Recovering from a personal setback will likely find yourself having to reconsider financial priorities in targeting where to focus effort and resources. Not all household debts will equally impact your family. First payment priorities should be all bills associated with your essential needs, including utilities, food, mortgage or rent, and insurance. While you can most likely find ways to save on all of these bills, by cutting back and negotiating lower rates, paying them is extremely important.
Also, having appropriate health insurance coverage is essential because a medical emergency could put a huge dent in your finances. Check out government offered health coverage or HMO companies that offer lower but practical medical coverages.
Here are some examples on how you can prioritize your financial obligations:
> First priority debts – would include your rent or mortgage, tax liabilities, insurance premiums, auto loans, and utilities.
> Second priority debts – may include other secured loans through financial institutions, such as a car loan.
> Third priority are lenders – this includes retailers, hospitals, doctors, credit card issuers and other unsecured creditors.
Remember, each person will have his or her own unique list of priorities. Realize that just because a category of debt is listed as a third priority, does not mean it isn’t important. It simply means you need to contact and make payments to the higher priority creditors first. For help determining your financial priorities.
Set your priorities – create your financial priorities worksheet, evaluate if these are “needs or wants”, then rank your payment priorities.
Priority – make a list of all your debts; rank and figure out when, and how will pay your debts.
On your spreadsheet, create the following tabs, and make notes on how will you resolve or attain your goals:
Paying off unsecured debt
Paying all secured debt on time
Saving for a down payment on a home
Buying a car
Taking a vacation-Having money for entertainment
Starting/maintaining a savings account
Setting SMART financial goals
Before you think about setting goals, review the five parts of SMART goals.
S A smart goal is specific. It pinpoints something you want to change to achieve.
M A smart goal is measurable. You can measure or count a SMART goal.
A A smart goal is achievable. Setting goals too high can lead to frustration.
R A smart goal is rewarding. Reaching the goal should be a reward for your hard work.
T A smart goal is trackable. Set milestones and schedules for your goals.
After you decide what your priorities are, review your budget and determine which bills you are unable to fully pay. Then, contact your creditors to discuss your situation. Explain that you want to pay your bills but due to your setback, are unable to. In some situations, you may be able to get a new payment plan.