2023 is your year for finally getting out of debt! No matter the type of debt you have, these essential steps will help you create a path to becoming debt-free this year.
Step 1: Learn about debt consolidation loans
Debt consolidation loans are a great way to reduce your overall debt burden. These loans can help you combine multiple debts into one loan and paid off more quickly.
To find the best debt consolidation loans for you, it’s essential to understand your options and criteria. Several different types of debt consolidation loans are available, so you should research to find the right one for your financial situation. You should also consider using a loan payoff calculator during your research, as it’s a great way to figure out the difference between paying off your debt without consolidating vs. with a consolidation loan. Seeing the cold, hard numbers can give you a realistic understanding of what timeline you’re looking at to become debt-free.
Some factors to consider when looking into debt consolidation include your income, outstanding balances, and credit score. Understanding these factors allows you to create a plan and timeline for consolidating your debts.
Step 2: Keep track of your expenses
Keeping track of your expenses is an integral part of becoming debt-free. By tracking your spending, you can identify areas where you may be overspending and make necessary adjustments.
One of the best ways to track your expenses is through a budget. A budget lets you see exactly where your money is going and can help you make smarter financial decisions. You can also use a budgeting app to keep track of your expenses on the go.
Another key way to keep track of your expenses is to set up automatic payments for bills. This will ensure that you’re always paying your bills on time and not constantly struggling to meet payment deadlines.
Step 3: Make extra payments toward your debt
Making additional payments toward your debt is one of the quickest and easiest ways to reduce the overall amount you owe. By making small, consistent payments, you’ll prevent old debt from accruing more interest which can add to your debt load even more.
Start by making an additional $5 payment with your minimum due each month and see how that goes. Once it becomes a routine that fits your budget, add a little more. Even $5 additional will go a long way toward quickly getting your debt knocked down.
Step 4: Commit to saving money this year
It might feel counterintuitive to put money away while you’re also trying to pay off debt, but the benefits of a savings account are well worth it. Putting a small, consistent amount of money (even if it’s just $10) away every month will allow your savings to grow and prevent you from needing to dip into your credit cards for the next emergency. Plus, with the power of compound interest, you’ll make your money work for you and accrue even more without any effort on your part!
The bottom line
If you want to create a path to becoming debt-free this year, make sure to take these essential steps. Debt consolidation loans can help you combine multiple debts into one, which will then be consolidated and paid off more quickly. Keeping track of your expenses is crucial to make smart financial decisions, and making extra payments on your debt can help you reach your goal sooner. Finally, budgeting and tracking your spending will help you track where your money is going and make better decisions about how to allocate it.