Managing debt is an important skill to master – especially when you’re just starting off on your own. After all, as a young adult you’re laying the foundation for your future financial life. By following these simple tips, you will soon become a pro at debt management.
1. Always make your payments on time.
The consequences of late payments are significant. Not only will you be penalized with a late fee, many credit cards also jack up interest rates significantly when a payment is delayed. Consider signing up for automatic bill pay to ensure you are never late.
2. Go beyond your minimum payment.
If you only pay the monthly minimum payment on your credit card bill you are not whittling away at the principal debt. It’s best to pay off your credit in its entirety; however, if that’s not possible make sure you at least pay more than the monthly minimum. Otherwise debt can quickly get out of hand. Also, if you have more than one credit card and are carrying debt on each card, be strategic about which one you pay off first. Pay the card with highest rate first and then focus on the others.
3. Avoid department store credit cards.
It can be easy to fall for the initial savings associated with opening department store lines of credit. However, many of these credit cards have huge interest rates associated with them that can quickly result in a large amount of debt. If you do have these types of cards, make sure you fully understand the terms.
4. Evaluate your spending habits.
Take some time to track your monthly spending to get a better sense of where your money is going. Train yourself to distinguish between a “want” and a “need,” and don’t purchase things on a whim. It can be hard to become this disciplined with your spending, but it will be well worth it in the long run.
5. Understand the terms of your credit card.
Take the time to read through the terms and conditions on your line of credit so that you fully understand the consequences. It’s really important to understand your interest rate and how it works. If you aren’t satisfied with the terms, don’t hesitate to shop around for another card.
6. Continue to make payments on your student loan.
There is a high default rate on student loans, which can be a costly mistake for young adults and can have a dramatic impact on future purchases. Don’t blow off your payments. Also, consider sitting down and evaluating your consolidation options.
7. Become aware of the debt you are carrying.
It’s frightening how some people have no idea how much debt they are accumulating. Make sure you are aware of your debt so that it doesn’t get out of hand. Sit down on a regular basis and review your spending and expenses, and try to adjust your habits accordingly.