Take Care of the Most Important Debts
March 24th, 2009 | by Administrator |You need to prioritize your debt repayments and ensure that the most important debts are taken care of regularly.
One way to determine how important a debt is can be by the impact that it can have on your life both now and in the future. Some people prefer to prioritise by affordability,i.e. pay off the easiest debt first, this can work with some strategies but can make you vulnerable in other ways. If you take the view that the important ones are the ones that can drastically affect your life then clearing any past due taxes would be one of the first debts that you would have to look at due to the penalties and compounding interest that you will have to pay and the fact that the IRS has so many powers to seize assets and make life very difficult for you.
A mortgage is another debt that needs to take top priority in the order that your payments are serviced as losing your house can impact on your ability to pay all your other debts and also make it difficult for you to find accommodation elsewhere.The last thing you want to be worrying about is where you and your family are going to
live. If you don’t have your own home then you need to ensure that your rent and utility bills are kept up-to-date so you keep a roof over your head and are able to live in suitable conditions to be able to work your way through your money problems.
The budget that you worked out will give you a clear indication of the total amount of debt that is owing to others and what your repayments are and from there you can set your priority list. Then you can start working with the people you owe money to in order of priority and sort out payment plans with your creditors and build your own steps to clear your debt.
Medical bills and court-ordered child support debt are also high on the priority list as failure to pay these can result in drastic action being taken that will once again make it difficult for you to work your way through your other debts.
Car loan repayments are a priority because car finance companies will quickly repossess your car if you fall behind with the payments and this can impact on so many other areas of your life such as your ability to get to your place of employment. Obviously not being able to get to work will be disastrous.
Don’t be forced into paying minor debts at the hands of debt collectors at the expense of being able to pay these priority debts first. You can take care of the minor debts when you have secured your home and a means of working.
