Make a fresh start on tackling your debt

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Tired of carrying old debts with you? Ready to shed the weight of all those interest payments?

One in three people say they’ve resolved to pay down their debts in 2017. Yet of the people who make New Year’s resolutions, only 8 percent typically keep them.

Want to be one of the 8 percent? You’re going to need a plan.

Consolidate your debts

Gather the most recent statements from every debt you owe. Make a list, including the balance, annual interest rate (APR or APY) and minimum payment. Now look for ways to lower your interest rates. See if it makes sense to:

  • Transfer a balance from a high-interest credit card to a lower-interest one.
  • Call each creditor to renegotiate your rate.
  • Take advantage of balance transfer offers with low interest rates.

Choose a debt repayment strategy

Let’s assume you’re making the minimum payments on all your bills. Now figure out how much extra you have each month to put toward paying down your debts. Using it wisely will help dig you out of debt faster.

There are three main strategies for getting out of debt efficiently:

  1. Constant payments. When you’re just making minimum payments, your balance will go down eventually. So will your minimum payment. That means the more you pay off, the less money you’re devoting to paying off the rest. Instead, set a constant total debt payment that stays the same each month, no matter what happens to your minimum payments. Add up all of your minimum payments, plus whatever extra you can devote to debt elimination. Anytime a minimum payment drops, shift the extra you were paying into another bill.
  2. Debt stacking. Order your debts by interest rate. Keep making minimum payments on all your bills except the one with the highest interest rate. Throw every extra dollar you have at it. Once it’s paid off, take everything you were paying into it and fire it at the next-highest interest rate on your list. Rinse and repeat until debt free. Debt stacking—also known as the ladder method—is “often touted as the one that saves you the most money over the long term because you're getting those high interest rates out of the way first,” says Bruce McClary of the National Foundation for Credit Counseling.
  3. Snowball method. This popular strategy works a lot like debt stacking, except you order your debts by balance rather than interest rate. Choose the lowest balance first, pay it off as fast as you can, apply that money to the next-lowest balance, and so on. Then watch it snowball. The snowball method won’t save you as much money over time on interest payments, but people like it because they’re able to pay off a bill sooner and get that flush of accomplishment. It’s motivating!

Make snowflakes

Every time we get a snowfall, it’s proof of how powerful small droplets can be. Enough tiny snowflakes can blanket the world. Snowflaking is a debt repayment technique that operates on the same principle.

Think of all the small actions you could take to save money immediately: brown bagging, buying a small coffee instead of a large, drinking water instead of soda. Think of these as snowflakes. Each time you make a snowflake, add the money to your next debt payment. They may not amount to much individually, but together they can have a surprising impact on your debt.

“Snowflaking made it feel like I was truly taking action on my debts several times each day,” says The Simple Dollar. “This left me feeling in control of the situation. I wasn’t just hoping for the future for this problem to go away. I was doing something right now to make it better.”

Stick to a budget

Once you’ve got your strategy figured out, the rest is like clockwork—until you splurge on a nice vacation or the holidays roll around again. Following a budget is essential if you don’t want your debt repayment plan derailed. Use these resources to help.

Ready to tackle your debts in 2017? These strategies will help springboard you into a debt-free future.