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December 13, 2021

How to reduce your debt in 2022

The year’s end means reflecting on the past and planning for the future. Goal setting for the new year is an excellent way to get 2022 off to a great start! What could be more important than planning your finances and reducing your debt?


Priorities change, and at the start of each year, it is good to set clear financial goals for the coming year. There are two main strategies you can take when paying off debt and taking control of your finances.

Snowball Method: This method is, for some people, the least overwhelming one. You first need to list all your debt from lowest to highest. Construct a plan where you first pay off the minimum necessary payment on credit cards, home loans, or anything else with an interest rate. Next, you use any additional money to pay off the smallest debts. As you clear smaller debts, it can be very motivating and might be a great option if you are someone who finds it hard to stick to a plan and stay focused.

High-Interest Rate Method: This method is precisely what it sounds like. You organize your debt starting with the highest rate, and after paying the minimum amount due on all debts, you pay off as much as possible from the highest. With this method, you will get out of debt faster and pay less money in the long run.

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Source: Pixabay

Firstly, it is essential to determine the exact amount of debt you have. Lock yourself away for a few hours before the start of the new year and make a clear plan. It can be a little daunting to see the reality but starting from a truthful place is necessary. Know your credit card repayment date and set up automatic payments so that they are paid on time to avoid high interest charges. You will need to pay more than the minimum payment to make a difference, but don’t worry. Even a small overpayment can make a big difference over time.

Reduce interest rates

Interest makes a massive impact on the length of time it takes to repay your debts. Shop around and make sure you are paying the best possible interest rates. The highest interest rate you are most likely paying is your mortgage interest. The interest you pay varies by mortgage types, such as fixed, discount or tracker. The best way to understand if you are paying the best possible rate is to speak with a mortgage broker who can assess your circumstances and talk to you about the available options.

Many people are not aware that it is possible to negotiate a lower interest rate on your credit card. If you are a little nervous and unsure how to negotiate, you can find helpful negotiating guides online. Make sure you speak with someone with authority to discuss reducing your interest rate. It never hurts to ask. You can run your credit report online to get a clear view of what exactly you owe, to make sure you do not miss the smallest things.

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Source: Pixabay


When budgeting, take account of everything you spend. This includes significant monthly outgoings, like housing repayment or car loans, and more insignificant expenses like trips to the salon. Small things make a big difference. Cut anything that is not essential. For example, can you cut that gym membership that you never use or learn to do your own gel nails? Of course, everyone has different priorities in life, so it is individual. By sticking to a clear budget, you can see what areas of life are draining your finances, possibly unnecessarily.

If you are not willing to cut some things, your debt will take a lot longer to pay off. For example, the average takeaway coffee in the U.S. costs $2.7. If you drink two a day, that will equate to a savings of $2,007.50 if you start making your coffee at home. Making your own lunch rather than buying out can save you up to $2,400 a year.

Budgeting and reducing debt doesn’t mean a fun-free life. If you take small and consistent steps to reduce your debt, you can still plan to have enough in the budget for the things you enjoy. Keep a good track of your progress and keep the goal of a stress-free debt-free life in view. Once you have your financial plan in order, you can focus on planning something a little more exciting, like your new year’s party.

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