You’ve made your budget. You’re excited to get on track. Everything looks great… until something happens.
BANG! CRASH! BOOM!
Your whole plan comes tumbling down before you even get out of the gate.
If this is you, don’t get discouraged or feel ashamed. This is waaaay more common than you think. In fact, getting your budget off the ground is one of the hardest parts of fixing your finances. But, if you can just make it through that first month or two, if you can just play catch-up and get ahead, you’ll be setting yourself up for a lifetime of financial fitness.
But, how do you do that when you’re already behind? How do you get ahead for that very first month?
That’s exactly the question our reader Jennifer posed to me the other day. Here’s what she asked:
At this moment, we are behind on everything… as in everything. I really think that a budget will work for us, and we will be making one. However, how do people go about catching up so that the budget can work? For example, I’ve made a few budgets for us in the past… The budget will look pretty good, and it never fails that I will look at it and say to myself “this is so doable, but oh snap!, there’s this, this, this, and this that we HAVE to pay this week or this or that will get cut off or repoed!” So that first week of the beautiful budget I’ve just created goes out the window! In other words, we are in a perpetual state of “playing catch up” or worse yet “robbing peter to pay Paul”. How do we end that cycle of being in constant crisis mode and be able to actually begin using the budget??????
Great question Jennifer, and it’s one I’m sure many of our other readers have. So, let’s dig in!
Budgeting When You’re Behind
If you’re behind on your bills, you don’t need me to tell you how bad it sucks. If you’re making a budget and still struggling, it can be totally demoralizing.
But that doesn’t mean you should swear off budgeting! Actually, you need to do the opposite: Cling to that budget for dear life… just make it better!
Falling behind almost always means one of two things are happening:
- You have an income crisis. – This means that you don’t make enough money to cover your basic living expenses. In many cases, an income crisis is the result a sudden loss of income – like losing a job. Out of the two issues listed, an income crisis is harder to fix. The best solution is to cut your expenses as much as possible and look for ways to bring in more money (a new job, side hustle, part-time work, etc.). You can learn more about surviving an income crisis here.
- You have a leaky budget. – More commonly, the cause of your pain is probably a leaky budget. In Jennifer’s case, as with the majority of people, her household income is greater than their expenses. That means, she is falling behind because her budget is leaky. This could be the result of budgeting errors, conscious or unconscious overspending, living at or beyond their means, or not budgeting at all. Luckily, this stuff all calls for a relatively simple fix.
Now, none of this is something to fear or be ashamed of. We simply want to identify the problem, be honest about what it is, and then use that information to fix our situation. How do we do that? Keep on reading…
How to Find the Holes in Your Budget
The first step to plugging a leak in your budget is to find out where the holes are. You need to know where the money you already have is going. In Jennifer’s case, that means taking a look at the data. She should be able to easily find the problem by tracking her spending.
Tracking your spending is exactly what it sounds like: You track and account for each and every penny you spend during the month. This can be as simple as grabbing a sheet of paper and writing it down.
Seriously, just take a piece of notebook paper and draw a line down the middle. On the left side, title the column “Expense.” On the right side, title the column “Amount.” Then, jot down the amount of everything you buy throughout the month.
If this is your first time tracking your spending, good for you! I’d start by going back to last month and tracking what you spent there, as well. Get it all down there on paper so you can see it right in front of you.
Once you’ve tracked your spending, total it up and compare it to your budget. (Personally, I like to compare my expense tracking and my budget about once or twice a week!) You should be able to see exactly where you went wrong or underestimated your expenses during the month. Make the adjustment on your next monthly budget, and vow to be more accurate from there.
How to Get Ahead
Now that you know where the problem is, it’s time to take action! It’s time to play catch-up and get ahead.
Let me be clear: This is going to suck. It’s going to be a bit painful. It probably won’t be that fun… until you start seeing the money pile up. Then, it’s going to get really exciting.
So, I want to ask you this: If you had to experience a little bit of pain for a few months so you could finally get ahead, setting yourself up for financial success the rest of your life, would you?
