You’ve lost your job. You’re furloughed. Perhaps your hours have been severely cut back. For whatever reason, suddenly you don’t have enough money to pay all of your bills.
You’re scared, angry, worried, and seriously overwhelmed. You may have promises of unemployment benefits and stimulus-type money coming, but when? What are you supposed to do right now? Which bills should you pay first and which ones can slide for a while?
This is not easy. But I want to assure you that it is doable. As bleak and horrible as things look right now, you will come through this. We’ll do this together.
Here’s a basic rule of thumb according to the Boston-based National Consumer Law Center in its book, Surviving Debt:
“Always pay essential expenses first. If any money is left, you can decide which nonessential debts, if any, to keep in your expense budget.”
That’s a great directive, but what is an essential expense? How do you know the difference between essential and non-essential when you need groceries, the car payment is past due, and the bank just left a threatening voicemail message?
Grab paper and pen
Create two columns and label them: Essential, Non-Essential. Now, let’s take that stack of bills and the expenses you have right now and separate them into those two columns by asking this question of each one: What’s the consequence if we don’t pay it right now?
- An essential expense represents a serious obligation that if not paid could produce immediate severe, even life-threatening consequences. These are the expenses you must pay first, in order of the severity of the consequence if you don’t pay.
- A non-essential expense represents an obligation that if not paid right now might harm your credit score, or require you to make a phone call, make you feel embarrassed—but will not result in a serious consequence right now.
As you fill the two columns, keep in mind not all of your essential expenses of food, essential medication, and gasoline. You won’t have a statement for those “bills,” but they are critical expenses and you must allow for them in this process.
Rule to follow right now
Here’s the rule to follow as you make your two lists and then prioritize them by the severity of the consequences to either pay or let slide:
Do not make payments on non-essential expenses and debt when you have not paid essential expenses even if your nonessential creditors are breathing down your neck with phone calls and threatening messages.
We’re going to concentrate first on your essential expenses that if you do not pay will create life-threatening or otherwise very serious consequences. And we’re going to do this in a specific order.
Do not misunderstand!
I am not suggesting that you should just walk away from your financial obligations. You must pay your creditors, you must pay your bills. To not pay them is not an option.
Of course, it is not ideal to let some of your bills slide for awhile. But your situation is what it is. Your resources are severely limited. In time, as things improve (they will) you will be able to get caught up completely.
But for now, you need to know how to get through this month.
Once you’ve determined which bills are essential, prioritize them according to the severity of the consequences you will suffer for non-payment.
Here is a guide to follow, listed by priority. Read more