Reader Question: I Can't Pay My Bills! What Bills Should I Pay First?

When times are tough and you can’t find the money to pay all of your expenses, where do you turn and how do you decide who gets paid? Of course, in a perfect world we would all have sufficient emergency funds to cover these types of situations, but many people are faced with this question every month and don’t have the money saved up. While you may incur late charges or possible dings to your good credit score, there are priorities you can set to ease the pain as much as possible.

1. Housing comes first. This is especially true if you own a home. Your mortgage payment should be at the top of the food chain. Your home provides shelter, it is one of your greatest assets, and it is a great mark to have on-time mortgage payment history on your credit report. Above all, make sure you are making those payments. It wouldn’t make sense to go into default because that cell phone bill you just paid required your mortgage to be paid late. Your housing expenses should also include any insurance, which may be part of your mortgage payment anyway. If not, it should be a top priority as well.

2. Don’t forget taxes. I’m not just talking about Uncle Sam, but this includes property taxes as well. If you are employed, chances are you are already paying taxes on a regular basis, but if you are under-withholding you could be faced with a steep tax bill at the end of the year. Your best bet is to have the right amount taken out of each pay check, but if that isn’t possible or you find yourself owing taxes, don’t delay in filing or paying. The same thing goes for property taxes. Failure to pay can put a lien on your home.

The penalties are stiff, and the IRS has no problem garnishing your wages or taking property to get their money. The good news, at least with the IRS is that they do have options available to assist when you can’t pay your taxes. Using an installment plan or reaching an agreement with them should be a last resort, but they are options.

3. You better make those car payments. The next item in line, especially if you require it to get to work every day, is your auto loan payments. Again, this is a secured loan, which means if you fail to make payments on time, not only can it affect your credit, but they can recover the property. Losing your primary means of transportation could cost you your job if you don’t have an alternative. Without a job, you’ll never be able to pay the bills. If being unable to pay your bills is a recurring theme, this is one of the first places to look at cutting costs by finding a cheaper vehicle. Auto insurance should be lumped in with any loan payments and considered just as important.

4. Begin looking at credit cards. Once you have secured your essential payments for your housing, tax obligations and transportation, you can begin looking at paying those credit card bills. Obviously, you want to stay current with these so you can keep your credit report clean, interest rates low, and avoid late fees. Don’t jeopardize your home or other things listed above just to try and avoid a late fee or negative mark on your credit score.

If you do have money left over to put toward credit card bills, pay at least the minimum. If it takes minimum payments on 4 different cards just to make all of the payments, then do that. It is better to only pay the minimum and keep the account current than to try and pay more and end up short on another card and have a late fee tacked on.

If you don’t even have enough money to make the minimum payments on all of the cards, you have to prioritize. First, realize that if you can’t make the payments, you’re going to be late and there are consequences. The best you can do is try and limit the negative impact. First, check to see if there are any grace periods on any of your cards. You may be able to squeeze a few extra days until payday and still avoid a late payment. If that is of no use, you’re probably going to want to look at the card with the highest balance. The reason is that if you’re late, they are likely to increase your interest rate. 29.99% on a $5,000 balance hurts a lot more than 29.99% on an $800 balance.

Finally, remember that late payments typically aren’t reported to credit bureaus until they are over 30 days past due. You may still have a late fee or a change in interest rates, but if you’re a few weeks late you’ll probably still keep that credit report free of a late payment mark. And, if it is your first late payment with that issuer, a phone call may actually get the fee removed or the rate dropped back down. Unfortunately, if you make this a habit, don’t expect any relief.

5. Utilities are often the last resort. You may think that keeping the lights on would be a top priority, but in reality you have the most latitude in making payments compared to the rest of the things on this list. First, many utilities are optional and aren’t a necessity to life. Things like the cable and telephone are good examples. If you fail to make your cable payment, they shut it off and possibly report it to the credit bureaus. Losing cable is better than losing a home or having your wages garnished.

When it comes to the more important utilities, such as electricity, sewer, water, or gas, you will want to try and make these payments, but doing so late might not be as bad as being late on a credit card. Most electric or gas companies have very low late fees, and in some cases it may just be a couple dollars. On top of that, it generally takes an extended period of being late before service is actually shut off. The best thing to do if you find you are unable to pay the electric or gas is to call your provider and explain the hardship. Most offer assistance or special payment plans for those in financial need.

When it comes to something such as sewer, you may actually have to place more importance on that bill. In some places, being late on your sewer bill could eventually result in a lien on your property, so be sure to check and see if that applies. But with most utilities you’ll pay lower late fees than you would on a credit card and they are much more flexible when it comes to being unable to make payments, so most utilities should be one of the last items to pay.

