Debt Management

  • April 20, 2021
  • By: P.T. Phan


Everyone who calls GreenPath receives a free financial counseling session. GreenPath’s professional counselors will listen respectfully and support you in reviewing your situation. The counselors will give you advice on budgeting and planning.

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Bills You Should Pay First Bills You Should Pay First

When money is tight, it might be difficult to pay all of your monthly bills. Rising prices and inventory shortages can also put pressure on your budget. You may have to make hard financial decisions about which bills you should pay and which ones you delay. Although everyone’s financial situation is unique, here are some general rules of thumb for which payments to prioritize.

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1. Food, Medicine and Child Care

The main bills you should pay first are grocery/food, child care, and essential medicine. These items should be your first priority. Although they are necessities, it’s important to be mindful of these expenses and keep them to a minimum. For example, look for opportunities to save money at the grocery store.

2. Housing

Keep current on your mortgage or rent payments if you can. A home financed with a mortgage is a secured debt. The lender expects timely and consistent payments. If you own your home, real estate taxes and insurance must be paid. These expenses may be included in the monthly mortgage payment. Any condo fees or mobile home lot payments also should be considered a high priority. Failure to pay these obligations could lead to a lot of stress and loss of your home.

3. Utilities

Make payments on essential utilities such as heat, water, and electricity. Working hard to maintain your mortgage or rent payment makes little sense if you don’t have heat, water or power. Carefully analyze other expenses in this category such as cell phones, house phones, Internet and cable TV. Are these “needs” or “wants”? Could you do without them in a financial crisis? Could you save money on electricity, heating and cooling, or phone bills?

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4. Transportation

If you need your car to get to work, rank your car payment just below food, medicine, housing and basic utilities. Pay your insurance payments too. If you don’t, your creditor may buy insurance for you at your expense. This will be more costly to you. The key here is buying a car that meets your needs and fits within your budget.

5. Child Support

Child support is a court-ordered payment. Thus, it’s a high priority from a legal and moral standpoint. It’s the court’s job to establish a payment that is fair for both parties. The court also must ensure the well-being of the child. In some states, child support payments are auto-deducted from your paycheck.

6. Income Taxes

You must pay federal and state income taxes that are not automatically deducted from your wages. You must file your federal and state income tax return, even if you cannot afford to pay any balance due. Failure to pay taxes on time can result in penalties and eventually wage garnishments. Some tax planning, and working with a tax professional, could help you save some money on your taxes.

7. Unsecured Debts

If you simply don’t have enough money to meet your monthly obligations, you should contact your creditors to explain the situation and request some assistance. These accounts may include credit card bills, doctor and hospital bills, or other merchant accounts. Explain that your financial situation is preventing you from making the payments, and you are working towards a solution. You don’t have any collateral tied to these loans, so you are not in danger of losing property, but these creditors do expect to be paid back.

Aligning Priorities

Figuring out your financial priorities is an essential aspect of money management. To get you started, check out the Aligning Priorities workbook.
If you need help getting out of debt, consider working with a nonprofit, reputable debt counseling agency. GreenPath debt and credit counselors are NFCC-certified, caring and nonjudgmental. We will help you understand your financial situation and make a plan to meet your goals.

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Benefits of a debt management plan Who Benefits from a Debt Management Plan?

For many of us, these past months have been marked with a level of uncertainty – especially around finances. In the face of unexpected changes in income, many households have turned to consumer credit cards to take care of daily expenses.

If that’s the case, it could be helpful to learn more about a debt management plan. Having options is always a good thing! Take a few moments to review what to keep in mind, if you seek options to manage debt.

Who is a debt management plan for?

A debt management plan is designed for anyone with a desire to pay their debt back and become debt-free.

This includes people who have several consumer credit cards and each month make monthly minimum payments; people watching their hard-earned income go to high-interest rates; and anyone who might be experiencing collection calls.

In some cases, it can be helpful to explore signs that a debt management plan can be of use.

The beauty of a debt management plan is that it can be customized to fit most situations and can help with many types of debt and creditors.

Why do people typically use a debt management plan?

Our clients have shared a few main reasons why a debt management plan works for them:

  • The structure — Often people come to us saying they have been trying for years to get their debt paid off, to no avail. Because we make it easy for clients to pay their debts, structure is key! A personalized payment schedule is created, based on schedules that work with pay frequencies and bill due dates. It’s a “set it and forget it” situation. Our clients realize quickly how easy it is to let us handle it for them.
  • Cost savings — Since we have relationships with virtually all major creditors, often clients take advantage of reduced interest rates, fees, and monthly payments. Depending on the amount of debt, this can add up to thousands of dollars saved in fees and payments when all is said and done.
  • The peace of mind — Starting on a GreenPath plan is often the first step in a journey of becoming a financially healthy person. 91% of people served by GreenPath feel better prepared to handle their finances. In addition, 93% of people served by GreenPath have reduced financial stress.
  • Teaming with a trusted resource — Knowing an organization like GreenPath has been in business for 60 years, is highly rated, nationally renowned and recognized for being innovative and customer-centric is working on your behalf every day allows our clients to stop worrying about a big issue. We’ve heard from people that they sleep better at night knowing there is a plan in place.


Whatever your financial situation, take our 3-minute assessment and we’ll work with you to create personalized steps for moving forward.


There’s a lot of advertising about something called “debt settlement” offered by for-profit companies. How is a debt management plan different?

