Debt Free in 2023?

It’s almost time to say goodbye to 2022 and hello to 2023, but are you prepared to make the New Year a better one?This is when a lot of folks make New Year’s resolutions, usually about how many pounds they plan to lose. Today Rob West talks about a making a special resolution: To become debt-free in 2023. Making New Year’s resolutions has become a big thing for society as a whole, but did you know that the origin of this exercise in self-improvement is really a Christian tradition? And it might explain why folks do it at the start of the year when, really, you could make them anytime. It’s a tradition going back centuries in the western world, and probably has its roots in so-called Watchnight services held at the end of the year by some Christian denominations. The idea is for believers to reflect on the past year and resolve to do better in the new one. God’s Word encourages this type of renewal. Romans 12:2 teaches, Do not be conformed to this world, but be transformed by the renewal of your mind, that by testing you may discern what is the will of God, what is good and acceptable and perfect. There’s also evidence that you’re more likely to keep your resolutions if you make them at New Year’s, as opposed to other times. That could be because choosing the first day of the year is like drawing a mental line in the sand. Out with the old, in with the new. People want to make a fresh start. But do we really stick to our resolutions, or has this become just an empty tradition? Different surveys reveal different outcomes depending on how they’re worded, but here’s one that seems reasonable: About 30% of us make resolutions each New Year. By March, only about 30% of them are still following them strictly. By the end of the year, only about 10% have kept their resolutions. That ends up being a pretty small number, but the experts tell us you can greatly improve your chances of keeping your resolutions for the whole year by using the acronym SMART. It stands for Specific, Measurable, Attainable, Realistic, and Timely. All of this brings us back around to the resolution we hope you’ll make in 2023: Getting out of debt. For many people, just the thought of getting completely out of debt can seem overwhelming, so they don’t try, or they give up too easily. But you don’t have to think of it that way. Think of it as a journey, and you’re taking one small step at a time. We’re not talking about your mortgage here (that’s a subject for another time), just consumer debt. And if you can’t envision being out of consumer debt by the end of the year, just think about making some amount of progress instead. First, write down all of your debts and their amounts. Gather up all your credit card statements, auto loans, and outstanding bills. Then total it up. That might be depressing for a lot of people, but it has to be done. You have to know how much you owe. Once that’s totaled up, make a plan to pay it off. Start by figuring out where you can trim spending from your budget to create margin that’s money left over after all necessary spending. If you’re not on a budget you’ll need to draw one up. The MoneyWise app will help you do that. Over 37,000 people are now using its digital envelope system, and you can choose from 1 of 3 options depending on your management style. Get it wherever you get your apps or go to MoneyWise.org and click App to get started. Once your budget’s set up, you know how much money you have to attack your debt each month. While still paying the minimum due on each debt, take that surplus money and put it toward the smallest debt each month. When that’s paid off, take all the surplus money and start paying off the next smallest debt, and so on. This is the snowball method because it picks up speed as you go along. As each debt is paid off, you have more and more money to apply to the remaining debt. But there’s a second part to your New Year’s resolution to get out of debt. You must also resolve not to take on any new debt. Otherwise it’ll just wipe out your progress. So don’t use your credit cards. If you have to, cut them up. Remember the SMART acronym: Specific, Measurable, Attainable, Realistic, and Timely. Choose an amount that you can reasonably expect to pay off in the next 12 months. That may not be all of your consumer debt, but set a goal that you can meet. You want to be in the 10% who keep their New Year’s Resolutions. On this program, Rob also answers listener questions: What is the best type of life insurance to own if you are 58, your husband is 65 and considering retiring, and you have a large mortgage and are concerned about meeting your bills in retirement? Should you cash out $300,000 in retirement accounts if you are 64, your husband is 70, and you are concerned about stock market risk? If you are going to school full-time and working full-time but your tuition program is about to get more intense, should you make a hardship withdrawal from your 401k instead of incurring more debt? Is it a good idea to switch your IRA into a variable annuity if you are age 61 and your financial advisors are telling you the annuity has downside protection as well as normal stock market growth? Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app. To support this ministry financially, visit: https://www.oneplace.com/donate/1085/29