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What to Do When You Can’t Pay Your Bills

At first, the credit card payments didn’t seem like a big deal. A few bucks here, a few bucks there. You didn’t pay attention to the interest or the balance. That is, until you added up the other bills: Student loan payments. An unexpected trip to the emergency room. A new roof. Before you know it, you’re out of money and sitting on top of a mountain of debt. But there are still bills to pay and not enough money to cover them.

So what do you do when you can’t pay your bills?

1. Cover your Four Walls.

When creditors are calling (emailing, texting, or sending snail mail), it’s easy to get bullied. Most of the time, they’ll try to convince you that paying them is more important than keeping the lights on.

Listen closely: The most important thing you can do is take care of your Four Walls first—and in this order:

  • Food
  • Utilities
  • Shelter
  • Transportation

Before you spend even one more dime toward debt, make sure to take care of you and your family. That means you need food in the fridge, lights and running water, a roof over your head, and a way to get to and from work every day.  

2. Get on a budget.

We know, you’re probably thinking, What’s the point of a budget when I have no money?

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Give us the benefit of the doubt here. When you make a budget, you’re taking inventory of the money you have coming in and telling it exactly where to go. This is extremely helpful when you’re wondering how to make ends meet.

With a zero-based budget and more debt than income, you might see a lot of red for a little while. But don’t worry. Stick to your budget, cut out the extra spending, and you’ll see it balance to that beautiful zero in no time.  

3. Get (and stay) current on your bills.

That means you need some extra cash—and fast! Whether that means you get a second or third job, start a side hustle making cupcakes, or sell that fancy wedding china you’ve never taken out of the box.

Don’t worry—there’s plenty of things you can do to make ends meet:

  • Sell your vehicle for a cheap-but-reliable used car instead.
  • Have the biggest yard sale ever.
  • Don’t step foot inside of a restaurant unless you work there.
  • Get a second job.
  • Consider downsizing your home so you can make more manageable payments.
  • Switch your cell phone plan to a pay-as-you-go service—and use your phone only for emergencies.
  • Get a roommate and share the living expenses.
  • And no matter if it’s $5 or $500, any extra money you make should go toward past-due bills.

You always have options!

4. Give your creditors their fair share.

When you can’t pay your bills, you need a plan. And when it comes to dealing with creditors, we like to use what’s called “pro rata” . . . or “fair share.” This means you’ll give each of your creditors their fair share of the money you have left after you’ve paid for the essentials (like the Four Walls). Here’s an example of how it works:

In this case, you have $300 left over to pay your creditors. This is your disposable income.

Once you know how much money you can spend on debt payments, you need to figure out pro rata. This part is a little more complicated, but stay with us. Here’s how you calculate it:

Steps to create a pro rata plan for creditors if you can't pay your bills

Remember, the pro rata plan is only a short-term solution. It just gives you enough breathing room to make changes for the better

But here’s the thing: You won’t get out of debt this way. However, making monthly payments to each creditor goes a long way in the long run.

5. Send payments with a letter.

Now that you’ve decided who to pay (and how much to pay them), it’s time to send your payments. Make copies of your math, including your income, expenses, disposable income, and the calculations you made to give every creditor their fair share. Don’t forget to include this letter with every bill, every single month.

Those creditors won’t like getting less than the minimum payment, but if you keep sending checks every month, they’ll probably keep cashing them.

This doesn’t mean they’ll stop calling and bullying you into giving them more money, but don’t let that steer you off course. You don’t want to get so rattled that you agree to something that will shoot you and your family in the foot when it’s time to buy groceries.

And never, ever give a creditor access to your bank account for automatic withdrawal every month. They’ll clean you out—even if they say they won’t.

Now What?

It’s time to move away from that paralyzing fear and start getting mad. Listen: Debt has got you chained to your past, so it’s time to start attacking it with everything you’ve got.

Give your debt the kick in the pants it needs to get out—and stay out—of your life. How? By changing your behavior (and your attitude). We’re guessing that by now, you’re sick and tired of living paycheck to paycheck.

That’s where the debt snowball comes in handy:

Step 1: List your debts smallest to largest, regardless of interest rate. Pay minimum payments on everything but the little one.

Step 2: Attack the smallest debt with a vengeance. Once that debt is gone, take that payment (and any extra money you can squeeze out of the budget) and apply it to the second-smallest debt while continuing to make minimum payments on the rest.

Step 3: Once that debt is gone, take its payment, and apply it to the next-smallest debt. The more you pay off, the more your freed-up money grows and gets thrown onto the next debt—like a snowball rolling downhill.

Repeat this method as you plow your way through debt. Pretty soon, you’ll be debt-free and ready to start living the life debt stole from you.

Remember: You don’t ever want to go there again, so do whatever it takes to say hasta la vista to debt for good! Just imagine the life you’ll be living when you’re debt free.

Ready to take a deeper dive? Check out Dave Ramsey’s bestselling book The Total Money Makeover. This book will help you get to the heart of your money problems and show you seven practical steps that will lead you out of debt and into a real-life total money makeover. 

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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