Did you know there is a pecking order for dealing with debt?
1 . Home…you need a roof over your head and food on your table. (some mortgage companies allow for deferments or refinance to help if your circumstances change. For example: in a divorce.)
2 . Vehicle…you need transportation to get to work, so you can feed your family and pay for your roof. Some companies will allow for deferring a payment if you are struggling due to a temporary situation such as an illness or layoff.
3 . Utilities…you need to keep the lights on, have heat, and keep the phone working. (the TV is not a priority) . You may be able to negotiate a lower budget plan for some of the utilities by calling and sharing your situation.
4 . Secured debt…anything that can be taken. Besides home, vehicle, secured may include large ticket items you purchased on credit or with a loan. (watch out for those equity and title loans–bad idea)
6. Savings...it is important to continue to set aside small amounts of money each month for emergencies, so next time the car needs repair or the kid gets sick, a credit card won’t be needed. Cannot increase your income? Then look for ways to cut costs. Example: buy generic at the grocery. There is a lot of difference in the prices of detergents and cleaning products. Getting a tax refund? Consider putting some aside for a rainy day.
5 . Unsecured debt…notes (money owed to individuals or institutions), medical, credit cards. It is possible to pay less than the “required minimum” when you are strapped for money. You can write the lender and let them know you will be making a “good faith” payment until your finances are more stable. They don’t like it, but they will accept it in most cases.
6. Charity...starts at home! I am opposed to churches and televangelism preaching the tithe when they fail to teach good money management skills. When you are saving and paying down your debt, you are doing a good work. Once your cash flow is better, then you can budget your charitable giving and have peace about all your spending.
FYI loan consolidations are not your friends. They charge a lot and do not solve all your debt problems.
Finally, don’t put all your eggs in one basket. Bundled services can be challenging if you get into a jam or pickle. Hope my food analogies only make you smile. Money management should not cause you to lose your appetite. Need help with a budget plan? My Concierge LLC can do that too.