What to Do When You’re Behind on Bills

If you’re behind on bills, you’re not alone. The economic fallout from COVID-19 has impacted millions nationwide. A study from Pew Research Center found that 53% of adults were unable to pay all of their bills due to layoffs or other hardships in April 2020.

Falling behind on bills is stressful, but you can get caught up. Here’s how to pull it off, step-by-step:

Step one: Get your bills together

Before you can pay anything, gather all of your bills and create a list with three columns: who you owe, how much you owe, and when the bill is due (or past due).

If you’re not sure what all you owe, go through your expenses for the last few months to see if anything slipped your mind. The key is getting everything written down so nothing falls through the cracks as you plan out how to get caught up on those bills.

Step two: Prioritize

Next, decide which bills to pay and what order to pay them. Typically, you want to start with your essential expenses — that includes making sure you’ve covered rent or mortgage payments, utility bills, and food costs.

Next, look at your debt payments. If you’re behind on credit card bills, you’re likely racking up fees that only put you further in debt. By law, credit card companies can charge up to $28 for your first late fee and up to $39 for future missed payments, according to U.S. News and World Report. Start by getting any past due debt payments caught up and then pay the minimum amount due by the due date on any other debts. Once you’re back on track, you can make a plan to tackle your remaining debt.

Step three: Cut expenses until you’re back on track

Cutting expenses long term can help you pad an emergency fund and have more wiggle room in your budget, but it is absolutely essential when you’re behind on bills.

If you buy mostly in cash, start tracking your expenses for a few weeks until you can see patterns emerge. If you’re a debit or credit card shopper, look through the last few months of your transactions to see what you could reasonably cut out—like gym memberships, streaming subscriptions, or take out meals. Then, reroute those savings into your bill payment plan. Once you’re caught up, you can decide if you want to add those non-essentials back, or if you’d rather put the money to different uses.

Step four: Create a budget

There’s no way around it: You need a budget. You can use an app, a budgeting spreadsheet, or pen and paper, but you need to keep a running list of all your bills and expenses. Knowing where the money needs to go can help you stay on track and anticipate any shortfalls in the future.

Step five: Boost your income

If you’ve been laid off or had your hours cut, you may qualify for assistance. Due to the pandemic many types of workers — like freelancers and self-employed individuals — now qualify for unemployment. If you haven’t filed yet, do so as soon as possible. Next, look for programs that can help give you a cushion. For example, you may qualify for the Supplemental Nutrition Assistance Program (or SNAP) to help you cover food costs.

If you’re still working but want to get caught up faster or just need more room in your budget, you may look into getting a part time job or side gig. Many places are still hiring, even during the pandemic, and offer flexible hours.

Step 6: Talk to your creditors

In response to the pandemic, many creditors are offering special payment plans and deferred payments for their customers. If you’re struggling to keep up with a bill, whether that be your rent or your credit card payments, talk to your creditor. You may be able to pay past due balances over time with a payment plan or defer a payment or two until you can get caught up.

Keep in mind, this can provide temporary relief while you secure a new job or get your finances in order but be careful not to overextend yourself. If you defer payments, you may continue to accrue interest and the total bill may come due immediately at the end of the term. If you’re not prepared, you could suffer another setback.

Falling behind on bills isn’t easy for anyone and you may not be able to correct the situation overnight (or even in a week), but if you stick with your plan, you will get caught up.