How to Get Rid of Debt When You’re Young
One of the worst traps we can fall into in life is the trap of financial debt. It is a vicious cycle that steals wealth and enslaves us to a lifetime of unnecessary interest payments and missed opportunities.
The amount of money most Americans will spend on just the interest payments on their debt can add up to hundreds of thousands of dollars over a lifetime.
It can mean the difference between retiring wealthy and not being able to retire at all.
Luckily, it doesn’t have to be like that. We have a choice as to how much debt, if any, we want to take on. And the sooner in life we make that choice, the better off we’ll be.
In this guide, I’ll show you how you can get rid of debt when you’re young and how you can stay debt-free for the rest of your life.
The decision to get rid of debt is one of the most important choices you will make, and it all starts with the relationship you have with money.
1. Debt when you’re young.
The type of debt you begin accumulating when you’re young is usually pretty small.
Maybe you financed the purchase of a used car or possibly even acquired a credit card and charged against it. It’s also possible you’re one of the millions who have taken out a student loan to pay for college.
It’s that last one that will be the hardest to take care of, as I’m sure you know, but you must take care of it.
Make a decision to pay down as much of your debt as you can now. Cut back on everything that isn’t essential to your survival and put that money toward paying off any loans you have.
This is an important concept to learn about when you’re young. Interest is what you pay for the privilege of borrowing money.
The average credit card currently charges around 15 percent interest – but that’s if you have a good to excellent credit history. Chances are young people will pay closer to 20 percent.
This means that $2,000 charged to a credit card and paid back at a rate of $75 per month will take three years to pay off and cost nearly $2,700.
Could you use an extra $700?
“Learning not to accumulate debt will
guarantee you a secure financial future.”
3. Pay off your credit card debt.
This means $75 per month for the next three years is unavailable for you to use on anything else until you pay off your credit card debt.
And that’s just the cost of one loan. What if you take out others?
4. Don’t live above your means.
I know that sounds simplistic, but it is actually a very important concept.
We are told – and often shown by our parents – taking on debt is just a part of life. If we want something we can’t afford, we borrow money to get it.
It’s this idea that we can always buy what we want regardless of the consequences that gets most of us into trouble.
Learn to budget and live within your means. It will pay off big time in the long run.
5. Learn to save a little each month and put it away in a safe place.
This could mean a savings account, a certificate of deposit or even a personal retirement account. Hey, it’s never too soon to start planning.
By saving now, you can avoid having to take out a loan (and pay the interest) when an emergency arises. You want to control your financial situation, not the other way around.
Learning at an early age not to accumulate debt or pay interest will almost guarantee you a secure financial future.
Remember the extra $700 you would pay in interest on a $2,000 loan? Well, that $700 invested for 50 years at a rate of 10 percent per year would earn you a total of $82,173 more toward your retirement.
Now is it making sense?
Photo source: pbs.org.