It is estimated that close to 500,000 people may find temporary employmentÂ this holiday season, putting some much-needed money into the wallets of consumers who havenâ€™t had a paycheck in months.Â
There will be many legitimate uses for this money, but it will only stretch so far.Â Therefore, the NFCC suggests prioritizing the use of this money in the following order:Â
Bring all living expenses current â€“ Housing, utilities, and insurance payments are at the top of the living expense list, as these must-haves need to be seen as priorities.Â The basics of keeping a roof over your head, food on the table, gas in the car, and the lights on will go a long way toward restoring stability to your home life.Â Â
Catch up on all secured debts â€“ For most people, their largest secured loan is a vehicle.Â Donâ€™t risk losing it to repossession.Â Downpayment money was used at purchase, followed by monthly payments. This money will be lost if repossession occurs.Â Further, fees associated with the repossession will be added on.Â Â If you canâ€™t totally catch up on past-due payments, call the lender to inquire about an extension, providing a specific payment plan that will bring you current.Â
Pay past-due debt obligations â€“ If you have credit card debt, you need to honor the commitment you made to repay per the conditions of the contract.Â Not doing so will result in negative marks on your credit report, a lower credit score, late fees, and the potential of a judgment or wage garnishment being filed against you.Â Your access to existing and future credit will be minimized, putting you in the position of having to pay cash for all goods and services.Â It can be difficult to obtain new credit in this economic environment, thus making it critical to treat existing credit responsibly.Â Â
Make any needed home or auto repairs â€“ With a reduced income, it is likely that home and auto repairs have been neglected.Â Now is the time to address those, as delaying may only worsen the problem.Â While youâ€™re at it, consider weatherizing your home for the winter months which could result in a nice savings on your utility bills.Â
Sock away 10 percent into savings â€“ A well-funded savings account is insurance against financial disaster.Â Today is the time to protect tomorrow by opening and contributing to a savings account.
Even though the NFCC is a strong advocate of saving, in this situation it is critical to bring past due accounts current before addressing saving.Â That will prevent eviction, foreclosure, repossession, and protect your existing credit, while making a significant step toward financial stability. Even though it will be tempting to spend this money on holiday gifts, it is more important to think long-term.Â Without a steady income in sight, bringing past-due obligations current will allow you to start the New Year on more solid financial ground.
Gail Cunningham is Vice President of Membership & Public Relations with the NFCC.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.