This is the second in a four-part series on steps Americans can take in the new year to get their finances in shape.
With the holidays over, there’s another post-holiday clean-up project that merits attention: debt.
A blitz of gift-giving and partying — not to mention the spending you’ve done all year long — may have left you with credit card bills and other debts to pay.
With the New Year here, now is a good time to resolve to reduce your debt in 2016.
“Debt needs to be managed, so the sooner you get a handle on what you owe and develop a plan to pay off your holiday debt the better, said Gerri Walsh, FINRA’s senior vice president for investor education. “Taking action quickly is important, because the longer you’re in debt, the more interest you’ll pay.”
Here are some tips to help you become a debt buster in the coming year.
Run the numbers
The first step to getting rid of debt is getting a handle on your income and your expenses.
You’ll want to keep a running log of all of the money coming in and all the places where it’s being spent.
Why is it worth doing this exercise? Because chances are you’ll discover areas where you can cut back on spending without feeling too much pain. Maybe you can do without the weekly manicure. Maybe you can skip the morning trip to Starbucks .
Each penny you save is extra ammo you can redirect to help zap your debt.
Any New Year’s resolution can be hard to keep if it’s vague. Giving yourself a specific goal to work toward, on the other hand, can help keep you honest.
Instead of resolving to “pay off my debt,” instead decide to “pay off at least $250 of my debt every month this year.” If possible set up an automatic payment plan to do so.
You can use the information you gathered from running the numbers to help you pinpoint an aggressive yet attainable goal.
Pay off high-interest debts first
When it comes to prioritizing which debt to pay off first, your high interest debt should be at the top of list. Few money management strategies yield as nice a payoff or have lower risk than paying off high-interest debt.
Consider how costly high interest rates can be: Let’s say you have a $3,000 balance on a credit card that charges 18% APR and requires a minimum payment of 2.5% each month. Assuming you charge nothing else, it will take you nearly two decades to pay off that debt, according to Bankrate Inc . The total amount you’d pay for that $3,000 charge would be nearly $4,000.
If you can’t do it alone, get help
Consider meeting with a non-profit credit counseling agency, such as the National Foundation for Credit Counseling that can help you craft a workable debt management plan.
This might involve consolidating some of your loans and negotiating more favorable terms with your creditors.
At the same time, be an on the alert for predatory lenders offering easy credit or possible settlement or credit repair scams . There is no such thing as an easy fix to getting out of debt.
Predatory lenders might make you an offer that sounds good but that involves high-interest short-term loans that might lead you further down the path of debt.
Stay away from services that require up-front fees, make too-good-to-be true guarantees, urge you to stop communicating with creditors or require personal information before sending you details about their organization and services.
Prevent future debt woes
Cutting your debt is hard, but it’s just the start. By adopting good habits, you can avoid future debt traps.
Set a budget and live within your means. It might help to stop using your credit card all together. If that isn’t an option, make sure you pay off your balance in full every month.
The less interest you pay, the more you’ll have to save and invest in your future. Now that’s something to celebrate.
This article originally appeared on The Alert Investor .
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