Drowning in Debt? 6 New Ways to Tackle Your Budget in 2017

Debt is a growing problem in America. Total household debt was $12.35 trillion at the end of the third quarter of 2016 -- up $63 billion from the second quarter, according to the latest figures available from the Federal Reserve Bank of New York. The bulk of that amount was mortgage debt, followed by student loan, auto loan and credit card debt.

What's perhaps more troubling than the fact that household debt is increasing is that the amount of debt that is delinquent -- payments that are 30 days or more late -- is growing. Clearly, some Americans are having trouble paying their debt.

Whether you're drowning in debt or just want to pay down what you owe more quickly, there are several budgeting strategies you can use. Here are six ways to take control of your spending this year.

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Create a YOLO Budget

If "you only live once" is the mantra that has fueled your spending and debt, it's time to rethink what YOLO really means.

"YOLO is not just about one moment but a lifetime of moments," said Jason Vitug, author of "You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life." If you have debt, it can prevent you from doing the things you enjoy in the moment and reserve your future time for work rather than fun, he said. That's because you'll be chained to your job in order to make enough to pay what you owe.

So, if you want to create a budget you can stick to, you need to start by changing your mindset about debt.

"I've learned people get depressed when tackling debt because they don't really understand what debt-freedom actually means in their lives," Vitug said.

With a YOLO budget, you start by figuring out what you really want in life. Have a clearly articulated vision and use that as a guiding principle to save, mindfully spend and pay off debt, Vitug said.

"You can create that amazing budget that prioritizes debt repayment, but if you don't have an overarching vision of what you'll do when you're debt free, it will be very difficult to get out of it," he said.

Write your vision statement at the top of your budget as a reminder of how allocating your money to debt repayment and aligning spending with priorities will help you reach your goals. Vitug said that you can also include in your vision statement how you expect to feel when you're living the lifestyle you want and photos to illustrate that lifestyle.

The budget will include the actual numbers -- how much cash you have coming in each month, the necessary expenses you have to cover and the amount you can allocate to debt repayment, savings and things you truly want. The vision statement is the motivation to stick to that spending plan, so you can pay down debt and live the life you want.

Related: How Dave Ramsey Helped This Family Pay Down $110K in Debt

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Use Digital Cash Envelope Budgeting

Paying with only cash isn't a new approach to budgeting, but it might be a novel idea for someone who's been relying on credit to fund spending.

"We've seen clients become much more aware of what they're spending, and that makes them much more accountable," said Charles Scott, an Arizona financial planner and co-creator of FinancialChoicesMatter.com.

You can start by dividing your cash into envelopes for your expenses -- one for groceries, gas and so on. The key is to spend only the amount you've set aside, so you don't overspend and end up with little to nothing for debt repayment.

"When you don't have any more paper money… you're done. It's just that simple," said Scott, adding that the practice can help people break the habit of relying on credit to cover spending. "The psychology of physically handing the bills and coins is totally different from just swiping a piece of plastic."

However, paying for everything with cash can be difficult -- especially if you make purchases online. Fortunately, there's a new digital cash envelope system, the ProActive app, that can help. You link your bank account to the app and distribute your money into virtual envelopes for saving and spending categories.

You must choose a category to transfer funds to the ProActive Visa debit card. The card has a zero balance, so it will be declined if you try to spend without choosing an envelope, or if you try to spend more than you have in a category. You can use the app for free for 45 days, and then there's a $60 annual fee.

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Try a Zero-Sum Budget

In her new book, "Zero Down Your Debt," Holly Johnson advocates using a zero-sum budget to get out of debt.

"When my husband and I were trying to pay off old car loans and student loans, we quickly found that zero-sum budgeting was the best strategy for us," she said. They paid off more than $50,000 in debt in about 18 months using this budgeting method.

With a zero-sum budget, you create each month's budget based on the amount you made the previous month, with the goal of putting those dollars to good use in the current month. You divvy the funds for regular bills and expenses and put whatever is not spoken for toward debt repayment. So, if you earned $5,000 last month and have $4,000 in expenses, you use the $1,000 that's left to make debt payments at the beginning of the month before you have a chance to spend the extra money.

