by Hope
I have started putting some effort into creating an all-inclusive budget. The BAD comments on Ashley’s air conditioner post have definitely given me some food for thought.
But one of my biggest questions is this:
What if you don’t have the money to cover your budget?
I can’t be the only person that faces that. For instance:
- Someone mentioned that put away $200 a month for car expenses and maintenance. That is awesome! Thankfully our car has required little other than new windshield wipers and regular oil changes.
- And even though I know it’s a want, not a need; I certainly want to include a “gift giving” line item to cover special occasions and particularly Christmas.
- Utilities fluctuate, and although you can average them, what if in the end, your “budget” is off. I had months this summer where my utilities were closer to $300 than the average $150. That could throw everything else off in a tight month.
I know many of the “planned” budget items are variable in that they can be “skipped” during some months. But in the larger scheme of things, all the budgeted items must be covered over the course of a year (with a few “want” exceptions.)
I realize my variable income is not necessarily the norm. But it’s really not that uncommon to be short at times.
But what do you do when you are trying really hard to stick to a budget and your income just doesn’t cover it?
Obviously, you “borrow from peter to pay paul” when you can’t cover your monthly bills. I am quite familiar with that method. It’s how we have survived the last couple of years.
But how do you live with a budget when you are continually living like that?
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 5 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
While thankfully we’ve not had to worry about having enough money to cover a basic budget, but I think our strategy would still be useful in that case. We use a priority list budget, basically do a budget but each item is ordered from most important to least important. And money is spend or set aside for the more important things before being used for the less important ones.
For us this helps us deal with life happening. Whenever some unexpected expense comes up, we decide where it goes in terms of importance, and money from the bottom of the budget gets allocated to fill it up instead. If there isn’t enough then either we decide if it is truly needed and we should use our emergency fund, or if it is something that can be partially saved for now and finish paying for later.
Sorry to say but you do without. Kids activities, no eating out, watching your gas usage, and not buying unless it is an necessity. No vacations or anything extra till you have a cushion to pay when things go wrong and they always do. My dh calls it life.
I’m just starting slowly…..each payday I am adding $10 to my different “sinking funds” – vet, car maintenance, home repairs, dental, etc. Some weeks I only add $10 to one area, but it does add up over time. My goal is to have $1000 in the vet fund (we have 4 pretty old cats), and $500 in the rest. Won’t happen overnight, but we’ll get there $10 at a time.
I also have a variable income that some months will not cover a budget that is averaged over the year. Assuming that you will eventually earn enough over the year to cover everything you have budgeted for, I have found that using the YNAB principle of living off last months income is great. It’s an effort to get there but fantastic once you have, as it gives you lots of flexibility. Also, I plan to try in future paying myself a steady income. Two bank accounts, all money goes into one, automatic weekly transfers to my everyday account so that I get used to living off a stready income. Of course this involves already being somewhat secure financially, as having the money to cover regular weekly amounts when I’m getting paid less is the key to this system.
The critical element is to get very clear what is a necessity and how much it costs at a minimum! Gifts that cost money are not a necessity. Food is one but a low budget menu can be put together. Don’t fund anything that isn’t a necessity until you have covered all that you must including putting savings in an emergency fund to cover low income months and for the inevitable unexpected expenses. You may pay bills/expenses monthly but your money has to cover longer periods of time than that and you can’t live on more than you make.
You need a written budget, and you need to track your expenses (every expense). Start with basic necessities: food (groceries-no restaurants), water, electricity, and rent. Then add in things like car insurance, car payment, gas, internet, and cellular. And then add in minimum payments on your remaining debts. Can you meet these expenses with your variable income? If not, then you cannot spend money on any other extras (and you need to see if there are things you can cut–can you spend less on groceries? can you get cheaper car insurance? or cheaper internet or cellular?)! And you need to make more money (more clients/another job). If you have “extra” money in the good months, that money needs to be saved for the bad months–it should not be seen as “extra” and should not be spent on non-necessities.
If you are not making enough to pay the bills you either need to cut expenses, increase your income, or both. It’s as simple as that. You have gotten many suggestions here on how to do those two things.
Laura, those were my thoughts- spend less and/or earn more.
I agree with others. At the most basic level, you spend less or earn more. I also get the impression that you’re trying to make your budget a ‘set it and forget it’ thing. If there’s one thing YNAB has taught me, it’s that budgeting can require constant attention. Your budget reflects your priorities. If your priorities are constantly shifting as you’re trying to stabilize, then likewise, your budget is going to constantly shift. For people on more stable financial ground, their budgets are probably more hands off since they don’t have to worry as much about where the money is coming from. For me, I keep categories for everything in my budget even if I can’t fund them. This helps me to recognize what goals are foregoing for the sake of that next meal out or that new lawnmower.
I agree with Jazz above. A budget is a guidance document that shifts and changes. I think the best part of having a budget is that it forces you to consider those changes and shifts and make informed choices. A budget should account for upcoming expenses in a way that cuts down on those expenses sneaking up on you.
But if you are looking for a set of static numbers that your life “fits” into, I don’t think most people budget that way. Some things are static but certainly not everything. I think of the robbing Peter to pay Paul setup as a way to get by, not a way to get out. You survive doing that but you aren’t getting out of debt and improving your financial health that way.
