It’s always better to pay off debts and obligations promptly. But sometimes, life happens, and you may fall behind on payments.
When you’re strapped for cash, knowing which bills you should prioritize paying, how to get a statement of no loss, and what to do about bills you can’t pay yet can help you prevent financial turmoil.
From reinstating lapsed insurance to consolidating credit card debt, here are some tips on what to do if you fall behind on bills.
Examine Your Financial Condition Objectively
You need to know precisely what you’re up against before you can catch up on past-due expenses. Keep track of the dates and amounts of all monthly payments.
Pay particular attention to the payments you’ve skipped, paid late, or otherwise had difficulty keeping up with. You may come up with a strategy to get back on track after you’ve gathered all the facts you need.
Look at your credit card statements to see if your spending has led to any unknown benefits or bonuses. Some cards have cash-back rewards where companies give you cash for spending money on your card.
Discovering applicable credit card benefits can be a great way to pay the extra debt.
No matter how terrifying it is to tally up your debt, you’ll have the knowledge you need to come up with a debt repayment strategy after you’ve done it on paper or in a spreadsheet.
Make Current and Past-Due Payments a Top Priority
Once you’ve made a list of just about everything you owe, prioritize them. This will allow you to concentrate your payback efforts on the invoices you consider to be the most significant or have the highest expenses, like bills with high-interest rates or fees.
You’ll also want to keep track of any missing payments, which might put you in serious legal or financial problems.
When you pay those off, prioritize any work-related costs, such as vehicle payments or phone bills, and afterward concentrate on loan payments and other obligations.
Expenses that allow you to take care of your loved ones are vitally crucial. Prioritize your rent or mortgage payments, followed by your food and utility bills.
Lastly, if you have trouble paying your mortgage or rent, visiting with a HUD-approved counselor may be helpful.
Contact Your Creditors and Other Financial Institutions
After determining which expenses you can’t afford to pay, the next step is to contact your creditors. Debt collectors may be more willing to work with you on payment arrangements if they know you’re having financial difficulties and are open about it.
While it may be tempting to pretend that you don’t have to pay your expenses, this tactic isn’t a great option. People who pay their bills on time are likely to avoid fines or a rise in the interest rate on their loans.
Make a Financial Plan
You need to prioritize and analyze your monthly budget now that you know how much debt you’re in. By tracking your family income and noticing when it arrives in your bank account, you can better stick to your payment schedules and pay off some of your past-due expenses.
Starting your budget is as simple as compiling two lists: one of your sources of income and one of your bills. Sorting them by fixed expenses, such as mortgage, insurance costs, or vehicle payments, and variable costs, such as food and entertainment, might be beneficial.
You may try to lessen your fluctuating costs and cut down on any extras until your income and spending are in balance.
Alternatively, you can use the 50-20-30 rule. Using the 50-20-30 rule, you set aside 50% of your income for necessities, 20% for savings, and 30% for discretionary spending. It’s a smart and simple way to budget your finances. The essentials like rent, other housing bills, food, and utilities make up 50% of the budget.
No matter how you organize your budget, keeping track of your expenses can help you stay on track with your budget once you’ve learned how.
Earn More Money, If Possible
Depending on your financial status, you may find yourself needing to boost your income to pay off your debts.
It may be time to start a side job if budgeting and reducing spending aren’t enough to help you pay off your debts fast. Possible ways to earn additional money include:
- Asking your existing employer for more hours or a raise
- Driving an Uber or Lyft vehicle for a living
- Entrepreneurship in the form of a side hustle like dog walking, babysitting, or lawn care
- Virtual jobs, like online customer care position or a virtual assistant position
To find a way to generate money from your abilities and interests, write down a list of occupations or enterprises that might help you do so.
However, you need to be honest about your money habits because being a successful entrepreneur starts by building good habits.
Begin promoting your services to family and friends, as well as in public venues such as shopping malls and restaurants. Then put your free time to good use and start making some additional money.
Use Debt Consolidation Programs With Caution
There are debt settlement businesses out there that may be able to help you when you find yourself in financial turmoil, but you should be wary before signing on.
Debt collectors often claim that they can renegotiate or alter the conditions of your loan. However, you may want to review these settlement offers carefully and ask how your debt will be disclosed to the credit reporting agencies before agreeing to a settlement.
Before beginning the debt settlement process, investigate the company and analyze customer complaints against the business, if there are any.
Getting behind on your payments is a stressful condition. Still, with a bit of planning, budgeting, and prudent spending, you can better understand your financial status and develop a strategy to get back on track.
Imani Francies writes and researches for the insurance comparison site, TheTruthAboutInsurance.com. She stays up to date on new money trends and frequently explores money management techniques to help others gain control of their finances.