How to Prioritize Your Debt When Paying Monthly Bills?


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Debt is not just a common fixture in the lives of Americans. For many of us, debt is rampant, wreaking havoc on our credit scores and forcing us to make difficult decisions about what to do with bills we face.

If you have a good deal of debt, you are not alone. The average American household has over $16,000 in credit card debt. Households with mortgages owe an average of $172,806. Households with auto loan debt owe an average of $28,535. Combine that with all the other debts people accumulate, and the average amount owed by households with debt is over $132,000.

Those are staggering numbers.
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With that kind of debt, people are often forced to decide where their income is going first. Do you pay your gas bill or your credit card bill? Do you forgo a monthly payment on your mortgage so you can make sure your hospital bills are paid?

These are difficult questions, but they are questions many Americans are asking themselves every month. There is no one-size-fits-all solution to these problems. What you decide to do with your income depends on several factors. However, there are a few things that you should keep in mind when prioritizing your monthly bills.

Pay the Essentials First

Your rent and other housing-related bills will likely take top priority, and they probably should. Unless you have a very forgiving landlord, youíll want to avoid putting yourself in a situation where you fall behind on rent. Failing to make rent could lead to eviction, which could then lead to even more serious problems, such as failing to find other housing or steady employment.

Know the Difference Between Good and Bad Debt

While no debt feels like good debt, there is a distinction between debt that is worse for your credit score and debt that is considered good for your financial standing. For example, mortgage debt and student loan debt can eventually improve your financial situation and is generally considered good debt. Bad debt comes in the form of credit card debt, and it is best to do away with it as quickly as possible.

Look at the Fine Print to Determine How Much Debt Is Costing You

Pay close attention to the interest rate on the different forms of debt. By knowing how much youíre losing from outstanding debts, you can begin to make smarter decisions on tackling the most taxing and expensive debts you owe. Prioritize debt that has high-interest rates. If you donít, that debt will end up costing you even more money in the years to come.

Look for Other Options, Too

Though many Americans donít take advantage of them, there are several systems in place that allow debtors the opportunity to prioritize and tackle their debts in a way that enables them to pay their essential bills first. Bankruptcy can offer a way out for consumers who find that there is no reasonable way to pay off their debt with their current income. Certain types of bankruptcy can help consumers find their way out of a vicious cycle of debt and eventually reestablish their lives on strong financial ground.

Paying off debt requires discipline and smart financial planning, but it is doable. Sitting down with your bills and calculating the cost of your current debt and devising a plan to overcome it is something that all Americans should do. As debt continues to rise and wages struggle to keep the pace, itís a habit that will become even more important in the years to come.

ABOUT THE AUTHOR: Thomas M. Fesenmyer
Thomas M. Fesenmyer is an Ohio bankruptcy and debt settlement attorney at Fesenmyer Cousino Weinzimmer, where his goal for all clients is asset protection and debt elimination.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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