Once you've got your budget laid out, you need to get yourself current. When you're behind on bill or debt payments, you probably feel as though you just can't get your footing...it's like you're walking up a sandy hill, and every time you take a step you feel the sand sliding out from under you. You can't get very far very fast that way, can you! So, if you’re behind on any bills or debts, you first need to bring everything up to date before you start on anything else. Here’s a systematic way to get this done:
- Go through all your bills and make a list of anything that is past due. List the creditor, the total amount due, the date due, and if this is a payment that recurs, the date and amount of your next payment.
- Devise a plan to pay off your past due bills. Get your budget out and see where you can come up with some extra cash to accomplish this. Most households have paychecks coming in at least twice a month, sometimes more if spouses are being paid on opposite weeks. Depending on when bills are due, you may be able to juggle your bills around for a month and "pay as you go" instead of all at once at the end of the month.
- Communication is your greatest asset - call your creditors and talk to them. Explain your situation and ask how they can help. Ask if you can make a payment a couple of days after it is due. Ask them if you can defer the payment until a date you know you CAN pay. Ask if you can pay a certain amount now followed by another payment in a couple weeks (or whenever you get your next paycheck). Ask if you can set up a payment plan to systematically pay it off. Ask, ask, ask! If you don't ask, you won't receive! Be creative and come up with a solution that works for you. Remember, don't try to set up any payment plans if you haven't already completed your quickie budget! If you don't know exactly where you are, you will not know what kind of payments you can afford. Setting up a payment plan without knowing what you can afford will simply put you right back where you started - behind.
- Cut out all expenses but the basics until you're current. Yes, this means no Starbucks, no eating out, no manicures, no golf games, no snacks at the grocery store, and no movie dates! Remember, getting your footing under you is worth the sacrifice, and it will only take a short time - it's not how you will have to live long term.
- Remember, don't ever sacrifice the four walls to pay off something else. Too many people allow themselves to get behind on a mortgage or car payment to try to pay a credit card on time. Don't go there...it's not worth losing your house! Keep your four walls - housing, transportation, food, and clothing - intact while you work on getting current.
Once you're current, take a deep breath, because next week we'll be moving on to our next milestone on the Road to Financial Freedom Part 4 - BUILDING AN EMERGENCY FUND.
