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A life you love on a budget you can afford.

Here on TBM®, I provide you with simple, easy-to-follow solutions to help you budget your money, pay off debt, save more, and crush your financial goals. But more than that, I give you the tools to start doing the things that matter most to you, on a budget that actually works!

How to Budget When You Are Behind on Bills

October 4, 2016
Budget Guides

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Budgeting when you are broke seems impossible. Here is how to set up a budget when you don't make enough money.

One of the hardest things to tackle when it comes to managing your money is trying to figure out how to make ends meet if your broke. Creating a budget is even harder when you are behind on bills and don't know where to start. The basic budgeting steps are the same, but your spending and breakdown of expenses might look a little different. If you are behind on bills, you are going to spend a little more time assessing your situation and coming to terms with how bad things really are.

If you are in this situation and are trying to come up with a money plan, here is what you need to do set up a working budget and get back on track.

STEP #1: ASSESS YOUR FINANCIAL SITUATION

If you have put off looking at your real situation because you are afraid to see how bad it really is, I urge you to push past that fear. You will never be able to dig yourself out if you don't know how deep the hole is. Remember, you can't change past decisions that put you in this situation, but you can change them now and in the future. The most important thing to focus on is moving forward and not backward.

  • Read: How to Build an Emergency Fund (Step-by-Step Guide)

You need to now how much money you have coming in versus how much money you have going out. If you are reading this, you probably have more money leaving than you do coming in and that's OK. Here are the things you need to do to assess your current financial situation.

CATEGORIZE YOUR EXPENSES

 

Are you looking for step-by-step instructions on how to create a budget when you are behind on bills. Here the steps you need to take to set up a budget when you are already broke.

The first thing you need to do is take out a blank piece of paper and write down your monthly income. This is the money that you actually see in your checking account when you get paid.

Next, you need to write down ALL of your expenses. EVERY single thing you spend money on every month needs to be recorded. Some of your expenses might include cable, utilities, food, gas, clothes, etc. Make sure to list all of your bill and debt payments on this list as well. The best way to do this is by looking at your bank statements for the last 2 months. This will give you a good idea of where your money is actually going.

Once you have everything listed out, it's time to organize everything. The main thing we are going to organize is your expenses. I want you to organize all of your expenses into these 3 categories:

  • DEBT
  • REGULAR MONTHLY BILLS (FIXED EXPENSES)
  • VARIABLE EXPENSES

DEBT: This category is to record all debts that you need to pay off. Make sure to list every debt you have, even if you are not currently making payments.

REGULAR MONTHLY BILLS/FIXED EXPENSES: In this category, you need to list the bills you have to pay every month. For example, your expenses might include things like mortgage, utilities, cable, and cell phone bills. These bills are usually the same amount every month and need to be paid around the same time every month.

  • Read: 4 Free Budgeting Tools Everyone Should Know About

VARIABLE EXPENSES: This is just a fancy word for expenses that change in value from month-to-month. For example, gas is a variable expense. Your gas doesn't have a due date and you might spend $100 this month on gas but only $50 next month. Do you see how one month might be a small amount and the next month might be a higher amount? Some other examples of variable expenses are food, clothes, house supplies, beauty and personal health expenses, child expenses, and entertainment.

To help you organize your expenses, I want you to download my free budget worksheet. This will help with the organization process and will help you set up a simple monthly budget.

When you have all income and expenses listed, add up all of your monthly expenses and subtract that amount from your monthly income. If you are behind on bills, don't worry about saving money for the time being. This is something that you should eventually add to your budget but right now you need to focus on getting caught up.
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IDENTIFY WHICH BILLS YOU ARE BEHIND ON

Are you looking for step-by-step instructions on how to create a budget when you are behind on bills. Here the steps you need to take to set up a budget when you are already broke.

From your debt and regular monthly bill categories, I want you to highlight the bills that you are currently behind on. These just became your first priority. If you are starting a budget when you are behind on bills, it's important that you don't fall even further behind. You do that by addressing the most urgent bills first and that's where identifying past due bills comes in.

