When it comes to getting out of debt, most people have a system. Some pay off the smallest bills first, some tackle the largest. But, the safest way to reduce your debt is to pay off essential debt, and then worry about debts that are nonessential.

What is the Definition of Essential Debt?
In the simplest terms, essential debt is the debt that pays for life’s basic necessities. It is the debt you want to pay off first. This debt should be made your number one priority; failing to pay off essential debt can open up a whole can of financial worms. It can cost you a house, a car, and your family’s well being.

What is Considered Essential Debt?
There are several things that can be considered essential debt. The following is considered the most common:

• Rent or Mortgage: Any debt that involves your place to live is definitely essential. Thus, your rent or your mortgage should be your number one priority each month. Finding yourself behind on your house or rent payment may just lead to finding yourself without a place to call home.

• Utilities: Having a roof over your head is often not enough, you also must have things like water, heat, and electricity. This means that utility bills are also considered essential debt. Not paying them can result in things like your telephone being turned off. This is not only inconvenient, but it also teeters on dangerous: failing to pay your heating bill in the dead of winter puts you and your family’s safety at risk.

• Court Ordered Child Support: Child support is also an essential debt. Not only does failing to pay child support compromise your children’s well being, but it can also leave you in legal trouble and put you, eventually, in jail. If your wages have been drastically reduced and you absolutely can’t afford your current amount, you can petition to pay a lower amount.

• Children’s Needs: Even when not court ordered, children always need support. They need clothes, they need food, they need supplies for school, they need immunizations. Making sure your child has everything they need in life should be considered essential.

• Health Insurance: Next on the list comes medical insurance. Though it may seem like going without insurance saves you money, it’s a huge risk, not only for your finances, but also for your health. In short, medical insurance isn’t really optional.  If you are fortunate enough to have insurance through your employer, chances are your rate is rather low and taken directly out of your paycheck. For those who don’t have job based insurance, rates can be high and falling behind just one month can result in revocation of coverage. If your payment lapses, some people, particularly those with preexisting conditions, may have a hard time getting new insurance.

• Car Payments and Car Insurance: Car payments and car insurance isn’t always essential. If you can take public transportation to work or ride your bike, you may not need a car at all. But, if you rely on a car to get you to work or get your children to school, both the car payment and the car insurance should be made a priority to pay.

• Legal Debts: If there are debts you have been court ordered to pay, such as a lapsed credit card bill, this debt must become essential. The reason for this is simple: if you don’t pay it, the creditor may garnish your wages, leaving you in even more financial turmoil than you were before. The same can be said about unpaid taxes. The IRS can take your paycheck, seize your bank account, take your savings, and even get your house if your taxes remain unpaid. Instead of ignoring them, set up a reasonable payment plan and adhere to the due dates.

What is a Nonessential Debt?
Anything that doesn’t put the basic necessities of life at risk can be considered nonessential debt. Credit card bills, for instance, are nonessential unless you have been court ordered to pay them. Even if creditors are calling or collection agencies are knocking on your door, they should still not be made essential. Other nonessential debts include things like gym memberships, club dues, cable bills, medical bills, bank loans and Internet service (unless you work from home and rely on the Internet)..

Before making a dent in your debt, it’s important to determine what debt is essential and what is nonessential and pay the former first. This helps assure you keep things like your house and your health insurance. Of course, this technique certainly doesn’t mean you should never pay the nonessential bills, just make sure you pay them after the essential debt payments have already been made.