Almost every person who comes for a financial consultation is making every effort if possible to pay their creditors. As it becomes more difficult to make payments to everyone, there is a decision process that takes place on whom should be paid.
It is always important to pay the household bills and items that are necessary for daily living. These include payments for rent, utilities and food. If you have a mortgage and car loan and need to keep your house or vehicle, these items should be paid on an ongoing basis as well. Any creditors that are unsecured, such as credit cards, lines of credit, loans from friends and family members, would be paid last. It is important to pay each of these creditors on an equal basis and not pay only one of them.
It is important when your finances are getting difficult to manage that you treat all creditors the same, even though you may wish to pay off a close friend or relative or a “nice” creditor. My next entry in December will discuss why this is important.