Which one do I stop paying first is a common question people ask when they can’t afford to meet all their bills each month. In a previous post I outlined a few steps one could take to avoid compounding interest on late fees or credit marks; however there are many people who aren’t concerned about maintaining their credit, since there’s no desire to borrow any more money.
I always suggest to being with a budget outline. Write down your take home pay or net monthly income and subtract out all the common monthly necessities. Here are some examples:
- First Mortgage
- 2nd Mortgage/HELOC
- Homeowners Insurance (If not included in mortgage)
- Property Taxes (Monthly)
- Property Upkeep (Monthly)
- Rent (If no mortgage)
- Household Needs
- Groceries
- Personal Care
- Health Insurance
- Medication
- Electric / Natural Gas
- Sewer / Water/Garbage
- Home/ Cell Phone
- Internet
- Cable TV / Sattelite
- Car Payment
- Car insurance
- Gasoline
- Car Maintenance
- Child Care or Support/Alimony
- Student Loans
- Credit Card Bills
- Other Loans
- Tithe / Donations
- Misc Entertainment/Other
By laying the foundation with a budget, you will clearly see where all your money goes each month. This will help identify wants vs. needs and highlight where to start saving on any recurring bills as quickly as possible. A budget is also handy to find extra money or decide which ones go unpaid for other unexpected bills.
Once you have outlined a monthly budget see how long it will take to payoff any credit card debt currently owed.
