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A big part of managing finances is paying your bills. But what are your options if you don’t have enough money to cover them?
According to a 2020 report by the Kaiser Family Foundation, four in 10 Americans suffered a job or income loss early in the pandemic. While some of those were “blips,” resulting in only a temporary loss of income, many Americans, especially those from marginalized communities, may still be feeling the impacts of job and income loss.
While this isn’t an easy problem to solve, help may be available when you’re in a bind. These steps can help you find the relief you need, avoid tapping your retirement savings and help reshape your finances so that paying bills is less likely to be a future challenge.
Step 1: Prioritize Your Bills and Reduce Spending
Not all bills are created equal, which is why you should prioritize the most urgent bills. Celeste Revelli, CFP and director of financial planning at Fidelity’s eMoney Advisor, recommends prioritizing those relating to shelter, food, transportation and healthcare.
After figuring out which bills are the most important, Revelli says you should look for small ways to reduce your spending or temporarily downsize your lifestyle to free up cash in months to come, including:
- Reducing what you spend on take-out and delivery meals.
- Cancelling streaming subscriptions (or subscriptions of any kind) you don’t regularly use.
- Switching the bulk of your energy use to your utility’s off-peak hours, where practical (for example, doing your laundry before 5 pm on weekdays).
When you’re struggling to pay bills, even a few small spending adjustments can help you make a dent in your high-priority bills and strengthen your budget.
If these smaller efforts won’t free up enough cash, you could consider more drastic measures such as getting a roommate or temporarily moving in with family to lower both your utility and housing costs. But keep in mind that terminating a lease can come with its own set of complications, including paying fees, hurting your credit and even getting sued. Also, with rent prices soaring, you may have to pay more to rent again when you move out.
Step 2: Evaluate Your Options
If spending and lifestyle adjustments aren’t enough to catch up on your bills, these resources may be able to get you the aid you need with your bills.
If You Need Help With Spending and Saving
If you’re struggling to pay your bills because you’re living beyond your means, you likely need to create a budget. The good news is that you don’t have to build a budget alone.
“You can use a budgeting app to create custom budgets, set goals, and track your essential spending,” says Brittney Castro, a CFP with Mint. “Dedicate 50% of your monthly income toward needs, 30% to non-essentials and 20% to savings.”
And speaking of savings, don’t forget to build an emergency fund. Even if you had one, it’s possible that, like many Americans, yours took a hit during the pandemic. Your emergency fund can help you prevent running up credit card debt when emergencies happen and manage tough financial times without making your financial situation worse.
If You’re Struggling With Your Rent or Mortgage
Feeling uncertain about the roof over your head is incredibly stressful. There’s potential help available for both renters and homeowners, but it can be time-consuming and complicated to get.
You’ll likely have to meet certain income requirements and provide documentation supporting your relief request. Application processes can be unclear and cumbersome, and there’s no guarantee that you’ll qualify for assistance.
But for renters and homeowners willing to go through the application processes for housing relief, there are some solid resources to get you started.
“Those struggling with rent payments and facing eviction can look for local rental assistance programs on the National Low Income Housing Coalition’s website,” says Leslie Tayne, a financial attorney with Tayne Law Group. You can find resources specific to your state using this interactive map. You can also reach out to local tenants’ associations to see if you qualify for relief. Be sure to review the application and qualification requirements for relief, which might include:
- A photo ID
- Utility bills and disconnection notices
- An eviction notice
- Proof of income
- Copy of your lease.
- A written explanation of your hardship
If you’re a homeowner struggling with your mortgage, it pays to contact your lender directly and as soon as possible. Some services have programs to help people avoid foreclosure and they’ll review your situation
Tayne also says that both renters and homeowners can use the resources available from the Consumer Financial Protection Bureau (CFPB) to find low- to no-cost housing counselors in your area. Housing counselors are well-versed in various options available to both renters and homeowners. In a single call, they can help you review your lease and mortgage documentation, a hardship situation and point you toward assistance programs you might qualify for in your city, state or even on the federal level.
If Student Loans Have You Stressed
If you’ve already reached out to your servicing company or lender yet can’t find the help you need for your student loan payments, the CFPB has your back. It offers a concise collection of resources, including information on current student loan relief provisions from the CARES Act (which are set to expire in August 2022) and a guide to help you understand all of your repayment options.
