If 2014 ended with your finances in a precarious position, then perhaps you have pledged to improve your money situation this year. Since many people don’t keep the resolutions they make at the beginning of a year, what can you do to ensure that you realise your 2015 money goals?

It’s best to review all the things you want to achieve with your money, and identify two or three objectives that would dramatically improve your finances. Then you need to carry out some small action every day that will further these goals, and you should see positive growth by year end.

An increasing number of people are currently struggling with debt issues which are crippling their ability to manage their money. If you admit that your borrowing has put your financial future in jeopardy, then reducing or eliminating debt must be one of your important plans for this year.

Consider the reasons for debt

Of all the money goals that you can set, decreasing debt is one of the most difficult to accomplish. Borrowing can sometimes be an insidious activity that initially seems to help you pay bills or attain your dreams; but you can quickly become entangled in its clutches, just like a fly in a spider’s web.

Many persons take on debt without first determining if borrowing will actually resolve the financial issues they are are facing. For example, borrowing to ease a chronic budget shortfall never works. Although a loan may temporarily fill the gap, eventually the debt only makes your situation worse.

Other people run into debt difficulties because they fail to calculate whether they can really afford the loan payback. While a loan may appear to be the way to acquire your desired car or home, the monthly repayments may reduce your ability to pay other bills and prevent you from saving for the future.

Obtain all the details of your debt

After identifying the root causes of your borrowing, you then need to evaluate the total sum owed, the monthly payments required, the loan interest rates, and the time remaining for payback. If you have several loans, you can download a form on financiallysmart.org to help you track your debt.

Reviewing your loan situation on one sheet will allow you to create a debt reduction plan. Your aim is to prioritise the loans to pay off quickly so that you can improve your cash flow. The tracker will also help you to be honest about your obligations, instead of ignoring them to your detriment.

Ask your lending agencies if they offer any solutions to mitigate your debt. It may be possible to renegotiate the loan to pay a smaller monthly amount over a longer period. You could also try to consolidate multiple debts into one more affordable loan, to ease the pressure on your budget.

Find drastic ways to pay down debt

Even if you are able to obtain better terms for your loans, your foremost objective is to seek to reduce your debt aggressively this year. This will require making extreme sacrifices, such as selling possessions like your smartphone, or using the collateral holding against the loan to pay it out.

If you really want to make a dent in your indebtedness, then you also have to be willing to do things differently with your spending. Review your budget and radically trim expenses such as cable, entertainment and clothing. Squeeze every dollar that you can find and redirect it into paying debt.

If you are in a negative cash flow crisis, then you need to get creative in sourcing extra money to deal with your obligations. Look for products in demand that you can offer to colleagues, and dig deep within to unearth hidden talents that can be turned into income-generating opportunities.

Stop depending on debt

Ultimately, if you want to be free of debt, you must have a different attitude towards borrowing. For many persons, getting a loan is the first thought whenever a need arises for money. Ask yourself, ‘What would I do if I could not get another loan?’ Train your mind to think of debt-free alternatives.

You also need to remove the debt access points that might tempt you to fall back into irresponsible borrowing habits. Even if you want to keep your credit card as an emergency back-up source of funds, you could put it in a water-proof container and seal it away it in a block of ice in the freezer.

Your budget is an important tool that will allow you to stay abreast of upcoming costs throughout the year. You need to think ahead of time how you are going to find money to pay your expenses, instead of borrowing money when you become desperate and your options are limited.

Remember that the money that goes towards loan interest costs represents funds that should be used to build your wealth. As you reduce your obligations, start channelling the previous loan payments into savings and investments, so that you can create a more prosperous future.

Copyright © 2015 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, January 22, 2015

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Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl