The Frugal Creditnista

How to Budget When You’re Behind on Bills

Catching up on bills isn’t as easy as getting behind. When you miss a payment, you’re likely facing late fees that dig your debt hole a little deeper. And until you can catch up, you’ll continue getting hit with late fees, not to mention mounting interest. 

it can seem impossible to get back on track when you start missing payments, especially when you’re broke. Your goal should be to catch up as soon as possible, because the longer you remain in the red, the more it will cost you in fees and interest in the long run. 

Let’s look at some practical ways you can budget your finances when you’re behind on your bills so you can get back to business as usual as soon as possible:

Start with a Simple Income Report

Before you can create a new budget to get caught up, you need to see exactly how much money is coming and going from your pockets each month. Ideally, you already have a monthly budget plan, but if not, this could be part of the reason why you’re behind on bills.

Start by listing all incoming monthly funds: paychecks, child support, alimony, bonuses, or other income. You’ll use this income report later when setting a budget to get caught up on bills.

Get a Bird’s Eye View of Your Bills

Start by making a list of all of your monthly bills, then separate the ones that you’re behind on. What will it take to make those bills current? Get a specific dollar figure, and make sure you include any late fees or interest that will grow this debt each month until you get up-to-date.

Prioritize Your Bills

If you just don’t make enough money to cover your expenses and emergencies, you’ll have to make some tough decisions on which bills to pay first. Granted, this might be how you got behind on bills in the first place, but if you’re not moving the needle in the right direction, you may need to rethink how you prioritize your bills.

Your first priority should be rent or mortgage to keep a roof over your head. Utility bills and car payments should come next, then whatever bills have the highest interest or biggest late penalties. 

You’ve got to keep living expenses at the top of your list. Not paying these bills on time will affect your credit, just like missing a credit card payment, but these will also affect your ability to take care of yourself.

Compare Your Bills to your Income Report

After you prioritize your bills, start comparing these expenses to your income report to see where the line ends. 

Keep in mind that you’ll have other expenses each month that aren’t in bill form: food, gas, clothes, personal care items, repairs, and parking fees, to name a few. It’s a good idea to create a separate list of monthly expenses that aren’t bills so you can see where you can make cuts in your budget.

For example, you might find ways to trim your weekly grocery bill and put those savings toward one of your delinquent accounts. Carpooling or biking can help you save on gas, along with planning your errands ahead of time instead of venturing out whenever the need arises.

Start looking at your expenses from a need vs. want standpoint. Try to get back to the basics as much as possible until you can catch up. Things like Netflix and eating out should be the first things to go. If you feel like you’re already operating on a bare-bones lifestyle, start examining every purchase you make to see if you can make additional cuts.

Work with Creditors to Adjust Payments

Once you know which bills aren’t within your ability to pay, start contacting your creditors to negotiate payment terms. Many companies will work out a payment plan with you that better suits your budget. It’s a good idea to have a dollar amount in mind that you feel comfortable with. This shows you’ve done your homework and are trying to get a better handle on your finances.

Also, if you see you won’t be able to pay an upcoming bill, in full or in part, contact your creditor before it’s due to see if they can delay payment or suspend interest for a limited time. This could prevent you from getting hit with a massive late fee that could set you back even further.

Get a Second Job

Depending on how long it will take you to catch up, you might want to get a second job temporarily to bring in some extra income. Even working a few hours a week might be enough to take one bill off your list and give you some breathing room.

Prevention is Protection

Once you get current on your bills, start building an emergency fund that can help you avoid the pitfalls of delinquency in the future. Keep living lean for a few months longer until you have enough money saved up to cover at least two billing cycles’ worth of funds. This not only gives you peace of mind in the event of an emergency but also reduces your risk of starting from zero if you do need to tap into your cash savings. 

For more money matters, head on over to the *Freebies* section of our Online Learning Center for our free Crush Your Goals and Master Your Money – Get Your Budget On courses. If you have questions, drop them there and I”ll be sure to answer them in an upcoming blog/vlog post!

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One Response

  1. This info was helpful. Must work on the emergency plan and at least 2 months for other emergencies. A lot to dooo.

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