Traditionally at the start of each new year, we start making plans on how this will be “our year”. Whether it’s deciding to get into better shape, travel more, or spend more time with family and friends, money is usually involved somewhere on the list. Is this the year you want to be able to save more? Are you in debt and have been feeling like it’s just a part of life?  It doesn’t have to be!

As is the case with most goals, we must create a plan and stick to it. Patience, dedication and hard work are also part of this debt reduction recipe, but you would feel much lighter if you spent the new year working on your financial health.

Track Spending

It’s so easy to lose track of how much you’ve been spending, especially because you don’t see the money leaving your account with each swipe of your card vs when we were using cash only. A lot of places don’t even accept cash anymore, so swiping or digital payments has become a big part of our lives. Commit to only using your debit card when making purchases. Using your debit card is the closest to using cash as either you have the funds to make the purchase, or you don’t as opposed to credit where you can purchase things you may not be able to afford at the moment. A great way to start climbing out of the debt hole is to stop adding to it.

Through tracking your spending you’ll be able to see what you’re spending on and start making some adjustments to create a new budget for yourself. This will also help you understand what an essential purchase or non-essential purchase is.

Eating out, daily coffee runs, online shopping are all areas where most of us could tighten the reins. Don’t set yourself up for failure by committing to change all your habits overnight but pick and choose where you can make small adjustments that will add up to make a big difference.

Pay More Than the Minimum

Now that you have created your cash budget for spending, you need to list all of your credit card balances along with the interest rate you are paying on each card per month.  Are you making the minimum payment each month? Great! However, paying more than the minimum every month will help you tackle that debt at a fast pace and lower the amount of interest you’re paying overtime.

One Card at a Time

As you look at the list of your credit cards, now list the balances in order from lowest to highest.  Tackle the lowest amount first. If you’re not able to pay more than the minimum on all of your credit cards, pay more than the minimum on the lowest balance. This practice will help pay off that debt quicker and once you have done that, the money that you were paying to that card can now go to pay more than the minimum on the next credit card and just keep repeating that cycle moving forward until you’ve paid off all your cards!

You can make a similar list of your credit card balances based on the interest rates you’re paying on each card. Tackle the highest interest rate card first by paying more than the minimum and then repeating the above cycle by taking the money you used to owe on the previous card (that you’ve now paid off) to start paying off the next highest interest card.

One Bite at a Time

These are just a few ideas to lower your debt over the course of the next year.  You may also want to think about getting rid of some things around your home that you rarely use through a yard sale, or an online marketplace. Use the funds from that item to pay towards one of your credit cards. Also think about securing a part-time job to help pay off debt and instead of splurging if you received an income tax refund, you pay off one of your credit cards.

More than likely, you didn’t get into credit card debt overnight, so give yourself some grace and understand you won’t get out of credit card debt overnight. But with a plan and dedication to that plan, you can start seeing the light at the end of your debt tunnel.