Once you have your past due bills highlighted, next to each one, I want you to list how much you are behind. For example, if you have a mortgage and you are two months behind and your monthly mortgage payment is $500, then you are behind $1000 (2 x #500). So you would write $1000 next to your mortgage bill on your expense list.

Do this for every past due bill. By doing this, you get a clear picture of your current financial situation. By creating your budget from my free budget worksheet, you are able to see if you are in the green or red (more money coming than going out). By listing all of your past due bills and the amount you are behind, you get a clear picture of your financial situation.

Use the following Past Due Checklist to help organize the things you have fallen behind on. You can also use it to record notes from your phone calls with the creditors and to write down your new repayment plan to get caught back up.

Are you looking for step-by-step instructions on how to create a budget when you are behind on bills. Here the steps you need to take to set up a budget when you are already broke.

STEP #2: KNOW YOUR OPTIONS

You might be behind on bills but you also might have options. Most of the time, creditors are willing to work with you if you are willing to make an effort to get caught up. Use the above Past Due worksheet and call every creditor for the bills you are behind on. Simply explain your situation and ask if there are any available options for you. They might allow you to make monthly payments to get caught back up. What this might mean is they will add that extra payment to your regular monthly bill until it's completely caught up. It might also mean that they will allow you to make a certain number of fixed payments until the amount you owe is paid off. They also might have programs that can assist you.

You will never know your options until you call them. I know this might be scary or embarrassing, but trust me, you are not the only one in this situation. Here are some tips you can use when trying to negotiate your past due bills:

  • Be kind, not matter how frustrated you might be: If you have a goal in mind of what you want, it's easier to get it if the person on the other side of the phone likes you. That means speaking in a calm voice, being courteous and respectful, and speaking with confidence. This will help you when you feel like reaching through the phone and punching them in the face.
  • Always ask for more than what you want: For example, if your goal is to set up monthly payments of $100 to get caught up on your mortgage, start by asking for $75. When you are negotiating with someone, you both want the same solution – to pay off your past due amount. That means, you both have to be willing to give in a little. If you start by asking for more than what you want (or smaller monthly payments), you have wiggle room to negotiate. If the creditor feels you are willing to work with them, they might feel more comfortable doing it as well.
  • Keep in mind that the person you first get on the phone isn't really in a position to negotiate. They are usually just the first customer service agent in a huge line of representatives. My point is, if they say they can't help, don't take no for an answer. There IS someone there who is authorized to negotiate with you but they just might be a few desks away. If you get a representative who is really not helpful try hanging up and calling them back. Usually, you will get another representative who will be more willing to help. If that doesn't work, you can always go to the last resort. Ask to cancel your service. You might not actually want to cancel your service, but you are more likely to reach someone who can help you pay off your past due amount.

Step #3: IDENTIFY THE PROBLEM AREAS

You will now be able to see your spending habits by looking at the budget you created in Step #1. Most likely, there are some categories that you can cut back on. Do you spend too much at the grocery store on unnecessary food items? Do you have a coffee habit that is eating away a lot of your funds? It's important to recognize where your weakness are when it comes to spending and keep those in your mind as you are working on your new budget. The truth is, if you are behind on your bills, you might have to cut out the small spending pleasures until you get caught back up.

  • Read: How to Create a Budget (When You Really Don't Want To)

STEP #4: REDUCE YOUR SPENDING

You will need extra funds to address past due bill payments. Remember, you still have to get caught back up and that means you will probably be paying more than your minimum payment for a while. To address this, you can do two different things: cut your expenses or make extra income.

