Let’s face it. Times are tough right now. A lot of people have been furloughed or laid off entirely. Others have taken pay cuts hoping that it doesn’t lead to a future layoff. We know that when you take out a loan, you have the ability and the best of intentions to make your regular payment each month. But now, your financial situation may be different, and you might find it hard to make your payments.
If you’re in that position, you’re probably worried and stressed about what will happen if you miss a payment on an important bill or loan such as a student loan, car payment, or mortgage. We don’t have all the answers and we can’t fix every situation, but we do want to help. Fortunately, you can take steps to keep your head above water until you get back on your feet.
Step 1 – Prioritize essential expenses for survival
Make a list of all the bills you pay each month and then figure out what is most important to pay so you can prioritize your spending. Focus first on the expenses critical to your survival. Financial experts recommend prioritizing your spending in this order:
- Utilities such as electric and water bills
- Unsecured debt such as personal loans and credit cards
Look at the money you have coming in and allocate it according to the list above. Figure out what you can pay and what you won’t be able to pay in full. Remember, just because they’re the last priority doesn’t mean they are not important, so continue to pay what you can. If you can’t cover the full amount of a bill, pay as much as you can. Paying something is better than paying nothing.
Step 2 – Contact creditors
Immediately contact the creditors you know you can’t pay each month. We know this isn’t easy, but it is very important to keep the lines of communication open. Get ahead of the situation and be honest about your current financial situation and future payment plans. Remember that most creditors WANT to work out a payment plan with you. They may be able to adjust the loan to give you some flexibility. They will be a lot more willing to work with you if you’ve given them a heads-up versus ignoring the situation. If you adjust your loan terms, be sure to get that in writing.
Step 3 – Find ways to make cuts
It’s time to make some tough decisions and reassess your budget and spending habits. It’s not fun but you can cut costs by canceling subscriptions, cooking at home, downgrading your phone plan, or ditching cable. This will help to free up funds for the essential expenses.
Few situations can be as stressful as not being able to make your payments. However, if you keep calm, pay the important bills first and work with your lenders, you’ll be able to keep your head above water until your financial situation improves.
When in doubt, we’re always happy to help you sort things out. At Members Trust, we want to help you make the right financial decisions. Contact us to discuss your options.