Yeah. That’s what I thought. So, let’s keep moving.
Step 1) Start a Written Budget
If you haven’t started a written budget, do it now. Like yesterday. In my opinion, a WRITTEN budget is THE key to getting ahead with your money.
Step 2) Cut Your Spending
In Jennifer’s case, to get the budget working properly, she needs to play a little catch-up by getting (and staying) current on her bills. She’s already doing a planning a written budget (Woo-hoo!) and is now tracking her expenses. If you’re also behind, make sure you’re doing the same.
Now comes the tough part: In order to catch-up, you’re need to cut your expenses like crazy. I mean cut everything. You need to live on a “bare bones” budget until you’re back on track.
Cut, cut, cut. Chop, chop, chop. Get out the butcher knife and start whacking away at those expenses.
Seriously, I mean cut everything.
No eating out. No fancy meals. No going out with friends. Nothing.
I’d suggest cutting out bigger expenses as well. That means cable TV, cell phones, kids activities. Every single extraneous expense needs to go until you get caught-up and ahead. The more you cut, the faster this works, the shorter time you’ll feel the pain, and the more likely you’ll succeed.
Yep, it sucks. But you got into this situation. Consider this your rehab for getting out.
Step 3) Review Your Budget
Alright, so you’ve cut everything you could. You’re living on a bare bones budget and you’re ready to rock. Next, you need to review your budget and create a plan for your bills.
I always suggest making a monthly budget first. Learning to think in terms of the month is going to be beneficial down the line when you start using last month’s income to pay this month’s bills. (I know that seems impossible right now, but you’ll get there eventually!)
Now that you’ve got your monthly budget, determine when you get paid and when your bills are due. If you get paid twice a month, make sure you have enough funds to cover your bills for that half of the month. If not, call some of those companies and ask if they’ll move your due dates. That way, your bills are spread out a bit more.
Step 4) Create a Beginner Emergency Fund
This is the technique that’s going to keep you from falling behind, so pay careful attention!!!
Falling behind is just a symptom of the real problem – living too close to the edge without any savings. If your furnace goes out and you don’t have money saved to fix it, of course your budget is going to collapse! You need a cushion to keep that from happening.
An emergency fund is that cushion. It helps you pay for emergency expenses without “robbing Peter to pay Paul.” You need it, and you need to start building it now.
Remember the money you saved by cutting your spending? All of that money (and anything extra you find lying around) needs to be put into your emergency fund until you have $1,000 saved. Keep socking all your extra money into this fund until you’ve hit that goal.
Step 5) Sticking to Your Budget
Now that you have your $1,000 emergency fund in place, keep watching your budget, tracking your spending, and living below your means. Be sure to compare your spending and your budget a few times a month – or do it a couple of times a week, like I do.
At this point, I’d also look at some of your long-term debt and consider cutting it. Is a car payment holding you back? Is your mortgage or rent too expensive? How much credit card debt do you have?
Better yet, I’d shoot to become debt-free. Pay off your debts quickly using the snowball or avalanche method; then, you’ll really feel like you have some disposable income! Eventually, you’ll want to have 3 to 6 months of expenses saved in your emergency fund. Additionally, you’ll want to have enough saved so you can pay this month’s expenses using last month’s income.
That’s a long ways off, but just realize it is possible. You can do it, but it takes time and dedication. For now, focus on cutting your expenses, saving that $1,000, and getting back on track! Take it one step at a time, and you WILL get there.
Falling behind can feel overwhelming. It might seem like there’s no way out, that you’re destined to be broke forever. Nothing is farther from the truth.
You can do it! Countless families have found themselves in the same situation as you. If you’re here, you’ve already taken the first step.
Now, work the system, plug the holes in your budget, and save that $1,000 beginner emergency fund. Once you do, you’ll be prepared to meet most hiccups that derailed you before. And when you can take care of those unexpected expenses, you’re well on your way to leading a financially healthy life!
Are you behind on your budget? What have you done to try to get ahead? Let us know in the comments below!