Are you struggling with your bills and payments, but really want to start saving money instead? Here’s how to get ahead financially when you are behind!
Are you struggling and currently behind on bills?
Do you wonder how you will be able to catch up?
Would you like to get ahead?
I know it can feel overwhelming when you have a lot of bills and debts.
You will need to make some sacrifices and have some discipline in order to reach your goal of getting ahead faster.
First, take a look at your situation and choose on one important goal.
Are you in a lot of debt?
Then your goal should be to pay it off quickly and not get into debt again.
Are you struggling with overspending?
Then your goal should be to set up a budget and track your spending (track every single penny you spend for at least 1-2 months). This will help you to adjust your budget and stick to it religiously!
Once you have made progress on one goal, you can move on to the next one.
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This list will give you a starting point on how to get ahead financially when you are behind on your bills.
13 Steps on How To Get Ahead Financially when You Are Behind
If you feel overwhelmed and so far behind that you can never catch up, don’t panic! Start here and take some small steps forward.
You can’t solve all of your money problems overnight, but you absolutely can take steps on the road forward.
Little by little you can make progress.
1. Write Down All Debt
The first step in how to get ahead financially if you are behind in your bills or if you have a lot of debt is to clearly assess your situation.
Take a piece of paper and write down all outstanding debt and bills that you owe. Be sure to write down everything (loans, credit card debt, mortgage, etc.).
This step is very important since the only way out of the hole is to clearly and objectively look at the total financial picture, including ALL debt.
2. Evaluate What Led You to This Situation
In order to get out of a financial mess, you need to realistically analyze how you got there.
Do you have a lot of medical bills?
Once you get out of debt, you need to set up an emergency fund which will help give you peace of mind in the future when an unexpected medical expense pops up.
Are you spending more than you make each month?
You need to find ways to cut costs. You can also try a no-spend month (which is when you don’t spend any money on anything extra – like lattes, movie tickets, etc. but just the absolute necessities – food, shelter, water, etc).
Do you have trouble saying no to using your credit card?
Destroy your credit cards, pay them off, and don’t ever use them again in the future. If you want to buy something and don’t have money, save up until you can pay for it in cash (yes, even for a larger purchase like a used car!).
You need to know what to do so you can avoid getting into debt and behind on your bills a second time.
You also need to evaluate your spending.
What can you cut out?
Review your needs and wants and cut out all non-essentials (subscriptions, cable, alcohol, soda, etc.). This will tough, but once you get your spending under control and can to stick to your budget you should be able to add some of these things back into your life.
People who manage money well and get ahead financially create and stick to a budget. You can’t get ahead if you don’t know how much money you have coming in and where it’s going out.
Start by setting up a very detailed and strict budget.
Write down absolute necessities (not wants, just what you need to survive).
Focus on having all of your needs taken care of.
Remember, soda is not a need, but water is.
Cable is not a need, but electricity probably is (unless you are living “off the grid”, but in that case you are probably already saving money!).
Then, determine how much money you will have left over. If you are behind on your bills you will need to take a serious look at the list and see what you can cut out or what bills you can lower.
A really simple budget to try is the 50/30/20 budget plan. This was made popular by Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan.
This is the plan. You spend:
- 50% on survival needs (food, water, shelter)
- 30% on wants (TV, coffee, etc.)
- 20% on savings (put money into an emergency fund, retirement plans, investment accounts, etc.)
The actual percentages are just a suggestion and you can adjust them to what fits your situation, but if you need more ideas about how to save money:
- Do you pay for subscriptions you don’t use?
- Have you tried to call and negotiate some bills or shop around for another provider that offers a cheaper alternative (for example, cell phone, insurance, or internet services)?
- Have you tried meal planning to cut costs or focusing on eating very cheap meals?
Related: Living Well on One Low-Income
Once you have analyzed your spending and made adjustments to cut down costs, you need to decide what to do with the extra money left at the end of the month.
- Do you have an emergency fund?
- Have you set up a retirement account?
- Do you want to start a savings account specifically for future vacations?
4. Track Expenses
I know it’s not fun or exciting, but if you really, truly want to get ahead financially when you are behind then you need to religiously track your expenses for a month or several.
The more carefully you track, the easier it will be for you to see where you might be wasting money or what areas you can cut costs to save more.
Budgeting and tracking expenses will also help you to get organized so that you can pay your bills on time.
Take time to write down every bill, the due date, past due amount, minimum payment, and total balance due and use this as a starting point.
5. Negotiate Bills
If you are struggling with your bills, it never hurts to call and ask to negotiate lower amounts or monthly payments.
You can also comparison shop. Look at prices for internet, cable, and insurance through different companies. If you find a better deal, call your provider up and ask them to match it. If they don’t, you can switch to the other company.
Related: Frugal Tips to Save More Money
Be sure to review all monthly statements and look for errors. Mistakes happen!
Try to bundle services with one company for a discount, for example insurance (home, car, etc.) or internet and phone.
Again, cut out anything you don’t really need (like cable TV, subscriptions, gym memberships, etc.).
6. Pay Off Debt
Nothing keeps you from getting ahead financially like debt! This is particularly hard when you have a lot of debt.
Write down all of your debt on one paper, get your budget, and make a plan to pay off all of your debt.
Once you are debt-free be sure to stay that way!
7. Make More Money
A little extra money each month can help you pay off your debt more quickly or get ahead financially. See what you can do to make some extra cash!
8. Live Within Your Means
People become rich by spending much less than they earn – this is living within your means. The bigger the gap between income and expenses the more money you have (to pay off debt, to save, etc.)
If you are behind on your bills and need help, do what you can to increase your income and spend less.
Don’t spend money on things you don’t need or any extravagances. Live a simpler life.
Find ways to have fun for free.
Don’t buy the most expensive house or car.
Shop store or generic brands.
Get creative to find ways to save more and spend less.
9. Set up an Emergency Fund
Once you are caught up on your overdue bills, be sure to set up an emergency fund.
This is a very important step because an emergency fund is a place to keep money for future situations so you don’t have to go into debt or fall behind on your bills again.
Most experts recommend to have enough money to cover 3-6 months worth of spending on regular bills (in the event that you lose your job or have an emergency situation).
10. Save for Retirement
The next important step is to save for retirement.
Ideally, you want to start as young as possible.
Being by opening an IRA (and depositing the maximum amount each year) and starting a 401K with your company (and contribute the maximum amount if they match).
Start saving for retirement as soon as possible and teach your kids to do the same.
11. Learn about Personal Finance
Everyone can learn more about money and personal finance, but if you have not learned much or feel overwhelmed when looking at your money situation, you can start with one of these simple books:
Be sure to invest in yourself.
Pay yourself first each month (by this, I mean put some money into your savings account, even if it’s just $10). Set up automatic deposits from your checking to do this.
Build up your emergency fund, retirement fund, start a vacation fund, etc.
Learn about investing (my favorite book on investing is The Simple Path to Wealth by JL Collins), especially as a way to combat inflation rates and to help your money grow for the future.
Put your money to work!
13. Be Content
Last, but not least, practice gratitude and be content with where you are.
Have you made financial mistakes? So have most other people!
Are you striving to get your finances in order? Great!
Don’t look at what everyone else has, instead focus on what you have and being thankful for that.
Final Thoughts on How to Get Ahead Financially when You Are Behind
I know you might feel stressed and overwhelmed if you are behind on your bills! Please don’t panic. Start with these steps to get on track and take charge of your personal finances. With a little bit of organization and some determination, you will be able to make progress.
You can take steps to get ahead when you are behind – just take one step at a time.
Which steps have you tried? What other suggestions do you have?