Budgeting When You're Broke

Go over all your bills to see what must be paid first and then set up a payment schedule based on your pay days. You will want to leave yourself some catch-up time if some of your bills are already late. If this is the case, call the bill companies to see how much you can pay now to get back on track toward positive status. Tell them you are catching up and going on a stricter budget. Be honest about what you can afford to pay.

Stashing 10% of your income into your savings account is daunting when you're living paycheck to paycheck. Balance your budget before starting incremental savings. It doesn't make sense to have $100 in a savings plan if you are fending off debt collectors. Your piggy bank will have to starve until you can find stability in your finances.

Online banking and budgeting software and apps help you categorize spending so you can make adjustments. For instance, with online banking, you can categorize your money for expenses, such as rent, food and utilities.

If you have good credit, call your credit card companies and ask for an interest rate reduction. If you don't ask, you won't know, as it's unlikely that credit card companies are going to initiate a reduction on their own.

Do you need to cut back on coffees? Or going to the movies? Or do you often have spoiled groceries? All cutbacks should start with items you wouldn't miss, such as switching car insurance companies to get a cheaper rate, or reducing your fresh food purchases if you find food spoiling before you can eat it. Eating out is even more costly, so examine how much and how often you really need to do this.

Once you've gone through the first eight steps, monitor your progress by journaling for one month. You can do this by noting everything you spend in a notebook, budgeting apps on your phone or with financial software. How you track your money isn't as important as how much you are tracking. Focus on ensuring that every cent is tracked by dividing your expenses into categories, such as rent, food, clothing and utilities.

Look at how much you are over budget and decide where you can cut. Don't rule out items that are viewed as basics, such as groceries, utilities or rent. Cooking from scratch can eliminate the cost of pre-packaged foods, and opting for generic brands over brand names will equal big savings on a cart of groceries.

Utilities can be reduced by turning off lights when you leave the room or using a lamp instead of elaborate track lighting. 

If your current budget doesn't balance or you're barely scraping by, you may need to look at working overtime, getting a second job, or possibly getting a new, higher-paying job. Often there is work that pays more, but the nature of the work is unattractive. You may need to decide if it's better to be unhappy at work or unhappy with debt.