inspired by GenerationX Finance: I Can’t Pay My Bills! What Bills Should I Pay First?

There seems to be a minor flurry of posts about “Which Bills to Pay First”. I don’t know how many of the people posting these comments have gone through an extended period of unemployment, but during the post-2000 downturn for IT workers in the U.S. I was unemployed for almost a year. Here are a few pointers that I came across the hard way. (Note: I had a small amount of savings put back, and lots of credit cards w/ empty balances. I had been working at getting out of debt before being laid off).

• Food Comes First – Everything else aside, feeding the family comes first. Do whatever it takes to make sure this happens. You can stretch a budget in amazing ways if you’re willing to forego the fast food, prepackaged meals, and expensive menus. Your parents did it, and so can you. Making things from scratch takes more time, but saves a LOT of money.

• Housing: Own - Normally, a mortgage company won’t start foreclosure proceedings for the first six months. They don’t want to take the house back and have to re-sell it. If they feel you’re being up front about what’s going on, they’ll usually work with you to make reduced or deferred payments. Either way, you usually have anywhere from 3-6 months before this becomes a pressing worry.

• Housing: Renting – Whole different issue. If you’ve been a good tenant, contact the landlord immediately and let him know what’s going on. If you’ve been frequently late already, you might consider holding off telling them. This sounds dishonest, but in an emergency, you don’t want to have to deal with a landlord that pre-emptively evicts tenants due to them losing employment. Try to get them in the loop ASAP, but temper it with an honest assessment of how good a tenant you’ve been.

• Utilities - When things get really bad, start talking to the utility companies. They can either defer some payments (if you’ve been a good customer) or can sometimes refer you to agencies that can assist with grants to keep utilities on. Many utility companies can’t disconnect you during the winter (notably Gas or Electric) because of local statutes.

• Cars/Transportation – Car companies, except the bottom-of-the-barrel used car dealerships, won’t take back the car quickly either. Same concept, they want your money, not your car. THIS IS NOT TRUE FOR VERY SMALL USED CAR DEALERSHIPS. Many of those COUNT on people defaulting and plan to repossess the car as quickly as possible. Transportation is a major concern when getting another job because many companies require a reliable source of transportation before they’ll hire you.

• Credit Cards/Loans – This is a sticky area. You can use the “Rob Peter to Pay Paul” principle with any cards that allow you to pull cash off of the cards to make payments to OTHER cards. I wouldn’t recommend this except in a DIRE emergency, but it is a strategy. Usually contacting the companies and letting them know your situation helps, but in most cases, for an extended unemployment, your credit is pretty much hosed anyway. You WILL miss paying something.

The one thing everyone should remember, is that there is no such thing today as a ‘guaranteed’ job. Planning is much better than reacting. Put your Unemployment Action Plan in place early, and you won’t have to consider some of these choices.