You are currently viewing #46: How to Budget When You Are Making No Money

#46: How to Budget When You Are Making No Money

This week, we dig into budgeting with Ruthie! She breaks it down this episode into two categories and walks us through when to do when you have money in savings and when you have no funds whatsoever. This is a great episode to listen to in order to prepare for any situation!

Welcome to Business Talk Sister Gawk! I’m Bekkah! And I’m Ruthie! And today we are going to be talking about an exciting topic for me anyway how to budget when you are making no money. I am so excited to talk about this because I have been begging Ruthie to do an episode on this for a while because she is a financial coach through Dave Ramsey and I am super excited about talking with her because she’s gone through a lot of information on this in the past with me and there’s so much here that I think is really valuable. So we’re gonna get started and she’s just gonna start doing a whole a bunch of different things so where do you start, Ruthie?

Step 1: Categorize Your Financial Situation to Having No Savings or Some Savings

Ruthie: I’m just gonna kind of approach this in two different ways here. We’re talking about when you’re not making money and when you’re living off of your savings versus when you’re not making money and you have no savings. I’ll just kind of give a little bit of context about me and kind of where this came into play in my life and how I kind of started pursuing this.

I’ll be quick, but basically, I was working, I got a concussion, could no longer work. I then had hip surgery. Still continued to not be able to work for a significant amount of time and during that time frame I lived off of my savings. Kind of where you start with this whether you are living off of your savings or whether you are trying to just kind of get by without a lot of money or no flow of income coming in is you start by tracking your income and expenses.

Step 2: Start Tracking Your Income and Expenses

Whatever that income is whether that’s government assistance or whether that’s just little, odd jobs or an actual flow of income you’ve got that tracked and you know where that’s coming from. Then you start tracking your expenses. What I usually recommend to people is that they spend the first – especially for people who are really hesitant to start with budgeting – to start by just taking a few weeks, I usually recommend two to three weeks of just collecting your receipts for things. Then as you do that you have a better idea of where you’re spending your money and where things are going.

Step 3: Categorize and Write Out an Actual Budget

Then as you get that idea of how much you’re spending and things like that you can plan for the next month and actually budget for that. Then you break out your categories of this is how much I’m spending on transportation. This is how much you’re spending on food and housing and phone bills and sports practice for kids or whatever, you know. Whatever those categories are you can plan for that in the coming month. That’s where I would start.

How to Budget When You Have Some Money in Savings

Bekkah: I was just thinking about so many different things when you said that. So when you start saving and you’re trying to figure out your basic income and expenses do you want to keep everything in one account or what does that look like when you’re trying to keep track of everything?

Ruthie: Okay so when you don’t have a flow well, you kind of mentioned two different things. What I did because I had money in my savings is I had two bank accounts. I had my savings account and my checking account and then because I knew what my expenses were every month and, at this time, did not have a flow of income but I knew what my expenses were. Then at the beginning of that month, I would transfer out of my savings account into my checking account the exact amount of money that I would need for that month, and then I would spend what I needed to in from my checking account based on that.

I, basically, gave myself an allowance from my savings account, but if you don’t have any money like you don’t have a steady flow of income and you don’t have any savings now is not the time just to try to save. If you have money coming in – I mean the goal is to have a thousand dollars in an emergency fund, but if you have bills that are in collections right now or if you have to eat which is pretty common for the human race, you have to be able to take your money and pay for those things directly so this is not the time to kind of stockpile that cash and put it into a savings account.

Now Is Not The Time to Save Money and Hide. Be Proactive!

Bekkah: Okay, when you’re talking about “now’s not the time to save,” what would you be saying what are you supposed to be doing with that money then?

Ruthie: Going back to your expenses and things like that is what I would do first. Especially, identify what your fixed expenses are versus your variable or discretionary – “variable” “discretionary” are the same thing – expenses are. Like if you have a car payment – that’s a fixed expense. You write that down. That’s a priority. If you have a house payment – that’s priority. Phone payment and loans things like that those and rent etc. those are all fixed payment.

