If you worry about how you're going to pay your bills each month, you're not alone. The latest data from the U.S. Census Bureau Household Pulse Survey shows that 41% of people are in the same boat.
The statistics reflect what many consumers already know: Interest rate hikes and inflation continue to bite. Savings rates are declining, credit card balances are increasing, and some Americans are falling behind with their payments.
What to do if you can't pay your bills
Not being able to pay your bills is beyond stressful, particularly when you have people who depend on you. It might help to know that you're not alone. Importantly, there are steps you can take to get on top of things. Many people have been in the same position as you and found a way through.
1. Make a plan
When a problem feels too big or there's no obvious solution, I often put my head in the sand and hope it goes away. Sadly, when it comes to your personal finances, that rarely works. In fact, ignoring financial issues often makes them worse. Instead, try to figure out how big the problem is and what steps you can take.
These moves will help you get a handle on things:
- List out what you owe: Write down each bill and expense you have, when it is due, and how much it is. This includes housing costs, utilities, groceries, insurance, debt payments, and everything else you will need to spend money on. Look through previous bank account statements so you don't miss anything.
- Map out your income: Work out what money you have coming in, and when you expect to receive it. Use this to work out how big the shortfall is. Also, think about ways you might bring in some extra cash, whether through a side hustle, renting out space, or selling unwanted items.
- Prioritize the essentials: There are consequences to late payments on all types of bills, but some are more severe than others. Housing, food, utilities, and transportation to and from work are more important than, say, your cellphone bill. If you're not sure where to start, there's a great worksheet on the CFPB website that explains the consequences of different missed payments and will help you know what to prioritize.
Once you have an idea of what you can pay, think about how to manage the shortfall. In some situations, it may make sense to get a personal loan or other form of borrowing to tide you over. Think carefully before you do this, as you may be kicking the can further down the road. Plus, you'll have to pay interest on the borrowed funds, which could make things harder long term.
2. Contact your creditors
It can be really difficult to call the people you owe money to, but those conversations could ease some of the pressure. Rip off that bandage and pick up the phone. If you're worried about the conversation, make some notes first. You'll need to tell them why you can't pay and how you plan to catch up on the overdue payments.
Be prepared to explain your situation in detail and show that you're ready to work with them. You might be able to work out a payment plan, so think about what you would be able to afford. If this is a short-term issue, you might be able to defer the payment. Ask the name of the person you speak to, and follow up with an email or letter confirming what was agreed.
3. See what help is available
Unpaid bills can be a bit like black mold -- the consequences quickly spread and worsen. The sooner you can get back on top of your payments, the better. See if there's help available at a local or national level that could get you back on your feet.
Here are some places to try:
- Utility bills: Check out the USA.gov page for programs that might help you cover energy, phone, and internet bills.
- Rent or mortgage: The Department of Housing and Urban Development is a good place to start in terms of help with rent or mortgage payments. Also, see if there are any housing assistance programs in your state.
- Debt management: There are some great organizations that can help you handle debt, but beware of scammers. Use the National Foundation for Credit Counseling to find someone accredited, and don't trust anyone who asks you to pay in advance.
- Food benefits: Over 40 million Americans receive SNAP food benefits monthly, which can help keep food on the table. If your circ*mstances have changed, you may be able to claim benefits (or qualify for more money if you already receive SNAP). For emergency assistance, find out what food pantries and soup kitchens operate in your area.
- General assistance or advice: United Way (211) maintains a database of resources and organizations. Give them a call and explain your situation.
What happens when you don't pay your bills?
If you fall behind with your bills, your credit score will almost certainly take a hit. That might make it harder for you to borrow money and can impact the cost of other services, such as insurance. You may also have to pay late fees and interest charges. Those aren't ideal, but they're easier to manage than some of the other consequences.
After a certain period, your debt will likely be passed to a collection agency, and the debt collectors will chase you for payments. If you have a secured loan, such as a mortgage or auto loan, where your home or car is collateral, these may be at risk.
There are no easy answers when the bills are piling up. But the more proactive you are about getting on top of your payments, the more likely you'll be able to avoid the more serious consequences.
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