If you are seriously thinking of getting rid of your debt, the first and one of the most important things that you can do is to prioritise your debt.
What exactly do I mean with prioritise?
Well you need to figure out which debt is more important. Now don’t get me wrong, because all debt is important, no matter how big or small, but there are those that have much higher interest rates than others, and it is that debt that you should prioritise as very high on your list.
When should you start to prioritise your debt?
It will be a good idea to start if you are one of the people that have a total of different debt.
So how do you know which of your debt has the highest balances and are costing you the most money every month?
The answer is simple – the debt that can be described as those with the highest interest rate include credit card debt and short-term cash loans.
Secured asset debt should come first.
Secured loans that include your mortgage payment and car loan should be placed on top of your list.
If you should fail to make payments on time you could end up losing your home or car, and this is something that you do not want to happen.
Another debt that should be high on your list is your income tax. If you don’t pay your income tax, you could also end up paying a lot more in penalties.
Medical bills is just as important, some of you might disagree, but if you fail to pay them, you could end up being sued, which will ultimately cost you a lot more money.
Always prioritise your debt.
Of course there are people who believe that you should try and pay off the debts with the lowest interest rates first. It is in fact a very good way to stay motivated and focused on paying off all your debt, just make sure that you don’t lose your focus on the debt that are actually costing you the most money at the end of every month.
So remember: Always prioritise your debt in a way that works best for you.