What to Do if Your Budget Doesn’t Balance

Lynnae McCoy is a freelance writer, homeschooling mom, and frugal living enthusiast. She writes about frugal living at Being Frugal.net and about balancing work and homeschooling at Freelance Homeschool Mom. When she has a rare spare moment, you can find her on Twitter.

You’ve finally taken the time to set up a budget. You’ve written down your income in one column. You’ve listed your expenses in another column. You’ve compared the two columns, and there’s a glaring problem: your expenses are greater than your income. Now what?

Take Another Look at Your Expenses

It’s time to take a hard look at your expenses. The truth of the matter is you can’t afford to have everything on your expense list. Make two columns. One column is for necessary expenses and the other is for unnecessary expenses.

You need a place to live, but you don’t need cable TV. Enough food to keep you healthy is necessary, but a restaurant meal every other night is not. Do you really need both a landline and a cell phone?

Once you’ve listed your expenses in columns, prioritize the unnecessary expenses. Keep cutting the lowest priority expenses until your budget balances. If you can make it balance, congratulations! You’re finished.

If your budget still doesn’t balance, you have more work to do.

Take Another Look at Your Income

By this point, you know you don’t have enough income to meet your necessary expenses, so you need to stop the budget bleed. Is there any way you can increase your income enough to meet your expenses? Perhaps it’s time to start looking for a better job. If you have a lot of credit card debt, maybe you just need a part-time evening job until you can get your debts paid off. Alternatively, you could also sell things around the house to cover your debt.

When your budget imbalance is small or is due to a short-term problem, such as too much debt, finding an extra source of income is often enough to balance the budget. But what if it’s not?

It’s Time to Make Some Hard Choices

If you’ve cut your budget to the bare bones, tried every possible way to increase your income, and your budget still doesn’t balance, you have some hard choices to make.

You need a place to live, but is your current home too expensive for your budget? You need to consider moving to a less expensive home if your income can’t support your current living arrangements.

If your debt payments are way too high, you need to contact your creditors and be honest about your situation. You may even need to contact Consumer Credit Services for advice.

It can be difficult to deal with a budget that won’t balance, but facing the problem head on will insure you get back on sure financial footing as soon as possible.

  • Anonymous

    first, the tip to write everything down and cut the lowest priority expenses is a great idea. it makes it very mechanical and logical to cut stuff you really don’t need. second, the option for a part time job might seem difficult, but i personally have friends who work full-time during the week, and pad their income working at Trader Joe’s. grocery stores and other “necessity” places are almost always hiring, especially for part time. the benefits of TJ’s specifically is 1. discount on groceries, 2. not spending money bc you’re earning money, and 3. really cool co-workers and customers!

  • Tim Z

    It might also be time for radical lifestyle changes. Some of these might sound scary but:

    (1) Consider changing careers
    (2) Cut transportation expenses by moving someplace where you can bike to your job. Even if rents or real estate is more expensive there, it may be more than offset by the savings of not owning and operating a car. (works best in major metro areas). All the problems you might imagine (sweat, rain, safety, theft) can be mitigated.
    (3) Start a side business… especially one with low startup/overhead costs.
    (4) Change your lifestyle so that you can live much more happily in a smaller/small space. It’s amazing how little space you really need.
    (5) Encourage your friends/peers to share cheaper activities. If they don’t want to, meet and hang out more with more frugal folks.
    (6) Brainstorm creative alternative approaches to budget-busting expenses related to children:
    (6a) Child-care cooperatives
    (6b) Is it really worth the debt for your kids to go to college at that school?
    (6c) Public schools K-12. If you hate your school, consider moving to a better district… maybe just renting an apartment.
    (7) Getting more education in order to make more money is always possible. But… like changing careers, there are risks here. You should talk to a lot of people in the field and be sure there is a clear and strong connection between the extra education and higher salary / more labor demand. There are a lot of overeducated and unemployed or underemployed people out there, and the cost of school plus the time they were going to school instead of working didn’t help their finances.

    In summary: It’s easy to come up with small changes to pare down your budget a bit… less eating out, skip cable TV, pay down high-interest debt, etc. But sometimes you need to make radical changes to your lifestyle that will put you outside your comfort zone and/or potentially cause friction with your friends and loved ones.