What should you do if you racked up a ton of debt last year?

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You’ve taken a look at the first credit card bills since Christmas, and it’s not pretty. The summer’s unexpected big car repair bill, combined with your son’s dental emergency in the fall and, yes, vacation expenses that may have been a little over the top, left you with a pile of debt. to enter the new year. And the wonder of how you will one day get out of this money pit.

Debt wasn’t created overnight, so don’t expect it to disappear overnight. Instead, create a debt reduction strategy and stick to it.

Read: 10 ways to bounce back from spending a month on your credit card
See: What not to do when trying to get out of debt

Review your expenses

Take a close look at your monthly household expenses by noting down everything you spend for a month and categorizing your expenses. Don’t forget to include the following:

  • Housing: rent, mortgage payments, property taxes, insurance and maintenance
  • Transport: car payment, insurance, gas, maintenance, travel, annual registration
  • Races
  • Utilities: electricity, gas, water
  • Medical and life insurance premiums
  • Medical expenses: monthly prescriptions, annual dental and eye exams not covered by insurance
  • Debt repayment: student loans, credit cards, other personal loans
  • Savings: deposits in savings accounts, retirement funds
  • Child costs: child care, school fees, sports leagues
  • Personal expenses: clothing, personal care (haircut, gym membership), furniture, gifts
  • Hobbies and entertainment: dining out, vacations, streaming or cable services, hobbies, concert or sports tickets, anything considered “fun”
  • Various

After categorizing your expenses, figure out what you can eliminate and divert those savings to paying off your debt. These are tough choices we all have to make, but maybe $60 a month for the gym, or the $100 a week for a “date,” are things you can live without. the moment. Don’t forget that you still have that treadmill collecting dust, and there are cheaper “date night” activities, like free concerts in the park with a picnic dinner.

Budgeting 101: How to Create a Budget You Can Live With

Create a budget

Once you’ve figured out what expenses you “must” pay each month, create a budget. It’s easier than ever with budgeting apps that let you tally up every dollar spent, as you spend it, since your device is always at your fingertips. You’ll always know how close you are to exceeding your monthly budget in any category and can adjust.

“By listing all sources of income and all monthly expenses, you can know where improvements can be made. Maybe you can save on take-out dinners or maybe you realize you’re spending too much on subscription services,” said Zachary A. Bachner, certified financial planner at Summit Financial Consulting in Sterling Heights, Michigan. “By listing all expenses, you can identify which ones are too high or which ones can be reduced.”

Boost your earnings

The list of our “must have” monthly expenses is long, and your monthly income might not cover these, plus a determination to pay off the debt.

“Without additional income, you cannot cope with additional debt repayments. Working harder or having a better paying job isn’t the only way to increase your income. If it did, everyone would change careers and make more money until they no longer needed credit cards. However, there may be ways to supplement your income – at least temporarily – until your obligations are paid,” said Lyle Solomon, senior counsel and financial expert.

“The most obvious strategy for increasing your income is to ask your boss for a raise. Arrange a meeting to discuss your talents and the great work you have done. If a raise isn’t achievable immediately, ask your boss what you can do to improve your hourly rate or income in the future.

“Odd jobs can also help supplement your income, and they don’t have to be second jobs. Childcare, driving Uber, and self-employment can all help you generate extra money.

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Keep reading: 16 Key Signs You’ll Always Be in Debt

Attribute all extras to your debt

With tax season approaching, you might just get a refund from Uncle Sam. It’s a windfall that isn’t part of your monthly budget and could go a long way towards paying down your debt.

If you’ve really planned on using for a week’s vacation in a sunny destination with your partner, remember that erasing debt is all about tough choices and trade-offs. Instead of a week in Florida or the Caribbean, how about spending most of the money on your debt and using the rest for a family weekend, and splurging on much more affordable treats, like a weekend at the beach or the local ski slopes, depending on where you live.

Prioritize your invoices

If you have a stack of bills to pay, pay them one at a time.

“If you have debt with multiple credit cards, check how much you owe and how much interest you’re paying on each card,” said Adam Deady, Certified Financial Planner at MassMutual. “Then prioritize the order you pay over your credit card balances by making the minimum payment on each card, then attacking the card with the lowest balance first, paying as much as you can. allow it, or by making the minimum payment on each card, then attacking the card with the highest interest rate.

“To help alleviate debt problems in the future, when paying off a credit card, consider whether or not you need that card. If you have several different credit cards, you probably don’t need it. Most importantly, talk to your credit card company before things get out of control, as there may be programs in place to help you.

Related: 9 fastest ways to pay off debt, according to experts

Once the debt is repaid

Don’t give up on the good habits you learned from ditching the budget or putting the $5-a-day latte back into your life. Instead, put the money you had allocated for your debt into your debt-free future.

“While paying off debt may be the immediate goal, staying out of debt should be the long-term goal,” said Zack Hubbard, certified financial planner at Greenspring Advisors in Towson, Maryland. “This can only be accomplished by identifying the issues that led you into debt in the first place. Were there a number of unforeseen expenses throughout the year? Establishing a An emergency fund of three to six months of spending can help.Do you have a monthly deficit and do you use credit cards to supplement?Creating and maintaining a budget can help limit your overspending.

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About the Author

Jami Farkas holds a degree in communications from California State University, Fullerton, and has worked as a reporter or editor for daily newspapers across the United States. She brings to GOBankingRates her experience as a sports writer, business writer, religious writer, digital writer – and more. Passionate about real estate, she passed the real estate licensing exam in her state and is still debating whether to get into home selling – or just writing about home selling.

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