It’s worth noting that your relief options will vary depending on if you have public (loans issued by the US government) or private student loans (those issued by banks or private lenders).
If You’re Struggling With Utility Bills
If your heat, cooling, water or other utility bills are sending an SOS signal, you have multiple resources you can look into for help.
First, you should always contact the utility directly and ask for help. Most utilities have various forms of assistance, from payment plans and low-income programs to local assistance agencies that can help you pay your bills and keep essential services from being disconnected.
Next, you can look into national programs that are locally managed, such as the Low-Income Home Energy Assistance Program (LIHEAP), which has resources for state, territory and tribal areas. The Salvation Army also runs programs that help people pay their essential utility bills, and you can use their website to find contact information for your local chapter.
If You’re Struggling With Credit Cards
If you’re unable to keep up with your credit card bills: stop using your credit cards and reach out to your card issuer. You can switch to paying cash or using your debit card, or if you must continue using your credit card, try to pay off the charges you incur each month going forward to avoid adding to your existing balance.
And if you’re hesitant to tell your card issuers you’re having a rough financial time—and for whatever reason—try to shift your thinking. Asking for help is a sign of strength and financial responsibility.
“Lenders have long had help available for someone struggling, but not that many people know about these programs,” says Ted Rossman, senior analyst with CreditCards.com. “Companies offer these [programs] partly out of goodwill but also for practical reasons. They’d rather keep you engaged and get paid back over time as opposed to having you disappear and go into delinquency/default and lead to expensive legal dates.”
When you contact your credit card issuer, Rossman suggests knowing what you’d like to achieve, from skipping a payment or avoiding late fees to reducing your minimum payment. It also helps to have an estimate when you’ll be back on your feet.
If You’re Struggling With Significant Debt from Multiple Sources
If you’re struggling to pay bills on all fronts, you might want to manage everything with professional assistance through credit counseling.
“Money Management International and Greenpath are two of the largest [nonprofit agencies] and both operate nationwide; They do a lot of their sessions over the phone or computer, which is convenient,” says Rossman.
When evaluating credit counseling agencies, Rossman says a good seal of approval is a company with a membership to the National Foundation of Credit Counseling. Credit counseling agencies are nonprofit agencies that can help you stop creditor calls, lower your interest rates and consolidate your debt payments into a single monthly payment. However, these nonprofit agencies are vastly different from debt settlement companies.
Though it’s easy to confuse debt settlement companies and credit counseling agencies, debt settlement companies are for-profit companies and their tactics can harm your credit and even leave you worse off than before you hired them. They also tend to charge fees which are higher than nonprofit debt counseling services.
For example, a debt management plan fee at a credit counseling nonprofit is typically capped to a per-month fee (for example, in California, the cap is the lesser of 8% of what you pay creditors monthly or $35).
At a debt settlement company, you’ll be charged a fee of roughly 15% to 25% of the debt the company is settling. This fee could be assessed on the total debt the company has to negotiate or on the settled amount. For example, if you have $20,000 in debt that the company settles for 50% or $10,000, you could be hit with fees ranging from $1,500-$2,500 in addition to the $10,000 settlement amount.
If You Have Unconventional Emergency Expenses
If the bills and emergency expenses in your life don’t neatly fit into a single category, you could consider a crowdfunding campaign.
You can create a crowdfunding campaign to share with your friends and social media accounts. These campaigns let you tell your story and why you’re asking for help to empower contributors to share your campaign for more exposure. Crowdfunding can raise money for situations such as an urgent need to move, sudden loss of income or unexpected medical bills not covered by insurance.
While there’s no guarantee that people will contribute to your campaign, crowdfunding offers an unconventional route to relief.
Step 3: Stay On Track
Even if you find much-needed relief from the resources above, there’s still work to be done to make sure you stay on track with your bills.
First, make a budget and stick to it. Your budget and a simple budgeting app can help you track expenses and keep you informed about where your money is and isn’t going each month.
Next, talk to friends and family. According to the TIAA Institute, 22% of Americans say they can’t pay their bills in full or on time each month. You may know someone who’s been in a similar situation. Speaking to friends and family can introduce you to resources you didn’t know were available in your area.
Finally, if you even need help with any aspect of your finances, don’t be afraid to ask for help. Every utility, business or lender you reach out to has resources for those who might be struggling, and you won’t know what they are until you make that call.