Can’t Pay All Your Bills? Now What?
Mon, Oct 10, 2011
Ever had that feeling of dread when payday comes and you have more bills than money in the bank?
Some of you won’t know what I’m talking about because you’ve never been there. And that’s wonderful! But others may know all too well what I mean. You get out your stack of bills, add them up, and try to figure out how in the world you’re going to cover everything. Or you have enough money to make all your payments, but not enough for food and gas until you get paid again. It’s a miserable, depressing feeling.
When I was still in spending mode, I wasn’t just a member of the Utility of the Month Club - I was the president. We never actually had any of our utilities cut off, but that’s only because I knew exactly how long I could wait. And because I frequently used credit cards to buy groceries. And because I had a friend at the electric company who would conveniently “miss” my house when he pulled meters for nonpayment.
Most finance sites would tell you a lot of practical ways to prevent bill overload from happening. Spend less. Cut out unnecessary items like cable. Use coupons at the grocery store. Sell your furniture and sleep in a tent.
And I will say that all of those can be great moves (except the tent thing). But what do you do when there’s no time for all that stuff? What happens if you are reading this RIGHT NOW and don’t have enough money to make it until payday?
Attention: This is an Emergency
Desperate people don’t have good options. It’s much easier to handle a disaster when you’re prepared, but then it wouldn’t really be a disaster, would it? If you can’t pay your bills, you may be facing choices like these:
- Use a credit card
- Take out a payday loan
- Use your bank’s overdraft and incur fees
- Ask friends or family for money
- Skip a payment
All of those options suck. You don’t want to do any of those things, yet the clock is ticking and you’ve got to figure out something NOW.
I’m here to tell you, there are better ways to handle this problem.
Prioritize the Payments
If you’ve read my Single Mom Budget series, you know that I prioritize expenses a little differently than most personal finance bloggers. That’s because I know what it’s like to live in the danger zone. I don’t recommend it as a longterm strategy, but you can’t wave a magic wand and make things better, so here’s where you start.
FIRST: Buy groceries. Yes, you’re in the middle of a crisis and I’m telling you to go shopping. You know you’re going to eat in the next week or two, right? So don’t pretend you don’t need food in the house.
Don’t go crazy - get the bare necessities. Milk, bread, pasta… Cheap multipurpose items that will last awhile. Allow yourself one snack item (candy bar, bag of Skittles, etc.) because you’ll need it later.
SECOND: Is your rent or mortgage payment due? Pay it. The last thing you need is to risk the roof over your head. Even if it’s not due for a week, just pay it now. No point teasing yourself with that money sitting around.
THIRD: Utilities. These costs are the ones that usually get people in trouble. I remember getting a $500 gas bill one winter, when it had been $200 the previous month. I nearly crapped my pants.
If your utility bills are the cause of your financial catastrophe, call the companies. Today. Don’t wait until the bill is past due and they’re mad at you. Explain that you are having trouble paying your bill and ask if there are options to break the payment into manageable pieces. All utility companies have payment plans (as long as you haven’t screwed them over recently). If you agree to reduced payments, be prepared to keep those terms; otherwise they may not work with you next time.
While you’re on the phone, ask about levelized billing options, where your bill is the same each month. Yeah, you won’t get the relief of lower payments during certain times of the year, but you also won’t have a heart attack during the hottest and coldest months. It’s worth it to know what to expect each month. Also, if your bills are lopsided (more due one pay period than the next), ask about changing your due date.
FOURTH: How much gas/cab fare/whatever do you need to make it until next payday? Take that amount out in cash. Just like with food, there’s no point in acting like you won’t need transportation. Don’t short yourself either. Very few things are more embarrassing than calling in sick because your gas tank is empty. Trust me.
Everything Else
If you’ve made it this far without running out of money, congratulations! Remember that snack food you bought at the grocery store? Now is the time to eat it, because it only gets tougher from here.
Now it’s time to look at everything else you need to pay versus the amount of money you have left. You may have expenses like:
- Cable/internet
- Phone
- Childcare
- Debt payments
Number these expenses from most to least important. Some questions to help you prioritize:
Will anything be repossessed, confiscated, or otherwise taken away if I don’t make this payment?
Will my children go without NEEDS (not wants) if I don’t make this payment?
Will I lose my job, car, or home if I don’t make this payment?
Once you’ve decided which payments are most important, set that list aside for a minute. Regardless of importance, think about which of those bills may be negotiable. For example, are you using a promotional discount on your TV and internet service? If not, call and tell them you need to lower your bill because you’re having trouble keeping up with the payments. Will your daycare provider allow you to make smaller payments for a few weeks? The worst they can do is say no. Even your auto lender may accept interest-only payments for a few months.
