Prioritize for Debt Debt Prioritization

Debt can be broadly defined as what you currently owe to creditors. Your debt payments may include your mortgage, your credit cards, your car loans or your student loans. These debts will be reported to one of the three credit bureaus (Equifax, Experian and Trans Union Corp) and your history in payments, as well as your outstanding debt will help in determining your credit score.

In order to prioritize your debt payments correctly, pull your current credit report from each of the three credit bureaus. You are entitled to receive one free credit report per year or you may have to pay a small amount for each one if you have exhausted the freebie. Once you have the credit reports in your hand you should be able to compare each one to be sure all your debt is correctly reported and accounted for.

Organization is important when prioritizing your debt payments. Make a list of all your debt obligations. After you have compiled all of your debt data, either on paper or stored in your computer, place a monthly payment amount, due date and the annual interest rate charged next to each item. For those payment amounts that differ every month, place an estimated average next to it. Once you add the figures up, you know exactly what money is needed to meet your monthly debt obligations.

If your net income exceeds you monthly debt obligations and living expenses, you should know where to apply the excess cash by choosing the debt with the highest interest rate first.

Now that you are organized and find you do not make enough to meet all of your debt obligations in one month, you need to prioritize your debt obligations. Obviously, during rough times, not everyone is able to pay all the monthly bills. You need to know which bills are most important.

The first priority, other than child support, is all housing costs, such as mortgage, taxes and insurance. It’s of utmost importance to have a roof over your head. The next priority should fall to the monthly housing maintenance costs, such as electricity, gas, water and trash. At this time, budget well for your monthly food consumption expense and place aside the funds to pay for this throughout the month. Then you will need to fulfill the transportation obligation, such as a vehicle payment, insurance and gas expense. Finally, pay those retched credit cards and other term debt you may have, such as student loans.

After the important stuff is out of the way, feel free to tackle the satellite/cable bill, the cell phone bill and the internet connection bill. These are things you can survive without, but if you are able to meet these bills as well, this is the time to pay them.

Try some of these cost saving tips:
-Eat out less and use coupons at the grocery
-Save gas when possible by walking more often when possible
-Turn out all your lights when you are not at home
-Turn down the thermostat before you leave for work in the morning

Paying debt obligations can be a very stressful endeavor, especially if you are unable to meet all these obligations. It will, however, go more smoothly if you are organized and know what to cover first. Pay down your debt when possible and avoid adding to it when you are able.