Ok, so you need your current stash of money to last as long as it can. Sure, you might wish it were a bigger stash, but we’re not going to dwell on it and neither should you. It is what it is, now let’s get to work: here’s how to take your pile of money and make it build a bridge as far as it’ll take you over the murky bog of the future.
Maybe your income is reduced, maybe you have zero dollars coming in, or maybe nothing has changed but you want to shore up your current financial situation. Here are the steps to take (in order), no matter where you fall:
1. You Need a Budget. So Get a Budget.
There’s a specific kind of budget you need right now: a zero-based one (think: putting money into envelopes). This kind of budget shows you how long the money you have will last (and that popular app that rhymes with shmint isn’t set up to tell you this). When you know how far your current money will go, it helps you make informed decisions about what financial levers to pull (and how hard to pull them) now.
Your budget could be actual envelopes, our You Need a Budget app, or you could even create your own spreadsheet to get to this zero-based magic. The key here is to budget in a way that deals only in the money you have right now, and not in forecasting money that may or may not come in the future.
2. List Out Monthly Expenses
Add up all the things that typically require your cash (yep, including the impulse Target runs). You’re trying to get to a number: how much cash do you burn through in a month’s time?
- Give each expense its own line (here’s how to set it up in your YNAB budget)
- Use your credit card statement (or we’ve got a long list of categories in this post) to help jog your memory
- Don’t forget non-monthly bills like car insurance and Amazon Prime
- Include the ballpark monthly cost of each one (it’s ok to guess)
3. Sort by Needs and Wants
Take your list of expenses and sort them into needs and wants. Needs at the top, wants at the bottom. Try not to overthink this one: do you need it? Can you live without it?
- Needs include food, water, shelter
- They could also include things like student loans, car insurance, internet
- List in order of bill due date
- Sort your wants by current priority (Let’s be honest, Netflix > vacation right now)
4. Budget as Far as Your Money Will Go
Add up the money you have in your checking account/savings account right now. Only use that money as you’re budgeting out (this is also a good time to use money from an Emergency Fund). Run a few scenarios: what if you only budget for the essentials? What if you budget for the essentials + a few extras?
If you’re getting paid next week, don’t budget that money until you get it. Anticipating the shiny inflow of a stimulus check? Don’t use that money until it hits your account. This harsh limit gives you clarity. Powerful, crystal-clear clarity. And you know what Coach Taylor says: clear eyes, full hearts, can’t lose.
- Ask yourself “what does this money need to do before I get paid again?”
- Give every dollar a job. This is like taking your cash and stuffing it into the proper envelope. Maybe $1200 goes to rent in April, and $350 goes to groceries. Map it out in your budget.
- Find the end. Will the money cover your expenses for two weeks? Two months?
You’ll arrive at the reality of your financial situation by the end of this step. It might be a little harsher than you wanted, but in this moment you’re taking back control. (Do you see it?! You’ve already started making decisions…”oh, I can cut this. I can live without this”). It’s not being forced on you, you’re just seeing your situation and you’re the one calling the shots.
5. Pull Levers to Stretch Your Money
Now here’s the really empowering part. You know where you stand, and now you’ve pretty much just eaten three cans of spinach. Your brain will unleash its own creativity to fill in the gaps. If you need more room in your budget so your dollars last longer, here’s where you go to town.
Trim Your Own Budget
Go line by line and look hard at each category. Do you absolutely need it? Can it be cheaper? Pull out that red pen and slash harder than Mrs. Kraley from 9th grade English.
- Cancel subscriptions
- Share streaming services
- Cut grocery costs (turns out rice and beans can be quite delicious)
- Delete your account passwords for online shopping
- Cut down on “wants” (we’re not saying you have to go completely Spartan here. Your budget and money outlook will help you draw your own line.)
Reduce Cash Required for “Needs”
If you’ve been focused on aggressive debt repayment and find yourself with a short bridge of cash, this might be a good moment to pause and focus instead on using your money to extend your bridge into the future.
If you’re recently jobless or with reduced income, you can save some serious cash by making a few phone calls.
- Negotiate your interest rates. Call up your credit card company, explain your hardship, and ask if they’ll give you a 0% interest rate for the next six months (but a word of caution: be wary about the mental game of zero percent)
- Contact your landlord/mortgage provider and ask about options for deferment or delayed payment.
- Contact your utility provider/internet provider/phone provider. Explain your hardship and ask about options for reducing costs.
- Request deferment on student loans or look into income-based repayment.
Benefits to those who are cashed-strapped are evolving (for the better) every day! See the latest government benefits here.
Bring in More Cash
Most of us will be getting a cash inflow again in a few weeks, whether it’s normal paychecks, reduced paychecks, unemployment benefits, or stimulus checks. You’ll budget that money out when you get it.
- Recently been laid off? You may still have paychecks coming in from cashed-out vacation/sick time or a delayed pay cycle
- Furloughed? your company is anticipating bringing you back on at some point, and you can often bring in unemployment benefits in the meantime
- If you’re an American, you’ll likely have a direct deposit arriving in the next few weeks. Calculate how much you’ll get.
But there’s more options within your immediate control to bring in additional income:
- Become a freelancer
- Grocery delivery
- Answer surveys
- Become a dog walker
- Bet on your own weight loss
- Transcribe audio into text
- More ideas…
6. Let the Budget Guide Your Way
Now that you’ve created a slim, trim plan for your money, now you follow it! Use your budget to guide your spending, not your bank account. As life happens, roll with the punches. When you get more money, repeat step four and give every dollar a job.
We don’t know what’s going to happen next any more than you do. But, the closer you can follow these steps, the further out your money will build a bridge in front of you.
If you want to hop on the fast-track to budgeting success, try YNAB free for 34 days and sign up for our Getting Started with YNAB bootcamp launching March 30. You’ll get live teaching on how to budget, make your dollars last longer, and you’ll have the support and encouragement of others doing the same thing.