How To Cut Your Budget — When There Is Nothing Left To Cut

It is no secret that you need to make a budget.  But, what do you do when you can’t make the numbers work? This is a common question people ask themselves.  So, how do you cut your spending?

what to do when your budget does not work - calculator and pencil doing the math

what to do when your budget does not work - calculator and pencil doing the math

I remember when my husband and I were struggling after I quit my job to stay home with our firstborn.  It was tough, and we all know you can’t get blood from a turnip!

Before you look at what you can do to save on your budget, you need to make sure you have one.  Your budget needs to be in writing. It needs to be a roadmap showing you where you will spend your money.

If you are just learning about budgeting, you will want to check out our page — How to Budget. There, you will learn everything you want to know about budgets and budgeting.


1.  Find ways to bring in more money each month

Of course, you can’t give yourself a raise at your job, but there are other things you can do to bring in more money.  You can sell items you no longer need or find a part-time job.

If your budget is not working no matter what you’ve tried, it is time to make some tough choices.  And, it may mean it’s time for another job to help you make your budget work.

Read More: 75+ Ways To Make Money

2.  Don’t be so hard on yourself

Sit back for a minute and look at where you were before you knew about budgeting and stretching your dollar vs. where you are now.  Be proud of what you’ve done and the changes you’ve made.  Sometimes, just knowing that you’ve made positive financial changes is enough to be proud about.  Just celebrate the small victories.

3.  Don’t compare yourself to others

You may see others who claim that they found a way to shave their budget by hundreds of dollars every month.  While we would all love to be able to do that, it may not be realistic for you.  You may have additional expenses others do not have.

Your income is different than them.  You have your own financial goals.  When you stop comparing yourself to others, the need to keep up and compete will stop, and you can feel better about your budget.

4.  Look at your needs vs. wants

There are probably things you have in your life that are wants rather than needs (and vice versa).  Do you have both a landline and cell phone?  If so, do you need both or do you want both?  Maybe it’s time to drop one of them to save money.

Take a look at your entertainment.  Do you need cable or can you find an alternative that will save you money? Do you need to eat dinner out once a week – or do you want to dine out?

Take our situation for example.  When we were getting out of debt, we did not eat in a restaurant for more than a year.  It was tough, but we survived.  The reason was that we determined that it was a want to dine out and not a need.  Instead, we took the money we would have spent having a dinner out and used it towards our debt instead.

Read More:  How Your Needs vs. Your Wants Can Affect Your Budget

5.  Seek assistance

Now might be the time when you need to reach out to get help.  You may need to look at local programs or services that can help you with your bills. Check with your local government to find ways to get help with utility bills, apply for food stamps, locate a food pantry and even get assistance for child care.

Just because you ask for help does not mean you are not financially responsible.  We all have times when we need a hand, and these organizations are here to help.  Once you get back on your feet, then that will be your chance to pay it forward to help someone else.

6.  Cut your food bill

It sounds simple, but you need to cut back on your spending. Perhaps you need to cut out some of the convenient foods you normally buy or make less expensive meals.

Start to use coupons!  While you may not find them for the fruits, vegetables, and meats you need, you can find them for the household products you use and many other products around your house.  Combine these with sales to ensure you pay the lowest price possible.

You might also consider changing where you shop.  One idea is to shop at Aldi.  If you live near one of these locations, you can easily cut your spending by nearly 50% just by shopping here!

Read More:  How to Cut Your Grocery Bill in Half

7. Lower your utility expenses

You can’t live without water and electricity, but you may be able to steps to reduce how much you spend.  Turn off the lights in rooms when they aren’t in use.  Keep the blinds closed to keep the heat out (or in, depending on the season).

Take a look around the house and unplug anything when not being used.  Electronics can still draw a charge when plugged in, even if you are not using them.

Finally, reach out to a provider like BillCutterz to see if they can’t negotiate rates down on your behalf.

Read more:  50+ Ways to Lower your Monthly Utility Bill

8. Eliminate subscriptions

Take a look at all the monthly services you pay for.  You may have a gym membership, Netflix or streaming service or additional services you are not using regularly.  When you continue to pay for something you are not fully using, you are wasting money.

9.  Use Cash

I know it sounds crazy, but it works.  When you use cash for your discretionary spending you can never overspend.  So, if you need to lower your grocery spending, the simple way to ensure you do not overspend is to get cash.

Cash is defined, and when it is gone, it’s gone. It is a simple tool that you can use to ensure that you always stay on budget and help keep your spending in check.

