How to Pay Bills and Debts
A guide to Bills and Debts priority self-management The best way to pay your bills:
Our most important subject.
If there is one thing we have to talk about here at Rebuild Repair Credit it is how to pay bills and debts. Yes, we all have bills and debts; and yes, they most certainly are overwhelming.
Any one of many unfortunate circumstances may lead you into financial ruin.
That is, unless you follow these tips carefully.
It Happens To Everyone…
At Rebuild Repair Credit we do not judge, because I really think most of us have been there. You lose a job you were counting on. Miss a bill or two and bam! The (censored) hits the fan. Over-due debts flood you. What a mess! How should we recover and begin better?
Well do not feel bad. Even the wealthy often have bills and debts they did not count on.
Many wealthy people do not manage their bills and debt right, and there are far too many to list.
But what is the point? Nobody likes to talk about their debts. I don’t even like to.
Bills and debts are your first priority in life; only with that mindset will you survive with your head above water. We will list them in the order of importance for you. Finally we will summarize why this order is important.
This very first bill you should pay every month is…
Cha ching! Pay day! Decision time!
Should we: A. Go out? Or B. Pay Bills and Debts?
You just got that paycheck. What’s the first thing that comes to mind?
A. Go out? Sorry, wrong answer. Luckily for you this a reality based game, and not reality.
Because of that poor decision, you are now homeless. Harsh game right?
The answer is B. What is the most important thing to your everyday survival?
You probably have guessed the answer by now. The very first one of the bills you should pay every month, and out of each check, is your housing expense.
You know what is nice in life? Please let me tell you, a house. When it is badly storming, or a tornado style flash flood storm is going on, or if it is snowing heavily, what do you need more than anything?
Sweet Shelter Protect Me!
Shelter; it is simply key to your survival. You have to live somewhere. Sure you could live in your vehicle but do you really want to? Not many people do, and frankly most do not.
Yes, housing expenses absolutely come first, ahead of all bills and debts. Please, if you take nothing else away from this today, let it be that.
When it is over 100 °F or under 50 °F I sure do like to have a place to lay my head that is between those temperatures.
We would like to think that everyone would. Because of the fact that you can actually die from exposure to harsh climates, housing takes essential priority over all bills and debts.
Sure, we could have made mistakes others have made.
By this we mean maxing out our home loan.
We were offered a max mortgage at least four times what we got.
Why did we get a mortgage that was so small? Where is the logic in that?
The house we picked out was only $35,000 instead of $200,000.
The logic here is we will have a very affordable mortgage.
Our mortgage is actually so affordable that unlike most people we have a plan to pay it off.
Not just pay it off, but we will be paying off a 30 year mortgage in about 11 years!
So as you can see from the above photo, total cost for our mortgage is under $371 monthly!
We had been paying $600-$800 a month for rent! Owning a home for less than renting is priceless.
Without great credit this would not be possible.
To answer a few very intelligent reader questions for all we have posted them here.
I want to pay my mortgage early! So how will you pay it off so soon? Are you rich is that how?
No, we are not rich yet, we manage our income and expenses correctly.
So tell me how are you paying your mortgage off twenty years early?!
Over the life of a 30 year loan you will pay a lot of interest, often more than home value.
If you can pay anything extra above your payment you will pay off early.
Personally, our plan is simple. Since we were paying $600 in rent that is our mortgage.
Mortgage payments include mortgage insurance, home insurance, tax, interest and principal.
Again our total for those payments combined is $371.
So if we take $600 and subtract $371 this leaves $229 every month extra on our mortgage!
This $229, seemingly small, is so very valuable. But why?
Any extra paid above your payment skips tax, interest, home insurance, and mortgage insurance.
So the $229 extra monthly comes directly off of the principal of our loan!
Because you are following our great example you too can pay off your mortgage in 1/3 the time.
In addition to not having a house payment 20 years sooner, we will also sharply reduce interest.
So that $229 looked pathetic at first but saves us over $25,000 in interest over the loan!
Housing Expense Summary
In summary, your housing expense is most important of all bills and debt. Without housing costs paid upfront, in advance (having several months worth in savings), or on time, you will surely fail in life.
To thrive you must take the housing expense as most critical. Because it is, and you must have it, period.
