Getting Out of Debt: A Millennial’s Dilemma

In the past two years, I have cut my spending in about more than half. Despite working since the age of 19, I didn’t start saving until my last semester of college. I didn’t understand budgeting or how a credit card worked and I didn’t listen to my mother when she tried to fix my bad shopping habits.

My biggest financial loss was when I was convinced to join a pyramid scheme. I paid a lump sum of money to join and a lump sum of money for training and materials; however, by the time I finished the training, I realized that these things are made to benefit the people up top. Soon after, I dropped out.

I mention this to make it clear that there is no quick way to get rich or be well off (Even if you hit the lotto).

When I reopened a savings account, I made it a rule to always put my tax return in my savings (If I do get something back). When I lived with my parents, I put half my income towards my saving and the other towards my debt. I was at an advantage, I didn’t have to worry about phone, rent, electric or gas bills.

Along with those changes, I continued to follow two tips that I got from a banker when I opened up my account at the age of 20. Always pay my credit card bills two days before they are due and always pay more than the minimum. This didn’t get me far with the amount of debt that I had, so I had to resort to debt consolidation, which I had to do for the second time this year. I used credit karma and Mint to find some really good options.

I also started using an app called clarity, which does great at calculating how much money you’ve spent a specific service thus far. (I’ve been using seamless a little too much)

The 50-30-20 Rule

If you follow the 50/30/20 rule you will find yourself in better control of your finances and save yourself the embarrassment of having to borrow money from anybody. The rule simply means that 50% of your income goes towards bills and necessities; 30% towards the things that you want to buy and 20% towards savings. You can find a more detailed explanation pretty much anywhere in the internet.

After all of my horrible experiences and recoveries, this is my short guide to help you find your way out of debt. Ask yourself these questions:

  1. How much money are you bringing home? – It is crucial for you to take a look at this first by working backwards. Go into your bank account and calculate monthly how much money was deposited into your account from work income, gifts, tax returns, etc. This will give you a bigger picture of how much you have to work with monthly (lets also pretend you’re not changing jobs anytime soon)
  2. What are your monthly bills? When are they due?– Although mint does a great job reminding me of when my bills are due, I like to look at things ahead of time. I keep an excel sheet and have my bills in order from first to last in conjunction to the days that I get paid. As the month goes along, I subtract my payments from the current balance in my bank account. This ensures that I always have a balance in my account and that my payments are always on time. (I can share a template if you are interested in this method)
  3. Do your accounts allow you to choose bill due dates?– This is very important because it will help you organize your bill due dates and make them fall at a time that there will be a balance in your account. For example, if you get paid bi-weekly or every 15 days, you will want to make sure your bills fall after the date your paycheck is in your account.
  4. How much money do you need for necessities?– Food shopping, cleaning supplies, Laundry, transportation, medication, etc. Calculate how much you spend in these or any other things that pertain to your lifestyle. Use this also as a way to determine the things you can cut back on and the things you need to be purchasing regularly.
  5. How much money do you have left?– Whatever money you have left, you need to put some of it away but also allow yourself to spend some of it on something of your liking. It is important to reward yourself so that you don’t feel like you are being punished.

One of the biggest headaches is credit card debt and there’s a few ways to tackle it.

  • Opening a balance transfer card with no interest: I will only recommend this if you don’t already have a lot of credit cards. From what I’ve gathered through my research, you shouldn’t have more than five cards but in all honesty, I think three should be the maximum. If you open this kind of card you can transfer a lump sum of what you already owe to whatever quantity the new account gets approved for. This will help reduce your interest and minimum monthly payments.
  • Take out a loan: This is what you should remember if you take this route. If you wipe all your credit cards clean with a loan, pay the balance in full every month for any and all Future purchases, It will be your biggest regret if you don’t do this because this is how most people wind up with credit card debt to begin with. If you opt from using your cards or cancel a few of them, you will only have your loan to worry about instead of multiple credit card bills.

I hope these tips are helpful to you. What I do wish for you to see is how hard you work everyday only to throw away the money you work hard for. If you take this task and complete it successfully, you will see that is not your income that is the problem, is your spending habits. There is always an alternative to doing the things that you want and most of the things you want are not immediately needed.

What are your tips to improve financial health? Share in the comments below.


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