by Gary Foreman

Have you cut expenses to the bone and still can’t make ends meet? Take these steps when a bare bones budget just isn’t enough to get you by.

Dear Gary
I already buy items on sale. I don’t make extra trips in the car. I do two or more errands during the same trip. I don’t eat out, go to movies, rent movies, travel, etc. But despite my bare bones budget, I can barely pay my current bills and have medical expenses as well.

What help is there for folks like me to make ends meet?
Frustrated

Like so many of us, Frustrated watches how she spends money. She even makes sacrifices. Yet, at the end of the month, there still doesn’t seem to be enough money.

How can she decide what to do about it? She won’t know until he determines what is causing the problem. And the best way to do that is to get an idea of where his money is going.

We’ll start by looking at two areas that can unbalance any budget: housing and autos.

These Two Areas Can Unbalance Any Budget

Housing should not consume more than 35% of your take-home pay, automobiles less than 20%. That includes not only your mortgage and car payments but also other related expenses like utilities or gasoline, insurance, maintenance, taxes and registration.

It’s easy to spend more on these areas, especially with car dealers and real estate agents telling you that you can handle it. But, if you spend more, you’ll have less available for other areas. And, to complicate matters, once you’ve bought a house or car, it’s hard to reduce that expense.

Often, the only option available is to sell the home or car. That’s a major decision for any of us and probably an uncomfortable one.

Are You Eating Too Much of Your Budget?

The third major expense in any budget is food and groceries. Obviously, a family or couple will spend more than a single adult will spend. Every family is different, but about 20% of take-home pay is a reasonable boundary.

Fortunately, if Frustrated spends too much on food, it’s more easily fixed. The reason is simple. Instead of making one big payment each month (like your mortgage), you make many smaller decisions every day. So you have many opportunities to cut spending. Granted, they’re small opportunities, but they do add up.

In our busy world, it should be no surprise that we often don’t have time to cook for ourselves. Often, we turn to pre-prepared meals, sometimes from restaurants, but often from the grocery store. Frustrated will want to check out things like freezer meals, planned leftovers and price books to reduce the grocery bill.

Are You Spending More Than 75% of Your Take-Home Pay?

Between housing, automobile and food, Frustrated should not spend more than 75% of take-home pay. That leaves 25% for everything else, including clothing, medical, entertainment, vacations, debt, and savings.

These areas tend to get out of whack through either one major expense (like a medical emergency or big vacation) or regular, small, routine spending. A weekly trip to the mall doesn’t seem dangerous, especially when you only come back with one item. And, it was on “sale” besides. But $50 a week becomes $2,600 in a year. And, if those purchases go on a credit card, the interest makes it that much worse.

You don’t even need to leave home to get in trouble. Online shopping has made it easy to spend money without even getting dressed! (See 10 Tricks to Prevent Impulse Buying That Work Both In-Store and Online.)

Is the Other 25% the Problem?

Frustrated might have pointed to her problem. Past bills (think credit cards, student loans and medical) must also be paid out of the 25%. Debt repayments that take up more than 5% of your take-home pay will require cutting things like housing and autos.

Frustrated might find that talking with the lender would help. If you show them that you’re spending cautiously, they might be willing to reduce your payments. Most would rather see Frustrated on a more lenient payment plan than declaring bankruptcy. In some cases, a credit counseling firm can help, especially when the debts are primarily due to credit cards.

You Might Need a Lifestyle Change

Finally, Frustrated might really be doing all she can to reduce spending. If that’s the case, she’ll probably need to consider making a significant lifestyle change.

That might mean moving in with family members, sharing an apartment or moving to a less expensive part of the country. She might need to consider additional training or even a change in career to obtain higher-paying work.

The good news is that Frustrated can figure this out on her own. She only needs her pay stub, bank statements, credit card bills and a calculator. She doesn’t even need to do a full budget. Just compare a few simple expenses to her take-home pay. Hopefully, she’ll find the problem area and a workable solution.

Related Articles

• How Retirees Can Live on a Tight Budget
• 12 Ways To Cut Spending to the Bone
• When There’s No Money Left for Extras

Reviewed November 2023

About the Author

Gary Foreman is the former owner and editor of the After50Finances.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.