When money is tight, it might be difficult to pay all of your monthly bills. You may have to make hard financial decisions about which bills you should pay and which ones you delay. Although everyone’s financial situation is unique, here are some general rules of thumb from our partners at GreenPath Financial Wellness for which payments to prioritize.
1. Food, Medicine and Child Care
The main bills you should pay first are grocery/food, child care, and essential medicine. These items should be your first priority. Although they are necessities, it’s important to be mindful of these expenses and keep them to a minimum. For example, look for opportunities to save money at the grocery store.
Keep current on your mortgage or rent payments if you can. A home financed with a mortgage is a secured debt. The lender expects timely and consistent payments. If you own your home, real estate taxes and insurance must be paid. These expenses may be included in the monthly mortgage payment. 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 home.
Make 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 cell phones, house phones, Internet and cable TV. Are these “needs” or “wants”? Could you do without them in a financial crisis? Could you save money on electricity, heating and cooling, or phone bills?
If you need your car to get to work, rank your car payment just below food, medicine, housing and basic utilities. Pay your insurance payments too. If you don’t, your creditor may buy insurance for you at your expense. This will be more costly to you. The key here is buying a car that meets your needs and fits within your budget.
5. Child Support
Child support is a court-ordered payment. Thus, it’s a high priority from a legal and moral standpoint. It’s the court’s job to establish a payment that is fair for both parties. The court also must ensure the well-being of the child. In some states, child support payments are auto-deducted from your paycheck.
6. Income Taxes
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. Some tax planning, and working with a tax professional, could help you save some money on your taxes.
7. Unsecured Debts
If you simply don’t have enough money to meet your monthly obligations, you should contact 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 don’t have any collateral tied to these loans, so you are not in danger of losing property, but these creditors do expect to be paid back.
Figuring out your financial priorities is an essential aspect of money management. To get you started, check out the Aligning Priorities workbook from GreenPath.
If you need help getting out of debt, consider working with a nonprofit, reputable debt counseling agency. GreenPath debt and credit counselors are NFCC-certified, caring and nonjudgmental. They will help you understand your financial situation and make a plan to meet your goals.