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10 Ways To Avoid Getting Into Debt In Your 20’s

10 Ways To Avoid Getting Into Debt In Your 20’s

Your late teens and early 20’s are times in your life when many people are making transitions from dependency to independence. With that, comes financial independence. Maybe you’re in college, or have just moved out of the house you grew up in.

Regardless, learning to balance rent, bills, groceries and other expenses can come as quite a shock, and many young adults end up accruing large debts that can plague them for years on end.

Many young adults are targeted by usurious credit lenders, offering high interest credit facilities such as credit cards, department store-specific cards and loans. These are often sold to young adults as a safety net for emergencies, but the reality is that frequently, these credit facilities are maxed out very quickly, saddling the borrower with high-interest debts that can take years to pay off.

Here are some simple, no nonsense pieces of advice for any young adult who wants to live a debt-free, stress-free life during their best years.

1. Avoid credit cards

If we could give one piece of financial advice to anybody in their 20’s, it would be this. You may think that it’s a good idea to have a credit card for emergencies, or to use one to improve your credit rating, and although these are all well and good, the reality is that credit cards are rarely used for these purposes, and the temptation to spend on them is always there.

Credit card companies aim to get people into debt while they’re young, and keep them their by bleeding them very slowly (through minimum payments and compound interest). Credit lenders are masters of making money, and they will play on your fear of being broke to mislead you into getting a credit card.

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The only real way to beat the credit card companies is not to get a credit card.

2. Overestimate your outgoings, underestimate your income

It always makes sense to have a budget for rent, bills, food and other expenses, but one thing that people seem to neglect to factor into their budget is that income and outgoings can fluctuate wildly. For this reason, it’s always a good idea to draw up a budget using your maximum estimated outgoings, and your minimum estimated income.

Remember that if you are sick one month, your income will decrease, and during the winter, your heating bills will increase. Using this method should help to ensure that there are no nasty surprises at the end of the month when the figures don’t match up.

3. Be prepared for sudden expenses

Never make the mistake of assuming that things won’t go wrong. Things will break, prices will rise and fines will be charged. When drawing up a budget, I find it’s wise to set aside 15% of your income just as a buffer against sudden expenses.

Your car might breakdown, your boiler might go on the fritz, your dog might get sick. Be prepared for this.

4. Accept that you may not be able to afford luxuries all the time

Luxury items bring fleeting and temporary happiness, which dissipate as quickly as they come. Expensive clothes, technology and furniture actually do very little (if anything) to improve your life and general satisfaction levels.

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That’s why it’s better to invest in doing things rather than having things. You don’t have to live a bare-essentials lifestyle, but cutting back on unnecessary luxuries during your younger years will not only save you a mountain of debt that you’ll have to pay off, but will also allow you to live a simpler, more care-free existence.

In the words of Roger J Corless, “Happiness is not something I have, it is something I myself want to be. Trying to be happy by accumulating possessions is like trying to satisfy hunger by taping sandwiches all over my body.”

5. Give yourself an allowance and stick to it

Sticking to a budget is often easier said than done. We often find the easiest way to regulate spending is to have an account which your wages are paid into, and a separate account for spending, and then arrange for a set amount to be paid into the spending account (either monthly, weekly or even daily), to ensure that you can keep track of your finances without overspending.

6. Save for things you really want

One of the side effects of the western fast-food culture of instant gratification, is that we struggle to get our heads around the concept of waiting to get what we want. In fact, we have all sort of credit schemes set up to actively encourage us not to wait.

Almost anything these days can be bought on credit. This usually involves making small, monthly payments for years on end at a massively inflated interest rate. It all seems very manageable, but one small payment added to another small payment, and another and another all begins to add up.

Before long, your disposable income has shrunk down to such a small amount that you can barely afford to buy gas for that over-sized car you’re still paying off. And what happens if you lose your job and can’t afford to make the repayments? Well, then you have to hand it all back.

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7. Learn to enjoy the little things

Some of the best things in life cost little to nothing. You can’t put a price on good company, laughter or fun. Anyone who claims that you can’t have fun without spending money probably isn’t much fun to begin with. Some of the best activities in your life life can absolutely be cheap or free. Trade TV and computer games for socializing, and you’ll find life becomes richer (and you, too!).

