My own priorities

#1 Food
#2 Mortgage and basic utilities
#3 Internet
#4 Transportation
#5 Telephone
#6 Clothing
#7 Student Loan
#8 Other bills (Cell)

Am I reading it wrong, or did she list "Gift Giving" as a priority over paying back creditors? I mean I can understand that you HAVE to get SOMETHING for Mom on her Birthday, but it seems like not incurring a late fee on a credit card would be more important than taking Mom out for a nice dinner, get her a card and pay a visit instead. She'll be just as happy.

Shouldn't outstanding credit card, or other high interest debt come above things like cable and internet?

@B: The internet? Is that thing still around?

I would agree to drop cable services, at least as a temporary measure, until you can pay your bills.

@GameVoid: I don't see gift giving on there, maybe you're reading it wrong? For me the Internet is above cell phone. That's just me though, I can't survive without it.

The above list must be Ben's priorities?? If you hit the link, you'll see the original:
#1 Food
#2 Shelter, rent, and basic utilities
#3 Clothing (upkeep)
#4 Transportation
#5 Telephone
#6 Federal Government, student loans, IRS
#7 Other bills (gift giving, paying your bills such as cable, etc.).
#8 Creditors, good faith with a letter

Yes, creditors are last on the list, and should be sent a letter explaining the situation and, if needed, a pro-rata plan. Some creditors may be below the line (they are not getting paid), and you should be honest about that with them. If you are in deep, then yes you should consider cutting things like cable or internet.

I can't tell you how wrong this is. If you have high interest debt, then that is your Priority.

After food and shelter (basic needs), you need to send whatever is left to pay off debt. Or you are just accruing more debt.

30 years ago, our parents were fine without Cell Phones, Cable, and Internet. So the fact that those are listed at 5,6, and 8 is ridiculous.

And CLOTHES???? Come on.

I don't understand the gift part either. Either find something you own that would make a good gift that you are willing to part with, or make them something (food works best), or just tell them "I fucked up, I am in terrible debt and all I can make you is this lame card, I hope you understand." If they don't they weren't your friends in the first place.

Internet is important for paying bills at the last minute, if that is something you run into a lot. Paying $15 a month for a rush payment per credit card is dumb when you could be paying $15 for basic DSL instead. Internet also provides opportunity for finding savings, comparison shopping, and buying at a discount as well as researching terms, and seeking help with debt. It also provides free entertainment which can help keep you from spending.

Pay yourself first. Even if it's only $20 a paycheck, put it in the bank & don't touch it.

@JAYSYN: I totally agree. When deciding whom to pay first, I always put aside a little in savings. If you wait to save until after you've paid everything out, it's doubtful that you will save at all.

I don't get the gift thing either. Perhaps it's because at our age, expensive/frequent gifts aren't the norm anyhow. Everyone's still got student debt, small children, and mid-level job income at best. Plus, most people have enough in the way of durable goods anyhow. For most occasions, food or crafts will do. My brother, who has struggled financially for years, always gives photographs (of us or himself, usually humorous) accompanied by funny poems or essays. Nothing from any store would be better than that to me!

I agree about keeping some kind of internet connection. It's important for communication, job hunting, bargain hunting, and information seeking. For what you get, it's cheaper than the phone. I'd give up my cell phone before internet. Or combine them into a voice/data plan and lose cable, phone, and internet.

@Jaysyn:

Sorry, I have to disagree here. If you have a debt that is accruing interest, paying yourself is a lost proposistion.

Using your $20 example.

$20 in a bank with 3% APY interest, 1 month = $20.27

$20 to Credit Card Company at 19%, 1 month = you owe $23.89

No matter how you look at it, unless your debt has a lower interest rate then your bank (which, doesn't really exist) paying yourself is just putting you in deeper debt.

The article is from 7 years ago -- wonder what year the IRS took her house

Check your credit reports first, because if its not there, then they don't get paid. Alot of companies as I've found, don't report to the bureaus(expensive, time consuming, etc). It may creep up later, and pay it then. Creditors fall about 50 on my list, after Playstation 3.

I would think the priorities might change a bit, depending on the situation. If I were to suddenly lose my job and find myself looking for another one, drycleaning (my suit for interviews) and office supplies (e.g.,resume paper) would move up the list. Internet and cell phone would be essential tools, and I'd probably be spending more on gas to get to interviews. Also, I'd be facing paying a COBRA premium to keep my health insurance going.

Right now, since I am employed and not having to live hand-to-mouth, I'm putting extra money toward aggressively paying off debt. If I were in a crisis situation (e.g., no job), those priorities would change, and my focus would move toward short-term needs vs. long-term goals.

@CreativeLinks: Your parents lived without clothes?

