How to Pay Bills

Knowing how to pay bills is essential when you can't afford to pay them all. Do you know which bills you should pay first?

Too Many Debts, Too Little Money
If your mailbox is stuffed with more bills than you can possibly afford to pay, you've no doubt found yourself having to make difficult decisions about who to pay first. Should you pay your credit card company? The electric bill? Your mortgage? It's a tough call, but fortunately there's a logical answer. To start organizing monthly bills, create a folder system, and put the folder with the bills you absolutely must pay on top. Here's a list of whom to pay and in what order:

  1. Pay for the necessities first. Credit card debt can wait, but things like eating and shelter can't. After buying food and necessary medications, start by paying any bills that are essential to your existence. These include your rent or mortgage, the electric and water bills and your natural gas or oil bill, if applicable.
  2. Pay your secured debt next. If you have debts that are secured by your assets, you'll want to tackle those next. This could include a home-equity loan or line of credit, a bank loan or a title loan. You should also include student loans in this category; student loans aren't actually secured by personal assets, but they're yours to keep for better or worse. Government regulations prevent consumers from discharging student loans in bankruptcy.
  3. Pay your bills for services. If you have doctor's bills, car-repair bills, home-repair bills or similar service-related bills, you'll want to make these your next priority. You don't want your doctor or another must-see professional to refuse you as a customer because of unpaid bills. These also happen to be bills that are likely to move to collections quickly.
  4. Pay back personal loans. If you have borrowed money from a friend or family member, repayment of the loan should be your fourth priority. Owing loved ones can create a lot of tension, and it's best to resolve these debts as quickly as possible.
  5. Pay your credit card company. Unpaid credit card debt can be very damaging to your credit record. After resolving the previous four debts, this should be your next priority.
  6. Pay for the extras. Things like cable, Internet access and cell phones are nonessentials. Pay these bills only if you have satisfied all of your essential bills, and remember that these services can always be canceled if you don't have the money to cover them.

Customize the Bill Payment List
Have a bill that isn't covered on the list? Look through the six categories featured above and try to decide where it best fits. Then add it in for a list that's customized to your bill paying needs.

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