April 29, 2020
Now that we have been on lockdown for a few weeks, there are lots of people whose income either dried up completely or decreased substantially. As the economy starts to open back up, plenty of us will have difficult choices to make regarding which bills to pay.
Obviously, food is going to be at the top of priority lists while rent or mortgage and utilities will most likely be next in line for most people.
But how do you decide which bills to pay first? Everyone will have to make their own choices on this but I would like to give some information that may help you make some of those decisions.
First in line have to be those things that are needed to survive. Food, shelter, transportation to work are some of the categories that fit here. But once you get past those necessities, how do you choose what bills to pay and what bills to put off for now?
From the viewpoint of what it will do to your credit, there are some tactics that can help with this.
Keeping in mind that the number of late payments on your credit report is directly related to your score and your ability to get credit in the near future, anyone who doesn’t have the money to make all their payments should begin with a complete list of all their monthly expenses.
If you make a complete list, including rent/mortgage, food, utilities, car loans, insurance, credit cards and everything else you spend, you now have a place to start. Total every monthly expense you have and compare it to your current income.
For those whose income is more than their monthly expenses, you are okay as long as the income continues or increases. But if your income is less than your monthly expenses, you have some choices to make.
What you are trying to do here is to keep the problem as small as possible. To do that, you need to prioritize your bills and decide what must be paid, what you would like to have paid and what isn’t really important to be paid.
This last group isn’t necessarily bills. It could be entertainment items like the deluxe cable TV subscription, health club membership, vacation fund or even contributions to a retirement account.
If you find that you don’t have enough to even cover your bills (not including the types of things included in the last group) you will need to choose who to pay and who to put off.
Suppose you have 5 credit cards and the total monthly payment on them is $1,000 but you only have $500 available. It would be a mistake to pay each of them half the monthly payment because then every single one of them will show that you were late on your payment and they would all charge you a late fee.
It would be better to make the full payment on as many of those cards as possible, leaving the smallest negative effect on your credit report and the lowest amount of late fees incurred.
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