Read More:  How to create a cash budget

If your budget is not working, then it is time to make some big moves. It will not be fun. It will not be easy. But it is something you just have to do.


How Much Will a Car Repossession Hurt My Credit Score?

In most parts of the country, having a car isn’t optional. Without your own vehicle, it can be extremely difficult to get to work or provide for your family, but at the same time, car ownership can be a challenge.

If you find yourself having trouble making your car payments, you could end up losing your vehicle. That can cause all sorts of other problems, which a reader recently asked about:

“How much does a repossession affect your credit?” —kc

Having your car repossessed can certainly cause credit problems, but the actual repossession is only one of them. Car repossessions are reported to the major credit bureaus, and as a result, will impact your credit scores.

“A car repossession is considered a negative payment event by the FICO Score,” Can Arkali, principal scientist at credit scoring company FICO, said in an email. “All else held equal, the impact of a car repossession is comparable to the impact of a collection account.”

Jeff Richardson, a spokesman for credit scoring company VantageScore Solutions, said how much a repossession affects your credit really depends on the scoring model you’re talking about, as well as other factors in an individual’s credit history. In general, a repossession is considered a derogatory event, like collection accounts, civil judgments and tax liens.

Credit Problems Leading Up to Repossession

Of course, repossessions generally don’t happen in a vacuum. Someone’s car is usually repossessed because they haven’t made their auto loan or lease payments on time, which likely would have already hurt their credit.

“Avoid it,” Richardson said, adding that people should avoid any derogatory events “at all costs.” According to VantageScore, it will take longer to recover from a derogatory event like a car repossession than it will to recover from a series of delinquencies. So even if you’re behind on payments, bringing that account to current status and avoiding a repossession may also help you spare your credit from further damage.

The Aftermath of Repossession

A repossession can remain on your credit report for 7 years from the date you initially fell behind on the loan. The loan status will change to “repossession” (it would have previously said how many days delinquent the payments were), and it will have a seriously negative impact on your credit, though that impact will lesson over time.

Rod Griffin, director of public education at Experian, said there’s no specific amount of points your credit score will drop after a repossession. Given that a series of delinquencies tends to precede repossession, someone whose car is taken back likely already has a poor score.

“Typically it’s not a unique element of the history,” Griffin said. There are probably other negative things happening, and that repossession is going to dig them in deeper.”

That’s often not the end of it either. Losing your main mode of transportation could seriously compromise your ability to get to work and make money to pay your other bills. The potential domino effect of a repossession is just one of many reasons to try to avoid it.

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A voluntary repossession — giving the car back rather than having someone come and take it — will hurt your credit score just as much as a forceful repossession, Griffin said, though it could help you in the future to maintain as good a relationship as possible with an auto lender or dealer. But as far as credit goes, it won’t help.

Finally, after the lender repossesses your car, they will sell it in an attempt to recoup their losses. If the sale doesn’t cover the entire balance of the loan, you can expect to get a 1099-C for that tax year. The Internal Revenue Service treats canceled debt as income, and you may need to pay taxes on it, which can further strain your finances.

If you do go through a repossession, Griffin recommends focusing on what you can do to improve your credit while you wait for the repossession to age off your reports. That includes actions like paying down your revolving credit balances (credit card debt) and bringing current any other delinquent accounts you may have, because payment history and debt use have the greatest impact on credit scores. You can see how your score changes as a result of a repossession and your efforts to improve it by getting a free credit score every month on

More on Auto Loans:

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What Is a Financial Planning Pyramid?

What Is a Financial Planning Pyramid? – SmartAsset

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Setting priorities in the process of creating a solid financial position can be challenging. The financial planning pyramid provides a visual explanation and reminder to help people make the right moves at the right time. It aims to keep people from taking inappropriate risk by gauging the relationship between risk and reward. The pyramid also takes into consideration the element of time as a person makes progress towards his or her financial goals. It is a simple way to suggest how much of a person’s assets he or she should commit to different investments and other financial products.

Deciding how to allocate your financial assets and when to do so is something a financial advisor can offer invaluable advice on. 

Levels of a Financial Planning Pyramid

There’s no single version of the financial planning pyramid. Some varieties have just a few levels and others have several. Some describe a wide variety of specific investments, asset classes and financial products and others just a handful of broad categories.

A core element of all versions of the pyramid is that the least risky financial moves are at the bottom, while the riskiest ones are at the top. The width of the pyramid at the level where a financial product appears suggests how important it is and how much of a person’s assets should be committed to it.

