Did you know that for the school year 2016 to 2017, the amount of student loans offered went up to $106.7 billion? It’s true that this amount was able to help a lot of students get the education they deserve.
The question now is this: will this make students in debt at a young age?
We hope not. Unfortunately, a student loan is just one of the many types of debt that people, particularly millennials, are facing. Later on, there’s credit card debt, personal loans, fast cash loan, auto loan, or even a housing loan. Before you know it, you are swimming in a pool of debt – and you’re just in your 30s.
The good news is you can avoid this. Here’s how you can avoid getting in debt while you’re still young:
Evaluate Your Spending Habits Now
You’re still young. The best time to change habits that could compromise your financial standing after 10 years is now.
To avoid getting in debt, you need to start making those “little sacrifices” and give up unhealthy spending habits like going out every week with friends, ordering for venti-size caramel macchiato from Starbucks every day, or shopping for new clothes every two weeks. You don’t need to eat out once a week or go on a vacation every chance you get. Instead, look for cheaper alternatives where you can still enjoy to be able to save more such as bringing your own lunch or cutting your gym membership, which you rarely use.
Believe it or not, these healthy spending habits will have a positive effect on your financial standing in the long run.
Reduce, If Not Avoid Credit Card Usage
The credit card can be tempting. Despite the convenience it brings, it could turn you into a Rebecca Bloomwood if you’re not careful.
Therefore, reduce credit card usage and instead, use cash to pay for your purchases. If you still don’t have a credit card, then do not apply. Unless you can promise and commit to paying your bill on time and in full every time your bill arrives, then it is best to stay away from the shiny plastic cards.
Start Saving As Early As Possible
Did you know that 35 percent of American adults only have few hundred dollars in their savings account? The more alarming part is that 34 percent have nothing saved for the rainy days.
Don’t be one of them. If you want to secure your financial standing and prevent yourself from being in debt, then you need to start saving as much as you can before it’s too late. Your spending habits will come into play because it will dictate how much money you will be able to save. This will keep you prepared in times of emergency as well; hence setting up an Emergency Fund is highly recommended.
Invest Your Money To Make It Grow
Aside from savings, investment should also be one of your biggest concerns as early as now. Investing your money on, say stocks or bonds, will have a higher chance of making it big by the time you hit your 40s or 50s.
Explore your options look for an investment that is most suitable to your needs and personality.
If you already accumulated few debts, then here’s what you can do:
Avoid Applying For A New Loan Or Any Other Type Of Credit
You already have a student loan under your name. That’s it. Avoid applying for another type of loan to finance a particular expense. If you are serious about getting out of debt, then you need to avoid replacing it with another one.
Nonetheless, there are exceptions:
- You plan to consolidate the existing loans for a lower interest; or
- You will pay off the existing debt with another debt wherein the interest rate is lower.
Aside from these two situations, don’t add anything. Debt can be a vicious cycle, so it’s better to get out of it while you still can.
Pay It Off – One Debt At A Time
There’s no better way of getting out of debt and avoiding it eventually than by paying them off as soon as you can. You might ask, “Which loan should I pay first?”
The answer is it depends on you. Ideally, you should pay the loan with the higher interest rate. You will be able to save more on interest, which is eating a big chunk of your money. You can also prioritize the loan by requesting installments and scheduling with the earliest due date so you don’t have to worry about it.
Still, remember this: don’t just pay the minimum amount. If budget permits, pay as big as you can to minimize your loan.
Consider Getting A Side Job For Additional Income
One of the ideal ways to pay off existing debt is to get a side job. There are so many things you can do and it’s just a matter of finding the right job for you. You can also explore your options online since a lot of employers are looking for freelancers – and they pay a good sum of money. You can use your additional earnings to pay for existing debts.
Yes, you can avoid debt, or at least minimize it. It takes a lot of commitment and discipline, but surely, you can do it.