Get Out of Debt in 2018 with 5 Easy Steps

Holiday debt can add up, fast. And after a month of credit card-swiping and complete-purchase clicking, January brings a rough financial reckoning for most of us. This New Year, resolve to dissolve your debt, whether you racked up some bills in December or have been carrying it around for awhile. This is your time to get out of debt once and for all.

Get out a calculator and let’s get to work.

TAKE STOCK OF YOUR DEBT

You have to know where you’re starting from, so list all your debts along with the interest rates for each. If you have a spouse or partner, sit down with them to add up your debt together.

COME UP WITH A GAME PLAN

Once you know all the gritty details about your debt, it’s time to figure out how to tackle it. While you have to make the minimum payments on all your debts, focus on making extra payments on the debt with the highest interest rates first. “The higher the interest rate, they more you’re spending just on interest each month,” says Bill Taylor, vice president of financial planning for Northwestern Mutual. “When you pay down the debts with the highest rates first, you’re not spending as much on interest every month.”

Some people think that paying off debt means that you have to struggle and suffer. But really, you just have to spend less money — the suffering is optional.

If you have good credit, you might even decide to get a debt consolidation loan in order to reduce the interest rate you’re charged. That will help you pay your debt off more quickly.

You might also consider getting a new credit card with a 0 percent introductory rate and no balance-transfer fees. “Switching from paying 20 percent on $10,000 to 0 percent is a $2,000 savings,” says Taylor. Whatever you can do to reduce the interest you owe as you pay back your loan will help.

FIND THE MONEY

This is a tough one. Sure, you can search between the couch cushions, but that’s not going to get you very far.

Look at your budget to find places where you can cut back without taking away the things you enjoy in life. Love going to the gym? Keep your membership and cancel a magazine subscription. Can’t imagine life without TV? Cancel the cable and get Netflix. Find ways to have things you want for less. “A financial planner can be a good resource here to help you think through what’s most important to you and help make suggestions about things you may be able to cut out,” says Taylor.

Once you’ve trimmed the budgetary fat, consider an early spring cleaning and sell things you’re no longer using on Craigslist or Ebay.

You could also get a side hustle to make extra cash. Not sure what you could do? Join the gig economy. Consider freelancing, becoming a dog walker, house-sitting, babysitting, designing websites, and driving for a ride-sharing company.

DON’T SWITCH TO AN ALL-RAMEN DIET

Some people think that paying off debt means struggling and suffering. In reality, you just have to spend less money — the suffering is optional. Make being thrifty fun. Compete with friends to find the best deals, challenge each other to host a dinner party for $20, and enjoy shopping for vintage clothes at the local flea market.

HIGH-FIVE YOURSELF

The final step to get out of debt in 2018 is to savor every big or little accomplishment — even if it’s just resisting the urge to buy a pair of jeans you don’t need. Make a special dinner and propose a toast to your fiscal responsibility. Give yourself something to look forward to and plan a celebration to mark the day that you’re finally debt-free. Rewarding yourself along the way can help you stay motivated and on track.