Most of our financial advice on Man Vs. Debt comes from the point of view of people who have enough to get by – but who are tired of just getting by. Our stories are not of people overcoming abject poverty, but rather about people who make the money they already have do more for them by kicking debt to the curb and getting rid of crap.
That said, what do you do when you are in a hole that goes beyond debt?
And that’s, many times, a different issue. There are two pieces to the “behind on your bills” issue. First, there are people who (later) find that the money they have is enough – but they’re not using it in a way that allows it to be. Second, there are people who simply, at this time, don’t have enough money to pay even the minimums due on various accounts, including non-debt accounts like their electric bills.
Either way, nothing will change unless you’re willing to take action.
Here’s how I suggest you start:
1. Take an inventory of where you are.
In another “5 step” post of mine, I shared 5 Steps to Facing What You Owe. Especially when you’re already sure you don’t have enough coming in to meet your minimum expenses, it’s hard to want to do this, I know.
But it’s not always disheartening! Sometimes, the picture you’ve painted for yourself is WORSE than the truth. And either way, you can’t figure out where to go if you don’t have a map.
Think about GPS, one of the greatest inventions of our time. What’s the best feature? In my book, it’s not that it can tell you how to get where you’re going. I can do that before I leave, or use a map. The greatest part to me is that, when you’re lost, IT KNOWS WHERE YOU ARE and can give you a direction to move. We need to be our own GPS.
You should take this inventory with whatever revolving debt you have. But you should go back and do it again with your bills in mind, and have a single list of all that needs to go out to another company in a particular month. Make a similar list with your regular income sources, too.
If you really want to get advanced, you can deal with other expense categories, like groceries and gas for your vehicle. Then you’re close to having an honest-to-goodness budget. That’s cool. But don’t get hung up on that. This is where we see too many people derail!
2. Understand your options
If you are behind on your bills and cannot get caught up, you have options. The challenge is that when you face something like debt relief, there are pros and cons and costs of each of those options. Then, it can be helpful to compare debt payoff planning to debt relief options such as debt management (also known as credit counseling), debt relief, and bankruptcy.
To compare your options, you may want to use a debt relief calculator which takes in your financial information and personalizes something based on your income and expenses.
Our favorite calculator is Ascend’s free debt relief calculator. The calculator shows you the options, the estimated cost, the pros and cons and alternatives.
If you are able to pull yourself out of the hole, let’s talk about stopping digging.
3. When you’re in a hole, stop digging.
If you’re not making ends meet now, you need to put a freeze on any new expenses. Period. This is often the hardest part. In our lives right now, that means that even though our car is basically 110% of the way to deceased, we cannot take on a car payment.
When my now-13-year-old daughter was first born, my financial status was more dire, and something like a new pair of shoes for her or for me would have meant the electric bill did not get paid. I have lived in the world of cardboard-in-shoes, and while I don’t prefer to go back, sometimes you just have to put your foot down (no pun intended).
House, electricity, water. No matter what, those are key. I have heard of people being afraid of collection agencies so much so that they tackled their medical debts – and did not pay their water bill.
Your job when you’re behind is to prioritize. Decide, every month, where the money is going. Maybe right now, it doesn’t cover everything. But if it can keep a roof over your head and sanitary conditions under that roof, you can work from there. The piece that many people struggle to wrap their heads around is that it’s even harder to tackle your financial situation when you’re about to become homeless. Too many people that I know have faced that exact situation.
Set your priorities. Take your list of expenses every month and rank them. Mine would look something like this:
… and so on. Debt payments, even the minimums, are much farther down my list. So are TV, cell phone, any subscriptions or memberships, clothing and so on.
Since we have literally no commute to work (Chris can walk, and I work from home), we don’t include gas on that list, but if your income requires you to drive to work, any car payment or gas costs need to be high on the list.
In my case, the opposite is true – the internet ranks high, but not as a luxury – it’s my only source of income. Make sure you think about income preservation here. You want to stay working!
5. Call and discuss your options.
Here’s the sad-but-true fact: Most companies are ONLY willing to negotiate with you when you’re behind. I hate that about our financial system, but if you are behind, don’t be afraid to use what leverage you have.
If there’s any company you know you CANNOT pay, even with all the scrimping, saving and extra earning in the world, in the next two months, call them. Explain that you realize you’re behind and you’d like to take steps to return your account to good standing, but have limited cash available. Ask about payment options, hardship plans, and any other measures that can prevent your account from becoming further delinquent.
This might not – and probably won’t – be a “magic fix” for these behind bills and debts. However, it’s another tool in your arsenal to help you with the final step.
6. Make a plan.
This is where we put everything together. It looks something like this:
- Take your updated list of expenses, prioritized and including any new agreements you reached with particular companies. Put them in the order they’ll be paid each month, accounting for all possible income.
- Reduce any expenses possible. You might be eating ramen instead of organic vegetable stir-frys this month. YUCK. I hate that, and I’ve been there. But it’s important to ask yourself what you really need to have (I’m not saying eat a bunch of pasta if you have Celiac disease) and what’s just a high-level want.
- Make as much extra money as possible in the short term. This is where I’m such a big fan of side hustles. You CAN make an extra $200 or more this week. It might not be easy, but it’s doable. I highly encourage you to take the challenge and get even $50 or $100 extra to put toward what you owe!
- Keep doing it. You’re not going to go from “behind” to “caught up” in a month. But if you’re missing payments on 4 bills this month, can you shoot to make that 3 next month, and 2 the month after? Can you get more caught up than you currently are? Absolutely, and you need to keep going from there.
Have you ever been behind on your bills? Are you now?
What are your best tips for getting back to where you want to be?
I’d love to hear your comments!