Which Debts Aren’t Worth Paying Down First?
4. Prepare For the Year Ahead
You may have some big ticket items to save up for in 2025. January is the time to acknowledge your year-round needs and siphon a portion of your income each month towards these expenses. If you set aside $100 a month for your travel fund, for example, you’ll have $1,200 ready for a year-end trip. Add another $50 for birthdays, and you’ll have $600 for gifts. While this might sound like trying to find extra money to put towards these expenses, you’d be spending the money anyways. By saving some money each month towards these irregular expenses, you’re spending cash and not using your credit cards, like most people normally do.
Some people add an emergency fund to their financial goals, running alongside their debt repayment. Savings is the trick to becoming debt free that most people overlook. Without an emergency fund, if you’re suddenly facing an unexpected bill, you’ve got cash on hand to pay for it – rather than wiping out what you just paid off on your bills. Start small, putting aside $25 a month; that gets you $300 by the end of the year.
Whatever you decide on, automate everything – on payday, you can arrange payments to be made to all of your debts, bills, and savings accounts. This way, your financial priorities are paid off first. It also makes it easier to keep track of how well you’re sticking to your budget each month and if you need to make some adjustments.
5. Earn More Income in 2025
Decide to earn more money this year – with the aim of throwing this extra income at your debts. You can take the traditional route, doing overtime at work, taking on a second job at the café nearby, or picking up freelance gigs in your area of expertise.
Or you can try the more unconventional route, selling gently used clothes on Marketplace, Depop, eBay, or Poshmark, picking up a few hours as a driver on Uber or Lyft, or dog-sitting via Rover. You can even make your yard available on Sniffspot to people who need space to exercise their dog in a private dog park. There are numerous apps that can help you earn some extra cash for your services – money which can go straight to debt payments.
6. Go On a Cash-Only Diet
Put away your credit card in 2025. If you’re paying off debt aggressively, you don’t want to add back to the balance you’re working on decreasing. And once a debt is cleared, close the account. Instead of tapping away, keep your credit cards at home, remove your cards from your Apple or Goggle Wallet, and delete these cards from your online accounts.
Some people choose a cash-only diet, withdrawing just enough to cover groceries, transportation and other costs defined in their monthly budget. This forces them to ration their resources and use only what they can afford. Use the envelope or cash-stuffing system to keep track of what the cash is for; and when it’s gone, stop spending.
7. Remember Your Why
A few months into your No Spend Challenge or after a few weeks of working overtime, you may be questioning why you’re taking on these extra measures. Keep your ‘why’ at the forefront of your mind. Some people do this with a vision board, showing their credit card balances at $0 or their emergency fund at their first $1,000 in savings. Others leave a Post-It note in their wallets or on their smartphone lockscreens to remind themselves of the dreams they’re working towards. Having these images within sight keeps you motivated as you push through each month. Finding ways to keep yourself motivated when paying off debt is key to sticking with your plan to save and put extra money towards debt payments rather than splurges.
What Would a “Throwback” Reveal About Your Spending?
Eliminating Debt Fast to Be Debt Free
The new year is a great time for change, to turn over a new leaf with your finances – and to be ambitious about eliminating debt quickly. From creating a budget and negotiating lower interest rates on your loans to carving out savings goals and making more money, there are so many aggressive debt repayment strategies to draw from. But if you feel overwhelmed with any of these steps, one of our credit counsellors would be happy to help you. They will look over your finances, offer guidance on your budget and debt repayment strategies, or build a debt repayment plan with you to help you achieve your goals in 2025. Talking to a credit counsellor is free, confidential, and judgement-free. Get help as soon as you think you need it – or even if you think you can go it alone. Your future self will thank you.
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