It’s never easy learning financial responsibility. Unfortunately, learning how to manage money properly takes time and experience. Sometimes as a young person it is easy to be uneducated when it comes to financial matters, and all too often we can become blinded by the glittery appeal of credit cards and loans. Before you know it, you may find yourself up to your neck in debt, with more creditors than you have the ability to pay. While this can be a very frightening situation, it doesn’t have to be. There is still hope. There are ways that you can dig yourself out of a financial hole if you are one of the many Millennials who have over-extended your finances by the age of 20.
Increase Your Income
If you have been staying with a lower paying job out of company loyalty or because you want to make a difference in the world, now could be the time to move on. While you won’t have to put all of your devotion on the sideline forever, you must get your finances under control if you want to avoid declaring bankruptcy. Spend a few years in a field that may not be your preference, but pays well. You simply cannot afford to do anything else. Your causes and motivations will still be there in a few years, but now is the time to take advantage of a higher paying job that can help you pay down the debts you have so eagerly accumulated. Look for other employers in your same field that may be willing to pay you more than your current employer. Really sell yourself and your qualities to other organizations and see what kind of offers you can get. Increasing your income is really a must when you are trying to dig yourself out of a financial hole.
Be Smart With Your Money
If you haven’t started budgeting, start now.
- Keep track of everything you spend for an entire month. Even of my guilt pleasure purchases, I always head right to my victoria secret credit card login to see my expenses for the month!
- Divide those purchases up into different categories, for example, groceries, utilities, car repairs, miscellaneous, etc. Having the exact numbers in front of you may shock you. For example, you might not be aware that you’re spending over $400 a month eating out. Knowing what you spend is the first step into knowing how much to allocate when you start budgeting.
- With your numbers in front of you, decide on an amount that you will spend in each category for the next month, making sure you set as much aside as possible for debt repayment. It may take a few months to get your budget numbers accurate. If you notice you have not allocated enough money for food month after month, maybe it’s time to consider increasing the amount of money you’re setting aside for your food. If you notice that you always have money left over in utilities, it’s time to lower the amount you’re setting aside for utilities. Adjust the numbers over the course of a few months until you have a good baseline established.
- Then, every week, update your spending to get a clear picture of where you stand. Stick to your budget. If you know you only have a few dollars left in your Restaurants category, don’t eat out. If you know your Gas category is running a little low, don’t take random trips.
Financial expert Suze Orman has some tips for spring cleaning your finances. She gives some fantastic insight into how to get your spending under control. Control your spending and you will keep your debt from controlling you.
Pay Down Debt
Be smart in the way you pay down your debt. Financial guru Dave Ramsay has a great method that he recommends for paying down debt quickly and effectively, called the Snowball Method. His method is the most efficient way to get yourself out of your debt.
Look Into Restructuring Your Debt
If you are one of the many college-age students who got stars in your eyes when you were given your first credit card, you are not alone. It’s often difficult for young people to understand the obligation they’re taking on when they get access to credit. If you have maxed out your credit cards, look into restructuring your debt.
-Contact the credit card companies. Tell them you’d rather not default on your debt, but would like to work with them to come up with a solution. Ask them for a lower interest rate. Often times they will comply because they’d rather lower the interest rate than have you default and not pay them back at all.
-Or, talk to debt consolidation companies who can do this negotiation for you and roll all of your debt payments into one monthly payment.
-Another option is to use your assets to get quick access to money, like car title loans. A car title loan is a great way to let the equity you have in your vehicle work for you. Educate yourself and see if a title loan can help you in your own individual financial situation.
Don’t be discouraged if you have over-extended your finances at a young age. Responsibility often comes with a price, and this is a lesson you’ll always remember and hopefully never repeat. Do what you have to to dig yourself out of your financial hole and enjoy the freedoms that come with living within your means.