There aren’t too many sure things in life, but we can agree that our bills are definitely among them. No matter what’s going on in our world the bills are always there, every month, relentlessly requesting our attention. Attention, that is, in the form of cold hard cash. If you’ve thought to yourself “I don’t make enough money to pay my bills,” read on, you’re in the right place.
Living paycheck to paycheck in America is a common way of life for many. But for some, the month’s bills can start to grow bigger while incomes can remain the same, greatly decrease, or even disappear. In this perilous financial situation, any unexpected expense – from a busted car muffler to a trip to the ER – can tip the scale and leave us owing more than we have.
With past due notices sitting on top of disconnection notices and debt collectors calling while you’re reading strongly-worded emails from attorneys demanding settlements, anxiety can grow high.
If this scenario sounds like your life, breathe.
Cool. Now, do it again.
You are not alone. Not being able to pay your bills is a problem that many people are sharing these days. And fortunately, there are some steps that you can take to move through this short-term personal finance problem and gain control of your cash flow so that you can pay your bills.
First, Cover The Basics
When you have lots of bills but don’t make enough money to pay them, you are going to have to first prioritize how you are spending by one thing: basic survival. While there are bills you don’t have to pay (we’ll get to that later), the ones that keep you alive, sustained, and secure are non-negotiable. Here are the basics:
Stick to groceries and stay out of restaurants and bars for a while. If you’re not a home cook, learn to be one. Home-cooked meals are much cheaper than takeout. Also, be sure to research outreach programs in your area. Many local communities provide temporary assistance with grocery vouchers and food pantry access to those who qualify.
Rent is a tough expense to negotiate; many property owners will just as soon terminate a lease as negotiate, so make that the last resort by paying your rent. For homeowners, mortgage lenders may have payment deferral programs, some of them mandated by the federal government. If you own a home, contact them today.
Falling behind on your utility bills doesn’t necessarily mean your access to electricity, water, and heat will be lost. States and utility companies have programs that can assist people struggling with delinquent accounts, and set up repayment plans on a sliding scale based on their income.
If having a car or other means of personal transportation allows you to make money (i.e. gets you to and from work), it is a priority. However, if you live in an area with reliable public transportation, you may want to strongly consider either decreasing your vehicle usage or selling it. Either move will decrease your expenses and allow you to pay down debt with your newly available funds.
Think about these necessities as the building blocks to success in all forms. With your basic needs met, you will be able to clearly see the difference between the important stuff and the not-so-important stuff.
And speaking of the not-so-important…
Decrease Your Bills.
Once you know what bills you DO have to pay, you will be able to determine what bills you DON’T have to pay. And this is an important step in making ends meet.
Contrary to the highly effective ad campaigns we’ve all been exposed to, TV, music streaming apps, online gaming services, and monthly box subscriptions are not essential services.
Are they awesome services? Of COURSE, they are! Their awesomeness is the reason why you love them and probably have too many of them. But no matter how awesome podcasts on-demand and HBO original programming is, they’re simply not worth staying locked in debt.
Aside from the monthly payments for these services, any of these bills could rack up late fees and penalties if they aren’t paid on time and in full. In that situation, your bills are essentially creating more bills for you. When your financial back is against the wall, you need money to make big changes to get on top of your debt.
Negotiate With Your Billing Companies.
The only thing scarier than a “past due” notice on a bill is the even more dreaded “cutoff notice.” That’s the one that tells you that some really important service (like any of those basic utilities we mentioned earlier) is about to be terminated. This could create another set of potentially costly problems, in addition to termination fees and reconnection fees. People who don’t make enough money to settle these issues often aren’t sure where to turn.
These notices typically come in bright envelopes and large print. They’re very important, so it’s important to handle them as quickly as possible.
Although these notices make it seem like they don’t want to talk, most utility companies will work with customers to create a repayment plan that will work for them, without depriving them of the services they need. In fact, Essentially, these companies want their money; they’d rather be getting something from you than nothing at all.
Additionally, some utility companies offer “budget billing” options that allow a customer to pay a fixed monthly payment based on their average annual usage, making it easier to plan and budget for this.
So, when it comes to negotiating your bills, you actually have a little leverage, as long as you are earnest in your commitment. If you show the company that you want to make good faith payments and want to resolve your debt, you’ll be in good shape.
Don’t Create Any New Debt.
No matter what special offers or incentives are offered (even if they sound really cool, like “cash back”), do not apply for any new credit cards if you don’t make enough money for your bills. Using your credit line or a personal loan as a way to pay your bills when your cash can’t cover them is a short-term solution to a long-term problem that will massively reduce your chances of getting out of debt anytime soon.
Credit cards and loans will only increase your amount of debt, giving you one more bill that will most likely go unpaid. If you didn’t have enough money before the credit card, you definitely won’t after. A credit card may make it difficult to pay the bills you already have.
When you mix high credit utilization (the rate of how much of your available credit you are using) with a bad history of making on-time payments, you have created the conditions for your overall credit score to significantly drop.
Since a good credit score is important in financing much of life’s big and important purchases (car loans, mortgages, etc.), keeping it healthy is important. Even though it can seem like the solution, credit cards are not the way out of debt. You will only get there by taking steps towards building strong financial habits.
How Can I Break the Cycle of Never Having Enough Money?
Debt is managed best when it is addressed as soon as possible. However, while we are taking steps to fix the problem in front of us, we can also do some things now to lessen the impact – or even eliminate another short-term cash-flow problem in the future.
