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Life is full of the unexpected—family emergencies, car trouble, a sudden career shift—and sometimes, this can make it difficult to stay on top of all those monthly bills. Falling behind on monthly payments can lead to debt pile-ups and a lot of stress.
If you find yourself unable to pay all your bills at once, it can be crucial to understand bill prioritization: what’s the most important bill to pay? Knowing how to navigate overdue expenses by learning how to prioritize bills can help minimize financial damage during tough times.
Prioritizing bills all starts with understanding your current financial situation. But how do you do that? We’re glad you asked.
Start out by making a list of all of your current expenses. You have a number of fixed expenses, like rent and/or mortgage, electricity, and water. Then you have variable expenses, things like groceries or entertainment, where the amount spent can vary over time.
Now that you’ve laid out all of your expenses, you can separate them into two categories: needs and wants. Needs are things you cannot sacrifice without significantly decreasing your quality of life—for example, housing and utilities. Wants are things you may enjoy, but can be lived without in favor of paying more pressing bills. Think dining out, streaming services, concerts, etc.
Whether you’re working full-time, part-time, freelance, or your primary source of income stems from unemployment or disability, track exactly how much money you have coming in on a monthly basis. Compare this amount to your essential expenses to see how much the amount falls short.
Make sure to consider installment loans—they provide a lump sum of money upfront, which can help you to handle expenses you might not have seen coming. Now that you’ve gathered all of your information, you can evaluate your financial capacity. See how much you can feasibly spend on bills so that you can start prioritizing.
How do you go about determining which bills are most important? Consider what role each payment plays in your life—a roof, a car, a heater—in order to figure out how to prioritize bills.
Your first priority should be keeping a roof over your head. Without timely payments on rent and mortgage, you run the risk of eviction or even foreclosure. Prioritize housing costs over utility bills—a house’s water and gas won’t benefit you if you’re not inside the house.
What does “utilities” encompass? Water, energy, heat—these basic utilities can significantly disrupt your daily life. Once your housing is covered, prioritize paying for these services. There are several utility programs that may offer financial assistance if you’re struggling.
When thinking about how to prioritize bills, consider the things that contribute to a reliable source of income. Once your housing and utilities are covered, turn to the thing that helps you maintain employment: transportation. Having a reliable car or the ability to play transit fees gets you to work consistently and makes sure you keep up your source of income. These costs can also include gas and vehicle insurance. Failing to pay your car loan or insurance fees means you run the risk of vehicle repossession or insurance cancellation.
Child support and alimony payments are considered legal obligations. If they remain unpaid, you might be susceptible to severe penalties like wage garnishment, legal action, or even jail time, which further hampers your ability to maintain a steady income.
Next, ensure that basic needs are met for yourself and your family. Groceries and household necessities aren’t necessarily a consistent “bill,” but they are crucial for your well-being. Maintaining employment and paying other necessary bills can fall by the wayside if you are lacking basic human needs like sustenance and cleanliness. Consider utilizing cost-cutting strategies like coupons, meal planning, or food pantries.
Another important expense that may be stretching your wallet is health coverage or other medical debt, especially in the case of an unexpected health emergency or trip to the ER. When considering health expenses, try negotiating with healthcare providers for payment plans that work for you, or look for sliding-scale services that adjust their prices based on your capacity to pay.
Now that you’ve separated needs and wants, established how much you can afford to pay, and learned how to prioritize bills, you can start developing a solid strategy to pay these expenses.
Creating a hierarchy means listing your bills in order of priority, which we’ve discussed above. The next step is pretty straightforward: start paying the most important bills first, and then work your way down the list.
Next, consider what happens if each bill goes unpaid. Make sure to think about both immediate and long-term consequences. Short-term consequences might look like eviction, a cut-off of utilities, or repossession. Long-term consequences are things like credit score damage, legal action, or compounded interest; they might not impact you right away, but they can become severe. Learning to balance the potential consequences helps you to evaluate which expenses are most pressing.
Now, what should you do in a situation where you can’t cover the entirety of a bill? Try “pro-rating.” This means you pay a portion of what you can afford rather than covering the full bill all at once—it shows good faith to creditors when you are willing to provide what you’re able rather than dismissing the bill entirely. In these situations, communication is key.
Don’t forget about potential assistance programs! Make sure to look into government programs, SNAP, utility assistance, and rental assistance. You might have more options than you think. There are also a number of non-profit resources like local charities and community organizations that may provide either financial assistance or donated household items or food.
Here at Credit Central, we want you to have the freedom to access funding when you need it, as well as the flexibility to pay it back over time. To get started on a loan or find tax assistance, find a branch near you or apply online today!
