Your club spends money on new players, wages, win bonuses and stadium constructions.
You can see full list of your expenses in the Finance tab.
Once you enter negative balance you have 7 days to go back to green.
If you do not, then your club goes bankrupt and the system will start selling one of your players every day to cover your financial situation.
Players are not sold at random. The system will start off from the player with the highest value and go down the chain with the same priority.
You will receive an in-game notification if this happens.