When you’re in a tough spot financially, which bills should take the highest priority in your life? My traditional advice is being distorted by the breakdown of the mortgage market.
In the past, I’ve said the highest priority for you should be paying your mortgage first, so you can have a roof over your head. The second highest priority I’ve talked about was your car note, so you can have wheels to look for work. The third priority has been food on the table.
And I’ve always said that credit cards should be at the very bottom of the ladder, even though they’ll shout the loudest to get your money.
But a new study from TransUnion that analyzed millions of people’s payment patterns found there’s a new hierarchy today. Car loans are by far the thing people pay first. I mean, there’s not anything even close, especially when you look at how people are (not) prioritizing their mortgage payments when they’re in financial triage.
Today you have people even paying their credit cards before their mortgage. That’s because the mortgage market is broken and it looks to some struggling homeowners like they’re throwing good money after bad. But this is a temporary phenomenon based on the real estate bubble bursting. It’s my belief that my traditional advice will be true again a few years down the road.
As always with money, you want to think about how you prioritize it. It is good sense to pay for your car first because in so much of America, if you don’t have wheels, you can’t work!