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

 

Take stock of your income, expenses and debt. This means setting up a budget and tracking your spending. Quicken provides easy budget setup tools and allows you to track your income and spending, including automatic payments, that you can set up for items such as rent, cable TV and loan repayments. A helpful practice is to enter your cash expenditures every day, while they are still fresh in your mind. Examine your budget carefully and determine where you can cut costs.

Make Tough Choices

 

If you are serious about paying down debt, you will have to consider cutting back on even your most cherished spending habits. According to Joel Pate, who runs a credit repair services company, “It’s important to eliminate every expense possible, including cable TV, eating out and every other discretionary expense from your budget, even if it’s just one dollar. Doing so will allow you to concentrate on paying your bills on time and paying down your debt.” If you have the discipline to track all of your unplanned purchases, especially the cash ones, in your budget, you might be surprised at how quickly the cost of everyday items mounts up. Brewing your own coffee and getting rid of premium cable channels can save you hundreds of dollars a year — and these are only two suggestions.

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

 

Take advantage of special transfer offers. Credit card companies often run special promotions that offer you zero-interest balance transfers. This is a convenient way to remove balances from your highest-interest credit cards. The trick is to pay off the transferred amount before the zero-payment period expires, because you might be hit with a high interest rate on the remainder. You can increase the effectiveness of this strategy by replacing some of your credit card spending with good old-fashioned cash or a debit card. This allows you to take better control of your spending and slows the accumulation of credit card debt, so that you are better able to pay down the transferred balances.

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.