How to Feel Good About Debt Going into the New Year

The new year is just around the corner and it’s time to start thinking about how you want it to be different. Better than this year. Resolutions are nice, but they rarely last more than a month or two. Goals are better. Ones that are attainable with a plan for reaching them and action steps to get you there.

If one of your goals for the new year is to get out of debt, it’s time to start planning. Getting your action plan in place before the end of the year will help you move into the new year ready to tackle your goal head-on.

There are a few steps you can take to get yourself ready to successfully reach your goal in the new year:

1. Know Your Number

You can’t make a financial plan for reducing and paying off debt without knowing how much you owe. And that means everything. Every loan, every credit card, every past due bill, every friend you said you’d pay back. Every single thing you owe should be written down in one spot. Preferably a spreadsheet to that you can also keep track of your payments, but whatever method you prefer is fine. You will need to keep track of your debts and your payments in one place.

2. Request Your Credit Reports

There may be old debts lingering around on your credit report that you’ve forgotten about. If you don’t deal with them, they can remain on your report for several more years, making it difficult to improve your credit score while you’re working hard to reduce your debt.

3. Accept Your Number

This is usually the hardest step that keeps people stuck in debt. Their number is too difficult to deal with so they choose avoidance instead. Which usually not only keeps them stuck in debt, but also increases their debt. If you really want to get serious about getting out of debt, it’s time to accept the reality of your situation. You can’t go back in time and make different choices, you can only make better choices for the future. Accept where you are and get serious about moving forward.

4. Create a Budget

Another reason people have trouble getting out of debt is because they don’t have a plan for how they’ll spend their money. Creating a budget can be the biggest step you can take to get yourself out of debt. Start with how much money you bring in every month. Then, start subtracting all of your necessary monthly expenses like rent or mortgage, utility bills, car payments, groceries, etc. Now you need a plan for the leftover money. A little for extra expenses like entertainment and dining out, but the bulk should go towards your debt.

Depending on your credit goals, you may choose to pay a little toward each debt every month or you may choose to pay off the smaller debts first before tackling the bigger ones.

5. Improve Your Budget

You can improve the bottom line of your budget, creating more money for debt, in two ways. Reduce expenses or increase income. Start with looking for items to cut like high cable bills. Consider changing your cellphone plan to a more affordable one. Give up the gym membership or daily coffee shop.

Once you’ve cut everything you can, start thinking about how to increase your income so you can pay off debt faster. Ask for a raise at work. Get a part-time job. Start a part-time business. Find ways to earn extra money in your free time online.

Going into the new year with a plan for getting out of debt already in place will help you reach your goal successfully. Don’t wait, start making your plan today. And if you need help getting started, connect with a nonprofit budget counselor and discover new ways to maximize your money and reach your goals.

Emilie is the brains, the brawn, and the beauty behind She Does Better, inspiring millennial women to live financially, physically, and professionally fit lives. She writes about overcoming debt, while balancing trying to eat healthy, stay fit, and have a little fun along the way. Read more about her journey here.

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