If you can’t pay your bills, the squeaky wheel should NOT get the oil...
At least, not until you’ve assessed all the other demands for oil.
That’s a quaint way of saying that your decisions about which of your creditors to pay when you can’t pay your bills should not be based on who is on the phone.
The creditors who call you are the ones with few other tools in their toolbox to collect the money you owe.
They hope to get you to write them a check for money they can’t easily get any other way.
Just because they squeak, doesn’t mean they should get paid first.
Important creditors don’t need to call
The debt collector on the phone certainly feels like he has invaded your sanctuary. Life is challenging enough without your money problems interrupting home life.
You are tempted to do anything to get them off the phone. Or keep them off the phone to friends and family.
But the creditors that really matter don’t bother calling.
- The taxing authorities just levy your accounts.
- The mortgage creditor schedules a foreclosure.
- The car lender repossesses the car.
- The ex spouse gets you cited for contempt for not paying support.
These creditors have real weapons, and those weapons aren’t the telephone.
Get them to leave you alone
You have a federal right to have debt collectors stop calling you.
State law may give you other rights not to be contacted.
Write a do-not-contact letter, keep a copy, and send it return receipt requested.
The squeaking should stop. Then start prioritizing.
Who to pay first
It’s your checkbook. You take control.
Take care of current living expenses first. Short the landlord and you’ll be homeless. Miss the car payments and you can’t get to work.
I’ve seen too many people tinker with their tax withholding to create cash flow to pay credit card bills. They have effectively made the toothless credit card creditor happy at the expense of taunting the big dog, the IRS.
Rest assured, the IRS has more collection rights than a credit card company.
Make a plan and stick to it.
Hands off the retirement money
It’s tempting, if you’ve been wise enough to set money aside for retirement, to dip into that fund to get out of today’s money jam.
Don’t do it.
Retirement funds are precious and almost everyone I talk to has saved far too little. The older you are, the less time you have to restore what you’ve already saved, when you should be adding to that store.
Your creditors can’t take your retirement savings; don’t you do it for them.
If the money doesn’t go around
Get help. Get input from a credit counselor or a bankruptcy attorney.
Find out what your options are. Get objective advice on a long range plan.
Don’t let the threats on the phone tell you how to manage your money.