How to Actually Achieve Your Debt Payoff Resolution
BY SEAN PYLES
A lot can happen in a year. You can get a new job, pick up a new hobby or, just maybe, you can finally pay off your debt. Many people have the motivation to tackle that last one: The average U.S. household with revolving credit card debt has an estimated balance of $6,849, costing an average of $1,162 in annual interest, according to NerdWallet’s 2019 household credit card debt study. If you hope to dig out from debt in the new year, boost your chance of success. Start with some smart groundwork, then focus on what’s driving your goal and what you can achieve monthly.
SET YOURSELF UP FOR SUCCESS
Before you set your specific debt-payoff goal, lay the groundwork so you can achieve your ambitions. This means at least roughing out a budget and getting to know the details of your debt. Look through your bank statements to see how much money you have coming in and where it goes monthly. Separately, put together a list of your debts, including their balances, monthly payments and interest rates. “In many cases, people don’t have a budget at all, or it’s been a while since they paid attention to their expenses,” says Lauren Anastasio, a certified financial planner at SoFi, an online lender. “The reason [a budget] is so important is it’s the way to really be honest with yourself.” And when drafting your budget, don’t skip monthly savings because you’re laser-focused on debt. Tania Brown, a Georgia-based CFP with Financial Finesse, calls savings “debt-free insurance.” Her advice: “Make sure you have at least $1,000 in savings” before diving head-first into debt payoff. “If you don’t have savings, the first unexpected expense can put you back into debt.”
The reason [a budget] is so important is it’s the way to really be honest with yourself.
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