Prioritizing Debt
Financial problems seem as if they will never end, but keep in mind that it is a temporary situation. You may have to struggle for awhile, but if you make smart decisions now, you can avoid more problems in the future.
When facing an uncertain financial situation, list all your income and expenses. As the expenses are listed, prioritize by need. Shelter is everyone’s first priority followed by food and utilities. A car may be a necessity in many cases, but a second car or a boat is not. Look for other non-essentials like a cell phone or cable television that could be eliminated from your expenses. Contact your creditors and ask if there is a way to reduce the monthly amount due on credit cards and loans. Start fixing meals at home rather than dining out.
Tracking all your expenses is a great step to prioritizing debt. For a simple budget tracking worksheet, click here.
Remember to call your servicer as soon as you know you are having financial problems. Do not wait until you miss your first payment. Explain the situation and try to find a solution. Despite what you may think, loan servicers do not want to take your home from you. The foreclosure process is costly to them and they would rather find a mutually agreeable solution that keeps you in your home.
Budgeting Tips:
- Create a budget and stick to it. Do not allow temporary wants outweigh your long-term needs.
- Eliminate unnecessary bills, like a cell phone or cable television, which may be eating-up too much of your income.
- Pay bills on time. Even if you only pay the minimum payment, it keeps you in good standing with the creditor.
- If you have previously gone through bankruptcy or foreclosure, keep in mind that it will stay on your credit history for seven to ten years.
- Get help from a reputable credit counselor at no cost. Contact the Kentucky Homeownership Protection Center to find one in your area.
- Check your credit report every year. Federal law allows all Americans to do this yearly for FREE. Visit www.annualcreditreport.com to get your free credit report and report any errors to the credit bureau that has the inaccurate information.