Key insights
- A survey indicates that consumers facing financial hardship would prioritize essential bills over discretionary spending and credit card payments. Experts advise prioritizing needs over wants and communicating with lenders to explore hardship programs. While mortgage/rent and utilities are top priorities, even minimum credit card payments are crucial to protect credit scores. This trend suggests potential weakening in consumer spending and increased credit risk, posing a slightly negative outlook for US equities.
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If you were struggling financially, would you consider not paying some of your bills? If so, which ones?
A JD Power survey asked respondents just that.
When questioned about which two bills they would consider skipping or delay paying if they faced financial hardship, more than half said entertainment subscriptions and memberships, while 29% said internet or cell phone bills. More than one-quarter said they would avoid credit card payments.
You don't need to skip paying bills if you're dealing with financial hardship. Reach out to your lender and explain your situation—they may be willing to offer you a grace period, lower monthly payments for a temporary period, and more.
To figure out which bills someone experiencing hardship should prioritize, Bill Shafransky, a senior wealth advisor at MONECO Advisors, suggests considering what they need versus what they want.
"You need to rank everything in order of importance, not by order of desire. Meaning keeping your electricity on is more important than your gym membership, even though the gym is your favorite activity," wrote Shafransky in an email.
And while it's typically more important to pay your rent or mortgage over a credit card payment, try to make the minimum payment if possible, as late payments can inflict significant harm on your credit score.
"If the primary concern is protecting your credit rating, then you should always pay any loans and credit cards first. This type of debt is reported to the credit bureaus after payment is 30 days late," wrote Clark Randall, Director of Financial Planning at Creekmur Wealth Advisors, in an email.
You should also consider calling your lenders if you can't make a payment. Some may offer a grace period or enroll you in a financial hardship program, according to J.D. Power.
"I never recommend stop paying anything," wrote Pamela Jacobs, a Principal Wealth Strategist at Monvia Financial, in an email. "Calling and letting the entities know about the hardship is important so they can work with you."