Debt Reduction for 20-Somethings

5 ways to stop paying interest before you turn 30.

SHARE

Today's guest post comes from Debbie Dragon of creditorweb.com:

Leaving high school or college and entering the "real world" is sometimes a lesson in reality for young adults. Up until that point, it's possible that you really haven't had to concern yourself much with your financial responsibilities. Once you head out on your own, though, you may suddenly find that using credit cards and getting loans may not have been your best options.

Here are some practical debt reduction tips to help you get your finances under control before they control your life:

  • Stop using credit cards for now. This is often easier said than done if you've gotten into the habit of charging everything you need or want when you don't have the cash on you. Put your credit cards in a fire-safe box and lock them up until you've paid off your debt. If you continue to use your credit cards, you will never get out of debt.
    • Try the snowball method. Many people have successfully used the snowball method to get themselves out of debt. Basically, your payments to your creditors grow larger as you pay an account off, like a snowball rolling down a hill. You order your debts from the smallest amount owed to the largest amount owed, then pay the minimum amount due on everything except for the smallest balance, to which you pay as much as you can afford every month until it's paid off. Once paid off, you apply the money you had been sending to the first account on the list to the second account on the list, including the minimum payment you had already been making.
      • Consider a consolidation or debt management plan. If you've managed to get yourself so far into debt that you can't even keep up with your monthly minimum payments, you may want to consider a debt consolidation loan (if you can get approved) or going with a nonprofit, debt management plan. Research any company thoroughly, and make sure that you don't start charging and borrowing money once you've consolidated your existing debt.
        • Try to increase your income. If you're struggling financially to make ends meet, you may have to consider getting a higher-paying job or supplementing your current source of income with a second job. You may be able to make additional money from home doing something on the computer or starting a small service-type business to generate additional income.
          • Decrease your expenses. Almost everyone has unnecessary expenses in their lives that could be reduced or eliminated. Now may not be the time for you to have an expensive gym membership or to be eating out at restaurants several nights a week. Look for areas of regular spending that you can cut back on in order to give yourself more money to pay your bills and necessary living expenses.
          • Applying some, or all, of the above debt reduction tips are sure to help you take control of your finances.

            If you are interested in writing a guest post for Alpha Consumer, please E-mail alphaconsumer@usnews.com.