There’s not a lot of leeway there so when you so say you have a $200 car payment which that’s pretty average but it’s also still more on the expensive side [if you have no money] so you might want to consider selling your car and buying something that’s a little bit less expensive. Something that you can afford, but basically, the name of the game is “being proactive”. That’s a long name for a game… Anyway! Be proactive in this.

If You Have Bills in Collections, Communicate Like It’s Your Job

If you have a payment that you know you cannot make, say your loan payment is $150 this month and you know you can’t pay it pay something. Even if it’s ten dollars. Then make it your job, your full-time job, if you are disabled like I was – I was not able to work at all physically it was a really hard time of my life for about four to six months was really the bulk of not being able to do anything. If you are not able to work your full-time job becomes being in constant communication with people who you owe money to.

So you’re calling those people and you’re saying, “This is what I can afford to give you this month.” Basically, you just become really good friends with debt collectors if your debts go to collections or maybe you don’t have debt but you have a landlord and you have to make payments or you have to make your rent payment, contacting your landlord and saying, “Hey, this is where I’m at right now and you know that I’ve been good for it in the past and I want to” – or maybe you haven’t been good for it *laughs* this is the time to make that right and be in constant communication with your landlord and let them know what you can afford and you might have to move. That’s a real possibility.

Bekkah: Definitely lots of resources in that.

Ruthie: Oh, yeah!

What Do You Consider a Priority and What Should You Cut in Your Budget?

Bekkah: Before we get into all of that because there are so many things. Let’s go back to what’s a priority. What are the things that when you’re like, “Oh, we need to tighten our belts but these are the things that need to stay as a priority,” what are those things?

Ruthie: Yeah so there’s something called “the four walls” when you think about basic shelter needs. There’s food, utilities, shelter, and transportation. Those are the four walls so you have to be able to eat. You have to pay for utilities you have to be able to be sheltered and you have to be able to pay for gas and things like that. Those are the the “four walls” of your main priorities of what you’re going to work towards first.

Bekkah: I know that you tell me this all the time so I just want to make sure we get it in there but your health is part of that and so insurance is another thing that’s very important to have even if it’s a lower plan, it’s so important to keep insurance.

Ruthie: Yeah, and it’s always worth it to shop around, too. If you think that you could probably be getting a less expensive insurance, well, first of all, know what you need. If you have really high medical expenses you’re gonna want a lower deductible and a higher premium. The premium is your monthly payment and you’re going to want to pay a little bit more on the monthly basis than something lower because if you have really high expenses then you’ll want that to be all caught. Insurance we’ll pay that out.

Bekkah: And for some people that are still under 26, and you’re still on your parent’s insurance. Wow! What a blessing! First of all! When you think about that for yourself what should be best for me or whatever, really look at the plans because the plans themselves have a lot of information in them. By law, if you have a health insurance plan they have to pay for one physical every year. You have to be able to get a check on that. They have to cover those checkups. They don’t have to cover anything else but they have to cover those.

But when you look at what is my deductible? Then, after a certain amount, let’s just say your deductible is $5,000 and then – that’s a really high deductible if you’re a single person. If you’re a family it’s probably not as bad, but let’s just say it’s that. Then your insurance you pay less monthly so then if you have say a car accident that could be a huge deal because your insurance could say will only reimburse 80% of all the medical costs because you had a lower premium and a higher deductible so keep that in mind.

I’ve Lost My Job, How Can I Keep My House / Not Get Evicted?

Sorry, side tangent, Ruthie. Okay, I want to come back to we were talking about okay you have to cut back and you’re trying to negotiate if you don’t have any money and you’re talking to your lenders or whoever. What does that process look like for the resources? What can somebody do if they’re like, “I don’t want to get evicted. I don’t want to lose my house. What can I do to take those steps?”

Ruthie: It’s definitely going to be dependent on your region. Specifically your county. What’s available to you in your county, but going to places for your local government assistant offices and if you just google that, just look for whether that’s affordable housing or whatever like just googling those things and finding those resources in your area start there. Then find out what’s available to you.

