Today’s tough economic ties are making some families choose the lesser of the two evils when deciding which bills they can afford to pay. Many struggling families are making the tough choices about which bills to pay and which they will have to leave for the next month if possible.
So, if you were in trouble, which bills would you choose to pay if you could only afford one….
Your mortgage or your car loan?
Your health insurance premium or a hospital bill?
Your phone bill or your electric bill?
Pay property taxes or income taxes?
It is not rocket science to know that not paying bills is a bad decision, but it is a decision that more and more families are finding themselves in as they are backed into the corner of mounting bills. Many families are faced with the choice of making the best “bad decision” during the current economic turnmoil.
Some of the bad decisions many families are finding themselves forced into taking are…
Take money out of a retirement account
Pay bills with credit cards
Take out a payday loan
Sell everything but the kitchen sink at a pawn shop
Delay needed medical care
Postpone normal car maintenance, veterinary care, or medical check ups
What should your payment priorities be in these tough economic times? June Walbert, a certified financial planner (CFP) at USAA Financial Planning Services, recommends that families prioritize their bills by importance and remember to always take care of their families first.
Remember Maslow’s Hierarchy of Needs. Harold Evensky and Deena Katz recently wrote a book, “Retirement Income Redesigned: Master Plans for Distribution: An Adviser’s Guide for Funding Boomers’ Best Years” in which they discussed a personal finance version of Maslow’s Hierarchy of Needs. Maslow said that people had an order of needs starting with their physical needs (food, shelter, etc.), then you need safety, then love and belonging, then self-esteem, and finally after completing all the others at the bottom of the pyramid you could reach the need for self-actualization which self fulfillment in your life and dreams.
Evensky and Katz translated Maslow’s Hierarchy of Needs to a personal finance version. At the base of their pyramid, people need survival money (food & shelter), then safety money (for emergencies), freedom money to do fun things like take family vacations, gift money (charities), and dream money (sail around the world).
So, why am I going on about some guy named Maslow and a hierarchy? Prioritizing your bills and your needs is exactly how you should choose which bills you should pay and which ones that can wait until next month if you absolutely have to wait. You should always take care of your family first no matter what. Popular financial commentator, Dave Ramsey, says that you should pay for your necessities first before anything else. The necessities are food, shelter, transportation, and clothing. If you are in trouble, you should pay those necessities before ever paying a credit card or other less important bill.
Walbert said that there is a unique trend during this current bear market. In the economic downturn of 2000, most people would do everything they could to stay in their homes including forgoing paying credit card bills and car payments. In today’s troubling times, the trend has reversed. People are overwhelmed by their rising adjustable mortgage payment and giving up more and more on the America Dream of home ownership.
A Few Ideas. There has never been a more important time than now to have a written budget. When money gets tight and you must choose who will get paid and who will not, it is very important to know where every dollar is going before the month even starts. Setting a budget will help you identify where your money is not being used most effectively. Walbert also recommends setting aside money to specifically have fun with in order to follow through with your budget. It is an important key to success.
Protect Your Credit Score. Your credit score is like gold now. With a tightening credit market, it has become even more important. The score is not only important if you want to borrow new money with a new credit card, home mortgage, or car loan. But, your score also plays a factor in expenses like homeowners’ and car insurance prices. A lower score will translate into higher prices that you have to pay. Your score is also an important factor in renting an apartment since most landlords look at your score.
Overwhelmed By Your Finances? When you feel overwhelmed about your financial situation, that is the point when you should seek professional help if you have not done so already. If you are considering bankruptcy, you should talk to a financial planner or counselor. There are a lot of great places you can go for free financial help if you needed.
- National Foundation for Credit Counseling (NFCC.org) can help you find a local credit counseling service to help you set up a debt reduction plan and budget.
- The Military One Source can also help with financial counselors. I have found that the professionals at Military One Source are a wealth of information and can point you in the right direction for any crisis you might be facing. You can call them 24/7 at 1-800-342-9647 or visit them on the web at militaryonesource.com
- USAA actually has financial counselors and Certified Financial Planners on their staff that are available to talk to USAA members for FREE about problems or financial issues.
- Your installation’s Family Readiness Support Center has financial counselors who are also available.