5 Strategies for Dealing with Debt in Your 20s and 30s

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Being in debt is a fact of life for most Americans: according to CNBC, three-quarters of Americans have at least some debt — $38,000 per person, on average.

The kind of debt a person has varies based on age:

  • For 18- to 24-year-olds, student loan debt is the largest percentage of money owed, followed by credit card debt. Half of people under 30 with bachelor’s degrees have some student loan debt, and the further someone continues in their education, the more they owe on average.
  • For 25- to 34-year-olds, credit card debt takes the biggest slice of the pie, with a smaller percentage going toward student loan debt. This age group also faces the most debt, with each person owing an average of $42,000.
  • And for Americans over 35, mortgage debt takes the highest portion, followed by credit card debt.

Debt has a big impact on someone’s life. It can cause a person to feel stressed out, depressed, or anxious. Both student loan debt and credit card debt have been shown to delay a person’s decision to get married (particularly women). And for those who are married, conflict over debt — and over money issues in general — is a top reason for divorce.

So what’s to be done? A short article is no substitute for in-depth advice from experts, especially because how you deal with debt depends a lot on what kind of debt you have and how much. But some basic attitudes and strategies can at least help make getting out of debt more desirable and achievable.

Attitude: Decide that paying down debt is worth it

It’s no surprise that debt can be stressful. Even thinking about it can spike anxiety. It can be all too easy to avoid the topic altogether, or decide to just live with debt without attempting to pay it down. But there are great reasons why your life will be better debt-free (or with minimal debt): peace of mind, future financial security, more freedom to use your money the way you want to, etc.

Strategy: Come up with some long-term financial goals that will be more achievable with less debt

Depending on where you are in life, this could include saving for a house, saving (or saving more) for retirement, or growing more capable to give more to causes you care about. Whatever the goal is, keeping it in the forefront of your mind — even writing it down, putting it on the fridge — can help the fight against debt seem more worthwhile.

Attitude: Live within your means, and don’t try to “keep up” with others’ lifestyles

Simple words, but hard to do! There will always be new gadgets, fun experiences, and desirable “stuff” that beckons to our wallets. Dealing with debt goes all the way back to square one — figuring out our relationship with money and what are wants or “extras” versus needs. Credit cards complicate the situation, promising the means to buy things without really being able to afford them.

Strategy: Keep track of your expenditures, i.e., use a budget

It can be eye-opening to honestly account for every dollar spent during a month. (We spent how much at Chick-fil-a and on beer?) But that’s the only way to really know what’s happening with your money and where adjustments can be made to spend less. A few dollars here and there add up. Budgeting tools like Mint and You Need A Budget can be great supports.

Strategy: Try a “no-spend” month

Choose a month (we like February; it’s short and already depressing) and do your best not to spend anything “extra” like going out or buying non-essentials, etc. It’s gratifying to see how much you’ve saved at the end of the month, and it’s also educational to see what it feels like not to pull out the credit card for impulse buys. It’s also a way to discover ways to have fun for free.

Attitude: Take care of your future self

Think long-term, not just in-the-moment.

Strategy: Save!

It may seem counter-intuitive, but the best way to start dealing with debt is not by writing a big fat check to the loan office or credit card company. Instead, it’s by keeping money in your own bank account. Financial expert Dave Ramsey recommends starting with $1,000 in savings, then building up to six months of your income. Why? Because life happens. Without savings, emergencies are paid with credit cards, which becomes more debt (with interest). And having some hard cash in savings can be a load off your mind and offer a sense of security, which stabilizes emotions. It’s looking out not just for you today, but also you tomorrow and into the future. (The same principles apply to saving for retirement.)

Strategy: Get savvy and suspicious about credit cards

Debt loads for 25- to 34-year-olds (the most in-debt generation) come more from credit card debt than student debt. Putting a purchase on plastic that you can’t afford now simply (and literally) passes the buck to your future self. That’s not to say you should cut up all your credit cards right now. But try treating credit cards like debit cards — don’t put more on them than you can pay off each month. And read the fine print about the various promotions that cards offer. For example, we use the Southwest credit card and have flown somewhere for free the last several years; but if you don’t travel, why get that card? A good gut-check is to list all the credit cards in your wallet (without looking), along with their exact promotions and annual fees. Can’t do it? Probably time to trim down.

Dealing with debt is possible, and it’s worth it! It can be a counter-cultural lifestyle today, but one that brings a lot of freedom and even joy.


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