Not having enough money to pay for life’s necessities can be pretty scary, but there are a few things you can do to get you through this time with minimal hardship.
Your first task is to take a look at your monthly expenses and prioritize them. Decide what you need to pay for and what you can, at least for now, let go. Housing, food, transportation, and insurance should take top priority. Dining out, clothes, and entertainment may need to be sacrificed for the time being. Remember, this isn’t forever, when the cash is flowing again, they can be resumed.
For those items you need, you may be able to pay less than you’re currently paying by downgrading. A smartphone with an unlimited data plan, for example, costs a lot more than a pre-paid basic phone plan. And if you can reduce daily driving by working from home, carpooling, or shopping once every couple weeks rather than every day, you can reduce your gas bill. Shop around for a better rate on your insurance to reduce monthly bills, and consider how your home lifestyle affects your utility bills. Can you shut off lights more regularly, lower the thermostat, and avoid running laundry or the dishwasher unless it’s full? Every little bit helps.
When shopping, consider every purchase. Ask yourself if you really need it, and if you do, can it wait a while, or can you get it for less somewhere else. Getting in the habit of asking yourself these questions will help you become a savvy shopper in both good and bad times. This will also help you avoid relying on credit cards during this difficult period. It might be hard, but you will be so much happier when that next paycheck comes in and it is not promised to high- interest debt.
If you have credit card payments, and you simply don’t have the money, contact your creditors immediately. You may be eligible for special programs that will keep your accounts in good standing. Waiting until you are behind will not only increase your balance because of hiked up interest rates and fees, but will damage your credit as well.
- If you really need to scare up some funds, consider every option:
- Sell assets, from a garage sale to unloading securities (just beware capital gains taxes for next year).
- Obtain temporary employment elsewhere.
- If you have children who work, ask them to contribute to the household budget.
- Make and sell things if you have a creative streak.
- Ask a friend or family member for a loan. Chances are they won’t charge any or much interest, but be careful – these sorts of arrangements have damaged many a relationship.
- Borrow from your retirement account or cash value life insurance plan. Be aware, though, that you are borrowing from an asset accumulated for a specific purpose. These come with their own set of problems if you can’t pay them back.
There are other sources of funds available, but beware: they may not be in your best interest in the long run.
- Credit card cash advances – There is often an origination fee to take out cash from a credit card, and interest not only begins to accumulate immediately, but is often higher than for purchases.
- Home equity loans or lines of credit – The equity in your home might be money that is readily available for you to borrow, however, if you can’t repay the loan, you put your home in danger of foreclosure.
- Car note loans – These loans work by a borrower exchanging the title and set of keys for a loan based on the vehicle’s value. Interest rates range from 30 to 120 percent, and if a single payment is missed, the car can be repossessed.
- High interest unsecured loans – Usually lent in increments of $5,000 or $10,000, interest rates for this new breed of high-risk, unsecured loans can be as much as 47 percent.
- Payday loans – Borrowing against future income can seem like a great short-term solution, but with average annual interest rates ranging from 390% to 871%, payday loans are no bargain.
