How to Manage Personal Debt in the New Year

Worried family with child sitting with financial documents at home

It is now a new year, which means you have probably made a resolution to be a new you. Whether you want to lose weight, quit a bad habit, or get a handle on your personal finances you have to really want it. This means that you have to continue your resolution throughout the entire year and not just in the first couple of months. We are creatures of habit, so once we get used to doing something, it will come naturally. This is definitely true when it comes managing your debt. If you are one of many who want to pay off old debt and make a plan to better your finances, then here are some tips that can help.

 

Develop a plan of attack

The first step in financial freedom is paying off old debt. This might come from a high balance credit card, or student loan debt. Whatever debt you have, make a list of the total amount that is owed back, and determine what you can do to pay off more than just the minimum payment due. Credit card interest tends to add up quickly when you have a high utilization and are only paying minimum payments monthly. By adding even an additional $20 to your monthly payment, while not spending additional money on your card, you can reduce the amount you pay in interest, and take less time to pay off the full amount. In doing this your credit score should increase, even if is only a couple of points, it is better than your score going down.

 

Continue to plan some more

In order to pay off old debt you have to make sure you do accrue anymore new debt, which is sometimes easier said than done. Emergencies happen and everyone can get into a tough situation financially. This is why planning and organization are so important. Creating a monthly budget will help you build a savings. When you have a good amount of savings, it can be used for those financial emergencies, rather than through the use of a credit card.

 

Start now, don’t put it off

In order to stick with your resolution you must implement it immediately in the new year. Also make sure that you continue to make progress with your personal debt as the year progresses on. You might pay off more than the minimum for the first couple of months in 2016, and fall back on only paying the minimum. To ensure this doesn’t happen, again, create a monthly budget. Include your credit card payments to reflect a higher overall payment, and try to stick to it.

 

Focus on 2016, while reviewing the past year

Of course you want to stay focused on how you can achieve your goals in the new year, but it can help to take a look at how you previously dealt with personal debt. What things might you have done in 2015 to put you in the situation? Understanding your personal debts can help improve your overall personal finances.