Fallen Behind on Your Bills?

What to Do If You're Behind on Paying the Bills

Have you fallen behind on your bills? Don't panic - here are 8 tips that can help

The unthinkable has happened: you’ve fallen behind on your bills. You are no longer able to make your minimum monthly payment. Collectors have begun calling. You feel a nervous twist in your stomach each time the phone rings.

What should you do?

Here are a few tips to help you if you’ve fallen behind on your bills:

1. Make a Budget.

I know this sounds basic, but it’s vital. Gather all of your monthly bills into one spot.

Write out the amount due so you know exactly how much money you're obligated to pay each month. These are your “fixed expenses.” They’re the regular, unchanging overhead associated with your life.

Review your variable cost-of-living expenses from the past several months as well. Look through the past few months’ worth of credit or debit card statements to see how much you spend on groceries, electricity, gasoline, water, and other necessities. These are “variable expenses,” but they’re also necessary.

These budgeting worksheets will help you figure out how much money you need to spend in order to stay afloat.

2. Evaluate Which Bills You’ve Fallen Behind On.

Chances are there are some bills that you are keeping up with, such as groceries, but other bills that you have fallen behind on, such as your car loan or your credit card.

Generally, people prioritize paying bills for items that they appreciate (such as food), but tend to avoid paying bills for items that they dislike (such as medical expenses).

Take note of which accounts you have fallen behind on, and see if you can find a pattern.

3. Jot Down Your Income.

List all your monthly income. Start by looking at your past few pay stubs. Write down your net take-home pay, after taxes and retirement contributions have been removed from your paycheck.

If you have any other sources of income, such as extra money that you make from walking the neighbor’s dog or babysitting your cousin’s children, write in that amount as well.

4. Compare Your Income to Your Monthly Overhead.

Are you earning more or less than you owe? If you earn more than you owe, then there should be some wiggle room in your budget that you can use to catch up on your bills.

The fact that you’ve fallen behind on your bills points to an overspending problem. You may be shopping impulsively and buying too many discretionary items, not leaving enough space in your budget to pay your bills at the end of the month.

If you earn less than you owe, then the fact that you’ve fallen behind points to an under-earning problem. Your income can’t support your basic cost-of-living, and you need to make more money.

Regardless of whether you spend too much or earn too little, you should approach this issue with a one-two punch combination. You have to simultaneously cut back on your expenses while increasing your income.

5. Review Your Expenses for Anything That You Can Cut.

Not all “groceries” are a necessity: a bag of rice and a pound of dry beans are necessary, but you can live without cookies, potato chips, and other luxuries.

Cable television is a luxury, not a necessity. Your electricity bill may be higher than necessary because you’re in the habit of leaving the lights on.

6. Earn More.

You should simultaneously increase your income by working extra jobs. Take on a second job during your “time off” in the evenings and weekends. Mow lawns, deliver pizzas, babysit kids. If you're a professional, pick up additional freelance or consulting work.

7. Negotiate With Your Creditors.

Don’t ignore their calls. Instead, talk to them about creating a payment plan. Explain that you don’t have the money to pay the bill in full at the moment, but that you are willing to make a sign of good faith by contributing an extra $50 a month towards your amount owed.

Ask if they’ll be willing to reduce your total balance owed, and insist that they avoid reporting your negative mark to the credit bureau.

Get all promises in writing.

8. Avoid Any New Debt.

This is absolutely not the time to take on any additional expenses. If that means that you need to sacrifice traveling out-of-state to see your family during the holidays, well, that’s a sacrifice you have to make.

If that means that you’ll have to give handwritten notes as Christmas presents rather than purchase gifts at the store, so be it. These are the trade-offs that you’ll need to make in order to regain solid financial footing.