When Americans started to lose their jobs, a lot of them were placed in this predicament. It is not an easy decision to make because both your bills and debts are important expenses that you have to spend for.
But if it comes down to choosing, of course you need to prioritize your bills. However, it has to be scrutinized to make sure that the bills you are paying for are down to the bare necessities. For instance, your living expenses will include your food, groceries, utilities and gas. If you are renting, you should also prioritize this. The idea is to pay for the bills that consists of things and services and you need to live comfortably.
Your debts will be second to this but you have to rank them according to priority as well. Secured debts are important because defaulting on payments could endanger your collateral. Unsecured loans will be on the lowest part of your list – even if some of them have a high interest. If you can keep up with the minimum payments, you should try to reach that amount at the very least.
Ultimately, you know that if your income is no longer enough to support your current bills and your debts, something has got to change. You need to rethink your lifestyle and lower it down to a level that your income can afford to support. If that means living in a smaller home or selling your luxury car to get a second hand one, that is what you should do.
As you lower your bill payments, you should also do something about your debts. There are debt relief options that can lower your balance significantly if you follow the rules correctly. Or you can consolidate your debts to make payments more manageable and to possibly have a reduction on your interest rate.
Debt management is a legitimate way of dealing with debt problems – especially for consumers who are in need of lower monthly payments. With the help of a debt counselor, they will create a debt management plan that will guide you through the tough sacrifices that you have to make as you pay off your debts. This plan will be based on the amount that you can afford to contribute on a monthly basis – regardless if it is smaller than your current. They will stretch your balance over a longer period and present this to the creditor for approval. The negotiation will concentrate around the lower monthly payment and a possible lowering of your interest rate.
Sometimes, all the decrease and budgeting and the debt relief program may still not be enough. If so, then you should probably increase your income. There are various work from home careers that you can explore. You can even look at your hobbies to see if you can earn from them. As you increase your income, you can loosen the restriction on your budget and make bigger debt payments. Any of these options, alone or combined, can help you ensure that every payable will be well funded.