Ask LH: What Should I Do When I've Almost Run Out Of Money?

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? Thanks, Nearly Broke

Photos by 401(K) 2013, photologue_np

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 Prioritise 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. 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, medical bills, any other loan that doesn't have a collateral).

Which Bills to Pay First

When money is 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.
  • 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 ATO.
  • Car payments: If you get behind, the lender could take your car and your credit rating will be affected as well.
  • Any other secured loans.

Even some of these are negotiable. Many utilities have schemes to adjust payments in times of hardship, for instance.

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.

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 pay TV, gym memberships, and other non-essentials.

Step 2: Trim Your Most Expensive Spending

Housing: We spend the most on housing, transportation and food, so these are the first categories you should scrutinise 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 public transport could save you thousands.

Food: It's possible for a single person to eat healthily on $25 a day, and multiplier effects mean families can get by on an even lower per-person budget. Eat food with the densest nutritional quality, like brown rice and beans. Learn to cook like a peasant.

Step 3. Find New Sources Of Income

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

Sell stuff: Selling stuff you don't need, such as jewellery or old electronics, can give you the wiggle room your family needs while searching for a new job.

Find temporary work: The most important thing to do, though, is to be relentless in looking for income. Even small tasks like babysitting, tutoring, or running errands can help you stay afloat. You might sign up to a service such as Airtasker, for example, to do simple tasks in your neighbourhood.

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

Cheers Lifehacker

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Comments

    Or you can hang out at train stations yelling "MAAAAAAAAAAAATE I JUST NEED $4 FOR A TRAIN FAIR, MY KIDS ARE AT HOME SICK I NEED TO GET HOME OH COME ON CUUUUUUUUUUU**** I SAW YOU GOT CHANGE, THINK YA TOO GOOD EH? MY BOYFRIEND WILL BASH YA". Seems to be lucrative for many.

      HOW MUCH MONEY CAN I GIVES YOU????!!??

    +1 for contacting the companies and getting an extension on your bills. Don't just panic and let them slide, call them up, say you need an extra month to pay your bills and work something out. Our local water company lets us pay in installments.

    So hard to find a second job that fits around your own full time job. I have been looking for a while now and have not even had so much as a call back..

    Sell what you don't need or want on eBay or through other websites (Gumtree comes to mind, though I've never used it). Or I guess you could have a garage sale, but do people still go to those? Either way, you probably won't get insane amounts of money, but it's better than nothing, especially when money is really tight.

    You can get some temporary reprieve by applying for "Financial Hardship" with most financial institutions. You will need to fill in an application where they ask all about your incoming and outgoing money. If approved you can sometimes get a repayment holiday of 3 months or so. Or they will let you make reduced repayments for a certain period.
    For a loan or mortgage some of them will allow you to extend the term of the loan so the missed payments are added to the end rather than caught up on. Beware though, they won't all do this and may want you to repay the missed payments at the end of the financial hardship term. Just google your bank name and 'hardship application' and you can usually find out what to do on their website.

    Eat healthily on $25 a day? Dude. You can eat pretty damn well for SEVERAL days on $25. You just have to have access to a fridge and stove/grill/oven.

    Take a quick look at Coles for example. A loaf of bread is $1, two litres of milk is $2, and you can usually buy large boxes/bags of cereal (generic corn flakes, muselei, oats) for $3.50, and a tray of two dozen sausages for $7. Three kilos of potatoes is $7. Two heads of cos lettuce for $3. A tub of margarine for $1.50

    That's your $25, good luck eating all that in a day. That should damn near get you through an entire week.

    (Edit: It's not the HEALTHIEST diet, but if you get a spare $30 you should be able to set yourself up with a month's worth of multivitamin to stave off scurvy. And it's certainly boring, but you won't starve.)

    Edit 2: Also, surprised the article didn't mention debt consolidation.
    Be sure to read up on it a little because the groups that do it aren't doing it out of the kindness of their hearts - they get a cut. But the person submitting the query mentioned maxed credit cards. That's bad news for anyone struggling to survive - really bad news. So much dead money and it doesn't go away unless you can pay them off. I'm guessing that's not a possibility, or going to be. Best to be rid of them, any way possible. The banks who run credit cards usually charge a very high rate of interest. The way the debt consolidators work is they convince an institution to give you a personal loan at a much, much lower rate, which pays off the cards. If you're too far gone (amounts too high) for them to negotiate that, there are other options such as bankruptcy or an intermediate stage just before bankruptcy, where you only have to pay back part of the amounts. (I think they negotiate around 60 cents per dollar owed or something similar.) It screws with your credit rating, but if you can't pay off your credit cards, a good credit rating will only get you in MORE trouble.

    Last edited 09/12/13 1:12 pm

      You also need a microwave to store your bread in. Paying that off piecemeal is probably factored into the $25 estimate.

      you'll be pleased to know that that was a mistake, and they actually meant you can live off $25 for a week (angus did it back in 2010)

    If you haven't missed a mortgage repayment, just repaying the standard amounts normally puts you a little ahead, so you might have some wiggle room to put your mortgage on hold for a few months (after discussing with the bank). Not a long term strategy but can help short term if you've been laid off. Also I know health insurance can be put on hold for up to 6 months, so you can avoid paying without losing your status or accumulated credit.

    Last edited 09/12/13 4:13 pm

    Oh, I thought it was more literal, as in have to start selling things on eBay etc.....(yeah, I've been there) (and no, it WASN'T drugs lol)

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