If you’re like most of us, the New Year is a great to reflect and reset your goals. And one big goal for a lot of people is to reduce or remove all of that accumulated debt. But how can you do it?

Everyone is different and the best approach will depend on your unique circumstances. But here are six possible ways to start the New Year by kicking your debt to touch.

Number 1: put a halt on borrowing any more.

This may sound obvious, but if you’re making great progress on paying down your current debts, but continue to accumulate more in the background, then all of your efforts are pointless. Start your transformation off by putting the brakes on any future borrowing. If it helps, put your credit card in a safe place and keep it out of your wallet. Be sure not to take the easy option when buying things and using buy now pay later options. If you can stop any unnecessary borrowing then you’ve taken the first step to reducing your debt.

Number 2: get on top of your current payments

Take a look at your current loans, credit card balances and fixed outgoings. Most people only make the minimum payments and this is how they get stuck in a debt cycle. By paying more each week, fortnight or month, you’ll start reducing the principal and start seeing real progress each month. Make sure you check to see that you’re not penalised for paying your loan off early, as some finance companies do charge a fee for repaying before the scheduled end date. We recommend you check your lenders website and work out which of your loans does and does not have a fee for this, for example you can see that Pronto Finance doesn’t charge any early repayment fee and they list all of their costs at https://prontodev.wpengine.com/is-pronto-right-for-you/.

Number 3: start an emergency fund

Whilst it may seem crazy to be saving while you’re trying to reduce your debt levels, you need to start planning for those unexpected expenses that occur in the future. We all get hit by them, so an important step in your debt reduction journey is going to be the ability to deal with it when it happens. Start with a small goal, and out away as much as you can afford each payday. Focus on saving $1,000 first and once you’ve got there, boost it up to $2,000. Long term you want to have savings that will cover you for 3 to 6 months if you were to lose your main source of income. And be sure to have these savings in an online account that you can’t easily access. If it’s in an account linked to a debit card, you’ll face the risk of using the money for things that don’t qualify as an emergency.

Number 4: get rid of your most expensive debt first

Find the bill with the highest annual interest rate and get rid of that first. With compound interest, a few extra percentage points can make a big difference to the total cost of a loan. By paying the higher interest debts first, you’ll save money in the long run. Going back to point number 2, the increase from the minimum payments here is really important, especially on loans with high annual interest rates. So prioritise your loans and allocate as much as you can to the expensive ones.

Number 5: create a budget

Sit down and make a list of all income and expenses on any given week/fortnight/month. By writing it down you’ll realise just how much money is ‘disappearing’ on things you may not need. You don’t need to cut all of the things you love out, but try and find things that you really don’t need but are gobbling up valuable funds. It may be buying lunches at work or a bought coffee each day. If you can identify the little things and cut down your reliance on them, you’ll make huge progress and find big chunks of money that you can apply to your current debts.

Number 6: use a budget advisor

There are a range of free budgeting services in New Zealand, and they’ve all got valuable insights and experience. Organisations like FinCap have teams throughout the country that can sit down and run through your personal circumstances. Their expertise is often overlooked, and only used by people who feel overwhelmed. But you can contact them at any stage, and if you need motivation it’s great to have a professional on side guiding you through the process.

As the New Year starts off now is the perfect time for you to take control and reduce your debt levels. Everyone works differently, but by following these six steps you’ll start to see improvements in no time. Just stick at it and focus on the long term goal, and even when the short term sacrifices seem difficult, think just how great it will feel to be debt free.