What To Do During A Budget Deficit
If you have a budget, which you should, odds are at some point you are going to have a budget deficit. Totally uncontrollable situations such as unemployment, illness, vet bills, are all reasons you may more money going out than you do coming in. Regardless of the situation, here are my top suggestions for handling a budget deficit.
When you’ve got more money going out than coming in, try to reduce your spending. The most important expenses are food in your stomach and a roof over your head. Food and shelter are fixed expenses, and they can’t really be altered although you may be able to cut down on your grocery bills a little bit.
If you’re in a short-term deficit, you can skip transferring money to your savings account that month, or if you carry a balance on your credit card, maybe this means only making the minimum payment. If your situation is more long-term, try cutting out things such as your costly gym membership, or that $4 coffee every morning.
Easier said than done, right? Honestly, though, when you’re on a budget, it’s easier to make extra income than cut things from your budget. Ask for a raise, start a side hustle, sell some stuff on eBay, or do odd jobs.
If you know you are going to have a deficit soon; you should save in advance. If you’re moving to a new city, but you or your spouse doesn’t have a job yet, you should definitely be prepared for that situation.
Side note: I wouldn’t recommend dipping into your emergency fund during a short-term budget deficit. This action may trick your mind into thinking it is okay always to use your emergency fund, and before you know it there is nothing left.
Track the deficit
It is entirely reasonable to have a deficit once in a while, but when it becomes a monthly routine, you need to find out why. If you constantly have more money going out than coming in, drastic changes need to take place before you find yourself in a worse situation.
The first step to financial freedom is learning to live within your means – a concept most people struggle to comprehend. If you can master living within your means, you’ll always be prepared for the times when your expenses outweigh your income.