Part II: How to make a budget when you don’t have any income
Know what you need to spend.
If you do not have any income, you will need to use savings, seek assistance or make changes to find some money or goods to meet your basic needs of food, shelter, clothing and transportation. You may be facing a crisis, but you will want to take steps to manage the crisis and recover as quickly as possible. Having a spending plan or budget is especially important during a crisis. Your plan can be the roadmap out of trouble. After you have assessed your immediate financial situation, you need to examine your expenses.
Start by asking yourself some questions. How many days are left in the month? What is past due? How are you going to track your spending? I suggest that you keep it simple at first. Use a notebook or keep receipts. You need to keep track of everything that you spend.
1) Make a list of “fixed” expenses. Fixed expenses are amounts that are the same every month. For example, rent or mortgage payments, most insurance premiums, installment loan payments, some phone and/or cable/internet contracts provide for fixed monthly payments.
2) List your flexible expenses. Flexible expenses vary from month to month, such as food, clothing and gasoline.
3) Make a list of priorities. Remember, this is a crisis situation – food, shelter, clothing and transportation. To help you prioritize, think about your current situation. For example, if there are 15 days left in the month and the mortgage or rent payment is due on the first of next month, you may want to set aside any found money or extra income from gifts, odd jobs or assistance toward your mortgage or rent payment. This would also be a good time to plan a visit to a local food bank to take care of your grocery needs for the next week or two. Don’t forget to plan for utilities, and make sure to think about the proper clothing for your family. Be practical and think seasonal to prepare for coat, boat, hat and other needs. If you have past-due bills, assess priorities based on days past due or whether you have received legal notices. If you are being sued, seek legal advice from a legal aid association in your area.
4) Discuss your needs and wants. From big decisions such as selling your home to smaller decisions like determining which bills to pay first, it helps to gather input, come to agreement about an idea and execute the plan.
The process for making a spending plan is the same whether you are in crisis or in financially steady times. However, when in a crisis, you can use your plan to help guide your way out. Whether talking to your creditors or your house of worship, if you know what you need and you have a plan, you can ask for grace or assistance with more confidence. When you find the job, start a business or receive income from government benefits, you will know what additional needs can be met, and you can start setting and working toward other goals.
Making financial changes can be difficult. There is a toolkit that was developed for people who have faced foreclosure. The toolkit has information and resources that can be applied to any financial crisis, and each unit can be downloaded to your computer for free. You may also want to contact a professional. To contact an expert in your area, visit http://expert.msue.msu.edu, or call 888-MSUE4MI (888-678-3464).