When you are behind on your bills, it is stressful. In fact, I remember the days when I was struggling to make ends meet. I worked my tail off to make sure I didn’t allow this to happen. However, that didn’t always work out the way that I wanted it to.
If you have fallen behind and can’t pay your bills, it is a horrible feeling. There are the relentless phone calls and the bills that notices that keep arriving in the mail. I found myself in this situation many years ago, which ultimately led me to declare bankruptcy.
I’m here to tell you that was not the answer. It wasn’t the right answer. It took some time, but I figured out the right things to do when you get behind on your bills. And guess what? It isn’t running away from it.
What can you do when you are behind on your bills?
Ask the experts and most of the will tell you the same thing — pay the most important bills first. As if you don’t already know that. If you could pay those, you’d have already done so. That is not the answer you need. You need someone who has been in your shoes guiding you and helping you create a workable plan so you can get caught up on your bills.
WHAT TO DO WHEN BEHIND ON YOUR BILLS
When you find you can’t pay your bills on time, you need a plan. Not just any plan. But a plan that will work, no matter how much you make or how far behind you find yourself.
PAY YOUR NEEDS FIRST
No matter your financial situation, you have four basic needs: food, shelter, clothing, and transportation. While you should not ignore your bills, you should first pay your housing (rent or mortgage) and then your utilities.
You still need clothes and transportation, but when you can’t make ends meet, it may be time to put a temporary hiatus on new clothes or change where you shop. It might also be a good idea to sell the expensive car and buy something cheaper. utilities. Then, you’ll want to find ways to spend less on food (see below).
Prioritize what you pay first
Look at your bills and list the essentials at the top of your list. List them in the order of the least amount owed to the greatest. Do what you can to pay as many smaller bills right now. That way, you will feel like you were able to cover some of your expenses and no longer must worry about those items.
Read more: How to Create a Budget When You are Broke
PAY YOUR ADDITIONAL LIVING EXPENSES
Once you’ve covered the things you need to live, you can then focus on the secondary, or additional, living expenses. These include clothing and transportation.
This is where it gets tough. You might have to change where you shop for clothes for you and your kids. It may have to change from your favorite store to the second-hand store (or ask friends for hand me downs).
When it comes to your car, you have to really should be tough on yourself. Can you afford the vehicle you have? Is it leased with a high payment? Does the insurance cost a lot of money? Is it fuel efficient?
Only you can answer these questions. You may learn that it might be best to voluntary give up the vehicle. I had to do that in my 20s. It was not an easy thing to do, but getting out from that higher payment allowed me to purchase an older, less expensive car instead.
If you find you are forced between rent and a car payment, you pretty much have your answer. Let the car go.
You might love it, but at the end of the day, it is not important. Get an older car, which is less expensive, and get a lower monthly payment.
PUT AWAY THE CREDIT CARDS
If you are shopping like crazy with your credit cards, you need to stop. This does not mean you can’t ever use them again. However, until you are caught up, you should stick to a cash budget.
Using cash really allows you to have a better picture of your money. You are also not borrowing against a future payment owed to you. It is just better to pay for everything you can right now, without having to worry that a bill is coming in the mail at the end of the month for all the purchases you made over the past four weeks.
Once your spending is back under control and your bills are being handled the right way, you can resume using your cards — responsibly.
Read more: How to Break Free from Using Credit Cards
MAKE MORE MONEY
Believe it or not, there are lots of ways you might be able to make money. Most of us can’t make more money at work. But, that doesn’t mean you can’t still bring increase your income. It may be time to do the side-hustle.
You might want to try your hand at being an Uber driver or tutor kids in China. Sign up to start taking online surveys to add to your monthly income. You can also check out this massive list of 75 different ideas to help you replace or supplement your income.
Additional money doesn’t just mean getting a raise, it means looking around and seeing what you might be able to do create additional cash.
ASK YOURSELF A SIMPLE QUESTION
Look at your budget and ask yourself this question: “Do I really need to spend money on this item this month?”
If you can’t afford rent, should you have cable? If you can’t put food on the table, should you pay for a gym membership? Here are some expenses you might consider eliminating:
- Dining Out
- Gym membership
- Magazine subscriptions
- Habits (coffee, smoking, drinking, etc.)
Identify these items helps you know which items you can remove from your budget, allowing you the money you need to pay towards your necessary expenses.
PICK UP THE PHONE
Take the time to talk to your creditor. Speak with them about why you are behind on your bills due to your current situation. They might be willing to grant an extension on your payments, allowing you time to get your finances back on track.
For instance, if you can’t make your car payment this month, call your lender. Let them know what is going on. If you have not been late with payments and have not asked for help in the past, they might be willing to allow a deferment on your payment.
You never know what will happen if you don’t make the call.
Read more: How You Can Negotiate Your Debt
PRIORITIZE NON-ESSENTIAL PAYMENTS
When you are behind on your bills, you also need to determine which bills may result in the most adverse effects.
For instance, if you have a federal student loan, you will not feel effects on your credit report until you are at least 270 days past due. However, if you are one day late on your car payment, you could be reported for late payments.
If you make your car payment late, it could affect your credit card whereas there is more of a grace period when making the student loan payment. A little late is better than not at all.
You may also want to consider refinancing your student loans and credit card bills. Doing so may help you get a lower rate, which may reduce your monthly payment and help you pay off your debt more quickly. Credible has been helping families, just like yours, reduce their high-interest rates.
DEEP LOOK AT YOUR EXPENSES
You probably know the regular expenses you can cut or those you must pay cover each month. However, do you know about the little things where you might be wasting money? Perhaps you make a couple of runs to the coffee shop each month. If it is not a normal part of your routine, you might actually miss considering slashing this expense.
The simple way to do this is to look through your bank statements. Check every single transaction. Those small $5 and $10 purchases can quickly add up and really hurt your bottom line. Learn where you are spending your money and where you can actually cut back.
Maybe you need to drop your expensive cell phone and find a way to get more affordable coverage. Using something such as Mint Mobile can cost as little as $15 a month and can result in significant savings. You get full coverage without the expensive price tag.
Next, see if you can save money on your utilities and other bills. Sign up for free with RocketMoney. RocketMoney can cancel subscriptions, lower your cable bill and even try to find you insurance that costs less money. The average person saves at least $30 a month!
KNOW EXACTLY WHERE YOU STAND
The final thing you need to do is understand your credit score. Doing so gives you a much clearer picture of where you stand, as far as your credit.
In most cases, you have to pay to get your credit score from the three agencies. However, you can use Credit Karma, and get your score at no cost. They not only give you your free score, but they also provide you with a credit report card and utilization grade.
These are the things I did when I felt I was drowning under the weight of my bills. It was not easy. Trust me. This will be a difficult thing for you to do. However, a few changes now will allow you to live better later.
Being behind on your bills causes financial stress. When you remove that, you feel better and can focus on other things in your life.