What If I Can’t Pay My Bills This Month? Steps To Take To Avoid Debt

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Inflation has wreaked havoc on many household budgets in 2022, as prices jumped a whopping 9.1% on a year-over-year basis in June. As most Americans can’t even adequately fill up an emergency fund, making household income stretch another 9% can be a big ask.

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If you find yourself in a position where you can’t pay your bills this month, the first step is to not panic. Even if you are struggling, there are steps you can take to get your financial affairs in order. Here are some of the most important ones. 

Assess Your Budget

To avoid making the problem bigger than it may be, take a step back and look closely at your actual budget. See how much you’re earning this month and compare it to the bare minimum you will have to spend to pay your bills. You may want to organize your bills by the due date, so you know when you’ll have to come up with extra money. Others prefer to organize their bills by size. Whichever method you prefer, it’s important to start by having all the information in front of you so you can take the next steps to resolve the problem.

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Rank Your Bills

Now that you know what you have and what you owe, it’s time to prioritize your outstanding bills. Although all your bills are important, some can be paid later than others, or in lesser amounts, without triggering negative events. If, for example, you’re already 90 days late on your electric bill and your service is about to be shut off, this would qualify as an “essential” bill that you must prioritize. But if you’re still 30 days away from the payment on your cable TV service — which even if it got shut off wouldn’t be anything more than an inconvenience — that one can wait. 

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If you’re really struggling financially and simply won’t be able to pay a bill in full, it’s time to call the creditor. Oftentimes, you can receive a grace period to pay your bill during a tough time, particularly if you lost your job. Other creditors may accept less-than-full payments to satisfy your account. However, others may take a harder line, and those may end up being bills you have to prioritize. But you won’t know until you call to negotiate with your creditors, so it’s certainly worth the effort.

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Pay the Minimums

If the size of your outstanding bills is overwhelming you, focus instead on the minimum payments. For example, if you have $10,000 in credit card debt and can’t imagine a way you can ever pay it off, just make the minimum payments for now. While it’s true that it will take longer to pay off your credit card by just paying the minimum, at least you will keep from defaulting until you’re in a better position financially and can make larger payments. The same is true with other accounts you may have. In some cases, you may even be able to pay a minimum amount on service accounts like utilities as well, but you’ll have to speak with your creditor directly to negotiate this.

Pick Up Side Work

It can be hard to keep up with rising costs on a fixed income when they are jumping by nearly 10% per year. On at least a temporary basis, look into picking up some side work. Side gigs offer lots of advantages, including plentiful options, rapid pay and often the ability to work from home. Even if you can bring in just a few hundred extra dollars per month, perhaps from tutoring, pet sitting or even selling items in your home, that may be enough to cover your bills until you can start earning more or until inflation gets back under control.

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Consider Taking Advantage of a 0% Credit Card Offer

This option requires a great amount of financial discipline, but in the right circumstances, it can be just the lifeline you need. Many credit cards offer promotional periods in which you can get a 0% APR on balance transfers and/or purchases for 12, 18 or even 20 months. Over the short run, this can provide you with a break from your current cash flow problems and give you some breathing room to accumulate more money. But you absolutely must be in a position to pay that money back before the promotional period ends. Otherwise, you’ll end up in an even deeper hole, as most credit cards charge interest in the high double digits, sometimes approaching 30%. 

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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.
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