Final Thoughts

As always, you should be trying to make all of your payments on time and in full, and this shouldn’t imply that it is good practice to make late payments, but the reality is that there are times when that just isn’t possible and you have to make the best of it. Also, keep in mind that these are just general guidelines. If your situation involves alimony or child support payments or such, these could take priority given the legal implications, so you have to analyze your situation carefully.

In the end, if being unable to pay your bills is becoming a regular habit, it is time to sit down and think about why this is and make some changes. The occasional emergency happens, but when it happens every month and every year, you need to really take a look at your situation to get out of that rut.

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

34 comments
LuvnMom
LuvnMom

What doctor bills should you pay? some of the small pills on my credit report are doctor bills from like 2006 and forward so how far back should I go and do I start with the oldest or newest bills in trying to pay them off?

 

lmangan27
lmangan27

i been living by my self for a long time,,,every time i lose my job, the thing got me so worry it my bank account,every time you dont have enough money and your bills is taking your money at your bank account. the bank is charging you so much for the over draft.....now got layoff again,, i went all the way to a 1000 boxs over draft,,i try to apply an unplyment money but i cant even hardly get it,,its like it is too hard to apply,

living by your self with out any one help you especially if you dont have a family around you,,is the hard thing ever,,you guys are lucky..you have a family you can ask for help,,me i dont have a family,,,just me....sometime i just wanna run away ,but i make my self to be strong person and just pray because believing in god and think positive its not bad right,,,sometime i just wanna cry....

J Nutter
J Nutter

I have been on unemployment for a year & a half. I have maintained most bills because I started working with a debt management company before things started decreasing. So now I am still not working and my cell phone bill has become a huge issue, they let me keep it cut off for 180 days, although they turned it back on for 3 days after 60 days and charged me $82.. I had other family members on the plan, a13 yo and my son also unemployed. They refuse to let me out of my contract, won't even let me combine all contracts into one, actually just ignore the fact that I am in arrears, just keep racking up charges on phones not being used. What can I do?

Jean Marie Davis
Jean Marie Davis

Did you know even if you pay your rent and can't pay your water bill , light bill or even your gas bill because you don't have the money to pay these bill that you are living in a health hazardous by not having utilities!

TDK8
TDK8

Ok, im stable right now. but if it were to ever come to it. my first priority is my car, because without it I would end up losing my job. which will result in me losing my home and everything else. I would just live with a friend while i plan something out for the time being. This makes sense, if i put house, utilities first, i would lose my car and everything goes with that a month later. Glad im good though, good luck to the rest.

Diane
Diane

I believe that since each one of us has a unique situation, we will also have a different order of priorities so just be practical when deciding the most important bills to pay. I read some very good ideas on this site already. There are some things you can be flexible on and that one is food. Depending on where you live, search out food pantries at churches to go everyweek. Stretch the food and use creative dishes to do this. It works. I do it. The electicity bill also can be controlled with not having lights on when you don't need them, unplugging the tv, computer, appliances etc at night because they take up juice even when not on. Choose between a cell phone or a house phone. If you can't pay your credit cards and the interest keeps building...go to a nonprofit credit counseling group that will act as the middle man to talk to the creditors, get your interest rate significantly down, and you end up paying one monthly payment that the group disperses a little of it to each creditor. I did that for four years and finally I was debtfree. I had to give up my car when the lease was over because I had to face it that I could no longer afford it. If I am late with my payments now, I call and sometimes they waive the fee. I use a bus to get groceries, go to doctor etc. If you have children that are old enough to work, they need to contribute financially to the household, it is only fair and necessary to avoid losing a roof over your head. If you have a house with an extra room or apt., you may have to think about finding some one to rent to (be careful). If you own a house, you may have to sell to avoid losing it altogether. If you have any valuables that you can get rid of, place ads up to sell them for extra money. Go to your local church for help, social services, St. Vincent De Paul, Salvation Army, United Way...There are some resources out there but you have to start making calls or looking on the internet for help. Please do not get sucked into people claiming they can loan you money...I would first check them out to see if they are even legitimate! Is there something extra you can be doing to make money..do you have a special talent, skill, creativity? Think outside the box....I myself are in a situation again, because I am now disabled and my income is no longer what it was, I am finding it more difficult to keep my head above water, so I may eventually have to sell my home, though it needs some repair first which is difficult to get done with little to no cash. Times are hard, so do the best you can, think creatively, perservere whatever the circumstance. If we lose all our possessions of course it isn't a happy situation, but we must move forward anyway, to make a new start somewhere else. You are not alone, so many of us are hurting. Stay connected to share. Good Luck you all.

barbara mack
barbara mack

My daughter has fallen on hard times and she just found out that her water utilities have been shut off is this legal? she has three children under age eight years old the youngest is not even two
(I will pay her bill) Pleas just let me know if this is legal especially having such youn children.
Thank You.