Here are levels of the financial planning pyramid:

Level 1 – The lowest level is the widest, which indicates its importance and where it should be in terms of priorities. It is also the least risky and, in fact, focuses on reducing financial risk. This level includes automobile, home, life, health, disability and liability insurance.

Level 2 – Once the first level is addressed, people can concern themselves with the second level. This level is focused on emergency savings. It includes money put into safe investments such as federally insured bank checking and savings accounts, certificates of deposit and government bonds.

Level 3 – The third level consists of savings and investment vehicles that may pay better interest rates than the very safe ones in the second level, at the cost of somewhat greater risk. They include money market accounts and high-grade municipal and corporate bonds and bond funds.

Level 4 – At the fourth level investments in equities begin to appear. These take the form of balanced mutual funds and high-grade shares of preferred stock and convertible bonds.

Level 5 – The fifth level consists of shares of blue-chip public companies as well as investments in growth-oriented mutual funds and real estate.

Level 6 – The sixth level represents investments in collectibles, speculative stocks and lower-grade bonds and mutual funds.

Level 7 – At the very top of the pyramid is a narrow wedge representing the small amount of assets that may be prudently committed to highly speculative investments. These could include commodities, over-the-counter penny stocks and the like.

Key Concepts

The main idea of the financial pyramid that the width of pyramid at a given level expresses how much a person might wisely commit to the investments in that level. That is, more of a portfolio should ordinarily be invested in blue chip common stocks than speculative penny stocks. Time is also a factor. This means people are advised take care of the risk-management tools in the first level before starting to build emergency savings or begin investing in the stock market.

Different investors have different situations, which can affect the pyramid. For instance, a person in the middle of his or her career may be more heavily invested in growth mutual funds than someone approaching retirement, who would likely emphasize safety of principal with investments in high-grade bond funds.

Some versions of the financial planning pyramid have an even lower level. This may include the creation of a financial plan. Another item sometimes included as part of the lowest level is a budget that aims to make sure a person has cash left at the end of the month to stock an emergency fund and, ultimately, invest.

While financial products at the bottom of the pyramid are lower risk than those on higher levels, there is no risk-free investment. Even government bonds may generate a negative return in terms of buying power if the return does not keep up with inflation. There is also a risk of paying insurance premiums without ever making a claim on the coverage benefits.

Bottom Line

The financial planning pyramid is a road map to help people decide where to put their emphasis today in preparing to reach their ultimate financial goals. It is a reminder of the relationship between higher risk and higher reward, and helps to ensure that people have the building blocks of a solid financial foundation in place before chasing better returns with riskier investments. While financial products at the bottom of the pyramid are lower risk than those on higher levels, there is no riskless investment. Even government bonds may generate a negative return in terms of buying power if the return does not keep up with inflation. There is also a risk of paying insurance premiums without ever making a claim on the coverage benefits.

Tips for Investing

  • If making and implementing a financial plan seems like a complicated challenge, consider working with an experienced financial advisor. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
  • Once you’ve decided to start investing your money, you’ll have to decide on an asset allocation that’s appropriate for your goals, age and risk tolerance. And unless you invest in a target date fund that automatically adjusts that asset allocation, you’ll have to rebalance your assets over the course of your investing time frame. That’s where a free, easy to use asset allocation calculator can be extremely helpful.

Photo credit: ©, © Trade, ©

Mark Henricks Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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Roth IRA Early Withdrawals: When to Withdraw + Potential Penalties

When it comes to saving for retirement, there are a multitude of options available to help you do just that. One of the more popular options people choose is an IRA, also known as Individual Retirement Account. The two main IRAs are Traditional and Roth IRAs and they can be used as alternatives to the traditional 401K.

An IRA is an investment account that allows workers to invest their earned income to encourage them to set aside money (earnings) for retirement. Unlike the traditional IRA, Roth IRAs are non tax-deductible which means you do not have to pay taxes when you qualify for your withdrawal. For this reason, Roth IRAs have become very popular.

If you decide to apply for a Roth IRA, it’s extremely important to be aware of the general rules and penalties associated when managing your account. Check out these simple rules and regulations associated with Roth IRAs.

Roth IRA vs Traditional IRA

Like we mentioned before, an IRA is an investment account that is designed to encourage workers to invest in retirement. With both Traditional and Roth IRAs, your contribution limit generally is the lesser of:

  • $6,000 ($7,000 if you are age 50 or older), or
  • Your taxable compensation.

Both options also allow you to invest in a variety of different investments such as stocks, bonds, mutual funds, annuities, exchange traded funds (ETFs), index funds, and so on.

