A year-end debt review in one hour

Why look back before setting next year's target

A target that ignores this year's actual pace is a guess. Looking at how much your total debt actually moved, and how much interest you paid along the way, gives you a realistic number to build next year's goal around instead of picking a figure that sounds ambitious but does not match your income or expenses.

Estimating interest paid this year

If your statements show a year-to-date interest figure, use that directly. If not, you can estimate by multiplying an account's average balance for the year by its APR. This will not be exact if your balance moved a lot or your rate changed, but it is close enough to see roughly where your interest went.

Comparing your balance at the start and end of the year

Write down your total debt across every account today, then find or recall the same total from around this time last year. The difference tells you whether you gained ground, lost ground or held steady. A small gain still counts if new expenses, like a repair or a medical bill, would otherwise have shown up as a larger increase.

1. List today's balance for every debt and add them up.
2. Find or estimate the same total from about a year ago.
3. Subtract to see the net change, up or down.
4. Estimate interest paid this year using statements or the average-balance method.
5. Write one specific number as next year's target, with a target month.

Turning the review into one target, not a wish list

A useful year-end target is a single number: a total balance to reach, or a specific account to close, by a specific month. Multiple vague goals tend to compete with each other for the same extra dollars. One number, checked at your next quarterly or year-end review, is easier to act on and easier to tell whether you actually hit.

Common questions

What if I do not have twelve months of statements saved?

Use whatever months you have and note that the estimate is partial. Many card issuers and loan servicers also show a year-to-date interest figure on the most recent statement or in the account dashboard.

Should I include my mortgage in this review?

You can, but many people find it more useful to focus the review on higher-rate consumer debt like credit cards, personal loans and auto loans, since that is where extra payments usually make the biggest difference.

Is checking my credit report part of a year-end review?

It is a reasonable addition. You are entitled to free reports through AnnualCreditReport.com, and scanning them once a year for accounts you do not recognize fits naturally alongside a debt tally.

What if my total debt went up this year?

Note it plainly and look for the cause: a specific expense, a rate increase or lower income. That context matters more for next year's target than the number alone.