If your income is less than your expenditure even if you don’t pay anything to your unsecured debts, then you have an emergency because you do not have enough to live on.
In this situation you need to ignore your debts for the moment and concentrate on improving your overall finances. Until you are at least ‘breaking even’ you can’t decide what debt solutions might work for you, because unless something changes in your budget, you are going to need to borrow more every month. Your debt hole is getting deeper and you can’t work out how to get out of it unless you put down the spade and stop digging!
Even if your debts are so bad that you are going to have to go bankrupt, you still have to tackle your budget first, because going bankrupt won’t solve the problem that you are spending more each month than you have coming in.
You need to look at some combination of:
- Increasing your income (are you claiming all the benefits you are entitled to?)
- Decreasing your expenditure and
- Selling any assets.
Emergency budgeting ideas
These are a set of ideas to get you through a short period.
Perhaps you have started a new job and don’t get paid until the end of the month? Or you have to move and need to save up every penny for a deposit and the first month’s rent? Or you have applied for Universal Credit but it isn’t yet being paid?
Some of the ideas won’t work for you and some may just sound desperate, but a bit here and a bit there can add up and get you through this rough patch.
Help from the benefits system
A wide variety of help is available. It may not be enough, but get what you are entitled to!
- Household Support Fund these are set up to provide grants and vouchers to help families with the cost of food and energy. Contact your local council.
- Universal Credit Advance If you have applied for Universal Credit ask for an advance payment. This can be paid very rapidly, within a few days. It is an interest-free loan that will be deducted when your UC starts to be paid. If the Job Centre says you can’t apply, go to your local CAB and ask for their help.
- Local Welfare Assistance Scheme (used to be called Crisis Loans). These will sometimes help families to replace things like white goods and essential furniture and enable vulnerable individuals to afford food and heating. It depends on your area exactly what is on offer.
- Budgeting advances and budgeting loans If you have been on Universal Credit, JSA, ESA or Income Support for more than 6 months, you may be able to get an interest-free Budgeting Advance or a budgeting loan. That could let you replace a fridge or a broken washing machine.
- For students Talk to your uni/college student welfare people. Or your tutor or any mentor/buddy. Talk to anyone – except a stranger offering you a loan. There may well be help to get you through but you have to find it.
- Free school meals Check if your children are eligible.
Citizens Advice has a page with details of other sorts of help.
Cut your food costs
- List everything you have and work out how to use them up. Lots of rice and a bag of frozen prawns – that would be prawn risotto;
- do you have some UFOs – Unidentified Frozen Objects – in your freezer? Take one out this evening and have a surprise for dinner tomorrow!
- make a list of very cheap meals. Porridge, macaroni cheese, sardines on toast, baked potatoes and baked beans, soup made from odds and ends of vegetables, dhal. Think veggie. Lots of ideas here: Extra cheap meals, to live on 50p a day for a bit, or even longer?
- make the yellow sticker aisle the first place you visit in the supermarket and find out what times of day it tends to be filled;
- offer to cook a meal for your friends next month if they’ll cook one for you this month;
- go to your local Food Bank. You usually need a voucher for this – ask a doctor, health visitor, social worker, Citizens Advice, welfare officer, the police and probation officers etc. They will also be able to say if there are other local Food Banks – that link is for the largest network of food banks but there may be a different one closer to you.
- see if there is a Local Pantry near you – members pay a small subscription of a few pounds a week and can pick groceries from the shelves worth many times more.
There may be other local organisations in your area. Your local council or Citizens Advice will know.
For example Incredible Surplus in Birmingham and Community Grocery in several towns. Bread And Butter Thing hubs sell bags of assorted food for a low cost.
Sikh Gurdwara temples often have a Langar kitchen that serves free vegetarian meals.
Find some extra cash
- empty out those jars of pennies;
- look down the back of the sofa, in coat pockets and any handbags or wallets you don’t often use;
- €25 left from a holiday? Change it!
- if you have some clothes which are unworn with the tags, return it to the shop for a refund;
- think about selling Stuff. A car boot sale can be quick to organise. Sorting through your wardrobe, photographing and describing the items to go on Vinted, Facebook or Ebay may take longer but you will be surprised what people do buy.
Cut your travel costs
- walk to work or cycle;
- run home from work – save money on gym fees too!
- in London, take buses, not the tube. It may take a lot longer but it’s only for a few weeks;
- see if you can work from home more often;
- lift share and split the petrol costs.
Don’t pay any non-priority debts
If you could get through to next month if you don’t make a payment to a loan, credit card or catalogue but can’t manage if you do, then this is what you have to do.
These debts are non-priority debts and your other expenses such as food, rent and bills are more important.
Don’t borrow more – this will make your situation worse next month
Don’t take out a high cost loan just to be able to pay another debt. That may get you through this month but all your future months will be so much harder!
- once you have an expensive loan, often the only way you can get through the next months with the loan repayment is to take another loan.
- pawning an item can feel like a quick way to get cash. But if you need the item (a laptop say) or it has sentimental value (family jewelry) you may find this makes your situation worse.
- guarantor loans are even worse. They may sound cheaper than payday loans but then you have no option but to keep paying it if you don’t want your mum, brother or friend to suffer. I have seen too many people describe a guarantor loan as their worst ever financial decision.
This also applies to Klarna and the other Buy Now Pay Later lenders. Here no interest is added but the repayments are large, so they make the next month much harder. Avoid unless you are totally sure everything will be easy next month.
One loan you could look at is the “micro loans” offered by Iceland. These are interest free and up to £75 and come in the form of pre-loaded card that has to be spent at Iceland. See How to get Iceland interest-free loan for more details.
Do you have a longer-term problem?
Most of these ideas won’t work in the long run. Eating all your store cupboard food means there is nothing left for next month. But they may get you through to the next payday if your problem is only temporary.
If your debts are the main cause of your difficulty, then get some debt advice as this isn’t a “one month problem”.
If bills and the rising cost of living is leaving you with too little to exist on, talk to your local Citizens Advice about whether there is any extra help locally. They can also help check you are getting the right benefits and advise on your debts.
If you have a problem that is going to last more than a few weeks then you may have to look at some unappealing options. Ask yourself if most people would think the things you are spending money on are really essential.
If the main cause of your situation is the cost of your mortgage and secured loans, think about The Pros and Cons of Selling the House – this is emotionally a hard choice to make but it may be the right one.
If your income has decreased because of health problems and these are likely to continue, then you may be in a situation where you need good advice on benefits, move to somewhere cheaper and also resolve your debts. Go to your local Citizen’s Advice for this sort of complex situation.