Starting the new year with the goal of getting out of debt is a worthy resolution to keep. This will not only allow you to breathe easier, but it will help you raise your credit score and become more financially stable.
Of course, to make sure you see your resolution through, here are five steps to help you get out of debt in 2023:
- Build a better budget. If you don’t have a budget, now is the time to create one—and if you do have a budget already in place, make some tweaks and hold force yourself to follow it. Don’t forget to cut costs where you can, like streaming services, eating out, or unnecessary subscriptions.
- Pay down credit cards. There are a couple of methods you can follow that can help you pay down your cards. The debt snowball method requires you to pay down your lowest card first (while paying the minimum on your other cards) for quick gratification, while the debt avalanche method has you focus on paying down your highest interest loan first.
- Save your money. While most people intend to have savings, sometimes it’s easier said than done. That’s why following the 80/20 rule can provide a solid parameter each month. Put 80% of your monthly take-home toward your household bills and 20% each month toward savings.
- Make an appointment with a credit counselor. When you’re in debt, it can be hard to get out. A credit counselor will help you create a manageable budget and may enroll you in a debt management program if you’re a good candidate. This means they will work with your lenders to lower your interest rates and consolidate your loans into one affordable monthly payment—so you can pay off your loan in three to five years.
- Educate yourself. Create a healthier financial future by becoming more financially literate—from reading books and articles to watching videos or taking workshop classes. A credit counselor is also a great resource and can guide you toward literature, workshops, and classes that can help you become better financially educated.