Q: Our mortgage payment was due on the first. It is now the 21st. We have the money to pay it now, but we don't have enough to pay all of our bills that are due. My husband thinks it would be better to pay our credit-card bills that are due and allow our mortgage to go 30-days behind. What do you think and who should we pay first?
A: Allowing bills to become delinquent is wrong, but available cash can be stretched only so far. That doesn't mean you are excused from payment, just that you need to know how to prioritize in a way that will cause the least amount of long-term damage and keep you in the best position to eventually catch up.
Here is a rule to follow when you cannot pay all of your bills: Prioritize and pay them according to the severity of the consequences you will suffer for non-payment.
If you do not pay your mortgage or rent on time you have to assume your mortgage lender or landlord will proceed against you to the full extent of the law. The consequence for non-payment is eviction and that is severe!
On the other hand, if you are late with credit-card bills the consequences will be unpleasant but not as severe. You'll get a late fee, an interest rate increase (ouch!), perhaps a phone call after 30 days, and for sure a blemish on your credit report if they go past the 30-day mark. But you won't find yourselves on the street with the kids and your big screen TV.
All that to say my advice is that you should always pay your mortgage or rent ahead of other debts. It should be at the top of your list with food, medication and child support. Other bills can slide for a while.
Excerpted from Can I Pay My Credit Card Bill with a Credit Card? And Other Financial Questions We're Too Embarrassed to Ask! (DPL Press, Inc., 2009)
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