About A Wealth of Knowledge
Financial expert Michelle Singletary answers questions about personal finance and the economy.
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Prioritizing the Basics
Q: I lost my job and haven't worked for 8 months. Most of my savings is gone. How do I prioritize my bills, house note and car payment? What is more important? What can you do if creditors give no slack to regular payments?
A Visitor, Upper Marlboro, Maryland
A: I don't have to tell you the awful unemployment numbers.
It's bad out there for a lot of people. I'm working one-on-one with several people who are unemployed, and often, after speaking with them, I want to cry. (Sometimes I do.)
At this point, you are in crisis mode. What gets paid are just the basic necessities. You have to have a roof over your head; so of course, keep paying your mortgage as best you can.
Set aside money for food and keeping up the insurance on your car and the car note. Now, on this last point, if you aren't upside down on your car—meaning you owe on it more than it's worth—consider selling it and taking any profit you make and buy a hoopty. The goal is to get rid of the monthly car payment. If you are upside down, which many car owners are, then you may have to tough that out.
You have to keep on the utilities. But you don't have to have cable, or at least drop down to the smallest package they have, especially if it helps you keep your Internet service, which can be key to your job search.
If you have a cell phone, drop that plan to the lowest minutes possible.
And, my friend, that is about it—roof, food and utilities. Everybody else has to wait.
At this point, all other creditors have to get in a line and wait until you are bringing in enough to pay them what, admittedly, they are owed. No doubt they may threaten you with a lawsuit, or they will likely report your delinquency to the credit bureaus. But really, so what? You don't have enough money to go around. You don't have a job for them to attach any wages.
If your creditors aren't willing to work with you to reduce your payments, or they won't grant you a forbearance until you are back up on your feet financially, then politely and respectfully tell them they just have to wait.