STEP 2: Help With Debt Problems:
Deciding Who To Pay First?

The next step in the Debt Ditch "help with debt problems" Solution is to figure out how to distribute your limited supply of money.

For some, debt problems are serious enough that you are trying to decide whether you should miss your mortgage payment, your tax payment or your credit card payments. This step in our debt elimination strategy will help you decide how best to allocate your limited dollars, based on what is most important to pay first.

1. Most Important to Pay: The "Need to Live" Items

In our world, there are some things that you need to pay for in order to live comfortably. We need a roof over our heads, warmth, and food on the table. Here are the items that are considered "must pay first":

Mortgage/Rent
  Keep the roof over your head no matter what.

Necessary Utility Bills
  By "necessary" utility bills we mean heating, water and lights. That super duper cable package is an option, not a necessity.

Groceries
  The basics of eating well and maintaining health are all important.

Health Care Insurance or Payments
  Essential in case someone needs emergency care or health treatment.

Child Support
  A "must do" for any non-custodial parent. Not only will you sleep better knowing your children are taken care of, it's the law.

Car Payment
  If a car is necessary to get yourself to work, make sure you make your car payment.

2. Don't Ignore the Government

File your taxes when they are due to prevent penalties and steep interest payments (up to 25%!). In the US and Canada (and I am sure many other countries as well), the federal government's tax department will develop a payment schedule with you if you can't pay your tax payments in full.

It's always best not to annoy the government, so do your best to keep up-to-date with taxes.

Student Loans

Student loans are usually backed by the government. When you neglect to make your loan payments, the government can go so far as to garnish your wages or retain any tax refund you might have owing.

Again, the government is usually willing to work with you and can stretch out your payments or even suspend them for a period of time under unusual circumstances (for example, if you are out of work). So if you think you can't make your student loan payments, talk to them and see what you can work out.

3. Unsecured Loans and Credit Cards

Credit card debt, store loans for large items of furniture or appliances and bank loans are the next most important category to pay. We'll show you in another step - how to decide which of these to pay off first as part of your new get out of debt plan.

There is a statute of limitations on credit card debt. Learn more here.

4. Loans from Family and Friends

Listing loans from family and friends last doesn't mean that they are not important or that you shouldn't do all that is in your power to pay them off. We certainly believe in paying off all your debts and will show you how to do that as you proceed through the Debt Ditch Solution. But if you are in a real bind, help with debt problems can begin with talking to family and friends and being honest with them about your situation.

If you can't pay them back right now, even a little bit, a friend or family member may agree to wait for payment until you get back on your feet. Tell them about this program and the effort you are making to get to the point where you can pay them back.

  Get more help with debt problems in the next Debt Ditch Solution action step here.