When it comes to debt, hindsight is 2020 (like I wouldn’t go there).
Sure, you could have skipped that shoe shopping spree or turned down that loan to cover spring break — we all make mistakes. But whatever errors you made in the past, you’ve resolved that this is the year you’ll eliminate your debt.
But it’s been a few weeks, and you’re still not sure where to start. Your resolve is starting to waver.
Your approach to debt doesn’t have to be a one-payment-fits-all strategy. In fact, depending on the type of debt you owe, your method could be key to paying off the debt faster.
We’re here with five common types of debt and ways to conquer them this year.
Five Strategies to Keep Your New Year’s Debt Resolution
To see success with a resolution, you should start by setting specific goals. And the best way to decide on your debt-free goals is to base your strategy on the type of debt you want to tackle.
Here are five common debts and strategies for wiping them out.
1. Crush the Credit Card Debt
If you’re prioritizing your financial goals this year, paying off the double-digit credit card debt should be at the top of your list.
Why? Let’s look at an example: You bought a $1,000 laptop and have been making a payment of $25 per month on a credit card that charges 18% interest. At that rate, you’ll pay $539 in interest and it will take you more than five years to pay off the laptop.
Moral of the story: Putting a dent in the credit card debt — or eliminating it completely — can save you a bundle in time and money.
Want to maximize your debt payoff strategy? Think small. Here’s how the debt snowflake method lets you pile up tiny payments to make a big dent in your debt.
If you’re feeling overwhelmed, start by figuring how much credit card debt you have by adding up the balances across all your credit cards. Then, it’s a matter of picking your debt payoff strategy.
We reviewed five methods for paying off your credit card debt — along with ways to determine which strategy is right for you based on your lifestyle, your personality and your current financial situation. Pick your weapon of choice and set your plan of debt attack in 2020.
2. Vanquish the Student Loans
Make 2020 the year you tackle your student loan debt so you can stop beating yourself up for using your loan check to trick out your dorm room.
Why prioritize paying off student loans? A student loan is almost never dischargeable in bankruptcy, which means those loans — and the debt collectors — will follow you forever or until you pay them off (but there are other options for getting your federal student loans forgiven).
If you’re a recent grad — or you’re just not sure where to start — finding out who you owe money to is the first step. If you took out multiple loans over the course of your college career, here’s a guide to figuring out how much you owe in student loans.
And if you’re making the debt payoff your mission this year, check out these 11 strategies for paying off student loans that you can start now.
3. Ditch the Underwater Car Loan
There’s no use staring in the rearview mirror at how you should have bought that used subcompact rather than taking out a long-term auto loan for the brand new SUV.
If it helps (and I know it doesn’t), you’re not alone.
With ever-climbing prices on vehicles, more people are lengthening their loan terms to lower their monthly payments. New car loan terms between 85 and 96 months (that’s seven- to eight-year car loans) increased 38% in the first quarter of 2019 compared to 2018.
Here’s how to calculate the equity in your vehicle: Value of your vehicle – loan payoff amount = equity
But if you’re ready to dump that clunker before you pay off the loan, there’s a good chance you owe more on the car than it’s worth (consider: New cars lose around 20% of their value the moment they leave the lot, according to AAA).
If you owe more than your car is worth, paying off that underwater car loan should be your priority.
How do you do it? There are smart ways, such as hanging onto the car and paying off the negative equity. Then there are less financially savvy options, like rolling over the amount you still owe into another auto loan so that you’re already underwater on the new car loan.
We explain your options in this guide to getting out of your underwater car loan.
4. Kill the Medical Debt
Medical debt can be particularly frustrating because it’s often due to health issues that are out of your control.
But making paying off medical debt a priority in 2020 can not only improve your financial outlook but also leave you feeling less stressed about the old debt (and thus reduce your chances of piling on more bills for stress-related medical issues — bonus resolution!).
We have seven ways to deal with medical debt that will help you identify how much you owe, negotiate for a lower price and ask for help if you can’t afford the bills.
By tackling your medical debt step by step, you can make 2020 the year you feel better — both physically and fiscally.
5. Kick Your Mortgage to the Curb
You may have heard that mortgage is a “good debt.” That’s because on average, returns in the stock market are higher than mortgage interest rates, so in theory you can make more money in the stock market than you’d save by paying off the mortgage.
Of course, that also assumes you can pick winning stocks.
But interest on mortgages are indeed at historically low rates, so if you have other, higher interest debts — like credit card bills — it’s best to prioritize paying those off before diving into your low-interest mortgage.
However, if you don’t have other debts and your goal is to live the debt-free life, this can be the year you can tackle the mortgage debt.
Wondering where to start? There are multiple strategies — from refinancing to making extra payments. This video about how to pay off your mortgage early explains your options.
With your debt payoff goals in sight, it looks like 2020 could be your year of financial freedom.
Tiffany Wendeln Connors is a staff writer/editor at Codetic. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.