No man is an island. Everybody needs help now and then. And we are not talking about personal matters. We are referring to financial matters. We get to a point where we have to buy something out of absolute necessity, but we just can’t pay for it in full just now. An example of this is a home.
So now the time has come to repay on what you own. You simply must have the discipline to plan out how much money you should have saved so that when time is up and you have to shell out the money owed (plus interest), you won't have a difficult time doing so.
You need to prioritize which debts must be paid first. Prioritize your bills. You need to make a list because that way it will be more organized and you will be able to see it right in front of you.
This is what is called "establishing goals". First you need to establish what essential debts must be prioritized over those you can pay later.
The essential debts are those debts that should be at the top of your list. These are usually:
- Rent / Mortgage:
Naturally, who in their right mind won’t pay as soon as possible? Paying your rent or mortgage bills on time helps you have a roof over your head.
- Child support:
This is important because if you don’t pay on time, there is a possibility you can go to prison.
- Car Expenses:
This also includes maintenance for the car.
- Utility bills:
You need to set aside a budget on heating, water, gas, electricity and/or telephone when you receive your paycheck. Then, when the bill arrives, you have something prepared.
- Other secured loans:
These are very important priorities because if you don’t repay collaterals, the creditor will take the property even without a court getting involved.
The lower priority debts can usually be set aside because when these are not paid, they do not have that much of a side effect. It’s a desirable goal to get them paid but not really an immediate priority. The concern that you need to consider when you don’t pay lower priority debts over a long time period is the negative effect it can have on your credit report...
- Department store and gasoline bills:
Failure to pay these costs can result in losing credit card privileges. If the amount is too large, you might be sued.
- Loans from friends and relatives:
Morally speaking, there's an obligation to repay, but sometimes because they are family, we think that they will understand if we delay. Talk with them to see if you can delay the payment and ask them for how long.
- Newspaper and magazine subscriptions:
Little by little, if you have not paid, they will amount to sizeable figures.
- Accounting and legal bills:
If these remain unpaid over a long time period, you might well be sued.
- Other unsecured loans:
When considering unsecured loans, remember that there is no collateral for the debt. This means that the creditor can sue and then collect the debt.
Now here is the confusing part. Some of your bills may border between "essential" and "non-essential". If you delay payment over a long period of time, they might have consequences in your personal life...
- Auto insurance:
In some USA states the consequence can be losing your driver’s license.
- Medical insurance:
If you have an imperfect record, you could well have a difficult time getting new insurance in the future.
- Credit cards & charge cards:
If you do not pay your bills on time, you risk losing your credit privileges and you may have a hard time when applying for a new credit card.
Now that we have set out the groundwork on how to prioritize your bills, we move on to another factor: the importance of having a time-frame.
Before starting it is best to have a calendar in front of you. A palm pilot or the calendar in your Microsoft Office program will be fine. First mark all the dates when you would normally have to pay the specific debt, regardless of whether the debts are "essential" or "non-essential". Then what you can do is set aside the bills that are allotted for those debts.
As for the budget, prevention is always better than cure. You know how much income you earn each month. Keeping that in mind, you need to alot what percentage of your income will go to pay certain expenses. Once you have done that, you really must do your best to stick to that budget.
For example, if “X” is the amount you alot for leisure spending, then that is simply the maximum you should spend for leisure. If at some point it went overboard, then there needs to a sacrifice on another category, such as food. That seems off, right?
So even when budgeting, you must also list which is the number one priority for you. And have the discipline to stick to your priority, your budget and to your time frame. If your budget is realistic and your discipline holds firm, then paying the bills will not be any problem.
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