Family and Consumer Sciences Education: Triaging Your Debt During a Money Crunch


   A money crisis can happen to anyone as a result of a layoff, illness, death of a family member, divorce or overspending. If you’re in crisis, you may be tempted to postpone making hard financial decisions until creditors begin calling. It’s easy to feel overwhelmed when a number of creditors are making demands or threats. Setting clear priorities about who gets paid first can help you overcome “debt paralysis” and deal with your finances in a positive way.

   LEVEL I: First Priority Expenses

•Rent/Mortgage. Try to avoid homelessness at all costs. Keep mortgage and rent current. There are practically no government resources to assist and the need is too large for most faith-based and help organizations to pay. Landlords will often send an eviction letter if rent is two to four weeks late and tack on late charges. You can also try to negotiate with your lender/landlord, explaining your current situation.

•Utilities. Use government resources first if eligible. Often there are help agencies that will assist one time if there is a cutoff notice. Obtain a free cell phone if eligible. Drop cable and Internet and reduce energy usage as much as possible.

•Food. Immediately check eligibility for SNAP (food stamps) and start going to faith-based groups or other food banks two times a month. Reduce your normal budgeted amount right away — no eating out.

•Medical. Pay for necessary prescriptions if you cannot get them free from a physician. Check with the pharmaceutical company to see if they have programs for limited income individuals.

•Transportation. Make auto payments and insurance payments. If your car payment is high, trade down quickly. Sell extra cars if they’re not used for work. Use public transportation or car pool if possible. Teenagers can ride a school bus. Drive only to get to work and the grocery store or pharmacy.

•Child Care. Try to find family or friends to help if possible.

•Non-food Items. Try to get the basics at food pantries. Borrow from family. Shop dollar stores.

•Payroll Deductions. Determine if benefit deductions can be temporarily reduced to increase pay.

   LEVEL II: Second Priority Expenses

•Cell Phone. Decrease your plan, use very limited minutes, or change to a pre-paid card.

•Homeowner’s Insurance. If not paid through mortgage escrow.

•Child Support and Other Legal Judgments.


•Car Maintenance. Do only the repairs necessary to keep the car running.

•Minimum Payments on Credit Cards and Loans. Make only minimum payments on credit cards and loans. Call your creditors and explain your financial situation to see if you can arrange a different or reduced payment plan.

•Medical Bills. Defer medical bills until all Level I and Level II expenses are current. Be sure you contact those you owe to inform them of your situation. Most medical facilities are willing to work with you.

   Level III: Optional Spending

•School Expenses. Ask if children are eligible for free or reduced lunch, waivers for field trips, sports and other activities.

•Clothing. Purchase no clothing at all until essential expenses and debt are caught up and a small emergency fund is established.

Source: UT Extension 

Christopher T. Sneed, Assistant Professor Ann A. Berry, Professor

Department of Family and Consumer Sciences