New Year Financial Resolution: Pay Down Debt
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Paying down debt can be a life-altering New Year's resolution -- if you actually carry it out. Often, best intentions are not enough. To successfully reduce your debt levels, you can employ tools and strategies to make the job easier. The rewards for paying down debt include more money for discretionary spending or saving, improved credit scores and an ego-boosting sense of accomplishment.
Begin With a Budget
Make Tough Choices
Pay Down Debt, Starting With High-Interest Balances
Pay down expensive credit debt first. When you set up your credit card and loan accounts in Quicken, you can enter each item's annual percentage rate. The most efficient way to pay down your credit card debt is to sort your cards by APR and pay off the most expensive one first. This requires that you pay more than the minimum balance each month. You can then increase your payments to the next card, repeating the cycle until all the cards have zero balances. You might decide to close a few cards you no longer plan to use, but bear in mind that this will not increase your credit score. However, reducing your debt certainly will help boost your score over time. If you have any non-credit-card debt, such as a revolving equity loan, pay it off when it becomes the debt with the highest interest rate.
Use Credit Card Transfer Offers
Apply Extra Income to Debt
Apply any extra windfalls you get, such as bonus checks, to your remaining debt balances. Though it can be tempting to spend such money on vacations or other wants, having the discipline to spend the money on debt reduction can help you fulfill your New Year's resolution that much sooner. Once you're out of debt, you can reward yourself with a trip or purchase, especially if you pay for it with cash rather than credit. Consider using secondary sources of income, such as the sale of unwanted household items and gifts; you can use online services to sell items without much hassle. To help fulfill your resolution, take the sales proceeds and apply them to your debt.