If you’ve found yourself unemployed due to the coronavirus pandemic — or you suspect that you might be soon — you may be wondering how you’re going to pay your bills.
The reality is that with no money (aside from possible aid from the government) coming in, you might not be able to pay all of them. If that’s the case, money expert Clark Howard says that you’re going to have to set some priorities. In this article, we’ll show you how to do that.
How to Prioritize Your Bills When You Can’t Pay Them All
Nobody likes to fall behind on paying bills but if you’re in a position where you can’t meet all of your financial obligations, you’re going to have to make some choices about who to pay first.
“In medicine it’s called triage,” Clark says. “It’s exactly what’s happening in the hospitals right now as they decide who to treat when or who not to treat. You have to look at your bills the same way. You’ve got to think about what you must have.”
Here’s the order in which Clark recommends you pay your bills:
“At the top of the list is food. You either need money to buy food or you’ve got to come up with a way to get food,” Clark says.
While you don’t get a monthly statement per se for the money you spend on groceries or eating out, feeding yourself and your family is the most important category in your budget. You’ve got to figure out how much you need to live on and how you’re going to pay for it.
“That could be through food stamps,” Clark says. “We’ll almost certainly have expanded availability of food stamps for many people.”
In the meantime, any cash you do have should be spent on food before you move on to other bills.
“Next would be paying for your housing,” he says, “because you need to maintain a place to live.”
If You Have a Mortgage
President Trump announced March 18 that he’s instructing the Department of Housing and Urban Development (HUD) to immediately halt “all foreclosures and evictions” for 60 days.
Still, if you can afford to pay your mortgage you absolutely should do that.
If you know you’ll be struggling to make your April or May payment, you’ve got to get in touch with your mortgage company immediately.
Stay in touch with them about your inability to make a mortgage payment. They’ll advise you what to do and what kind of options are available to you, which may include deferring payments for several months.
Clark says that lenders are much more likely to work with borrowers who communicate with them about their circumstances early and often.
If You Are a Renter
Similarly, if you are able to continue to pay your rent you should.
But if that’s not going to be possible, you should let your landlord know ASAP. They may be willing to work with you on a plan.
“Most apartment complexes are owned by big real estate trusts or big investment groups,” Clark says. “So far, there’s been no movement, no willingness, for apartment managements to offer any assistance or accommodations to people who’ve been laid off because of coronavirus. Almost certainly, that’s going to require action by state legislatures or the U.S. Congress.”
As you attempt to work with your landlord, keep an eye on reputable news sources both nationally and locally to see if any assistance is being offered.
“Once we can work again, for most of us that means having access to our vehicles,” Clark says. “So paying vehicle loans would follow housing.”
Again, if you can pay what’s due on your car loan each month, pay it. If you find yourself short after you’ve taken care of your food and shelter, you should contact your lender as soon as you know you won’t be able to make a payment.
“The big thing not to do is hide from this,” Clark says.
If you don’t make a payment and don’t communicate with your lender, you may risk repossession.
However, he says, “The lender does not want your vehicle. They have a direct incentive to work with you for a while to see if you can get back on your feet. That’s why you stay in contact.”
You should still pay your utility bills if you can, but what do you do if you have spent all you have and you still owe for power, water and internet?
“There are not standardized policies,” Clark says. “However, many state regulators have outlawed shutoffs for now for electricity or natural gas.”
He says you should look on their websites for coronavirus accommodations and how you ask for assistance. Again, don’t ignore bills — stay in contact with each company if financial hardship puts you behind and you can’t pay.
“Water is a different thing,” Clark says. “Many of us get water from our city or county. One by one, local governments are suspending shutoffs. However, if you get your water from a private system, you may have more difficulty avoiding a shutoff. Try to negotiate a payment plan to delay having your water cut off.”
5. Unsecured Debt Like Credit Cards and Personal Loans
“The lowest priorities are any unsecured debt,” Clark says. “That’s credit cards, any personal loans — anything that is not absolutely necessary.”
Still, you are probably well aware that not paying could have long-term negative impacts on your credit, so you should continue to pay if you can.
Again, getting in touch with your credit card company or personal loan provider is key if you aren’t going to be able to meet your obligations.
These companies have a variety of tools at their disposal to help during times of widespread crisis. Some of the common ways they work with borrowers include:
- Extending your payment deadline
- Lowering your annual percentage rate (APR)
- Waiving a late fee
- Allowing you to skip a payment
And while paying the credit card company is a low priority, Clark says, it doesn’t mean you don’t owe them the money.
“It doesn’t mean when your income stream starts again that you don’t start paying them again. You do.”
The coronavirus has put all of us in uncharted territory. While it may be scary to be facing the prospect of not being able to pay your bills, remember that you are not alone.
Tackle the bills that you can pay in the order outlined above and remember that through all of this, communication with whoever it is you owe money to is key. They can’t work with you if you’re simply hiding from your debt.