Paying your bills - how to catch up when you’ve fallen behind

It can feel impossible to catch up on paying bills after you've fallen behind, but it’s important to remember that the COVID pandemic is a unique situation. The economic fallout of the pandemic will see many people lose their jobs and others facing pay cuts.  In either situation, your income may no longer be enough to cover your expenses. 

Falling behind on your financial obligations isn't the end of the world, but it can cause long-lasting financial challenges if you don’t have a plan in place. If you're feeling overwhelmed by unpaid bills, mounting interest, late fees and more, here are some steps to help you start moving in a positive direction.

1. Make a list of overdue payments and anything that’s due in the immediate future.

Keep track of which payments you're delaying, when each one is due and any late payment fees.  It may be tempting to bury your head in the sand but being organised is key to navigating your way through a crisis. Start by making decisions on how to allocate your money and look at what payments can be delayed and what the consequences are. Check with all your credit providers to establish any penalties for late payments. Being armed with this information will ensure you’re making the right decisions.  

2. Prioritise current and missed payments

After you have a list of everything you owe, order them by importance. This will help you focus your repayment efforts on the bills you feel are most important. Keeping up with the essentials such as housing is critical, so be sure your rent or mortgage payments are at the top of your list, followed by your food and utility bills. After these necessities, prioritise any work-related expenses, such as car payments or phone bills, and then focus on loans and other debts.

3. Talk to your creditors

If you know you’re unable to pay creditors, calling them is a great next step. If you communicate with your creditors about your current financial struggles, they may be more flexible with repayment plans, including changing terms or possibly even waiving penalties.

Pretending your bills don't exist will only make things worse in the long run. Clearly communicate with all your creditors and don’t be embarrassed. The economic impact of COVID will affect most households in different ways.

4. Make a budget and track your spending moving forward

Once you know how much you owe, it's time to track how much you're earning and review your monthly budget. Knowing how much cash is coming into your household and when the cash will hit your bank account will help you stay on track with your payment plans and allow you to catch up on some of your unpaid bills.

You can start your budget by creating two lists -- one with your income and one with your expenses. It is helpful to sort them by fixed costs, like rent or car payments, and variable ones, like groceries, entertainment, and travel. Then you can sort your variable expenses into critical expenses like food - and non-critical such as entertainment and travel. You can look to lower your variable costs and reduce any extras until your income and expenses are balanced.

Once you have your budget, make sure to track your spending which will help you stick to it. This allows you to identify your spending patterns and see areas where you may be overspending.

5. Be wary of debt relief services

Some lenders may offer deals if you’re  in a financial bind. Make sure you read these offers carefully and ask how your debt will be reported to the credit reporting agencies before you sign.  Thoroughly researching lenders is recommended and reviewing any feedback is a good way to ensure the company is reputable. Each lender has an obligation to ensure they’re lending responsibly.

Falling behind on your bills is stressful, but with some organisation, budgeting, and careful planning, you’ll feel more in control of the situation, and more positive about the future. For more information and support, visit the official government COVID financial support and assistance site.

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Additional FAQ's on the impact of COVID-19 on your credit file can be foud here.

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