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It’s extremely hard to try to make ends meet when you are not earning enough money. Falling behind on monthly payments can happen to anyone, especially in today’s economy. The situation is stressful enough to also have those pushy collectors call you constantly as if you weren’t aware that you owe them money.
So what is the best approach to get back on track? Forget about delaying your some payments to try to catch up on other bills. It will only add up more fees that will become harder and harder to pay off and can seriously affect your credit score.
Even thinking about taking smarter financial choices and creating a budget can seem overwhelming right now. Where to start?
Getting back on track is possible, don’t despair. If you are behind on your bills, gather your strengths and take the bull by the horns, unless you want to keep going on a downward spiral.
It takes a great deal of effort to catch up, but if you follow a plan, you will have a better chance to succeed.
1. Make a list of the bills.
First, take a pen and notebook, gather all your receipts and monthly statements.
Write down all the payments you are behind on, the total amount due, the minimum amount due, payment due dates, and frequency (monthly, bimonthly, etc.).
The most common recurring expenses are rent/mortgage, utilities, credit card payments, insurance payments, other loans (such as student loans), cellphone and subscriptions (streaming services, gym, etc.). Put them all on the list.
2. Set priorities.
Now you have the list of your monthly expenses with all the information mentioned above. Rewrite the list of based on their priority. Always pay for your basic necessities first, so start by setting money aside to cover the mortgage/rent and utilities (water, electricity, gas).
Covering these expenses should be your main concern. Being late on your credit card payment won’t leave you or your loved ones without a roof over your head.
Follow by arranging the remaining bills from the highest to the lowest amount of debt, interest rate, and due date.
Your second priority is to catch up and avoid paying late penalties. You’re going to have to cut back on unnecessary spending if you’re earnings do not match your lifestyle.
This sacrifice will pay off in the long run, so don’t feel bad about temporarily saying bye-bye to Hulu and focus on gathering the required amount. Your economic stability is much more important than momentary gratification.
3. Find a way to catch up.
By making a list of your bills, you will find out how much money you’ll need and when you’ll need to make the expenses. How can you gather that sum?
We talked about cutting back on luxuries, but if it’s still not enough to cover your needs, think about getting a side job or freelancing.
Maybe you can sell the things you are no longer using or need on Craigslist, or have a garage sale, or even monetize on your hobbies.
Do whatever is necessary to regain your stability and peace of mind. Who knows? Maybe your Etsy shop ends up being your main source of income!
You can also talk to an agency or church and ask them to pledge some money towards your bills. They might cover the entire amount or part of it but will ask you to submit paperwork to prove that you need the assistance.
Don’t take it hard on your ego, it’s not charity. Instead, be thankful that you won’t have to dig deeper into your debt to get by during rough times.
4. Make minimum payments (at least).
Credit card debt is terrible. Late payment fees, interests, overdraft fees, and other penalties can be obstacles when trying to put your finances back in order.
If you’re buried under this type of debt, stop using your cards right now! This is a crucial step to getting your finances back on track. You might need them to cover for your basic expenses, but it’s best if you’re able to gather the money some other way.
Being able to pay the amount in full would be the best scenario, but it’s unlikely you’ll be unable to do so at the moment. Try to make the minimum payment at least.
It might not seem to help much, but it will decrease your balance (assuming you are not using your credit card), keep your credit healthy, and allow you to redirect your money to other payments. Just make sure you always pay on time.
5. Talk to your creditors.
You’re not the only one interested in getting back on track with your payments. Your creditors want to get that money back, of course! Letting them know you are going through a tough time but are working towards gathering the capital can earn you lots of points.
Talk to them and see if you may be able to work something out with them that fits your monthly budget. Communication is key!
But before contacting them, check your budget and see how much you are going to be able to disburse each month.
Get well organized because you will be expected to make at least three minimum payments on time to be eligible for some payment plans. Some companies might even ask you to catch up on payments before taking in any of your requests.
A creditor can assist you in several ways. They can accept late payments without penalties, help you out setting a payment plan, stop interests during a short period, remove late fees, change due dates, lower monthly payments, temporarily postpone a due date, etc.
Even putting down a note on your account stating that you are going through tough times can be helpful. If they are denied, ask them what needs to be done so you can become eligible. Be prepared, since it might take a few billing cycles to see the changes reflected on your monthly bills.
Talk to your landlord or mortgage company and let them know you are going or will go through tough times. They may offer forbearance, a repayment plan or refinancing the loan. Keep in mind that your mortgage or rent is the most important bill of all. You do not want to face foreclosure or eviction of your home.
6. Get into budgeting.
Budgeting will protect you from overspending your paycheck. Project your income and expenses to protect yourself from negative cash flow. You can do this daily, weekly, biweekly or monthly. This way you’ll be sure you have enough cash on your accounts and find out if you are misusing your money.
Be careful with discretionary spending (not fixed), the expenses that can make anyone fall of their budget, like entertainment, groceries, gas, etc. Use cash for these needs to have more control and hold yourself accountable if you overspend. Only use your debit cards to pay your fixed bills.
7. Have an emergency fund.
After you’ve covered the bills you were behind on, consider saving for an emergency. A contingency fund will be your safety net just in case you happen to run behind on your bills again in the future.
Gather at least 3 months’ worth of expenses. Don’t try to collect the entire amount right away, set aside some money on your monthly budget and let it slowly but steadily add up.
Once you have your emergency fund, keep saving for retirement and put it in a special savings account so it generates interests. Just remember, it’s for emergencies only!
What is a true emergency? Getting laid off, medical emergencies, a divorce, a death in the family, home and car repairs, unexpected travel to visit a critically ill family member.
Any other expense is considered something that should have been budgeted for. Planning ahead will let you live a stable financial life.
The bottom line
First, breathe and relax. This is a temporary situation if you follow this plan. Slowly but surely you will be able to catch up on your bills.
Hard work pays off, and you’re doing this sacrifice for yourself and your loved ones. Once you’re on track with your expenses, never allow this to happen again.
Hard work and discipline are key to reaching financial stability. Falling off track with your monthly payments is a result of a lack of order in your spending. Stay on track by keeping your monthly budgeting habit, thinking twice when you want to spend money on luxuries, saving, and always paying the total amount due on time to prevent interests and unnecessary debt. Remember, budgeting is the best way to thrive financially. You can do it!