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If you're struggling to keep up with your finances due to job loss, furloughs, or other financial difficulties brought on by the pandemic, you may be wondering which bills to skip for the time being. Should you delay the water bill in favor of your credit card payment, or should the reverse be your choice?
Fortunately, there’s a well-informed answer to this dilemma—and it's backed by a trusted authority.
The National Consumer Law Center (NCLC) has made its classic book Surviving Debt: Expert Advice for Getting Out of Financial Trouble available for free download in digital format. (A special thanks to CNBC for highlighting this valuable resource.)
The first rule, according to Surviving Debt, is “Prioritize Debts Whose Non-Payment Immediately Harms Your Family.” These include essential bills like electricity, car loans, child support, and similar obligations. As the NCLC advises:
Failure to pay certain bills can result in immediate and severe consequences for your family. Address these debts right away—either prioritize paying them off or follow the advice in this book on how to manage them effectively.
Don't pay off smaller, lower-priority debts just because you're unable to manage higher-priority ones—“If I can't pay my mortgage, at least I'll stay current on my credit cards.” This is a poor strategy. If you can't make full payments on critical debts, try negotiating with your creditors for lower payments or save money to catch up later. This could be used to cover moving costs, buy a new car if yours gets repossessed, or other essential needs.
Keep in mind that the NCLC classifies monthly costs like rent and utilities as “high-priority debts.” If skipping any of these would directly affect you or your family, prioritize paying them first.
If missing a payment wouldn't have an immediate, serious impact, like with a credit card bill that could hurt your credit score but won't cause you to lose your home, push that payment to the bottom of the list. Don't pay it until your top-priority bills are covered—and explore options like credit card forbearance to delay payments if possible.
The coronavirus pandemic has led many companies and lenders to offer more flexible options for consumers, such as forbearance programs or even a few months of free services. For instance, if you have a federally-backed mortgage, you can request up to 180 days of forbearance (which means you can pause your mortgage payments for that period), and many non-federally-backed mortgage providers are offering similar solutions.
Similarly, if you're part of a low-income household and need internet access for work, school, staying in touch with loved ones, or simply keeping yourself entertained while self-isolating, Comcast is offering free basic internet for up to 60 days.
These kinds of offers give you the opportunity to skip or delay certain monthly bills, allowing you to use your available funds to prioritize more urgent debts and expenses.
It's important to remember that forbearance programs allow you to delay payments, but you’re still required to pay the debt eventually—along with any interest that accrues during the forbearance period. This could lead to higher monthly payments in the future, depending on your total balance and interest rates. On the upside, forbearance helps maintain your credit score by reporting your account as 'current' to the credit bureaus, meaning missed payments won’t negatively impact your score.
When deciding which debts should be prioritized and which can be postponed, understanding which bills you can delay—and which lenders you need to contact for forbearance options—will be crucial in protecting both your family and your financial well-being during tough times.
Follow the advice from the NCLC, and perhaps take some time to read the free online version of Surviving Debt while you're at it.
