“Debt” is a scary word, especially to young adults. The idea of owing some faceless credit card company or bank money doesn’t sit well with many people. And that fear shouldn’t have you scouring Google for more info about payments, debt collectors, bail bondsmen, and more. As a young adult, right now is when you’re supposed to be learning all about financial responsibility. Below are 4 tips to get you started down that road.
Understand debt. As a young adult who is just getting started in the world of debt, credit, and payments, it can be hard, and intimidating, to try and understand everything, especially if you’re trying to untangle this knot of information alone. Debt is borrowed money that needs to be paid back.
There are two main ways to pay off debt. The first is in installment payments. This means every month you make a payment to the bank for the same amount of money until your debt is cleared. The other debt payment involves what is called a revolving account. This also requires you to make monthly payments, but payments aren’t fixed, so your payment amount changes with your balance.
Pass on credit cards. As a young adult, you will have credit card offers thrown at you left and right. Every credit card company from here to the moon is going to try to get you to open a card with them. Don’t even open the envelopes when they come in the mail. Just rip them up.
Credit card companies specifically target young adults because young adults haven’t yet had the opportunities to learn all there is to know about financial responsibility. Don’t allow yourself to be taken advantage of by companies offering you something you don’t completely understand.
Be smart about car debt. One of the biggest debt traps young people face is one they throw themselves into when they buy cars. As a society, we tend to be materialistic, so we are rarely content with what we possess. When we buy new cars, they have to be the biggest, fastest, and prettiest.
Even worse is the fact that young adults, especially here in America, will trade in their two or three year old car and take a loan on another new car before the first is paid off. This is what is known as rolling debt. To avoid rolling car debt, buy a car, pay it off, and hang onto it for at least a few years after finishing with payments. That way, you’re debt-free with regard to cars for a few years and you get your money’s worth out of your car purchase.
Don’t be afraid to ask for help. This is the mistake most young adults make when it comes to money. Perhaps they don’t ask for help because they are afraid or because they are too proud. Whatever the cause may be, many young adults make the financial mistakes they do because they do not seek guidance before making a decision.
This could be as easy as asking a parent for their opinion. Many universities also offer financial planning options to students and alumni. You could even pop into the accounting department at work and ask a few questions. Asking a trained professional or someone who’s probably been in your shoes before for an opinion can make all the difference in your financial future. Just remember—it never hurts to ask.
Debt is not a bad thing, though—unnecessary debt is. The above tips will help you avoid some of the common and unnecessary debt that many young adults face. There’s just no need to fall behind financially, especially not during the part of your life when you’re just starting to get ahead.