My husband and I sit down on the last day of every month and make our budget for the new month. That way we discuss each category and can talk about upcoming expenses (e.g., replacing struts on the car this month). We can’t anticipate every expense, but this goes a long way. We use our previous data from tracking every penny in and out to inform our categories (e.g., what was our electricity bill last August? How much did we spend on gas/tolls last time we drove to his parents’ house?). Most categories stay the same most months, but we still discuss each one. We’re in the habit of tracking our spending every day or two (takes like 3 minutes at night), so this budget talk only takes maybe 20 minutes/month. We also calculate our change in net worth that month, which feels good and motivates us to keep going on saving! This was especially important when we were paying down huge student loans.
When I was single, I always stayed within my (tiny) budget and my challenge to myself was to underspend each category so the extra could go to debt. My husband was never a poor grad student or student loan debtor, so he’s more of a spender (he can always find $50 of stuff we “need” at Home Depot). To account for that, now we budget a little more than we think we need. We also leave a little bit of wiggle room; if we know our income is going to be ~$7,000 that month and our expenditures will be ~$5,000 (half of that is our mortgage because we live in a very expensive major city for our jobs), we’ll “pay ourselves” maybe $1,500 (IRAs, 529s, non-retirement investing) and leave the extra $500 for unforeseen expenses. I’d prefer to allocate ALL of the extra dollars for our financial goals, but since getting married and buying a house, I’ve learned to be more realistic and expect some extra expenses to come up. We really try to minimize it, though, because I at least feel like $100 toward financial progress/well-being is much better “self-care” than anything I could buy with that money.
This next month budget conversation would be great for you to have with your kids each month Hope. That way they have realistic expectations and are learning about how to budget and plan for their own finances once they are grown.
Have you thought about doing a “zero sum budget” and then splitting any extra between debt and savings? Once you have an emergency fund set up (which should be 2-3 months of expenses) you could then put all extra towards your debt? I think having an emergency fund is critical. Now that your business is picking up, you could build your emergency fund quickly.
Years ago our financial situation was very dire, we both lost our jobs and where at risk of losing our home. I had debt collectors calling – and I was too ill to work so it was very stressful. There was no way the money we had covered everything. I followed Dave Ramseys budgeting – four walls first and then pay part payments to others. Zero based budgeting, no ‘extras’ like gym or christmas presents or ‘treats’. It was hard but it was needed. Write out a budget every week – ONLY allocate the money you actually have. cut back on expenses that are wants not needs. nothing will change until you are spending less than you earn.
Yeah, there kind of is no such thing as “not enough money to cover your budget.” If you have a short-term shortfall that’s a different thing — you can use savings or even a credit card, etc — but if your income is less than your expenses on a consistent basis you only have two choices: increase the income fast (get another job, get your kids to get jobs) or cut your expenses (you spend a fair amount on things that are not strictly speaking necessary for survival, like the new expenses for gymnastics, volleyball, school lunches.) At a certain point it’s just math and life choices.
This.
Um. Your post – immediately – before this one was about how you were were adding $100-160 to your expenses for gymnastics. I would start by ditching that. And volleyball. Unless the kids pay for them. I think a suggest on that last post that your son should have used his iPhone money for gymnastics was a very good one, and would have allowed him to experience making tough choices and prioritizing.
If your question is what order do you pay bills when you don’t have enough, food (not school lunches, home food will taste better and be healthier anyway), utilities, rent, car, insurance. Credit card just before luxuries like gymnastics and volleyball and park passes and gifts to the very end, and those thing might get nothing at all. I wouldn’t bother with collections at all until you had a budget that balanced (excluding said luxuries). The damage has already been done there. Call those you can’t pay pay. Sometimes they will make some deal with you.
Your budget needs to reflect your financial reality. I am a little concerned because I am noticing the kid line items creeping up. 300 over a year is 25 per month which is fairly inexpensive in terms of cost however add another 80 for school lunch and princess already ha s a $105 line item in the budget. Gymnast is at 100 already as well and you are talking about increasing that to 160 while simultaneously arguing that you may have to rob Peter to pay paul. It’s time to cap the kid line item Hope. If princess wants anything else like pictures, yearbooks, or any other money she needs to pack lunches to save money towards what she wants. If gymnast wants an hour extra gym time then he should consider asking the coach to advertise his babysitting the younger tumblers on Friday nights to earn money towards gym time. As a mom you need to set financial boundaries and teach them that they can have some things but not ALL things. In March your student loans will start to cost money again. You have 3000 plus on a card with 17 percent interest. You only have 1100 in savings. Your budget needs to reflect these things as priorities. You CAN love your kids and set limits. Your financial future depends on your resolve to do so and say 200 a month is more than enough extra.
Thats why you need the budget! If it doesn’t balance then you are off track. What are you doing to correct? Adding in new items like new travel gynmastics isn’t the way. I think you have a hard time saying no. Think longer term. What are you going to do for medical when the medicaid runs out?
Yes, I am also curious what your plan is to cover gymnastics fees again…..it seems like you are just starting to get back on your feet and I feel like you’re going to spiral back out of control again…..
You have to have a base budget that covers your shelter, food, gas, minimum payments. All of that gets taken care of first.
And then, if you make more money than that in the month….. you SAVE, pay extra on your debts, SAVE, SAVE and maybe get a pizza:)
Hope, I’m concerned about the ongoing expense of Gymnasts phone. Who is paying for his calls and connection??
I have to agree with the others. It sounded to me when you ended gymnastics that there was something untoward happening. You can’t afford to start back up again. The Cheer suggestion has been made multiple times and you keep ignoring it – can you please explain why this isn’t a viable option given that it uses similar skills and offers scholarship opportunities while being available at most high schools?????