Your 20’s are supposedly the best years of your life. The crazy and carefree years. This is what your 20’s are for, right? To feel and see as much as you can, to take advantage of not being tied down to anything and anyone and to go the extreme with everything that you do. But wait! Why does it feel like these are the hardest years? College tuition on the rise, lack of employment, paying bills, suffocating in student loan debt. So which is it? Are these the years everyone looks back on fondly? Or some of the hardest times of your life?
Your 20’s can be a time of great financial challenges: You’re not quite skilled enough to get the job of your dreams in “the real world,” yet you have real bills and financial responsibilities that demand a salary you can’t command. Worse, you may be struggling with student loan debt, credit card bills, car payments and other income drains.
If you’re currently on the downside and debt has left you feeling helpless, it’s important to know that you’re not alone and there’s always a way to start improving your financial situation. In fact you can start today with specific debt reduction strategies. Your 20’s ARE supposed to be the best years of your life, so don’t let your finances take that away from you. It’s time to get SMART!
Here are 5 ways to get out of debt:
1. Assess the problem
The first basic step in tackling debt for anyone is to know what you owe and begin to deal with it in a dedicated way, setting real goals. For many young adults, one of the most intimidating parts of getting out of debt is actually coming to terms with how much you owe. Get organized! First write down each of your debts in order of the highest interest rate to lowest interest rate, along with the total balance for each debt. Be sure to include all debts (like student loans, car loans, mortgages, etc.) and list the entire balance and not just the monthly payment.
2. Create a budget
Examine your budget closely and see where you can save money to put more towards your debt. The most important part is to track your spending so you can see where each dollar goes. Evaluate your needs vs. wants. Cut back on eating out at restaurants, fast food, buying new clothes, or online shopping. When you have debt, it’s an emergency – and that means you can’t afford those kinds of luxuries except on rare occasions.
3. Consolidate and get advice
You may be able to consolidate your debts into lower monthly payments, such as student loan debt. However, just make sure that if you consolidate it doesn’t lead to higher interest rates or unmanageable payments in the long run. If you are unsure where to start, get advice! Ask your financial institution for help. They are available to answer any questions you have about your finances or about getting out of debt. They are there to help, so don’t feel shy about asking for their assistance.
4. Automatic payments
If possible, set up automatic payments so a certain percentage of each paycheck will go towards paying off your debt. It makes debt payments and saving seem effortless and painless.
5. Set goals
Set SMART financial goals for yourself. SMART is an acronym for Specific, Measurable, Attainable, Relevant, and Timely. Use Mint.com to help you achieve these goals. Just enter how much money you need, set a date and link your goal to specific accounts so it’s easy to stick to your plan. You can check how close you are to your goal amount anytime. Keep up-to-date with monthly emails that track your progress, and learn how to reach your goals faster with free advice and customized next steps. Just remember…goals give you something to look forward to, so you keep saving money, creating new goals and enjoying the rewards. With each goal you achieve, your personal success story grows.
Remember: Minimum payments lead to the maximum amount of money paid over time. Paying more than the minimum applies more money to the balance, which decreases the amount of interest you will have to pay overtime.
Also, Pay off your high interest loans first! Interest can add up to hundreds and thousands of dollars over time, so you want to make sure to eliminate the loans that are costing you the most money and have the highest risk first.
Until Next Time,