The basics of prioritising your debts
Debts can be difficult when you have a limited income.
13:03 16 December 2013
Debts are a fact of life. You can deal with them but it can be difficult when you are dealing with a limited income and household expenses on top of credit card debt. There might be some instances where you find yourself faced with the decision of paying your expenses or paying off your debt.
It is obvious that you cannot put your debt off so you start wondering how to deal with a limited income, expenses and debt all at once.
The answer is a simple one; you just need to prioritise your finances.
While this will not eliminate the fact that you have both expenses and debts, it can help you come up with a plan to be able to handle both at the same time.
- Create a journal. You can use a standard writing tablet for this.
- List all of your expenses. Start with your fixed expenses. These bills are absolutes, your rent or mortgage payments, utilities, petrol, transportation, and groceries.
- Next, list your debts, store cards, credit cards, and loans.
- Finally, list all your extras, such as dining out, movies, subscriptions and so forth. This will give you a clear idea of your overall financial situation.
- See What You Can Eliminate
While it may be difficult at first to cook more at home or take your lunch to work, eliminating these types of expenses can add up to a considerable amount. This makes the process of lowering your debts faster.
- Needs vs. Wants
Make sure to remember that creating a prioritised list is about putting your needs ahead of wants. If you can live without it while you are paying your debts then you should eliminate it until you get your financial situation back into a good place.
These steps can help you make sure you can pay off your debt without sacrificing your expenses.