When you are already behind on bills, the thought of starting a budget seems overwhelming and just not worth your time. But in my opinion, what’s not worth your time, is the weight you are carrying around unnecessarily.
Here are some tips for how to start a budget when you are already behind on all the bills.
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How to start a budget (when you are already behind)
Before we talk that… let’s look at some statistics! I love me some numbers (probably why I drool over this budget excel spreadsheet for couples). A surprising 31% of Americans put absolutely no money into savings each month and an even more surprising 15% of Americans spend more money then they earn each month.
Additionally, 22% of Americans are considered economically vulnerable.
What does it mean to be economically vulnerable?
Not including unexpected expenses, economically vulnerable Americans expect to forego paying a bill in the current month either by not paying, making only a partial payment, or putting it entirely on credit card without a plan to pay it off. These bills include rent, mortgage, and utility bills.
Yikes! That’s so scary worrying about whether or not you’ll have a roof over your head or if you can afford to meet all your home and car payments. I get it. It’s’ hard, but you don’t have to do it alone.
Basic Steps to Start Budgeting When You’re Behind on Bills:
- Make a list of overdue bills
- Read the beginner’s guide to budgeting
- Create a budget – create your own, use a simple printable, or an easy to use pre-made goal-oriented budget
- Track Your Spending Habits
- Play around with your spending to decrease expenses
- Make a plan to pay off highest-priority overdue bills first
- Negotiate with your creditors to reduce rates
- Increase your income with a new job or side gig
- Don’t give up!
The above steps seem simple… but I also know it can still feel paralyzing, especially when you’re dealing with everything else too! I know when life gets busy, managing our finances is one of the first things to go.
But since money touches everything in your life… like your home, your safety, your food and clothing, your identity, your stress levels, and your relationships… tackling and making positive improvement on this one aspect of your life can have HUGE benefits on your overall well-being.
Related Post: How to live on one income with a baby (not grocery hacks)
“Is it really worth my time to budget?”
Of course, I think the answer is a resounding yes. But you are the one that must make the choice for yourself.
It’s more than worth your time, it’s an investment in your future and your kids’ future and your grandkids’ future when you spend time managing your wealth and paying off overdue bills and doing what you need to do to make more income, cut expenses, or overall rehaul your lifestyle.
But no one can do it for you.
I can offer inspiration and stories and advice, but without your choice and decision to act, none of it really matters.
But I do want to share… that with the simple act of tracking my expenses using You Need a Budget (try YNAB free for 34 days here) and this practical money goal-setting spreadsheet, I quickly found easy ways to save $400 per month by cutting simple expenses and niceties that I didn’t really have to have. I found ways to still maintain my lifestyle while also meeting my future financial planning goals like buying a new car in cash.
What would you do with an extra $4,800 per year?!?
How do I start saving $4,800 per year and catch up on bills?
If you’re having trouble just getting started… here are some money mindsets to adopt to give yourself the motivation to act.
“I want to provide a stable and secure life for my kids”
When I was pregnant with our oldest, I realized something needed to change with our spending habits. We added daycare, diapers, and other expensive items to our budget and it already seemed like we were so tight on money.
This catalyst for change prompted me to make a decision. Something needed to change in our lifestyle if we were going to provide for the future of our kids! I was going to do everything I could to provide a stable and secure life for my kids – I was willing to finally stop making excuses.
I stopped impulse buying. I reduced my expensive coffee habit (notice how I said reduced not eliminated haha). And I stopped being lazy about not bringing lunch to work.
I found my reason to start changing, but yours doesn’t have to look exactly the same.
Once you find your why everything will fall into place. You’ll start acting and doing and making a lasting change in your financial management strategy instead of feeling guilty about not changing.
Share your why with someone who will hold you to it – and start accomplishing your goals.
Believe that you can change
Part of your new mindset must include the idea that you CAN do this. Where there is a will, there is always a way to do it. It may not look exactly as you hoped, but you’ll find a way.
Possibility keeps hope alive and gives you the chance to take your next step. It keeps your feet moving. One foot after another.
When you believe in your gut that it IS possible for you to change, that your situation can eventually change, but you just don’t know how you will get there, then you are in the right spot.
As I said, the mindset is where you need to do the most work. The HOW… we can help you with the HOW when you’re ready.
Here are some tips for HOW to start tackling those overdue bills and start a budget
Figure out your priorities
The key here is figuring out your priorities. Grab some paper and make a list.
Write down “NEEDS” verses “WANTS. Consider the worst case of not paying bills in order to decide priority.
Then pay off the bills in order of the worst-case scenario.
By the way, the above advice I only give to people who are behind on bills. If you’re looking to get out of debt, I would instead focus on the smallest one and snowball until you’re done.
Using this easy-to-use budget spreadsheet will provide everything you need to set your money goals, set a zero-based budget based on your income, and walk you through step-by-step what you need to truly start budgeting your money.
Avoid using your credit cards
During this time, it’s essential to avoid using your credit cards.
Leave them at home, shred them up, use cash only.
Whatever it takes, avoid adding more debt during this time of getting caught up. It will also set you up for success AFTER you catch up.
Communicate, communicate, communicate – call your creditors
Some creditors are willing to talk if you communicate with them. Be in open communication about your different options before they send the debt to collections.
If this is just a slump and you have a good credit report, have it ready to discuss as leverage.
Stop putting money into savings
While I think it’s essential to have $1,000 readily available for emergencies and 3-6 months worth of expenses in high-yield savings account, if you’re behind on bills you need to handle this first…
If you are behind on rent and have a chance of being evicted due to not paying, then this is a true emergency that you should use your savings for.
Stop putting money into savings and pay off your overdue bills with your savings so you can start fresh.
Manually track your expenses
I mention tracking expenses above, but I think it is absolutely essentially to manually track your expenses when starting a budget. Here are all the budget categories I think you should track – the more detailed the better.
Manually tracking gives you awareness of each purchase.
It allows you to see the numbers in black and white instead of hiding them. Bring those numbers into the light, don’t be afraid of them. Having a clear picture of your income and expenses will maybe even give you the reality check you need to actually make changes with your spending habits.
The Simplified Budget for Families also includes an easy to follow method that rolls-up your daily, weekly, and monthly expenses so you can WIN at budgeting and start living abundantly.
Consider a major overhaul – house and car
When things are really tough, it calls for tough decisions. Do you need to move to a smaller, cheaper home? Do you need to sell your car and lease or buy a new one?
Rent and transportation should always be less than 40% of your overall budget. If it’s not and you are behind on bills, it’s time to make some major changes to make the biggest impact.
Ever hear of the sunk cost fallacy? This is simply the idea that you are STUCK with something simply because you’ve already invested money in it. Don’t get stuck for this simple reason. If it’s not working, chalk it up to lesson learned and drop it like it’s hot.
I feel like I’ve just touched the tip of the iceberg with these tips to help you start budgeting when you’re behind on bills.
If you get to this point in the post and you’ve tried all of the above or you’re looking for more specific guidance, I’m always available to help you discuss your specific situation. Leave a comment or send me a message under the Contact Me page and I’d love to chat!!! Talk soon.
