.  For example, CC #1 represents 50% of the remaining debt, so you’ll give it 50% of your remaining money each month, $125.  CC #2 is 17.5% of your remaining debt, so it will get 17.5% of your remaining money–$43.75, and so on.

Negotiate Credit Card Rates

If you think your current financial situation is temporary, call your credit card company and ask them to reduce the amount of interest you’re paying.  By doing this, more of your monthly payment will go to principal, lowering the overall amount that you owe.  You’ll likely be successful with agents lowering your rate about 50% of the time.

Negotiate Monthly Payments

If you feel your financial situation may last longer than a few months, call your lenders and explain your situation.

Credit card companies have the power to reduce your monthly payment.  When you negotiate with them, they will ask you how much you can pay monthly.  Using the math that you did above, let them know exactly how much you can pay a month.  (You’ll tell credit card company #2 you can only pay $43.75 even if your monthly payment is $70.)  The credit card companies will likely lower your payment to what you can pay because you’re making a good faith effort to meet your obligations.

Remember to call your other lenders.  Your mortgage company may be able to work with you to reduce or temporarily suspend payments.  You can also apply for deferrals on your student loans.

The important advice is to call these companies early, before you fall significantly behind.  Call them while you still have good credit.

Find a Side Hustle

More Bills than Income
Photo by Garrhet Sampson on Unsplash

Reducing expenses is important when you have more bills than income, but the flip side is just as important.  Can you start a side hustle as a way to make extra money and boost your income?  I started freelance writing 10 years ago when our youngest was a baby.  Now, my freelance work contributes 25% of our monthly income.  Imagine adding an extra 10 or 20 percent to your current income?  How would that money help you improve your financial situation?

Final Thoughts

If you’re in the unfortunate position of having more bills than income, know that you’re not alone.  There are steps you can take to improve your financial situation and help you survive this current financial difficulty.  Most importantly, remember that this situation is temporary.  Things will get better.

Read More

How to Pay Down Your Credit Card Faster Even If You Don’t Have Extra Money

How to Feed Your Family on a Low Budget

How to Create a Zero-Based Budget in Excel

How to Create a Zero-Based Budget in Excel

By Leave a Comment

Whether you feel like your finances are a mess and you don’t know where the money goes every month, or you want a better handle on your spending and saving records, I highly recommend keeping a monthly budget.  I know, I know, people always complain that they don’t want to keep a budget, or that their finances are too complicated for a budget.  The simple truth is, once you learn how to create a zero-based budget in Excel, keeping a budget is quite easy.   And if you’re short on cash, that’s all the more reason why you should keep a budget.

How to Create a Zero-Based Budget in Excel

Why Keep a Budget?

A budget can be helpful at the beginning of the month to act as a map.  This map tells you how much you have to spend and save and helps direct how you use your money.

At the end of the month, when you fill in what you spent, the budget serves as a financial journal, so to speak.  I find it very helpful at the end of the year to see how much I spent on groceries, miscellaneous, etc.  That helps me make next year’s budget.  Also, if my savings is smaller than I would like, looking over past expenditures helps me see what was the cause.

Why Use Excel?

There are so many budgeting software programs out there.  Why not use one of them?  Well, you certainly can, but I’ve discovered that most of them charge a monthly or yearly fee.  I don’t know about you, but I find it irritating to pay $5 to $8 a month just to have a platform for maintaining my budget.  However, after you initially buy Excel, it’s completely free!  And, once you learn how to use Excel, it’s easy to use.

Sure, you could keep your budget on paper, and I did that when my husband and I were first married.  However, as finances get more complicated, a paper budget is harder to maintain.  It’s also harder to evaluate your spending at the end of the year because you can’t organize it by categories and expenditures.

What Is a Zero-Based Budget?

A zero-based budget simply means that each paycheck, you plan expenditures that are equally to your income.  So, if you create your budget, and you discover you have an extra $200, you don’t just leave it sitting there.  (Most people will slowly pitter away that money during the month.)  Instead, you earmark that extra money for something.  Maybe it goes to your emergency fund.  Maybe it goes to debt repayment.  The point is, you give that money a job so you don’t spend it because you see it as “extra.”

How to Create a Zero-Based Budget in Excel

Creating a zero-based budget in Excel is fairly easy and quick.

Create Categories First

When you start your budget, you’ll want to have several categories.  These categories will run vertically down your Excel column.

Categories to Add to The Budget

The first column should have several major categories:

  • Income
  • Fixed Expenses
  • Variable Expenses
  • Debt

These categories represent your income and all expenses for the month.

How to Create a Zero-Based Budget in Excel

Fixed expenses will be those expenses that are the same month after month.  Think rent or mortgage, cable & internet, etc.

Variable expenses will be those expenses that vary every month such as gas, groceries, spending, utilities, etc.

Debt will obviously include all of your debt such as credit card payments, student loan payments, car payments, etc.

