Many people find themselves in situations where they can't afford their bills. Whether it's a result of a medical condition or your school loans, you have every right to get out of debt and to balance your financial future. As a young adult, you've just finished college and are starting a good job. Now focus on paying down your debt with these tips.
1. Start small
It can be tempting to take a bonus from the workplace or your first few paychecks and pay off debt. A good idea is to first begin a savings account with at least six months of your expenses. After that, begin paying off your debt. Start with the highest interest rates to save the most over time, or choose to pay off the lowest loans to free up more money each month.
Whatever way you choose to move forward with repayment, make sure to pay each bill on time each month and to add extra payments to at least one to reduce the amount you owe and start paying off your debt faster.
2. Tap into a retirement savings account
Sometimes, using your retirement is beneficial. For example, if you owe a debt of $100,000 that has a 15 percent interest rate, you're paying an extra $1,500 each month in interest when you break down the yearly rate. Paying off that debt leaves you with $1,500 more a month in your pocket over the long term. Don't take a distribution of your retirement to pay off the debt. Instead, opt for a loan that you pay back over time. Typically, you have only three years, or whatever the term of the loan is, to pay it back in full into your retirement account.
3. Live below your means
It's sometimes hard to do, but putting off gratification by living below your means helps you pay off debt fast. Live with roommates to save on the cost of rent, stick to a budget for food each month and avoid any unnecessary spending until your accounts are under control.
Keep a list of each debt you have, so you can see each payment and payoff date. As you pay off the debt, mark it off to keep yourself motivated. Once you pay off enough, choose to move out on your own, to spend a little more on things you want to do or grow the money you're saving by living less expensively for future needs.
School loans usually can't be discharged in bankruptcy, but other debts can. If you're overwhelmed, your attorney might have a solution that works for your situation.