2011 is drawing to a close and if you’re like one of the 150 million Americans you are in debt. If you don’t want 2012 to be a repeat of this year you’ll need to make a plan to get out of debt in 2012. It takes more than just making a New Year’s resolution to reduce your debt. You’ll need a plan and you’ll need to stick to it. Here’s a blueprint you can use to make 2012 a debt free year.
Add it up
Have you actually added up all your debt yet? A lot of people don’t even know how much they really owe. The just keep making payments every month until they run out of money and then let the bills they can’t pay roll over to the next month. The problem is, they never make up the deficit. In fact, it just keeps getting bigger every month as late charges are tacked on by the creditors.
Add up all your debts. Make a list of who you owe, how much you owe, how much your monthly payments are and the interest rate. Reality hurts but you need to know what you’re up against.
Keep an eye on your spending habits. The average American spends approximately $400 a month more than they bring home in their paycheck and most don’t even realize it. Track every single cent you spend for an entire month. Little things – that designer cup of coffee every morning, fresh doughnuts on the weekends, dinners out, the shoe sale at DSW – really add up and if you’re serious about reducing your debt then every penny counts.
To seriously attack your debt you will need to make some spending cuts. Yes, it’s going to hurt. But only for a little while. After one or two months you’re going to be able to see that mountain of debt start to shrink. And you won’t believe it right now, but when that starts to happen you’re going to be more more motivated than ever before.
Reorganize your debt
Some of your debt can be reorganized. For example, maybe you can use a lower interest rate credit card to pay off one of you higher interest rate loans. If you contact the credit card companies you may be able to get them to lower your interest rate as well. If you go a step further and talk to a credit counseling service they may be able to reorganize your debt into a single monthly payment at a much lower interest rate.
Making a commitment to reduce your debt in 2012 isn’t going to be easy and, in the beginning, you’re going to have to force yourself to stay motivated. Don’t reward yourself with something that’s going to cost you more money. That money could be better spent getting rid of a bill or two. Instead, make a chart or a big calendar that you can hang on the wall and start tracking your debt. It won’t be long before you see it start to drop and that’s going to be all the motivation you need to keep going.