what to do if you can’t pay your bills


Couple on the computer creating a budget

Living paycheck to paycheck can get you caught in a situation where your monthly expenses exceed your monthly income, leaving you wondering how to make ends meet and worrying over how to pay your bills. Here are a few helpful tips and some of the best ways to pay bills each month to improve your financial wellness.

prioritize expenses

Start by making a list of all your monthly expenses and the amount you owe. Don't worry about listing these in any order – the point is to calculate the total cost.

Typical monthly expenses on this list should include the following: housing, utilities, food, transportation, insurance, debt (student loans, credit card payment, etc.), medical expenses, and childcare.

You probably have bills for some (or all) of the things on your monthly expense list, but you may not have enough money to pay all of them. This is where prioritizing or deciding what to pay first comes in.

Paying for shelter should always be your first priority, so you can continue to have a roof over your head. If you pay for utilities, like heating and water, you may have a month or more to make your payment before having your service disconnected.

Your food budget is a great example of an expense that is both a priority and something that you can adjust if you have more pressing bills to pay. There are probably items on your grocery list that can be removed to save money for other bills that month.

Go through each expense on your list and make a note of any you can delay payment on (utilities) or change for a brief period (groceries). The expenses left are your "must pay" expenses for the month.

Once you know your "must pay" monthly expenses, focus on paying any bills that could impact your credit, including debt from credit cards and loans. A record of late or missed payments could stop you from borrowing money or getting a place to live in the future, so it's a good idea to look at your credit report on a quarterly basis to get a full picture of all the money you've borrowed from lenders.

Remember that some debts, like mortgages and car payments, are secured loans and are tied to your house or car. If you miss payments, your lender may eventually be forced to repossess these items. If you find that you don't have enough money left to make these payments after paying for your monthly expenses, using our tips below, contact your lender as soon as possible to negotiate a more affordable repayment plan.

Prioritizing bills and expenses in order of importance lets you meet basic needs, protect your credit and lower your financial stress. This, in turn, allows you to focus on finding ways to cut costs or increase your income so you can pay all your bills each month and even start saving for the future.

create a budget

Developing a budget can do more than track your spending and savings. It can also help you work toward your financial goals. The following steps will show you how to build a budget that works for your life so you don’t have to worry about falling short on your monthly expenses.

1. start with your goals

Write down your financial goals. Be sure to include actual dollar amounts and time frames to make tracking possible. For example, measurable goals would be “Have a $1,000 emergency fund by April 1” and “Pay off $5,000 credit card debt in 18 months” Then divide the dollar amount by the number of months to figure out your monthly goals.

2. know your income

Before you can establish a budget, you have to know exactly how much money you have coming in every month from your employer and other sources. Make sure to include only the money you actually receive (for example, the exact amount of your paycheck rather than your gross pay).

3. total your monthly expenses

You’ll need to know how much money you’re spending every month. When figuring out your total monthly expense, be sure to calculate minimum payments of rent or mortgages, all debt payments (including car loans, student loans, and credit cards), cell phone service, entertainment, and groceries. Remember to include occasional expenses, like doctor visits and car insurance. Look through bank and credit card statements to get a realistic picture of your spending.

4. create a realistic budget

To take your first stab at a budget, add your monthly expenses from Step 3 to the monthly goals you calculated in Step 1, then subtract that total from your monthly income. If the balance is positive, you’ve created a budget that is compatible with your current lifestyle. If the balance is negative, take another look at your goals, expenses, and income.

5. revisit your goals and expenses

If the first draft of your budget came out negative, rework the numbers and try again. Think about what areas you may be able to alter in order to create a budget that’s manageable and still fits your needs. For example, you can revisit your expenses and decide which are priority items that need to stay in your budget and which you can do without. You can consider changing the amount of time or money needed to meet your goals. Or you can figure out a way to increase your income. Any one of those changes makes your budget come together.

talk with your creditors

If a creditor or debt collector is calling about a balance you can’t pay in full, the last thing you probably want to do is talk with them. But here’s one reason to pick up the phone: you may find the creditor or collector is willing to negotiate.

Debt collectors tend to buy debts for pennies on the dollar, which means they don’t need to recoup the full amount you owe to reap a profit. As such, there’s a chance one will agree to a settlement. Creditors, too, may be good with reaching an agreement since the alternative is to write the debt off as a loss.

Of course, there are some best practices when it comes to debt negotiation, including explaining your current money situation, taking notes, and obtaining written confirmation of any settlement you do reach.

Here are 10 tips for negotiating with creditors and collection agencies.

1. stick to your story

When speaking to the person on the other end, it's best to avoid details about why you’re unable to pay your bills. Simply explain you're in a hardship situation and your plan to get back on track with your finances. Be truthful. If you tell everyone a different story, especially one that’s not true, it’s bound to backfire.

2. avoid drama

Dealing with debt can be frustrating and lead to you losing your cool. A bad temper will hamper your chances of coming to an agreement. If you feel yourself getting angry, tell the collector you would like to talk at a different time.

3. ask questions

Some collectors will tell you that you'll be sued or that you'll lose the property if you don’t repay your debts. Some of these threats may be illegal, and the more information you have, the better. So just calmly ask for specifics: “When can I expect to be notified of a lawsuit?” Or “When will you take the money from my bank account?”

4. take notes

Take notes whenever you speak with a collector. Write down their name, date, and what you discussed. Keeping track of these conversations could help you determine if the creditor or collector broke the law in their attempts to collect. You can also ask the collector to record the conversation. That usually keeps them on their best behavior.

5. read and save all communication

Don’t get rid of any letters, emails, texts, voicemails, or any other communication between you and your creditors. Open it, read it, and save it in a file.

6. know what you can afford

Go over your budget, figure out what you can afford to pay back on a month-to-month basis, and only agree to pay a realistic amount.

If you agree to a repayment plan, you'll likely pay more over time. If you do agree to a repayment plan, make sure you understand the total amount you'll pay.

7. deal with creditors, not collectors

Collection accounts can cause a great amount of damage to your credit report and score, which is why it's best to work out an agreement with your creditor before your debt is sent to collections.

8. get it in writing

For your safety, get the agreed-upon repayment plan or debt settlement letter in writing before you begin paying. There are many stories of consumers who have run into situations where the terms were changed, or they’re being contacted for balances they believed were resolved years before.

9. get help when negotiating with creditors

If you're having difficulties coming up with a repayment plan that works for you, connect with our partners at GreenPath Financial Wellness to access their debt management services.

10. put the past behind you

Getting the creditor to agree to remove all the late payments doesn’t always happen, but paying off a collection account will improve your credit over time.

You can still begin to build better credit as soon as your debts are resolved. Plus, assuming no new negative hits emerge, your score will surely make its way back up the further you get from all those original delinquency dates.

GreenPath Financial Wellness

BlueOx Credit Union cares about your ability to pay your bills on time. That’s why we have partnered with GreenPath Financial Wellness to provide you with access to financial tools, such as:

  • Free Financial Counseling
  • Debt Management Plan
  • Housing Services
  • Student Loan Counseling
  • Credit Report Review
  • Financial Education

Learn More

One of the best ways you can regain control of your financial wellness is to partner with an exceptional Credit Union that offers its members many benefits. Contact BlueOx Credit Union today to discover how we can help you get your finances back on track.

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