Finance

How to Get Caught Up on Bills: 8 Practical Tips

Caught Up on Bills

You might be surprised to learn the average American pays just under $1,600 per month in various loans. This is a substantial amount for many people, and it can quickly become difficult to handle when considering other obligations like rent, groceries, gas, and childcare.

If you fall behind on your expenses, your financial situation can quickly become unmanageable. The good news is understanding how to get caught up on bills is far easier than it seems. Let’s explore the key information you need to know.

1. List Your Expenses

Before moving forward, create a list of every monthly expense you had. You should include everything you regularly pay for no matter how inexpensive it is.

Even an $11 monthly subscription to a music streaming service should be on this list. Doing so provides valuable insight into your spending habits.

2. Pay Missed Payments First

Falling behind on bills can be stressful, but it can also be expensive. Many credit card and utility service providers charge late fees if you don’t make your payments on time.  If you leave these payments unsatisfied for an entire billing cycle, they’re considered “missed.” This can heavily impact your credit score and make it difficult to obtain certain forms of financing in the future. In some situations, it could even impact your ability to find housing.  If you’ve missed a payment, allocate money toward it as soon as possible. This will help prevent additional issues from arising.

Keep in mind that creditors are often negotiable. If you contact them and explain your situation, they might allow you to make your payment later than initially required.

3. Focus on High Interest Rates

Most people in poor financial situations have multiple forms of debt. The interest rates across these often vary. When creating repayment plans, focus on the debt with the highest interest rate.  This could potentially save you thousands of dollars per year. It’s also a great way to stay motivated since your monthly interest will quickly decrease as you pay off debt with substantial interest rates.

4. Create a Monthly Budget

You can’t expect to optimally pay your debt if you don’t have a budget. Be honest with yourself about what you spend. For example, some people irregularly eat out and don’t factor in this form of spending.

However, it can quickly add up. Once you’ve established what you typically spend in a month, look for ways you can reduce your expenses. It’s not recommended to cut costs down to your bare necessities.  This can substantially lower your quality of life and cause you to miss out on memorable experiences. For example, let’s assume you’ve spent the last two months saving every penny you make. A group of your friends wants to go to a music festival, but the tickets cost $100.  While you technically shouldn’t be spending this money, you might regret not going. Assess situations like these to determine if you can feasibly spend money.

5. Avoid Debt Relief Scams

There’s no shortage of debt relief scammers that aim to take advantage of those in financial distress. Debt settlement agencies sometimes promise to eliminate your debt for a fee but won’t follow through on your promise.

This leaves you in the same financial situation but with even less money since these fees are often substantial. Avoid companies that make offers that seem too good to be true.

6. Use the Snowball Method

Many people have heard of this process, but not everyone understands how it works. The snowball method works by paying off your smallest debt amounts first.  After you do, you allocate the money you would have spent toward your other debt. This allows you to contribute more toward your debt as time passes and pay your debt off sooner than anticipated. Calculate how much money you pay in interest on each loan so you can decide which to focus on.  For example, you might owe $10,000 at 4% APR and $7,000 at 25% APR. In this case, it’s recommended to focus on the $7,000 balance first since you pay more in interest on this amount.

7. Consider Financial Assistance

If you’re struggling to pay your bills, there are financial assistance options available. Reach out to your creditors and ask if they offer payment plans. Many of them will, and this could substantially reduce your financial burden.

This often works by them accepting partial payments over an extended period. Don’t use this as an excuse to pay less toward your debt each month, though.

8. Don’t Stress Over Your Credit Score

Being in debt is stressful enough. Being overly focused on your credit score can be damaging to your mental health.

It’s best to accept that your score will be lower than you’d prefer it to be for the moment. The good news is that it will slowly increase as you begin to pay off your debt.  Your credit score is influenced by many factors, and the total amount of money you owe is one of the most substantial. As time passes, your payments will contribute to your debt and reduce how this aspect impacts your score. If you can’t get this situation off your mind, you can work with a credit repair company.  These firms have the tools and resources to substantially improve your score. When looking for credit repair in Tyler, Texas, consider their past reputation. Look at what other people online have to say about what it was like to work with them.  There should be no shortage of positive feedback, and the reviews should highlight the amazing results they got. If your intuition tells you something is off, don’t be afraid to look elsewhere. With a bit of vigilant research, you shouldn’t have an issue finding the right opportunity.

Understand How to Get Caught up on Bills

The info in this guide will help you understand how to get caught up on bills and improve your financial situation. From here, you can improve your mental health and strive toward a new chapter in your life.

Our blog has plenty of information that can help you make better financial decisions in the future. Be sure to check them out today!