How to Triumph in Your Budget: When Expenses Exceed Income

Creating a budget is no easy feat, so I’d like to start by applauding you for doing just that. You’ve come this far and yet, the bottom line shows that you have more expenses than you have income, and you aren’t sure what to do next.

Don’t worry. I’ve got a couple of things that should help you get that budget on track so you can meet those goals!

Tip: Before we start, though, go grab my FREE Closing the Gap: Expenses and Income Worksheet – I’ve designed it specifically with you in mind, and I promise it will help you throughout this process.

Once you have that worksheet you will want to start by recording your income and TOTAL expenses on the top two lines and then following the directions.

Step 1: Determine the Necessities

First and foremost, you have to determine how much your necessities are. Expenses such as rent, mortgage payment, insurance, minimum debt payments, and utilities, among other things, should not be missed.

Trust me…missing a payment now will leave you with a much bigger headache later.

If you walked through the How to Implement a Budget Series, then you likely have all of those numbers ready to go. If not, take a moment to go back through your budget and determine how much you ABSOLUTELY have to pay in expenses each month.

Record your total necessary expenses on the worksheet and follow the directions.

Does your income cover those necessary expenses? If not, you’ll want to head over and check out my How to Cope When Income Doesn’t Cover Necessities post.

If your income does cover the necessities, go ahead and fill out the remaining part of the worksheet (following the directions). Don’t worry about the “items to cut” section, I’ll walk you through that one myself.

Step 2: Determine How To Cut Back

The easiest thing to do in this situation is to go through all of the expenses, fixed and variable, in your budget and first determine if there is anything you can let go of. If it sticks out like a sore thumb, then it’s time to wave goodbye and put that money to better use (or simply make up the difference between income and expenses).

If it’s not glaringly obvious how to cut the expense from your budget, then it’s time to take a deeper look into ways you can cut back.

When Justin and I had no money in our early years of marriage, there was really nothing I hated more than hearing that we should probably just find a way to spend less. In fact, there were several times when it brought me to tears because, we were working hard, but there just wasn’t enough money to cover even the little luxuries we wanted to enjoy.

And yet, we were able to creatively cut back and did so in a few specific ways.

Eating Out

Over the years, eating out has become less and less important to us as a family, but when we first had to stay within our budget, eating out was one of the things that we were most reluctant to let go of. It was something our friends did regularly, and we loved a good outing, food included.

What we found though, was that if we didn’t want to quit eating out entirely, we could make smarter decisions in doing so.

We Ate Cheap Meals

If you absolutely HAVE to eat out, then it’s time to get creative with how you do so. If it’s simply the act of eating on the go, then check out a dollar menu at your favorite fast food restaurant. Those full meals add up quickly, but for three dollars, you can often have a full meal at a variety of places.

Our favorite was Saturdays at Costco. After going through and eating all of the samples, and (possibly!!) picking up a few items we needed, we’d have a hot dog and soda at the café. In fact, when we were on our big weight loss kick, we even split a hot dog, making it that much cheaper.

We Made Concessions

No, I’m not talking about the popcorn you get at the stadium…instead, I’m talking about the idea of meeting halfway.

When friends wanted to go out to eat at a place nicer than that, we would recommend just meeting for appetizers, or catching up with the group over dinner, after eating a whole meal at home. By choosing to avoid paying for a whole meal, we saved a lot of money.

Cut the Cable or Internet

Of course, one of the most highly recommended ways to cut back includes cutting the cord, whether that be to the cable, internet, or your expensive cell phone plan.

At the time we were broke, we only had one phone, with no data plan, and we didn’t use it much, so that wasn’t an expense that we felt we should cut. On the other hand, the cable subscription was easy to say goodbye to (except that we really missed football season that year). We had Netflix and were still mostly buying series of television shows on DVD, so we didn’t miss it much when it was gone.

If you are in a place where the internet is only used for fun things, not for school or work-related activities, then you might consider cutting it as well. Choosing to use a public library computer a couple of hours per week might be worth leaving the expensive internet bill behind.

At the time, we both used the internet for pieces of our work, so it wasn’t really an option (but did make it easier to cut the television, because we could have Netflix instead).

Ultimately it comes down to what works for you and your family and, really, how critical it is to cut the expense. Remember: if you can’t pay your necessities, then it’s time to take drastic measures.

Pare Back on Groceries

I was surprised at the sheer number of people who mentioned during our Implementing a Budget Series, that groceries and food were the most significant chunk of their monthly expenses. In fact, nearly every person who admitted that to be a weakness said something along the line of: “if I just cut back on food we’d have a lot more money”.

Is that you?

If it is, it’s time to see how you can eliminate some of the grocery expense and help that income cover all of your expenses.

Create a meal plan

I’m a huge proponent of meal plans. Not only does it give everyone in the family an idea of what we will be eating this week, but it makes it easy to shop for exactly the items we need and not purchase random items (or let food go bad in the fridge).

Looking for some meal plan ideas? Check out these HERE.

Stick To The List

Of course, making a meal plan and a list to go along with it, won’t actually make a difference in your budget if you don’t stick with it. Stick with that list and it will go a long way to help you cut back on your grocery expense.

Just Cut One Item

If you are already struggling with your grocery budget, it might not be feasible to restrict it any further. I do want to suggest that you look at your list this week and ask if there is just one item that you could eliminate. Perhaps you really don’t need that can of olives for tacos, or the box of crackers you snack on in between meals.

You might just find that you can save a few dollars (and possibly pay for something else that’s more important) by simply letting go of that one item.

Step 3: Don’t Use Credit

Whatever you do in this situation DO NOT PUT YOUR EXTRA EXPENSES ON CREDIT CARDS. Remember those goals you made? Just because your income is less than you expected it to be, DOES NOT mean that you cannot still reach those goals.

But here is the kicker: if you start putting money on credit cards, rather than cutting the expenses you know you can’t afford, then you will forever be in this debt-cycle that will keep you from achieving those long-term goals.

Go back and look at the promises you made to yourself, what you and your family hoped to achieve, and then determine once again that you will do everything and anything to make it happen, despite the temporary setback you are currently dealing with.

It’s Up To You

Make sure to note all of the cutbacks you plan on making on the worksheet. Does that amount bring your expenses under (or equal to) your income? If so, give yourself a pat on the back and then head back to readjust your budget for the month.

It’s never fun (or easy) when you find out that you are spending more than you should. I do want to encourage you, though, that while it might be frustrating at this moment, by making this decision to cut items you can’t afford, you are also making the decision to invest in your future goals.

What is the hardest cut you’ve had to make from your budget? Leave a comment below and let me know!

Tip: If you haven’t yet – go grab my FREE Closing the Gap: Expenses and Income Worksheet – I’ve designed it specifically with you in mind, and I promise it will help you throughout this process.