I’m a Financial Expert: Here’s What To Do If You Fall Behind on Your Bills

Close up photo of male hands holding bill and pen and female hands hugging him while they doing home finances together online on a laptop computer in the kitchen.
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Roughly 62% of American adults live paycheck to paycheck, but it’s not only those with lower incomes who struggle financially. Many high-earners are also in a similar situation.

The problem is, when you live paycheck to paycheck, you’re at a higher risk of falling behind on your bills. In many cases, something as simple as a flat tire or a leaky roof can set you back hundreds or even thousands of dollars.

But while these things aren’t always within your control, you can still do something about it. Whatever the circumstances, here’s what you can do to get yourself back on track if you’re falling behind on payments.

Budget and Cut Unnecessary Expenses

One of the very first things you should do when falling behind on bills is to create a budget. And if you already have a budget, it might be a good idea to review it.

“When bills are missed, it is important to assess one’s bills, expenses and income,” said Sebastian Jania, the owner of Manitoba Property Buyers. Add up your income and expenses and compare the numbers. While you’re at it, see if there are any areas where you can back spending, such as on a monthly streaming service or dining out.

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“By doing a self-audit, one can have a crystal-clear picture of what they need to do to lighten the burden of the situation,” Jania added. “For many people, a self-audit with a removal of a few expenses can get them back on track.”

There are many budgeting systems to choose from, such as the 50/30/20 budgeting rule and the cash envelope system. Try out one or two to see what works for you. And remember, the goal is to spend a little less so that you have more cash for things like bills or debts.

Negotiate With Your Creditors

If your accounts are past-due, reach out to your creditors and explain the situation. You might be able to negotiate for a lower monthly payment or reduced interest rate.

“Most service providers just want to get paid,” said Jen Reid, CFP® and founder of BASE Financial Planning. “Be honest, tell them what happened and where you are at, what you can pay right now and how you plan to pay in the future. See if you can get the bill amounts lowered.”

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Jay Zigmont, PhD, CFP®, founder of Childfree Wealth, added, “Some creditors, such as healthcare organizations, often have a structure for those who are having trouble making ends meet. Others, like credit cards, are less likely to negotiate unless you are paying it off completely.”

Set Up a Payment Plan

A payment plan can help by lowering how much you pay each month for things like credit cards, medical bills or even personal loans. Speaking with your creditors might be overwhelming, but it’ll be worth it in the long run, especially if you can avoid late fees or a ding on your credit report.

“I know it can be scary to ask about money, but most providers will work with you when you tell them that you cannot pay the whole amount at the current moment,” said Reid. “They may help you figure out something that you can afford — maybe monthly payments, for example — and try and get on a plan.”

Secure a Secondary Income Stream

If cutting back on expenses isn’t enough, it might be time to pick up a second stream of income. The good news is that there are plenty of ways to make some extra cash.

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“Don’t hesitate to take on more work if you need more income and go back to negotiations if you feel like your bills and expenses are weighing you down,” said Reid. “There are so many websites for finding side hustles and remote jobs — even saving an extra little bit here and there will help.”

“If you are falling behind, the answer is a combination of spending less and making more. You may need to pick up some gig work or part-time work to make ends meet,” added Zigmont. “For example, the local McDonald’s is advertising a $14 per hour rate [which will vary depending on where you live], and daily pay (i.e., you don’t have to wait a week to get paid). It may not be glamorous, but it is a quick way to add cash.”

Use a Home Equity Loan or Home Equity Line of Credit

If you’re a homeowner and have earned equity in your home, another option is to take out a home equity loan or home equity line of credit (HELOC). Using the equity in your home could help resolve immediate or temporary financial problems like overdue accounts. “With this approach, this is more of a short-term solution, but [it] ultimately buys time to put something more concrete together,” said Jania.

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Using your home equity in this way comes with certain drawbacks, however. For example, you’ll typically owe interest on the borrowed amount. You also risk losing your asset if you don’t pay back what you owe on time.

Get a Balance Transfer Card or Low-Interest Loan

It might be tempting to turn to fast-cash options like payday loans or cash advances, but these are often more expensive than they’re worth. They’re also a temporary solution, rather than a long-term one.

“If you fall behind on your bills, you need to see that as a flashing red light that something is wrong,” said Zigmont. “While some people may see a payday loan as a way to make it through, avoid these at all costs. Once you start the payday loan cycle, their structure and fees will keep you trapped.”

That’s not to say that all loans are bad. If you qualify for a low-interest personal loan with a reasonable repayment term, this could help you get back on your feet — but only if you can handle the new monthly payment.

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Alternatively, you could apply for a balance transfer card or a 0% APR credit card. “If you need some time to catch up on bills, try using a balance transfer 0% card to give you some time to catch up, and continue to make those payments to get you caught up,” said Reid.

Pay Only the Minimums for Now

If you have credit card debt, consider paying only the minimums until you’re back on track with your other bills. This might result in more interest charges on your current balance, but it can also give you time to catch up on other accounts. It can also be helpful if you’re juggling multiple bills with similar due dates, or are trying to save up some money for emergencies.

“Managing payables like bills can be a challenging task, especially when they all have common due dates,” said Raymond Quisumbing, a registered financial planner with Bizreport.com. “It is important to reverse one’s cash flow from mostly outgoing to mostly incoming. Once one has ample savings, the struggle to pay on time will become less difficult.”

Consider Credit Counseling

A certified credit counselor can help you establish a personal budget that works for you. They can also help you understand your credit score better, as well as get a handle on your current debts. Check with the National Foundation for Credit Counseling (NFCC) for more information or a credit counselor near you.

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Use Other Financial Tools

And finally, consider using some other financial tools like online budgeting apps, savings features at your bank or earned wage access services. Some of these tools should be used pragmatically and as a short-term solution, but they can get you through the tough times.

“For example, consumers can use earned wage access to pay their bills on time, instead of waiting until payday and incurring late fees and overdrafts,” said Ram Palaniappan, CEO and founder of EarnIn. “In tighter times, these fees add up, compounding the effects of inflation.”

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