Maybe you’re in your twenties and you’ve been out and about enjoying life. You socialize with your friends most nights and you finally got that apartment you always wanted even though it cost just a little more than you wanted to pay. You have a job, but it’s not the one you really wanted. It’s a paycheck and some experience, but you really want something better. And now this…you realize that you just can’t pay all your expenses each month and you’re in big trouble! Trust me on this: you’re not alone. Many young people (and even not so young people) start out with the idea that everything will just fall into place once they’re on their own. They’re all about the fun of independence, their first apartment and job, and what seems to be a great adventure with sunshine and happiness ahead. But, the reality is you never had to manage your own money before. Mom and Dad probably helped you quite a bit and if a shortfall ever arose, well they put a bandaid on it with a loan or a gift. There’s nothing to be ashamed of here. It’s part of growing up and now that you are an adult, you need to figure it out on your own!
So you can’t pay your bills…what can you do?
Don’t ignore your creditors
Often when people don’t have the money to pay their bills, they stop opening their mail. They just can’t bear to look at all the balance they owe, but it’s important to know where you stand. Ignoring your bills and your creditors will just make things worse when your services are shut off or your debts go to collections. Instead, contact your creditors and explain your situation. If there are extenuating circumstances like you’re temporarily unemployed, had unexpected medical bills or something similar, let them know. Tell them that you want to pay your bills but you need a little flexibility right now, like a lower minimum payment, an extended due date, or a lower interest rate. Creditors would rather have some of what you owe rather than none at all, so they may be willing to negotiate the terms. This is true whether it’s student loans, credit cards, or other types of debt.
Find some additional income
Sell your junk. One man’s trash is another man’s treasure. Your old music CDs, video games, books, clothes, etc. can get you some fast cash. Even items that don’t work can have value…I sold an inoperative PlayStation3 on Ebay last year so that someone else can repair and resell it.
Ask your boss for a raise if you think you really deserve one. Make sure you review with him or her all the contributions you’ve made and the reasons you’re worth more. It doesn’t hurt to ask and it will give you at least some feedback as to whether you’re progressing at work and will see more money in the near future.
Get a second job or a side hustle to earn additional money. Even a part time gig at a fast food outlet 10 hours a week will earn you several hundred a month and maybe some free food. Or work for yourself by babysitting, dog walking, selling crafts, or one of hundreds of other ways you can make a little extra dough.
When you find that additional income, make sure it goes towards paying off your bills and doesn’t get squandered.
Track expenses and start budgeting
Do you know where your money goes? Do you have a budget? If not, start tracking your expenses to see what you’re really spending each month. If you already have a budget, it’s probably just not managed well. Your income can only go so far and when overdoing the credit cards or other things like car loans, disaster approaches. You may find upon examination that you’re spending all or even more than you’re making. Perhaps your income is irregular, like earned on commission, tips, bonuses, or overtime. Whatever it is, it can make your finances difficult to manage. This in turn can damage your credit rating, which you are going to need more than you may even realize. Your credit score can affect many areas of your life including your employment chances.
Right now you may not be in the right job and are not getting paid what you think you deserve. Or you may have run up debt on things that aren’t necessities in life and now you’re paying it off at something like 23% interest. The first step is to make a real budget. Reduce your expenses wherever you can. Be aggressive to give yourself a chance to get back on track.
Cut your expenses
If you can’t pay your bills, you need to cut your expenses to save money for those critical payments. It may be time for a roommate to share your basic household expenses. That can save you hundreds a month and be put towards your debt.
Eliminate use of all credit cards until you can pay them off in full. After that, only use credit cards when it figures into your monthly income plan or don’t use it at all. (If you do wind up using a credit card, make sure it has no annual fee, some kind of reward program, and an interest rate that’s as low as can be.)
Save on your utilities: wear a sweater in winter and open the windows in summer to save on energy costs if you’re paying for them.
That car you drive at $300+ per month may have to go as well. Look at a used car and see if you can save money with it. Right now, reliable transportation is more important than fancy. And while you’re at it, shop around on your car insurance to see where you can save.
Find ways to reduce your grocery bill. Shop the sales, use coupons, plan your meals, and make smart choices to reduce your food budget while still eating healthy.
Solve the long term problem
To make sure you can pay your bills in the future, and even start to set aside some savings (especially that all-important emergency fund!), you need to live within your means. Simply enough, you either need to earn more, spend less, or most likely do both.
If your earnings and career are falling short, then you must look at yourself and see what you need to do to improve. Do you need more education? What about training that will supplement your job skills at work? If you have settled for a dead end job, then it may be time to start looking for another opportunity while you’re still employed. It’s always easier to find work when you’ve still got a job.
But don’t ignore the other half of the equation. Reducing your expenses should be an ongoing effort. The lower your spending, the more flexibility and security you will have.
Not being able to pay your bills is a terrible feeling. But with some effort, you can balance out your income and expenses to be sure you’ll be able to pay in the future.
Have you ever been unable to pay your bills? What did you do? What would you do if you were in that situation now?
Image courtesy of stockimages at freedigitalphotos.net (with changes)