You have now learned the most important lesson: Keep this housing paid first at all costs.
I have and would again: skipped meals, skipped many fun activities, and many great deals on items needed to pay rent. If that’s what it takes do it. Please take your bills seriously, especially this most important of bills.
Keep the Lights on Pay Your Utilities!
Secondly, on our path to financial independence, we will focus on the number two on our most important list of bills and debts.
Do you like to see at night? Would you like to stay warm in the winter? Like to stay cool in the summer? Want water to drink and flush your toilet? Want trash in a front yard mountain or in the landfill? You may have guessed the second group of bills and debts by now and it is utilities.
Got your check again, you really want that new phone or pair of shoes. Should you get it now?
Too soon, sorry not yet you still need to wait. Because what’s more important after housing?
Keeping the lights on. Keeping the toilet flushing. Being able to shower. Not developing your own landfill.
Things we often take for granted other people would die to have. Make sure these essentials stay paid.
Power, water, sewer, and trash. Do not slip and miss any of these bills and debts. It is easy to do. Sometimes we only get a pink disconnect notice and not even an actual bill! Those need paid promptly. Do not forget these urgently required bills and debts.
What? Double Pay? What is that?
So you now have a roof over your head. You have the utilities paid on time or early. We even recommend double paying on them. Keeping a month ahead with all of your bills and debts. This gives you cushion room should a rainy day happen.
Yes this hurts in the short-term, but we are looking ahead to a brighter tomorrow! Please allow us to help! Please listen closely because we will now explain why this is so important.
So why should I double pay now?
Say you run into a hard time it is a great thing to know that you have cash on hand to fix it easily.
You will have this cash in hand by properly investing in your future, your bills and debts.
This has saved me from terrible things happening many times already. I will continue and so should you.
To close, pay your utilities as a second priority of bills and debts in life. You need to value them like your life depends on it. Because again, it actually does. Survival is of the utmost importance here. Under freezing temperatures survival is very difficult.
Keep those utilities paid, double pay if you can, and finally do not ever underestimate their importance!
A word about saving, what people will not tell you, passed to me from my grandfather:
Winning in life you have gotten paid again. You have cleared housing and utility bills and debts. This is challenging but keep up. The next most important group is number three saving.
Pay close attention please because this lesson is especially hard, and even more important.
My grandpa told me long ago a life critical lesson. To summarize he said,
“You will never get anywhere unless you learn to save.”
“But grandpa” I said, “life is hard, money is not worth much. It is gone as soon as it comes.”
He replied with possibly the best advice I have ever gotten my entire life,
“If you can not save money, even when you have no money, you will never get anywhere.”
Save when you have no money? But, that is just plain impossible, right? Wrong!
Being young and dumb, I thought either I did not know how to properly apply that, or he was wrong.
I am here to tell you today that he was not wrong. Saving, even when you have no money, actually is how you get ahead in life. Save money, start with change even. Just save up please.
Rainy days happen unexpectedly and it is very stress relieving to have safety nets. First your change savings. Next you intentionally pay too much tax at your job. Finally you save something out of every single paycheck you get.
So here is our summary on savings:
See what you can do with this. I have saved money even when bills and debts were over income. This may sound impossible but proper money management and good credit open doors. Saving is critical to getting ahead and keeping your head above water.
Try to develop a change savings, a back up housing payments savings, and finally a small vacation or extra fund as a reward. Even on minimal income I was able to vacation, drive a sports car, and travel.
How was I able to do all this with practically no money?
I finally listened to grandpa. He was right for sure. Save money!
Beep Beep! Who has the keys to the… Supercar?!
Next, but not quite last in our list of bills and debts is transportation. Do not underestimate your transportation expenses. Many people do that and it leads to big problems.
Unless you ride the subway, busses, trains, etc and even if you do you need to consider transportation a big cost and priority.
Again, I think many of us have been there. Begging rides of parents and friends. Taking cabs and public transportation. Nobody wants life in that place so let us help you stay out of it once and for all.
If you had the choice would you want to ride on a public bus or drive in a super car?
I think we all know the answer to that one as well. Skip the bus, take the Lamborghini instead!
Most of my cars were old and embarrassing.
Not saying that I do not still use older model vehicles at all because I do. There are good reasons for this.
Skip the car payment….
