Accumulating debt is incredibly easy in today’s world. We instinctively make purchases on our credit cards, we quickly build up student loan debt, and we purchase most large items on finance. Our entire financial system is based on debt! So it’s no surprise that many millennials find themselves in a tricky position. Being in debt is no way to start your early life. For those in their twenties, we always suggest that clearing debt is a top priority. In fact, it is possible to be wealthy in your 20s! When you’re constantly in the red, it feels like a strangle hold. It’s a dark cloud that follows you around. Ultimately, it will limit your ability to get a mortgage, and you’ll struggle to achieve financial freedom. Today, we’ll help you get things back on track.
Face up to your debt
The first step is accepting the debt, and facing up to it. It’s the single hardest thing to do, because it will always feel overwhelming. When we’re in the red, we tend to avoid our bank statements. The best thing you can do is accept it, and face up to it. Calculate the exact figures, and start to figure out the best way to deal with it. Only when you understand the scale of the mountain can you begin to climb it.
Separate and prioritize
Now that you know the total figure of debt, you can start to break it down. Separate your credit card debt from your overdraft. Distinguish between IRS tax debt and your student loan fees. Once you’ve done that, you can tackle each one individually. Each piece of debt requires a different solution. For example, your IRS tax debt requires the help of an expert IRS enrolled agent. Your credit card debt involves multiple different companies that each need a different approach. At this point, you can prioritise which payments are most important. Start paying off the highest interest debts first.
Make a plan
Cutting debt doesn’t happen overnight. Unfortunately, it’s a long road, and it will take a long time to get back in the black. That’s why a strict plan will really help you out. Set a month-by-month plan based on your current income. Even if it’s only small chunks to start with, it will put you on the right path.
Cut down your spending
The most important thing to learn is that you can’t continue in the same spending pattern. There has got to be some reduction in the amount of money you spend. Only then will the debt start to move in the other direction. Cut down on non-essential spending like eating out, and unnecessary clothes and luxuries. It’s a difficult change to make, but it is essential.
Learn from it
The last point here is to learn from your past mistakes. You now know that debt is crippling and depressing. It’s unsustainable, and you want a brighter future! Once you’ve finally started to clear that debt, don’t let it rebuild.
With the right attitude, you can beat debt for good. Live within your means, and make sensible decisions from now on. Good luck!