In order for you to cut back on your spending, you need to address the problem areas you identified in Step #3. You also need to look at your Variable Expenses from your budget and look for ways to cut down costs. This means looking for things that are more of a luxury than a need. Trying to manage your money when you don't have a lot of it means you really have to think about downsizing your lifestyle for a while. Here are some examples of unnecessary expenses that you might be able to reduce:

  • Cable
  • Cell Phone Plan
  • Entertainment Costs
  • Gas
  • Eating out

Look for ways you can downsize and reduce these expenses. Instead of paying for an expensive cable plan, look into Sling TV, Philo, Netflix or Hulu which can start as low as $5.99 per month or cut it out all together.

Ditch your outrageous cell phone plan and look into joint plans with your spouse. Get rid of the high data charges by lowering your data usage every month. Don't be afraid to shop around for better deals.

Is there a way you can cut down on food costs? Focus on staple foods that last a long time such as rice, potatoes, beans, etc. Pay attention to eating out and limit it to only special occasions.

Adopting a more frugal lifestyle will vary for everyone but it's important that you are always looking for ways to reduce your expenses, even if its small amounts.

There is one thing I won't recommend that a lot of finance experts do, and that's to move. Trust me, I know what it's like to barely make ends meet. I lived it for almost 4 years. When I started my pay off journey, nothing frustrated me more than reading that I should move to save money. Yes, moving has the potential to save you some big bucks, but it's also not a realistic option for a lot of people and can be expensive. If you have been behind on bills for a while, then your credit score and payment history might not get you into a cheaper place than you have now. Before you contemplate moving to save money, look for ways to cut down on your current lifestyle first. Once you have squeezed every dollar you could from finding ways to save, then look into relocating.

STEP #5: LOOK FOR OPPORTUNITIES

The next step in the process is making extra income. During this point, a lot of people will just say, “Get another job.” It's true that getting a second job would provide much-needed income but it can really hinder family dynamics. Earning extra money is important, but overworking yourself isn't a good idea. Spending time with your family and having a life to do things you enjoy is crucial when you have hit rock bottom. It's important to keep your spirits up and to maintain a healthy mindset along the way.

Now is the time to keep your eyes open for opportunities to make some extra cash. There are a ton of ways to earn extra money without having to get a second job. It's all about learning to be resourceful even though at first you might feel like you are giving up a lot. Here are some ways you can earn extra income:

  • Sell your stuff: I have a surprise challenge for you. Right now, I want you to get up and find two things in your home you are no longer using. Research what these items are selling for used. One way to do this is by simply searching Craigslist. Your challenge tonight is to find two things you can list for sale on the internet. Do your research, take pictures of your used items, and place them for sale. If you don't feel comfortable with using Craigslist, Lifehacker wrote an amazing article with some tips on selling your stuff on Amazon.
  • Look for better opportunities at your current job. I know the thought of asking for a raise can seem scary but you will never know unless you ask.
  • Turn a hobby into cash. Do you have a special talent? Can you turn your art into a paycheck or your knitting into a side business?

It's time to look at every angle and seize the opportunities that are in front of you.

  • Resource: Use Steady to find side gigs and make more money.

STEP #6: REWORK AND UPDATE YOUR BUDGET

It's important to update your budget regularly. When you are tight on cash or funds it might be easy to overspend. You also need to make sure that you add the debt-repayment plans that you negotiated with your creditors from Step #2 to your overall budget. For example, if your mortgage payment is $500/mo and you ended up negotiating with your lender that you would make an extra payment of $100 until you are caught up, then you need to add that extra $100 to your monthly budget to reflect your new monthly payment of $600 ($500 minimum payment +$100 extra payment).

  • Read: 4 Must-Read Budgeting Articles For Beginners

When you are completing and updating your budget always make sure the numbers you write down are realistic. Nothing will set you up for failure more than having an unrealistic budget. If you know there is no possible way you can spend less than $200/mo on food for your family, then keep your food budget at $200. It might make you feel better to write down and see $150 on your budget, but it's not realistic and you will end up failing.

If you are behind on bills and are wanting to get back on the right track, budgeting is your answer. By creating and sticking to a budget and creating a plan of attack to take care of past due bills, you will feel more and more like you are in control and that's exactly where you want to be!