Contributions made with after-tax dollars. Contributions made may be tax-deductible.
Your earnings grow tax-free. Your earnings grow tax-deferred.
You don’t pay income tax on distributions. You pay income tax on distributions.
Contribution limit based on filing status and income thresholds. Contribution limit is not based on income thresholds.

So what’s the difference between a Roth IRA and a Traditional IRA? The primary difference between the two is the way they are taxed. With a Traditional IRA,  the amount you can contribute annually (up to $6,000) can be deducted from your taxable income which reduces the amount of income tax you’ll owe for the year–providing immediate benefits. However, when you withdraw your money in retirement, you will be taxed on those withdrawals.

On the other hand, contributions to a Roth IRA are non-tax deductible, but qualified withdrawals are tax and penalty free. Roth IRAs also offer flexibility with non-taxable withdrawals compared to a 401K. With that being said, Traditional IRAs are best if you think your tax bracket will be lower by retirement and Roth IRAs are better if you anticipate taxes to be higher when you retire.

When Can I Withdraw From My Roth IRA?

When Can I Withdraw From My Roth IRA?

The contributions you make with a Roth IRA are not tax-deductible, but earnings can grow tax-free. Roth IRA withdrawal rules vary depending on your age and how long you’ve had the account. You can withdraw from your Roth IRA at any time, but before you make a withdrawal, keep in mind these guidelines so you can avoid the potential 10% early withdrawal penalty:

  • You must be the age of 59 ½  or older to make a withdrawal
  • You must have your Roth IRA for at least 5 years before you make a withdrawal

If you don’t qualify for withdrawal based on your age or how long you’ve had your account, have no fear, there are still exceptions to the early withdrawal penalty.

Exceptions to the Early Withdrawal Penalty

If you need to make an early withdrawal, but are under the age of 59 ½ or have not had your Roth IRA for at least 5 years, there are exceptions to the Roth IRA early withdrawal penalty.

You can avoid the Roth IRA early withdrawal penalty if you use the withdrawal:

  • to pay for a first-time home purchase
  • to pay for qualified education expenses
  • to pay for birth or adoption expenses
  • to pay for unreimbursed medical expenses or health insurance if you are unemployed

Unfortunately, if you don’t qualify for withdrawal or for the exceptions, you’ll have to pay taxes and penalties in order to withdraw from your Roth IRA.

Roth IRA Withdrawal Penalties and Rules to Consider

It is advisable, if possible, to avoid making an early withdrawal from your Roth IRA. Even though you can withdraw up to the total of your contributions at any time, once you have withdrawn your contributions, you will be hit with taxes and penalties if you don’t meet a qualified withdrawal or are under the age of 59 1/2. There may still be penalties if the account is younger than 5 years too.

Once you start dipping into your account’s earnings, it may be subject to a 10% early distribution penalty because that amount is considered taxable income and therefore the money would be treated as income.

Another thing to consider is the tax implications associated with a Roth IRA. If you contribute to your Roth IRA and then decide to withdraw within the same year, the contribution you make is treated as if it were never made as long as the distribution is taken prior to your tax filing date. However, keep in mind that you would have to report those earnings as investment income.

Roth IRA Withdrawal Penalties and Rules to Consider

Pros and Cons of Withdrawing

When it comes to withdrawing, there are pros and cons to consider before making a decision. Weigh your choices and decide whether withdrawal is the best option for you.


  • Roth IRA withdrawals are tax-free and penalty free when withdrawing contributions
  • You can possibly avoid the tax and penalty associated with early withdrawal in certain situations


  • Most of the time, early withdrawal of the portion of the distribution allocable to earnings may be subject to tax and it may be subject to the 10% additional tax
  • Once you withdraw, you cannot pay back the money to your IRA account
  • If you withdraw early, you will miss out on years of growth

In summary:

  • Roth IRAs are investment accounts that are non-tax deductible, but qualified withdrawals are tax and penalty free
  • To qualify for a withdrawal from your Roth IRA, you must be over the age of 59 ½ and have the account for at least 5 years
  • If you don’t meet the qualifying requirements or the exceptions, your earnings may be subject to a 10% early distribution penalty
  • Once you withdraw from your Roth IRA account, you cannot pay back the money and you will miss out on years of growth in your earnings

With all that being said, the decision to withdraw from your Roth IRA  should not be taken lightly. It is important to manage your money responsibly and make smart financial decisions so you can maintain your credit history.

Sources: Investopedia | IRS

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