The point is, you don’t know what options are available unless you ask. And if you can score a discount on any of your remaining expenses, you may be able to pay more than you thought. Once you’ve asked about every possible discount or extension, go back to your prioritized list and pay what you can.
Where to Go From Here
Obviously the steps outlined above are not a solution to your problem - they’re a band-aid. Following my advice will only keep your head above water until the next payday, when you’ll likely be freaking out all over again.
This is the time to consider some changes in the way you’re living. No one likes to hear that, but it’s just the truth. There are only two ways out of a bad money situation; you have to either spend less or earn more. Consider implementing the Single Mom Budget to figure out where your money goes and how to gain control of it. Read some other finance blogs for tips on budgeting, saving, and spending smarter.
Need help figuring things out? Send me an email and we’ll talk. If you’re struggling to pay your bills, something has to change. Let today be the LAST DAY you spend worrying about money.
It’s time to stop panicking and start living. Take real steps toward positive financial change. TODAY.
Great Job! This is the type of in depth info that you just don't find that often. I agree that you have to take care of yourself first in terms of needs such as food, shelter, transportation to your job, etc. before you even think about things like paying down debt and other bills.
So many people are living paycheck to paycheck and have desperation knocking at their door every day. When you are desperate you don't make good logical decisions and you end up with payday loans, pawn shops, etc. I teach in my Celebrating Financial Freedom course that when you are in desperate mode you MUST seek good advice and not let your desperation rule your thought process. Needs should come before anything else.
Keep up the good work!
"When you help me with money, you help the world prosper"- J.M. DuMont
Thanks so much for your comments. I spent several years of my life completing the exact steps I discussed in this post. It wasn't pleasant by any means, but it got me through. Of course I had my fair share of payday loans and overdrafts too, but doing things this way was a lot easier.
When you have a story like that you should never hesitate to tell it. Your story can change lives. Although it's difficult, I tell the story of my wife and I, and how lack of communication and very different views of money was a factor in our marriage that almost split us apart. We went through counseling and came out much better for it. Neither one of us can even remember when our last fight about money happened. It's been a long time!
One of the things I think is important, and probably the most difficult, is to communicate to those who aren't going to get paid. Most people think that if you're going to be late paying a bill, then avoiding phone calls, letters, e-mails and such will keep the companies off your back. Truth is, companies are often going to work with you if you're open and honest with them.
Good point, and one I totally left out! Though I think that could be a post of its own. I used to avoid my creditors until they were literally calling 20+ times a day. A lot of that could have easily been avoided if I had talked to them and explained the situation.
I agree. Companies are in fact on your side for trying to come up with a solution. Running away isn't the thing to do.
I also like your priority list. I think the order you put out says it well about what one should really focus on when they are in this kind of situation.
I once sold blood plasma for money (a long time ago). Great advice about prioritizing the essentials.
That's one thing I've never done, though I've known people who have. Was it worth it in terms of how much you got paid?
It was so long ago, I can't even remember what I got paid. I did it only once so must have decided it wasn't worth it!
I'm bitter that I can't comment from work, but that's another story. Stupid firewall. Anyway, really appreciate the blog. I can comment from the perspective of a creditor. I handled high risk collections (think more than 30 days past due) for an auto finance company for several years. Regardless of why you are past due, call them. If you haven't been a total retard to them in the past, they will work with you. About 3 years ago, repossessions cost the company an average of 10k. It has only gone up since then. They don't want your car. They want you to pay for it and will help you do it. You will pay for the privilege, but you will still have a car.
Thanks for the input, Rachel! Always nice to hear from the "other side." I've only had two creditors that flat refused to work with me - one was a personal loan company, and the other was an auto lender. Compared to the number of total creditors I've had in my life, that's not so bad. I've found that most companies would rather work out some kind of arrangement than have borrowers file for bankruptcy or stop paying completely. I just wish the majority of them weren't so snooty about it - makes people scared to ask for help.
I was always thrilled to set up arrangements. That meant my numbers and therefore my performance bonus would go up. I have to say that when my arrangements were broken I would pursue those people with a vengeance. I've been on both sides though, so I always tried to be realistic with what I set up. After all, I grew up as the gatekeeper for my parents. You'd think that would have kept me out of debt, but alas no.
Maybe you should write a guest post for me from the perspective of someone who did that kind of work. I'm sure people would be interested in reading! I know I would - there are a lot of stereotypes and misinformation floating around out there.
Email me at [email protected] and we can discuss it. I don't mind sharing what I learned.
How about looking to see what you can sell? A garage sale can bring in $50 or $100. Also, if you have medical bills, most places would be willing to work out a payment plan if you are upfront with them.
Yes to both of those. Though a garage sale may not be possible if your bills are due right this second - it takes time to plan and organize them. That's how so many people end up giving things away at pawn shops.