Create a Budget
If you don’t seem to have the money to pay your bills, chances are that a part of the problem is the lack of a budget in your life.
A budget details the amount of money you need to spend over a certain period of time. A typical home or personal budget is created to plan a person’s spending from month to month.
Some people find themselves intimidated by the thought of creating a budget. When living a paycheck to paycheck life, people tend to believe that budgeting is a near impossibility, because they see what little money they bring in has to go right back out to their debtors.
Basically, lots of financially struggling people feel that they are too poor to budget. However, those that get over that misconception and start to use a budget realize that they were struggling because they don’t budget!
How Does A Budget Work?
Budgeting is a critical step in getting your bills under control. With a budget, you make sure that you are paying on the most important debt and bills before you consider any other type of spending so that the money you need for those essential basics isn’t used for any unnecessary expenses.
If maintained and followed, a budget will do the work of not only remembering when bills are due, but will also give you better information about your financial health. Instead of trying to decide what to do in the moment, a budget will show you what your bank account balance can’t: What money is available to spend, and what isn’t. The inability to easily tell the difference between “bill money” and your “fun money” is a huge issue for people who end up short on cash.
Tons of apps can help you organize your spending each month, and teach you how to set financial goals, such as saving a particular amount of money or paying off a credit card or other large piece of debt. But, if that sounds intimidating, start slow.
Just write down every bill that you pay each month, along with their due date and the amount. When you add up the total, you’ve got the amount of money that you need to make each month. Then, right next to that total, write down the amount of money you make in a month (or if you’re paid by the hour, as opposed to receiving a salary, use your average monthly wages).
Why Should I Budget?
Just by using this basic budgetary view, you can collect some incredibly important, yet simple data that can help you put a solution in motion. For example, if your income is less than the total amount of your bills, then it’s time to look at what bills you can get rid of, or negotiate a more manageable monthly payment.
For some that try this exercise, they can discover that they actually do make enough money to pay their bills and just need some help with building better financial habits. There is a big difference between being actually “broke” and being overspent, or using more money for the things you don’t need than for the things you need.
Although a budget will help you focus on the right bills, remember that it won’t do the work all alone. It’s going to keep your budget updated so plan time every week to make sure that you are staying on track by living within the means of the budget you create. You do this work, and the budget will do the rest!
Build an Emergency Fund
An emergency fund is an amount of money that is set aside for unexpected emergencies and expenses that happen to virtually everyone.
Cars break down. Teeth need dental work. Roofs need repairs. And although these types of things can and do happen, experts say that less than half of all Americans don’t have enough money set aside to cover an unexpected expense greater than $1,000. And when you think about most home, family, or medical emergencies, they tend to cost more than your average laptop. This is why paying into an emergency fund is so important.
Many people tend to think of their long-term savings account as the account they dip into for their emergencies, simply drawing from it when they need that extra money to pay the bills. However, in order for it to remain intact and drawn from only when necessary, it is important for your emergency fund to be out of quick reach. For example, your emergency fund should be kept at a bank or credit union that doesn’t hold any of your other accounts. At the same time, funds should also be easily accessible so that you can have the cash you need as soon as possible.
How Big Should My Emergency Fund Be?
Emergency funds, according to many experts, should hold about 3-6 months’ worth of living expenses.
If you’re thinking that’s a lot of money, don’t worry – you’re right. But just know that you don’t have to put all that money aside all at once. This number is a goal that can be used to decide which percentage of your earnings you can contribute to your emergency fund.
Remember: your emergency fund is not your “mad money” or tidy bundle of cash tucked away. It is the money you will need to bounce back from a heavy loss, medical troubles, or job loss.
Making the effort to invest part of your income into an emergency fund will not only help you mitigate future financial problems, but also build good financial habits that encourage budgeting, and long-term planning.
Emergency Funds & High-Yield Savings Accounts
A high-yield savings account will give you a higher interest rate on your money than a traditional account, which means that it will grow faster in a shorter amount of time. In America, a high-yield account will, on average, pay interest rates that are 20 to 25 times greater than those attached to traditional savings accounts.
For example, in traditional savings accounts with the average 0.10 percent annual percentage yield (APY), a deposit of $1000 would earn $1 after sitting for one year. In a high-yield savings account with a 2.5 APY, that same $1000 would earn $25
In addition to the phenomenal potential for earnings, a high-yield savings account also streamlines access to your money, making funds available through electronic transfers while limiting or not providing services like checking accounts and ATM withdrawals. Like many other regular savings accounts, many high-yield savings accounts also require a minimum deposit amount to stay open.
This balance of benefits and restrictions makes high-yield savings accounts a near-perfect place to store your emergency fund.
Take Action. Any Action. Now.
Landing in heavy debt is a tough reality to handle. Because of that, many of us get stuck in that reality, thinking that dodging creditors and scraping by are just part of the cost of living. However, once you begin to work on managing your bills, either by using the strategies we discussed here or the host of others out there – you will be able to see that getting control of your finances is possible.
All you have to do is start somewhere. And start today. Apply for a second job, or talk to friends who might be able to help you get a second job. Start a side hustle, sell some belongings you don’t need, do whatever you can to find the extra money. Any combination of these things could help your financial situation and make ends meet.
Sit down and take a hard look at the bills that come due every month, and how they impact your life. Or make that call to your creditor and explain your situation. Whatever you choose to do, do it as soon as you can. When you start to do the work, you will learn how to build your financial plan of action. And with a good plan, you will be able to identify, prioritize, and eliminate your debt.
Also, keep breathing. You got this.