It’s New Year’s Eve and you know what that means, you only have a few hours left to decide on your 2022 resolutions. Anybody can make New Year’s resolutions. It’s keeping that them that’s the hard part. But today on MoneyWise, we’ve got one for you that you’ll never regret keeping.
- Right now, a lot of folks are trying to decide how many pounds they want to lose in the next year. That’s a worthy endeavor, but why not add something else to your list of resolutions? In addition to reducing your waistline, how about reducing your debt?
- We’ll get into that in a bit, but did you know that making New Year’s resolutions is actually a strong Christian tradition? Many cultures make them, but Christian New Year’s resolutions are grounded in a centuries-old tradition called “Watchnight.”
- These were services held at the end of the year by some Christian denominations, and they inspired believers to reflect on the past year and resolve to do better in the one ahead.
- About 30-percent of Americans make resolutions each New Year, but by March, only about 30-percent of them are still following them strictly. And in the long run, only 10-percent of folks making resolutions keep them permanently.
- So years ago, someone came up with an acronym to help when setting goals. It’s S.M.A.R.T. That stands for Specific, Measurable, Attainable, Realistic, and Timely.
- So keep those in mind as you work out the specifics of resolving to reduce your debt in the New Year.
- RESOLVING TO BECOME DEBT-FREE
- The thought of getting out of debt may seem overwhelming, but you don’t have to do it all at once. The important thing is to set a realistic goal and get started.
- And to be clear, we’re only talking about consumer debt like credit cards and maybe auto loans, not your mortgage.
- The first thing you need to do is write down all of your debts and their amounts. So pull out all of your credit card statements, auto loans, and outstanding bills. Then total it up. That’s never a fun thing to do … but it’s essential.
- When you’ve totaled up your debt, make a plan to pay off some part of it. Start by figuring out where you can trim spending from your budget to create margin— that’s money left over after all necessary spending.
- Of course, if you’re not on a budget you’ll need to draw one up. If you need help with that, sign up with one of our volunteer coaches at MoneyWise.org.
- You can also download the MoneyWise app wherever you get your apps. It’s based on the tried and true envelope system, and it makes setting up a budget a snap.
- So after you’ve done that, you’ll know how much money you have to attack your debt each month. While still paying the minimum due on each debt— take that “surplus” money and put it toward the smallest debt each month. This is called the “snowball” method.
- When the smallest debt’s paid off, take the surplus money and apply it to the next smallest debt. When that’s paid off, repeat the process.
- As you keep going, you’ll begin to pay off debt faster and faster, like a snowball getting
- Now, to be successful, you also have to resolve to not take on any new debt. Otherwise it will wipe out your progress. So don’t use your credit cards. If you have to, cut ‘em in half.
- Remember to make your goals attainable. One step at a time!
- Do those things and you’re far more likely to be in the 10-percent who keep their New Year’s Resolutions.
On this program, Rob also answers listener questions:
- After cashing out a life insurance policy, what should you do with the money?
- If you sell a product for full price rather than at a discount, is that usery?
- Do extended vehicle warranties make sense?
- What is the best way to budget your money?
RESOURCES MENTIONED DURING THIS PROGRAM
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