There are differences between debt management and debt settlement. A debt management plan is designed to get all of your debt paid off and in full.

This may be better for your credit as compared to a debt settlement which pays off only a portion of your debt according to Experian, one of the major credit repositories. Paying less than you owe is in opposition or conflict with lenders and creditors. Plus there may be tax consequences when you pay less than your full balance.

Looking deeper, a debt settlement firm may advise you to ignore all the missed payment notices sent to you by credit card issuers. Missed payments may negatively impact your credit score.

Missed payments typically remain on a credit report for seven years. Until you replace the negative payment history with some positive information, it likely means you may have difficulty getting new credit cards and loans and have higher interest rates.

A debt management plan helps to reduce debt and establish consistent on-time payments, two factors that impact credit scores. In addition, some creditors may “re-age” your past due accounts which fast tracks your status to current after making multiple on-time payments via the debt management plan. Re-aging can also save you from additional late charges.

Final Thoughts

As a national nonprofit, GreenPath structured the debt management plan program to improve and promote financial wellness. It’s part of our mission… looking out for the best interest of our clients.

So think about the benefits of a debt management plan. It’s a good chance to learn new spending habits, stay on track to pay off debt and build a healthy financial life.

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debt calculator Why it Pays to Use a Debt Calculator

Even a month into the New Year, it’s always a good time for making positive changes, and getting on the path to good health — not only physically, but financially as well. Are you ready to start on the road to positive financial health?

One way in which you can do this is by reducing and eliminating debt. With careful planning, informational resources and support, you can do it. It just takes a plan.

If you carry personal credit card debt, you are not alone. Like others, you may have suddenly found yourself with unexpected expenses or a decreased income, and used your credit card to stay on track. And that may have meant you couldn’t pay the total balance each month, which has led to increases in finance/interest charges and added to what you already owe.

This is not uncommon and can be adjusted. It is important to understand the impact of interest charges to help you effectively manage your debt and reduce your financial stress.

Using a debt calculator will give you a clear picture of your financial situation. It can illustrate how long it will take to pay your cards off. And once you’ve reduced or eliminated credit card debt, that money can be used to build savings, start an emergency fund and achieve other positive financial goals you have set for yourself.


See how interest can impact your financial situation. Getting the facts may be a good option.


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Pay off Your Debt Pay Off Your Debt

If you are dealing with debt, you aren’t alone. The average American household has an average balance of about $6,600 in credit card debt,  and that’s not taking into account home, auto, and student loans. Paying off your debt isn’t always easy, but having a plan can go a long way in achieving your financial goals.

Two of the most popular strategies for paying off debt on your own are the snowball method and the avalanche method. Both methods require making the minimum monthly payments on all but one debt, which you put extra money towards.

The Snowball Method

With the snowball method, you begin by paying off your smallest debt first. This method creates a sense of motivation and accomplishment from being able to pay off smaller bills at a higher frequency.

How it Works

Let’s say you have the following debts:

  • Credit Card A: $3,500, 17.99% APR
  • Credit Card B: $7,500, 15.00% APR
  • Personal Loan: $1,000, 10.05% APR

Using the snowball method, you would pay the minimum monthly payments to the credit card debts, and pay any extra that you can to the personal loan until it is paid off. You would then apply the extra payments to Credit Card A until it is paid in full.

Pros and Cons

With the snowball method, you are able to see progress faster. Quick wins can help you stay motivated to keep going. However, with this approach, it will take you longer to pay off your largest debts—and those are often the ones that carry the highest interest, so you’ll likely end up paying more overall.

The Avalanche Method

The avalanche method takes into account the fact that high-interest debts cost you the most money over time. Using the avalanche method, you pay off your highest interest debts first.

How it Works

Let’s look at the same scenario as above.

  • Credit Card A: $3,500, 17.99% APR
  • Credit Card B: $7,500, 15.00% APR
  • Personal Loan: $1,000, 10.05% APR

With the avalanche method, you’d pay the minimum monthly payment on Credit Card B and the Personal Loan, and pay extra towards Credit Card A, since it has the highest interest rate. Once it was paid off, you’d move on to Credit Card B.

Pros and Cons

This is the fastest way to eliminate debt and save on interest payments. However, it can take years to eliminate this debt while other smaller bills still trickle in.

Which option is best for you?

It comes down to what you feel most comfortable with. Ultimately the best method is the one you can stick to.  If you’re motivated by quicker victories, the snowball method may be the right option for you. If you want to pay the lowest amount of interest, you’re likely better off choosing the avalanche method.

Looking for more options to pay off your debt?  Click here to learn about debt management plans, balance transfers, debt consolidation, and more.

GreenPath is Here for You

At GreenPath Financial Wellness, we are working to make it easier for everyone to achieve financial health. We can help you gain a better understanding of your spending habits, and we can help you create a plan to pay off your credit card debt. Our financial coaches are kind and caring. We can help you understand your finances and make a plan to meet your goals. It’s free, confidential and no pressure!

Call today for a free financial counseling session.

Dusti Young  Dusti Young has a passion and energy for spreading financial wellness. Through her role at GreenPath, she connects people to financial wellness by working with GreenPath’s partners. Dusti has been with GreenPath for nearly 13 years and has held a number of roles, including financial counselor, business analyst, and her current role, Partner Relations Specialist.