If the past six months have taught us anything, it’s that we can’t always rely on the income we usually receive . Even when a global pandemic isn’t smothering the economy and resulting in massive job loss, we’re vulnerable to layoffs, sudden business downturns, and factors that could reduce or eliminate our income streams. That’s an unquestionable fact of life in the current economy.
What can you do about this? When you suffer a sudden reduction in your income, how can you keep yourself afloat? The answer isn’t simple or easy, but you can take action. Here are 10 critical steps.
10 Things to Do When the Money Isn’t There
1. Stop Digging
There’s an old saying: “If you find yourself at the bottom of a hole, the first thing to do is stop digging.” This is true and essential for financial holes. The second you learn your income will be cut, cancel plans to spend extra money.
Shopping is a typical way of dealing with stress . It may feel good in the moment, but it will make every problem from your cash shortfall worse in the long term. Do what it takes to stop unnecessary spending in its tracks until you have things under control.
2. Run the Numbers
Sit down and find out how bad things are. Go through your past few months of bank statements, and look at your calendar for upcoming irregular expenses like a child’s birthday, a doctor’s visit, or scheduled maintenance for your car.
Whether or not you usually stick to a budget in your regular financial life, it’s essential to know as accurately as possible how much money you have to spend in the coming weeks and months. While going through this process, note habitual spending that’s necessary and what you can do without for a while.
This process tells you exactly how much trouble you’re in and can help you form a plan to get yourself back on track.
3. Review Terms
Review the payment terms and late payment policies for your regular bills, like utilities, rental storage, car insurance, and your mortgage. Use this to prioritize payments if your shortfall is massive enough that you can’t pay all your bills in a given month.
For example, say your garbage company has a hefty penalty on 10-day late fees. However, your electric and water bills have no fees until you’re 90 days late. In this case, you should pay your garbage on time monthly while staying a bit looser with your electric and water payments.
Of course, you ideally want to pay all your bills on time every time. But this research will help you make the smartest possible decisions if that proves impossible.
4. Cancel Subscriptions
Subscription services like premium sports channels, box deliveries, and print magazines tend to be a sort of sleeper cell in your finances. They don’t cost much, and you’re used to them slowly bleeding your finances, so you don’t really notice them. In good times, this isn’t necessarily a problem, but when you’re struggling to make ends meet, reducing these expenses can make a big difference.
Review your statements for recurring charges, and ask yourself how vital each one is to your happiness. There’s nothing wrong with keeping that sports channel if you watch it with glee every week. But that membership to the gym you never visit, or the subscription box shoes you rarely wear, should go.
5. Find Extra Cash
For short-term financial hits (like a week without work or a tax bill), this might mean finding spare cash in a savings account or going through coat pockets and couch cushions. It can also mean selling used books or old sports equipment. Whatever it takes to make up for the temporary shortfall and keep things moving forward.
For a longer-term problem (getting laid off or a major economic downturn), you need to find extra ways to earn cash. This could be a side hustle , a regular part-time job, some kind of passive income project, or whatever else you can find. The point is to create a regular stream of extra funds however you can.
It pays to get creative. Look at your resources, both physical and mental, and brainstorm how to turn them into the cash you need. Who knows? You may find an option you like better than your current solution.
Under no circumstances should you even consider using a payday loan outfit to provide this extra cash. Their interest rates are extremely high, and you risk getting trapped in a spiral of paying fees every month moving forward. This makes your financial situation much worse when you should be taking steps to make it better.
6. Call Around
Once you learn you will experience a budget shortfall, call the vendors you’ll owe money to in the coming months. Find out how flexible they can be with due dates, late fees, finance charges, and even pricing. You might find that a company — especially one you’ve done business with for a long time — will offer you deals to keep you happy when you’re having trouble. Many companies that won’t offer a discount will still put your account on hold so you don’t have to pay or incur new charges until you’re back on your feet.
During these calls, ask for the representative to email you any offer made in writing. That way, you have a reference to look back on later and proof of the offer if you talk to a new person when you take advantage of the offer.
7. Hold a Fundraising Event
A one-time cash infusion can help in any budget shortfall. Consider holding a garage sale, crowdfunding event, or training course related to what you do for a living. As with finding extra cash, get creative. Think of how to make a few hundred, or a few thousand, dollars with your energy one-shot expenditure.
For short-term problems, this might be all you need to get by. You could even experience one of the best months of your financial life so far. In a longer-lasting financial dilemma, aim to earn enough money to help a little for several weeks or months to come.
8. Identify the Silver Lining
We’re not telling you to be cheerful about financial stress. However, most causes of an income shortfall also come with opportunities. For example, getting laid off can mean lowered expenses from gas, work clothes, and eating out.
Look hard at what caused your income shortfall. Find the ways it can save you money or create opportunities to earn income in other ways. Leverage these small advantages to help you make it through this lean time, and even to refocus your priorities once your income stabilizes.
9. Cut Corners
Go back through your statements and look for every way you can reduce any given bill by 5% to 10%. Some common opportunities include:
- Reduce utility bills with simple changes in your habits
- Cook large, inexpensive meals and eat leftovers instead of dining out
- Downshift your cell phone plan to less data per month
- Carpool to work to save on gas
- Opt for a less-expensive plan at a gym, day care, or other service
- Skip alcoholic drinks when eating out
- Put premium entertainment options on hold
- Skip a costly event you go to regularly
The goal isn’t to reduce your life to a joyless experience with only the essentials. Instead, just trim a little fat off everything you do, just long enough to make it through the crisis. When it’s over, consider how much of the fat you can leave off and still be happy.
10. Cure the Disease
Finally, look deeply at the cause of your sudden cash shortfall. In some cases, the cash shortfall is a symptom, not the disease. The disease might be the tenuous position of the career you chose or a lack of financial discipline in your personal finances. It could even be a personality trait or home situation that leads to getting fired frequently.
Be honest with yourself and assess what changes you could make in your situation to prevent the next hiccup in your income. Once you’ve identified what you can do, create and execute a plan for doing it.
If you’re experiencing a sudden cash shortfall right now, the best thing you can do is go through the list above. If you aren’t experiencing a shortfall, there’s an important step you can take right now to help yourself in the future: start your emergency fund.
Do whatever it takes to get $500, then $1,000, then one month’s worth of expenses saved in an easily accessible account. That way, if you suffer a cash shortfall in the future, you can borrow money from yourself and keep moving forward.
Sean Picket is a financial journalist in Florida. Over the years, he’s used many of these strategies himself to contend with financial rough spots.