It’s a new year, and you’re ready for a fresh start.
And while you’re probably setting goals and preparing for the year ahead, there’s just one thing holding you back: debt. Perhaps you’ve even tried to commit to paying off a debt in the past, and it just didn’t stick.
If you’re finally ready to pay off debt, here are seven steps you can take towards finally getting out of debt this year.
Step 1: Achieve what you believe
You might think the first step in creating a get out of debt plan is crunching the numbers. While that is an important step, the first step to getting out of debt is actually believing that you can.
Start by removing negative self-talk (which is easier said than done) and focus on the belief that you can and will get out of debt. At the end of the day, you can only achieve what you believe.
Maybe that sounds cheesy, but actions follow thoughts. And if you repeatedly say “I’ll never get out of debt!” or “I don’t know how I’ll pay this back” then you’ll stay in debt pretty much forever.
When I made the commitment to pay off debt, I was making $12 an hour at a temp job. Nevertheless, I said (out loud) that I was going to pay off debt within four years.
It certainly felt scary at the time because I didn’t have all the answers yet on how it would happen. But sure enough, after I believed I could get out of debt and set a crazy goal, I ended up reaching my goal ahead of time.
Step 2: Be ruthless with your budget
If you really want to get out of debt this year, you need to be ruthless with your budget.
Although it’s not fun to cut back on life’s little luxuries, doing so temporarily can help you make much-needed progress. To pay off debt this year, you need to allocate every extra cent you have towards your debt.
It can be a test of your will and seem extreme. But if you want to pay off debt this year, think of it as a temporary sacrifice for a longer-term gain. Those Venti Soy Macchiatos with whip aren’t going to help you become debt-free, but not drinking them will.
Step 3: Monetize your life
Cutting back on expenses is just one way to get out of debt. Something that can make even more of an impact is earning more money. You might think you don’t have a lot of time or don’t have any skills you can monetize, but that’s simply not true.
In fact, there are a variety of side hustles listed right here that you can start tomorrow. When striving to reach a goal like paying off debt, you must commit 100 percent and give it your all. That means figuring out ways to monetize the time you have available.
You can sell stuff online on eBay or Craigslist in the evenings and work as a tutor or brand ambassador on the weekend. Or, consider working as an Uber or Lyft driver during the holidays. The point is to get creative and find ways to earn more consistently.
Step 4: Make weekly payments
Instead of paying your debt once per month, consider making multiple payments per month.
You can strive for making weekly payments and cutting down on overall interest. At one point in my life, my student loans were accruing $11 in interest per day. Talk about a money pit.
Even if you just divide your regular monthly payment by four and make weekly payments, you’ll be able to cut down on interest. Our Student Loan Hero payment calculator can help too.
Step 5: Set a goal and work backward
So you want to get out of debt in 2018? Calculate how much debt you have left and divide it by 12, the number of months there are in a year.
Then, figure out how much do you need to put towards your debt each month to be debt-free before you ring in 2018. If the number you need to put towards debt seems scary, don’t panic. Instead, figure out a way you can reach that goal.
How many extra hours do you need to work? How many $20 to $100 eBay or Craigslist sales do you need to make? Don’t let yourself be held back by the impossibility of it all.
Remember, step one is believing you can solve a problem and then figuring out a way to do it.
Step 6: Throw all windfalls to debt
Sometimes you come across some money you weren’t expecting. You get an unexpected bonus at work, or you get cash for the holidays from your parents. Maybe you get a killer tax refund.
It’s easy to think that windfalls are free money and your desire to spend it on fun can be overwhelming.
However, you need to harness in your discipline and throw every last penny of windfall money towards your debt. It will help you reach your goal that much faster — and frees your life from burdensome monthly payments.
Step 7: Ask for a raise, then put the difference toward debt
If you’ve been working at your job for a while and doing a great job, evaluate if it’s the right time to ask for a raise.
But before you do, take some time to do some research on Payscale and Glassdoor to get an accurate sense of what folks in your area and level of expertise are making. Then, make a list of all that you have accomplished so you can illustrate that you’re worthy of a raise.
Finally, set up a meeting with the boss and make a case for earning more money. The worst they will say is “no.” If you are successful, put all extra income towards your debts.
Pay off debt today, not tomorrow
In order to pay off debt, you have to be fully committed and make changes across the board in your life.
It’s tough; no one ever says it’s easy. But they do say it’s 100 percent worth it. That’s one thing you can be sure of this year.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|5.99% – 24.99%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|