New Year’s resolutions are known to be incredibly gimmicky and unreliable.
Every committed gym-goer knows that they can expect their typical routine to be bombarded by a slew of newcomers at the beginning of January, only to see it taper off and go back to “normal” by the beginning of February.
Though New Year’s resolutions about the gym are generally quite fickle, there’s nothing saying that such a resolution can’t be sustained.
There’s also nothing to say that it needs to be only about your physical health.
Perhaps of equal concern during this time of year is the health of your personal finances; namely, your credit card debt.
It’s not unusual for people to experience a bit of a holiday spending hangover, as debt tends to pile up around the holidays. That’s why this is a great time for a resolution to pay off your debt.
The trick is to make sure that it actually happens.
Here are a few ways to improve your odds.
1. Give your resolution a practical plan and put it on paper
Simply thinking or saying that you’re going to pay off your credit card debt doesn’t change anything. You need to put some action behind that goal. The best way to start is to come up with a plan to reduce your expenses so that you have extra money to devote to paying off your debt.
Start by listing your discretionary income (extra spending money), then take note of how much you can afford to put toward your credit card debt right now.
Then see where you can cut other expenses (entertainment, non-essential items, etc.), and funnel the money you save into paying down your credit card debt.
2. Make sure you’re able to pay principal
Hopefully we’re not confusing a resolution to pay off your credit card debt with a resolution to simply pay your credit card bill.
Keep in mind that you need to attack the principal sum you owe on the card. That means you’re not just dealing with the minimal monthly payments and interest. Instead, you’re paying extra money, which is going toward reducing the amount of money (the principal) that is generating interest. If you’re able to pay down the principal, you’ll loosen the rope on your monthly income and eventually have even more to contribute to principal.
3. Stop using your credit card
Credit cards have their place in our lives and certainly in our society, but generally speaking, you should not need to use one, especially if you’re in the middle of trying to pay it off.
If at all possible, avoid the use of your credit card entirely and keep it on hand only for emergencies.
That will ensure you aren’t adding any additional expenses that would then grow (because of the interest charges on the card). If you owe $50 for something, pay for it with cash, a check or a debit card. That way you’ll only be paying $50, and not $50 plus interest.
4. Commit to a culture of saving money
Frugality isn’t a once-a-year endeavor.
If you’re going to be committed to a debt-free (or at least credit-card-debt-free) life, then you need to build your personal finances around a culture of saving money. This means that you make sure you’re contributing to your savings account and that you’re aggressive about pursuing a long-term retirement savings plan.
The more you get away from the idea that “If I just made more money, I could save some,” the easier it’s going to be for you to build up your short- and long-term portfolios, pay off debt, and avoid red ink entirely.
5. Do a budget every two weeks
Setting up a budget is smart, and a lot of people do so at the beginning of the year. However, budgeting isn’t a one-and-done proposition.
To a large extent, spending and expenses are unpredictable. In many cases, even income is unpredictable, such as in the case of freelancers or those who work on commission. That means you may not be able to do your budget only once for the entire year.
A wise practice would be to redo your budget every two weeks, accounting for changes in both expenses and income, while making reasonable projections for the next two weeks.
This will make it easier to set aside money to put toward the principal on your credit card.
Why the New Year doesn’t matter
If having a fresh calendar and a chance to metaphorically start over motivates you, that’s great. I’d say take advantage of it.
At the same time, it’s important to recognize that a New Year’s resolution should have little or nothing to do with what day it is, especially in the case of paying off credit card debt. Rest assured that the motivation will fade as the New Year wears on, and you’ll need to rely on the systems you’ve put in place to make sure you actually have money set aside to pay off your credit card.
Make tangible changes to your habits and the financial culture of your home. If you stay committed to a budget, set money aside, and adhere to a culture of saving, you’ll have the credit card issue off the table quicker than you ever thought possible.
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.