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Dealing with several debts at once can be confusing. Having to remember each payment date, how much, and what each debt is for can give anyone a headache. What’s more, you may find that having to juggle different payments overwhelms you to the point that you don’t know where to begin, or fear that the debts will consume your life. With this in mind, here is a 4-step priority technique which can help you tackle almost any number of debts.

  1. Income Versus Outgoings: The first thing you need to do is assess whether you can meet your debt commitments or not. In order to do this draw up a list of the minimum amount you absolutely have to pay for all your monthly debts including rent, council tax, credit cards, bank loans, phone bills, necessities such as food and travel to work, and utilities. Now take this number away from your monthly income. You’ll soon see whether you can actually pay your debts or not. If you need to pay out more than you are bringing in, then don’t worry, you just need to speak to a financial adviser who will help you reduce your payments. If you can afford all of your minimum debt payments with a little to spare, then you can move on to the next step.

  2. Number of Payments Versus Amount: Now make three lists. The first should be a list of all your bank loans and credit cards which you need to pay, from highest debt to lowest debt (make sure you calculate the interest and add this on to each figure). The second list will rank each debt by the minimum amount payable every month from highest to lowest. The final list will be the length of the debt agreement – how long it will take to pay back – from highest to lowest. This will let you move on to the next step.

  3. Prioritise: Now you need to choose one debt from the three lists. This is the debt you are going to clear first. For all other debts you will only pay the minimum charge towards each which will probably only clear the interest owed for that month. Any available cash will go towards your prioritised debt. From your three lists you will see that the first column shows the debts which will cost you the most in the long term. The second list will indicate which debts cost the most each month. Finally, the third list will show you which debts will take the longest to pay back. Whichever debt you choose to prioritise should benefit your situation. If you have very little extra cash left over after meeting your commitments, then you might want to put it towards the debt with the highest payment each month so you can clear it quicker, or towards the debt which will take the shortest amount of time to pay back in order to free up some extra finances. If you have a substantial amount of money left over then you might want to clear the debt which will cost you the most in the long run. You might also want to choose a debt which balances all of this out between the monthly payment, the overall amount, and the number of payments. Whichever you choose, stick to clearing this one debt until it is paid back.

  4. Move on the next debt: Once you have cleared your prioritised debt, move on to the next debt and clear it. The great thing is that each time you clear one debt you will end up with more money being made available to you on a monthly basis (as long as you don’t take on anymore debt). It’s up to you as to whether this freed up resource goes towards your other debts or not.

The priority technique is a great way to order your payments and make sense of juggling a number of debts at the same time, and can really reduce the stress of the entire process.