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8 ways to start paying off debt

Easy to-dos to help reduce your loan and credit card balances and work toward paying off debt.

Woman working on laptop with family in the kitchen

Getting rid of debt is a great way to exert more control over your finances. When you have fewer financial obligations, it’s easier to put more of your budget toward growing your family, planning for retirement and vacations, and other want-to-dos, versus have-to-dos. The new year is a great time to take concrete actions to reduce what you owe.

Not sure how to get started? Use these ideas to figure out an approach and then start taking your first steps to help pay down debt — the best New Year’s resolution yet.

  1. Create a budget.
    You’ll find that documenting what you spend and what you take in is a good first step toward understanding your debt and figuring out ways to pay it off faster. Record all fixed expenses such as rent or mortgage, utilities, and vehicle and student loan payments. Then determine miscellaneous expenses for things like restaurants, entertainment, and clothing. Total those and subtract them from your income to see how much, if any, you have left.

  2. Establish a "debt payoff" budget line item.
    Even if you don’t have much leeway in your budget, try to include a separate line item dedicated toward reducing your debt. It helps you create a habit of thinking about faster debt payoff as a regular expense to account for. One note: your debt payoff budget line item shouldn’t be lower than the minimum balance you must pay each month, otherwise you risk affecting your credit score negatively.

  3. Don't add to your debt.
    If you can, don’t continue to use your credit cards or add to any loan totals. Your goal is to reduce debt.

  4. Prioritize debts.
    Pick the loan or credit card with the smallest balance or with the highest interest rate, and focus extra resources on paying off that first. Then move on to the next smallest one or next highest interest rate loan or credit card.

  5. Consolidate — if it makes sense.
    Balance transfers can be a good way to both reduce your interest rates and streamline your payment strategies. If consolidation is an option, make sure there are no associated fees.

  6. Double your minimum due payment.
    Paying the minimum won’t help you make quick progress on your debt. Instead, for the first loan or credit card you prioritize, try to pay double the minimum due — or even a little bit extra — to make a quick impact on the remaining balance.

  7. Put extra income or resources to work.
    Apply bonuses, tax refunds, and any other money you make, such as a second job, to work on your debt priorities.

  8. Know that every contribution matters.
    It’s easy to get overwhelmed when you have debt — especially multiple loans or credit cards. Just try to make progress each month, even if it’s a small amount.

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