With the beginning of a new year and a new decade, many may resolve to get out from under the mountain of debt that often follows the Christmas holiday season. Increased year-end spending can cause many households to fall behind on their financial commitments. Approximately 182 million Americans will carry a total of $1 trillion in debt into the new year, often as a result of mismanaging their credit cards. The following five tips can help you reduce debt over the next year.

1. Develop your budget

Paying off your debts requires you to develop a monthly budget, including your income and essential expenses. Your income is generally straightforward if you have a salaried job, but it can be much more unpredictable if you’re self-employed. Your outgo may be further classified into living expenses and debt payments. Essential living expenses include your house payment or rent, utilities and food, all of which tend to be relatively constant.

List your debts and calculate the total of your minimum debt payments. Classify your debts into secured and unsecured loans, which will be helpful when prioritizing your debts. A secured loan is backed up with collateral that you can lose if you default on the loan. A car loan is one such debt, making it a priority. An unsecured loan has no collateral, so you can’t lose property if you default on it. A credit card debt is an example. However, falling behind on credit card payments has other consequences such as a reduction in your credit rating.

2. Prioritize your debts

If you’re carrying significant debt, you need to decide on the order in which you’ll pay them off. You’ll generally want to pay off secured loans first, which may involve closing the loan or negotiating for better terms. Lenders typically would rather have you continue making payments instead of their repossessing the collateral, so it may be worth trying to renegotiate.

After your secured debts, the debts with the highest interest rates should be your next priority. It’s often tempting to pay off the debt with the lowest principal first so you can see progress quickly, but you’ll save more money by eliminating debts with the highest rates first. These debts are usually unpaid credit card balances, which you should pay off with any money you have left over at the end of the month after taking care of essential living expenses and secured loans.

3. Consolidate your debts

Consolidating debt involves using one new loan to pay off multiple existing debts. This strategy generally makes sense only when the cost of the consolidated loan is less than the total cost of all the debts you’ll be paying off. Even if the costs are about the same, consolidation may still be worthwhile for the convenience of making only one payment each month. The biggest obstacle to debt consolidation is that you may not qualify for a new loan if you’re already deeply in debt.

If you’re a homeowner, you may be able to use your home equity to pay off your debts. Home equity loans have a much lower interest rate than credit card debt because they’re secured by your home. For older homeowners, a reverse mortgage is one way to use home equity to pay off debt, which generally involves the lender making payments to you for a fixed amount each month. Another option to consider is a cash-out mortgage refinance like the one from Figure, which replaces your existing mortgage with a new mortgage that has a larger balance. You receive the difference between the two balances in cash, which you can use to pay off debts that carry a higher interest rate than that of the cash-out refinance.

4. Transfer your balance

Some credit cards are known as zero transfer balance credit cards because they allow you to transfer a debit balance on an existing card and waive the interest on the debt for a specified time known as the introductory period. Some zero transfer balance cards don’t even charge a fee for the balance transfer itself.

To benefit from such a credit card, you will want to begin paying off the balance on the new card as soon as possible, ideally well before the end of the introductory period. Be sure to compare the interest rates on the two cards, especially if you don’t expect to pay off the debt during the introductory period. January is an ideal time to reduce your debt through a balance transfer if you accumulated extra debt during the holidays. This strategy for paying off debt requires you to have the discipline needed to pay off the balance quickly by paying as much as you can each month.

5. Change utilities

Utility bills are essential expenses, but that doesn’t mean you have to get your utilities from a particular provider. These services have historically been natural monopolies due to the expense of the infrastructure needed to deliver products like electricity and telecommunications. However, technological developments have eroded some of these barriers, resulting in the gradual deregulation of utilities in the United States since the late 1990s.

Today, deregulation has increased the number of utility providers from which many people can choose. The differences in charges can be quite substantial, since providers that are new to a market are often willing to temporarily forgo profits to gain market share. Thus, it’s often possible to significantly reduce living expenses by switching providers, leaving you with more income to pay down your debt.

Summary

Spending time regretting your past actions doesn’t help you pay off debt. You need to focus on what you can do about it in the future by reducing expenses and prioritizing debt payments. You should also remember that you didn’t suddenly get into debt, nor will you get out of it overnight.