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Which Bills to Pay Off First (or Cancel) When Money Runs Tight

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Whether it’s from job loss due to a recession, a drop in income, or an unexpected major expense, there may come a time when you struggle to pay your bills. What can you do when your income and expenses don’t match up? It’s essential you prioritize your bill payments and what you owe, paying the most important bills first.

The most important bills are those that cover the necessities: shelter, food, water, and heat, for example. The next most important are bills that cover things that make it possible for you to get where you need to go, such as your vehicle expenses. Last on the list are bills that can ding your credit history, but not much else, if you fall behind on them.

Although you can make some adjustments to the order you pay bills based on your circumstances, it’s usually best to focus on paying your housing bills first, then paying what you can with the money you have remaining.

Bills to Prioritize When You’re Low on Money

1. Mortgage or Rent

If you fall behind on mortgage payments, you risk having the lender foreclose on your home. If you fall behind on rent, your landlord can evict you. Even though the foreclosure or eviction process can take months, it’s not something you want to risk happening. Keeping up with your housing payments is a must if you want to stay in your home.

When money is really tight and you’re not sure you can pull together enough to make a payment one month, the best thing to do is talk to your landlord or lender. Many mortgage lenders have programs in place to help homeowners who are facing financial hardship. Your lender can review your options, such as forbearance or loan modification, with you.

During forbearance, you stop making payments on your loan, but interest continues to accrue. If a lender agrees to modify your loan, they adjust your interest rate or otherwise make changes to lower your monthly payment.

The United States Department of Housing and Urban Development (HUD) also has programs available to homeowners struggling with their mortgage payments. You can contact HUD to connect with an approved counseling agency. The counselor can work with you to create a plan to help you avoid foreclosure.

If you’re a renter, talk to your landlord as soon as you know you’ll have difficulty paying rent. Explain the situation to them in detail, including whether you think you’ll be late with payment, won’t be able to pay all your monthly rent, or won’t be able to pay at all.

Many landlords are willing to work with you to come up with a solution. You can help the situation by suggesting solutions. For example, if you’re going to pay late, tell the landlord when you plan to make the payment. If you can’t pay the full amount this month, tell the landlord how you’ll make up the difference. For example, you can add an extra $100 or so to subsequent payments until you pay off the balance.

2. Utilities

After your mortgage or rent payment, the next most important bills are your utility bills: gas, water and sewage, and electricity. Although some count TV and the Internet as utilities, those services aren’t essential for everyone.

Fortunately, many programs exist to help people who need emergency financial assistance paying bills. The first place to look is your local utility provider. It may have its own program to help people pay their bills.

Another option is the Low Income Home Energy Assistance Program (LIHEAP), a federally funded program that provides financial assistance to help people pay energy bills. LIHEAP has specific income requirements and is grant-funded, meaning only a set amount of money is available each year. If you think you qualify for LIHEAP, the sooner you apply for it, the better your chances of receiving aid.

3. Insurance Premiums

Having insurance is always a good idea, as it provides financial protection against the worst things life can throw your way, such as illness, fire, or accidents. Paying your insurance premiums even when money is tight is a smart move.

If you’re struggling to afford your premiums, you do have some options, particularly when it comes to health insurance. If you purchased a plan from the Healthcare.gov marketplace, you qualify for a special enrollment period if you’ve recently lost your job and associated coverage, if you’ve had a change in income, if you’ve gotten divorced, and for a few other reasons.

During the special enrollment period, you can apply for Medicaid or CHIP if your income is below the threshold or a credit on your insurance premiums based on your income. Doing so can lower the cost of your health insurance considerably.

4. Food & Household Necessities

Food, soap, and paper products are up there with shelter, heat, and hot water on the list of essentials. Luckily, you have more wiggle room when it comes to adapting your food and household supply costs compared to your mortgage or rent payments and utility bills.

When money’s tight, there are many ways you can trim your food and supplies bill:

  • Limit Shopping Trips. Plan your meals for the week, make a list of the ingredients you need, and go to the store once. The more you go to the store, the more likely you are to buy things you don’t need.
  • Buy Store-Brand Items. Store-brand products usually taste the same as or similar to their brand-name counterparts, but they cost a lot less. If you typically purchase branded foods and supplies, try switching to the store brand. It’s likely the only place you’ll notice a difference is in your wallet.
  • Limit Packaged Products. Packaged foods, such as grated cheese, bagged salads, and prechopped vegetables are convenient, but that convenience comes at a cost. You can save a lot if you buy whole, unprocessed foods and prepare them at home.
  • Skip Bottled Water. If you live in the U.S., it’s highly likely your tap water is safe to drink. According to the Centers for Disease Control and Prevention, the U.S.’s water supply is among the safest in the world. Bottled water is expensive and terrible for the environment and is often little more than repackaged municipal water.
  • Buy In-Season Produce. Pay attention to seasons when shopping for fresh produce. Fruits like strawberries and blueberries are usually in season and inexpensive during the summer but cost more in the winter. You can cut your grocery costs if you buy what’s in season.
  • Grow Your Own. Another way to cut your food bill is to grow your own fruits and vegetables. Herbs and green vegetables are usually the most cost-effective edible plants to grow, as you can get an entire plant for the price of a handful of herbs or greens at the grocery store. You don’t need a ton of outdoor space to start a garden. You can grow plants in containers on a small balcony or patio.
  • Use Your Freezer. Frozen vegetables and fruit often cost less than fresh, so it pays to purchase those when money is tight. You can also prep double batches of meals to freeze for later. That way, if you run out of money before the end of the month, you have a supply of ready-to-eat meals waiting for you.

