5 Things to Do When You Can't Pay Your Bills
Realizing you don't have enough money to cover your monthly expenses can be a scary situation. There are many ways this can happen, including overextending yourself with too much debt, having an irregular income, or losing your job.
There are many signs that you need to earn more money but not being able to cover your basic monthly expenses is a huge red flag. It's important that you take action as soon as possible to turn the situation around.
Try these five steps to boost your earning power if you find yourself unable to pay your bills. They can help you get on a more stable financial footing and move out of survival mode.
First, you need to find ways to reduce your expenses. There is almost always at least one more area that you can cut back in. You may need to find a roommate to share your apartment or find a way to carpool to work.
Cut back on your food budget or keep the heat turned down. Another option is to shop around for a cheaper cell phone plan.
Since most of your monthly income is likely going toward housing expenses, you can also look for ways to save on rent.
Also, you should also stop spending money on things that are not necessities. This includes new clothes, eating out, or vacations.
Second, you need to find an additional source of income or a new job. This may mean that you take on an additional part-time job. You may be able to pick up extra hours at work or can sell some things to help pay off some debt.
Keep in mind that a second job should only be a temporary situation until you get caught up on bills and are able to cover your monthly expenses with your fulltime job. In fact, more than one in three workers with a side hustle say they need that income to pay their bills.
For example, if you need the extra money to cover debt from a medical emergency, you can take on a second job or side gig to pay on that debt until it's paid off.
Next, you need to look for a long-term solution. This may mean that you need to go back to school to secure a higher-paying job, get additional certifications for your current position, or it may mean that you need an entire career change.
If you have not attended college, you may consider doing so, since research shows it increases your earning power. If you are considering a career change, be sure to choose something you are passionate about, not just a field in which you could earn a good salary.
If you find that you make decent money, but still struggle, you may need to get more serious about budgeting. Your problem may be due to a lack of budgeting.
Fourth, contact your creditors and see if you qualify for a reduced payment or forbearance of some kind. Student loans will offer forbearance if you can prove economic hardship.
Credit card companies can temporarily reduce interest rates or reduce the amount you owe each month, though they may require you to stop using the credit card. Lowering your monthly payments, even by a small amount, can help you get in a better position financially.
Finally, it is important that you cover your basic needs before you pay your creditors. This means that you should continue to pay your basic needs: housing, food, healthcare, and utilities. Only after all these bills are paid do you begin to pay your creditors.
Remembering these priorities throughout the month will prevent you from running short on cash towards the end of the month.