One of the most common New Year's resolutions is to get out of debt. Most people forget or give up on their plan to get out of debt before the first month is over, just like they do with most New Year's resolutions. Here are some ways to help you keep your New Year's resolution to get out of debt:
- Keep track of your money. To pay off your debt, you need to know where your money is going. You should keep track of how much money you spend. You can do this with software like Quicken or MS Money, with spreadsheets, or even with pen and paper. No matter what method works best for you, it's important to keep track of where your money goes so you know how much you have each month to pay off your debts.
- Treat yourself every so often. As important as it is to set goals you can reach, you should also give yourself rewards when you reach goals and milestones. People also give up on their goals because they think they have to give up too much to reach that goal (i.e., skipping that latte, cutting back on spending, etc.). You should give yourself a reward every time you reach a goal or see that you are getting closer to a goal. This will keep you going. If you never celebrate your wins, you might start to dislike your goals and give up on them.
- Don't take out loans. The first step to getting out of debt is to stop taking out new loans. You won't be able to get out of debt if you keep adding to it every month. So cut up your credit cards, freeze them, or put them somewhere safe you can't easily get to, and start paying for everything with cash. This simple step will stop you from spending too much and make you stop and think, "Do I really need this?" before every purchase. You will be surprised by how powerful this one strategy is!
- Look at what you have. This is a hard step, but you have to take it before you can come up with a plan to get out of debt. Write down who you owe money to, how much you owe them, and how much you need to pay each month to meet your obligations.
- Set goals and milestones for the short term. Getting out of debt can be a huge challenge, especially if you have a lot of it. People often give up because the goal itself seems so big that it's impossible to reach. To avoid this, I suggest that you set smaller goals that will help you reach the larger goal. For example, if you have several credit cards and owe a total of $5,000, don't make it your goal to pay off the whole amount. Instead, try to pay off the card with the smallest balance first or find an extra $50 per month to put toward your debts. The idea is to set short-term goals that you can reach quickly so that you can see results right away and be encouraged to keep going toward the bigger goal.
Lastly, knowing why you want to get out of debt is the best way to make sure you keep your "get out of debt" resolutions. Is it to make you feel better? Is it to be with your family more? How will you feel when you've paid off all your bills? Putting emotion into your goals and reminding yourself why you want to get out of debt will help you stay on track and reach your goals.
