Have you ever been in a situation where your expenses are greater than your income? As per a report by CNN Money, those with lower earnings in America are more prone to spending beyond their means. While this budget deficit could sometimes be an intentional choice, often individuals are compelled to do so in order to meet their basic needs. Such a deficit can occur regardless of your income bracket, especially during situations like unemployment or unexpected lifestyle changes.
If you are currently in or anticipating a budget deficit situation, don’t panic. Let’s look at some realistic strategies and tips to manage your budget effectively:
1. MANAGING EMERGENCY SAVINGS:
You might have to delve into your emergency fund to navigate a budget deficit. Ideal practice is to stash away funds sufficient for a few months’ expenses or at least $1,000 for urgent situations. You can either build this fund with a lump sum like a tax refund or an additional paycheck, or by making smaller monthly deposits with automatic withdrawal. Consider rationing out these savings to extend its utility while you’re adjusting your income and expenses.
2. CREATING A BASIC BUDGET:
Designing a stripped-down budget helped me prepare for any potential financial crises. This isn’t like your standard budget; it strictly entails only the absolute necessities for your survival. While items like housing, food, and utility bills find a place in this budget, discretionary spending does not. Although this frugal lifestyle might not be enjoyable, it could significantly reduce your outlays.
3. DEBT MANAGEMENT:
Dealing with debt while experiencing a budget deficit can be unnerving. Lenders could impose penalties if you fail to make timely payments. However, remember housing needs take precedence over debt repayments. If you’re facing a monetary bottleneck, reach out to your lenders promptly, clearly explaining your situation. They might be flexible in extending your due date or permitting you to compensate in the subsequent month. Repayment relief options like deferment, forbearance, or income-based payments are available for individuals with student loans.
4. EARNING INCREASE:
While job hunting is advisable, traditional hiring could be time-consuming. You could instead turn to immediate sources of income like babysitting, handyman services, office cleaning, or errand-running. This could act as a stopgap solution while you’re job hunting and establishing more lucrative income sources.
5. COMMUNITY RESOURCES:
If cutting your expenses is proving tough, make use of community resources available at the local level. From job fairs, free clothing drives or communal dinners, to knowledge classes at your library or aid from a local church – make the most of these resources when you need them.
6. PROACTIVELY AVOID A DEFICIT:
Evading a budget deficit altogether, although difficult, is surely desirable. It’s paramount to have a robust savings account as your initial defense against a budget deficit. Your savings account balance can only grow with regular contributions. Building extra income sources through part-time or seasonal jobs or occasional gigs like babysitting can form a safety net when your main income takes a hit. Lastly, always live within your means to avert unnecessary expenses. It’s simpler to increase your income than to adjust to living beyond your means, a habit that would leave you content and stress-free from pecuniary pressures.
Ever been in a situation of budget deficit? Share your experience and what measures you took to avoid falling back into it.
– (source: smartasset.com)
