If you are in a financial crunch, a great way to work around it until you are back on your feet is to prioritize your bills. The first thing you need to do is get all your bills laid out in front of you to visually see what is owed each month. Then, order your bills from high priority, like basic needs, to low priority, debt you may be able to push off until you are on more stable ground.    

Secured Vs. Unsecured Debt

A great way to divvy up your debt further into the high, medium, and low priorities is to see which are secured and which are unsecured. A secured debt is backed by collateral that will guarantee it. When you do not pay the debt, your collateral could be taken away. For example, a mortgage is secured because the home is your collateral. This secured debt will need to be placed under your high-priority bills to pay.

An unsecured debt does not have collateral supporting it. While still important to pay this debt, you have some breathing room because there is no collateral that can be repossessed. An example of this is your credit card debt. There are consequences to not paying your credit card bill like paying interest and possibly late fees. Plus that missed payment will go on your credit report, but you will not lose your home. Your credit card bill can therefore go under a low priority bill category.      

High Priority Bills

These bills are the items you must pay on time because there are serious repercussions for not paying them. A great deal of these bills will fall under your basic needs, like shelter and food.

1. Food
2. Housing
3. Utilities
4. Other Secured Debt

Medium Priority Bills

When you have a bill that needs to be paid as soon as you can to prevent it from becoming a problem, but it will not cause outrageous consequences, it can go under your medium priority category. Once you have paid all your high-priority bills, the extra money you have should go to these items.

1. Car Insurance (unless legally required)
2. Medical Bills
3. Vehicle Loan Payment (not the primary mode of transportation)
4. Student Loans

Low Priority Bills

Your low-priority bills will not cause immediate or devastating effects if they are not paid right away. These bills can be pushed off till you are in a better financial spot.    

1. Credit Cards
2. Department or Gas Cards
3. Subscriptions
4. Other Unsecured Debt

Each of these bills may be a higher or lower priority for you. It is all based on your financial situation. As you prioritize your bills, contact the creditors about your situation prior to missing a payment. They may have payment options to help you during this time and will be more willing to help if you inform them in advance. Velocity Community Credit Union is here for you during your ups and downs. Contact us today for ways we can help you, from lending to savings options.

Source: Green Path, Nerd Wallet