Falling behind on your bills can cause a lot of stress, especially if you’re at risk of losing your car, home, or even just your good credit record. In this article, I’ll show you how to catch up on bills and minimize the damage caused by missed payments.
Before we dive in, understand you’re not alone.
According to research from the Urban Institute, roughly 30% of Americans have debt in collections listed on their credit reports. That’s 68 million people! While I couldn’t find directly-comparable statistics for Canadians, an Ipsos poll revealed that a staggering 46% of us are just $200 or less away from being unable to keep up.
The bottom line is that millions of people in North America have either fallen behind on bill payments or are at risk of doing so in the near future.
While you shouldn’t use these statistics to excuse poor behavior, it’s important to recognize you’re not an aberration or a failure.
That said, here are 11 tips for digging yourself out.
11 tips for catching up on bills
1. Organize your finances
If you’re behind on bill payments, chances are you’re financially disorganized across the board. Remedying this is an absolutely crucial first step towards getting back on track.
In my article about organizing your finances, I walk you through the following:
- listing all monthly bills
- identifying your priorities
- using a budgeting app
- calculating your net worth
- discussing money with your partner
- setting check-in dates
- eliminating debt using proven strategies
Once you’ve read that article and followed its steps, you’ll have a concrete plan for handling your money. The remaining tips in this article will complement that strategy.
When creating a list of monthly bills for the purpose of getting caught up, make note of the amounts outstanding along with any associated interest rates and penalties. This will give you a clearer picture of your situation.
2. Figure out why you’ve fallen behind
If you want to catch up – and stay caught up – on bill payments, you need to figure out why you fell behind in the first place.
This may be a fairly short process if you already know an emergency put you over the edge. You’ll need to dig your way out and establish an emergency fund so you can avoid this situation in the future (more on this in a little bit).
However, if you’ve fallen behind on bills without any major catalyst, you’ve got some more investigative work to do. Look through your transactions to identify negative trends such as overspending on discretionary items. This should be easy if you followed the first tip properly.
It’s very possible you’ll discover the need to downgrade your lifestyle in some way or another. For example, you might need to relocate somewhere cheaper or downgrade to a car that more accurately reflects your financial situation.
While these moves may dent your ego, so does being broke. In fact, going broke will likely force you to cut back anyway. You might as well do it preemptively on your own terms.
3. Call your lenders
You should never miss a bill payment without first attempting to reach an arrangement with the provider. If you have a history of making payments on time and being a great customer overall, they may be much more flexible than you’d expect.
After all, they want to get paid. They’ll often make it easier for you to do that.
Even if you’re already delinquent, there’s no harm in picking up the phone, explaining your situation, and inquiring about any assistance they might be able to offer.
Don’t expect them to wipe the slate clean or anything like that. However, a payment plan or extension on the next deadline may be reasonable depending on the situation.
In addition to giving you some breathing room, this can prevent your debt from going into collections, which would tank your credit score.
Some people find it difficult to get ahead financially when all of their bills are due around the same time. If you’re in that situation, speak with your lenders and service providers about spreading some of those dates around within the month.
4. Be strategic about repayment
While you should absolutely aim to get caught up with all of your bills, you’d be wise to prioritize some over others. There are several ways to go about this.
One involves prioritizing creditors that refuse to budge on deferring payments or offering any other type of assistance. These lenders or service providers are more likely to take action against you sooner (i.e. by cutting off service, repossessing your collateral, sending your debt to collections, etc).
Personally, I’d prioritize getting caught up on the bills for which delinquency has the harshest consequences. For example, if it came between the mortgage and a credit card bill, I’d go with the former since homelessness would be a pretty terrible outcome. A credit card, meanwhile, is an unsecured loan. While there are still consequences for falling behind, nothing would get repossessed.
That said, I strongly recommend speaking with a financial advisor to determine which strategy is right for you. Everyone’s financial situation is unique and so, too, should be their strategy for something as nuanced as catching up on bills.
The universal truth, however, is that approaching repayment strategically will yield much better results than aimlessly throwing money around.
5. Stop using your credit card
Personally, I’m not against using credit cards. I have several and I pay my balance off immediately or – at the very latest – the next time I get paid.
However, I’d argue for a much more conservative approach if you’re behind on bill payments. You simply can’t afford to take on additional debt in this scenario considering that you’re already having a hard time.
You’d be much better off spending cash, especially for in-store purchases. You can take this literally by withdrawing cash whenever you head shopping. Only withdraw the amount you’ve budgeted, which will prevent you from spending more impulsively.
This is my method of choice whenever I feel like I need to hunker down and get focused financially. However, even switching to a debit card will likely make it easier for you to stay on track financially since you’ll be limited to spending what you actually have in your checking account.