You can save money if you do not take on that car payment. At least until your credit is healthy.
Life throws a curveball. You are driving and all the sudden your car’s transmission stuck in second gear. You are only able to limp it home. Dreading the major cost your mind boils with what to do. If you are properly managing your transportation funds this is not the major stress of the day.
Old me, does this sound like you? If so time to change.
Long ago I got my first car, like many boys I was too rough on it. My friends liked to see and hear tire smoke. Young and dumb I put my car into neutral gas it to the floor, and put it into drive. Needless to say that transmission did not last very long. Junkyard transmission later and it was back on the road.
A few weeks go by and just driving normal I hear a horrible sounding metal ping. Just one, but it sounded like high tension metal deep in the engine broke. Broken crankshaft, junkyard time.
With no savings I was riding my bike and getting rides to work for a while. Hard lesson learned. Big mistake not properly maintaining and even destroying my needed transportation.
New us, what to do.
Recently, my wife needed a car. Instead of taking on a car payment I went another route. Found an older model gas saver car with a bad motor and wiring problem for $400. Towed it home. Made that car run great again, for a month.
The engine died and it got us 20 minutes back home after. This was a good car decision despite the failure. Went to the junkyard and got engine transmission for $300 with 150k miles on them. Sure, that is higher miles, but if you get a reliable car that is only broken in.
We probably put about two thousand dollars into her car in total. But it has many new parts and runs and drives almost like new. It passes most cars. You would never guess there was 200k on the odometer.
The point we are making here is that instead of buying a new car, or a newer used car, go for older.
Older model cars are more affordable to repair and insurance is cheaper. So if you get a reliable one they are well worth it.
But, an old car? I want new and nice!
Not saying get an ancient car, but a few years back at the least. Because what has worked best for us is staying around 10-15 years older than current. Sure you will not look as good in an older model vehicle.
But the vast payout is that you will not have a car payment. Also, you are able to save for repairs or a better vehicle.
Using this method I was actually able to buy my dream car. I honestly now own my dream car. You can own yours too. If you want it reach out and grab it, fight with everything.
In summary there are many expenses involved in transportation. From mild to wild. Car payments, car insurance, car repairs. Do not forget to make these payments. If you want to drive like a kid, or drive a high-end car do not forget that your transportations costs will be much higher. You do not need a fast race car that is a want and an extra. You need a practical reliable daily driver car.
The last expenses on our list of bills and debts you are tracking and keeping paid are basics and extras. These categories contain: basic pc items like shampoo, toilet paper, tampons, dish soap, bleach, and more.
What I have often done is to stock up on these items. Now you probably do not want a whole bedroom of toilet paper but back stock of anything you have to buy anyway is great.
Stock up, on a rainy day when you either can not afford or need to shift and spend basics money.
This has single-handedly helped me save for vacations many times. Make sure to keep extra stock of all pc items.
Extras are things like, yes finally, going out and shoes. Anything that is not one of the above is an extra. Seriously ask yourself, “Will I die without that?” if the answer is no, it fits here. So to put it simply extras are not needs, they are wants.
You think you need a vacation? You do not need a vacation, you want one. We see far too many people these days spending most if not all their money on wants.
After spending all their money on wants they wonder why they have no money for needs.
The more of the extra want type items you can avoid spending on, the better extras you get.
Where do you spend your check first? Bills or Extras?
Some people spend their paycheck first thing on extras. Then after wonder why they can not pay their rent. Other more intelligent people spend their paycheck first thing on rent, and know they can not go out as much.
Now we’re not saying avoid extras all together. We are saying that you need to consider and pay all of your needs first to make sure there is extra money for such things.
Honestly, the extras group is what you will fight hardest for, because it is the very last priority.
If you are doing everything right, you will likely understand you have little to no money for extras.
A Summary about Bills and Debts
To end we taught you today how to pay your bills and debts, as well as their priority.
First is mortgage and rent. Secondly, utilities are very important as well. Saving is a third priority and rounds out the top three. After saving, next is transportation expenses. After that every day basics. Last but not least, extras.
Do not make the mistakes others including myself at one time have made. Extras are not worth sacrificing any of the categories before it. Make sure not to blow money on extras. Save money and be sure to follow our bills and debts payment plan.
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