HOW TO BUDGET WITH NO INCOME

Trying to figure out how to budget with no income? We own a few small businesses that have been severely impacted by the coronavirus. Because of that, my husband and I won’t be taking pay checks for a while until we’re able to open some things back up (like his dental practice) and get things going again. We’re self employed, which means without the CARES Act fully in place, we don’t qualify for unemployment, and we aren’t holding our breath waiting around for the Paycheck Protection Program or SBA Disaster Loan relief anytime soon. In short, right now it means we are living off savings. I’ve honestly never had to budget for living off savings. It’s a weird time. But here is how we are budgeting with no income. 

FIGURE OUT HOW MUCH MONEY YOU HAVE.

The first thing you should do when budgeting with no income is to figure out how much money you have to work with, or in other words, how much you have in savings.

If you don’t have any money in savings, you’ll need to look for help, such as filing for unemployment or seeking financial help from your church or other government programs (food stamps, Medicaid. etc). Figure out exactly how much money will be coming in from that or from any other source. This information is critical to setting up a budget with no income. 

ESTIMATE HOW LONG YOU’LL BE LIVING ON NO INCOME.

The next thing you’ll need to do is figure out roughly how long you will need to be living with no income. Maybe you are going on unpaid maternity leave for 12 weeks or otherwise know exactly how long you will be living off savings. Or maybe you are like us and have lost your income and aren’t really sure exactly when it will be coming back. All you need is a rough guess as to when things will  be getting back on track for you. 

DIVIDE YOUR MONEY UP PER MONTH TO BUDGET WITH NO INCOME.

After you have a rough estimate as to how long you’ll be living on savings or unemployment, etc, knowing roughly how much money you have to work with, you will need to divide that money up per month. Think of it as paying yourself each month.

Let’s say for example that you have $20,000 in savings. You know that you won’t have an income for 4 months. That means that you’ll have $5000 to live on per month that you are unemployed. 

Note that just because you have enough money to spend $5000 per month, doesn’t mean you have to. Now is the time to live as frugally as possible. If you can keep *something* in your savings during this time, that is certainly ideal. 

GET RID OF ALL UNNECESSARY EXPENSES.

Even if you think you have enough money in savings to comfortably live on during your time with no income (and certainly if you don’t), you should get rid of all unnecessary expenses for now. Once you have a better idea of what you are working with, go through each area of your spending and see what you can cut out. Maybe you can cut cable or Netflix or going out to eat. Don’t spend money on clothes or anything that you don’t need right now. Remember that this isn’t forever. This is literally emergency mode and will be temporary. 

PRIORITIZE EXPENSES.

After you’ve cut out any unnecessary expenses, you’ll need to prioritize your most important expenses. Food and housing are expenses that should be on the top of your list. This should be a narrow list of things that you really cannot live without. 

IGNORE DEBT PAYOFF WHILE YOU BUDGET WITH NO INCOME. 

Obviously I am very pro getting out of debt. That’s what this entire blog is dedicated to really. Debt is the worst. But, during times of emergency when you don’t have an income coming in, I want you to ignore any of your plans for aggressive debt payoff. If you’ve been making extra debt payments (I’m so proud of you!) now is the time to put those on hold, just until you get an income back. 

IGNORE SAVINGS

In addition to ignoring your debt payoff, now is not the time to focus on building up your savings, obviously. Put that on hold for the moment. You’ll be focusing on this again once you have an income– you’ll need to replenish the savings you’ve used during your time with no income. 

REQUEST FORBEARANCE OR EXTENSIONS SO YOU CAN BUDGET WITH NO INCOME. 

Another thing you should do when you are budgeting with no income is request forbearance or extensions on payments during the time you know you’ll be without an income, simply as a way to cut expenses while you are in financial crisis mode. 

THEN BUDGET LIKE NORMAL. 

Once you’ve done all that, do your budgeting just like you normally would. Assign every dollar (that you are allowed to spend) a job or responsibility. Remember a few steps back when I had you prioritize your expenses? Pull up that list and assign dollars to it. If you don’t have enough money for each month that you will be without an income, you’ll need to go back and reduce more expenses and or figuring out how to bring in some income. (More on that next). 

[Related: Easiest Budgeting Method Ever]

[Related: How to Create a Budget That Actually Works]

FOCUS ON INCREASING INCOME.

If you don’t know when you will be receiving an income again and or if you don’t have enough savings to cover your now reduced monthly expenses, then you will have to figure out how to make some money to make ends meet. I definitely know what it feels like to not have enough money to make ends meet and how what a panic that can make you feel. Not to worry, there are plenty of resources here to help you. Be sure to check out my posts that will teach you how to increase your income when you click here. 

In addition, you might want to use this time when you are figuring these things out to start a business. If you’ve been toying around with the idea of starting your own business (aka generating  your own income, being your own boss, taking matters into your own hands, etc) make sure you grab a copy of my free Checklist for Starting a Business.

Budgeting with no income can feel overwhelming and scary at first, especially if you don’t know when exactly you will be seeing some income again. Everything is going to be OK. The fact that you are here trying to figure it out at all is proof of that. Eventually, things will go back to normal or you will find a new normal. It might take a little elbow grease for a while but you can do this. 

What questions do you have about how to budget with no income? Drop a comment below. 

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Here at Deeply in Debt, we offer tons of personal finance advice based on our own journey paying off $650k of student loan debt. If you have student loan debt and aren’t sure where to start or what to do, I highly recommend the CFA’s over at Student Loan Planner to help you put together a solid financial plan for your student loan debt. We personally used them and it literally saved us over $200,000 on our student loans. You can check out the Student Loan Planner here.