When you fall behind on your bills or debt payments, it can be an extremely stressful situation.
It happens for many reasons—because you just do not make enough money to cover your expenses and handle emergencies, you do not have a workable monthly budget, or you were set back by an unexpected expense.
However, it is possible to recover. You just need to focus and cut unnecessary spending until you are caught up. Read on to learn how to catch up on late bills or payments—and how to not let it happen again.
Make a List of Bills You Are Behind On
First and foremost, sit down and make a list of what bills you are behind on and what you need to bring those bills current. Before you can fix anything, you need to get organized. You should also have your current budget on hand. If you do not have a budget, you need to make one as soon as possible.
Prioritize the Bills
Next, prioritize your bills. Arrange them in order of importance. Lead with your mortgage or rent payment, then utility bills, and then other bills in order of amount or interest rate or late fees. It is important that you make sure that you have a place to stay, electricity and running water. This is why the rent and utilities should come first. After that, you should stay current on your car payment so you can ensure transportation to and from work.
In this situation, your credit card bills are your last priority. If you get behind on your credit cards, it may affect your credit, but you will still have a place to live and a means of transportation.
Find the Money to Get Caught Up
Determine how much extra money you have available each month to put toward your overdue bills or payments. Additionally, when you are trying to get caught up on bills you need to stop all unnecessary spending. This includes going out to eat, going to the movies, and other forms of entertainment.
You can also suspend your cable or other unnecessary monthly expenses until you are caught up. You may also want to consider selling some things that you are no longer using to earn some extra money to get caught up.
Talk to Your Creditors to Set Up a Plan
Once you have determined how much you have available each month to put toward your late bills, you should call and talk to your creditors or anyone that you are behind with. Many companies will be able to work out a payment plan with you in order to help you get caught up. In fact, you should try calling even if you are just afraid that you are going to fall behind.
Look for a Second Job
You may need to take on a second job for a short time so that you can get caught up. This should be temporary, but it can help you get control of your finances that much faster. You may want to consider these part-time jobs that pay better than minimum wage and be sure that all of the extra money you are earn goes directly to your late bills.
Start Saving for an Emergency
Once you have gotten current on everything, you should begin to save money for an emergency fund to prevent this from happening again. Many experts recommend saving an emergency fund that will cover at least 3-6 months of living expenses.
You should also begin to look for long-term solutions for your income shortfall. You may consider looking for a higher paying job or enrolling in a program or school so that you are qualified for higher paying work.
Keep a Monthly Budget
The next step (and to prevent this from happening again) you should create a monthly budget and stick to it. No matter how much money you earn, you should always have a budget. You should pay particularly close attention to your variable expenses. You may be able to cut back in areas without feeling like you are.
The Bottom Line
Catching up on late payments or bills should be your first priority when it comes to your finances. After all, being late on bills can affect your credit score, which can have a ripple effect on your finances in the future.
While cutting back and taking on a second job isn't the most fun thing in the world, it's important to take steps to get current on your bills to you are are not just surviving but thriving financially.
Updated by Rachel Morgan Cautero.