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Put your debt on a diet

By Marcie Geffner · Bankrate.com
Wednesday, January 4, 2012
Posted: 10 am ET

Losing weight, exercising more and giving up cigarettes are good New Year's resolutions. But what many people should have at the top of their 2012 to-do list is a promise to get out of debt and start living a financially healthier lifestyle.

That's according to the National Endowment for Financial Education, or NEFE, a Denver-based nonprofit organization that aims to improve Americans' financial well-being.

Many Americans experience financial anxiety in January due to credit card statements that reflect holiday spending indulgences. That anxiety can be a good incentive to develop a plan to get out of debt, NEFE spokesman Paul Golden said in a statement.

"For anyone who is concerned about the amount of debt they owe," Golden said, "now is the perfect time to resolve to pay down debt and establish a plan to stay financially fit throughout the year."

Here are five tips from the NEFE.

  • Assess your debt. List how much you owe each creditor and what interest rate is being charged. An unwillingness to perform this exercise is one warning sign your debt might be out of control.
  • Prioritize payoffs. Start paying more toward the highest-rate debt. Once you've paid that off, continue to pay the same amount toward the debt with the next-highest rate and so on.
  • Cut your expenses. Commit to giving up one spending item or activity for a set period of time. Use the money you normally would spend to help pay down your debt or build up your emergency savings.
  • Be careful with credit. Use credit cards sparingly, if at all. If you wouldn't borrow money to buy something, don't use your credit card to purchase it. If you're tempted to buy something that's a "want," not a "need," walk away for a while. You might overcome or forget about the temptation.
  • Start saving. Dedicate yourself to saving regularly, even if you save only a small amount. The next time you face an unexpected financial need, you'll have savings at your disposal and won't have to increase your debt.

Follow me on Twitter: @marciegeff

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