Related:

  • 20+ ways to make more money
  • 30+ ways to help you save money

Did you complete the challenge from this article? How much did you make by selling two unused items from your home?

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Filed Under: Tagged With: BUDGET, BUDGET GUIDES, DEBT, MONEY

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Comments

  1. Kristi says

    October 16, 2016 at 10:37 am

    This is great – thanks, Kumiko! I’m not technically behind on my bills at the moment, but I sometimes have to pay my bills up to a week late…and perpetuate the cycle of not being current. It’s a stress-inducing mess.

    Okay, so I identified two items that I’m going to sell…fingers crossed that someone buys them! Thanks for the tip 🙂

    • kumiko Ehrmantraut says

      October 31, 2016 at 4:52 pm

      Thanks Kristi!

  2. Ann says

    January 12, 2017 at 7:47 pm

    This is the first budget article I have read which is both inspiring and filled with valuable information. Most of them are so useless. Keep up the good work and thanks for the tips.
    Now off to look for things to sell!

    • kumiko Ehrmantraut says

      January 16, 2017 at 9:22 am

      So glad you liked it Ann!

  3. Cynthia says

    January 20, 2017 at 4:59 pm

    I am $100,000 in debt mostly student loans and I am the only income. I currently live with my sister and help her with some of the bills. I would like to buy my own house someday since its just me and my spouse (disabled) and the kids stay sometimes. My question is should I consolidate everything or file bankruptcy or what would be a good plan of attack?

  4. Bryan Sarff says

    February 11, 2017 at 11:38 am

    That feeling of being behind on your bills is not something you want to continue. You have set forth some really great, concrete ideas to get back on track and reduce your stress level. Thanks for sharing.

    • kumiko Ehrmantraut says

      February 12, 2017 at 8:35 am

      Thank you Bryan!

  5. Lee Smith says

    February 11, 2017 at 12:01 pm

    Getting your budget in shape will not only make you feel better but will benefit you financially in so many other ways. Great advice to get on track and ensure you save money in the future.

    • kumiko Ehrmantraut says

      February 12, 2017 at 8:35 am

      Thank you Lee!

  6. Candy says

    March 17, 2017 at 1:54 pm

    All I can say is, thank you. Smart on point helpful, useful information.

    Again,
    Thank You

    • kumiko Ehrmantraut says

      March 18, 2017 at 10:41 am

      Thank you Candy!

  7. Lisa says

    April 8, 2017 at 7:44 pm

    If you haven’t already acquired one, I am available as a proofreader. Your information is great although contains several grammatical errors. I can definitely use some of your recommendations!

  8. Krissy says

    April 23, 2017 at 6:47 pm

    Thank you!! I actually read all of this and am in the process of putting it forward. I’m a single mom with 3 kids and no help. I feel like I’ll be able to see daylight soon.

    • kumiko Ehrmantraut says

      April 25, 2017 at 7:35 pm

      Thanks Krissy!

  9. Seeking Help says

    May 6, 2017 at 5:23 pm

    This is the first article with truly practical, “been there” advice that I have found (despite desperately searching EVERYWHERE for it). EXCELLENT article – so appreciate the way you broke it down into manageable steps. I have been paralyzed by fear for years now, and obviously, that hasn’t made the situation better. Great links too; thank you!

    I am hoping you can provide some guidance in our individual situation. My husband and I agree that our financial situation is near critical, but he is far less willing to make sacrifices than I am (we dont agree on what are/are not necessities). In addition to the financial stress, my daughter and I both have significant health issues; our son is a senior in high school next year, and we have dipped into retirement twice already to pay for only the first year of our daughter’s college. Poor decisions early on in our marriage, combined with becoming ill 6 years ago (reducing me to 50% work, and now none at all), fixed bills that obviously didn’t go down just because our income did, and kids starting college, have created the perfect storm. We have never received any type of assistance (I haven’t even applied for disability), and we have never considered bankruptcy – but we are scared. My husband is blessed with an excellent job, but he literally works almost 80 hours a week. We are about to celebrate our 25th anniversary, but these combined stressors have really taken a toll on our relationship. Every attempt to face our finances results in tears, frustrations, and more avoidance. We desperately need an experienced, objective third party to not only sit down and advise us, but ALSO to help us set up various accounts and a concrete system (such as auto-pays)to begin a structured paydown of life ur debts. Can you point us in the right direction on this? Who does this sort of thing? I have contacted “financial advisors” and “money managers”, but these all seem to service clients with LOTS of money. Any help/referral you can provide would be greatly appreciated.

