What Bills Should Be Paid First

To many times do we pay the unimportant bills first and pay the ones that are important last or not at all. (speaking from experience)

It has taken me a few years to realize that my cable bill should not be a priority on my list of things to be paid because I do not want to miss a show. We all do it and than will get upset with ourselves and later realize what we should have paid the mortgage or credit cards first.

I felt that these five things are the most important what we should do time you get paid.

1. Mortgage: 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. 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. Car notes: 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. 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.

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. Utilites: 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.

Spending Wisely To Own A Home

Many single people prefer to buy a home and build equity for themselves rather than pay rent to someone else. If you've been at the same job for a while and anticipate staying in the area you currently are living, buying a home is a great way to invest in yourself. Here are some tips for getting started:

Budget yourself
Figure out how much take-home pay you have each month. Add up your expenses. If you are spending more than you earn, cut back on extras like lunches and dinners out, cappuccinos and new clothing. Find a way to set aside savings each month, even if it’s only $100 or $200.

Did you borrow money for college? Work towards paying off debt from student loans. Do you owe money on your credit cards? Make those payments on time. Work toward paying more than the minimum due on your credit cards -- or you’ll never get that balance paid off. The calculators at http://www.choosetosave.org can show you how long it will take to pay off your balances. If you make a double payment, remember that you still owe the next month’s minimum payment by the due date.

Save for a home and retirement
If you find it impossible to save money, trick yourself by having the savings automatically withdrawn from your paycheck or bank account. Tell the human resources officers where you work what you’re saving for (retirement or a home) so they can set up the right savings plan. Or ask your bank to automatically transfer money from your checking account to a savings account or investment fund each month.

Establish credit
How is your credit? You can get your free credit reports (they are free once a year) and order your credit scores (a small fee is charged) from all three national credit reporting agencies at http://www.annualcreditreport.com. If you have little or no credit, start building good credit by applying for a credit card where you bank. Make small purchases and pay the entire bill before the due date.

Are you a chronic late-payer? Have the credit card issuer set up automatic payments from your checking account. If you pay even one month late, your credit score will fall. The lower your score, the more interest you may need to pay when you borrow money for a home or a car.

Traps to Avoid

Wedding debt
A wedding is a once-in-a-lifetime event. If the two of you are paying for it and you overspend, it becomes a paying-for-years event. Trim your expectations and your wedding budget so you’re not burdened with wedding debt. The average wedding for 150 people costs $20,000. Cut that guest list in half and you’ll have enough money left over to put the down payment on your first home.

Credit card debt
Only charge what you can pay off entirely each month. Before you charge a big ticket item, such as furniture, figure out how much you need to pay each month to pay the balance as quickly as possible. Avoid charging anything that won’t last as long as the payments you’ll have to make on that item.

Living beyond your paycheck
Are you living paycheck to paycheck, never saving a dime? The best path to riches is to simply spend less than you earn — no matter what size paycheck you take home. To see where your money goes each month, get a notebook and write down every penny you spend for one month. At the end of the month, figure out what you can cut to live within your means.

Identity theft
Never give callers or e-mailers personal information, such as your Social Security number, address and employer information unless you’re absolutely sure they are who they say they are. e-mails that claim you can get low-cost credit cards and mortgages or erase your debt are sent by thieves trying to steal your identify. Thieves pretend to be telemarketers as well. Most banks and credit card companies only communicate with you via letters. Do not provide financial or personal details in response to an e-mail solicitation from what appears to be your bank. If you question whether an e-mail correspondence from your bank is legitimate, call your bank and verify.

To Get Ahead

Buy your first home
It’s never too soon to buy your first home. Special programs can help you purchase a home with little money down, if you have good credit. Talk to a mortgage banker about first-time home buyer mortgages, downpayment assistance organizations and local home buying programs. Ask questions about terms. Be sure you understand how adjustable-rate mortgage payments may increase.

Make jump-ahead principal payments
Ask your mortgage lender for an “amortization chart” that shows how much of your monthly payment goes to principal and how much to interest. Look at the chart and ask your lender how you can make an extra principal payment each month. Doing this can shave years off your mortgage and save you thousands of dollars in interest.