Trying to Save Money But Don't Know Where to Start? How to Prioritize.

In tough times, saving money becomes a new priority among consumers. Indeed, the aftermath of the 2008 credit crunch made a lot of us begin thinking more seriously about how we can cut expenses. As a result, the savings rate among consumers inched upwards from zero for the first time in several years. For consumers struggling under intense debt loads, such news is hardly reassuring. Their priority is to get out from under the weight of their debt. How can they do that if every spare cent goes to making the minimum payments every month? This is not the time to be baby-stepping your money goals. By prioritizing your bills, you can knock off some big debt quickly and start saving sooner.

Learning How to Prioritize

Prioritizing which debts to pay off first gives some organization to a debtor's repayment plan and allows for significant changes to be made to the debtors financial life. Prioritizing debt does isn't just about paying high interest credit cards first. Mortgage debt, student loan debt and other kinds of debt can also be dealt with by using this method. 

Secured Debt

The best place to start with secured debt, rather than attacking unsecured debt. This is because creditors with secured debt can seize vital assets if they do not receive payments, such as the debtor's house or car. Therefore, repaying secured debt is more important than paying off unsecured debt.

Always make sure the mortgage and car payments are made first. Your house is the one thing that you cannot live without, and so it is vital you devote all of your resources to make the mortgage payments on time. So step one is to find out if there is a way to reduce your mortgage costs. Look at your interest rate and check the current rates. If the market is offering rates low enough to cover the cost of a refinance in the first few years, refinance the mortgage before you look into your unsecured debts. Next, focus on repaying your car loan. Should you consider paying off the loan when you refinance the home? Only if it will save you money on your monthly payments.  

Unsecured Debt

After paying off all secured debt, it's time to focus on paying unsecured debt like credit cards. When focusing on credit card debt, it is important to prioritize credit card accounts in terms of interest rates. Therefore, the debtor will pay off the card with the highest interest rate first, the second-highest second, and so on. By making the minimum monthly payment on the other cards and aggressively repaying the first, you'll have additional funds to pay off the lower interest cards sooner. If at all possible, consolidate into one payment with a lower interest rate. Throw as much money as you can at this debt until it is paid off, then start using the extra money to attack the mortgage. 

Where Will the Money Come From?

So were will you find all this money to pay off those more important debts? You guessed it...you need to prioritize your other expenses. Depending on your household size, your grocery bill or your energy bills will be the biggest. Start looking for ways to save on groceries by simplifying meals and eating in whenever possible. If energy is the biggest concern, looking into energy saving tactics getting energy efficient bulbs, unplugging appliances when not in use and only turning on the lights you absolutely need to. As you find ways to cut the big bills, you'll find a little extra cash to attack the mortgage, car loan and unsecured debt.

You may find that you are paying a lot for cable or satellite television. If you are really serious about saving money, you can always cancel your cable and go for a Netflix or Blockbuster account. You may be able to get by watching TV online. You can probably hook up your PC or laptop to your television and watch your favorite shows that way. Look at your cell phone plan. Can you get by without a land line? Can you ditch the cell? Remember, this does not have to be a permanent lifestyle change. Once you have paid down your debt, you can reinstate those conveniences you have come to thing of as necessities. 

Remember, there was a time when families got by on three television channels and only land-based phones. They hung the wash out to dry and made use of every last scrap of resources. You don't have to live like a miser forever, just until you have paid down your debt enough to have some wiggle room.