New Year Tips to Digging Out of Debt

A few tips to follow

By Joseph Montanaro, USAA Financial Planning Services

First come the holiday parties with fancy foods and “secret Santa” games.  Then there are the big-ticket gifts under the tree with stocking stuffers to boot.  And just when you think the holiday spending spree is over, it’s time to ring in the New Year with a stylish night on the town.  Come January, your credit cards have had all the abuse they can take.

Racking up a small mountain of debt during the holiday season may be an annual tradition for many consumers, but it’s problematic nonetheless.  Overspending can cost you dearly in the form of high interest charges, and it can derail important financial goals like saving for retirement.

The damage may be done for this year, but here are several ideas to help you ditch your debt quickly and avoid the credit card crunch next December.

Tighten the reins

If you were a little too generous for your budget last month, it’s time for a reality check.  Start tracking your expenses – line by line – to determine exactly where your money’s going each month.  You may be surprised by how much you’re really spending on lunches or spontaneous trips to the mall, and chances are you’ll find some places to cut back.  The more you save, the more money you can put toward paying off those credit card bills.

Set realistic goals

The most common New Year’s resolution is simply to “lose weight,” but most people never make progress because they don’t aim for a specific target.  Dropping debt is similar to shedding pounds.  You’re more likely to get results if you vow to reduce your debt load by a certain dollar amount within a specific time frame.  For example, you might shoot to pay off $500 by the end of February.  Even if you still have $1,000 left to go, hitting that first goal will give you the confidence you need to stay on track.

Joseph "J.J." Montanaro is a CERTIFIED FINANCIAL PLANNER^TM practitioner with USAA Financial Planning Services, one of the USAA family of companies.  Montanaro served in the U.S. Army for six years on active duty.  He is currently a Lieutenant Colonel in the U.S. Army Reserve.

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.