It can happen to anyone: One day you’re living comfortably, and the next, you’re struggling to pay the bills. Whether you lost your job, went through a medical emergency or experienced some other hardship (like, say, living through a pandemic), realizing you don’t have enough money to cover your basic needs can be scary.
“But it doesn’t have to be a catastrophe,” said Amy Maliga, a financial educator with Take Charge America, a nonprofit financial counseling agency. “Knowing which bills to pay and which ones can wait will help you bridge the budget gap.” She shared how to prioritize your bills so that you can make it through and eventually get back on track.
Pay These Bills First
Maliga recommended that when money is tight, you first focus on covering your rent or mortgage payment. “Keeping a roof over your head should always be your priority,” she said.
If that’s not doable, you should contact your landlord or mortgage loan servicer immediately to discuss your options. You may be able to work out a temporary plan to lower or defer your payments until your income has increased.
If you have a car loan, do your best to cover the monthly payments. Missing payments could result in having your vehicle repossessed. “Maintaining your transportation to get to and from work and other essential errands is almost as important as keeping a roof over your head,” Maliga said.
Don’t forget about your car insurance, too. Missing insurance payments could cause your policy to lapse, making it difficult and expensive to get a policy in the future. It’s also illegal to drive without insurance, so getting caught could result in hefty fines or even arrest.
Speaking of insurance, you should also strive to stay current on health insurance premiums. “Although it can be tempting to overlook these, letting your insurance payments lapse can cause even more financial issues if you have an accident or need emergency medical care and end up being responsible for paying those costs out of pocket,” Maliga said.
If you’re falling behind on your electricity, gas and other utility payments, the provider will usually give you plenty of notice that a service is about to be cut off. “But you want to avoid getting to that point,” Maliga said. Once a utility is cut off for non-payment, it can be expensive to get it up and running again. “Having a non-payment notation on your credit report means you will likely need to pay hefty deposits in the future when you move and need to re-establish service.”
Plus, going without certain utilities can be a health hazard. In some areas of the country, it can even be dangerous to go without necessities like heat or air conditioning.
What About the Bills You Can’t Afford?
You might be surprised to learn that Maliga advises making credit card payments last on your list of priorities. “For one, payments won’t be considered late until 30 days have passed, so you have a bit of wiggle room before creditors report the late payment to the credit bureaus,” she said. However, it’s important to know that you could be hit with a late payment fee sooner, which could add to your debt.
If you find yourself juggling multiple debt payments every month, Maliga said that nonprofit credit counseling can help you find a way to manage them more easily. If necessary, a credit counselor can put you on a debt management plan (DMP), which is a structured repayment program that helps you save money and improve your credit in the long run.
When you’re struggling to pay bills, Maliga also said it’s important to reach out to your creditors or service providers to let them know. “There may be grace periods, payment plans or other short-term concessions that can help until you resolve your cash flow issues.”
So don’t wait, because the sooner you reach out for help, the more options you’ll have.
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