Yesterday you will have seen a sample financial statement to help you get a grip on the stark facts of the income and outgoings of your household.

Today we will speak about the key step of prioritising your creditors to ensure that you deal with the most pressing debts first.

Prioritising your monthly expenses is about making sure you can keep the roof over your head and your family protected.

The law gives different creditors different ways of getting their money back from people who owe them money.

Priority debts are the ones which have the most serious consequences if they are ignored.

These consequences could be losing your home, losing essential goods or services or even being imprisoned.

While these sound quite extreme you shouldn’t panic – things can and will work out.

You will always be given warning and as long as you act promptly you should be able to stop things happening.

In the majority of cases your creditors cannot take action until they have gone to court first and you will be notified of this and have the opportunity to attend the court hearing and state your case.

There are important exceptions to this however, such as gas and electricity companies who can disconnect you without going to court first and the Revenue who can send the Sheriff.

As a rule of thumb your priority debts will likely be Mortgage or rent payments; Payments on secured loans; Gas, electricity and water; Maintenance payments; Tax, VAT; TV licence; and Insurance premiums.

Secondary debts include all other types of debts where the creditor hasn’t got extra powers to reclaim their debt ie. they can’t take your home or have you jailed.

Some examples include: Credit/store/charge Card arrears; unsecured personal loan; bank loan, overdraft; telephone arrears; hire purchase; catalogue arrears.

When you have sorted your debts into these two piles, it is time to put your good work into action and contact your creditors.

You can get a head start on this difficult topic by downloading chapter two.