And that’s the goal here. Avoid spending more than you have, which would counteract any progress towards getting caught up with your bills.
6. Cut back on discretionary spending
You really can’t afford to be spending money on non-essentials if you’re behind on your bills.
In fact, it may help to remember that you’re not actually spending your money in this scenario. Rather, you’re spending money that belongs to whichever lender or service provider you’re late with.
Think about how you’d feel if someone owed you money but was still going out and blowing $100 at the bar every weekend.
Now, sure, you may not have the same sympathy for whatever giant corporation or bank you owe money. But as a matter of principle, do the adult thing and prioritize making good on your debt rather than buying things you don’t need.
That means cutting yourself down to the bare essentials (food, shelter, and water) until you’re current with your bill payments.
7. Negotiate your bills down
If you’re still not where you need to be budget-wise after eliminating discretionary expenses, shift your attention towards essential ones.
Specifically, try to negotiate your other bills down. Of course, you’ll have a much higher chance of success negotiating bills you’re not delinquent on so start with those.
You don’t need masterful haggling skills to do this. One of my favorite approaches is to simply call a utility provider and say, “I need to get this bill lower. Please tell me my options.”
I’m often surprised at how quickly they find some “special discount” I qualify for. It’s really that simple about 90% of the time.
Sometimes, though, I do need to haggle a bit. It helps to do a bit of research into competitors are charging so you have concrete numbers to present the customer service representative.
If you’re already getting a good deal and your service provider refuses to budge, ask about a service downgrade and see if you can save money that way.
Remember to allocate those savings towards getting caught up with your bills.
8. Make some extra cash
While trimming your budget can certainly help you make strides towards getting back on track, there are practical limits. No such limit exists, however, on the amount of money you can earn.
There are several ways to approach earning more money. You can start by asking for a raise at work if you truly think you deserve one. If that’s not feasible, additional ideas include:
- Selling Old Items
- Driving for Uber
Check out this article in which I discuss these and other ideas for getting money quickly.
One major advantage of pursuing additional revenue streams is that they’ll continue to serve you long after you’ve caught up on your bills. At that point, you can start directing those extra funds towards savings and investments.
Until then, however, use your extra cash to chisel away at your unpaid bills.
9. Tap into your cash savings
Whether you realize it or not, being behind on your bills is an emergency. And while tapping into your cash savings can be demoralizing, you have to prioritize. Rent, groceries, utilities, and other essentials are much more pressing concerns than any medium or long-term goals you may have (i.e. buying a house).
In fact, failing to address those immediate concerns can leave you in a less optimal position to achieve your major financial goals.
Use your cash savings to get caught up. Once you’re back on track, you can start rebuilding.
If you don’t have any cash savings yet, check out this article from Common Cents Lifestyle for some information on getting started.
By “cash savings,” I specifically mean money kept in a savings or checking account.
Personally, I’d avoid withdrawing funds from something like a retirement account since such a move would incur a tax bill and other long-term ramifications. Speak with a financial advisor before proceeding if that’s what you intend to do.
10. De-prioritize investing
There are several valid reasons to de-prioritize investing until you’ve gotten caught up with your bills.
For one, investing is a long-term play. You shouldn’t think of it as a quick solution to your money problems. In fact, you’re far more likely to exacerbate your troubles by losing money on emotional trades.
Second, it’s unlikely that any investment will reliably produce a solid enough short-term return in excess of the benefits you’d receive by directing those funds towards your late bills instead.
For example, even the stock market’s average annual return of 10% will benefit you relatively little if achieving it pushes your debt into collections.
Even contributing to your retirement account in order to take advantage of an employer match arguably makes little sense if you’re behind on bills. Remember – falling behind is an emergency. Pretty much everything else (even things that would normally be wise, such as investing) can wait.
11. Get serious about your finances
Falling behind on your bills should be a wake-up call. Once you’re caught up, don’t simply go back to whatever you were doing before.
Remember the second tip, which was to identify the reason you fell behind in the first place. Make sure your financial strategy going forward addresses that trigger in a way that makes you less likely to stumble again.
By growing in this regard, you’ll be able to better focus on building wealth rather than putting out fires.
Check out this article to learn about the hallmarks of fiscal responsibility. Then, read this piece to learn about how rich people view money. Those are two great starting points for a brighter financial future.
I hope this article has provided you some valuable tips for getting caught up with your bill payments. While falling behind can be stressful, taking a measured and strategic approach can get you back on track in no time.
In fact, the process of getting yourself upright can teach you many valuable lessons that ultimately give you an advantage when it comes to building wealth in the long term.
For more personal finance tips, click here.