There’s no feeling in the world quite like running out of money before your next paycheck hits — and it’s not a good sensation. It can have you feeling stressed and unsure of your options.
But, the truth is, when you’re running out of money, you still have ways to move forward. There are also steps that’ll help prevent the problem from cropping up again.
Here, you’ll get a closer look at what happens when you’re running out of money, what options you have, and how to avoid this situation recurring.
Key Points
• Running out of money before payday can be stressful, but there are ways to manage and prevent it.
• Excessive spending on fixed and living expenses often depletes funds quickly.
• Creating a tailored budget helps control finances and prevent overspending.
• Essential bills should be prioritized, and unnecessary spending should be cut.
• Exploring additional income sources and government benefits can provide financial relief.
Reasons for Running Out of Money
In order to fix a problem, we first have to understand why it’s happening. That means it’s time to take a good, hard look at your finances to learn why you’re running out of money in the first place. Here are some common causes.
Spending Too Much on Fixed Expenses
Major budget line items, like a rent or your car payment, can take a serious chunk out of the funds you have available for everything else. Although trading in your car for a bicycle or enlisting a roommate might seem like huge changes, they can also make huge differences in your financial life.
Spending Too Much on Living Expenses
Where and how you live can make a big difference in your personal finances. A person who lives in a small town with a couple of roommates will probably be able to stretch their paycheck a lot further than someone who has their own place in a major city where the cost of living is significantly higher.
Also, people vary: According to the USDA’s monthly estimates, a single adult might spend as little as about $275 to as much as $450 or more per month on groceries. Finding ways to cut down on non-fixed living expenses, like groceries, can pack a big punch in terms of not running out of cash before your next pay day.
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Spending Too Much on Discretionary Purchases
Don’t beat yourself up: We live in a world in which we’re the subject of constant advertisement. (According to some estimates, we see as many as 10,000 ads each day.) So it makes sense that we often grab that new pair of boots or book a quick weekend getaway. However, making a habit out of treating yourself or making impulse purchases can wreak havoc on your bank account.
Not Earning Enough
If you’ve cut back in every way that feels comfortable (and perhaps even some ways that do not) and still feel you’ve run out of money, the answer may be to increase your income. While starting a side-hustle can make a dent, finding a better-paid full-time job or making a career change might be a more sustainable course of action.
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Tips for When You’re Running Out of Money
Once you’ve figured out exactly where your monetary life is going awry, you can take concrete steps to make your personal finances better. Here are some ways that can help you get off the paycheck-to-paycheck roller coaster.
Create a Budget That Fits Your Needs
As you’ve doubtless noticed by now, if you don’t make a plan for your money ahead of time, it pretty much develops a mind of its own and walks away. Creating a budget is exactly the anecdote to this problem: planning ahead for where your money is going. And don’t worry, it doesn’t have to be tedious or boring.
Using one of the many online apps built for this purpose or a plain old pencil and paper, start the process:
• List your monthly income at the top, and then deducting your fixed living expenses. (Think: rent or mortgage payment, insurance, any car payments or other loans you pay.)
• Next, budget for living expenses whose amounts can change (like utilities and groceries.)
• It’s also a good idea to set aside at least a little bit of your money each month towards your savings goals, which is an objective that you can boost when you open a high-yield savings account.
• Finally, the rest of the money is yours to do with as you please, so be sure to budget for items and activities that are meaningful to you. You can have just about anything you want on a budget, just not everything.
Pay Your Most Important Bills
The next idea for what to do when you’re running out of money: Know how to handle bills that are threatening to go unpaid.
Not being able to pay your bills is indeed a sad and scary circumstance, but it’s not actually the end of the world. Stay calm, and prioritize. Important bills to put first include:
• Housing
• Health insurance and healthcare expenses
• Food
• Utilities.
Keep in mind, too, that you might be able to negotiate with your creditors or put your student loans in forbearance. Either way, it’s worth the phone call to find out.
Spend Money on Essentials Only
When money is (very) tight and you’re scraping the bottom of the bank account barrel, it’s not the right time to splurge on any fun extras.
Until you can build up a bit of a cushion (even a $1,000 emergency fund is better than none at all), limit your spending to only the essentials: the stuff you need to live. It may feel like a sacrifice today, but you’ll thank yourself in a few weeks when you’re breathing easier.
Limit Borrowing and Taking Out Loans
When you’re out of money, there are plenty of companies who are happy to give you some… in exchange for even more money they’ll expect you to pay them (aka interest).
As tempting as it is to borrow money or take out a loan when your well has run dry, in the long run, it can exacerbate the problem. So if you’re already in dire financial straits, it may actually be a bad time to take out a loan.
Use Credit Cards Sparingly
Similarly, you want to avoid racking up interest charges by breaking out your plastic when money is tight. Credit card debt is high-interest debt and can be a real challenge to pay off. Whenever possible, pay for items with cash or a debit card.
Also consider a balance transfer credit card if you already have an amount of credit card debt that is making you uncomfortable. It can give you a period of low or no interest that can help you pay down your balance.
Make Time to Make Extra Income
As mentioned above, your problem might be improved by earning more. Picking up a side gig, like driving for Uber or selling crafts on Etsy, is one road forward. Training and applying for a more lucrative career could be another path through this tough time.
Look at Government Benefits
Nobody should have to forego medical care, food, or shelter because of their financial situation. That’s why government benefits like the SNAP program (previously known as food stamps) and low-cost health care options exist.
Specifics vary by state, but your local government website should have details available and phone numbers to call. If your income is under a certain threshold, you may qualify for programs that can make it a lot easier to budget what you’re earning on other needs.
Downsize When Possible
Moving or changing your favored mode of transportation are big life changes, for sure… but they can also make big changes in your financial life, for the better. If you downsize your cost of living, you won’t have to struggle quite so hard to pay for it, which could be well worth the sacrifices.
Sell Items You Don’t Need
Selling things you don’t need can help you downsize and line your pockets with some extra change in the short term. You could have a yard sale, offer them on eBay or another online platform, or see if a local second-hand store will purchase them, among other options.
Take Care of Yourself
No matter how dire your financial circumstances get, don’t neglect your personal needs. Going outside for a walk, sitting down to eat nutritious foods, and talking to loved ones are imperative for your mental and physical well-being, and none of them are exorbitantly expensive. In addition, you might look into low-cost or no-fee financial counseling from a nonprofit to help you pull through this challenge.
Managing Finances with SoFi
You’ve just learned ways to cope when you’ve run out of money. Also make sure that the funds you do have are easily managed and earning some interest to help your cash grow.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
What options are available if I can’t afford to pay my bills?
If you can’t afford to pay a credit card bill, auto loan, or student loan payment, consider calling your creditor or lender and asking about ways to negotiate the payment amount or file for forbearance. Debt consolidation loans are another option if your debt is spiraling out of control, but they should be approached with caution.
Which budgeting methods are helpful for people that are running out of money?
One popular budget is the 50/30/20 budget rule, which says, of your take-home pay, to allocate 50% towards the musts in life, 30% to the wants, and 20% to savings and additional debt payments.
Should I contribute to my retirement fund if I don’t have the money?
As important as it is to save for a comfortable retirement, if you don’t have the money to live today, it’s hard to be focused on the money you’ll need to live tomorrow. If you’ve made all possible budget cuts and still don’t have any money to contribute to your retirement fund, so be it for the present. Consider using “windfalls” like your tax refund, bonuses, or birthday gifts to pay into your retirement accounts when they show up.
Photo credit: iStock/miniseries
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