Millennial Essential: How To Avoid Getting Knee-Deep In Debt In Your 20s3 min. read
In this day and age where smartphone manufacturers release a new flagship model every year, international shopping chains finding their way in our malls, and other temptations ready to take away our money from us, it’s getting harder and harder to save money and avoid falling to a huge pit of debt. Since Millennials are on the greatest financial challenge of their lives—that is shifting from financial learning to independence—it is more than important to learn how to avoid the most common traps that ensnare some of the freshest people in the workforce. So how can you avoid getting into debt in your 20’s?
Get a credit card that works best for you
People will probably advise you that credit cards are evil and they are simply debt-incurring tools that will one day grab you by the neck. However, you do not need to fear the plastic since having a conscious effort in using it wisely will allow you to save up big time.
When getting a credit card, you need to determine how your lifestyle will benefit the most with every swipe of your credit card. For instance, if you love traveling, then maybe an airline miles credit card works best for you. Or if you want to automate everything, then probably getting a card with lowest interest rate is your best bet. Just keep in mind to pay your bills on time and in full to avoid interests.
Accept the fact that you cannot afford the things you want
We all have wants: a shiny new smartphone, a brand new car, a cutting edge laptop, and others that have a price tag so astronomical, it will require us to shell out several months’ worth of our salary. While some of us will patiently wait until we can do it, others prefer the easy but troublesome road: borrowing money just to get is as quickly as possible. Sounds great, right? Wrong. That’s the first step in getting yourself in neck-deep debt.
If there is one thing you need to realize, it is that you cannot afford the things you want. While it may sound so simple, the idea behind it is that by accepting it, you can start working on the slower but surer way to get them. For luxury items, you may want to save and buy only if you can already. Meanwhile, higher priced yet more practical items like a car and a home, you may want to refinance them via loan. Remember, every purchase you make can greatly affect your finances for a very long time, so be wise about it.
Go back to the whole allowance way
Back before you were thrown into the coral of adults, you survived high school and college with meager allowance—and you managed to survive with the little you have. Now that you’re a bona fide adult, you think you can spend your money with reckless abandon. If you want to nosedive to financial mess, then it’s a good way to do it. Otherwise, we suggest you go back to the tried and tested way: allowance.
If you want to be economical and learn the art of frugality, you need to go back to the whole allowance method; this time, it’s you who has to be strict with yourself. When you return to your money handling roots that helped you survive college, you will be less prone to spending beyond your usual budget. After all, you just need food and transportation allowance to survive the daily grind. Go beyond your daily spending habit and you’re dead.
They say you’re only young once, and this is why you need to make sure you have proper foundation when it comes to your financial state. When you start your first decade with a nice mentality, then you will have no problem achieving better financial status later on in life.