We all have bills to pay but sometimes life throws us a curve ball and all those bills simply can’t be paid. Deciding who to pay and in what order is an important topic because missed or late payments can have dire consequences.
In “Mounting Bills, But Who Do You Pay?” we discussed that your basic human needs were the most important thing and thus must be paid first. But what about after that? Which bills get paid next and which bills don’t get paid at all? That’s what I’m going to discuss in this post.
When money is tight you still should make every effort to pay your credit card bill. If you are late or miss a payment you will be hit with late fees and your credit score will take a hit as well. If your credit score takes a beating this can affect other aspects of your financial life. Do your best to at least make the minimum payments. Sure you wont be paying down your debt much but at least you’re keeping your account current and in good standing.
If times are extremely tough and it’s a struggle just to put food on the table, you may want to consider not paying your credit card at all. There are consequences to this of course. First your credit will be destroyed which may impair your ability to get a new credit card, a mortgage, a car loan, rent an apartment and even land a job. The credit card company can even sue you for the amounts you owe in a court of law. But when you are in a bind, the necessities in life trump any credit card payment.
If you’re going through difficult times you should consider getting rid of services that are not essential. These services include your: home phone, cell phone, satellite or cable tv and internet service. When you don’t pay these bills your services will be cut off after several months.
These companies will continue to send you bills and add late fees, but you can ignore them if money is real tight. Usually these companies will not sue you to get their money. They will just cancel your services, report it to the credit bureaus and send it off to collections. Again, these are harsh consequences, but nothing trumps putting food on the table.
If you ever want to get one of these services back you can use a different company, one of their competitors. You might even get a discounted rate for being a new customer.
If a friend or a relative has loaned you money it’s important to continue paying them back. Failure to meet your end of the bargain could create a strain in your relationship with them. But what if money is real tight this month? What if there is no agreement on late fees? If that’s the case you may want to consider holding off on making this payment.
Be sure to explain your situation to them. Let them know this is a temporary issue and that they will be getting their money paid back in full.
Loans With Collateral
When you get a loan with collateral the lender gives you money up front and you offer an item that the lender will own if you don’t pay up. It’s important to pay these loans back because if you don’t, you’ll lose that item and you won’t get any money back. A common collateral loan is a house, a car or a pawn shop loan. Just how important this bill is depends on the value you place on the item you put up as collateral.