{"id":673,"date":"2021-09-09T13:07:00","date_gmt":"2021-09-09T19:07:00","guid":{"rendered":"http:\/\/www.lexingtonlaw.com\/blog\/?p=673"},"modified":"2024-11-13T16:02:34","modified_gmt":"2024-11-13T22:02:34","slug":"payments","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/negative-items\/payments.html","title":{"rendered":"Can\u2019t pay your bills? Here\u2019s what you should do"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law\u2019s editorial disclosure for more information<\/a>.<\/em><\/p>\n\n\n\n

Whether it\u2019s because of a job loss or something else, not being able to pay your bills is stressful. Unfortunately, missing payments on your bills can have long-term consequences, such as your credit being negatively affected. <\/p>\n\n\n\n

So if you\u2019re wondering what to do when you can\u2019t pay your bills, here are some straightforward steps you can take today to improve your situation.<\/p>\n\n\n\n

1. Reevaluate your budget<\/h2>\n\n\n\n

The first step is to reevaluate your budget. You need to understand how much you have coming in (income) versus how much you\u2019re spending (expenses). Break out your expenses into two categories: essential and nonessential. <\/p>\n\n\n\n

Essential expenses are anything you need to survive your daily life, such as food, shelter, utilities and transportation. Your nonessential expenses are costs that you could live without, such as cable, Netflix, subscriptions and eating out. Evaluate if there are any nonessential expenses you can cut out.<\/p>\n\n\n\n

Next, look at any debt you have and understand the difference between secured and unsecured debt. If you can\u2019t pay all your debts, you\u2019ll probably want to prioritize secured debt first. <\/p>\n\n\n\n

Secured debt is typically guaranteed by an asset, such as your mortgage (backed by your house) or your car loan (backed by the vehicle). If you don\u2019t make the payments on these secured loans, you may lose your shelter or transportation.<\/p>\n\n\n\n

You can\u2019t afford to lose a roof over your head or the ability to drive to work, so these secured debts should be a priority. In comparison, unsecured loans like credit cards come with higher interest rates, but it might be better to miss these payments in the short term. <\/p>\n\n\n\n

Rather than becoming overwhelmed by all your debts, consider implementing the debt snowball method. This method has you write down all your outstanding debts from smallest to largest. <\/p>\n\n\n\n

From there, any extra money you have goes to the smallest debt first. As you pay off each debt, you work your way down the list.  <\/p>\n\n\n\n

Experts prefer the debt snowball method because it helps individuals see real progress and stay motivated on their debt-payoff journey. Financial planner and founder of personal finance site, ThefinU, Chrisanna Elser advocates for the snowball method. <\/p>\n\n\n\n

Elser states<\/a> this method \u201cis the most accepted method by psychologists because it rewards you for terminating one debt at a time in its entirety […] The little wins will keep you focused.\u201d <\/p>\n\n\n\n