It can be a terrifying moment when you realize that you don’t have the money to pay the bills. This often results in inactivity and procrastination out of fear or anxiety. With this inactivity comes increased debt and further embarrassment.
However, doing nothing is the worst thing you can do. The problem will not go away by itself. Options do exist and once you take an active approach to resolving the situation, you will feel back in control of your life.
The first thing you must remember is to take care of necessities. You need food, shelter, utilities and a means to get to and from work. With the money you do have, these items should be prioritized as number one and should be maintained. Once you have determined how much money is left after these items are paid, you can then create a budget.
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Your budget does not have to be extensive or complicated. It is important to sort out who gets paid and how much can be dedicated to that creditor. It is essential that you stop using the credit card — it may only make matters worse — and pay your creditors with cash when possible. It is also advisable to contact your creditors in writing, be honest and explain your circumstances, and provide a fair payment schedule with a deadline to be completely caught up on your debt.
Credit card companies and other merchants have a hardship department that will provide assistance and advice on how to get your account current. Contacting your creditors should be done as soon as possible. If the debt goes to a collection agency, you will need to work with them, and they may not be understanding of your situation.
If you must contact a creditor by phone, follow up the conversation with a letter to the person you spoke to summarizing your conversation and keep this letter for future reference. Always get the names of the people you talk to when working out your debt situation.
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Once you have determined a deadline to get your bills up to date, stick to it. It is unwise to have to explain again why you still can’t pay your bills even after a plan has been put in place. Third and fourth chances to catch up are rarely given.
It is also important to note that some items can be repossessed — like your car. If it is needed to get to and from work, and it is your only means of transportation, it is important that the lender not take possession. Make sure that you inform your lender of your circumstances and work with him/her to ensure that you are making every effort to repay the loan.
A basic rule of thumb is to work as hard as you can to evoke confidence in your resolve to pay. If you need to have a garage sale or take a second job, then do so. There are several work-at-home part-time jobs that can be used to get over this temporary financial deficit. In fact, some of the lenders may be able to offer suggestions. Even a small income from a part-time job can help.
Although the government does offer some temporary relief, it should not be relied upon for the long term. Government programs do end, and you could find yourself in worse circumstances than you already are.
Mary Fox Luquette, MBA, CLU, ChFC is a finance instructor in the BI Moody III College of Business at the University of Louisiana at Lafayette.
This article originally appeared on Lafayette Daily Advertiser: Can’t pay the bills? Here’s what you need to do | Personal Finance