You’ve got a budget worked out to the penny.¬† You know every dollar that comes in and every dime that you spend.¬†¬†¬† All of your bills are getting paid on time.¬† Then, one day, it all comes crashing down. Your budget is no longer even a reasonable approximation of your cash flow.¬† You’ve got no idea what’s coming in or going out.¬†¬† Bills are piling up and fees are digging you deeper in debt.
What happened?¬† More importantly, how do you get back on track?
The first thing you need to do is identify the problem. What, exactly, went wrong?¬† Did you lose your job or need a surprise botox injection?¬† Your car died or your kid developed a hockey habit?¬† Sports car or shoe sale?¬† Whatever the cause, if you can’t identify it, you can’t deal with it.¬† Some of the possible problems may be things that can get clubbed and buried in the backyard, while other things may be expenses that won’t be going away.¬†¬†¬† If it’s a one-time expense, you can simply refocus your debt repayment to take it into account.¬† If it’s an ongoing expense, you will need to adjust your other expenses, possibly in a drastic manner, to make ends meet.¬† You can’t know which way to go without knowing what caused the problem.
Next, commit to to making it right. Don’t leave it at a mere commitment.¬† Actually commit and actually do it right. Future-you is counting on you to fix the problem before he gets screwed.¬†¬† This is important.¬† Without firm–and real–commitment, nothing else will matter.¬† At best, you will be treading water.¬† At worst, you will drown yourself in unanticipated bills.
Cut everything extra.¬†¬† Every expense–whether it’s your mortgage or your maid–is a rock in your pocket, one hundred miles from shore.¬† How much can you carry and stay afloat?¬† This isn’t the time to keep paying something because you enjoy it.¬† If it isn’t absolutely necessary, it’s got to go.¬† Cut your internet, cancel Netflix, learn to shut off the lights when you aren’t using them.¬†¬† Is the early termination fee less than 6 months of your cable bill, your satellite bill?¬† Cancel it.¬†¬†¬† You can always sign up again later.¬† This is the time to be ruthless.
Is there a way to bring in some extra cash?¬† Can you pick up a second job, or land a freelancing gig?¬† If you’ve suddenly found yourself unemployed, can you spend some time on being a Mechanical Turk?¬† Sell all of the things you don’t use anymore, or, more likely, never should have bought in the first place?¬† Do you have a spare kidney?
Remember, this is a drastic situation calling for drastic measures.¬† Your future is depending on you.¬† Don’t make him come back and kick your butt.
Update:¬† This post has been included in the Carnival of Personal Finance.