How to Prioritize Your Debt Payments in a Financial Crisis
Presented by Honey B Wackx
In today’s recession plagued economy, many more families than normal have found themselves in a financial crisis. Perhaps you’ve experienced reduced income due to layoff or reduction in work hours. If you’re a small business owner, it’s possible that your sales have decreased significantly over the past couple of years.
Whatever your situation it may be necessary to make some very difficult decisions about which bills get paid this month and which ones will have to wait.
How do you decide which debt payments take priority and which ones will have to take a back seat? There’s no doubt that each one of your lenders holds the belief that the debt owed to them is the most important. They can certainly be assertive and downright demanding. But don’t allow them to frighten you into making decisions that aren’t in your best interest.
In order to prioritize your debt payments you need to weigh the importance of each of your basic needs:
* Your home mortgage or rent takes precedence over all other things. As long as you have shelter you have roots and protection from the elements. It’s always possible to get food from a food bank or apply for food stamps if your situation comes to that.
* If you have no other means of transportation such as bus service or a good friend or neighbor to ride with, then you’ll need a vehicle – especially if you have a truck or van that is central to operating your business.
* Student Loans and taxes must be paid regardless of your situation, but you can usually request forbearance or arrange for smaller payments.
* Next in line are your secured loans. More often than not your lenders would rather work with you than have to seize your possessions. However, it’s very rare but possible that your level of distress may become so desperate that you have no other choice than to allow seizure. If this happens to you, don’t despair. It may be uncomfortable and humiliating but you can survive. Sometimes people become so attached to their material things that they’ve come to consider them necessities.
As long as you have a roof over your head and food to eat, you’ll be fine until your situation changes once again for the better.
* Credit card companies and doctor bills come last on your list of debt payments. It’s certainly not your choice to let these slide, and being a conscientious consumer you no doubt feel quite guilty. But if you’re doing the very best you can, then there’s nothing more you can do.
It’s certainly nice to have cable television, non-business internet access, and other luxuries. But these non-essentials can be discontinued to free up money to make debt payments.
Those of you that live in an area where cable or satellite is the only way to get TV need to opt for the cheap or cheapest basic package. Many like where I live, offer a couple of dozen channels with the basic package at a sharply reduced price over the premium packages.