New Year's resolution notebook

Getting out of debt is a great New Year’s resolution

The new year is the time to set goals that we want to achieve over the next 12 months. According to Statistic Brain, 34 per cent of people make money related New Year’s resolutions and save more or spend less is the third most popular resolution—after lose weight and get organized. What’s your New Year’s resolution this year? If it’s getting out of debt, we can help.

Getting out of debt is a great New Year’s resolution because it helps save money on expensive interest charges and frees up money from the monthly payments that can be used towards something else like planning a vacation, buying a new car, or saving for retirement.

If your New Year’s resolution is getting out of debt here are three ways to do it:

Make larger payment

Becoming debt free isn’t magic and there’s no secret sauce. All it takes is dedication and discipline—honestly, it’s just that simple. If you want to pay off debt faster, then the first step is to make more payments each month. Making only the minimum monthly payment won’t help your debt get paid off sooner rather than later.

In order to allocate more of your monthly income towards getting out of debt you’ll first need to free up some extra cash. That means putting other goals on the back burner until your debt is paid off. It can also mean finding a second income. If your budget doesn’t allow for any disposable income, you’ll need to increase your income with a second job. More income means bigger monthly debt payments and that means getting out of debt sooner.

Consolidate your debt

You may have more than one credit card or loan payment every month and that can be hard to manage. If money management is a problem in your debt-free plan, you can solve it by consolidating your debt by applying for a personal loan.

A consolidation loan brings all of your outstanding debt into one loan—with only one monthly payment. It’s much easier to manage and the simplicity can help your debt get paid off faster. The interest rates on personal loans are usually lower than credit cards; that will help save money on interest costs. The more of your payment that goes towards the capital owing instead of the interest costs, the faster your loan gets paid off.

Cut expenses

If living beyond your means is a contributing factor to your debt, then you need to cut it out. Changing personal spending habits is a major factor in becoming debt free. There’s no point in working hard to make bigger debt payments every month if you continue using credit cards and accumulating more debt.

The first step towards living within your means is to cut out all extra expenses that aren’t necessary to live. You can track your spending with an app from your financial institution. When you see where your money goes you can cut out the extras. Leave your credit cards at home and live on a strict cash budget until your debt is paid off. If you live on cash, you can only spend what you have—forget the credit and debit cards if you want to be debt-free in 2017.