Deciding Which Bills to Pay First
Food, Medicine and Child Care
Paying for food, child care, and essential medicine should be your first priority. You should always be a good steward of your money and spend wisely here. Don’t overspend for food and unnecessary medicine.
If possible, keep current on your mortgage or rent payments. A home financed with a mortgage is a secured debt, and the lender expects timely and consistent payments. If you own your home, real estate taxes and insurance must be also paid. These expenses may be included in the monthly mortgage payment as part of your escrow account. Any condo fees or mobile home lot payments also should be considered a high priority. Failure to pay these obligations could lead to a lot of stress and loss of your residence.
If possible, make necessary utility payments on essential utilities such as heat, water, and electricity. Working hard to maintain your mortgage or rent payment makes little sense if you don’t have heat, water or power. Carefully analyze other expenses in this category such as cellphones, house phones, Internet and cable TV. Often, those expenses are “wants” — not “needs” — and can be reduced or eliminated during a financial crisis.
If you need your car to get to work or for other essential transportation, rank your car payment just below food, medicine, housing and essential utilities. Stay current on your insurance payments as well. If you don’t, your creditor may buy insurance for you at your expense — andit will be more costly to you. The key here is buying a car that meets your needs and fits within your budget.
Child support obligations are court-ordered payments that must be considered high priority, from both a legal and ethical standpoint. It’s the court’s responsibility to establish a payment that is fair and just for both parties, and to ensure the safety and well-being of the child. In many states, child support payments are automatically deducted from your pay check.
You must pay federal and state income taxes that are not automatically deducted from your wages. You must file your federal and state income tax return, even if you cannot afford to pay any balance due. Failure to pay taxes on time can result in penalties and eventually wage garnishments.
If you simply don’t have enough money to meet your monthly obligations, you should communicate promptly with your creditors to explain the situation and request some assistance. These accounts may include credit card bills, doctor and hospital bills, or other merchant accounts. Explain that your financial situation is preventing you from making the payments, and you are working towards a solution. You have not pledged any collateral for these loans, so you are not in jeopardy of losing property. However, these creditors do expect to be paid back. So understand that collection efforts can be persistent and stressful.