Start with the essential bills and set priorities.
There may comes a time when you hit a difficult period, and the fact may be you can pay some bills and expenses but not all of them. This is when setting spending priorities is key. In a perfect world you will continue to pay some bills during a hardship, while you continue to work towards a longer term solution and getting back on your feet.
Priority of bills to pay
1. Food and any essential medical bills and expenses need to be your first priority to pay. However the essential medical bills will be more of the life saving type. If there are some nonessential medical bills, such as dental or general check ups, those can be put off. Many secondary doctors, dentists, and hospitals are not as aggressive in trying to collect unpaid medical bills and debts.
2. Pay housing and shelter related bills.
- Keep current with your rent. You do not want to be evicted or homeless. Shelter needs to be a priority. Look into rent assistance programs.
- If you own your property, contact your mortgage holder as soon as possible to let them know you are experiencing hardships. In most cases they will work with you to adjust your payments. However, real estate taxes and insurance must be paid. Taxes must be paid or the government can claim your property for failing to pay taxes, and your local government can foreclose on the home. Read about how to save on taxes. Failure to pay these debts could lead to loss of your home.
- Pay utility bills. Make necessary utility payments next if possible. However, there are some programs that you can explore that will offer you help paying utility bills if it is not realistic for you to pay them. The government offers a Low Income Home Energy Assistance Program (LIHEAP) program. Also, call your utility provider if you need help paying your bills as most of them will work with you to ensure your power stays on.
Identify your low-priority obligations
An unsecured debt is a low priority. Most credit card debts, attorney bills, as well as any other bills to professionals are low priorities. Also low priority are open accounts with merchants (such as a store credit cards) and similar debts. Since you did not pledge any collateral for those bills and loans, and there is also rarely anything that those creditors can do to hurt you, these are lower priority and should be put to the bottom of the list. Many of those people and companies will not bother to try to collect in the long term.