Why in the world would someone deep in dept be gift giving and watching cable before they get around to paying down debt. Get rid of the phone, transportation (if you've got a car payment get rid of the car and buy a less expensive car or take public transport), get rid of the cable and instead of watching tv get yourself a second job.

@rocnrule:

Haha but seriously... Your credit report has NOTHING to do with whether a you owe a creditor money, and NOTHING to do with the order they'll get paid when they haul you into bankruptcy court.
Anyone deep enough in debt that they have to chose WHICH creditors get paid needs to be talking with a bankruptcy attorney about, oh, six months ago.

"Gift giving" and cable tv are priorities over creditors? I think not. That's how the twit got into a bad situation in the first place.

On paying yourself first, I do agree it should be a priority to build up a small emergency fund. Otherwise, next time something unexpected comes up, you're just adding to your debt. You have to stop the cycle people! Here's my list:
#1 Shelter/housing
#2 Food
#3 Basic utilities- electric, gas, water
#4 Transportation/auto insurance
#5 emergency fund
#6 Creditors/Debt
#7 Phone
Drop the cable, go to the library for Internet, trade in the car for a cheaper one if you can't afford it.

I'm paying down debts, and I have this question: is it better to pay down a mortgage with a higher interest rate before education loans? both have tax advantages so it seems possible that this is an instance when it makes better financial sense to pay off the lower interest rate debt first. any help?

@forever_knight: if you pay off a mortgage quicker, you have equity earlier.

@GameVoid: That one boggled me a bit too. :)

@CreativeLinks: It was Clothes (upkeep) ... it does become very difficult to get a job if you have nothing to wear to an interview. And very difficult to leave the house if you have nothing to wear at all. :) There are entire charities devoted to helping poor people get appropriate interview clothes so they can improve their situations. So my charitable interpretation is we're talking clothes in a "food, shelter, clothes" kind of way, not in a "ooooh -- Jimmy Choos!" kind of way.

@forever_knight: Personally I'm paying down the student loans which are at a lower rate than my mortgage. My house continues to appreciate in value, but my student loans just sit there. Also, psychologically, the mortgage doesn't bother me much but the student loans feel like a millstone around my neck. And I can get rid of the mortgage completely by selling the house, which I can't do with the student loans; the only way out of them is payment.

That said, we're probably going to pay down the student loans to what we feel is a fairly negligible monthly payment for our budget and then let them ride that way since the interest rate on them is below what I can make in a low-interest money-market account, and we'll shift our priorities to investing. It's possible at that point we might pay down the mortgage if we had reasons to do so. I guess what I'm saying is since they're long-term debts, we're not locked into a permanent strategy. :)

#1: the pimp, of course

@CreativeLinks:

While your point is right, your math assumes values after 1 year, not 1 month. 19% is the ANNUAL rate, not the monthly.

1. Health insurance
2. Outstanding doctors' bills ($10-$20/week)
3. Food
4.

that's it. money runs out before 3. i'm sponging off my family, exchanging driving my father (whose license was revoked - old man driver) and my mother (vision is failing) for room, board, and DSL. No cable.

@CreativeLinks:
On the other hand, having saved up $1000 that you can use in an emergency instead of using a 18.99% APR credit card saves you more money.

#1 Mortgage
#2 Federal Government, student loans, IRS
#3 Creditors, good faith with a letter
#4 Basic Utilities
#5 Other bills
#6 Transportation
#7 Food

I can eat ramen, keeping the house is more important to me. And then not having it taken away for not paying the government.

@rhombopteryx: i always chuckle a little bit when i receive the bankruptcy notifications at work. you owe us $1000, you're only past due on half of that, you haven't sent a payment or made arrangements in over 6 months, despite repeated requests...but you had $3000 in cash laying around so you could sit down w/ a bankruptcy attorney?

funny how that works.

I suspect the people that put food over housing are renters with roomates who [they think] will cover their rent. Because the mortgage comes first. Always. In fact, food should be way down on the list. I can survive for a LONG time on free meals from friends/family and bologna/rice/ramen.

The important thing is to communicate with your creditors and pay something every month if you find yourself in crisis. Most creditors will work with you to arrange for partial payments for a certain amount of time.

If you must triage, you should pay secured debts (house, car) before you pay unsecured debts (credit, doctors). Because you are increasing your net-worth in the event things get worse and you need to liquidate your assets. No sense in throwing your money out the window.

After (1) Food, (2) shelter, rent, and basic utilities, and (3) necessary clothing, always, always pay your taxes and student loans. The government has given itself extraordinary remedies not available to other creditors. For example, student loan debt from or guaranteed by the federal government is not dischargeable in bankruptcy. Unpaid taxes can become liens on your property without a court order. If that wasn't enough, failure to pay taxes is a crime! Other creditors can't send you to jail.