Step 7: Prioritise your debts

By now, hopefully you’ve found some extra money. So, the next logical question is where do you put it? Where do you put it so that it will make the most difference in paying off those loans and credit cards, but also in your life?

You’ve already been given a plan for paying back your credit cards. Sometimes though, those cards should not be your top priority. Here’s why:

You have two types of debts. Secured debts are those that have assets backing them up—they can be repossessed or taken back. They include your home and your cars.

Unsecured debts are those with no assets backing them up. If you don’t make a payment on your credit card, the bank is not going to come and take back the blue jeans you bought at the mall. It might make your life miserable to have a collector call you at all hours, but the credit card company is not going to take away your place to sleep or your transportation to work.

1. Your secured debts need to be at the top of your priority list.
2. Debts for which your wages can be garnished. These include your HECS (Higher Education Contribution Scheme) fees or any child support payments. If you don’t satisfy these, your wage is at risk.
3. Any services you need to continue using. If you are not paying your health care practitioner’s accounts, that particular practitioner is not going to be willing to see you again. That’s a problem if you’re relying on that practitioner for care for a chronic condition.
4. Unsecured debts such as credit cards. Once you’ve satisfied all of these urgent debts, you can begin to really focus on making headway with your credit cards. Use Step 3 to get them paid off as fast as possible.
5. Family and friends. Hopefully your family and friends are the most understanding of your creditors. Confirm your commitment to repay the debts, but make them a lower priority and choose accounts that can improve your credit rating first. 

Earning More

You probably already work really hard, but sometimes the only way to actually get yourself out of that deep financial hole is by earning extra money. You may be able to do that at your own job.

1. If it’s been a year or more since you received a raise, it’s time to ask for one. If you don’t get it, ask your supervisor what you need to do to increase the size of your wage.
2. You may need to get a second job. According to the Bureau of Statistics, about 4 out of 10 people get a second job to help with the family income or to pay off debt!
3. If it’s been a while since you raised your rates or raised your prices, do so today by 10%. That’s the easiest way to increase your income.