The past few years have brought financial turmoil to millions of Americans. A turbulent economic climate has resulted in many households having their income reduced or losing income entirely. When this happens, it can be hard to know how to prioritize expenses if you can’t afford to pay for everything. If someone is experiencing a reduction in income or loss of income, here is what I suggest.
Set a Money Date
Set a money date with yourself or with your spouse or partner. It’s important to take inventory of your income and expenses to truly understand what you can afford and what you need to pay for. These conversations can be very difficult, but if you set aside time to deal with it, the process is less overwhelming or stressful.
A money date can help you cover the most important themes of your household finances, including cash flow, outstanding debts and savings goals. Make sure you go over any big bills or expenses that are coming up in the next few weeks or months.
This is also a good time to discuss each person’s priorities and values regarding finances. By laying out your collective and individual priorities, you can make a budget that everyone is happy with. This makes sticking to that budget more sustainable.
Consider the Consequences of Not Paying
A simple way to decide which bills should be paid first is to weigh the consequences of not paying each bill. The more severe the consequences of non-payment will be, the bigger the priority it is to pay that bill.
If there are some bills you simply can’t pay, it’s important to be proactive. For example, you certainly don’t want your phone turned off. Contact your provider and ask if you can split the bill. And if you’re falling behind on rent or mortgage payments, contact your local housing counselor or rental assistance program to ask for help.