If you are in debt, figuring out who to pay first can sometimes be a difficult task. Of course, you’d like to pay everyone what they’re due, but if you have less income than what you owe, you may have to let a bill or two wait for a while. Too often the decision on who to pay is based on what creditor is screaming at the loudest.

But the fact is all bills are not created equally. While failing to pay any bill will undoubtedly hold negative consequences, some consequences may be more severe than others. When deciding who to pay, prioritize your bills by ranking the penalties of not paying the bill, and take care of the ones with the most dire consequences first.

Here are some of the bills you should consider paying first:

• Rent or Mortgage. Miss some of your housing payments, and you could be thrown out of your home. While failing to pay your credit card will put a ding on your card that may later make it more difficult for you to get a low mortgage rate or a favorable background check on rental application; paying to keep a roof over your head in the here-and-now is more important. Beside, a foreclosure or evection will put a larger ding on your credit report than being late on credit cards will.
• Child Support. Miss a few of these payments and the only house you’ll be living in is the big house. If you are destitute and truly can’t make your payment, go before the judge. Only the court can grant you a reprieve from your child support payments.
• Utility Bills. A house isn’t very useful without electricity, gas or a phone. But in this day-and-age, remember that you need only one phone, having both a cell phone and a home phone is a convenience, not a necessity. Consider canceling one of the two. Since many cell phone providers carry contracts with hefty cancellation fees, it may be less costly to cancel your home phone.
• Taxes. One of life’s two certainties, the taxman doesn’t take a break when you’re down on your luck. Failure to pay could result in garnished wages. If you can’t pay, contact a friendly IRS agent and ask to work out a payment arrangement.

Next, there are several other bills which may or may not be considered essential, depending on your situation:

• Car Payments. You may need to keep your car to commute to your job (or to interview for a job). But if you live in an area that has a good public transportation system, you may want to consider selling your car to pay off your car loan or other essential bills. Or, volunteer to give your car back to the lender to avoid repossession.
• Car insurance. Many states require you to have general liability coverage to drive. However, you may want to consider eliminating other forms of coverage that are not required by law such as collision coverage.
• Other secured loans. If you have any other loans you had to put down collateral for, remember it could be repossessed without a court order, depending in what state you live in. Consider how important the item you put up for collateral is to you and whether or not you would need it after it is taken from you. Keep in mind that just like many other financial obligations, missing payments or defaulting on this loan will result in another negative ding on your credit report.
• Health insurance or doctors bills. It is a sad and fact that if you are in between jobs or are working at a company that doesn’t provide health insurance, your insurance costs will be hefty. Still, if you are currently receiving medical care, or need the assurance of knowing you’ll be covered if a sudden medical emergency arises, it may be worthwhile to keep your coverage. Consider insurance with a high deductible, which is basically designed to offer coverage if you need emergency care in a hospital. It probably won’t cover routine doctor’s visits, but your premiums may be more affordable.

While the remaining bills are important and may have many negative consequences if you fail to pay them, they are not essential. Attempt to pay them only after you have budgeted for the essentials above, as well basic necessities such as food and clothing:

• Credit cards. Miss a few payments and you’ve you’re likely to see negative marks on your credit rating. You’ll also likely be facing calls from collection agencies, increased late fees and high interest charges, and maybe even potential lawsuits as creditors try to collect their money. While there is no denying these situations are extremely stressful, paying these bills should never be your top priority.
• Debts to friends or family. You may have a (justified) moral responsibility to pay off personal debts, but there are generally few financial repercussions on being late on a payment to your cousin Larry. If you tell Larry you will have to be late paying him because you have to make a mortgage payment, he’ll likely understand. But your mortgage company is likely to be much less forgiving if you tell them you didn’t make a payment because you had to pay Larry.
• Bills for legal or accounting services. While you probably should expect good financial advice from an accountant you owe money to, paying for their services is not a matter of life and death. While it may not be a stretch imagine that a lawyer you owe money to might sue you, bills for your housing are still more pressing.

Being in debt can be maddening and frustrating thing. But don’t let the frustration force you to make poor money choices by paying for non-essential bill before you’ve taken care of the necessities.

David Plowman

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If you are in debt, chances are you have had the unpleasant experience of dealing with bill collectors. As difficult as this experience is, you can make the experience easier on yourself if you know your rights and don’t let them harass you.

