Saving Money

What Should I Do When I've Almost Run Out of Money?

Melanie Pinola, Gawker Media

What Should I Do When I've Almost Run Out of Money?

Dear Lifehacker,
My family is seriously stretched thin for cash. Our credit cards are nearly maxed out and we wiped out our savings when my husband was laid off and then we had expensive medical bills. What can we do to get money fast and back on our feet again?

Signed,
Nearly Broke

Dear NB,
First of all, we're sorry to hear about your predicament. This is an unfortunate situation that can happen to anyone, whether it's because of a lost job or another misfortune. It's time to go into financial survival mode. Here's a three-step plan to help you focus on the most important things now: preserving the money you still have as much as possible and finding other sources of income.

Step 1: Take Stock and Prioritize Your Spending

What Should I Do When I've Almost Run Out of Money?

Take a deep breath, then take a hard look at your income, expenses, and debt, if you haven't already. The National Foundation for Credit Counseling has an online budget worksheet to help you tally everything up.

For your debts, separate them by those that are tied to collateral (your house or car loan, for example) and those that unsecured debts (credit cards, doctor's bills, any other loan that doesn't have a collateral).

Which Bills to Pay First

When money's really tight there are some bills you can let slide for a while, and others that you should keep on paying if at all possible. The ones you should pay first are the ones that would affect your family's health and security the most:

  • Rent or mortgage payment: In some states, landlords can kick you out if you're even one day late on rent
  • Essential utilities: gas, electricity, and water
  • Child support: If you stop making those payments you risk losing custody rights and could even end up in jail
  • Income taxes: Never mess with the IRS
  • Insurance: It's too risky to go without medical, auto, or home insurance
  • Car payments: If you get behind, the lender could take your car and your credit score will drop
  • Any other secured loans
  • Student loans

Even some of these are negotiable. If you owe taxes, for example, you can contact the IRS for a monthly repayment schedule. Most utilities have programs that help services stay up in times of hardship. And if you have a federal student loan, you could have the payments deferred-as long as your loan isn't in default.

Although it's not the best tactic, paying just the minimum on your credit cards can help you get by; just make sure you put the cards away and stop using them. Also, if you can qualify for a 0% balance transfer offer, you might be able to reduce your interest payments, but you'll need to calculate if it's worth it.

Cut Your Existing Bills

You've probably already done this, but just in case, go through your budget and ruthlessly strike out everything else that absolutely isn't necessary, such as the cable bill, gym memberships, and other non-essentials. (Even internet access might not be necessary, but that depends on your job.) This is your new emergency budget, but we can tighten it up even more.

Then call your bank, credit cards, and wireless bill to negotiate better rates. These calls can save you a few hundred dollars a year. Just about any kind of bill can be reduced just by asking, including auto insurance. Now might be the best time to shop around for better rates.

Step 2: Trim Your Most Expensive Spending

What Should I Do When I've Almost Run Out of Money?

Housing: We spend the most on housing, transportation, and food, so these are the first categories you should scrutinize to save more on. Although moving might not be an option right now, it's something to consider down the line. Perhaps consider renting out a room of your home if necessary.

Transportation: Do you really need a car for work or the second car? Using alternate transportation could save you thousands.

Food: It's possible to eat well on just $1 a day or, if you're not into extreme couponing, save by creating meal plans from flyers and what you have in your pantry. Food banks (a.k.a., food pantries) can help supplement your grocery trips too. Marisa Miller, a former chef and mother of two who found herself with just $100 after bills to buy food, gas, and other necessities, has great advice on using food banks and eating smarter in general, including:

  • Eat food with the densest nutritional quality, like brown rice and beans. (Learn to cook like a peasant.)
  • Know the pull days at your grocery (when they reduce items for clearance). Shopping later in the evening, perhaps on Wednesdays, could net you reduced prices. Miller notes that Trader Joe's pulls expired food on Fridays so the weekend is a good time to visit the food pantry they donate to.
  • Get bread and produce weekly at most food pantries. Find a list of food pantries at Feeding America.

Shop at salvage grocery stores to save more than you would at the supermarket, and if you can't afford groceries, don't be afraid to look into food stamps (SNAP) or other government assistance.

Step 3. Find New Sources of Income or Cash

What Should I Do When I've Almost Run Out of Money?

Sell stuff: Selling stuff you don't need, such as jewelry or old electronics, can give you the wiggle room your family needs while searching for a new job. The Simple Dollar has a story of a couple who picked up stuff for free (like tables put out on the curb) and sold them at yard sales, making more than $1,000 in one summer. Not everyone's going to get richer like that, but it's an example of turning trash into treasure.

Find temporary work: The most important thing to do, though, is to be relentless in looking for income. Tap your local unemployment agency for help and follow our unemployment survival guide. In the mean time, companies like LaborWorks (in Washington, Oregon, and Nevada) offer temporary jobs that run the gamut-from accounting to general labor-that can turn into permanent jobs. Volt is a similar agency nationwide. Do a search for "work today, get paid today" in your city for daily jobs that pay immediately.

Even small things like babysitting, tutoring, or running errands can help you stay afloat. You might sign up to become a TaskRabbit, for example, to do simple tasks in your neighborhood.

Explore loan options: If you need more cash right away, you have several borrowing options. The safest loan is from family or friends, but that depends on how comfortable you are asking them and if they could help. There are risks and hefty fees with other loans, such as taking out a loan from your 401(k). If you have good to excellent credit, you can get a decent rate from peer-to-peer lending sites like LendingClub. Above all, avoid shady payday loans. (If you just need your paycheck a little earlier and you're an hourly worker at one of many major retailers or corporations, ActiveHours will pay you early-without any fees or interest.)

Seek government/non-profit assistance: Finally, don't forget that there are government programs that could help you get back to financial stability, beyond unemployment insurance and food stamps. Main Street lists a few of them, targeted towards low-income households, but you could also confidentially contact United Way for help finding assistance or programs that apply to you, including financial planning and help with the job search.

Last Resorts

Bankruptcy is an option that can clear you of many debts-but won't completely solve your problems, so take care when considering it.

When you're broke and have a family to take care of, sometimes you'll have to take desperate measures like dumpster diving, giving blood, and other emergency measures. It's heartbreaking, but millions of people are simply doing what they have to do to get by.

Hopefully you'll bounce back soon. Don't forget to keep active and take care of yourself during this challenging time.

Love,
Lifehacker

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