Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
4 Things You Can Do In Your Early 20s to Get Out Of Debt
Moneymagpie Team
12th Feb 2020
Many young adults try to have as many luxuries as money can buy, and then some more. That is why loans and credit card debts start to pile up. If you are in this situation, there are ways to get out of it. You can start by making some changes to your habits and routines. It will take time, but you will eventually be free. Here are four things you can try doing immediately.
Create a Plan
If you are already under substantial debt from credit cards, personal loans, student loans, or others, then it would be best to have a plan to tackle them.
You should consider making a list of all the debts, starting from the smallest amount to the biggest. Then, you should prioritise each debt. The highest priority would be the one that has the most interest rate. Now, there are two ways to handle this:
- You can contribute the most money towards paying off the debt with the highest interest and smaller amounts as the debts go down the list. It can be very beneficial, as you will have to pay less interest.
- You can contribute the most money to paying the debt with the smallest amount, while making lower payments to higher debts. It is useful, as it will slowly remove the debts.
Control Your Desires
When students get straight out of the university, they make entry-level income, which can only mean paying the minimum on loans. However, you will soon hopefully start making more money. You must try to allocate as many funds as possible to clearing loans, instead of renting a better flat or eating out more often.
You should focus on your life, try not to look at the social media posts where your friend is having a great vacation in Bali. It will be very helpful in controlling your desires.
You should also track down all monthly expenses and figure out where your money goes. You might not have any idea of the amount being wasted away on unnecessary things, which can help pay your debts.
You can try to start cutting back on all the ‘wants’ and only use the money to buy something you need. Start shopping deals and offers. You should also consider purchasing weekly groceries because the more you go to the store, the more temptations there will be to buy other items.
Avoid Going Further Into Debt
The only thing worse than having a lot of debt is getting into further debt. You must find out your weaknesses and draw the line. You can even ask a friend for help, as it can be difficult on your own.
Credit cards can make it very challenging. You will keep ordering things online, eating out, or endlessly shopping in the stores, among other things, if you have them. You can try ditching them and start using cash. It might lead to some embarrassing moments every now and then, but it will be beneficial in the long run.
Ways to Manage Heavy Debts
If you owe so much money to lenders that it’s hard to pay them off even in the next five to ten years, or just aren’t capable of doing it on your own, then look into solutions.
IVA
Individual Voluntary Arrangement is a possible debt solution that can be used to make more affordable monthly payments. The creditors won’t be able to take any legal action against you, and all the interest and charges will be frozen, provided the monthly payments continue. You can find out more about an IVA online.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
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