Setting Financial Priorities

The economy remains sluggish at best and most people are still dealing with a reduction in income while the expenses remain the same or escalate.  Often times there is no longer enough money to meet all of the obligations (home, car, credit cards) and still put food on the table and keep the electricity on.  So how should you prioritize?

Obviously food and utilities are important to everyday living so they are non-negotiable.  You can cut back on these though.  Shop the sales, use coupons and look for budget friendly recipes.  You can also lower your utilities by reducing your use.  Switch to flourescent light bulbs.  Save up your laundry and don’t run small loads.

Most consumers are also making their car loans a priority.  If you work or are looking for work you need transportation.  A vehicle is especially important in an area like San Diego that is spread out.  If you stop paying the car loan they will repossess it and you will be out of luck.

Credit cards can go either way.  If you don’t pay them off you won’t be able to use them anymore and your credit will take a hit.  Your balance will go to collection and you’ll be hounded by those people.  So it’s a toss up on that. 

Finally, there is your home.  You need shelter; but do you need the shelter you are in?  Are you underwater with negative equity and likely to lose your home anyways?  If you stop making mortgage payment could you put that money towards paying off your creditors?  It may be a good time to short sale your home and downsize to something you can afford.