Your 20s are an exciting period of life. You have a job, you’re finally independent, and you don’t have the same responsibilities as adults in their 30s and 40s. While your 20s are certainly a time to kick back and celebrate your success as a working individual, you’ll have to keep your finances in check if you want to avoid making the mistake as many 20-somethings – getting into debt.
Darren Hojnacki of the firm Hojnacki & Hojnacki, LLC is a bankruptcy attorney who has been helping clients with debt settlement matters for the past three years, and according to him, it’s not uncommon for people in their 20s to wind up in debt as a result of untamed spending habits and poor judgment. If you’re looking to use as your 20s as a time to become financially responsible, then you’ll want to follow these tips to avoid wracking up debt:
Don’t blow your paychecks
If you’re in your 20s and finally have a regular paycheck, then you’re likely to be tempted to treat yourself to everything under the sun, from meals at nice restaurants to the latest electronics. While it’s natural to want everything that you couldn’t afford back in college, it’s important to avoid throwing those initial paychecks down the drain. Sure, you might have a cheap apartment, and your expenses might not be so hefty right now, but you never know when you might end up needing those extra dollars in a crunch. To avoid debt early on, resist the urge to spend all of your take-home pay and instead come up with a savings plan.
Don’t rely too heavily on credit cards
Since most post-college salaries tend to be on the lower side of the spectrum, it’s natural for some people to get into the habit of spending more than they make. If you happen to fall into this category, then you should know that it’s a bad idea to rely on your credit card to make up the difference between what you can afford to pay each month and what your bills actually are. Since credit card interest rates tend to be extremely high, by charging the things you can’t afford, you might end up doubling or tripling their cost by paying these bills off over time. Therefore, if you’re looking to stay out of debt, then make a habit of paying off your credit card in full each month and keeping your balance at a point that allows you to do so.
Don’t overspend on graduate school
If your career path is such that you’ll need a graduate degree in order to pursue it, then you might want to think twice before taking on a whole new set of student loans. While certain professions are known to more than make up for the cost of tuition, this is not always the case. Therefore, if you’re going to take out loans or spend all of your savings on graduate school, then make certain that your career offers a reasonable payback period. As wonderful as it might be to follow your dreams, it’s financially foolish to spend $80,000 on grad school only to make a $30,000 a year for the next decade of your life.
Track your spending
One of the best ways to avoid debt in your 20s is to pay close attention to what you spend your money on. By recognizing what your expenses are and coming up with a realistic budget, you’ll be less likely to overspend on certain aspects of life and subsequently end up in the hole.
Hold off on big purchases
Now that you’re working, it’s natural to want to use your earnings for big-ticket purchases, such a new home or car. However, you might want to hold off on doing so until you’re truly in a position that offers a fair amount of job stability. Putting your money towards a mortgage is responsible in theory, but if you’re not settled into your career, then it could be a bad idea in practice.
Treat yourself in moderation
With college behind you and a lifetime of responsibility in front of you, it’s normal to want to treat yourself to some of the finer things in life, such as designer clothing and exotic vacations. On the other hand, if you’re serious about staying out of debt, then you’ll need to get your financial priorities in check and indulge in moderation. It’s okay to spend a portion of your paycheck on luxuries that will make you happy, but to avoid debt, you’ll need to find a way to enjoy your life without forking over most of your funds.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