Wayne Hall
Wayne Hall

Where do you turn for help? My income for the last year was just a little over 19 thousand not a lot of money to live on, much less pay bills. I was told the Catholics would help me, I wrote them several times, they never responded. When I got sick and ran up a hospital bill, I was told to contact Medicade since I was already 63, they said they could not help I made to much money???

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Juna
Juna

Wow - It seems like a lot of folks are going through financial hardship. I agree pay your mortgage and maintenance if you are in an association, then taxes then hit your light bill and water. Phone, cable, can wait. It is better to have a cell phone. Cutting back is an art. Even if you are paying late, I think it would be hard for a jusge to allow a company to garnish your wages. Balancing can be hard if you don't have much money. What is the max amount that your wages can be garnished? Is their an amount?

dave
dave

housing is very importantthat comes first credit is a privalage you dont realy need it but my electric bill is over 1200 and i have allready used heap and red cross what next i am struggling here to fix this by 2 days any suggestions

Ryan
Ryan

Wondering if someone could tell me if the gas company would shut off my gas if partial payments are being made.Last month my bill was over $300 and I made a $100 paymentRyan

annmarie
annmarie

If you can't make payment on the water bills, some localities will roll the water bill onto the tax bill after it's late for a while , in turn your mortgage co. pays that in escrow,then you can write the taxes off. I realize this may increase escrow a bit. Sometimes you have to do what you have to do.

Marco
Marco

The Chevololet dealer ship close down while my car was in repair I was making payment on it. what do i do? So many people just went and got their vehicle and said the company will get back with them. The word going around is they may file bankruft this week

Andrea
Andrea

What should we do if we can't pay our bills and we can't sell our house to change our situation, how do we lower our monthly expenses when the housing market is so terrible?

Struggling
Struggling

I just wanted to give advise. I too am struggling. I used to make a 6 figure income until my business went south and my health did as well.It's been very dificult as it has been with many.
Now I barely get by. But regarding the order of payments. This is what I recommend.
Pay Housing first, then utilities, then ,car,gas then consider paying credit cards.
But you should first negotiate with the credit card companies. You can yourself. If you lost your job sometimes they can defer payments. Or if you can't pay the minimums tell them you're considering bankruptcy.Then tell them if anything you can afford and if you have had a god payment history, mention that.
Another thing that helps is my family gets by instead of buying food, we get good quality store and manufacture donated food from foodbanks weekly. This saves hundreds a week and a month. If you're fortunate enough to have access to some in your area, try the church's an there are senior ones as well. Be proactive when you're going through hard times and don't forget coupns online. They help a bundle too.

LauaL
LauaL

I give up, I am now using my credit card to get money to pay on my credti card.. I have a fixed income SS, I guess they cannot touch that..all of my cards (only three), have finance charges greater than the montlhy bill.. I am so sick of this..!! A lawyer told me to call them up and tell them goodbye..!!They cannot take my SS.
Honestly I need food and gasolene...How does anyone do it? I am 70 years old..I need some freedom from worry.!I have maintained excellent credit for years, with sacrifice.I cannot do it anymore.

Richard Neva
Richard Neva

I am beyond the beyond with financing and being retired on a fixed income! I maxed out 14 credit cards and chose not to go bankrupt but went into debt negotiation. That takes 555.00 every month, then my house payment 786.00, then my gasoline bill about 150.00 a month. Now my car needs a 1000.00 dollar part to be reliable and I must have a good car for all my doctor appointments, I do not do pleasure trips. That car repair blew all my savings! Now I have nothing to live on till the end of the month when my checks come in. I cannot use credit cards anymore either. I am screwed!

Dawn
Dawn

After struggling for the last year I find myself finally at the end of my resources and have to make some hard choices. I am psychologically ready to take the credit hit and understand the implications of not paying my credit cards - but I'm wondering would it help any to make some effort to pay even if it is not the minimum every month? Mostly I'm scared they can come take my house (in our state homes are not protected, for example if you declare bankruptcy - so that is not an option for me).

matthew
matthew

i have 3 Credit cards and only get paid 530 get paid every 2 weeks and i have a house payment which is 417.06 what do i do about the credit cards i can't even make a payment at all on my credit cards

Jeremy
Jeremy

A signature loan is just an unsecured loan. That means if you default on it, it will eventually go to collections. Then you will be hounded by a collection agency that tries to get you to pay. By now this will all be on your credit report, and you are still on the hook for the money.

