The Complete Guide to Prioritizing Bills During a Financial Crunch

Prioritizing Bills When Times Are Tough

If your source of income has been reduced or eliminated, you may be panicking about incoming bills and wondering where you’ll find the money to pay for them all. Let’s take a look at what financial experts are advising now so you can make a responsible, informed decision about your finances going forward.

Triage your bills

Financial expert Clark Howard urges cash-strapped Americans to look at their bills the way medical personnel view incoming patients during an emergency.

“In medicine it’s called triage,” Howard says. “It’s exactly what’s happening in the hospitals right now as they decide who to treat when or who not to treat. You have to look at your bills the same way. You’ve got to think about what you must have.”

Times of emergency call for unconventional prioritizing. Clark recommends putting your most basic needs, including food and shelter, before any other bills. It’s best to make sure you can feed your family before using your limited resources for loan payments or credit card bills. Similarly, your family needs a place to live; mortgage or rent payments should be next on your list.

Housing costs

It’s one thing to resolve to put your housing needs first and another to actually put that into practice when you’re working with a smaller or no paycheck. The good news is that rules sometimes change in response to widespread economic downturns.

For example, in early March, 2020, the Federal Housing Finance Agency offered payment forbearance to homeowners affected by COVID-19, allowing them to suspend mortgage payments for up to 12 months. These loans, provided by Freddie Mac and Fannie Mae, accounted for approximately 66 percent of all home loans in America. Some lenders allow delayed payments to be tacked onto the end of the home loan’s term, while others collect the sum total of the missed payments when the period of forbearance ends.

Speak to your lender about your options before making a decision. A free pass on a mortgage during an economic crisis can be a lifesaver for your finances and help free up some of your money for essentials.

If you’re a renter, be open with your landlord.

“Consumers who are the most proactive and say, ‘Here’s where I stand,’ will get a lot better response than those who do nothing,” says Lynnette Khalfani-Cox, CEO of AsktheMoneyCoach.com and author of “Zero Debt.”

Your landlord may be willing to work with you. That’s true whether it means paying partial rent this month and the remainder when you’re back at work, spreading this month’s payment throughout the year, or just paying rent a few weeks late.

Paying for transportation

Missing out on an auto loan payment can mean risking repossession of your vehicle. This should put car payments next on your list of financial priorities. If meeting that monthly payment is impossible right now, communicate with your lender and come up with a plan that is mutually agreeable to both parties.

Household bills

Utility and service bills should be paid on time each month, but for workers on furlough, these expenses may not even make it to their list of priorities.

Many providers are willing to work with their clients. Visit the websites of your providers and check to see what kind of relief and financial considerations they’re offering their consumers at this time.

As with every other bill, it’s best to reach out to your provider and be honest about what you can and cannot pay for at this time.

Unsecured debt

Unsecured debt includes credit cards, personal loans and any other loan that is not tied to a large asset, like a house or vehicle. Howard urges financially struggling Americans to place these loans at the bottom of their list of financial priorities during a financial crisis. At the same time, he reminds borrowers that missing out on a monthly loan payment can have a long-term negative impact on a credit score.

Here, too, consumers are advised to communicate with their lenders about their current financial realities. Credit card companies and lenders are often willing to extend payment deadlines, lower the APR on a line of credit or a loan, waive a late fee or occasionally allow consumers to skip a payment without penalty.

Other Resources:

Click here to see Clark Howard’s perspective on prioritizing bills on a tight budget.