How to manage and avoid debt in the new year

Amica Insurance is a sponsor of "Good Morning America."

Bryanca Colvin, assistant vice president at Amica Insurance, understands what it's like to struggle with debt.

Colvin's parents planned as best as they could to prepare their daughter for college. Although Colvin had a few scholarships, it wasn't enough to avoid loans.

Colvin needed financial assistance for tuition, room and board, and more, and like many young adults, she quickly maxed out her credit cards and could only pay the minimum.

This carried into Colvin's young adult life as she searched for steady employment and took on additional bills for rent, groceries, insurance, student loans and beyond.

Colvin's experience taught her valuable lessons, and now she has created a three-step plan to help others manage and avoid debt in the new year.

Step 1: Differentiate your needs versus your wants

The first part of Colvin's three-step budgeting plan is to differentiate your needs versus wants.

The top of your "needs" list should include housing, meals and transportation. "Wants" include things like vacations, entertainment and your wardrobe.

Step 2: Be honest with yourself

Be honest with yourself about what you can afford without creating more debt.

Colvin explains that compromise is key: You don't need to give up all of your "wants" to save money. Instead, find ways to do the things you love on your budget.

For example, rather than going out, invite friends and family to game night at home.

If you're considering a vacation, schedule a day trip or book a staycation nearby instead of traveling abroad.

And when it comes to your wardrobe, always evaluate what you already have before buying new. Consider restyling some of your favorite pieces in new ways for a fresh look.

Step 3: Be clear about your financial goals

Again, honesty is key: Be clear about your financial goals, along with the steps and discipline you'll have to commit to reach those goals.

Prepare for the unexpected

Don't let a surprise derail your process and prepare for the unexpected. Even if you think you can't afford insurance, you can't afford not to have it.

Colvin recommends being picky when it comes to your plan and do your research, because different people need different types of insurance. Amica representatives can guide you through the process and help you choose the right plan.

Learn more

See resources below from Amica Insurance.

• "Build an emergency fund": Check out how to choose the right deductible for your home insurance policy.
• "Don't cut corners on insurance": Check out how much home insurance you need.
• "Shop smart for coverage": Check out a closer look at what's included in your homeowners insurance policy.
• "Review your coverage regularly": Check out when you should review or update your homeowners policy.