According to the Federal Reserve, 18- to 29-year-olds carried over $1 trillion in debt at the end of 2018. A 2018 NBCNews/GenForward survey of this age group found that a third said “debt caused them to put off buying a home and 31% to delay saving for retirement. In addition, 14% percent said they delayed getting married, and 16% delayed having children.”
Not only is the level of debt crushing lives today; it is also affecting the future of these young people. Once mired in debt, it is hard to see how it will ever end. Here are a few strategies that can help.
Track your spending. By logging your spending for a month, you can pinpoint where to cut back and then divert the savings to getting out of debt. For example, if you stop at the local coffee shop every day and spend $5, that’s $150 a month that can be used to pay a bill.
Come up with a budget. Once you have tracked your money for a month, take a few hours to make a plan for the next month. What bills have to be paid? What do you need for food, transportation, rent, electricity, and entertainment? Put it all in writing or create a spreadsheet, then keep it where you can see it. Review each day’s expenditures so you can make adjustments quickly.
Pay down your debt in a focused way. Create a debt snowball or debt avalanche to wipe out the debt. If you choose the snowball approach, focus on your smallest outstanding balance first, and make a commitment to yourself to pay that balance off as quickly as possible. That means paying as much as you can above the minimum due each month until it’s gone. This creates success that you can see, which is a psychological boost to your plan. Once that small balance is wiped out, you add the amount you had been paying monthly for that bill to the minimum on the next largest debt and pay that one-off. This continues until all your debt is gone.
With the avalanche approach, you focus first on the debts with the highest interest rate while still paying the minimums on your other bills. As with the snowball approach, you then go on to the debt with the next highest interest rate, increasing the payments to each debt as you go. During either of these plans, don’t buy anything else on credit as you pay off your debts. It is tempting, but won’t get you where you want to be. You want to be free of all those payments due notices at the end of every month, not simply replace them with new ones.
Live below your means. As you work to slay your debt, change your thinking about what you need. Do you need those expensive shoes right now, or can they wait until your debt is under control again?
Accept that you don’t have to live anyone else’s life. Often referred to as “keeping up with the Joneses,” your plan to live debt-free is more important in the long run than having that house or buying that new car you can’t afford. You can have those things later without guilt and without putting yourself into financial jeopardy.
It takes making a commitment and then changing some habits, but you can slay your debt by devising a plan. Once you have, work the plan and stay focused on your personal goals to achieve a secure financial future.
