When you’ve got numerous bills and you need to pay down debt, it can be challenging figuring out which bills to tackle first.
In fact, for many people it is so overwhelming that they put it off completely, making late payments – which trash their credit – or try to please everyone by writing a bunch of checks that end up bouncing – and none of this ends up being productive.
However, if you look at the process logically, it becomes very easy to see what order you should choose to pay off your bills.
First of all, and most importantly:
You need to pay your rent/mortgage, utilities, grocery bills, and car payments. Income tax is also a priority because if you have a tax lien taken out against you, this is something that can devastate your credit rating for many years to come.
You need to set aside at least SOME money for savings – even if it’s only $50 a month.
Beyond that – you need to make a list of all the debts that you have and find out the interest rate on each debt.
Paying the minimum that you owe is a disaster. If you can afford to pay more than the minimum on all of these debts, more power to you.
However, if you can’t afford to do that, you need to pick the debt – probably a credit card debt – with the highest interest rate, and make it your goal to pay off that debt first.
So put some extra money towards that payment every month, until that debt is paid off.
If all that you can afford to pay is the minimum on the other debts, so be it.
When you need to pay down debt and you are focusing on one credit card instead of your giant mountain of bills, you will be surprised and pleased at how quickly you see the balance on that credit card shrink.
You will find yourself setting aside money to put towards that bill…paying close attention every month to how much you owe, not hiding from it…and you will be thrilled when that bill is finally paid off.
And then you will move the next high interest bill to the top of the list, and you will do this one by one until you are free of high interest bills.
Yes, this may take a couple of years to accomplish, but this way there is an end in sight and you will no longer feel so trapped and hopeless.