The Fair Debt and Collection Practices Act, puts limitations on what third-party collection companies can do. (A third party collection company is an agency that attempts to collect on another person’s debt. The law does not apply to a creditor’s in-house debt collectors.) If you fall behind on certain bills and are being contacted by a collection agency, understand there are certain things bill collectors can not do:

• Call you at inconvenient times. Generally, bill collectors can only call you between the hours of 8am and 9pm, unless you agree to be contacted at other times. However, “inconvenient” can vary from person to person. For example, if you work the third shift and sleep during the day, an 11am call can be inconvenient, and you can ask collectors not to call you at that time.
• Call you at work if you advise them your employer does not allow such calls. It is generally up to your discretion to decide if your employer allows such calls. You do not need your supervisor to tell the collector the employer frowns on the calls.
• Inform friends and family members about your debt. Bill collectors can only report specific information regarding your debt to the original creditor, credit reporting agencies, or your attorney. While they may contact your friends and family members to get limited information such as your contact information and where you work, they cannot inform these parties any details of your account.
• Contact you if you have an attorney. If you have an attorney, a bill collector must deal with your attorney, the collect cannot contact you directly.
• Make false claims. Bill collectors can not claim you may serve jail time if you don’t pay, threaten to garnish your wages, liquidate your property, or file a lawsuit if they have no legitimate plans to do so.
• Make threats or harassing statements. Collectors are forbidden from making any threats of violence against you, nor can they use profane language.

Finally, according to the Act, you can contact a collector in writing and tell them to stop contacting you. The collector may then can communicate with you to verify they will cease contacting you or to inform you that the creditor or collector intend to take a specific action. However, this does not absolve you of the debt, nor does it prevent you from being sued by either the creditor or collector.

By knowing your rights, and what bill collectors can and cannot do, you may relieve some of the stress of this situation and keep your focus on your primary goal of getting out of debt.

By David Plowman

411Web provides finance ideas for its readers. Our postings, articles and e-mail responses are not meant as to serve as personal advice, nor are they endorsements of any investment or personal finance strategy. Any financial or investment plan must take into consideration an individual’s personal experience and circumstances. Individuals may want to contact their investment or tax advisor on these subjects.

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Chances are, if your employer provides life insurance coverage, you have no idea whether it’s whole or term. Most Americans who receive life insurance as part of a benefits package never bother to pay attention to anything other than the beneficiary amount. However, if you are self-employed or simply interested in your benefits, you may want to understand more about life insurance.

Term life insurance is perhaps the concept that most readily comes to mind. This policy is straightforward insurance that pays the beneficiary the secured amount of the policy when the insured dies.

There are two types of term insurance premiums that can be paid into the policy: Level and annual renewable. Level term premiums remain constant through the life of the policy term which can range from one to 30 years, depending on your policy. On the other hand, annual renewable policies are renewed once a year, and premiums increase with your age.

Many term policies are flexible, allowing you to convert to whole life without a medical exam.

Whole life insurance carries the same basic features of term, but also has an investment component in the form of stocks, bonds or other investment instruments.
There are two basic portions to a whole life policy—mortality and reserve. The mortality portion of your premium goes to insurance coverage, while the reserve portion is directed to an investment. Over time, more of your premium goes into the mortality component of your policy.

Your whole life policy will accumulate cash value over time. In some situations, you may be able to borrow against its value or pay a surrender fee and cash-out a reduced amount of the accrued cash value. Whole life policies can also be used as a part of the overall estate-planning process. An insurance trust can be created, which will apply the proceeds of the policy to estate taxes after death.

Before purchasing a whole life insurance policy, consult a financial planner, actuary or accountant. These professionals can analyze the policy to evaluate the strength of its investment component. Just as with any other investment, it is important to know exactly where your money is going. While many term life insurance sales representatives will tout whole life insurance as “forced retirement savings,” some financial experts caution that other investment strategies may offer a much better return on your investment.

Whole life will typically cost more than term due to the investment component. Both whole and term life policies generally begin to increase in cost when the insured is over the age of 50.

By Darryl James

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Face it; we all know the value of saving money. Read any financial advice column and you’ll hear the familiar mantra: “Put your money into IRA’s.” “Invest your money in the stock market.” “Set aside a nest egg for your children’s education.” “Save for a rainy day.”

