8 Easy Habits That Will Help You Confront—and Maybe Even Pay Off—Your Debt in the New Year

Debt is, for many people, a scary four-letter word. There’s something terrifying about owing large amounts of money in any form—whether that’s money you borrowed from a friend, a student loan or mortgage, or a credit card balance—but it’s difficult to survive in the world without some form of debt. According to NerdWallet, as of June 2020 the average American household owed about $137,729; on average, over $6,000 of that is credit card debt and $46,000 shows up as student loan debt. And nine percent of those surveyed said they don’t think they’ll ever be fully free of credit card debt.

If you’re afraid to start dealing with your debt, that’s totally normal. I’ve been there, and take it from me when I say the most important thing to remember is that small actions can make a major impact. If reducing debt is on your list of New Year’s resolutions, following these simple tips to tweak your routine can help change your mindset about your finances—and finally tackle your debt for the long haul.

It’s not fun to look at your credit card balance or credit score, but in order to deal with your debt, you have to actually look at it, and understand every element of that number. How much interest are you paying each month? Where are you overspending? Where can you cut back? If your primary source of debt is a car loan or something similar, can you make extra payments anywhere to reduce the balance faster? Stay informed and on top of your debt so you can track your progress.

Few people like talking to a stranger on the phone, but when it comes to questions about statements and late payment fees or even negotiating a better rate, there’s no better way to resolve any issues than by picking up the phone and speaking to a person. (The chat feature works too, but I’m Team Phone.) You can accomplish so much simply by having a short, pleasant conversation with another person; don’t forget to thank them for their help, because being on the receiving end of such calls probably isn’t fun.

There are apps for everything money-related, from budgeting tools like Mint to investing apps like Acorns, to saving programs that act like a piggy bank in your pocket. I’ve been a fan of the app Digit for years, which works by connecting to your bank and keeping an eye on your spending habits, then skimming off cash in amounts you won’t miss—a few dollars here, a few dollars there—and adding it to a savings account. You can connect it directly to a credit card and have it autopay towards a balance each month, or set up various accounts to help stash away cash for a big purchase you know you’ll need to make. Your banking app might already offer a similar auto-transfer feature—the point is to find a system that works for you, and which you can stick to over the long haul.

Make things extremely easy for yourself: Set it and forget it! Missed payments can be one of the biggest dings to your credit score, so setting up autopay for your loans and cards pulls double-duty for your financial health. 

Ready to get started making a serious dent in your debt? One of the most common methods to pay off debt is the “snowball method,” where you focus on paying off your smallest balance first. You do this by paying at least the minimum towards your other credit cards or loans, and put the bulk of what you’ve budgeted each month to pay down the smallest balance as quickly as you can. When you pay off one balance, you transfer that budget to the next-smallest amount, thereby allowing the percentage to snowball and get bigger over time. Chipping away at the balances one by one can be motivating, and results in a sense of accomplishment. 

Another popular method, called the “avalanche” method works in reverse: Focus on the account with the highest interest rate first. It may take longer to pay off one or more of your cards, but it could save you more money on interest in the long run.

You know that saying, “You have to spend money to make money?” Well, sometimes spending money can also help save you money. As someone with a full-time job and a busy freelance side hustle, I need all the help I can get when it comes to taxes and IRAs, and without the help of my financial advisor and CPA, I would be lost. They’ll help you create a budget, advise you on big purchases, and tell you where to put your money—not to mention all the ways they’ll teach you what to write off or how much cash to transfer to various accounts come tax time. Their advice can often be worth its weight in gold.

Managing debt is all about balance, but when you have a variety of loans and cards to pay off, you really want to do more than the minimum. Paying only small payments from month to month can impact your credit score, result in higher interest charges, and even dissuade lenders from giving you cash when you need it. If your budget supports paying more than the minimum payment due—even if it’s just $20 more than the minimum payment you’re expected to make—do it.

And if you’re feeling particularly flush one month, why not put some of that extra money towards your debt? Sure, it’s more fun to buy something shiny and new, but think of it as an investment in future you—and fewer payments in the long run.

Your debt does not define you, and even when it feels impossible, there is a way out! Consider reframing the way you think about your debt; a 2018 article from The Financial Diet talks about taking responsibility for what you owe. They encourage moving your thoughts from a negative to a neutral to a positive place; for example, consider what your debt made possible, whether it’s school, a car, a job, and/or a home you love. That mindset shift might not make the debt disappear, but it will certainly help you reframe your thinking to remember why it was worth it. And a positive attitude can help you stay motivated to chip away at your debt day by day.