8. Use savings to pay off debts

This is one of the most obvious but commonly overlooked ways to reduce your debt level. If you have $1,000 of debt, accruing interest at 18% APR (if you were so lucky as to have it so low), and $1,000 in savings, accruing interest at 3% APR (if you were so lucky as to have it so high), then you would immediately save yourself money by paying off your debts with your savings.

There is pretty much no scenario in which you will be borrowing money at a lower rate than the interest on a savings account.

9. Pay debts on time

If you have debts to pay, make sure you have the correct direct debits/standing orders and available money to pay them on time. Often the charges for missing payments can cause your initial debt to soar, which can lead to spiraling debts and financial chaos. Always ensure you know when money is due to be paid, and ensure that you have the funds set aside to do so.

10. Interest-free credit is not free money

Just because something says it is interest free for six months, don’t assume that this means you have just been given a fistful of free cash. These offers are setup to deliberately encourage reckless spending, and as soon as the interest-free period is over, you’re saddled with a high interest rate on an insurmountable heap of debt, which you probably don’t have much to show for.

Now, we know what you’re thinking; you could just put all of the money in a savings account, wait until the six months is up, and then pay it all off, keeping all of the interest accrued for yourself.

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Great idea… In theory. The reality is that less than 1% of people who attempt this actually manage it. Your creditors know this. They are not stupid, they know how to get you into debt and keep you there for as long as possible. Don’t be caught out.

Hopefully, this has given you some insight into how to avoid debt. Debt is a totally unnecessary stress that the majority of us deal with throughout our lives. Your younger years should be spent enjoying the simpler things in life, not over-complicating it with financial worries.

With a little calculation, and a lot of impulse control, you can have a fun, free and fulfilling life. Without Debt.

Featured photo credit: Flickr via farm8.staticflickr.com

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JC Axe

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Published on November 8, 2018

How to Answer the Tough Question: What are Your Salary Requirements?

How to Answer the Tough Question: What are Your Salary Requirements?

After a few months of hard work and dozens of phone calls later, you finally land a job opportunity.

But then, you’re asked about your salary requirements and your mind goes blank. So, you offer a lower salary believing this will increase your odds at getting hired.

Unfortunately, this is the wrong approach.

Your salary requirements can make or break your odds at getting hired. But only if you’re not prepared.

Ask for a salary too high with no room for negotiation and your potential employer will not be able to afford you. Aim too low and employers will perceive as you offering low value. The trick is to aim as high as possible while keeping both parties feel happy.

Of course, you can’t command a high price without bringing value.

The good news is that learning how to be a high-value employee is possible. You have to work on the right tasks to grow in the right areas. Here are a few tactics to negotiate your salary requirements with confidence.

1. Hack time to accomplish more than most

Do you want to get paid well for your hard work? Of course you do. I hate to break it to you, but so do most people.

With so much competition, this won’t be an easy task to achieve. That’s why you need to become a pro at time management.

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Do you know how much free time you have? Not the free time during your lunch break or after you’ve finished working at your day job. Rather, the free time when you’re looking at your phone or watching your favorite TV show.

Data from 2017 shows that Americans spend roughly 3 hours watching TV. This is time poorly spent if you’re not happy with your current lifestyle. Instead, focus on working on your goals whenever you have free time.

For example, if your commute to/from work is 1 hour, listen to an educational Podcast. If your lunch break is 30 minutes, read for 10 to 15 minutes. And if you have a busy life with only 30–60 minutes to spare after work, use this time to work on your personal goals.

Create a morning routine that will set you up for success every day. Start waking up 1 to 2 hours earlier to have more time to work on your most important tasks. Use tools like ATracker to break down which activities you’re spending the most time in.

It won’t be easy to analyze your entire day, so set boundaries. For example, if you have 4 hours of free time each day, spend at least 2 of these hours working on important tasks.

2. Set your own boundaries

Having a successful career isn’t always about the money. According to Gallup, about 70% of employees aren’t satisfied with their current jobs.[1]

Earning more money isn’t a bad thing, but choosing a higher salary over the traits that are the most important to you is. For example, if you enjoy spending time with your family, reject job offers requiring a lot of travel.

