Which Bills Should You Pay First When Money Is Tight?

If you’re short on cash and literally have to pick which bills you should pay first (just in case you can’t pay all of them), then it’s important that you have your priorities in order. Otherwise, you could make things worse for you and your family.

Here are some pointers about which bills to pay first when money is tight.

Necessities

Items like food and medical expenses should always take top priority. You need to stay healthy and alive, after all.

Housing

You need a place to live, and your car isn’t an acceptable place to live. Once you’ve taken steps to ensure that food is on the table and healthcare related costs are handled, pay your mortgage or rent. You’re much better off defaulting on credit card debt than defaulting on your mortgage.

Utilities

You might be able to sweat in the summer, but you really need to stay warm in the winter. To that end, make sure that you pay your utility bills.

Also, you’re going to need to keep the food that you purchased fresh and your children will need lights so that they can do their homework. That’s why you’ll need electricity.

It’s worth mentioning here, though, that you should also search for ways to lower your utility bills. That might help you make ends meet.

Car Loan

If you bought your car with an auto loan, then the payment for that loan is the next priority.That’s because you’re probably going to need the car to get to and from work. Obviously, if the car is repossessed and you can’t get to work, you’re going to lose your job and make your financial situation much worse.

Child Support

Child support is a legal as well as a financial issue, so this is a touchy subject. Plus, you care about your own child, right? Make this one your next priority.

Income Taxes

Beware the power of the IRS. That bureaucracy has the power to force you to pay your taxes. Once you’ve got your other responsibilities handled, pay your taxes or you’ll owe more with penalties and interest.

Collateralized Loan

You may have taken a loan that was secured with some household products (note: not your actual house, but furniture or electronic equipment). If that’s the case, then pay that off next if you still have money left over. Otherwise, forfeit the collateral.

Unsecured Debt

Unsecured debt includes credit card debt and personal loans you’ve received from a financial institution. It’s lower on the priority list because, in this case, your creditors can’t “repossess” anything. They can (and will), however, report your delinquent payment to credit bureaus. They can also send you nastygram letters and call you to harass you into paying your bill. They can also turn the whole thing over to a collection agency, but they really can’t take your property away from you.

Keep in mind, though, that if you run afoul of your creditors, you’re going to have trouble getting a loan in the future. That’s because your credit score will drop like a rock.

It’s not easy to pick and choose which bills to pay. However, once you make the tough choices and get back on your feet, it’s important to put some money away for future emergencies. Be sure to create a savings account or buy treasury bills so that you’ll have an emergency fund on hand the next time something like this happens.