What to Do When You Have No Money

How do I budget when I'm broke? If I'm on low income? If I can't pay my bills?

This is such a tough question. Having personally struggled financially in the past, I know how tough it can be when things are that tight. I wish I had a simple, easy answer that fixes everything. But that’s why it’s a tough question, there is no easy answer. I can’t say, “Oh just click on this button and you’ll be all set!”. I can’t say, “Oh, this rule will easily address that issue right now.”

This question is really one of two questions:

1. What do I do when my expenses exceed my income?
2. What do I do when the bills arrive before the money?

There are only two options: You either need to cut expenses or increase income. That’s it.

Where to cut first when money is short

Before you can cut anything, you have to see it. So track your spending—all of it, for a few weeks. I know how that sounds when you're already short. Tracking feels like admin you don't have the energy for, and there's a particular dread in facing your situation head on in this way. 

When I did this, eating out was the leak. Not dramatically. No single meal looked like a mistake. It was the accumulation, and I simply hadn't seen how it all added up. Once I saw the total, the decision made itself.

You may find something similar. You may also find that there's nothing much there, which is information too, and we'll come back to it.

What to do when you can’t pay a bill this month

While you're working out the bigger picture, three things will get you through the month.

#1: If a bill arrives and you really can’t pay it, call before it’s late

This is the one people skip, and it's the one most worth doing.

Call before the due date, not after. Say plainly that you can't cover the full amount, what you can pay, and when you expect to be back on track. That specificity is what the Consumer Financial Protection Bureau advises too, and it notes that many card companies are willing to change your payment if you're facing a financial emergency.

How much room there is depends on who you're calling. Hospital bills have the most—nonprofit hospitals are required to have financial assistance programs, and it's worth asking for one by name. Utilities often have formal payment agreements, though the rules vary by state and they can turn you down. Credit card issuers vary the most—some run hardship programs, many don't advertise them, and you generally have to ask.

One thing to ask before you agree to anything: how will this be reported? Some hardship arrangements get flagged to the credit bureaus, and some come with the account being frozen or closed. That may still be the right trade, just make it knowingly.

#2: Only assign the money you actually have, and prioritize like crazy

How do you prioritize your money when you can’t cover everything? 

This is the hardest habit to build and the one that changes the most. Don't try to make a plan with money you're expecting. Plan how you’ll spend the money that is in your account right now. When it's a small amount, that means ranking things honestly: food first, then whatever gets you to work, then everything else in the order that keeps your life running. Some things further down the list won't get funded this month. That's not a failure of the plan—that is the plan, doing its job, showing you the truth early enough to act on it.

If your income is irregular, or there isn't any coming in right now, the same rule holds and gets simpler: every dollar that arrives gets assigned to an expense the moment it arrives, and nothing is promised in advance. You can only work with what you have. 

#3: Avoid using your credit card to get by

I know. Putting some of your spending on a credit card closes the gap tonight, and tonight is the problem you're trying to solve.

But it closes this month's gap by widening next month's, and the shortfall underneath doesn't go anywhere—it just acquires interest and a deadline. If you're already carrying a balance, every month you add to it, the minimum payment takes a bigger bite out of a paycheck that's already too small.

How to tell a spending problem from an income problem

Sometimes you track everything, you cut everything you can stand to cut, and the numbers still don't work.

This is the part almost nobody says out loud, so I'll say it: there was nothing else to cut—at least not without a negative impact on my quality of life. That was a hard pill to swallow, but at least I was making that decision armed with good information.

I remember sitting at the computer staring at my plan one day and hearing it, clear as anything: Erin, you need more money. You aren't earning enough.

That's the first time I heard my money speaking to me. And it wasn't a criticism—it was a diagnosis. I'd been treating an income problem as a spending problem for months, working harder and harder at the wrong lever, and feeling like a failure every time it didn't work. Of course it didn't work. I was solving for the wrong thing.

So I started teaching music lessons that summer, and it generated a couple thousand dollars over the summer. It wasn't a career plan. It closed the gap though, by the only route left.

Your version won't look like mine. But if you've cut to the bone and the math still doesn't work, more money is not a failure of imagination on your part. It's the answer.

If the numbers aren't working right now, that isn't a character flaw and you aren't the only one—it's information, and now you have it. YNAB shows you what your money is actually doing, so you can see what's worth cutting and tell clearly whether the real gap is your spending or your income.

Budgets are bones and income is muscle. You need both. If you've been building the skeleton and wondering why nothing moves, it may simply be time to work on the other half.

Getting a month ahead on my expenses was slow at best in those years, and for a long stretch it felt out of reach entirely. It came eventually, and it came from the income side, not the cutting side. I can’t begin to describe the relief having that built-in breathing room brought me though. It was a significant step in my journey of getting good at money.

The definite truth in all of this is that nothing will improve if you stick your head in the sand about your financial situation. Track your spending. Get clear on your priorities. And make a plan for the money you have by asking, “What’s it for?” before you spend it. You can get good at money, even when you don’t have much of it. But you have to do the work to see the change. 

Do you ever worry about money? You're not alone. Download YNAB, get good at money, and never worry about money again. Try YNAB for free for 34 days.