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Prioritizing Expenses

It can be tough to decide which bills and monthly expenses to pay first, especially if you're on

a tight budget. Although it's important to try to make all of your monthly payments, it may not always be possible.


If you're struggling to decide which bills to pay first, these tips can help you make a wise choice.


Make a List of Your Expenses

Start by making a list of all the bills you pay each month and the amount you owe. Don't worry about listing these in any particular order, the point is to calculate the total cost.


Typical monthly expenses on this list should include the following:

  • Housing

  • Utilities

  • Food

  • Transportation

  • Insurance

  • Debt (student loans, credit card payments, etc.)

  • Medical expenses

  • Child care

Identify Your "Must Pay" Expenses

You probably have bills for some (or all) of the things on your monthly expense list, but you may not have enough money to pay all of them. This is where prioritizing, or deciding what to pay first, comes in.


Paying for shelter should always be the first priority, so you continue to have a roof over your head. If you pay for utilities, like heating and water, you may have a month or more to make your payment before having your service disconnected.


Your food budget is a great example of an expense that is both a priority and something that you can adjust if you have more pressing bills to pay. There are probably items on your grocery list that can be removed to save money for other bills that month.


Go through each expense on your list and make a note of any you can delay payment on or change for a brief period. The expenses left are your "must pay" expenses for the month.


Pay Your Debts

Once you know your "must pay" monthly expenses, focus on paying any bills that could impact your credit, including debt from credit cards and loans. A record of late or missed payments could stop you from borrowing money or getting a place to live in the future, so it's a good idea to look at your credit report on a quarterly basis to get a full picture of all the money you've borrowed from lenders. Luckily, there are a number of websites that let you access your credit report for free.


Remember that some debts, like mortgages and car payments, are secured loans and are tied to your house or car. If you miss payments, your lender may eventually be forced to repossess these items. If you find that you don't have enough money left to make these payments after paying for your monthly expenses, contact your lender as soon as possible to negotiate a more affordable repayment plan.


Prioritizing bills and expenses in order of importance lets you meet basic needs, protect your credit, and lower your financial stress. This, in turn, allows you to focus on finding ways to cut costs or increase your income so you can pay all of your bills each month and even start saving for the future.

TOOLS TO HELP

Cash Flow Budget Template


Prioritizing Expenses Worksheet

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