"I tend to believe a lot of details get lost in the shuffle when you live paycheck to paycheck or think of your income and bills as they come in," said Johnson, who is also the founder of ClubThrifty.com. "With a zero-sum budget, you have to think in terms of the month and how you're putting that month's dollars to good use. For us, zero-sum budgeting highlighted where we were spending too much but also showed us how we could do better."

If you don't create an intentional spending plan, your money will disappear, and you won't know how you spent it, Johnson said. By giving each dollar a job with zero-sum budgeting, you'll ensure more of your money goes toward debt repayment each month.

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Find Extra Cash in Your Budget

If you only make the minimum payments on your debt because you don't think you can afford to pay more, you might be able to find more cash in your budget to increase payments with the help of Qoins or Digit. Connect the accounts you use for everyday purchases to the Qoins app, and it will withdraw your spare change and make an extra debt payment to the loan or credit card of your choice each month. There is a $1.99 monthly fee to use the app.

You can also opt to link the free Digit app or website -- Digit.co -- to your checking account. This product will analyze your income and spending to figure out how much can be set aside in savings. Every few days, Digit will automatically transfer an amount ranging from $5 to $50 into a savings account.

Morgan Quinn, a content designer for TurboTax, said that using Digit has helped her find an extra $1,300 in her budget in just six months.

"I was definitely surprised we could save that much extra cash," she said. "Plus, the amounts are so small, we really don't feel the pinch."

Although the money is transferred to a savings account, you can transfer it back to your checking account to make debt payments. You can adjust the Digit settings, too, if you need to reduce the amount that's withdrawn, Quinn said.

"I might even increase my settings to see if I can save even more next year," she said. "We have a car loan I'd love to not have to think about, and with this system, we can probably cut the payoff time in half."

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Resort to a Bare-Bones Budget

If you're really buried by debt, paying it off might require extreme budgeting measures. This is what Melanie Lockert, founder of DearDebt.com and author of "Dear Debt: A Story About Breaking Up With Debt," discovered when she found herself saddled with $68,000 in student loan debt and unable to find a good-paying job.

"In order to pay down debt, I lived on a bare-bones budget -- in other words, with next to no extras or frills," Lockert said. "No cable, no pets, no car, no gym membership."

Some of her debt was from her undergraduate degree, but the bulk of it came from a master's degree. After graduating from New York University, she stayed in New York but couldn't find a job. After the six-month loan repayment grace period was up and student loan bills started to arrive, Lockert realized she couldn't pay them. She moved to Portland, Ore., to live with her partner and cut down on rent. However, she couldn't find a "career" job and was making little money for the first two years after getting her master's degree.

Related: My Wife Kept Her $90,000 Student Loan Debt a Secret -- Here's How We Survived

"Student loans were making me sick, depressed and affecting my life choices," she said. "I knew I would never be free until they were off my back." She used Mint.com to track her spending and cut out everything that wasn't essential.

To stay motivated while living on a bare-bones budget, Lockert used a rewards system.

"For example, after paying off $1,000, I'd treat myself to a lunch," she said. "After $10,000 was paid off, I'd get a massage on the cheap at the local beauty school." Within four and a half years, she had paid off $68,000 in student loan debt.

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Use a Debt Thermometer

It can be hard to stick to a debt repayment goal, especially if it requires being frugal and making choices about the best ways to spend your money. However, Jen Smith of SavingWithSpunk.com discovered that you can stay motivated by visualizing your goal.

"My husband and I made a thermometer, and we take turns coloring it in every month when we've hit our repayment goal," she said. They had a total of $86,000 in debt when they got married in October 2015 but are on track to be debt free by July 2017.

You can download a free, printable thermometer from SavingWithSpunk.com. You can use an online debt repayment calculator to figure out the total amount you'll pay with interest over the time period you think it will take you to pay what you owe. Next, label the lines on the thermometer with the amount you need to pay each month to pay off the total debt in a certain time period.

As you color in each section on the thermometer, you can actually see -- and celebrate -- your progress.

Related: The Biggest Source of Debt for Americans in Every State

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