It’s easy to be overwhelmed by bills, especially if you’re someone who doesn’t have a high level of financial literacy. But this doesn’t mean you have to be held back by your bills forever.
Here’s how to take control of your bills.
Talk to a Credit Counsellor
If you’re having trouble paying your bills, it’s often smart to talk with an industry expert. For most people, a credit counseling service will be one of the best places to turn for financial advice. There are a few different services that are offered by credit counseling organizations, such as:
- Giving you general tips and advice for how to handle your money and debt
- Showing you how to create and stick to a budget
- Obtaining your credit report
- Providing free educational materials for your benefit
- Helping put together a debt management plan (DMP)
These are all things that are designed to help consumers get back on track with their finances, which include taking control of bills. It’s important to note, however, there are organizations that pose as credit counseling services that are actually predatory—even some that are listed as having non-profit status. No legitimate credit-counseling agency will ask you for payment before they’ve provided you with an actual service, such as setting up a DMP. Don’t trust organizations that want you to pay for basic info, as this is typically a bad sign.
When your bills start getting out of hand, it’s probably time to start tightening your budget (if you haven’t done so already). Even if you’re currently working on some form of budget, reassessing your situation can help you reset your understanding and expectations of the budgeting process. As mentioned in the previous section, working with a credit counselor can be helpful for formulating a budget. At the end of the day, however, there’s one major thing that needs to be done: your monthly expenses need to be lower than income. If you can’t do this, you’re going to end up engulfed by debt.
Understand How Interest Rates Affect You
How well do you really understand debt? Just because you’re carrying debt around with you doesn’t mean you have a full grasp as to why it’s so sticky. One of the biggest reasons people get into trouble with debt is they don’t fully comprehend interest rates.
The interest on a loan is going to massively affect how much you’ll end up paying back over time. Typically, unsecured loans like credit cards are going to come with some of the highest rates, which is why this form of debt is so difficult to pay off. While paying the minimum on a credit card can seem appealing, doing so can send you into an interest spiral, in which you’ll end up paying way more for an item over time than it actually cost.
Cut Unnecessary Recurring Expenses
There are some bills that are more or less essential for your daily life, such as water, heat, and electric. These should generally be the last things to get cut from a budget, and only considered if there’s truly no other option. Other recurring expenses, however, can be removed from your life without causing the same level of harm.
Items like cable, costly gym memberships, or other recurring expenses, can all contribute to you spending more than you can really afford. Determine which of these are really important to you, and which are just costing you each month, and act accordingly. Cutting out memberships and other recurring expenses can quickly get you back on track with your bills, as these can quietly add up with you realizing it.
Seek New Sources of Income
As mentioned in the section about budgeting, the ultimate test of whether you’ll be able to afford to pay your bills over the long term is whether your income is greater than your expenses. If you’ve already done all you can in terms of cutting out costs, it might be wise to look for an alternative form of income.
Whether this is just something you do on the side, like a part-time gig, searching for a new job, or just getting a raise at your current position, you’ll need to bring in more money if you can’t afford to pay your bills. This is certainly not always the most enjoyable realization, but it’s better than feeling like you’re trapped under the weight of bills you can’t afford.
No matter how you got into a difficult situation with your bills, it’s worth it to find a way out. If none of the aforementioned options work for you, speaking with a debt relief agency could be another way out. Though this can come with a set of issues of its own and isn’t guaranteed to work for everyone. Regardless, seek the resources you need for taking control of your bills.
Also Read: Key Tips to Keep Your Finances in Check