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1. Prevent immediate disasters
The first thing to do is request payment plans or bill extensions. For example, if your biggest problem is that you’re worried about being evicted from your house or apartment, talk with your landlord. At the same time, ask for extensions on other bills, which could give you extra money to help you keep your home. Let’s presume that your rent was $650 and you’re $200 short. You might be able to postpone your phone, cable bill or cell phone bill until the next time you’re paid so that you can avoid being evicted.
2. Write down your credit card payments and when they are due
Are you missing payments on your credit cards or just making the minimum payments? This can have a disastrous effect on your debt. You might be charged a late fee that would be higher than your minimum payment. Plus, the interest you would be charged on future purchases would go to the 25% default rate. This could make it even tougher to pay off that credit card.
3. Prioritize your bills
Make a list of your bills ranging from the one you feel should be paid first down to the one you could pay last. Then create a schedule to make your payments based on your paydays. If your bills are already late, you may need to leave yourself some time to catch up. Just call the companies where you have bills and ask how much you would have to pay to get back on schedule. Tell them that you are working to catch up and going to be on a budget. Make sure you’re honest about what you can pay. If you make promises but fail to keep them, this only makes things worse.
4. Review your spending
If you haven’t been tracking your spending, you need to do so. There are all kinds of software and smart phone apps available that can help you do this. Once you have tracked your spending for at least 30 days, divide it into categories such as food, dining and utilities so you will know exactly where your money is going.
5. Reduce avoidable expenses
Maybe you don’t need as many morning coffees or go to as many movies. Review your categories to see where you could make cuts. The first cuts you make should be items that you won’t really miss. But you should then tackle the tougher items such as your automobile insurance. For example, you might be able to get a cheaper rate by switching car insurance companies.
6. Look for ways to make additional money
If you create a budget and find that it just doesn’t balance out or that you would still be barely getting by, you may need to look for additional sources of income. You might be able to work an extra shift at your job or get a second job. Best of all, you might be able to get a new, higher-paying job. You might find that there’s work that pays better but you don’t like the job. If this is the case, you may need to ask yourself if it’s better to be unhappy at work or happy being in debt.