America’s Biggest Debt Crisis Not in D.C., But at Home

The debt debate raging on in Washington should look familiar to Americaafter all, its one that families and individuals face daily. How can you pay for the things you need to survive, and want to enjoy in life, when you just can't afford to?

While lawmakers on Capitol Hill are trying to prioritize their own debts, including government programs like Social Security and Medicare, Americans are struggling to pay their student loans, mortgages and medical bills. However, unlike in Washington, raising the debt ceiling isn't an option for many American families being crushed by debt.

Setting priorities in your personal debt can seem just as overwhelming as the nations debt dilemma, but think first about what you really can't live without, according to Dave Ramsey, personal money-management expert.

"Start with food, utilities, shelter and transportation," Ramsey said. "Those are your basic necessities. Always pay those first and stay current on them. Once you've done that you can attack your credit cards and any other bills you have."

Even though climbing out of debt is stressful, be sure not to make any rash decisions that will only send you into a deeper financial hole. According to Gerri Detweiler, personal finance expert from Credit.com, those in debt often either go into "ostrich mode," sticking their head in the sand to try and forget about things, or they panic.

"Panic mode means doing things that have big consequences, like tapping your retirement funds to pay off bills," Detweiler said. "It doesn't solve the problem."

Here are six tips from Ramsey and Detweiler on how to manage your own personal debt debate.

No. 1: Quit borrowing money! Cut up your credit cards and stop borrowing money, Ramsey said.

"Personal finance is 80% behavior and 20% head knowledge," Ramsey said.  "You must break the cycle no more borrowing."

No. 2: Figure out what you can't afford to lose. If your debt is secured with something you can't do withoutlike a house or a carDetweiler says to pay up.

"Traditionally home loans were at the top, but that is changing because people are discovering they can't or shouldn't stay in their home," she said.  Ramsey also suggests creating a written budget to figure out how much you need to live on a monthly basis, and where your money is going.

No. 3: Look at unsecured debts. Your next priorities should be things like paying child support and the IRS, Detweiler said. These are things you can be majorly penalized for.

"You can get into big trouble if you don't pay child support," she said. "If you owe the IRS on back taxes and fall behind they can put a lien against your property."

No. 4: Always pay student loan debts. Detweiler suggests doing everything you can to make the minimum payment on your student loans each month. Even if you are working out a forbearance agreement with your loan company, or have looked into an IBR program, don't stop paying the minimum until you have something in writing.

"Once you default on your student loans, the interests and collection costs can make debt mushroom quickly," she said. "Collection can be much more aggressive than collection for other types of debt. For example, they can go after your tax refund."

No. 5: See what you can push off. Although ideally you would be able to manage and pay off debts simultaneously, for many that is not an option. Detweiler said often credit card bills can be pushed off, but those in debt should try to at least make the monthly minimum payment on their cards.

"Issuers can't raise the interest rate on existing balances unless you fall 60 days behind," she said. "If you do fall behind, they may close your line of credit."

No. 6: Attack your debts. Ramsey suggests paying off debt using the Debt Snowball Method, in which you list your debt from the smallest payoff to the largest.

"Put all of your extra money into your smallest debt, paying the minimum on the rest," he said. "Once you pay off the first debt, apply that amount to the next on the list."