Paying Your Debt
Carrying a large amount of debt will cause problems in any budget
. Having the income to pay the bills is one thing, but knowing which ones should be paid first is additionally important. To start the process, make a list of monthly bills which have to be paid, these are your household expenses, electricity and water for example. Take the sum of this list and subtract it from your monthly income. You now have an amount which can be applied to your debt. Create a new list of your creditors, those which you have debt with. Write down the amount of debt next to the creditor's name and for how long the account has been open. Take a moment and read through the list. It is time to prioritize your debt.What debt is important to fix?
*IRS debt can cause many problems for you if left unpaid. If you owe back taxes, make this your priority. Work with the IRS to set up a payment plan. If you are in a financial hardship, you can request a compromise, and the IRS might settle your account for a lower amount. Staying quiet gets you nowhere positive, so make the effort and the IRS will notice.
*Medical debt is a tough one for many people. If you or a member of your family has medical problems the bills can pile up quickly. Keep the health costs a priority and work out some sort of payment plan with your health care provider. Preventive care will benefit you, especially if the doctor diagnoses a problem before it becomes a major medical expense.
*Student loans are important. These loans never go away. It is hard to know what your income will be after college, but the Department of Education works out your payment plan when they give you the loan. If your income is covering the cost, you can request loan extension in order to lower the payments.
*Child care support is something you will need to pay. The government will garnish your wages and subtract what you owe from your taxes if you do not make the payments. They may also place a lien on property to try and collect the debt. This is a debt priority.
*Credit card and bank loans are debts that will need a closer look. How long has the debt been accruing? What are the interest rates? Do you have room to make transfers anywhere? Which ones are you paying the highest interest rate on? Start to pay down your debt as best as you can. Paying down your debt will lower your debt to income ratio which will help your credit score rebuild itself.
Seek out a credit counselor who has been trained by an organization other than a creditor. Learn to budget your income according to your debt priorities. Work with the creditors accordingly and do not feel pressure when items at the bottom of your list send collectors after you. Stay your course and keep communication open with your credit counselor. Efficient debt control will take determination and lots of budget control. Take charge of your finances instead of your finances controlling you.
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