Is there a particular order...

[Anonymous]

of what to pay off first?

We have medical bills (less than $1500) and credit card debt ($4500) that we want to start paying off. I have heard with credit cards to pay off your smallest balance first but some say you should pay off the one with the highest interest rate first.

Thanks for your help.

[Anonymous]

I'm a Dave Ramsey fan (and I believe Time magazine recently backed up this theory) and I believe that knocking your debts out smallest to largest, ignoring interest rates, is the way to go. It's very motivating to see a debt disappear, and will give you that extra oomph to keep working on the next debt. If you start with your largest amount, you can sometimes lose steam. We're not talking about years worth of interest payments here, just a month or two at most, so I'd recommend starting with your smallest debt and working up to your largest. Good luck!

[Anonymous]

Those don't sound huge, I'm assuming you are generally pretty good about paying bills. Dave Ramsey's advice is really for folks who struggle with paying anything off - ever - so he tries to get them to pay off something small as a motivator to keep paying other stuff off.

Unless that's you, the indisputably financially optimal thing to do is pay highest interest first.

[Anonymous]

Keep in mind that it's worth trying to negotiate medical bills by offering to pay a smaller amount right now if they will consider the bill paid in full (i.e., half the bill).

[Anonymous]

Anonymous wrote:Keep in mind that it's worth trying to negotiate medical bills by offering to pay a smaller amount right now if they will consider the bill paid in full (i.e., half the bill).

Good advice. Offer 50% of the bill.

[Anonymous]

OP here.

Our medical bills are actually co-payments. We have insurance, just not the greatest, and we had an extensive amount of hospital claims the past couple of months. Our daughter had to have 3 ct scans, 1 bone scan and there were times we had to take her into the ER.

I know it's better to have something, so I appreciate what the insurance covered. I know that co-payments are our responsibility. Can they be negotiated? I had thought of calling the hospital and agreeing to "X" amount of money taken out monthly until it's paid.

We do not have a lot of money in savings. So, unfortunately, we haven't been able to just pay these amounts out right.

[Anonymous]

It's absolutely worth calling the hospital to see what they can work out with you. Worst case, they're inflexible on the total amount--you're not any worse off than you were before you called. But if you can work out a schedule with them, then you know what you're on the hook for each month and you'll be better able to plan.

As for the credit card debt, I think the smallest debt vs highest interest is really dependent on your own personality, the relative size of the accounts, and the relative interest rates. Let's imagine you have 3 cards total with debts owed of $250 at 18%, $2000 at 13%, and $2250 at 22%. To me, it would make total sense to knock out the smallest card first because then it's done and you have one less payment to worry about. But on the next two, I would absolutely prioritize the one at the higher interest rate because it's significantly higher and you'll save a good amount of money and pay the loans off faster if you tackle that one first.

[Anonymous]

OP here.

You all are so wonderful! Thank you each for taking time out of your day to help my finances.

[Anonymous]

I know you just did your "thanks" post, but want to +1 the Dave Ramsey advice. He has a whole method for getting out of debt. Then a method to acquiring wealth. Step by step, "baby steps" he calls them.

I just moved here and can't find his show in VA although there may be a station in MD.

I just figured out two days ago to download the free " I Heart Radio " app to my iPhone, I can get any station I want (so now I've got my old favorites, including Dave Ramsey's in Los Angeles 870am) It works for other devices as well, and should work for computers but it didn't work with mine for some reason. So I bring my iPhone in the house to listen.

you can go to daveramsey.com and find out what station carries his show near you, if you like.

Money and finances bores the heck out of me but this guy is totally interesting and so are his callers! SO interesting in fact that I took three of my friends to a show of his last summer--huge place and it was packed. And was a great show and I learned a lot! He's got some great sayings, just little one-liner sayings…hilarious

[Anonymous]

I will check out Dave Ramsey!

[Anonymous]

I agree with checking out Dave Ramsey. Also, I have gotten a lot from reading some of Suze Orman's stuff.

I also second the suggestion of calling the hospital directly and saying, we can pay you $x today, or $x per month. They may be willing to work something out with you, even though these are copays. It's worth a try.

And, this may be a dumb question, but I'm assuming this means you don't have a health care FSA? We have had one every year since having kids and it's been worthwhile, in fact we will add more for next year. This year we have had 3 trips to the ER between myself and DD, as well as a lot of trips to a specialist for me.

[Anonymous]

Anonymous wrote:I'm a Dave Ramsey fan (and I believe Time magazine recently backed up this theory) and I believe that knocking your debts out smallest to largest, ignoring interest rates, is the way to go. It's very motivating to see a debt disappear, and will give you that extra oomph to keep working on the next debt. If you start with your largest amount, you can sometimes lose steam. We're not talking about years worth of interest payments here, just a month or two at most, so I'd recommend starting with your smallest debt and working up to your largest. Good luck!

+1