When you reach your 20s, a whole world of fantastic opportunities opens up, and searching for debt management tips for your 20s problems aren’t the most fun thing to do. There’s a lot to look forward to, whether it be getting your first real job, making new friends, starting relationships, travelling the world, or something else.
However, living through such an exciting time in one’s life can cause some people to feel pressured about money. This specifically applies to debt. Getting into bad habits with debt leads to serious consequences that can last far beyond your twenties.
What Are The Best Debt Management Tips for Your 20s?
Thankfully, it’s easy to keep yourself out of bad debt with the right planning and a positive mindset. We’ve compiled 5 essential debt management tips specifically for twenty-somethings to help you make better financial choices. Read on to learn more or contact our experienced team for professional help with managing your debts.
1. Consolidate Your Debt
Do you know how much money you owe? The first stage in debt management is working out exactly how much you owe and to whom you owe it to. You may have just one credit card or you might have several that are accumulating massive interest charges. Having more than one monthly repayment can quickly cause even the most organised person to become overwhelmed.
This is why debt consolidation can be hugely helpful in enabling you to get control back over your finances. There are numerous ways you could consolidate your debt, but there are two tried and tested methods.
Firstly, shop around on the market for a new credit card with a lower interest rate than what you currently pay. Secondly, you could consider consolidating your debt in a similar way by taking out a personal loan. However, it’s essential that you read the terms and conditions thoroughly and take your time before you make any decision. If you’re in doubt, seek the help of a family member, friend, or an expert at Debt Busters. Both of these can be great options, but you need to think them through.
2. Set a Budget to Start Saving
Once you’ve got a handle on your debt, you can start looking towards the future. Your years as a twenty-something are meant for having a good time. But, that shouldn’t stop you from making responsible financial decisions. Creating a budget is an ideal way to help you save money for personal goals and should make managing debt much easier.
Start by working out your earnings and then subtract your monthly expenses. This should give you a good idea of the possible amount you could save each month. From here, you’ll know if you can cut back in other areas of your budget.
It’s crucial that you take the time to do this if you want to stop yourself from falling back into debt. Learning how to create a budget might not sound glamorous, but it’s not a huge pain either. It empowers you to live within your means.
3. Learn About Good Debt
If you’re wondering what good debt is, it starts as a smart investment. Good debt comes in many different forms but some of the most common examples include:
- Higher education
- Home mortgages
- Investments
Why are these “good” debts? The theme here is that these examples are all likely to generate you a profit in the future and could lead to a higher paying job, real estate asset, or an annual dividend.
As you might imagine, it’s far easier to get into bad debt and this can cause serious problems with your credit rating and future hopes of taking on good debt. Try to avoid credit cards, car finance agreements, store finance, and payday loans at all costs. If you really want something, set yourself a goal and include it in your budget plan.
4. Build Your Credit Responsibly
A lot of people in their 20s get in over their heads with credit. Just because you can get a new credit card or take out a loan doesn’t mean you should. Again, there’s good credit and bad credit. It’s easy to assume all credit cards are bad, but that’s also not true. The key is these cards need to be used responsibly.
Here are some tips for becoming a responsible credit card user:
- Keep your balance below 50% (or less)
- Make large monthly payments over the minimum
- Always make payments on-time
- Look for credit cards with cash-back deals or rewards
- Avoid using cards for impulsive spending
It’ll take a bit of practice to get the hang of using credit cards. Remember, these are a great financial tool, but they need to be used responsibly. Getting in over your head in credit card debt only leads to trouble.
5. Stop Relying on Your Parents
In your 20s, it’s not always easy to avoid the bank of Mum and Dad. Your parents love you, and they might be willing to help you out of a bind. However, the real way to get ahead in your 20s is to learn how to become self-sufficient.
If you have a job, your own home or rental, and a way to get around on your own, you’re well on your way to success. When you turn to your parents to get out of debt and other financial challenges, you don’t learn vital money skills. This might be fine today, you need to learn to be able to rely on yourself.
Instead, create your own emergency fund. Having money put aside specifically for financial emergencies is the key to becoming self-sufficient. When you don’t have to pick up the phone for help with that last-minute car repair or other financial trouble, you feel like a real adult.
One Step at a Time to Financial Security
Debt management as a twenty-something might seem like a chore that can wait. While delaying this may be possible, leaving this until the last possible moment will only increase the financial burden you’ll face and cause you untold amounts of stress. Our 5 tips above are here to help you get a handle on your debt sooner rather than later so you can invest in a healthier financial future for yourself.
The sooner you take these steps above, the better off you’ll be when it comes to your credit rating, debt, and overall financial wellness. Becoming a mature money manager isn’t as complicated as it sounds, but you need to take action today, with implementing some of the debt management tips for your 20s that we suggested here.
If you’d like to learn more about other debt management tips for your 20s or debt management options available to you, read our budgeting articles or visit our Debt Solutions page now. Or, to speak with one of our friendly experts at Debt Busters, please contact us now on 1300 368 322.