This is a contributor’s blogpost …
No matter how good your financial management is, it only takes one bad month to make everything begin to unravel. The moment you realize there is a chasm between the amount of money you have coming in in a month and the amount of money going out – well, it’s one of the most difficult moments most of us face.
Stage One: Disbelief
The first feeling that will hit you when you realize your outgoings exceed your income is going to be disbelief. You will look at the stack of papers in front of you and wonder what on earth happened. You earn money, you have other income (from your partner, for example) – so how have you lost control this badly?
You might be tempted to run your figures again. In the first instance, this is a good idea, especially if you are usually financially sound. However, if the second calculation still comes back looking bad, then the best thing to do is try to push on to acceptance.
The worst way of handling this stage is to keep scrutinizing what you have spent and effectively punishing yourself for it. While there has to be room for an examination of your finance situation and how you are spending money, this is almost certainly not the moment for it. The need at this point is to find a way toward your next point and look to the future. Raking back over the past isn’t going to do much besides make you feel miserable at this point in time.
Photo Courtesy of Xusenro via Pixabay
Stage Two: Panic
When you have finally accepted that the coming month has a deficit, you would think you’d be on to the calm waters of coping.
Sadly, that’s rarely the case.
Instead, the next place that your mind might go to is panic. There’s not much you can do but try to surf the wave of this panic and cope with it. Breathe into a paper bag, put your head between your knees or go for a walk to burn off some of the excess adrenaline.
What is important is that you have to let the panic stage pass naturally. If you try and move on to strategies for coping while your mind is still preoccupied with panic, then you’re not going to make good decisions. You’re going to miss things, miscalculate, and make errors when you need to be entirely on the ball. So take your time to let yourself calm down – if necessary, sleep on it for the night. Sometimes, this can help you gain some perspective so that you’re good and ready to make the next decisions that you need to make.
Stage Three: Write It All Down
The next stage is a simple one, and the beginning of the process of dealing with the problem. The only way to do this is to write absolutely everything down, so you know what you’re dealing with.
Don’t just write down the expenditure that you can remember off the top of your head. Go through the last month’s bank statements, so you can scrutinize all the payments you had to make. You need not only to come up with a list of figures that you have to pay to creditors and essential bills, but also a list of the essential items you spend money on. There’s no point trying to figure out a way forward that involves putting all of your income towards debt repayment or meeting bill demands. You’re going to have to have the money to live off through the month as well.
So make sure you write down a realistic figure to cover you for the month for the following expenses:
- Any gas you use in your car
- Food. It’s worth taking a look through your house and freezer and seeing what you have in stock – the less you have to buy through a tough month, the better. This might mean a few unusual combinations when it comes to mealtimes, but it’ll be worth it for the extra room in your budget!
- Essential purchases related to health, such as the cost of prescriptions or even just over-the-counter medicines that you usually use.
When you have a full list of the things you’re going to have to spend money on, it’s time to progress.
Photo Courtesy of Miesha Moriniere via Pexels
Stage Four: Divide and Conquer
The first thing to do is to separate all of those expenses into the things you should pay to and the things you have to. As an example, you should pay your Netflix account, because you use it. However, there’s no penalty if you cancel and don’t pay it, so it’s not a necessity.
Things like bills, taxes, and anything to do with the general basics of what it costs for you to live are the essentials. Don’t forget your household utility payments and phone bill. There will likely be financial penalties if you don’t pay these. Effectively, this column should be everything that you can’t afford not to pay – the reasons behind that “afford” can be financial or in terms of how your lifestyle would be expected.
The second column is the things you should pay, but that you don’t absolutely have to. This could be the cost of Christmas presents (if you save up for them beforehand), money needed for contact lenses (you can wear glasses for a month) and other important payments – but not payments there’s a penalty for missing.
Stage Five: Review Your Income
It’s a good idea at this stage to go through your income and make sure you’re getting everything you should be. Is your wage slip correct, and the slips of anyone else? Are you owed any money from a friend or family member? Do you use cashback websites: might you be able to get a payout?
It’s also worth investigating whether short-term lending which can provide you with fast cash can ease the burden. This is generally not recommended if you have had this problem multiple times, but can be invaluable for helping you leap over a short-term chasm.
Photo Courtesy of Jeshoots via Pexels
Stage Six: Time To Talk
With your essentials list in hand and an exact, correct figure of how much money you’ve got coming in for the month, start making phone calls – and yes, it does have to be phone calls.
The idea of calling a company and saying you can’t afford to pay them might sound intimidating, but it’s a necessary evil. Many companies – especially if this is a first time problem – will be happy to cut you some slack for a month. Have a figure in mind that you can comfortably pay, make an offer, and agree to make good within the next three months. You might be surprised as to how many will agree.
When you have got the essentials ticked off, deep breath: it’s time to cut everything else. It’s about belt-tightening at this point, which means one month without the things you don’t necessarily need. It’s tough, but it’s the way it has to be. Just try and remember that it’s not forever, and once you’re over the hiccup, you can get back to normal.
Stage Seven: Assessment
When you have found a way to meet all of your responsibilities for the month, it’s a good idea to turn your mind into why this happened to you. If it’s been a one-off unexpected cost, then you are probably doing okay – though looking into saving for an emergency fund for future occurrences could be beneficial.