By Anna Helhoski
This new year, you can resolve to end your struggles with debt if you start with a realistic plan. Beginning Jan. 1, make a commitment to:
Figure out what you owe
Start by tallying your total debt, says Beverly Harzog, credit expert and author of "The Debt Escape Plan."
"You've got to face it, own it and see how much it is," she says. "That's going to give you sort of an idea of whether or not you can pay this off yourself."
Compile a document or spreadsheet of the amounts you owe including payments, due dates and interest rates. Check your most recent billing statements or go directly to your lender or credit card company to find this information. You can also pull your free credit report from one of the three credit reporting bureaus -- Equifax, Experian and TransUnion -- to get a picture of the state of your credit and all reported debts.
Then, add up the total amount you owe as well as the total you need to spend each month on bills. Having this information is crucial to determining your next steps.
Seek guidance from reputable credit counselors
If your debt is more than half of your annual income or you're struggling to pay for living necessities, a certified consumer credit counselor may be the best source to advise you on how to tackle your debt. In your initial meeting or call, general advice on budgeting or creating financial goals will be free. For other services, such as those for debt management plans or bankruptcy counseling, expect to pay fees.
"There are a lot of scammers in this field," says Harzog, who recommends contacting the nonprofit National Foundation for Credit Counseling for a free consultation.
"Some people are fine after that first phone call," she says. "They get some ideas, they talk to someone and work on their budget and feel like they can do it."
Look for a counselor affiliated with the Financial Counseling Association of America or the National Foundation for Credit Counseling, which has a search tool to find locations near you.
Decide if debt consolidation is right
If you're making several monthly payments on multiple high-interest bills consider debt consolidation. With this option all of your unsecured debts are combined into one single debt with a lower APR, which can make payments more manageable.
"Focus on your interest rates," says Michael Foguth, a financial planner and founder of Foguth Financial Group in Brighton, Michigan. "We get caught up in our monthly payment and the reality is that payments will be there a lot longer than you want them to be because you're paying these credit card companies and lenders high interest rates."
You can consolidate in several ways -- including with a 0% balance transfer credit card or a personal loan. If you have good credit, a 0% interest credit card can save you money as long as you have a plan to pay off your debt within the interest-free promotional period.
A personal loan makes sense if you have several sources of unsecured debt, but works only for those who can obtain a lower fixed interest rate than on existing debt. Compare loan APRs and fees from lenders, but avoid for-profit consolidation companies. There's nothing they can do that you can't do yourself. It's faster and cheaper to compare your options or consult with a credit counselor and then apply on your own.
Avoid debt settlement companies
Debt settlement is risky and doesn't work for many people. It involves paying a lump sum to a debt settlement company that then negotiates on your behalf. Then, you pay the agency a percentage of the total debt or a percentage of the debt eliminated by the settlement. If you're in dire straights financially, you may want to consider filing for bankruptcy of your unsecured debt. It will damage your credit history, but you can begin rebuilding it almost immediately.
Develop a budget you can stick to
Debt repayment works only if you can plan how to avoid getting into debt again. While unexpected expenses happen, such as medical emergencies, you can take control of your finances by keeping a budget.
Figure out your after-tax income and then choose a plan that covers your needs, wants and savings. Consider trying the 50/30/20 budget, which allocates 50% for cost-of-living necessities, 30% on wants and 20% on prioritizing emergency savings, retirement funds and repayment on toxic debts, such as payday loans.
Once you have a budget, automate your payments when you can so you don't miss bills, and watch your spending by using a budgeting app or spreadsheet. Keep track of your credit and resolve any errors you find.
By making a plan to pay down debt and budget for your future expenses, you can be well on your way to fulfilling at least one resolution in 2017.
Anna Helhoski is a staff writer at NerdWallet, a personal finance website. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski.