A Guide to Paying Off Debt in the New Year

The start of a new year is an opportunity to make positive changes and set new goals. For many, this means taking steps to tackle their debt. Whether you are looking to pay off debt from last year or starting a new debt-free journey, there are several strategies that can help you achieve your financial goals in 2023. Here are some tips on how to pay off debt in the new year.

Create a Budget

Creating a budget is the first step in tackling debt. It helps you understand how much money you have coming in and going out each month so that you can determine where adjustments need to be made in order to free up funds for repayment. To create an effective budget, track your income and expenses over the course of one month—including any additional sources of income (like side hustles) or non-monthly expenses (like car insurance). Once you have tracked all of your spending for one month, create a plan for how you will use those funds most effectively.

Pay More Than The Minimum Balance

If you have credit card or loan payments due each month, it’s important to pay more than the minimum balance due if possible. This will help reduce the amount of interest accruing on your account and shorten the life of the loan or credit card balance. If paying more than the minimum isn’t doable right now due to other financial obligations, consider making smaller payments multiple times per month instead of just once per month. Doing this will reduce your overall principal balance faster and decrease the amount of interest accrued over time.

Take Advantage Of Debt Snowball

The “debt snowball” strategy involves paying down debts from smallest balance to largest balance rather than from highest interest rate to lowest interest rate—which is known as “debt avalanche” method. Paying off smaller balances first gives you a sense of accomplishment as well as momentum; this can encourage motivation as opposed to becoming overwhelmed by larger balances due later on down the line. Additionally, if utilizing both strategies together works best for your current situation—paying extra on high-interest accounts while still working toward paying off lower balances—that may be an option as well!

Paying off debt isn’t easy but it can be done with careful planning and dedication! By following these tips, creating a budget that works for you, paying more than just minimum payments when possible and taking advantage of debt snowball/avalanche approaches – you will be able get back control of your finances in 2023! For any questions about debt relief and finding financial freedom in 2023, contact our team of expert Sacramento bankruptcy lawyers today. Happy New Year!