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During your twenties, you will often be strapped for cash. You have finally gained the independence you wanted from your parents, graduated from college and gotten a job. While greatly liberating, But it's also expensive!
Many people make the mistake of using credit cards during these years, and charging up huge balances very quickly. This debt may haunt them for the rest of their lives.
It is important not to make this terrible mistake. Below is some advice for young people on avoiding debt. Following such guidance is practical, not glamorous. However, if you are a young adult, it can save you a heap of financial trouble.
* Live within your means.
The most important thing you can do to avoid debt at any stage of your life is the following: live within your means. It's that simple, yet many fail so horribly at this financial rule of thumb.
Living within your means requires discipline. It requires choices. And it requires commitment, focus and planning.
When you live within your means, you cannot buy whatever you want whenever you want it. You may not get to go on lavish vacations. You may need to limit the number of shoes you purchase.
That's okay. You are not entitled to have whatever you want. And living within your means will teach you sound and important core values. You can learn to enjoy the simple things and save for the more luxurious things.
Sound old-fashioned? Well that's because it is, and there is nothing wrong with old-fashioned and sound financial advice.
* Pay in cash.
Learn to pay for things in cash. One way to do that is to use a debit card instead of a credit card. That way, you will not be spending what you do not have.
* Have only one credit card. Pay it off in full each month.
Credit cards are nice to have, but only if you know how to use them responsibly. You need no more than one credit card at any given time.
You can use a credit card to buy things, but you need to be committed to paying off the balance in full each month. That way, you will avoid debt from building up. If you are disciplined enough to do this, you can earn some reward points this way.
However, if you are not disciplined enough to pay off your balance in full each month, get rid of the card. It will only lead to trouble.
* Make a monthly budget. Put away whatever you can each month into a nest egg.
The key to managing your money is to make a monthly budget. You will use this tool to help you stay on top of what your expenses are, and how they stack up to your income.
You can create a simple but effective budgeting tool in Excel. You will want to list all of the areas that require spending each month. And then see how that compares to your income. Make adjustments where necessary to keep within your means.
It's important to put aside some money each month for a safety nest egg. That way, when you need new tires for your car, for example, you will have some cash available.
* Make decisions that support your commitment to live and spend responsibly.
It's not easy to live within your means, as it requires discipline. But you can do it, and it means making choices that support your resolve.
If you need to share a place with roommates to lower your rent, then do so. If your need to get two part-time jobs instead of one to support your financial needs, what's holding you back?
Hard work and strong financial discipline during these years will build your character. And you will develop sound habits that will always be useful for you, no matter how much more money you make in coming years.
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