How to Prioritize Accounts
If you’re struggling to make ends meet due to job loss, layoffs, or other coronavirus-related financial uncertainties, you may be asking yourself which bills you can afford to miss this month. Should I pay by credit card and set aside my water bill, or is it the other way around?
Fortunately, there is an expert answer to this question – and it comes from a reputable source.
The National Center for Consumer Rights Advocacy (NCLC) recently made a digital edition of its classic book, Surviving Debt: Expert Tips for Dealing with Financial Troubles, for free download. ( CNBC Council for alerting us to this excellent resource.)
Rule # 1, according to the Remaining Debt document , reads: “Prioritize debts that are directly detrimental to your family if not paid.” These are your electricity bills, car loan payments, child support bills, and so on. As NCLC explains:
Failure to pay some debts has unexpected and dire consequences for your family. Deal with these debts immediately – either pay those debts first, or follow the advice in this book on how to manage these debts.
Never pay smaller, low priority debt just because you can’t handle high priority debt: “If I can’t pay off my mortgage, at least I’ll be able to pay off my credit cards.” It is a bad idea. If you don’t have enough money to make full payments on high priority debt, try negotiating with a lender to accept lower payments or save money to use later to catch up to cover the initial costs of moving to a new residence, or to paying for another car if your car has been seized.
Note that the NCLC includes monthly expenses such as rent and utilities under this “high priority debt” category. If missing one of these bills could directly harm you or your family, make the payment first.
If missing an invoice would have less direct consequences, then missing a credit card payment could hurt your credit score, but probably won’t result in a loss of your home, lower the priority of the payment. Don’t pay this bill until your priority bills have been taken care of – and look for options that might help you put that bill off until later, such as ditching your credit card.
Of course, the coronavirus pandemic has prompted many companies and lenders to be more lenient with consumers, whether through leniency programs or simply offering a couple of months of free service. For example, if you have a federally backed mortgage, you can request a 180-day grace period (that is, you can ask to suspend the mortgage payment schedule for 180 days), and many non-government-backed mortgage issuers provide similar options.
Likewise, if you’re in a low-income family and need home internet to keep up with work or school, stay in touch with loved ones, or just stay busy and entertained while self-isolating, Comcast offers free basic internet for 60 days.
These and similar offers give you the option to either skip certain monthly payments or de-prioritize them, freeing up more of your money for priority debts and bills.
One final note: keep in mind that abstinence programs simply allow you to defer payments, which means that you will still be responsible for paying that debt eventually, as well as any interest accrued on your debt during the period of abstinence. … This could mean higher monthly payments in the future, depending on how much you owe and how much interest your debt collects during the grace period. On the other hand, abstinence programs help protect your credit score during periods of non-payment, as your lenders will continue to report your account to the three credit bureaus as “current” (meaning they will not report missed payments, which could lower your bottom line.) ).
When it comes to deciding which debts are prioritized and which ones can be deferred, knowing which bills you can defer and which creditors you need to contact to request deferred payment options will help you protect both your family and your finances. in these difficult times. once.
So take NCLC’s advice and maybe read the free online Surviving Debt while you do it.