Utilize Resources Meant for People in Your Situation to Lower Your Expenses in Other Areas

Also, there are food shelves everywhere. There’s no shame in that. I’ve definitely used that in the past because groceries are a really high expense especially if you have a lot of mouths to feed! Groceries can get very expensive so if you need to utilize things like the food shelf then do that. There’s also something called Ruby’s Pantry you can get a share for like 20 bucks and a lot of people split those with other people if they can’t use all of it, but there are definitely resources available to you whether that’s for housing or even getting clothes.

There are a whole bunch of different programs where you can get work clothes or school clothes for kids or whatever and then also food is another one and then transportation. There are different programs that you can work with like local transportation and things like that.

Bekkah: Like ride assistance and stuff like that. And I would say that all of these vary by state but some of the federal or overarching programs that I know of, WIC is one of them. They do stuff specifically for moms who have children two and under. If you’re pregnant it counts as a child and those help you with your food bills for like nutritional things to make sure that you’re giving the right nutrients to your child.

There are lots of different things out there but these programs are there to help people in need. One thing that I have found consistently is that the people who need them most feel bad using them.

Ruthie: Yeah, they’re often the people who don’t seek it out.

Bekkah: Especially, if you know this is a short-term thing for you because you’re trying to get back on your feet, there’s no shame in that! That’s the point of the program is to help you get back on your feet and if that’s your ultimate goal you should be trying to get to your goal as fast as possible by using these programs to get there, right?

Ruthie: Yeah. It’s all about mindset really too. I had written down that you can’t be so proud that you don’t ask for help, but you also can’t be so dependent that you stop trying to get back on your feet. It’s that balance of accepting that help but also not becoming reliant on that. You still have to have that mindset of you’re working towards something. You’re getting this help now because you’re working towards something. One thing that I really recommend to people is that you have tangible goals.

Set Goals for Your Financial Future That You Can Attain

Honestly, at any point in your financial journey having those goals is so important, but especially when you’re kind of in a slump, making sure that you are setting goals that are dependent on you. If you’re trying to get another job don’t set a goal like “I need to have a job by February.” Because that’s not necessarily dependent on you that’s dependent on somebody else hiring you but you can have a goal like “I’m going to apply for four jobs this week” and you have to keep in mind you and how you work and what’s going to be manageable for you. Maybe you can do 10 or 20 applications or whatever!

Whatever job you’re applying for, understanding how long those application processes take and keep that in mind when you’re setting goals for yourself. Another goal that you could set for yourself is how often are you going to check in on the assistant applications that you’ve applied for. If you did apply for housing assistance or some form of child care assistance or something like that what is your goal for following up on those applications, because like Bekkah and I were talking about before this episode, that the squeaky wheel gets the oil you know? And that’s especially true with anything with government.

Bekkah: Oh my word! Yeah!

Ruthie: And, I mean do, it in a respectful way because that same person who can you can push it through the funnel for you also can be the one to hold that so make friends and not enemies. Also setting goals for if you have a certain amount of networking events that you want to attend like job fairs or whatever else set a goal for that.

Understand How The Collections Process Works & Your Rights

Then how many times a week do you want to call those debt collectors or other people you owe money to.

One thing that I love telling people is to make it your goal to call them before they call you! So surprise them! Get to know on a first-name basis! Just keep calling back! Also one thing that I will note is that there’s oftentimes different debt collectors, especially if they’re kind of more aggressive and rude, there are laws against that now about the level of aggression that they can use. If they’re saying things like “if you just make this one-time payment of $3,000, we’ll cancel the remaining $15,000” or whatever. If they start saying things like that get that recorded because if they say that more often than not they have to keep their end of the bargain if you have it documented.

Bekkah: And they’ll get in a lot of trouble with their boss!

Ruthie: Oh, yeah! But that’s something to keep in mind! If they’re going to be making these big promises then hold them to that by getting it recorded.

Bekkah: And one thing I know that I didn’t know before Ruthie started like really geeking out about this with me but there are specific rules on when they’re allowed to call you. First of all, they’re not allowed to call you more than once a day per company. If you have lots of different people that’s a different thing but also if you have a child that they are calling for and they’re asking specifically to speak to the child, say it’s a medical bill, that’s illegal if they’re under the age of 18. You should get that recorded because you can definitely sue them or file basically a claim that you’re going to and then they take care of it right away.

