Twenties Life

Having debt in your 20s is not ideal.  Chances are you’ve just entered the workforce, and you’ve gotten your hands on a credit card or two, and somehow within a few months (or less for some of you), those cards are maxed out!  That’s not a great way to start your financial life.  Let’s get rid of that debt, shall we?  I’m going to share with you some great ways to eliminate your debt and stay debt free from now on.

1. Spend less than you earn.  Seems simple, yet most of us can’t even follow this one.  If you spend less than you earn, you have more money to knock down debt or build up savings.
2. Keep only 1 credit card.  This way your debt focus is simple and your amount of debt stays low.
3. Build an emergency fund.  Here’s how to start your emergency fund.
4. Stop using credit cards to “make it until my next check.” You’ll likely pay it back ten fold before the debt is gone.
5. Avoid eating out often – it’s the easiest way to save money.
6. Find cheaper entertainment – renting a movie is way cheaper than seeing one in your local cinema.  Cooking is cheaper than eating out…
7. Save for future expenses – car tires looking worn?  Wardrobe need updating?  Save a small amount each month to go towards future expenses.
8. Snowball your debt – pay the minimum on every account except the smallest, and pay as much as you can afford on that.  When you finally pay that off, add the amount you paid towards that account to the next one.  Rinse. Repeat.
9. Stop Spending – I know it’s hard, everyone likes new things.  But you have to commit to spending less or you’ll never get ahead.
10. Set goals in stone – “I’m going to pay off this card in 6 months.” Then plan out exactly how to do it, and stick to your plan.
11. Pick up side gigs – have a talent that you could make money from?  Try Craigslist or find other ways to do some small side jobs, and put that money towards your debt.
12. Make purchases with cash – Want an iPad?  Don’t reach for the plastic.  Save some cash each month for you “iPad” fund, and when you finally have enough, go out and buy it.  It will feel so much better not having to charge it.  Trust me, I just bought my first BMW, and I paid ALL CASH!
13. Don’t borrow money – owing other people is the worst kind of debt.  It can ruin all kinds of relationships.  Do your best to never owe money to a friend or family member.
14. Plan for retirement – The difference between starting in your twenties and starting in your thirties is millions when you consider the time value of money. Take a look at this chart.
15. Move into a smaller home – Americans have some addiction with bigger things that we just don’t need.   I live in a modest <700sq ft apartment, which in Texas is pretty tiny.  I save over $300 per month because of this smart decision.
16. Use an online savings account – IngDirect is my favorite.  It makes it harder to spend, and you can open multiple accounts to track different things you’re saving for.  For instance, I have an emergency account, a travel account, a new car account (even though i just bought a car last month), and a general savings account.  If you’d like to open an IngDirect savings account, contact me here, and I can get you a free $25 referral code.
17. Cancel the cable – this will save you time and money each month.  Watch the shows you really love on Hulu.com or their network websites.
18. Think about worth instead of stuff – I used to want things.  Now I want wealth.  I want security.  I want value.  And my investments and savings give me much more value than an iPhone or kindle.
19. Read Personal Finance books – Who Moved My Cheese and Rich Dad Poor Dad are two of my personal favorites.
20. 30 Day Waiting Period – If you think you really need something, print out a picture of it and put it on the fridge.  Look at it every day.  If at the end of 30 days of waiting, you still want it just as much, buy it.
21. Watch this documentary – Secret History of the credit card. If this doesn’t convince you that credit is evil, I don’t know what will.
22. Feel good about your sacrifices – there is nothing like being debt free.  If you haven’t experienced it, trust me.  It’s the most wonderful feeling of accomplishment you can have.  I recently paid off every dollar I owed (other than student loans), and I don’t want to ever borrow again.  I bought my newest car cash, after saving for over 2 years (and driving a 16 year old piece of junk).

The road to freedom of debt is difficult, and requires a lot of discipline.  All of your friends are going to keep spending the way they always have, and you’ll be tempted to fall back into the trap.  But if you can stick to your plans, sacrifice a few restaurant meals, and go on a few cheap dates, you’ll find yourself in a much better position.  Then, when you’re all debt free, every purchase will be so much more fun, because you don’t owe anyone but yourself!

What’s your best get-out-of-debt tip?