6 second take: Realizing that you can't make ends meet is daunting, but it's not the end. Here are six steps you can take when you've run out of money.

It’s not uncommon to go through a time when you have no idea how you’ll make ends meet. Sometimes the amount of money needed to pay the bills is just bigger than the money available. With the majority of Americans having little or no savings, it doesn’t take a very large unexpected expense or a very large drop in income for “broke” to become more than just a buzzword. So what do you do when you run out of money?

Most people know that they’re supposed to have an emergency fund; most who don’t, plan on doing so when they can. Most people who live paycheck to paycheck would prefer to have a bit more margin; but they don’t seem to be able to do so.

When you’re broke, these aren’t priorities. When you’re broke, these are no more than abstract concepts. No one who has spent the last few years living paycheck to paycheck and dealing with multiple emergencies with no money thinks this is the best way to live.

But if you’re in it, there don’t appear to be options. All too often, what comes next is that the next step is a turn for the worse.

When there’s no margin, an unexpected expense or a loss of income can easily put you in a place where you have simply run out of money. When that happens, there are specific steps you can take.

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Assess Your Situation

Assessing your situation is personal finance’s refrain. It repeats in situation after situation. There’s a reason for that. Assessing your situation is the foundation upon which all decisions are made. You need a good foundation to know that you’re building a workable solution.

You’ll need to know exactly what — if any — money you do have available.

You’ll need a list of bills, what is owed on each, both for current and ongoing payments as well as any amounts past due.

You’ll need a list of ongoing expenses, such as food or other things that you might pay for as you go. You’ll need to go through your lists and prioritize. If you can’t pay everything, you’ll need to decide what is most important and what comes after that. Prioritize survival over niceties.

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Trim

Sometimes a trim is a trim; sometimes a trim is more of a cut.

Depending on how big of a gap there is between income and expenses, you may need to trim a little or cut a lot. There’s always room to cut. Even if it’s only a little, when there’s more going out than coming in, sacrifices have to be made. If it’s not something you need to stay alive and stay healthy, it may have to go.

Communicate, Communicate, Communicate

They say if you want someone to remember something you should tell them three times. That’s why we say “communicate, communicate, communicate.” If you cannot pay a bill, you need to contact the person or organization that you owe.

People tend to want to avoid unpleasant tasks and most people would consider this an unpleasant task.

But you aren’t the first one who’s been here. We know from those who have traveled this road before you that things go much better when you communicate.

You know from your assessment what, if anything, you can pay. It helps if you have a plan to propose. You may find that calling creditors goes surprisingly well. You may find that when you call them with a plan, there doesn’t seem to be any of that adversarial demanding tough talk you get if they have to call you.

Some things will be straightforward, such as federal student loans. There are rules; you’re eligible for some help or you’re not. Chances are if you have no money and little or no income, you’ll be able to get some help.

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Many lenders will be very willing to work with someone who has a history of paying on time. They may be less flexible with someone who has a weak payment history.

You can’t go wrong by calling and letting them know where you stand, what you’re going through, and what your plan is. There’s no downside; communicate, communicate, communicate.

Ask for Help

Bad things truly do happen to good people. There are a lot of programs to help people in need. There are federal programs, perhaps state or local programs. And there are nonprofits whose sole purpose is to help those in need.

You may be able to get assistance with food or housing or other types of aid — it will all depend on your situation and to a degree on where you live for some state, local or nonprofit’s assistance.

You might ask and not get all the help you want, but not asking assures that you don’t.

Raise Income

You can raise income through work or you can raise income by selling things you don’t need.

Selling things can generate a little cash quickly. That’s its big attraction. One downside is that you no longer have the thing that you sold. Naturally it’s great to start with things you don’t use or need. But this scheme has finite potential. There’s a limit to how much stuff you can sell and how much money you can make selling the stuff you own. It helps in a pinch, but it’s only a short-term solution.

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A job or a second job is a better and longer-term solution to being broke.

Some people don’t like the idea of a second job. It doesn’t necessarily have to be forever. If your broke situation is severe, it warrants drastic action.

Make a Long-Term Plan

This is the step to take once the crisis has abated.

Everywhere we get in life, we leave a trail. We can look back and see the steps and actions we took that got us to where we are.

Often, a situation of not being able to pay bills doesn’t come about from one event.

Looking back isn’t to beat yourself up. It’s to make an honest assessment of what happened and how you got here. This is necessary and important if you want to never get here again.

Once we’re through the worst of our hardship, we can more objectively look at what needs to change. Perhaps we need to find a long-term solution to making more money. Perhaps we need to find a long-term solution to reduce major expenses such as rent or transportation. Perhaps some of each.

What to Do When You Run Out of Money: The Bottom Line

Being broke is something that happens. It is not at all an unusual occurrence. For some people, it’s a wake-up call to begin taking steps to gain control over their financial lives and make long-term plans to prevent this from happening again. Or at least to reduce the chances of it happening again. Being broke happens. Staying broke doesn’t have to.

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