budgeting priorities which bills to pay first

Budgeting Priorities {Which Bills Should I Pay First}

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Setting budgeting priorities can seem like a daunting task. How do you know which bills to pay first? How can you protect your credit from plummeting? Is bankruptcy the best option? I will explain how to pay your bills in order of priority and importance. This is especially helpful if you’re overwhelmed, drowning in debt, or living paycheck to paycheck and just barely getting by.

Before I dive into it, I want to allow you the opportunity to grab a copy of my debt snowball spreadsheet tracker. It’s a simple spreadsheet; all you have to do is enter your debts and calculate how long it will take you to pay them off! You can play around with it to see how much of a difference an extra $500 payment makes. It’s super handy, and it’s totally free for you to use!

How to Set Budgeting Priorities When You’re Barely Making It

How to Prioritize Bills and Debt

This post may contain affiliate links. You can read my full disclosure here.

Whether you’re struggling with debt or you just don’t have enough money to keep a roof over your head, the best thing you can do is start with a written plan. You NEED a budget quick. Every single time you receive money coming into the household, you should set your budgeting priorities (who you’ll pay in what order). This includes bonuses or unexpected windfalls. I wrote all about how to create a budget here, but the idea is that you list your bills starting with four walls (rent/mortgage, utilities), add a grocery budget, transportation to and from work or school, and THEN list your debts. Your cell phone is NOT your #1 priority. As much as we like to worship the almighty LTE, please know that we survived without cell phones for years and years, and we didn’t die. Yup. I just went there. Priorities, people. Budgeting priorities.

How Much is Your House Payment?

Here’s a fun exercise. How much are you paying in rent or mortgage in relation to your income? Most financial experts recommend your house payment not to exceed 25-30% of your take-home pay. So let’s say you take home $5000 per month total, and your house payment is $1500. $1500 divided by $5000 is 30%. So, in this case, you’re on the high end of a mortgage payment. This isn’t ideal, but it’s doable.

Alternatively, if you’re calculating based on your gross income, those numbers will be much different. Gross income is how much you make before taxes, and any insurance or retirement expenses are deducted. So you may take home $5000 per month, but if your gross income is $6,000 and your payment is $1500, the calculation isn’t $6000 divided by $1500. Remember you calculate based on a take-home. So, don’t fudge the numbers to justify a higher house payment.

If your mortgage or rent is higher than 30% of your take-home pay, it’s time to either raise your income, start a side hustle, or sell the house and move to something more affordable. As a licensed REALTOR in Illinois, I can connect you to a reputable agent in your area (all 50 states) to assess the value of your home. This will tell you whether a move is even possible.

How Much is Childcare, And Do You Make Enough to Justify Paying It?

Years ago, when we first moved to Illinois, I started working at a bank. We quickly learned that childcare in our area was way more expensive than where we had moved from, and after taxes, childcare, and expenses to and from work, a business wardrobe, etc., I was taking home approximately $300-400 per month. Hardly worth it for 40 hours per week. That equates to about $2.30 per hour. Definitely not worth it! So I quit my job and stayed at home with the kids, transferred my real estate license from Georgia, and I worked from home, built my blog, and helped provide for my family less traditionally. This is where I want to caution you. Stop comparing your situation to every other mom out there. I received so much crap for staying at home with the kids, but to expect someone to work for 2080 hours per year for $400 per month is ludicrous. How much are you paying for childcare, and is it worth it? Find a way to stay at home if that’s what you want to do. And if you enjoy working, find a way to raise your income.

Ask Yourself, “How Much Debt Do I Owe?”

Here’s where that handy debt snowball calculator comes in. Gather all of your bills and list them, from the lowest amount owed to highest balance and enter them into the spreadsheet. The spreadsheet totals all of the balances owed and minimum payment obligations per month.

This can be a painful process if you haven’t added your total liabilities before, but it’s a crucial step in moving forward towards being able to pay off debt.

And look…I know if you’re barely scraping by, living paycheck to paycheck, the last thing you want to do is take a look at your less-than-perfect financial picture. But you can’t start moving forward if you don’t know where you’re going.

What About Hospital Bills?

Hospital bills and medical bills are the least important in the realm of paying bills. Docs are paid last, with whatever is leftover after taking care of all other financial obligations. If you don’t have health insurance and are self-pay, call the hospital and the providers to ask about discounts. Uninsured patients or those with medical cost-sharing programs can negotiate substantial discounts (most of the time). I’ve seen an urgent care bill of my own discounted 70% by Christian Healthcare Ministries. Don’t disregard hospital or medical bills. But they can usually be set up on 0% interest payment programs while you are getting back on your feet.

Ways to Make Extra Cash Today to Help Pay Bills

I’m embarrassed to admit that when I was a single Mom, we almost lost our house. I wasn’t a good steward of my money. I had payday loans with astronomical interest rates, and I was borrowing from my overdraft line of credit at the bank I worked at. If it weren’t for my grandma, I would have been evicted, with nowhere for my 3-year-old daughter and I to live. Not everyone has a grandma that is willing or able to help her make it just a few more days to the next payday.

3 Ways to Earn Cash to Help Pay Bills Today

  1. Donate Blood Plasma – You can make up to $500 per month donating blood plasma at your local plasma donation center. Here are the details, medical requirements, and an explanation of exactly how it works. Note: it isn’t painful (just a needle stick) and totally worth it (especially if you’re a two-adult household and can both donate). This is the easiest way to make extra cash in less than 4 hours per week.
  2. Declutter – Look around your house. What do you have of value that you can sell for quick cash? Please resist the temptation to pawn your items and instead sell them on eBay or Facebook Marketplace. My favorite place to sell items is Facebook Marketplace because you get the cash at pick-up. Items I’ve sold include coffee tables, end tables, picture frames, gaming consoles, old TVs or extra TVs, DVDs (everything is digital now anyway), appliances, and so much more. In my opinion, clothes haven’t brought much return, so I usually donate them to Goodwill.
  3. Start a Side Hustle – What skills do you have that you can use to earn cash right away? Are your knitting or crochet skills second to none? Are you the best antique furniture refinisher in town (but no one knows it yet)? Can you tutor kids or teach music lessons, earning upwards of $40-50 per hour? Find a side hustle and offer your services. If you have skills and can offer coaching, tutoring, or lessons, you don’t need start-up funds! Get to work!


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