Becoming Debt–free For Next Year

You may have suffered from being debt-ridden for the current year, but it is not too bad to start the incoming year on a new leaf /clean slate when it comes to your finances.


When it comes to your finances, this is the best time to reflect on how you did with your spending and taking care of your debts; and plan for next year. You would also want to consider or think that you will finally taste debt freedom.

If you are carrying anything around the average credit card debt of $16,000 you likely feel the same way. Take heart, it can be done. You can kill your debt next year, or make significant strides towards it in a few simple ways.

Work on a Plan – if you want to “kill” your debt next year, there should be a plan. It is a simple process – just like planning ahead your next vacation for next summer. The basic key is to personalize it. You can use the debt snowball or debt avalanche method. You can start on a budget or you can just simply track your expenses.

Make More Money! – At times, we focus on cutting costs when we’re paying off debt. It perfectly makes sense as we need to find ways to free up some funds to pay off debts. However, this should not be focused solely on this. You may also want to find ways to earn extra money.

You don’t have to take on extra job to earn. Other ways to increase your finances can be:

  1. Ask for a salary increase.
  2. Start a side hustle.
  3. Pick up extra hours from work.

***Plus other great ways to earn extra money.


Make Friends – It is one of the most overlooked ways to pay off debt. Paying off what you owe can be very isolating at times. You might feel shame and disappointment or lack of courage to focus on your financial problem. Counteracting with friends will give you that sense of “company” to get over your financial trouble. These friends are meant to not only hold you accountable to kill the debt but also to motivate you. Trust me, both are needed to be successful.


Adjust your Attitude – Staying out of debt is a matter of adjusting our attitude. You don’t want to pay it off only to return to it in the future. Break the cycle of debt to look different for everyone. This means getting rid of the “I deserve it” attitude. Be self-aware to know what that attitude is and get rid of it. It will be difficult to do at first, but take one day at a time and over time you’ll see a changed attitude.

Bottom line is, commit to killing your debt now and you will be well on the road to tasting debt freedom next year.

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Out from Your Personal Debt

If you are considering to borrow money and pay it back on a monthly basis, personal loan would be the best option. But before dipping into it, here are few things that you need to know before you go further.

Personal Loans – being catered by banks or other lender are loans that are not assured by any asset such as your property/possessions. It is also known as unsecured loans.


Advantages of Personal Loans:

> You can borrow more than with a credit card.

> You have the option on how long you would like to repay the loan. But bear in mind that the length of a loan will affect the amount you are charged in interest.

> Interest rate you pay is usually fixed (but not always).

> You can pay your loan on a fixed amount each payment. This means your repayment amount is going to be the same each month and easier on budget.

> You can consolidate few debts into your personal loan, this means reducing your monthly repayment costs. But this may mean extending the length of loan and so paying more.

***You can make over-payments or pay off a personal loan in full before the end of your agreement without penalty.

Disadvantages of Personal Loans:

> Personal loans have higher interest rates compared to other forms of borrowing.

> Because the interest rate may reduce the more you borrow, you may be tempted to take out a bigger loan than you need. This might become a debt pit.

> Older loans normally have an early repayment charge if you want to pay off your loan early or overpay.

Personal loans have variable interest rates, it can go up or down. If you can only make the initial repayments, you should shy away from this type of loan.

Think carefully before accepting any payment protection insurance (PPI) the lender tries to sell you. This insurance will cover your repayments in case of accident, illness or you lost your job. The idea is good, however, it’s been widely mis-sold and many of the policies on offer weren’t adequate or didn’t pay out at all. Much as you want to avoid this cover, you will almost certainly get a much better deal by checking prices with several different providers.

Getting the best personal loan deal can be a bit tricky. Scout for the best offer, consider the interest rate, and compare the rates online. Consider peer-to-peer loans especially if you have a good credit standing. Some loans may offer lower interest rates and are available for smaller amounts.

***SECURED LOANS – If you have a property, you may consider availing of a secured loan. But, you will be exposed to bigger risk, because your property is secured against your loan. If you can’t repay your loan, the lender could force you to sell your home to pay off what you owe.

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Best Ways to Become Debt Free

Find out about the different ways to deal with debts if you are falling behind with day-to-day bills, loan and credit card repayments or other financial commitments, like your rent or mortgage. Then get some free debt advice before you make a decision.


Debt Management Plan – It is suitable if you have non-priority debts such as credit cards, overdraft or personal loans. This allows you to pay back debts at a rate you can afford. You make one monthly payment to the Debt Management Plan provider.


Debt Relief Order – This is suitable if you are on a low income with very few assets. Or freezes debt for a year then writes it off completely if your circumstances haven’t changed. Once a Debt Relief Order is agreed, you make no further payments to the people you owe money to (your creditors). Your creditors are only likely to agree to a Debt Relief Order if it is unlikely that you will ever be able to clear your debts.


Bankruptcy – If you file for bankruptcy, it will allow you to make a fresh start. Writes off all debts you can prove you owe. If you have any assets, they will be taken and used to pay off your debts.


Full or Final Settlement – If you have a lump sum that would cover part of your debts, you could ask your creditors whether they would accept a part payment and allow you to write off the rest. Alternatively, they may allow you to make monthly payments for an agreed period after which the balance is written off.


