When we first made a commitment to NEVER use debt again and started putting together a real budget, we realized we were coming up $300 short of being able to make all of our payments each month!
This isn’t as rare as it should be. Most Americans are living paycheck to paycheck and have no emergency fund or savings they can go to if something goes sideways.
So when you’re short of funds, which bills do you pay and which ones do you let slide? Who to pay first?
Believe it or not, most people prioritize the wrong payments. And that can really get them into trouble.
I’ve counseled several pastors who can’t pay their rent, but they’re all up to date on their MasterCard payment… You’ll notice that your credit card payment is all they way down at the bottom of this list.
Here’s who to pay first and why.
Biblically, tithing is not just about funding the church. We return 10% to God as a radical core understanding that God owns everything and we are His managers. This is about prioritizing God and trusting our lives completely to Him. This is also about building a habit of giving and generosity into our characters. For many pastors, tithing is actually a condition of employment. If you don’t tithe, you may get fired. I know that takes the joy out of giving. But seriously, why are we pastors if we can’t get this one right?
This is a “necessity.” You need food to live. Buy food.
3. Housing and Utilities
This is a “necessity.” You need to make sure you and your family have a place to live–with heat, electricity, and water. If it doesn’t fit your budget, you might need to live in a smaller place, but you MUST pay your mortgage or rent.
You probably need transportation to do your job. You may not need the SPECIFIC car you have… But you do need transportation to get where you need to go. If this means you get rid of your car and use Uber or public transportation, fine. But some form of transportation is a “necessity.”
Taxes and government obligations, like child support, come before your other “debts.” The IRS is notoriously nasty if they don’t get their money, so be sure to pay them on time every time. If you don’t pay them, the penalties and fees are high and they’ll garnish your wages (i.e. you’ll pay them anyway, just more).
6. Secured Debt
Secured debt is anything you bought on payments using collateral. Your home improvement loan may have placed a lien on your house. That means if you don’t pay your debt, they can come and take your house. If you buy a new sofa or dining room set on credit, they can come take away your furniture if you don’t pay. Car loans are also secured debt. If you don’t pay your car loan, they can come take your car away. Pay secured debt BEFORE you pay unsecured debt.
7. Unsecured Debt
Unsecured debt is the LAST thing you should pay. I know it feels like it’s the first thing you should pay, but that’s because you’ve been using your unsecured debt (credit cards) in place of an emergency fund. So you’re afraid if you don’t pay your debt, they won’t let you use your credit card anymore. Yes. That may be true. But unsecured debt, like credit card debt and medical debt are the safest debts to let slide.
If you find that you can’t pay all of your debts, don’t hide in shame from the debt collectors. Be proactive. Call your creditors before they call you. Tell them you won’t be making a payment this month and why. Tell them what you can afford to pay, if anything.
We were able to work with a credit card company to reduce our monthly payment from $980 down to $422 per month. That gave us just enough wiggle room in our budget to start getting some traction. They shut down the card and we couldn’t use it anymore. But the new arrangement brought the interest down from 24.24% to a measly 2% for repayment.
Let me know if there’s any way Clergy Financial Coaching can walk alongside you and support you in your pursuit of financial wholeness. It’s our specialty. Schedule a FREE 30-minute strategy session and I’ll be more than happy to help you get on the right path with your finances!