By now your Excel spreadsheet should contain two columns.  The first should be the broad categories of income, debt, fixed expenses and variable expenses.

The next column should contain the names of all of those particular expenses.

How to Create a Zero-Based Budget in Excel

Get Ready to Record Data

After that, you should have two new category headings, each in their own column—Budgeted and Actual.

At the beginning of the month (or pay period), you will put in the budgeted amount you plan to use for each category.

As you incur expenses, you will put the actual spending under the “Actual” column heading.

Customize to Your Choosing

At this point, you can customize how you would like.  Some people focus on the aesthetics and make each column a different color.

Some people budget for the entire month, while other people budget for each paycheck in the month, whether that be four or five for a weekly paycheck or two paychecks for a bimonthly payment.  You decide what works best for you.

Keep in mind, if you look in Excel, you don’t need to create such a simplified budget.  Excel has plenty of budget templates already designed for you such as this:

How to Create a Zero-Based Budget in Excel

What If You Don’t Know How to Use Excel?

What if you’re convinced you need a budget, but you are intimidated because you don’t know how to use Excel?  No worries.

There are plenty of free online tutorials that can teach you how to use Excel.  If you’re a visual person, check out YouTube tutorials.  If you prefer online websites that explain how to use Excel, there are plenty of those, too.

For the most part, learning how to create a zero-based budget in Excel only requires the most remedial Excel knowledge.

The only tricky part is that in some places in your budget, you will likely want to add a calculation formula.  For instance, if you have a category for “Emergency Fund” and at the end of the month you want the $400 you saved this month to be combined with the $600 you saved last month, you’ll need a calculation formula.  Again, this is easy to learn in less than two minutes through a video like the one below:

Final Thoughts

Learning how to create a zero-based budget in Excel will be worth your time!  Once you have the budget set up, you can create a plan for your spending and also track how you spent your money at the end of the month.  When you have a clear view of how you’re spending your money, you’ll be able to have more control of your money.  As a result, your financial situation should improve.

Living on a Tight Budget: Should Groceries Be the First Place You Cut?

By Leave a Comment

If you’re like me, the last few years, you may have felt that you’re simply treading water when it comes to income and expenses.  It seems every time our income goes up, our expenses go up, and I’m not talking about lifestyle inflation but rather insurance premiums and deductibles, etc.

Like many people, I try to cut corners to make our money stretch as far as I can.  I’ve certainly had times a few years ago when I bought the cheapest groceries that I could find by using coupons and sales, even though the food was processed and not that good for my body.

I rationalized that I was being frugal, and, I’ll admit it, I was proud of myself.  Never mind that we were eating casseroles that we didn’t really like made with processed foods or that the leftovers often went to waste because we didn’t want to eat the meal again.  Never mind that both my husband and I had cholesterol well over 200 even though we were in our thirties.

Change in Eating Habits

However, over the last few years, my opinions on grocery shopping, the foods we eat, and how to save money have changed. I still like to save money (and I still need to in order to make our budget stretch), but now I do it differently, and I feed my family differently.  A few years ago, I went Paleo.  I dropped a lot of weight, and my cholesterol level settled around 155, even though I was a few years older. True, our grocery budget went up, but not by as much as I expected.  I learned ways to buy healthy food at a reasonable price.

Where Else Can You Cut Besides Groceries?

Should you Cut groceries first?
Where would you cut first?

Sometimes, especially when money is tight, groceries seem like an easy place to cut.  Convenience foods bought with coupons can be had for a steal.  Take a look around Pinterest, and you’ll find many posts of bloggers touting how little they spend for groceries.

But is this a good thing?  I know groceries are typically one of the largest monthly expenses for a family, but should this automatically be the place we look first to reduce our budget?  After all, there is great truth in the adage, “Pay your farmer now, or pay the doctor later.  In fact, “Americans spend nearly 20% of their income on healthcare costs, while on average spending 10% of their income on food. . .Considering the age-old adage, ‘an ounce of prevention is worth a pound of cure’ may be the first step to attempt to reduce healthcare spending—and the key place to start is food consumption.  If you start to consider your diet a form of preventative health care, you might start rethinking your daily meals” (University of New Hampshire).

Take a look at your budget.  If you don’t automatically slash your grocery budget, where else can you cut expenses?

If you don’t short change your body healthy foods, you’ll save thousands on health care later on.  Meanwhile, why not consider dropping your smartphone and getting a “dumb” phone?  (Yes, I still have a flip phone for emergencies that we bought 10 years ago.)  Can you drive your current vehicle a little longer so you don’t need to have a new car loan?  Can you drop cable?  Do you have subscriptions you’re paying for but you don’t use?  Likely, there are several lifestyle choices you can make to cut your expenses without compromising the quality of food you can buy and eat.

Do you cut other expenses so you can continue to buy quality foods, or do you prefer to slash your grocery budget?