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Okay, so you’ve moved out of your parent's house!
Got your first apartment! Oh, you have a car also!
With that being said, let's make some sense out of your money so you can avoid high debt as a young adult!
Trust me, you don't want any debt that you can't handle. The quicker you get out of debt, the less stress you will have and the better your finances will be. Take it from someone who's been struggling with debt for quite a few years.
Did you know that many young adults go into serious debt within the first 5 years of being on their own?
Mostly because they apply for every single credit card out there, have high-interest rates on said cards, get a vehicle with a car payment that also has a super high-interest rate, an apartment with a high rent not factoring in their income, schooling costs, etc.
Within the first 6 months, you burn yourself out because you now had to pick up a second job just to cover the gas and utilities for the car and apartment that you just had to have. So now you’re barely breaking even and have racked up over $15,000 in debt just on your credit cards and you haven’t even factored in your college loans yet.
The average debt load across the nation is towering over $130,000 per household with over $15,000 being credit card debt. – The Nerd Wallet
5 Ways to Avoid High Debt as a Young Adult, Your Parents Didn't Tell You:
Don’t borrow more than you can handle:
- Don’t get 5 credit cards just because you’re approved for them. This may make sense but you’d be surprised how many people can’t understand this. You don’t need them. Just because Nordstrom gives you one doesn’t mean you have to
- You don’t need a brand new car. One of the best ways to avoid high debt, is not to finance a car that you can't afford. Find a used car that you can pay for in cash. No payments. Of course, you’re going to want to make sure that it’s of sound condition. Make sure you take it to a mechanic or have a mechanic with you that you trust so that you can have them look it over before purchasing the vehicle. Most vehicles that are cash only have no warranty and you don’t want to drive off the dealership’s lot and something happen.
Don’t get an apartment with a high rent:
- Don’t get an apartment in a big city if you don’t have to. Try a suburb, further out, or even close to your campus Nothing is worse than only making $1200 a month and your rent is $750, you have a $250 car payment, $50 electric bill, $100 cell phone bill, etc. That leaves you with $50 a month for food and gas back and forth to work and school. Do you see the problem here? You'll start using credit cards to pay utilities and instead of trying avoid high debt, you're incuring it.
- Get a roommate or a few roommates. Having roommates will cut the cost of the apartment along with the utility bills as well if they are not included in the rent. Make sure you all fill out the lease agreement, that way they are held accountable for their portions of the rent.
At the beginning of every month fill out your budget and stick to it:
- I mean it. You don’t know how many people I know who don’t have a budget and at the end of the month don’t have a pot to piss in and are begging people for money to feed themselves, keep their utilities on, gas in their vehicles, etc. It’s really sad. I understand if things come up, but these people I’m talking about have NO reason to be without money.
- Write everything out. Don’t leave out anything, nope, not even eating out or going to club. You have to write down everything and be absolutely honest with yourself. If you’re not honest on that paper, you will go into deeper debt before you even realize it and when you do it will be entirely too late to say “Oh, I guess I should have budgeted better!” (Trust me, it took me until I was 28 yrs. old to understand the importance of a budget and I’m paying for it still into my 30’s)
- If you haven’t looked up Dave Ramsey, do it. NOW. Seriously. His envelope system is the best and will help you work down current debt and teach you how to avoid high debt in the future.
- Check out my awesome budgeting advice! I give great advice and also have a printable for you.
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Start an emergency fund:
- You need to start an emergency fund…. like last year. I can’t stress this enough. You should have at a minimum in your bank account 6 months worth of savings that will go towards rent, utilities, car payments, etc. at all times in case you lose your job, hours get cut at work, or get strapped on funds for whatever reason.
- DO NOT TOUCH THE EMERGENCY FUND. Hence the name EMERGENCY FUND! It’s not called “Going out to the club with my friends and needs money to cover my drinking!” or “I have a date on Friday and need a new outfit and shoes” No. Don’t do that! Anyone who is worth your time is going to like you with the clothes and shoes you have. Don’t start a relationship off broke just to impress them.
Start at a community college first:
- Seriously, hear me out! If you can’t afford a state university without some major loans, don’t go there until you can. There is absolutely NO rule anywhere that you have to go to a university immediately after high school. Go to a 2-year community college for a couple years, work while doing so and save up money.
- Get Grants! They will help you avoid high debt from the start. Get as much financial aid from the Pell Grant as you can so you can get at least your Associate's degree before you transfer to the university.
- Check out the college first. Make sure the university you’re going to has the degree program you are 100% sure you want to study. It’s going to be a waste of money if you pay $50k in loans for a degree you end up not wanting after you graduate.
BONUS – Avoid High Debt By Keeping Track of Your Credit:
- Keeping track of your credit is extremely important. When you keep track of it, you can make sure that there are no issues going on that shouldn't be. ie. identity theft, over limit charges, etc.
- Great way to keep track is using a company like Credit Sesame. I've been using them for over 2 years to help me keep track of my credit and debt. It sends me warnings when my credit scores have gone up and/or down. Let's me know when something has been added, removed, or marked as paid off. You can get your free credit score and sign up for their services here: Credit Sesame.
Above everything that I’ve written about here, make sure you have your head on straight.
Don’t let your friends or family sway you one way or another. It’s about your financial security and future, not theirs. Once you’re 18 yrs old, your parents don’t have to provide anything for you. It’s your time to shine and show the world what you’re capable of. No one sat down with me and helped me budget my finances, so I had to learn the hard way. Even if only one person learns from this, I’ve done my job.
Since no one sat down with me to teach me these things, I didn't avoid high debt at all, instead, I just let it keep building and building and I was drowning before I knew it.
The last thing any parent wants to see is their child fall on financial hard times.
1) We hate seeing our children struggle.
2) We don’t want your butts back in our house.
It’s not that we don’t love you, but once you’re out of our home it’s time for you to build your own home. The only way you can do that is by living and doing. We can’t hold your hands forever. My parents helped me out a lot and I ended up moving back in with them a couple of times. I don't want you to have to do that. It really hurts your ego so much when you have to go back home.