What Bills Should I Pay First When I Can't Pay Them All?

Sometimes life just happens, an emergency, illness or loss of a job can derail a budget faster than you think. What’s even scarier is that you might not be prepared for an emergency for the simple fact that everything was going so well before. It’s almost impossible to have all your bases covered especially when it comes to bills. So when life gets out of hand and your finances become overwhelming, what do you focus on first?

Stick With the Basics

The first thing you need to do is to make sure that the basics are covered. This is obviously different for everyone, so make a list, find all your bills and decide what falls into the category of “basics” for you. Decide what is essential to your lifestyle you need to make it a priority to pay those bills and purchase those items. Here are some of the items that most people would consider basic necessities.

A place to live: Mortgage payments, rent or simply a friends’ place to stay at.
Transportation: Car payments or a monthly pass for public transportation, especially if you need to get to work or a job interview. Don’t forget about vehicle maintenance, you might be tempted to skip it but a small issue can turn into a really big and expensive one very easily.
Electricity/ heat/ hot water: Electricity and hot water are essential to everyone so make sure you pay those bills. Depending on where you live heat might not be a priority, but make the best decisions for your situation.
Food/ groceries: Everyone has to eat just be careful that you aren’t overspending when it comes to food, avoid going to restaurants and cook at home instead.
Healthcare/ insurance: These are two very expensive things but having them could end up saving you thousands of dollars in the future.
Insurance: Health insurance is obviously important but so is all your other insurance, home, apartment, car and life. Try to keep up with these payments; you’ll thank yourself in the future.

Next, you should figure out what bills you’re paying that aren’t necessary or essential, this way you’ll be able to eliminate the expense or at least temporarily stop it. Here are some items to consider when making this decision.

Cable/ satellite: If you’re serious about paying your bills then you definitely need to cancel your cable or satellite; it’s unnecessary and expensive.
Subscription services: This can mean magazine subscriptions or other online subscriptions. Chances are you won’t end up missing it.
Extra fees: This could be for anything, bank accounts, credit cards, insurance or your vehicle. Extra fees that you never thought twice about before could be costing you a lot of money so double-check everything.
Cell phone: We’re not suggesting that you cancel your cell phone service altogether but it might be a good idea to see if you can lower your monthly payment somehow.

This can be a difficult decision, but if you’re having trouble paying your basic monthly bills then you definitely need to consider eliminating the unnecessary ones.

The Creditors

After you’ve assessed your basic needs you should now review all your credit and loan documents, some of these bills might be just as important. Unfortunately, this will probably be the most difficult part; you’re going to have to make some hard choices and cutbacks.

Secured loans

If you have any secured loans then they absolutely need to be a top priority for you as the item in question can be repossessed if you fail to make your payments. On the other hand, if you have a secured loan for a non-essential item for example a recreational vehicle or a cottage then you need to consider selling that item. Mortgage payments on your primary home are more important than the ones you make on your vacation house.

Credit cards

If you are having trouble paying all of your bills then credit cards should be a low priority for you. You should consider only making the minimum payments and conserve your money for other bills. Don’t worry about your credit score, if you make the minimum payments on time it shouldn’t be affected too much. Keep in mind this is one of the only situations where credit cards are a low priority as you could potentially put yourself into serious debt if you don’t pay off the full balance each month.

Medical bills

If you suddenly had a medical emergency and now you have a huge medical bill to pay which is making it almost impossible for you to pay all your other bills then you need to consider speaking with your healthcare provider. Depending on your healthcare provider you might be able to work out a payment plan that better fits your income and makes it easier for you to pay off your other bills as well.

What Not to Do

We understand that being unable to pay monthly bills and provide the necessities for you or your family is extremely stressful and one of the hardest things to go through financially, but under no circumstance should you drain your retirement fund to pay off creditors or lenders. Losing all your retirement money will only make the situation worse; there are other options that you should consider first.

When All Else Fails

Unfortunately sometimes cutting back and creating a repayment plan is just not enough and more drastic efforts need to be made. Filing for bankruptcy is always an option, it might seem like the most appealing but when you are completely unable to pay any of your bills and your financial situation is out of control it could help you. It’s important that you consult a professional first as bankruptcy might not be a viable option for you, but if it is they will be able to help you get through the process and make the best choices.

On a much less serious note if you’ve cut back and are still having difficulty making your payments you should consider selling some of your possessions. There are lots of ways to do this online or you could hold a yard sale on the weekend. This probably won’t make you enough money to pay all your bills but even one payment will help ease some of the pressure.

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Caitlin Wood

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.