A Financial Expert’s Guide To Reducing Your Debt Before 2024 in 9 Ways
Written by
Yaël Bizouati-Kennedy
Edited by
Cory Dudak
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The New Year is approaching, prompting many to think about resolutions and what habits they can change to lead a better life.
When it comes to finances, experts said that starting one resolution and changing one habit right now — reducing your debt — will put you in a better place moneywise when 2024 rings in.
Americans have been racking up debt very rapidly in the past months. For instance, as of the second quarter of 2023, total household debt rose by $16 billion to reach $17.06 trillion in the second quarter of 2023, led by credit card balances, according to the Federal Reserve Bank of New York.
In that time, credit card balances alone increased by a whopping $45 billion to reach a high of $1.03 trillion.
According to Terry Turner, financial wellness facilitator and senior financial writer for Annuity.org, reducing debt before the New Year is important, as clearing debt by year-end is “akin to financial decluttering.”
“It’s not just about numbers. It’s a commitment to a less stressful future, where your money works for you, not against you,” said Turner. “If you put it off and make it a New Year’s Resolution to reduce your debt, you might just write it off as another resolution you can give up on. Plus, you delay paying down that debt and keep paying interest on it between now and the end of the year.”
“Small victories build momentum on the road to debt-free living,” Turner said. Here are some steps they recommended to help you start tackling debt:
1. Create a Budget
According to Turner, you should confront your financial reality with a clear-eyed budget, as to face debt head-on, you will have to start by understanding your financial landscape.
“Make that realistic budget your financial GPS. Prioritize debts strategically,” he said.
2. Pay Down Debt
There are two ways to go — attacking high-interest debt first or using the so-called “snowball strategy.”
“Paying down high-interest debt first will save you money in the long run by wiping out interest payments,” said Turner.
In contrast, in the snowball strategy, you pay off the smallest debt first, the next smallest second, and so on, he explained.
“This can give you a sense of accomplishment with each debt wiped clean,” he said. “This can keep you on track to pay off all your debts.”
3. Build an Emergency Fund
Turner said this is crucial as it’s your financial shield against unexpected expenses, preventing you from piling on more debt when life throws a curveball.
“Start small and get in the habit of contributing from each paycheck,” he said. “Once you get used to it, you won’t notice the money you put into this fund. Eventually, you want it to equal three to six months of expenses but don’t worry about the total — just how much you can spare each payday.”
4. Consider a Balance Transfer
A balance transfer is tactical, shifting high-interest debt to a friendlier zone.
“Picture it as giving your high-interest debt a temporary vacation to a more budget-friendly resort,” said Turner. “Just be savvy–watch out for transfer fees and commit to paying off that balance before the promotional period ends. It’s debt management with a strategic twist.”
5. Get a Side Hustle
Another way to help you reduce debt is by getting a side gig.
“Boost your income with a side hustle,” said Turner. “It’s like having a financial superhero–extra cash to throw at your debts and speed up that debt-free journey.”
6. Negotiate Friendlier Terms
Rutner said not to be shy and reach out to lenders to negotiate lower interest rates or more manageable payment plans.
“It’s like turning debt into a conversation, not a monologue,” he said.
7. Consider Debt Consolidation
Debt consolidation streamlines your financial journey and is akin to “merging lanes to reach your destination faster,” according to Turner.
“But it’s important to ensure the terms favor you, turning multiple payments into one manageable stride toward financial freedom,” he added.
8. Pay More Than Minimum Monthly Payments
Paying more than the minimum is your debt’s kryptonite, said Turner. It’s not just about settling the bill — it’s about slashing the interest and accelerating your journey to financial freedom.
“Think of it as a turbo boost for your drive to be debt-free — every extra dollar is a step closer to breaking free,” he said.
9. Change Your Behavior
He added that breaking free from debt involves rewiring financial habits, saying people should think of it as a money makeover: budget wisely, track spending, and distinguish between needs and wants.
“Cultivate a savings mindset — treat debt as a non-negotiable expense, He added. “It’s often said that financial wellness is a journey, not a destination. Learn from your past missteps, stay disciplined, and let your newfound habits be the map to your debt-free future.”
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