Unexpected Cash Flow Crunch

Just about everyone gets surprised by a month that has more expenses than income. As with any unpleasant surprise, how we handle it can determine whether it turns into a long term problem or just a short term bad situation that we learn from. Here are some ways that might help with cash flow and, depending on the next steps you take, keep it from causing you angst in the future.

While dealing with the cash flow crisis, rethink your needs and wants for the short term. Trimming some spending around movies, restaurants, weekend trips, and other niceties for a while may get you out of your tight financial spot. Then you can have some of these luxuries go back into your spending patterns. Look in your pantry and freezer. Most people who grocery shop regularly have some canned goods and frozen foods that can be a good meal at home. Cooking instead of eating fast food or living off heat-and-eat foods can also save money. An entrée or meal with a few different food groups that you make in bulk from scratch may feed you for several meals of leftovers, cost less than the convenient pre-made items, and actually be better for you.

Don’t let sunk costs trick you into spending money. A sunk cost is a business concept that is basically money that was spent that you can’t recover. Let’s say you’d planned a weekend trip to the mountains and have already put down a non-refundable deposit on a condo or hotel room. You’re hit by a surprise budget crunch and are trying to decide if you should go on your trip or not. While there might be some variations of a right answer, don’t let the deposit weigh too heavily in your decision. If that lodging payment is a small piece of the entire cost of the trip, you might be better off seeing if the money can be applied to a future stay or accepting the loss, rather than spending several times the amount of the deposit to avoid having it go to waste.

If you work at a job where there is an opportunity to pick up some extra income, do it. Two things that can generally be traded are time and money. We pay extra to have someone do our laundry, yard work, or prepare meals. If we need money, using some of our leisure time to get extra money is a practical trade off.

All these austerity measures, of course, assume that you don’t have enough in savings or credit card availability to take care of the financial crunch for the month. This is evidence of a bigger financial concern for the household. While getting through this short term problem, take a close look at your income and expenses. And be willing to make major changes to avoid tight financial times in the future.

-Linda Leitz