5 Tips to Get out of Debt in the New Year

If you are about to enter a new year already burdened with debt, it is wise to start the year off right – with a plan for eliminating debt and preventing another year of financial burden for yourself. There are many things you can do to relieve yourself from the burden of debt and with these simple tips, you can be on the road to a better financial future

Here are five ways to start getting yourself out of the debt hole as you enter the new year:

Coordinate Your Plan

Before you can handle debt effectively, you need to start with a plan so you can see the big picture. Choose a time when you will not be disrupted and gather your financial information, including bills, income, and other financial documentation. Not only will you need to create a budget, you will also need to create a timeline for yourself to tackle your debts effectively during the year. Print out the plan and post it somewhere you can see it to keep you focused on your goals. Remember to be somewhat flexible in your planning as your money situation begins to change as time goes on.

Choose Your Starting Point

Financial experts often disagree on which debt to tackle first. It really is a matter of personal choice. You need to either tackle the biggest debt you have first or eliminate the smaller debts right off the bat. Whichever you choose, focus on one debt by making as many extra payments as you can while keeping up with the minimums on the rest of your expenses. When the first debt is paid in full focus on the next one by making a payment that also includes the previous debt payment while still making the minimums on your other debts.

Bulk Up Minimums

If you have a mortgage payment and other personal loans, you should round the amount due up to the next dollar amount. For instance, if your loan payment is $452 a month, start paying $460 or more. It may not be a lot of money with each payment but it can actually cut down the length of your loan by years if you continue to bulk up these payments.

Repair Your Credit

The amount you pay out for certain expenses is dictated by your credit score. If debt has been in your life for some time your credit score may be suffering. It is wise to request copies of your credit history reports and check your credit score to see where you stand. Any inaccurate information should be disputed with the credit reporting agencies and your creditors as mistakes can drop your credit score. If you have a better understanding of your credit and can improve your existing score, you will likely find cheaper rates for insurance, credit card interest rates, and be in a position for financing approval for future loans.

Learn to Save

At the same time you are working down your debts, you should also be learning to save more. Automatic deposits from each paycheck into a savings account can be a great way to build an emergency nest egg. The set-it-and-forget-it mentality allows you to build up a savings you are less likely to touch if you never actually see the money. As you free up more money after paying off debt, make a plan to store those extra payment amounts directly into savings.