How to Cope with being Flat Broke

A lot of people live in financial denial. They spend far more money than they make, and they use debt to finance their luxurious lifestyles. They casually borrow money without thinking about the long term consequences to make up for the lack of money in their checking account. This might work for a while, and you might look like you’re keeping up with the Jones’s, but eventually there’s going to be a point where the boat takes on too much weight and sinks.

After a continued pattern of borrowing too much money, you’re going to get behind on your bills. Usually people won’t admit they’re in a financial mess until they start missing payments, and then they ask for help. Sometimes people won’t even ask for help then, they’ll think that they just missed one payment and continue their downward spiral. Don’t worry, if you find yourself in such a situation, there is hope.

The first thing you need to do in order to turn yourself around is quit borrowing any more money. The first step in getting out of a hole is to stop digging! If you’re at this point, you’ve proven that you can’t handle borrowing money and need to quit doing it. If you fix the symptom of excessive debt and don’t fix the problem of over spending, you’re just going to end up in the same mess again in a few months.

There are no magic pills; after you have quit borrowing money, you either need to find a way to make more money, or spend less money. Usually it’s a combination of those two things and selling some stuff that will get you out of the mess. There’s no ifs, ands, or buts about it. Whatever unique situation that you’re in doesn’t matter. Those are the only options.

You’ll have to bring in some extra money. A great way to do this is to sell that car you can’t afford, or get rid of any recreational items, such as boats, jet ski’s, snowmobiles, computers, flat-screen televisions, and other big ticket items that you can do with out. You should also look for a part-time job in addition to the 40 hours a week you are already working at your normal job. It might not be fun, but you have to do it to clean up the mess that you’ve found yourself in.

After you have some more money, you’ll also need to find a way to spend less money. If you’ve never done a budget before, now’s the time to do it. All of the different things you “have” to spend money on don’t matter, because your creditors just don’t care. You have to find a way to spend less money, period.

If you’ve taken those steps to start moving in the right direction again, and you still can’t pay all your bills, here’s what you need to do. First, take money out for food, pay the house payment, pay the utility bills, and put gas in the car, everything else is secondary. You should at least have enough money to do that, this way your home is protected.

After doing those things, take the amount of money you have left over and then give each creditor you have their fair share, even if it’s less than the minimum payment. If you at least do this, they won’t sue you. They’ll kick, scream, and yell at you, but at least they won’t sue you. Once you get more money coming in, get back up to your minimum payments, and systematically pay off your debts one by one. Start out with the smallest debt first, and then work your way up to the biggest one.

That’s the only way to do it, there are no magic pills or instant solutions. If you’re in such a mess, you need a major reality check, and need to stop digging yourself deeper in to debt, and start making positive steps for your financial future.