Here are some important traits to consider:

  • Work and life balance – The last thing you’d want is a job that forces you to work 60+ hours each week. Unless this is the type of environment you’d want. Understand how your potential employer emphasizes work/life balance.
  • Self-development opportunities – Having the option to grow within your company is important. Once you learn how to do your tasks well, you’ll start becoming less engaged. Choose a company that encourages employee growth.
  • Company culture – The stereotypical cubicle job where one feels miserable doesn’t have to be your fate. Not all companies are equal in culture. Take, for example, Google, who invests heavily in keeping their employees happy.[2]

These are some of the most important traits to look for in a company, but there are others. Make it your mission to rank which traits are important to you. This way you’ll stop applying to the wrong companies and stay focused on what matters to you more.

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3. Continuously invest in yourself

Investing in yourself is the best investment you can make. Cliche I know, but true nonetheless.

You’ll grow as a person and gain confidence with the value you’ll be able to bring to others. Investing in yourself doesn’t have to be expensive. For example, you can read books to expand your knowledge in different fields.

Don’t get stuck into the habit of reading without a purpose. Instead, choose books that will help you expand in a field you’re looking to grow. At the same time, don’t limit yourself to reading books in one subject–create a healthy balance.

Podcasts are also a great medium to learn new subjects from experts in different fields. The best part is they’re free and you can consume them on your commute to/from work.

Paid education makes sense if you have little to no debt. If you decide to go back to school, be sure to apply for scholarships and grants to have the least amount of debt. Regardless of which route you take to make it a habit to grow every day.

It won’t be easy, but this will work to your advantage. Most people won’t spend most of their free time investing in themselves. This will allow you to grow faster than most, and stand out from your competition.

4. Document the value you bring

Resumes are a common way companies filter employees through the hiring process. Here’s the big secret: It’s not the only way you can showcase your skills.

To request for a higher salary than most, you have to do what most are unwilling to do. Since you’re already investing in yourself, make it a habit to showcase your skills online.

A great way to do this is to create your own website. Pick your first and last name as your domain name. If this domain is already taken, get creative and choose one that makes sense.

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Here are some ideas:

  • joesmith.com
  • joeasmith.com
  • joesmithprojects.com

Nowadays, building a website is easy. Once you have your website setup, begin producing content. For example, if you a developer you can post the applications you’re building.

During your interviews, you’ll have an online reference to showcase your accomplishments. You can use your accomplishments to justify your salary requirements. Since most people don’t do this, you’ll have a higher chance of employers accepting your offer

5. Hide your salary requirements

Avoid giving you salary requirements early in the interview process.

But if you get asked early, deflect this question in a non-defensive manner. Explain to the employer that you’d like to understand your role better first. They’ll most likely agree with you; but if they don’t, give them a range.

The truth is great employers are more concerned about your skills and the value you bring to the company. They understand that a great employee is an investment, able to earn them more than their salary.

Remember that a job interview isn’t only for the employer, it’s also for you. If the employer is more interested in your salary requirements, this may not be a good sign. Use this question to gauge if the company you’re interviewing is worth working for.

6. Do just enough research

Research average salary compensation in your industry, then wing it.

Use tools like Glassdoor to research the average salary compensation for your industry. Then leverage LinkedIn’s company data that’s provided with its Pro membership. You can view a company’s employee growth and the total number of job openings.

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Use this information to make informed decisions when deciding on your salary requirements. But don’t limit yourself to the average salary range. Companies will usually pay you more for the value you have.

Big companies will often pay more than smaller ones.[3] Whatever your desired salary amount is, always ask for a higher amount. Employers will often reject your initial offer. In fact, offer a salary range that’ll give you and your employer enough room to negotiate.

7. Get compensated by your value

Asking for the salary you deserve is an art. On one end, you have to constantly invest in yourself to offer massive value. But this isn’t enough. You also have to become a great negotiator.

Imagine requesting a high salary and because you bring a lot of value, employers are willing to pay you this. Wouldn’t this be amazing?

Most settle for average because they’re not confident with what they have to offer. Most don’t invest in themselves because they’re not dedicated enough. But not you.

You know you deserve to get paid well, and you’re willing to put in the work. Yet, you won’t sacrifice your most important values over a higher salary.

The bottom line

You’ve got what it takes to succeed in your career. Invest in yourself, learn how to negotiate, and do research. The next time you’re asked about your salary requirements, you won’t fumble.

You’ll showcase your skills with confidence and get the salary you deserve. What’s holding you back now?

Featured photo credit: LinkedIn Sales Navigator via unsplash.com

Reference

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