In less than 60 days, the world will change the calendars to 2017. People enjoy shopping for the holidays, going on a vacation with their families, and basically making the most out of the remaining days of 2016. And here you are, worrying about the same financial problems you’ve had last 2015 – your debts.

What’s worse than a debt? A pile of debt. And throwing your limited cash on the wrong debt can put you in a deeper, eternal suffering rather than saving you from it. If you have several debts to think about and you don’t know where to start, all you have to do is to stop, breathe, list down all your debts, and prioritize. With overwhelming interests, late fees, and other penalties in mind, knowing what debt to prioritize and pay off first will help keep your sanity.

Wouldn’t it be a great feeling to jump start into the approaching new year with a little less financial burden on your shoulders? It’s always easy to shout a resounding “yes,” but it would be better to take some steps into clearing your debts.

Good Debt VS Bad Debt

Before being specific in what major debts to prioritize, let’s briefly discuss the difference between a good debt and a bad debt. Good debts are money owed which is meant to boost your financial position. Long-term loans like mortgage, car, and education are considered as good debts, and there’s no need to pressure yourself into repaying these loans ASAP as long as you’re doing well in installment payments.

Bad debts, on the other hand, are debts that don’t improve your financial position, which usually in the form of credit card debt or a personal bank loan. The money owed may be used for an expensive gift for your kid or other short-term needs. Good debts can also turn intro bad debts, when your money management skills failed and made the debt worse. Basically, you should pay off bad debts first.

Three Major Debts You Should Prioritize

Listed here are three debts you should prioritize and other actions to lessen your debts effectively and save more money. 

#1 Mortgage and any loans secured against your home

As long as you’re keeping up with the installment, there’s no rush into paying off mortgage loans. But a lot of people take this good debt and turn it into a bad one. The bank can foreclose your beloved home or property if you fall behind on your repayments during the terms, which is the least you’d want to happen.

A recent news shows that mortgage rates are rising slowly. You may consider refinancing your loan if you’re currently battling with a mortgage rate higher than 5% or you’re still paying Private Mortgage Insurance (PMI). Refinancing can extend the life of your home loan but may save you each year, especially if you’re paying for PMI fees.

#2 Car loans

A car loan is another example of a good debt gone bad. It can quickly become a bad debt if you purchase new automobiles and trade them continuously, which will prevent you from saving more money for your retirement and other long-term goals. Like mortgage loan, a car loan is a secured one, and therefore shall be prioritized. Your car can be repossessed by the bank, leaving you with nothing but a broken heart and pocket.

If your vehicle loan interest rate is 6% or above, you might want to consider refinancing. Unlike refinancing your mortgage or consolidating credit card debts, refinancing your car loan is quick and easy, with no appraisal required.

#3 Credit card debt

Though it isn’t a secured loan, it would save your life to have your credit card debt prioritized. Credit card debt is your highest-rate bad debt and the outrageous interest rates are the ones keeping the card debt from going down. In addition, the low minimum payments you think that are helpful are what have kept you in debt for so long.

It’s easy to say that the best move you can make is paying your card debt in full, but we know that it’s never easy to get help. The online loans aren’t meant for such major need. You can either refinance your debt with a low-interest personal loan or transfer the card debt to a promotional 0% balance transfer card.

If you’ll go for a low-interest personal loan, you’ll switch the debt to a three to five-year personal loan and you’ll pay off credit card debt faster with higher monthly payments. The 0% balance transfer card, on the other hand, allows you to transfer your debt to a card that doesn’t charge any interest for a promotional period.

Like other young adults, Carmina Natividad also experiences struggles in saving money, yet she finds a way to become a responsible spender. She shares her views on money issues by being a daytime writer for Speedy Money, an Australian-based business, providing short-term loans and other borrowing solutions.

5 Smart Moves For Millennials to Get Out of Debt Quickly

As it stands, many younger millennials are completing their final years of college. The eldest millennials, however, are into their 30s. Many of them, at this point, are in the midst of decisions about buying a home, raising a family, and other major life choices.
If you are a millennial who falls anywhere along this spectrum, chances are that you’re paying off a significant debt. Over 60% of millennials have at least one source of long-term debt (often student loan debt) that now averages about $40,000. Understanding your finances and getting out of debt are critical to building a financially successful future. Let’s take a look at five ways to gain control of your money and work your way to financial relief.

Acknowledge your debt

The first step to getting out of debt is to really understand what you owe and what you are paying. You’ll want to list all of your debts (including student loans, car loans, credit cards, personal loans, medical bills and mortgage loans) and see where each one stands.

Understand how much you can pay on debt each month

Take time to create a budget for yourself. Identify exactly how much you earn each month and how much you spend.

Get organized

Set aside a few hours and organize your bills. If you are receiving paper statements, go through the steps to convert each account to electronic delivery. Arrange to automatically pay at least the minimum on each account before the due date, and then return later to pay more (ideally, pay in full).

Pay off student loans

It’s quite clear that more millennials have attended college than any other generation. Half of older millennials (about age 25-35) have a college degree, and graduate-school enrollment increased by 35 percent between 1995 and 2010. However, over a third of millennials who have a household income of $75,000 or more worry about being able to repay their student loans. If you don’t think you can make a loan payment, contact your lender and speak with them about your payment plan options. Having said that, always be aware that the faster you pay off your student loans, the faster you can secure other life goals.

Save, save, save

Even if you do have debt to repay, it’s important to save for retirement. In addition, Scottsdale top bankruptcy attorneys note that saving six to nine months’ worth of living expenses can prevent you from going into debt in the future.