You should still pay your essentials first, such as housing, vehicle, or anything else that is secured by an asset. But while any unsecured debt may not be directly tied to an asset, it is possible for a company to legally seek out the collection of the debt, which could include judgments, garnishment of wages, etc. Still not a good situation, but at least they won't be repossessing your house or car because you're behind on payments.

Lynda
Lynda

I was wondering what happens if a signature loan goes into default?

I am very tight right now, after paying housing, car, gas, the needs.

I just don't have enough to spread it out to all the rest.

CreditWithdrawal
CreditWithdrawal

Agreeing with Moneymonk here. It's better not to have to choose, but if you do, things like worrying about your credit rating and CC rates become secondary. Food, Housing/utilities, and then things necessary to get a job become top priorities. Worry about other things later.

MoneyNing
MoneyNing

It's hard to prioritize! Someone who can't pay all the bills shouldn't be thinking about which bills to pay first but should be thinking how to reduce them first which is more important. Otherwise, the situation is just going to get worst.

Fiscal Musings
Fiscal Musings

Hopefully you don't ever need to choose what bills to pay first, but in that event you do need to prioritize. This prioritization however, should only be a short term fix. You should ultimately pusue ways of lowering your expenses (any and all).

SavingDiva
SavingDiva

What a frightening post! Earlier this week that I'm one paycheck away from being homeless...so this is really hitting home...I really need to add to my emergency fund.

Sara
Sara

Let me just say this post rocks. About 12 years ago we were in this situation. We made abotu $2k/month collectively and it was very tight and I wish we would have been educated about this because our credit suffered and well it took 7 years for it to not be an issue anymore. A hard lesson to learn when you're just starting out in life.

Moneymonk
Moneymonk

Food, gas, lights, water should always be first, then house/rent.

For as car note and credit card bills, I'm not sure because it is best to not have cc debt or a car note. Pay cash for items to avoid juggling later which need to be paid.

Jeremy
Jeremy

Right, everyone will have slightly different priorities. If you rent instead of own and have a good tenant history, you may have some compromise on rent.

And just like Webomatica said, you may be in a situation where your computer and internet connection at home may be vital for your job.

Webomatica
Webomatica

Interesting post. I have to agree with most of it especially how cable is not a necessity like electricity is. And for many of us working in technology, the electricty and internet access are essenatials to stay employed.

dong
dong

I think the housing from it's also worth negotiating with the bank and landlord, both prefer getting some kind of payment rather no payment at all...

Jeremy
Jeremy

Thanks, Brent. Food is very important, and I didn't include that because it generally isn't a "bill" that has to be paid. Most people are going to be buying food and other necessities regardless of what bills are due that month.

And yes, the utilities are important, but in most cases you can often go as long as 90 days before they are shut off. Clearly you want to avoid that, because as you said, it can be expensive to have them turned back on, but there is enough lag time between the due date and actual shut off that you should be able to address more important concerns first.

But you make a good point about credit cards, I think people can get their priorities out of order. There is so much stress and talk about maintaining a good credit score that some people will literally try to pay those before other vital expenses just to avoid hurting their credit.

Sure, bad credit can be costly, but having an accident when your insurance premium wasn't paid or ending up losing your home will ruin your life a lot faster than a late payment on your credit score.

Brent
Brent

First off I love the site and everything you talk about, keep up the good work.

I agree with a lot of what your saying but don't think the order is correct.

1. Housing - agreed.
2. Food - Family needs to eat.
3. Utilities - I do agree that the phone/cable/extra's aren't needed but keeping the lights, gas and water on are very important. From experience it cost's a lot to have these turned back on. Change the way you do landry, keep the lights on, temperature of the house to help cut costs.
4. Car - Sell the car and get a cheapo if possible, look into alternatives like bus/bike/etc to help save money here.
5. Credit cards - Credit score is the least of your concern if money is tight and the other areas are far more important than keeping a good credit score. I agree with paying the minimum at worst but only after the rest is done first.

I'll deal with the credit cards but only after my family is taken care of first and foremost. I didn't put taxes in there, it needs to be as well and I would put that above credit cards.

This is just my take on it.

Simple Me
Simple Me

that is the same problem im having.. worst of it.. the old house i lived int 6 years ago, must of been using water under my name? cause now.. i have to pay for MONTHS i didnt even live in there? and i had called to cancel the water in that house before i moved out? now i need to pay 1,600 ? how is that?!!