    Thank you again for your blog.

  10. L says

    May 17, 2017 at 5:43 am

    Although I have not read the article yet, I am sooooo looking forward to reading it. Your title has alwayssss been a question of mine, and I think that is why I have hesitated in starting a budget. THANK YOU IN ADVANCE.

  11. Katie says

    June 26, 2017 at 11:25 am

    These are all absolutely great tips. Living below your means when you’re on a budget is really all it takes and your plan for how to quickly catch up on past due bills is awesome! Thanks for the tips. 🙂

  12. Lydia @ Thrifty Frugal Mom says

    July 14, 2017 at 8:49 am

    This is such a great practical post and I love how detailed you are and spell everything out in a clear way that makes it easy for people to implement! Sharing on Pinterest so others can benefit. 🙂

  13. Janiel says

    July 25, 2017 at 2:14 pm

    These are great ideas, I frequently overspend on things. So these are great tips now that I’m getting into a bloody mortgage payment. Thanks again.

Hello, I'm Kumiko, but everyone just calls me Miko. Welcome to my blog, The Budget Mom. I am an Accredited Financial Counselor® , and mom to a rambunctious boy. Come along with me as I strive to live a life I love on a budget that I can afford. Read more about me.

RECENT YOUTUBE VIDEO

The Budget Mom

The Budget Mom
It’s time for another Real Life Budget. I asked my readers to submit their REAL information. Real spending, real debt, and real savings goals.

I am taking those real-life numbers and showing you how I would organize and budget that information using my Budget By Paycheck® Method.

If you would like to submit your budget information to possibly be picked for a Real Life Budget that we will show on YouTube, please reach out to budgets@thebudgetmom.com.

Diane is a single mom who is a Database Administrator for an IT Department at a local college. She lives in Queens, NY, and eventually wants to move to a lower-cost of living area in the future. 

Diane submitted her information because she is struggling to organize and tackle all of her larger short-term goals.

CHAPTERS:
00:00 Introduction
02:15 Why & Personal Story
04:20 Income 
04:37 Fixed Expenses
05:48 Variable Expenses
06:31 Debt
07:53 Savings Goals
10:18 Budget By Paycheck Method
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➡️ HOW I TRACK MY SPENDING: https://bit.ly/3aIe89I
➡️ HOW TO USE A BUDGET CALENDAR: https://bit.ly/2IzF2Vj
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➡️ THE BUDGET MOM'S FINANCIAL FREEDOM STEPS: https://bit.ly/3cfJXsp
➡️ HOW TO GET STARTED WITH THE CASH ENVELOPE METHOD: https://bit.ly/2vQJaO5
➡️ HOW TO CREATE A PLAN OF ATTACK TO PAY OFF DEBT: https://bit.ly/2wDETxF

ABOUT ME

Kumiko Love is a single mom who empowers women everywhere to regain control of their financial lives. An Accredited Financial Counselor with over nine years of experience in the finance industry, she founded The Budget Mom, a community of millions of women on a path to financial fulfillment.

She's also the creator of the wildly popular Live Rich Planner® and Budget by Paycheck® Workbook. Love has been featured on Good Morning America, the Today show, CNN, CBS, ABC and in USA Today, US News, World Report, Huffington Post, Money Magazine, Parents Magazine, the Washington Post, and Real Simple. She lives in Spokane Valley, Washington.

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