When you have a high debt load, you have to think carefully about how you are going to pay that down. There are many options that you have, but you must consider how various options will impact you now and into the future. Finding the best order to pay off bills is challenging, but it will be worth it as you see your debts trending down.
Your top financial priority has to be paying for the necessities. For example, you must pay for your mortgage and vehicle payments unless you want those to be taken back by the lender. You also need to pay for utilities and insurance payments since those are also important for your life. When it comes to other bills, you have to look at several factors.
One of the top things that you have to look at for other bills is the interest rate you are paying. Since interest is essentially free money you are giving to the lender, you should try to minimize the amount that you are paying. This means that paying off higher interest debts might be your priority.
Another factor to look at is the balance on the account. While some people prefer to pay down higher balances, it might be better to pay off the smaller ones first. This will cut down on the number of places that you have to pay. As you pay one account off, you can move the money you were spending to another account. Keep doing this until your debts are all paid off.
There are some instances in which you won’t be able to afford to make the payments on all the accounts. At this point, you might need to consider filing for bankruptcy in order to gain control over your finances again. Bankruptcy isn’t something to fear. Instead, it can provide you with the financial relief that you need so you can have a fresh start.
