You need to prioritize your outstanding bills when caught in a financial crush, warns Money magazine, especially if you haven't built a rainy-day cash fund.
Some debts are more dangerous if you don't have the cash to pay off those monthly bills hiding in the corner desk. Organizing them in order of importance will reduce stress and focus attention on the ones that keep the lights on and those that can wait without immediate pain. With that in mind, let's look at Money magazine’s top recommendations for which bills to pay right now.
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Housing payments, whether for rent or mortgage, naturally sit at the top of the list. Missing either can lead to severe consequences, including loan default and eviction notices that result in you losing your home or apartment. Loan defaults can take years to overcome, hitting your credit record like a tornado, making it harder to get new digs once you rebuild your nest egg.
Money recommends you contact your landlord or lender immediately when you run into a financial crush. Many on the other side of the phone will be sympathetic and willing to work out temporary solutions, including partial and split-up payments. And if they don't, at least you know how much cash you need to scrape together in a hurry to keep them at bay.
Also, ask your community for help. Many nonprofit groups help renters and homeowners with financial issues, and may intercede on your behalf with the loaner or landlord. Moneyreminds folks to ask for support "proactively," i.e. before everything blows up and the sheriff is at your door with an eviction notice.
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Next, you need to keep the lights on so utility bills should be paid after you've sent the housing check. Water, gas and electricity companies will send past due notices when you fail to pay your bills, and threaten to turn them over for collection. Even worse, disconnection of services may follow if those payment requests get ignored for long enough.
Speak with utility providers right away if your cash is limited. These companies deal with all types of economic stress and may provide temporary solutions. Payment plans sit at the top of this list, followed by extensions. They may also point you to private or public programs where you tap government funds to catch up. It will get harder if payments are past due but utilities may still agree to monthly installments until the debt is paid off.
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Money lists insurance premiums as the third most important bills to pay, above living and transportation essentials because it provides a "critical financial buffer." Those challenges can turn into catastrophes if you have a medical emergency or auto accident after you lose coverage. In addition, homeowners insurance is a condition of your mortgage contract and the lender can find you in default if it lapses.
Fortunately, you often have time to act on insurance payments when picking financial priorities. Auto insurers are required by law to inform you before canceling coverage. So it's a good idea to check the carrier's site, looking for a grace period after a missed payment, which is typically 30 days. This will give you more time to catch up on your overdue bills.
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