Originally published on May 15, 2024, at Living Life in Rural Iowa. Given the current economy and the hopelessness of many people who have been hit hard by rising prices, this article remains timely. We are all feeling the pinch. If you are struggling with debt, let this article help you see the light at the end of the tunnel.
I have been in this position. It’s tough—more than tough—it’s soul-crushing. When you think you might have a plan, another bill comes in or another expense happens.
Unfortunately, this economy is not improving, and more people are finding themselves unable to pay their bills. Having been deeply in debt and beyond broke, I have some tips and advice to help you navigate this process and give you hope that you can get back on your feet, even in this economy.
You might think finding ways to make more money is the first step, but ironically, it is not. The first step is to make a list of all your bills and expenses. Split that list into two columns: one for fixed or necessary expenses and one for unnecessary expenses. Sometimes you are truly broke and cannot cut your expenses any further. Sometimes, you’re paying for things that you can live without for a temporary period of time.
Cancel any unnecessary expenses that you can live without. If you are truly broke and money is tight, you can live without creature comforts to get back on your feet. Unbelievably, streaming is not a necessity. You can watch a lot for free on Roku or YouTube. You can also visit your local library to check out DVDs. You also should not be paying more than $50 a month for your cell phone. You can get plans through Mint Mobile or Visible for a fraction of the price of Verizon or T-Mobile. The cell phone coverage might not be as good, but you are trying to get by. Cancel all of your subscriptions. You might think they are necessary, but nine times out of ten, they are not. You have them for the convenience. Again, they are not necessary.
The next step is to list all your debts. You can put them in order from highest to lowest, but you might also have to list them by the urgency of payment. If you have fixed expenses like heating or electrical utilities, call those companies. Most of the time, they will work with you to set up a payment plan, a budget plan, or an even-pay program. Not paying them is not an option. They will go after you for non-payment. You will also lose access to those services until they are paid. You may also have to pay high extra charges to use those services again. It’s not worth it.
Whatever you do, make some sort of payment. If the companies question it, let them know you are having financial difficulties and are paying them what you can at this time. Some companies will try to squeeze you for more money, but they can’t send you to small claims court if you can prove that you are making some sort of regular monthly payment on the account.
As someone who works in accounts receivable and collections, I know most companies will be flexible enough to work with you. You have to swallow your pride and ask. That can be hard. I have been on both sides of the equation; nothing about those conversations is easy. But letting your pride get in the way of making your life easier is not the solution.
The next step is to look through your remaining debts and ask yourself how much you can reasonably pay on them. If you have credit card debt, make the minimum payments until you get back on your feet. You may also need to defer any student loans. You might not make any progress, but you will make the payments and avoid default.
If you owe medical or dental expenses, try to work out a payment plan with the provider. Some providers will work with you and not send you to collections unless you miss a payment. However, if you get sent to collections, you might find collection agencies easier to deal with than your medical provider. Again, the collections will not send you to a small claims court if you make regular monthly payments.
Throughout all of this, communication is key. I’ve learned that lesson the hard way. Being in that kind of debt is scary. You will be afraid of getting in trouble or being yelled at. Don’t be. Most companies would rather work with you than go through the work of sending you to small claims. The small claims process is costly for companies, and they lose money due to fees.
What happens if you have a company that absolutely will not work with you? It does happen. If you cannot pay that debt in full, use a credit card to pay the debt. It sounds like a bad plan and it should be a last resort. However, you can make the minimum payment on the credit card and avoid going to small claims and having a judgment against you. The problem with credit cards is that you accrue interest until the balance is paid in full. Sometimes, though, you don’t have a choice.
One thing we haven’t talked about yet is how to make more money. Some people who are deeply in debt do not have the option of getting another job. Some people need daycare and do not have daycare available after 6:00 p.m. or before 6:00 a.m. Daycare is very costly, and some people simply cannot afford it. Some of you are already working 10 to 14-hour days and do not have time for another job.
If you have the time to get a second job, you could do so for a temporary amount of time. Sometimes, you only need 3 to 6 months of extra income to get out of debt. You can find a side hustle or gig to get out of debt. Just beware that some side hustles and gigs cost more money to get started than what you will earn, and you may never earn that money back.
If you get extra money (bonuses, tax refunds, etc.) during this time, use that money towards debt. This is not the time to blow that money on a trip or some big-ticket item. This money should be used for home needs or debt. While it may sound harsh, you must look out for your future. And you will want a debt-free future.
Some of these tips and advice are not foolproof. I speak from experience on all of them. You will find some companies impossible to work with when it comes to reducing your payments or extending your payment schedule. You may have already cut your budget to the bare bones and have no options left. You may have to borrow money from family, which should absolutely be your last resort. You may not have the option of borrowing money at all. I have been through all these situations, and knowing what to do can be incredibly difficult.
There is a light at the end of the tunnel. You may not see the light yet, but it is there.
Thanks for reading,
Erica
I will add this about medical bills.. if you truly can't pay it, once it goes to collections you can sweet talk into paying 40% of original bill. It's a game. It does effect your credit, but not forever.