When money is tight, you may find yourself wondering if you should be making trade-offs on which bills to pay on time, versus which to postpone until more money comes in. Big picture, think of your essential bills in the following categories:
- Basic needs (food, medicine and shelter)
- Things that enable you to keep working (transportation, childcare, cell phone and internet, if you work from home)
- Keeping your credit score in good standing (debts and other bills for things that you can’t do without)
More specifically, assuming you’ve done all that you can to eliminate unnecessary bills for now, it’s a best practice to pay your bills in the following suggested order:
- Food and medicine – visit food banks if possible, to keep this cost as low as possible.
- Mortgage – contact a housing counselor ASAP if you don’t think you can keep up with your mortgage.
- Rent – let your landlord know if you need to pay late or make a partial payment. Remember too, eviction doesn’t happen overnight.
- Utilities – reach out to your electric, gas and water providers for payment plans if you’re struggling to pay in full. Most don’t report late payments until you’re over 30 days late.
- Car payment and insurance – if you need a car to drive to work, then this is an important bill to keep current, but do your best to lower this cost if necessary by finding a cheaper car or re-evaluating your auto insurance coverage.
- Child support – to avoid wage garnishment, even a partial payment is better than nothing.
- Student loans – particularly federal student loans, which generally don’t go away if you have to declare bankruptcy and can lead to garnishment of your wages or your federal tax refund.
- Taxes – if you have a payment plan with the IRS, you might look into modifying it until you get back on your feet if allowed.
- Medical bills – contact your providers about payment plans before you skip a bill or put it on a credit card, knowing that this is especially important to stay on top of if you have ongoing healthcare needs. Most hospitals and doctors’ offices will work with you as long as you’re paying something each month.
- Credit cards and other unsecured debt like payday loans – make sure you contact your card companies if you can’t pay your minimum due on time, but if there simply isn’t enough money, this is the last priority.
- Collection accounts – make sure you know your rights and don’t let a debt collector talk you into paying them before you take care of all of the above for yourself first. Even then, it’s best to work with a lawyer if a debt collector is contacting you.