Also, I think they’re not allowed to call before 8 AM and I think there’s like a cutoff in the evening too so they can’t call you in the middle of the night and all that kind of stuff.

Understand That Bankruptcy Is Not Going to Solve All Your Problems

Bekkah: Definitely, keep those things in mind but I never knew this until Ruthie was telling me all about these things but when you are in this place of managing that it’s actually way better than filing for bankruptcy because, first of all, you have to pay like $1,500 to file for bankruptcy and second of all if you have a reasonable like you’re not incompetent and you go before a judge to file for bankruptcy what they actually do is they put somebody in charge of you to make sure that your pay is docked anytime you get a job to pay off these bills.

It doesn’t necessarily always mean that they just magically go away like it happens like that it doesn’t. If they’re like, “No, you’re definitely a young competent person. You’re going to be able to like make income for the rest of your life. We are getting this paid for.” What Ruthie is telling you to do is manage that so somebody doesn’t become your boss in managing your own money.

They won’t budget the way you do and they’ll just take it straight from your paycheck and make you pay all those things back and on top of that you’ve completely ruined your credit and you’ll never be able to like get a house for a super long time or anything like that which could be something that’s part of your goals. Anyway sorry. I digress but seriously, Ruthie knows so many things and she’s worked with so many different concepts that it’s really important to know what your options are.

Ruthie: That payment for bankruptcy specifically it is dependent on your state too and the type of bankruptcy that you’re filing for. Whether it’s chapter 7, chapter 13 or chapter 11. So you have to kind of know what the differences are between those. We won’t get into that but the prices do vary based on the different kinds of bankruptcy that you’re filing for in the state that you’re in. It is almost never the right answer to file for bankruptcy.

Bekkah: True, like everything that we’ve talked about I’m like, “Oh, yeah! This is a bad idea.”

Ruthie: I remember when I was little and I used to think like, “Oh, if I ever got in trouble, why don’t people just file for bankruptcy then all of your problems go away and then you start over.” And that’s not true. It does not work like that. Anyway, okay so we kind of talked about different assistants and things that you can work on and apply for but let’s talk about more of the day-to-day function of things and kind of how you can really be paying attention to where you’re spending your money.

How to Track Your Monthly Budget

It’s good to have those monthly check-ins you know to kind of see the forecast for the whole month as well as the planning for the coming month but also be really intentional about just weekly check-ins. I remember when I first really got into budgeting I was super obsessive about it and I would spend like just hours and hours documenting all these different things and it basically just became this weird like diary kind of thing.

I just spent a lot of time on it and you don’t have to do that. Get a good process that works for you and then the more you do it the faster it becomes. I use an app. I’ve tried a whole bunch of different apps and I know I’m kind of biased because of Dave Ramsey anyway but honestly of all the apps I’ve tried like Mint and iSave, there’s a bunch of different ones that I’ve used before.

Timely Bills, iSaveMoney, Mint things like that, they all have their pros and cons but really the one that I like the best is EveryDollar and there’s a free version and there’s a paid version. I used the free version for years before I switched to the paid version. Actually, I got the paid version for free after teaching a class, but anyway!

Bekkah: I was like, “You do!?”Anyway sorry.

Ruthie: I really like the way that they have it laid out. You basically track every dollar. Like when I didn’t have any money I transferred over $300 a month or something. I’m just giving numbers but $300 a month and then in that app you set aside what every single dollar is going towards and it sounds way more complicated than it is. It’s like a hundred dollars goes to gas a hundred dollars goes to grocery and then a hundred dollars is for, usually I would put it towards, like if I had some car expenses or something like that then I would throw it all into that.

You’d split it up all into those categories, but anyway keeping an eye on that on a weekly basis or even for me because I have the paid version it pulls straight from my bank account any transactions that I make so I just do it as I see them pop up and that can be a daily thing. Then I just throw it in there and then I keep moving, but the key to it is just staying on top of it so it doesn’t become that super overwhelming thing.

Bekkah: Okay, well, there are so many more things that I was just like, “Wow, we could do so many more talks about this in subcategories!” But thank you so much for talking about that with us today, Ruthie!

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