Which Bills Should You Pay First?

by Miranda Marquit · 0 comments

When you are strapped for cash, it’s difficult to determine which bills should be paid first. This is an especially difficult decision if you have recently experienced a big financial setback, such as a job loss or a medical emergency. Once you reach this position, it’s time to think about how you will pay your bills, and what you should do next.

Take Care of Survival First

Your first move should be to take care of your survival. You need food and you need to make sure that your power/heat stays on. You might also need to make sure your insurance is up to date so that you don’t end up with even bigger problems.

However, when taking care of your survival, it’s important to make sure that you are only spending on true needs. When you’re in a financial bind, you can’t let your wants become needs. It’s a good way to run into bigger trouble down the road. Slash your budget as far as you are able in order to make sure you survive.

Pay on Secured Items

Next, you probably need to figure out which debts you need to focus on for payments. Start with secured debt, since non-payment can result in loss of an asset. If you don’t make payments on your house, you could lose it (this might also be considered a survival item). The same is true of making your car payment. If you need your car to get to work, you don’t want it repossessed. Look through your debt obligations and identify those that will result in bigger problems if they aren’t paid.

If you absolutely have to skip something, it should be unsecured debt payments, since it’s harder for these creditors to force payment, and it’s harder for them to seize assets.

Contact Your Creditors

It’s best if you aren’t just skipping bill payments, though. When you run into trouble, you should contact your creditors and let them know. In many cases, you can set up a payment plan that reflects your straitened circumstances. Many creditors are willing to work with you if you are committed to debt repayment. Share your situation, and see if you can work out a plan. This is better than just ignoring bills and skipping payments with no explanation. Your credit is still likely to suffer, but it probably won’t be as big a hit.

Consider Other Alternatives

You should also consider other alternatives. You might be surprised at the alternatives available to you. You might need professional help from a reputable credit counselor. In some cases, you might even need to resort to bankruptcy. This is rarely a desirable option, but it’s one that you might be required to consider if a financial catastrophe such as job loss or medical problems have made your situation untenable.

While most of us don’t like the idea of skipping bill payments, or avoiding our responsibilities, there are times when you just don’t have a choice. Prioritize your bill payments, and think about where you can cut back in your budget (or perhaps make more money) so that you can cover as many of your needs as possible.

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