5 Ways to Eliminate Debt Before the New Year

5 Ways to Eliminate Debt Before the New Year
GUIDE
Andrea Woroch
By: Andrea Woroch
Posted: November 5, 2019
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You don’t need to wait until the New Year to set a financial goal. In fact, making a plan to improve your financial health ahead of the expensive holidays can keep you from taking on more debt during this tempting shopping season. Plus, clearing your financial slate before the ball drops is a much better way to ring in the New Year.

Here’s a look at five simple ways to give yourself a financial checkup and clear up debt before year-end.

1. Take Inventory of Your Accounts

One of the most basic but often overlooked steps toward becoming debt-free is understanding how much money you owe across all accounts. People who are carrying debt often avoid facing what they owe by not looking at their statements.

Ignoring your debt, however, does not make it go away. In fact, it only puts your finances in jeopardy and adds more stress in the long run. Spend time reviewing balances across your credit cards and store cards, noting interest rates for each account.

Photo of a Credit Card Statement

Review statements for each of your credit accounts and take note of your balances and APRs. You can view your statements on your card issuer’s website.

This may play an important role in determining your debt pay-off strategy as the cards with the highest APRs charge the most in interest fees when carrying a balance from month to month.

2. Set a Holiday Budget

When you’re working toward paying off debt, the holiday season can be a major roadblock toward reaching your goal, thanks to endless shopping temptations. And, considering 22% of consumers who went into debt last year to finance the holidays are still paying it off (and likely blowing money on interest fees), as reported by a recent Credit Karma survey, it’s more important than ever to watch where every dollar goes.

Setting a holiday budget is an essential step toward monitoring your money. Think of it as an action plan for how you’ll spend your money. Once you outline all your expenses, you will quickly realize what you can realistically afford and what you may have to cut back on or cut out completely.

To craft your holiday budget, try to think of every possible expense you may take on this time of year. Then begin outlining your anticipated expenses, such as gifts, travel costs, decorations, groceries for holiday celebrations, and postage for holiday greetings.

Reviewing your bank and credit card statements for the same period last year is a helpful practice, as it allows you to not only see which types of expenses you typically take on during the holidays but also your average spend across these different categories. Seeing your spending habits in black and white can help you make better buying decisions moving forward.

3. Audit Your Recurring Bills

To pay down debt while simultaneously affording the holidays, it’s important to think of ways you can scale back on spending in other areas of your life. One of the biggest places to begin this process is by reviewing your recurring bills.

So often, people are paying for monthly and yearly subscriptions or memberships they aren’t really using, such as gyms, monthly boxes, or video streaming services. If you have no idea what you’re spending every month on these expenses, list them out. You may even come across something you forgot you signed up for!

Photo of a Streaming Service

Stop paying for monthly subscriptions and memberships you no longer use.

Once you know which recurring bills you must pay and which are optional, it’s time to cancel the services you aren’t using. Some people find this step difficult because they don’t want to give up the “what if.”

What if they finally feel like exercising, but canceled the gym membership? What if they want to watch that one program on the streaming service they never use? Here’s the answer — you can always sign back up! So, give your finances and budget a little breathing room and nix the monthly subscriptions you don’t need.

Services like Trim can help you identify which monthly bills you’re paying for and cancel the ones you don’t use.

4. Compare Provider Rates

Don’t assume the original price you negotiated with your service providers is still the best rate. For instance, Homeowners and auto insurance prices are constantly fluctuating, so it’s a good idea to review rates periodically.

Sites like The Zebra and QuoteWizard provide instant price comparison on insurance rates, making it an easy way to check for savings opportunities. Meanwhile, BillCutterz negotiates with tedious providers, such as cable and internet, on your behalf to help get you the best bang for your buck without any extra effort on your part.

And it doesn’t stop there. Shopping around for financial products, like bank accounts, investment funds, and credit cards, is just as important as shopping around for a new car or TV to find the lowest price.

Failing to do this means you could be missing out on better interest rates on your savings account and credit card or overpaying on various fees. Spending a few minutes to compare options for banks and other financial products could give you more wiggle room in your budget to pay down debt and reach financial goals faster.

5. Increase Your Earnings

In your effort to trim your bills and cut back on spending, it can still feel like you’re barely making progress toward paying off credit card balances. The truth is, the fastest way to reach a financial goal, like becoming debt-free, is to make more money that you can put toward your goal.

With the end of the year approaching, you may be up for a promotion and raise or holiday bonus. Unless you already have an employee review schedule, arrange a meeting with your supervisor to inquire about these options.

Photo of an Employer Handing Over a Check

You may be eligible for a year-end raise or bonus with your employer.

Alternatively, you can boost your cash flow outside your regular work hours. This doesn’t mean giving up nights and weekends to a demanding part-time job. You can find side hustles that provide flexible schedules.

For example, as a ride-share driver, you can pick up passengers on your way to or from work, or while running other errands. If you prefer not to deal with strangers, check out Roadie, a service where you can run deliveries around town for other people.

You can even find odd jobs — such as building IKEA furniture — on TaskRabbit.com or dog-sitting gigs through sites like Wag. You can also post your professional skills to find freelance work at Upwork or FlexJobs. The extra income you earn from these side hustles will help you pay off debt faster and can be done when it’s convenient for you.