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7 doable steps to be debt-free

Put your resolution into action with these tips for getting out of debt.

Getting out of debt is a superb start to improving your overall financial health. It can boost your credit, lower your debt-to-income ratio — not to mention all of the stress it’ll eliminate.

But if you’re serious about eliminating debt this year, you’ll need a plan. Here are our strategies to lower your debts after ringing in the new year.

1. Consolidate your debt

Managing monthly payments on multiple credit cards and loans can makes it difficult to keep track of just how much you owe. If you have good or excellent credit, consider taking out a debt consolidation loan, which allows you to gather all of your debts into one place — and one payment. You might even save on interest if you qualify for a lower interest rate.

Got a lot of credit card debt? Consider moving your debts to a balance transfer credit card. These cards often come with an introductory 0% or low-interest rate that typically lasts over a year or more. If you qualify, make a plan to pay off as much of this debt as possible within your intro period to avoid paying unnecessary interest.

Compare debt consolidation options now

2. Cut out useless expenses

You’ll hear this one often because it’s just that helpful: Go through the past few months of expenses to find places where you might be able cut back. Maybe you pay for cable but rely on streaming services. Or maybe you spend more money than you realized on booze.

Figure out where your money is really going, and make an effort stop overspending where it’s not necessary.

This doesn’t mean you have to take an axe to everything that gives you joy. You can often cut back by making a few, almost unnoticeable adjustments to your life.

3. Start budgeting — and make it fun

Making a budget is a solid way to make sure you have enough money to make repayments on time — or early. But getting into the habit of it isn’t always easy.

Try designing a system that rewards you for sticking to your budget. Especially in the first few crucial months of a budget, set aside some money to do something you love — whether it’s trying that new restaurant or just picking up some chocolates you’ve been eyeing. Anything to make budgeting feel rewarding as you build up new habits.

Got a competitive streak? Make it a group activity with friends or family by setting up rewards — and penalties — for sticking to your budget or reaching your goals. You can offer up doing extra household chores or picking what you watch during movie night, for instance.

4. Sell your stuff

Chances are you own at least one thing you never use. Selling even a few of your personal items is a way to make some extra cash to pay off your debts faster.

Take a day (or a weekend) to go through your things to see what you can live without. You probably won’t miss clothes that don’t fit, that guitar you never play, that bike you never ride or that yogurt maker you used only once.

Post on online classifieds sites like Craigslist or Facebook groups, or even set up an eBay account if you have enough stuff you want to get rid of.

5. Make some money on the side

Selling your toaster oven isn’t the only way to make some extra cash. You have plenty of other ways to make extra cash without a lot of effort. Tutoring, hosting travelers through Airbnb and even selling scenic photos you’d otherwise put on Instagram are easy places to start.

6. Struggling? Get credit counseling

When debt is too big for a budget to handle, a credit counseling agency can help you figure out first steps. These nonprofit organizations can give you advice and point you toward solutions that work for your specific financial situation. Many also offer budgeting workshops that can help you build skills to stay out of debt.

The Department of Justice offers a list of government-approved credit counseling agencies that can help you get back on track.

7. Have a plan to stay free of debt

Getting out of debt includes having a plan to stay out of it. Sticking to your budget, setting up a savings account and making sure you have an emergency fund are excellent ways to avoid taking on more debt, even when life throws you an expensive surprise.

And for those non-emergencies — like family vacations or down payments for a house or car — make a plan to build up savings, instead of financing these costs with a credit card or taking out a loan.

Bottom line

Getting out of debt takes a bit of planning, but it is doable. Keeping on top of your personal finances is key to staying on track. But the most important thing is not to give up — even if you can’t completely get rid of your debt this year.

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