How to Create a Paycheck to Paycheck Budget when You're Already Behind

While creating a neatly laid out, perfectly planned budget for the family household seems to be the most practical information offered today, a budget for those with a limited income who are already behind is almost impossible to create in the traditional sense. Sure, your income covers the bills, and probably a little more, but just barely. Add that to the fact that you are still catching up from last month, and you've got a vicious circle going. Throw in the occasional unexpected expense, and you're done for. Well, not quite. You just have to understand how to get back on track slowly. Consider the following steps on how to create a paycheck to paycheck budget when you're already behind, and you'll be out of the dark in no time.

Step #1: Go ahead and write down your expenses and your projected income for the next month, as usual. Yes, you've done this before to no avail. However, go ahead and create the ideal budget that you'd like to abide by, as unrealistic as it may seem in your current paycheck-to-paycheck state.

Step #2: Figure out your projected deficit for the beginning of next month. This is where that "living in last month" syndrome comes into play. If you're like most families trying to create a budget when they're already behind, you likely shy away from tight monthly planning because you are always fighting an overdue payment of some sort. Go ahead and face those past dues head on. Write down everything you're behind on, even if the total amount exceeds your monthly income, and calculate the sum.

Step #3: Split that deficit that shadows each month's budget into reasonably sized chunks. This part takes a bit of finagling on your part. Split those past due bills that are keeping you from adhering to a real monthly income into manageable pieces that you can pay up in the next 4-12 weeks, based on their importance and urgency. Plan on paying them up completely in a specific time span, no matter what it is. The point here is to stop giving every dime to one bill and nothing to another. This process merely repeats itself over and over, hence the paycheck to paycheck lifestyle you are currently leading. Treat these bills as one large cumulative past due account to give yourself a bit of perspective before moving on.

Step #4: Speak to your creditors about your intentions. You will determine who you pay first, as mentioned earlier, based on importance. For example, your electric bill, if unpaid, will simply be added on to next month's budget and will become urgent very quickly. Your credit card bill, however, may be put off for a month completely until you are completely caught up on your utilities without becoming an urgent affair (by urgent, we're speaking of being without the basics). Speak to the companies with whom you have store cards, credit cards, revolving accounts, etc., about skipping one monthly payment. Many will comply without much hassle, or will at least temporarily reduce your minimum payment. The act of simply communicating with them will buy you a little time. When the next month comes around, you'll be able to stick to your utility and housing budget a little better than you would have been able to had you scattered your funds elsewhere unnecessarily, which will help ease you into a more productive financial pattern in the months to follow.

Step #5: Once any payments have been deferred with permission of creditors, cut back as much as possible for the following month. This is for two reasons. The first is because you won't be sure how much you'll truly need to allocate to various categories of your budget until you actually employ it for a while. You'll need to make room for adjustments. The second is that you'll want to create an emergency cushion in case any unforeseen emergencies arise that could interrupt your current budget plan.

Step #6: In the following months, continue paying down your necessary and vital bills first, and work with your creditors on paying a little at a time over a specified time period to their accounts. Budget, write down your current overdue totals, pay off the necessities first, and pay the rest with your excess a little at a time for the next several months in order to catch up. That paycheck to paycheck lifestyle that inevitably left you behind on your bills each month will slowly but surely begin to stabilize, and then fade away for good.