Running out of money can be a stressful experience. Whether you’re watching your savings dwindle over time or find yourself running out of money before your next paycheck comes in, the worry that you won’t be able to cover your expenses and financial obligations is a real problem for many people. It can lead to missed bill payments, an increasing reliance on credit cards or loans, and an inability to save for the future.
If you recognize the signs that you’re running out of money, you can take action. The first step is to understand what’s causing your funds to dry up. Then you can implement strategies to help you regain balance and work toward greater financial stability.
In this article, we’ll cover:
Reasons you may be running out of money
Several factors can cause you to run out of money to cover your expenses. Understanding these reasons is the first step in regaining control of your financial health.
Unexpected expenses
When life tosses you a financial curveball, it can throw your financial landscape into turmoil. From a big unexpected expense, to a series of unfortunate events, to losing your job, unforeseen disruptions can easily leave you running out of money. If you don’t have an emergency fund to cover these unplanned expenses, you may have to go into debt or do without important things to make ends meet.
Living beyond your means
Spending more than you earn can quickly deplete your finances. When your expenses outpace your income, you may find yourself running out of money before you get paid or using up your savings. And if you cover the deficit with credit cards in the moment, you could wind up running out of money later when your minimum monthly payments start mounting.
Living beyond your means can be driven by many causes, including a high costs for essential expenses as well as overspending on discretionary expenses or falling into the habit of impulse buying. If you don’t keep tabs on where your money is going, it’s easy to lose track and end up overspending.
Low income compared to expenses
Sometimes, running out of money happens simply because you’re not earning enough to cover your basic needs. If your income doesn’t support your cost of living, you might find yourself continually running short. Living paycheck to paycheck can put you on shaky financial ground, struggling to cover essential expenses without running out of money before the next payday. This can be a result of underemployment, stagnant wages, or living in a high-cost area without corresponding income adjustments.
What to do when you’re running out of money
If you find yourself running out of money, there are several steps you can take to regain control of your finances and start turning things around.
Assess your financial situation
The first step is to get a clear picture of your current financial status. List all your income sources and monthly expenses. Take note of recurring payments, how much you spend for necessities, your discretionary spending, and any debts. This assessment will help you identify the areas that are straining your finances the most, sort out which expenses are truly necessary, and identify where you can cut back costs immediately.
Create a budget
Building and sticking to a budget allows you to make a proactive plan for how you’ll spend your income. Use what you learned from your financial assessment to total up all your monthly income, including your wages as well as other money you receive from things like extra jobs, child or spousal support, and government benefits. Then sort your expenses into budgeting categories and add up how much you’re spending overall. If you’re frequently running out of money, you’ll likely find that your expenses are more than your income; you’ll need to balance your budget by cutting back on expenses.
Prioritize your most important expenses
When funds are limited, it’s crucial to prioritize essential expenses. Focus on paying the non-negotiable costs that ensure your basic needs are met, such as housing, food, utilities, health coverage, and minimum debt payments. Determine which expenses are less pressing and could be reduced or eliminated if you’re running out of money. This process involves understanding the difference between needs vs. wants. Needs are essential for survival and well-being, while wants are discretionary expenses that you could go without when money is tight.
Implement cost-saving measures
Look for practical ways to save money on both essential and discretionary expenses. For instance, you might reduce the cost of necessities by using coupons at the grocery store, shopping for better deals on insurance plans, and adopting habits to save on your electricity bill.
If discretionary spending is the culprit behind running out of money for you, find ways to reduce how much you spend. Consider canceling subscriptions you don’t use, dining out less frequently, and attending free community events instead of spending money to attend movies, concerts, and other events.
Negotiate bills where possible
Review your recurring expenses and see if there are any opportunities to negotiate lower rates or eliminate unnecessary services. Contact your service providers to discuss options for reducing your bills. For example, you may be able to negotiate lower rates for your internet, phone, or insurance services. Many companies offer better deals if you bundle services or plans. Municipal utility providers often have programs to help people on lower incomes, so call and ask about your options.
Lower your debt payments
For many people, high debt payments are a primary reason they’re running out of money. If you’re carrying balances on multiple high-interest credit cards, you might see if you can consolidate them with a lower-interest personal loan or balance transfer card. You may also be able to consolidate your student loans to reduce your interest rate and monthly payments. Just be aware that consolidating debt comes with multiple considerations: your credit score can affect your eligibility and interest rate, and you may have to pay fees in some cases.
Don’t be afraid to ask for help with your debt payments. Many lenders will work with you to devise an affordable payment plan if you just call and ask. You can also take advantage of free and low-cost credit counseling organizations that help you make a plan to reduce debt.
Look for extra income
When you’ve tightened your belt as much as possible and are still running out of money, you may want to consider finding additional income sources. If you have the time and your circumstances allow, you could pick up a side hustle like freelancing, gig jobs, selling used clothing or items, or monetizing a hobby or skill. A seasonal part-time job may also be an option for earning extra income to get you through a rough patch.
Consider government benefits
If you’re struggling financially, government benefits and assistance programs could provide temporary relief. Depending on your situation, you may qualify for support from federal, state, or municipal programs designed to help those in need, like SNAP (Supplemental Nutrition Assistance Program), unemployment benefits, and housing assistance. Research and apply for any benefits you may be eligible for to help bridge the financial gap when you’re running out of money during tough times.
Running out of money? Start taking action
Running out of money is a challenging situation, but proactive steps can help you overcome it. By understanding the causes of financial instability and taking immediate actions such as creating a budget, cutting unnecessary expenses, and seeking additional income sources, you can start to regain control of your finances. Small, consistent efforts can lead to significant improvements over time.
Investing made easy.
Start today with any dollar amount.
FAQs about running out of money
What to do if you’re running out of money?
Assess your financial situation, create a budget, cut unnecessary expenses, and explore ways to generate extra income. If debt payments are straining your finances, consider options to reduce your payments or seek free credit counseling to help you make a plan.
What does it mean to run out of money?
Running out of money means you don’t have enough funds to cover your essential expenses and financial obligations. You may also feel that you’re running out of money if you’re draining your savings over time to cover your cost of living.
Why do I keep running out of money?
You may be running out of money due to unexpected expenses, spending more than your income, or not earning enough to meet your basic cost of living. Assess your spending habits and income to identify areas for improvement.
The post Running out of money: why it happens and what to do about it appeared first on Stash Learn.
https://www.stash.com/learn/running-out-of-money/
#financialliteracy #financialfreedom #finance #financialindependence #personalfinance #money #financialeducation #investing #financialplanning #entrepreneur #debtfree #wealth #creditrepair #budgeting #investment #debtfreecommunity #credit #financialadvisor #creditscore #financetips #financialgoals #realestate #debtfreejourney #moneymanagement #creditrestoration #invest #wealthbuilding #creditrepairservices #moneytips #passiveincome #finances #generationalwealth