No matter what our financial situation, everyone should have a budget. I mean, everyone! Budgeting allows you to assess how you are doing monetarily and make changes to make sure you will have enough money to cover your expenses. The best rule is to make more than you spend. It is the general basis of personal finance. Most, if not all, of the readers of Debt Roundup have a budget or are working on one. You should be budgeting out your monthly expenses along with your monthly income. We all hope to have a surplus on the credit side. But what happens when we don’t? What happens when we cannot make ends meet and it is now the end of the month and there is nothing left in the checking account? What do we do?
I have been in the situation of not having enough to get through the month. This was usually do to a small emergency fund and an unexpected bill that arose, like car repair. While I have fixed the emergency fund issue, it is always an struggle to deal with an expected expense. If they were expected, then they would be in the budget already. If you are approaching the end of the month and your finances are looking depleted, then what should you do?
There are two choices that I tend to make depending on the scenario. These choices might not work for everyone, but they can if you use them properly.
- Ask A Friend or Family for a Short-term Loan – Hopefully you have some friends or family to ask, as this is a great choice if you can use it. Family usually are willing to help you and if your are only in the hole a small amount, then they might be willing to lend you the money. The key to this choice is to come up with a quick, written contract on your payback terms. You should always make sure your friend or family member knows when they are going to get their money back. Make sure to add the loan into your next months budget.
- Use Your Credit Cards – This choice can be dangerous, but that is what I use my credit cards for. They are my emergency beyond a normal emergency fund. Since owing the credit card companies $50,000, I am very careful on when I use them. If you have a reasonable interest rate, then it might be wise to use it to purchase food or pay your last monthly bill. It would be better to revolve that debt until the next month, then to default on your bills. You can ruin your credit report really quickly by defaulting on bills. The key is to make sure that you pay off the amounts that you charged. Don’t get complacent and only pay the minimum payment. That will just result in more financial mess.
There is one choice that I do not advocate to anyone and that is Payday loans. I think the lenders are aggressive sharks that charge astronomical interest rates that hurt the very people they are supposed to help. No one wins when you are being charged an interest rate of 800%, except for the lender. Many payday lenders have been shut down in my state due to their poor business practices. There are alternatives to Payday loans, such as ActiveHours, which doesn’t charge a fee, but allows you to tip them for their service. It is a relatively new concept, but one that might be worth trying.
The one thing that you must think about when dealing with a shortcoming in your budget is what is necessary. You must distinguish between wants versus needs. You may want to eat out at a restaurant, but since you don’t have money, you need to settle for a cheap dinner (Ramen noodles anyone?). There are going to be times when money might be flowing out faster than it is coming in, but you have to get control of it and figure out where you can make some changes. Having a budget shortfall every month is not a way to live, but with some changes, you can start living on a small surplus.
If you deal with living paycheck to paycheck and are always trying to make ends meet, what do you do? How do you deal with your finances?
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