Without denying the importance of stashing away some green for a brighter tomorrow, for many of us it can be hard to read these headlines without our rolling our eyes. ”Absolutely, it is a good idea to save, but with what money?” say most of us who are struggling to live paycheck-to-paycheck. “If I had an ‘extra’ $500 a month, of course I’d put it in an IRA, but right now, I just don’t have the bucks. Saving money is just for the rich,” we say to ourselves bitterly.

But the good news is you don’t have to start out saving in large amounts. In fact, deciding you will one day go from no savings to contributing $500 a month to an IRA isn’t realistic, and may be setting yourself up for disappointment. Building a large nest egg starts not in one broad stroke, but in many small, incremental steps. Little things do add up.

Try these simple things you can do to start saving no matter your budget. You’ll be surprised at how quickly the savings add up:

• Save that change. Every time you pay with cash, stash the change. Keep the change in separate jar at home, and periodically deposit the coins into your savings account. You’ll probably end up with an extra $500 annually.
• Avoid ATM surcharges. Speaking of cash, don’t pay money to get it. Unless you are using your bank’s ATMs, you are probably getting charged at least $1.50 on each transaction. That might not seem like a lot, but if you go to the cash machine two times a week (a conservative estimate for some) you’ll end up paying $150 in a year. Go a little out of your way to your bank’s ATM or get cash back when using your debit card at your local retailer.
• Bring your lunch to work. Going for fast food over your lunch break? Even if you eat off the “value menu, you’re probably spending at least $5 a day. That amounts to a whopping $1,300 a year. Brown bag it or bring leftovers from the night before and save.
• Become a smart grocery shopper. Clip coupons, but only for products you already use. Even then, compare the coupon “savings” with the everyday savings on generic products. Even with the 50-cent coupon, the name-brand cereal might still be more expensive than the generic equivalent.

This is just a short, partial list of everyday savings. But you’ll quickly realize that these small and easy ways to save dough will quickly amount to a nice windfall. You’ll be energized to find more ways to save the green.

After a few months, you’ll have enough to make regular contributions to your IRA, and be able to watch your money earn interest and grow, just like it does for those rich folk.

By David Plowman

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The basic concept of Occam’s razor, that the simplest explanation always works, just doesn’t seem to work in the sometimes strange world of determining a credit score.

For example, the simple-is-as-simple-does theory of credit card management says that you should have one credit card, use it sparingly and pay off the entire balance every month. Such fiscal responsibility has to reflect well on your credit score, right?

Well, not exactly. Though it may seem counter-intuitive some, your credit score—the all important number usually between 300 and 850 that is used by creditors to determine your creditworthiness—may not rise as quickly as you like if you use this logic, according to many credit counselors. By their point of view, if you only have one credit card, you are not giving them many opportunities to demonstrate your credit worthiness.

Instead, credit counselors suggest that you have two or even three credit cards that you can successfully manage. Additionally, your credit score will improve if you successfully make payments on different kinds of debts such as credit cards and installment loans, like a loan for a car or any other loan where you make regular, monthly payments.

Of course, the key word is to successfully make payments on these credit cards and loans. If you take on more debt than you can handle, you will hurt your score.

Conventional logic also suggests that it is always best to pay off your balance in full every month. If you maxed out your credit card with one large purchase, and paid the balance five days later, you would be both money ahead and demonstrate your credit worthiness, basic logic would seem to suggest.

While that may be a sound financial decision and one that could save you from having to pay finance charges, that line of thinking may not boost your credit score as much as you would think. Instead, what matters to those keeping score is the amount you charge much lower than you credit limit.

Ideally, credit counselors say, you shouldn’t charge more than 30 percent of your credit limit. What’s more, your credit insurer takes note of your balance and sends a report to the credit bureau once a month. If that snapshot of your account happens immediately after you have made a large purchase, but before your credit company received your payment, it may give potential lenders the impression that you are overextended on your bills.

Though it may be counter-intuitive at first, it may make sense to determine how your credit score is calculated so that you can boost your credit rating, and potentially be able to secure a lower interest loan. That’s a strategy that makes sense and could save you more than a few cents.

By David Plowman

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