Individual Voluntary Arrangement – This will allow you to pay back what you can afford. This usually sets an amount of time and anything you haven’t paid off by the end is written off. Individual voluntary arrangement is a legally binding agreement – this means once you’ve signed it, neither you nor your creditors can back out of it.


Write Off Your Debt – This is only suitable in exceptional circumstances if you have no available income, savings or assets. You must be able to show your creditors that your circumstances are unlikely to improve in future (for example, if you are severely ill)


It’s always best to talk things through with an experienced debt adviser before you decide how you’re going to pay off debts.


There are many ways to clear your debts and some are well known than others. The one that is best for you will depend on your personal circumstances.


A free debt adviser can help you make the right decisions so that most of your money will go to paying off your debts – meaning you could be debt free sooner than you thought.


The people that let debts build up before they seek advice often find things have spiraled out of control, their cards are maxed out, no-one else will lend to them and it takes much longer to pay back what they owe.

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How To Get Out Of Credit Card Debt

Financial uncertainty happens. So, securing yourself financially is the only way to go.

Credit card debt is a doom when you’re right in the pit of paying off and no stable funds to cover the payment is available.

Here are some doable hacks to handle your credit card debt:

> Assess your credit card debt –You’ll never hit your target if you don’t know where it is, so be brutally honest with yourself. Create a record of our outstanding credit card debt and its interest rate of every card you use.

> Negotiate with good rates – Get in touch with your credit card company/s and negotiate with a lower interest rate. A simple phone call and a polite request may be all it takes. Each lender has an approach in handling such issues. Once you get the lower rate, write down your new interest rate and check on how much you will be saving.

> Make a record on all your expenses – Write down all regular, committed expenses (scheduled payments), and keep track of other variable expenses. This will be your foundation to your budget. You can assess where to cut back, cancel, or downgrade some of your services. Spread your monthly budget into weekly allotments to better handle your spending. Study up to a year’s worth of credit card bills and bank statements to get an accurate sense of your monthly spending, and keep tracking your expenses with a notebook or financial software.

> Opt for your payoff technique – First strategy, payoff the highest card that has the highest interest rate, while paying minimums on your other cards. Once paid with the highest, repeat the process on your other cards. Second strategy is, payoff your credit card with the lowest balance first while continuing to pay the minimums on the others. Once you choose your strategy, arrange cards in the order that you will want to payoff.

> Put away your plastic – Store your credit cards where you won’t have easy access to them — but don’t cancel them. Plan to pay in cash whenever possible.

> Look for motivation and support – Build concrete goals and be focused. Write down your goals and keep them in your wallet or purse. If you get tempted to overspend, take a look at them to remind yourself of the bigger picture. Find a community/group to swap stories, successes, and challenges. A forum where you can feel supported and finally say, “I can do it”!

> Keep track of your financial progress – While you abhor spending time everyday fretting over your bills, watch out on your spending. Put reminders in your calendar to check up on your finances. Keep the page with your starting balances, and compare them to check your progress.

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Ways to Avoid A Circling Debt

If you feel alarmed opening your billing and credit card statements every month, you are not alone!

With loan/debts, biggest challenge is that, it balloons quickly, kudos to the high interest rates!

Take these few steps to keep your debt from incurring mind-blowing interest rates:

> Pay More Than The Minimum Amount Required – Paying more than the minimum will greatly reduce both the time it takes you to pay off that debt and the interest that you’ll pay on it. Even if you can only pay $100 or $50 more each month, do it.

> Stop Spending. – This is self-explanatory, if you want to keep your debt from spiraling, stop adding to it. Move to spending cash until you can reduce your credit card debt. It’s tempting to pull out your plastic to pay for a new item that you fancy. But instead, save up the money first and then make your purchase. Remember, every time you make a purchase, you are making it even more difficult to pay down that debt.

> Make a Plan – You’ll have difficulty to control your debt if you don’t first draft a plan to deal with it. Target the credit card with the lowest amount of debt. Make extra payments each month on that card until it’s paid off. You can then move on to the card with the next highest amount of debt, making extra payments on it. Or, you follow the same strategy but start with the card with the highest interest rate, making extra payments on it each month until its balance hits zero. Then move on to the card with the next highest interest rate.

> Cut Unnecessary Expenses – If your credit card debt is out of control, you need to make paying it down a priority. One way to do this is to free up extra money each month by cutting down on unnecessary expenses. This could mean reducing the number of times you eat out each month and using those extra dollars on your monthly credit card payments. It could mean ending a gym membership. You can exercise without belonging to a gym, after all.

Just make sure that when you reduce an unnecessary monthly expense that you use this money to whittle down your credit card debt.

> Tackle the Reasons Behind Your Credit Card Debt – The final step in controlling your credit card debt might be the most difficult: You need to determine why you ran up so much debt. What were the reasons behind your excessive debt?

If you don’t figure out why you abused your cards, you run the risk of running up your credit card debt again after you pay it off. If you want to keep your credit card debt from ever spiraling out of control again, you need to take a close look at your negative spending habits and change them — permanently.

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