What to do when you can’t pay your bills: Strategies to take control

Struggling to manage overdue bills? Rising costs and interest rate hikes can feel overwhelming, but taking proactive steps to protect your credit score and creating a budget can help you regain financial control and avoid falling deeper into debt.

When you can’t pay your bills, it’s easy to feel overwhelmed and bury your head in the sand. But ignoring overdue payments won’t make them disappear; it can lead to late fees, credit score damage, and mounting financial stress. The good news? Taking steps like contacting your service providers, setting up a payment plan, or getting advice to protect your financial future is absolutely possible. Let’s walk through some practical strategies to help you reduce money worries and take back control of your finances.

Why are people struggling with money?

The rising cost of living and increasing debt levels are making it harder for Australians to keep up with their bills. In 2023 and 2024, the Reserve Bank of Australia (RBA) implemented 13 consecutive interest rate hikes, bringing the cash rate to 4.35% by December 2024. These rate increases have significantly impacted mortgage repayments, personal loans, and credit card debt, leaving many households struggling to make ends meet.

On top of rising mortgage payments, soaring energy bills, food prices, and other everyday essentials have created a perfect storm of financial pressure for many households.

The aftermath of the pandemic is still being felt, with some people struggling to break poor money habits developed during lockdowns, while others are dealing with reduced savings and mounting debt after government support ended. It’s a tough environment to manage, but with the right strategies; like budgeting, prioritising payments, and seeking advice; there are ways to navigate through financial difficulty and reduce stress.

What to do if you can’t pay your bills

If you’re in a situation where your bills are out of control, don’t panic. Instead, take a deep breath and start working through these steps to regain control of your finances.

Protect your credit rating and avoid defaults

Your credit rating is your financial lifeline. A poor credit score can make it harder to get loans, secure rental properties, or access favourable interest rates in the future. If you’re struggling to pay your bills, focus on preventing defaults on your credit file.

Start by prioritising your payments. Mortgage payments, rent, and utilities should be your top priorities. Missing these payments can lead to serious consequences, including eviction or disconnection of essential services.

But don’t forget that other creditors, like mobile providers, energy companies, and credit card issuers, can also report defaults to credit agencies. Contact them early to explain your situation and ask about hardship programs or flexible repayment options. Most companies are willing to help if you reach out before you miss payments.

Why credit cards, BNPL, and payday loans are not the answer

When money is tight, it can be tempting to rely on credit cards, Buy Now, Pay Later (BNPL) services, or access pay early loans to cover your expenses. But these options often make financial problems worse.

• Credit cards: Using your credit card to pay bills might feel like a quick fix, but it’s a financial risk. If you can’t pay off your balance in full, you’ll be hit with high interest rates that can quickly snowball into unmanageable debt.
• BNPL services: While convenient, BNPL plans can lead to multiple payment obligations that add up fast. Missing payments can result in fees and impact your credit score.
• Access pay early loans: These short-term loans often come with high fees and interest rates. They might provide immediate relief, but they can trap you in a cycle of debt.

Instead of turning to these options, focus on reducing your expenses and working with your creditors to set up manageable payment plans.

Take action immediately to manage overdue bills

The worst thing you can do when you’re struggling to pay your bills is to do nothing. Financial problems don’t go away on their own; they escalate. Late fees, penalties, and reconnection costs can make a bad situation even worse.

Start by opening your bills and making a list of what you owe and when it’s due. Then, contact your creditors to discuss your situation. Many providers have hardship programs that offer temporary relief, such as payment extensions or reduced payments.

Create a personal budget to regain financial control

A personal budget is your most powerful tool for regaining control of your finances. Start by listing your income and expenses to get a clear picture of your financial situation. If you’re not sure where to begin, download our free Personal Budget Template to make the process easier.

Look for areas where you can cut back. Small savings can add up over time. For example, consider reducing your streaming subscriptions, cutting back on takeaway meals, or shopping around for better utility rates.

If your income fluctuates, focus on covering your essential expenses first, like housing, food, and utilities. A budget will also help you negotiate with creditors by showing them what you can realistically afford to pay.

Prioritise your bills and avoid financial stress

When your bills are more than your income, you need to prioritise payments. Start by asking yourself:

• Which bills are essential to keep my household running?
• What are the consequences of not paying a bill?

For example, it’s more important to keep your electricity on than to pay for a streaming service. Similarly, ensuring your insurance remains active is more critical than keeping up with a gym membership.

Also, look for ways to reduce your household expenses. Compare energy providers, phone plans, and insurance policies to find better deals.

Contact your creditors and service providers for flexible payment options

If you know you won’t be able to make a payment on time, contact your creditors and service providers as soon as possible. Explain your situation and ask about flexible repayment options.

Most companies have financial hardship policies and can offer temporary relief, such as payment holidays, reduced payments, or extensions. Be honest about your situation and provide any relevant documentation, such as a personal budget.

The earlier you contact your creditors, the more options you’ll have to avoid serious consequences like debt collection, default notices, or even bankruptcy.

Seek help from financial services

If you’re still feeling stuck, don’t be afraid to ask for help. Sometimes, a fresh set of eyes can provide valuable insights into your finances.

Consider speaking to a financial counsellor or reaching out to a budgeting service like MyBudget. Our team can help you create a personalised budget, negotiate with creditors, and provide practical advice to get you back on track.

Sometimes a fresh set of eyes will help you to see your finances from a new perspective. Seeking a financial counsellor can help to answer those more difficult questions around financial difficulty and legal advice. But if you’re in need of a more grassroots solution, good money management always comes back to budgeting and the team at MyBudget are ready to help you get started right now.

Tips for managing financial stress

• Avoid high-interest debt: Stay away from credit cards, BNPL, and payday loans.
• Look for ways to increase income: Consider taking on a side hustle or selling unused items on eBay.
• Utilise community resources: Food banks and utility assistance programs can provide temporary relief.

You’re not alone, MyBudget can help you pay your bills

Financial stress can feel overwhelming, but you don’t have to go through it alone. At MyBudget, we’ve helped over 130,000 Australians take control of their finances and achieve financial freedom.

We’ll work with you to create a budget that fits your unique situation, negotiate with creditors, and help you build a plan for the future. There’s no obligation to join, and your first chat with one of our friendly money coaches is completely free.

Let us help you live your life free from money worries. Enquire online or call 1300 300 922 today to get started.