According to a recent survey conducted by the Certified Financial Planner (CFP) Board in October 2024, eliminating debt has emerged as a top financial goal for 2025, ringing in at No. 3, just behind “exercising more.” With U.S. consumer credit balances exceeding $5 trillion, it’s no surprise that many people prioritize debt reduction to increase their financial well-being.
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The No. 1 goal was financially focused, too: saving more money. The great news is that saving more money is a great way to pay off your debt, helping you achieve two financial goals this year. Here are five simple ways to ditch debt fast and reach those New Year’s goals.
Build a Budget
One of the most effective ways to manage and eliminate debt is by creating a detailed budget. To make a budget, list your sources of income and all of your expenses to understand where your money goes. By categorizing your spending, you can identify areas of discretionary spending, where you can cut back and allocate more funds toward debt repayment.
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Steps To Create a Budget
- List all sources of income.
- Track all expenses, including fixed costs, like rent and utilities, and variable costs, like groceries and entertainment.
- Categorize expenses to identify discretionary spending.
- Set realistic spending limits and allocate funds for debt repayment.
Cut Discretionary Spending
Reducing discretionary spending is a quick way to free up cash for debt repayment. Easy options may be cutting back expenses that are not essential, such as dining out, subscription services and entertainment. According to the CFP Board survey, 44% of Americans are already taking steps to reduce discretionary expenses.
Tips To Cut Discretionary Spending
- Cook at home instead of dining out.
- Cancel or downgrade streaming services.
- Opt for free or low-cost entertainment options.
- Shop for deals, use coupons and buy store brands.
Increase Your Income
Accelerate debt repayment by finding ways to increase your income. Consider asking for a raise, taking on a second job or exploring freelance opportunities. According to the survey, more than a third of Americans are seeking ways to earn more in the new year.
Ways To Increase Income
- Ask for a raise or promotion at your current job.
- Take on a part-time job or gig work.
- Offer freelance services in your area of expertise.
- Sell unused items online.
Consolidate Debt
Debt consolidation can simplify your debt repayment process by combining multiple debts into a single loan with a lower interest rate. Having just one loan with lower interest can make it easier to manage your payments and potentially reduce the total interest you pay over time. About 16% of Americans are considering debt consolidation as a strategy to manage their debt.
Steps To Consolidate Debt
- Research and compare your options for consolidation loans.
- Apply for a consolidation loan that has favorable terms.
- Use the new loan to pay off existing debts.
- Make consistent payments on the consolidation loan.
Seek Professional Advice
Working with a financial planner, such as a certified financial planner (CFP), can provide personalized strategies to manage and eliminate debt. A financial planning professional can help you create a comprehensive financial plan that aligns with your life goals and financial objectives. According to the survey, one in four Americans seeks advice from a financial planner to manage their debt.
Benefits of Professional Advice
- Get advice tailored to your specific financial situation.
- Develop a long-term debt repayment strategy.
- Receive support and accountability for achieving your financial goals.
- Access resources and tools to improve financial literacy.
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This article originally appeared on GOBankingRates.com: CFP Board: Eliminating Debt Is a Top 2025 Financial Goal — 5 Simple Ways To Ditch Debt Fast
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