Was “get out of debt” or “reduce my debt” on your list of New Year’s resolutions for 2023?

Was “get out of debt” or “reduce my debt” on your list of New Year’s resolutions for 2023? Financial resolutions are among the most popular goals people set for themselves at the start of each year. (In fact, health resolutions are the only ones that are more common!)

Unfortunately, January is when those holiday bills start rolling in. While you may have resolved to get out of debt, those bills can make it seem overwhelming or even impossible.

There’s good news: There are really only two main steps you need to take to start digging yourself out of the debt. Even better — you can do both of them from the comfort of your couch.

1. Get Organized!

Before you start paying down those bills, determine exactly how much debt you have. List every credit card that has an outstanding balance and jot down the amount owed to each. Next, list the interest rate of each card. Do this for any other loan debt you have as well, including education loans, your mortgage, car payments and personal loans. These numbers will help you build a debt-payoff plan in the next two steps.

2. Choose Your Method!

There are two common approaches people use to get rid of debt:

• The snowball method involves paying off your smallest debt first, and then moving to the next-smallest debt until all debts have been paid off.
• The avalanche method involves getting rid of the debt that has the highest interest rate first and moving on to the debt with the next-highest rate until all debts are paid off.
  In either case, you need to continue to pay the minimum amount due on all your debts, only putting any extra money you have toward the debt you’re currently focusing on reducing.

Each method has advantages and drawbacks. The snowball method provides frequent motivation as the first, smallest debts are paid off quickly, but it may involve paying more overall interest on the debt over time. The avalanche method, on the other hand, generally saves the borrower a significant amount they pay in interest, but it can take a while to generate results.

Choose the method that makes the most sense for your personal and financial circumstances.

Regardless of the strategy choose, commit to not adding more charges onto your card while paying it down. Paying off a large amount of debt will take time and willpower, but living debt-free is key to financial — and overall — wellness.

Need a little more advice or motivation to get started? In addition to the advice you can get from CommonWealth One Certified Financial Counselors, our partnership with GreenPath provides you with additional access to caring financial wellness experts to assist in starting your year strong! It's as easy as a quick phone call to CommonWealth One.