Note too that depending on your income, you can qualify for financial assistance with groceries. The Supplemental Nutrition Assistance Program, aka food stamps, helps to cover the cost of groceries for people with income below certain thresholds.

Pro tip: Make sure you’re saving as much money as possible on your grocery trip. Apps like Fetch Rewards and Ibotta allow you to save money on purchases by simply scanning and uploading your receipts.

5. Car Loan & Other Expenses

Your car gets you to and from work and lets you get to other important places, such as your kids’ school, the grocery store, and the doctor. If you have a car loan, it’s crucial to find a way to pay it each month.

Just as you can call your mortgage company to work out a deal, you can call the lender behind your car loan to see if you can come to an agreement. Like mortgage companies, these lenders can also offer you loan modifications, refinancing, or forbearance. Loan modification or refinance can lower the amount of your monthly payments, making it easier for you to afford the car. Forbearance means you don’t make payments for a set period.

Another option is to sell your current vehicle, use the proceeds to pay off the loan, then purchase a less expensive model. If you decide to sell, look for one that has a low cost of ownership to keep your expenses low. Some vehicles are more reliable than others, meaning you don’t have to worry about expensive repair or maintenance bills.

6. Unsecured Debts

Although you should make every effort to repay your debts, when money is tight, unsecured debt, such as credit cards and personal loans, should move to the back burner. While these debts typically have the highest interest rates, they also have the lowest impact on your daily life.

You don’t go hungry if you miss a credit card payment, nor can your credit card company take your home or car if you pay late.

That said, it’s still best to pay what you can toward unsecured debts, such as the minimum due on a credit card. If even that is too much for you right now, contact the card company or lender. Sometimes, credit card companies are willing to work with you to create a debt repayment plan or let you temporarily pause payments.

7. Student Loans

While you should make every effort to pay your student loans when money’s tight, the loans often have the most flexibility when it comes to repayment, particularly federal loans.

If you have federal student loans and you’re struggling to keep up with payments, you have multiple options. You can request a deferment or forbearance from your loan servicer, or you can switch to an income-driven repayment plan, which adjusts the amount you pay each month based on your income.

The situation with private student loans is a bit different, as they don’t have the same protections as the federal student loan program. If you’re having trouble affording private student loan payments, your best option is to contact the lender to see if it offers forbearance, repayment plans, or loan modification.


What to Cancel When Money Is Tight

While some monthly bills are essential, others are considerably less so. When it’s a struggle to make ends meet, here’s what you can consider cutting:

  • Subscription Services. Netflix, print or digital newspapers, meal kits, and gym memberships are all things that can go. In many cases, you can find free alternatives to the subscriptions you were paying for. Some local libraries give you access to streaming movies and local or national newspapers for free. You can find workouts available for free on YouTube. Make sure you don’t miss any subscriptions that you might have forgotten about. Services like Truebill will find subscriptions and either cancel them or negotiate lower rates for you.
  • Cable and Internet Service. You may not want to disconnect your Internet completely, but see if you can switch to a slower, less expensive plan. If you have data on your phone, some providers, like Xfinity Mobile, let you use your phone as a hotspot to get online, meaning some people don’t need a separate home Internet plan.
  • Phone Service. While you do need your phone to stay connected, you most likely don’t need both a landline and a cellphone. You probably don’t need the most expensive cellphone plan, either. Shop around with companies like Mint Mobile or Ting to see if you can get a better deal.

Final Word

Self-care is essential, which is why it’s vital you focus on paying for the things that can help you sustain your life, such as food and shelter, when times are tight. While missing debt payments can affect your credit history, in desperate situations, your health and safety are more important than your credit score.

Along with prioritizing your monthly bills, talk to your lenders and service providers. Many companies have programs in place to keep you from sinking deeper into debt. Keep the lines of communication open, and remember you’ll get through it.

What do you pay first during times of financial hardship? Do you have tips on what worked when approaching your lenders?

Amy Freeman
Amy Freeman is a freelance writer living in Philadelphia, PA. Her interest in personal finance and budgeting began when she was earning an MFA in theater, living in one of the most expensive cities in the country (Brooklyn, NY) on a student's budget. You can read more of her work on her website, Amy E. Freeman.

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