Budgeting When Behind on Bills: What to Do

Falling behind on your bills can make you feel like you’re drowning financially.

A lot of people have been there; it’s stressful and overwhelming, and it can seem impossible to dig your way out. But creating a budget to catch up on past-due bills and avoid falling further behind is completely doable.

We’ll walk you through the steps you can use to get back on track.

Assess Your Current Financial Situation

Before making a plan, you need to understand exactly what’s going on with your money – how much is coming in and where it’s going out.

Sit down with a notebook, and write down any money you receive – your paychecks, side hustle income, child support, even birthday gifts. List absolutely everything.

Then, make a list of what you spend money on each month. Rent, utilities, and groceries are obvious. But don’t forget smaller recurring expenses like Netflix, gym membership, and your daily coffee.

Tracking every dollar helps reveal where your money’s been going so you can redirect it.

Make a separate list of all the bills you owe right now and how much you owe. This part is crucial – you need the full picture of what’s past due so you can tackle it.

Key Takeaway: Understand your complete financial situation – all income, expenses, and overdue bills.

Prioritize What You Absolutely Need To Pay

Not all bills are created equal when you’re short on cash. The expenses you need to stay current on are rent/mortgage, utilities, and food – things tied to basic survival. You want to keep the lights on and a roof over your head.

Cutting back on non-essentials for now is key. Be really honest with yourself about what a want is versus a need. Netflix is nice to have, but food is essential. Temporary sacrifice of the wants will help you get back on track.

Key Takeaway: Focus first on paying bills for your basic needs. Minimize spending on non-essentials.

Read More: Here Are the 9 Top Personal Finance Mistakes to Avoid

Call Creditors and Explain

We know it’s uncomfortable, but you must contact any company you owe money to. Many major corporations have hardship programs to help people who’ve fallen behind due to circumstances outside their control.

When creditors call you, be upfront that you’re experiencing financial hardship but want to pay what you can. Ask if they can waive late fees, reduce interest, or create a temporary payment plan that works for you. You’d be surprised how willing they are to work with you – they want to get paid something rather than nothing if you default completely.

For bills you can’t pay in full right now, explain how much you can reasonably pay each month.

Get any payment plans in writing to make sure you have a path to gradually pay down what you owe.

Key Takeaway: Contact creditors, explain your situation, and negotiate doable payment plans. Many will provide relief options.

Adjust Your Budget to Direct Cash to Past Due Bills

Now it’s time to update your spending plan to reflect your obligations and direct more dough where it’s needed most.

Look at your income sources and required expenses. Make adjustments to allocate as much money as possible toward past-due bills based on the payment plans you worked out with creditors. This likely means reducing restaurant meals, entertainment, shopping, and other non-essential purchases.

Also, set specific and realistic short-term financial goals, like paying off your smallest past-due bill in 3 months. Tracking your progress can keep you motivated!

Key Takeaway: The goal is to create a budget directing maximum funds to past-due bills while still covering your basic necessities.

Check Out Assistance Programs

Government and community programs exist to help ease financial pressures. We know asking for assistance can be hard, but look at it as a short-term bridge to get you back on your feet.

Research government programs like food stamps, Medicaid, and energy assistance. Local food banks, charities, utility company assistance programs – all can lift some financial burden so you can focus cash on outstanding debts.

Key Takeaway: Take advantage of any assistance available so you can devote more to paying off debts.

Avoid Quick Fixes That Make Things Worse

It’s tempting to seek fast cash when you’re financially stressed, but some common shortcuts ultimately sink you deeper into the hole. Steer clear of:

Payday loans – These small, short-term loans charge crazy high-interest rates and fees, trapping you in a never ending cycle of debt. Not worth it!
Ignoring bills – Sticking your head in the sand will just lead to more late fees and penalties. Stay in touch on what you realistically can pay each month.

Key Takeaway: Beware of predatory loans, neglected bills, or anything else exacerbating your situation.

Final Thoughts

Getting behind happens, but you CAN take back control of your finances. If you have an honest assessment of where you stand, prioritize obligations, negotiate plans with creditors, adjust spending, and utilize available assistance, you can create a budget to get back on steady ground.