I had a lot of cash flow issues in my early 20’s. I had an entry-level salary, was maxing out my 401k & FSA contributions, and I was living in one of the most expensive cities in the US – without any savings. I wasn’t broke, but I definitely struggled when the first of the month came around and everything was due at once. Sometimes your rent is due just a few days before your payday and when you’re living paycheck-to-paycheck, you don’t have the luxury of savings to bridge the week or so gap.
When you run into cash flow problems, what are your options? Without the ability to pay, you have to do something, right?! As I mentioned earlier, I’ve endured my fair share cash flow issues and have personally used many of the below in times of distress.
What is cash flow?
Cash flow is the movement of cash in and out of your accounts. When you have more money coming in than going out, you have a positive cash flow. When you have more money going out than coming in, you have a negative cash flow. A cash flow is a funnel, and cash flow issues occur when you have a healthy flow of cash in and out, but all of your cash going in is stuck at the neck of the funnel.
Sometimes, you have all of your bills due on the 1st but you’re not paid until the 6th, an all too common problem. Many of us (myself included) will, or have, experience cash flow issues at some point in their lives. When this happens, it can be a huge point of anxiety and pressure. Without the necessary cash in-pocket, what are your options when you have bills due but not the funds to pay them?
Break the glass
Savings accounts are the first place you should turn to when you’re experiencing cash flow issues. Ideally you have a “break the glass” account for that exact purpose, which experts advise should be equal to or more than 6 months of your salary.
This is a big goal – remember that every little bit counts and you’re doing amazing!
While a 401k/retirement fund should never be touched (outside of dire circumstances), savings accounts are the perfect options for the occasional cash flow issue. Most savings accounts accrue interest as well, so it’s a failsafe option. When you can, pay back your account when your cash flow issues are resolved.
Turn to credit
While you can’t typically use credit for things like rent or credit card payments (obviously), you can usually pay a utility or internet bill with a card. Autopay is usually your best option for recurring monthly expenses like electric, internet, loans, etc., since they are often incentivized, most utility accounts will only let you enroll in autopay if you connect your bank account – autopay won’t typically allow you to enroll with a credit card. However, when you’re in a payment crunch and your bill is due, it makes sense to pay a few dollars more to make a one-time payment with a card.
When possible, I always recommend enrolling in autopay. You’ll never miss a due date and, incentives.
Request an extension
Sometimes, all you really need is a day or two to get your funds routed correctly. If this is the case, try going to your debtor directly and explain your story. Landlords will often agree to holding off on cashing your check for a day (just don’t ask too often), or you can just eat a late payment penalty. Wireless carriers and internet providers, as well as utility providers, generally provide a grace period of up to a month prior to service termination or late credit reporting.
Obviously this isn’t ideal, but it is not the end of the world if you are a few days late on making a payment!
Request an early payday
If you need your cash immediately, your employer may be able to move your payday up. Reach out to your AP to see if this is possible. This can be a slippery slope, as your next paycheck will be delayed as early as you received your check. Be mindful that though it never hurts to ask, this is a trickier one to pull off. If your company is smaller and on a tighter budget, they might not have the funds to pay you early, so it’s no guarantee.
File financial hardship
Many cities have programs in place to help you if you’re facing eviction or homelessness. While these are programs for those who are facing long term financial hardship, a bit worse than your standard cash flow issues, it never hurts to see if your city or provider is able to offer any sort of leniency on your bills. This may give you a chance to come up for financial air and let your cash flow issues subside.
Virtually every provider on a monthly basis has programs in place that can assist you in making payments if you’re consistently struggling to meet your deadline. Sometimes, the answer is as easy as moving your billing date back a week or two.
At the end of the day, know that you’re not alone in facing cash flow issues. It’s a huge pain point and can cause anxiety, panic attacks, depression and endless issues in your life, but you have options – cash flow issues are temporary. With some time, money management and planning, you’ll be able to better your financial (and mental!) health. All in time.
