For many Americans, New Years resolutions revolve around one of two things: losing weight or paying off debt. Achieving either of these resolutions requires a lot of self control, and many people who enter the New Year with the best of intentions will be back to their old ways before the month of January comes to an end. To avoid having this happen to you this year, here are a few tips to help you get out of debt and stay out of debt.
1) Hold yourself accountable
Simply saying that you want to get out of debt is a vague goal, and vague goals are more likely to fall by the wayside. Instead of making this your resolution, set very specific goals for yourself. The goals might be something like paying an extra $100 to your credit card every month, stopping the use of credit cards, or paying off $5000 of debt by March. Whatever your goals are, they should be concrete and measurable to make sure you are living up to them.
Once you have your goals, find some way to hold yourself accountable. Find a buddy that you have to check in with periodically to report how you are doing, start a blog to track your progress, or use an online goal tracking website to keep track of how you are doing.
2) Set a budget
You cannot realistically pay off your debt unless you budget money to do so. While you don’t have to sit down and detail where every dollar is going, for some people, setting a budget is the best solution to money management problems. Setting a budget can be as simple as allocating how much to spend and how much to pay to debt or save, and then paying yourself first the money you want to save and put towards debt. When you pay yourself first, all the money you have left over is yours to spend and you won’t have to worry about not meeting your goals or about budgeting every dollar. Make sure you never spend more than you allocate to the spending category.
3) Stop digging yourself deeper
You cannot get out of debt if you keep digging yourself deeper into debt. End your reliance on the credit cards if you are going to pay them off. Don’t cancel accounts, because this can cost you in terms of your credit score, but do make it difficult or impossible for you to use your credit cards. If cutting up the cards is too drastic a move, consider freezing the cards into a block of ice. You’ll have to wait several hours for them to defrost before you can use them, which will cut impulse spending out entirely.
4) Look for ways to make debt repayment cheaper
Call up your creditors to try to negotiate a lower interest rate, or consider a balance transfer offer to move your higher interest debt to a lower interest loan to repay. Anything you can do to make paying off your debt faster and easier, and to make sure more of your money goes to the principle instead of the interest, will help you to accomplish your goal.
5) Remember your motivation
For most people, there is a specific reason or series of reasons that they want to get out of debt. Some people want to have money to buy a family home, for example, or to put money into their kids college fund. Whatever your goal is, remember it and let it motivate you when times get tough. Put a picture of your dream home in your wallet where your credit cards used to be, for example, or a photo on your screen saver of the school you hope your kids will some day attend. These constant reminders will help you to remember what the sacrifice is for and will help to keep you motivated towards getting your debts repaid and your resolution fulfilled.