How to Prioritize Your Debts
Determine if this method is right for you., Keep a roof over your head., Pay your utilities., Make your car payments., Pay other legally-required debts and payments., Pay student loans., Pay medical bills., Take care of lower priority debts., Bring...
Step-by-Step Guide
-
Step 1: Determine if this method is right for you.
If you're just barely scraping by, you should prioritize to make sure you have the necessities now while trying to minimize potential problems down the road.
However, if you're able to pay for necessities like your home and basic utilities, move on to the "debt avalanche" method. -
Step 2: Keep a roof over your head.
If you own your home, the mortgage payment is your highest-priority debt.
In the U.S. lenders will typically begin foreclosure proceedings after three missed payments, though this may vary.Even if you get just a month or two behind, you may have trouble getting your payments back up-to-date, which can cause you problems down the road.
If you rent, you can usually be evicted after just one missed payment, and then you'll be faced with finding another place to live with a huge blemish on your record. , Power, water, and other utility companies will usually give you some leeway in missing payments, but if you get too far in arrears, they'll shut off your service, which can make everyday living very difficult and can also make it more costly to get service in the future.
If you can't pay your bills in full, call the company and see if you can work out a payment plan.
They're usually very accommodating., If you need your car to get to work or to find work, it's important that you keep your payments up-to-date.
Finance companies can repossess cars fairly easily, and in many cases they don't even have to give you notice.
Make sure to pay your insurance, as well, because it's the law and because if you don't the lender will add their own insurance, which will cost you far more while only protecting the lender's interest.Keeping up with a car payment while doing your best to pay for your mortgage and utilities can be difficult.
Consider these options to ease your financial burden:
Do your best to save money on gas.
Consider carpooling.
Have you considered living without a car? , Failure to pay child support, taxes, or other legally-mandated payments can land you large fines or even jail time. , The government backs student loans, and if you go into default they can take collection actions that other creditors can't.
Luckily, there are numerous government programs to help you with this., Medical bills offer a bit more leniency than most other kinds of loans, and even if they go on your credit report they're generally looked at differently than other missed payments. , Credit cards, loans secured by household objects, personal loans, and store charge cards are not high priorities.
Pay the minimums on all these if you can, but if you have to choose between your credit card bill or your mortgage, choose your mortgage.
Call your credit card companies and tell them you need either deferment or lenience.
If you call and let them know you are in trouble, most are willing to work out a payment plan by temporarily lowering your minimums or deferring payment for a couple of months until you are working again, etc.
If you blow them off, though, they will be less apt to work with you. , Once you've gotten back on your feet, get all your accounts current if you've fallen behind on them.
Focus on the ones on which you are the furthest behind.
Once everything's caught up, start prioritizing to pay debts off quickly. -
Step 3: Pay your utilities.
-
Step 4: Make your car payments.
-
Step 5: Pay other legally-required debts and payments.
-
Step 6: Pay student loans.
-
Step 7: Pay medical bills.
-
Step 8: Take care of lower priority debts.
-
Step 9: Bring accounts up-to-date as soon as you can.
Detailed Guide
If you're just barely scraping by, you should prioritize to make sure you have the necessities now while trying to minimize potential problems down the road.
However, if you're able to pay for necessities like your home and basic utilities, move on to the "debt avalanche" method.
If you own your home, the mortgage payment is your highest-priority debt.
In the U.S. lenders will typically begin foreclosure proceedings after three missed payments, though this may vary.Even if you get just a month or two behind, you may have trouble getting your payments back up-to-date, which can cause you problems down the road.
If you rent, you can usually be evicted after just one missed payment, and then you'll be faced with finding another place to live with a huge blemish on your record. , Power, water, and other utility companies will usually give you some leeway in missing payments, but if you get too far in arrears, they'll shut off your service, which can make everyday living very difficult and can also make it more costly to get service in the future.
If you can't pay your bills in full, call the company and see if you can work out a payment plan.
They're usually very accommodating., If you need your car to get to work or to find work, it's important that you keep your payments up-to-date.
Finance companies can repossess cars fairly easily, and in many cases they don't even have to give you notice.
Make sure to pay your insurance, as well, because it's the law and because if you don't the lender will add their own insurance, which will cost you far more while only protecting the lender's interest.Keeping up with a car payment while doing your best to pay for your mortgage and utilities can be difficult.
Consider these options to ease your financial burden:
Do your best to save money on gas.
Consider carpooling.
Have you considered living without a car? , Failure to pay child support, taxes, or other legally-mandated payments can land you large fines or even jail time. , The government backs student loans, and if you go into default they can take collection actions that other creditors can't.
Luckily, there are numerous government programs to help you with this., Medical bills offer a bit more leniency than most other kinds of loans, and even if they go on your credit report they're generally looked at differently than other missed payments. , Credit cards, loans secured by household objects, personal loans, and store charge cards are not high priorities.
Pay the minimums on all these if you can, but if you have to choose between your credit card bill or your mortgage, choose your mortgage.
Call your credit card companies and tell them you need either deferment or lenience.
If you call and let them know you are in trouble, most are willing to work out a payment plan by temporarily lowering your minimums or deferring payment for a couple of months until you are working again, etc.
If you blow them off, though, they will be less apt to work with you. , Once you've gotten back on your feet, get all your accounts current if you've fallen behind on them.
Focus on the ones on which you are the furthest behind.
Once everything's caught up, start prioritizing to pay debts off quickly.
About the Author
Justin Lopez
Professional writer focused on creating easy-to-follow DIY projects tutorials.
Rate This Guide
How helpful was this guide? Click to rate: