The phone is blowing up! Call after call. One bill collector after another is calling for money. Times are difficult. How did this go so wrong?
How to Budget When the Bill Collectors Call
Before we get started let’s lay the ground work. Your goal is to get out of debt and begin to build wealth. But you are behind on bills and the bill collectors are calling.
Build your budget carefully
Review your income first. How much do you make? Are you in the career you want to be in? What is the potential that you can make more? Do you need a career change? Or a second job to get over this rough patch?
Be honest with yourself!
Next we will need to understand why you are behind. Have you just borrowed money running up the credit cards? Bought that expensive new car with a high monthly payment?
Now we can evaluate why you find yourself where you are Behind on Bills.
Ask yourself if you have been spending because you need everything? Well news flash wants are not needs. We will begin building your budget based on needs first.
Wants will be extremely small until you get this mess cleaned up.
Building your new improved budget
Start with your income, this is what you have to spend. Not a penny more. If you are behind on your rent or mortgage payment you will need to get current. Utilities next and they will need to be current. Food and transportation also need to be included.
Building the Four walls
Rent and/or mortgage payment first. We must put a roof over your head. This is the first thing that must be paid. If you are behind you will need to work out a plan to get current. The best course of action will be to have a discussion with your landlord or to call your mortgage company and explain the situation. Work out a plan and make certain you can deliver on it.
Utilities are the next item. This will be for lights and heat. Cell phones are not here. You need electric or gas. If utilities are not current you will need a plan to bring this current. Again be proactive in that you need to call them and work out a plan.
Two down, A roof over your head and the lights are on
Do you like to eat? Well that is next. There must be food on the table for you and your family. Set a budget for food. There will be no eating out. You will not be eating expensive steaks and the like. Your meals will be economical. Pasta’s, rice, beans just the basic foods. This is an important part of build the four walls. Having a full belly will go a long way.
The final component is transportation. How will you get to work? Do you have a car? Do you have a car payment? How large is that payment? Is this part of the problem?
If the car payment is part of the problem it is time to get rid of it. Eliminating that payment will help you move things forward. If you are under water on the value of the car this may be a bit complicated. If you are behind on payments you will need to get current. Having the car reposed is not a good option.
Find out what the value of the car is, then what it will cost to pay it off. The difference will be either the amount you will need to come up with or perhaps you may be able to get more than what is owed.
Once you have eliminated this payment you will have some extra cash to begin to address your other issues.
Don’t forget to include gas and insurance. You may also want to include some maintenance costs such as oil changes.
Time to do some Math
Add up the total from the four walls. Mortgage payment or rent, utilities, food, transportation costs.
The moment of truth. Is your income higher than these essential items? If so then you can begin to build out the rest of your budget. If not you need to evaluate why. Is the rent or mortgage payment higher than 25-30%. May be time to find a low cost option. We already discussed the car payment. Time to lose it. Utilities will need to be only the basic needs. No cable, cell phones, internet.
Time to address the other bill collectors
Gather them up and begin to compile an inventory. Make a list of every bill that you owe. List the amount you owe the monthly minimum payment and the contact information along with the account numbers.
Based on the calculation made above how much do you have to pay these bills. can make all the minimum payments you have a good start. If you are behind which you probably are you will likely want to bring them current. If bringing them current is not an option then we have some work to do.
The ultimate goal is to get them paid off
If the bill collectors are calling you are in trouble. We have laid the ground work with the planning and preparing outlined above.
Now based on the information you have gathered it is time to get rid of these calls.
You have a plan to create the four walls discussed previously and you have a plan to get current with those bills.
Let’s begin to tackle the credit card and other debt payments you have fallen behind on. Create a plan as to how you could pay them off. Will you need additional income then you need to get a second job. How much will you need? Begin to develop that plan. When do you want them to be out of your life?
Create a detailed plan
Now it is time to become proactive, meet this head on, be aggressive!
Call each debt collector and tell them that you can’t pay! Oh they will yell back at you and threaten you with legal action and all sorts of nasty stuff.
Tell them you have been working with your financial consultant (me) and have developed a plan. The plan provides for them getting paid some amount each month for a period of time until paid. Be specific as to how much you can pay and how long it will take. You need them to work with you or they will not get any payments.
Be very firm and do not waiver. You owe the money and are obligated to for fill you agreement to pay. Make sure you only agree to what you can deliver on. They will push you to make larger payments than you offer. Simply tell them this is what you can do not any more. If they don’t agree just tell them you will use their payment to pay somebody else and they will go to the bottom of the list and it will be sometime before they begin to see any money.
They will most likely threaten you with legal action but stand firm. Remember they do this all the time and their job is to get your money. You need to be in control.
Depending on how many you have this can take a while. You will get better each time and build confidence.
You are on your way
With your plan in place and intense focus you can pull this off. I know you can especially if you are still reading this!
Congratulation on coming this far. This will be difficult but you can do it!
Below I have left you some links for additional information to build upon. Develop your skills and create financial independence.
