How to Triage Bills – Part 1

Jun 27, 2012 by

man with empty pocketsLet’s say a family member is abruptly laid off or temporarily disabled due to, for example, a health challenge. Ideally, you’ll have an emergency fund or other savings to help keep you afloat, but the reality is many families don’t have these resources. This article is not about wagging a finger and saying, “See, you should have had an emergency fund!” That doesn’t help when you’re facing a crisis. Regardless of how and why you got to where you are, the point is that, at least for the next little while, you won’t have the cash to pay your debts plus even basic bills. So how do you decide what to pay to minimize the short and long-term damage?

Devote Day 1 to Cutting Your Obligations

If you’re lucky enough to have followed Money Counselor’s 6 Steps to a Great Family Budget (see Free Downloads link at the top of this page), then you’ve already got itemized a set of what I label “Optional Expenses” that can be partly or fully dialed back. So start dialing, now!

Next, contact every party to which you send money regularly. For example:

  • Your utility providers (electricity, natural gas, fuel oil, water, sewer, trash pick-up)
  • Your insurance agent(s)
  • Your telecom service provider
  • Your mortgage provider or landlord
  • Your car loan company
  • Every credit card account you have that has a balance

Explain to each (write a short script to save time and be consistent) what’s happened and what you’re doing to recover. Ask for options to reduce temporarily your financial commitment. Depending on the circumstances, credit card companies may enroll you in a “hardship plan,” with a temporarily lower minimum payment and interest rate. You may be able to stretch insurance payments, say by paying monthly instead of quarterly or annually. Your utility companies may offer programs for low-income customers for which you now may qualify.

Devote Day 2 to Rallying Your Troops and Resources

See that section in the right sidebar of this page labelled “Crisis Help”? Use it. Click on every link and follow-up. Get your butt down to the unemployment insurance office if you were laid off. Learn where the nearest food bank is located and introduce yourself. Maybe you qualify for Home Energy Assistance. Lots of help—called a safety net—is available for people in short-term need. Too proud to ask for help? Get over yourself. Just resolve to give back with time or money once you’re back on your feet. Food banks are always in need of volunteers and donations, for instance.

Have a family meeting and ask every able-bodied family member to pitch in by cutting expenses and even earn money to help the family stay afloat. I bet your kid would feel really proud and come away with an improved sense of responsibility to take on a paper route or lawn care jobs for a while and deposit the earnings in a big “family unity fund” you set up in a kitchen cookie jar.

Your Ideas?

What would you do to help close the gap between income and expenses during a temporary family financial challenge?

Next: Part 2 of “How to Triage Bills”

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