THe Debt Myth

How to Stick to Your “Get Out of Debt” Resolution

If your New Year’s resolution is to get out of debt, you’re not alone. It’s one of the top resolutions every year. Now we all know that many resolutions fall by the wayside in a matter of weeks or months, but getting out of debt doesn’t have to be one of them. You can reach that life-changing goal. Here’s how to stick to your get out of debt resolution.

Spend some time on the why

While you may be tempted to jump right in to the details of how to pay off debt, it’s important to spend some time on the why first — and then put those reasons down in writing. Get out a piece of paper and make a list of exactly why you want to get out of debt.

Maybe you dread opening the mail, because there’s always a stack of unpaid bills waiting for you. Maybe you think you’re going to explode if you have spend one more day working in a cubicle — but you can’t quit because you owe too much money. Maybe you’ve got a new baby, and you’re determined to make their future a bright one.

Whatever it is, write it down. In fact, write down as many reasons as you can think of. The why matters, because it’s what will keep you going when you get a little bit down, and it’s what will spur you to reach your goal as fast as you can.

Get specific

The next step is to get specific about what you want to accomplish. A resolution isn’t the same thing as a plan. To be successful, you want a plan.

Believe me, getting out of debt is a great goal to have. But, how much debt are you going to pay off, and by when? If you’ve got a ton of debt, do not get overwhelmed. Instead, break it down into smaller pieces. For example, the first part of your master plan could be to pay off your VISA bill, or your student loan, or whatever debt is bothering you the most. (To really speed up the get-out-of-debt process, consider using the debt snowball method.) Then break that amount down further into what you can achieve each month.

Turn your resolution into a statement that spells what you plan to get done this year. For example, your resolution might turn into a goal that says “By December 31st, 2012 I will have paid $18,000 toward my debt, which will include my VISA with a $2000 balance, my car loan with a $7300 balance, and $8700 toward my student loan. I will do this by sending $1500 per month toward my debt.”

Start on the how

There’s just one thing missing from that statement above: exactly how you’re going to get that $1500 per month to send to your debt. (You’ll want to add that part too once you get it figured out.)

Basically, you’ve got to come up with more money. The two ways to do so are to earn more money and spend less.

If you don’t already know what you’re spending each month, start by tracking your spending. Next up is budgeting. (See this post for more info.) Most people can cut their spending back by 5-10% without even feeling a pinch, so that’s a good place to start.

Bringing in more income helps too. Try asking for a raise, getting a part time job, or brainstorming ways you could bring in a little bit more each month. If you think that has to be boring, the Penny Hoarder has a whole slew of wacky ways to make money.

Give yourself regular checkups

Getting out of debt takes time, so you’ll want to check your progress at regular intervals. It can be motivating too. (The more I check our mortgage payoff progress using the Pay Off Debt app, the more I want to send.) Regular checkups will help keep your goal top of mind and on track. Give yourself a break if you didn’t do as well as you’d like one month. Use that as motivation to try even harder from here on out instead.

If you can check in with others who have similar goals, it can be even better. It’s a lot easier to get out of debt when the people around you are doing the same. Consider joining the (free!) Debt Free Club while you’re at it.

Finally, come back to your list of whys at each check up, to remind yourself of exactly how your life will change once your out of debt. Before you know it, another year will have passed, but by that time you’ll have either reached your goal of becoming debt free or will be well on your way.