Prioritizing After A Job Loss
Suzette's husband lost his job last week. They have enough money just for this month and wonder which bill they should pay first. The money they have saved and their expenses factor big into Dave's answer.
QUESTION: Suzette in Michigan has a husband who lost his job last week. They have enough money just for this month and wonder which bill they should pay first. The money they have saved and their expenses factor big into Dave’s answer.
ANSWER: You don’t have much money, so you have to make it last as long as we can make it for the most important things. You would use your emergency fund for this, but not to pay a credit card bill. If you have $2,600 saved and your mortgage payment is $1,700, then by the time you do that and then eat, you’re done. I’m not even sure you should pay your house payment out of the $2,600.
I think food is most important. By the time you pay your lights and water and food, you’ve got maybe three months’ worth of income. We’re going to do that right now. Nothing else. If you can get some money coming in, then you take care of the house as soon as you can. But if you pay the house bill and next month you don’t have any food for your kids, that’s not going to be smart.
It has everything to do with him getting a job or three jobs to get this mess cleaned up. We are going to prioritize food, lights and water, then house and transportation. If you have an extra car that is worth $2,000, then sell it. It would be nice to have a spare, but right now we’re trying to feed the children.
As soon as he has a job and things get rolling again, the first thing we’ll do is build up a $1,000 baby emergency fund. The second thing we’ll do is try and move up out of some of these cars. Then we’ll work on any debts that you’ve got. You can’t afford to pay credit cards right now. If you have to choose between paying MasterCard and feeding your kids, you feed your kids.
We are not going to give any money to MasterCard and risk getting your lights cut off. We’re not even giving any of it to the house payment. You can get five months behind on your house payment before they foreclose. I don’t want you to, but if I have to choose between losing the house and feeding the kids, I’ll feed the kids.
Right now you need to live on beans and rice and it’s very important that dad gets some kind of job in the next two weeks like delivering pizza, working at a construction site, lifting boxes at UPS or landing a big job. But he has to get some money coming in because this is just really tight.