In a perfect world, there would be no unexpected expenses, no broken alternators, no sick pets, and no “How could I have spent that much in Cancun?” moments. Sometimes life throws expensive curveballs, and you’re obligated to pay unexpected bills. But what if you can’t pay the piper? What if you’ve looked at the budget, and there’s no way to stay out of the red? Let’s tackle the different steps you can take when you can’t pay your bills on time.
When the bills start piling up, you might feel overwhelmed. The out-of-sight, out-of-mind approach is not recommended for handling bills. You may be tempted to shred the bills or shove them in the back of a closet, but this will be disastrous in the long run. Instead, start with taking a few deep breaths, and with some proper planning and a little bit of discipline, you can get through your unexpected financial crunch.
Bare Bones Budget
The best place to start the recovery process is at your budget. If you haven’t already, cut out all nonessentials: eating out at restaurants, multiple entertainment subscriptions and expensive hobbies. Think of how freeing it will be when you’re no longer in debt. Being debt-free is much more satisfying than having a few fleeting comforts.
If you don’t yet have a budget, start one today. While you’re looking at your budget, make a list of the creditors to whom you owe money, along with the amount that you owe each. This visual will help you see where all your money is going.
Sometimes, spending less isn’t enough to get out of the red. You may have to seek out additional employment to pay your bills. Whether you’re a freelance graphic designer on the side or you drive for Uber on the weekends, consider temporary employment for boosting your income. If you’re able to earn more per month, you’ll be on your way to paying down your debt faster. Take a look at some of the best part-time job options and start applying.
Talk About It
It can be hard to talk about money when you’re low on funds. If you truly want to get out from under your debt, tell people about your goals. Tell your family and tell your close friends. They can help you make a plan for getting where you need to be.
More importantly, talk to your creditors. Whether you have a stockpile of medical, student loan or credit card bills, call these companies and tell them you cannot currently make full payments. In most cases, they will help you find a solution. Some companies will go as far as to freeze the interest that’s accruing on your account.
Creditors want to get paid. By helping you come up with a new plan to make your payments, they are increasing the odds that they won’t lose money in the process. The new agreement might be for you to make smaller monthly payments for a period of time. It’s better to pay something than nothing at all.
If the idea of talking to a creditor has you shaking in your boots, take a look at this article outlining 10 tips for negotiating with creditors.
Know Your Rights
If you haven’t yet responded to your creditor’s calls, pick up the phone. If you don’t recognize the debt they’re referring to, you should ask for a written validation notice. This requires a creditor to send you a written notice of how much money you owe, who you owe and steps to take if you were wrongly charged.
Some creditors have been known to be too pushy with their customers, so before you tango with a debt collector, make sure you are aware of your debt’s statute of limitations.
Make a Note
Whenever you speak to a creditor, be sure to write down the occurrence. Note their name, ask for their extension and request a confirmation email. This helps keep your new deal from slipping through the cracks. If it’s not documented, there’s no way to prove it happened.
Credit counseling can be a great move for people who are struggling with their bills. These agencies act as a bridge between you and your lenders, and they help negotiate the payments. If the thought of talking to your credit card company makes you feel queasy, credit counseling might be right for you.
You need to make sure you’re finding a legitimate and reputable credit counseling agency and understanding all of the expectations once you enter credit counseling.
More than anything else, don’t let your debt get you down. You may have made some regrettable financial choices and you may have had some rotten luck, but doing nothing isn’t going to change your situation. Take your problems by the horns and get out of debt.
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