According to a recent survey by The PNC Financial Services Group, the average 20-something has $45,000 worth of debt and only 25 percent of people in their 20s feel totally independent.
There are many ways to get a handle on debt, as well as prevent it before it happens, but too many 20-somethings are not educated in the area of personal finance.
This is where we come in. Ladies, it’s time to get educated.Types of Debt
CREDIT CARD – Credit card debt is an unsecured consumer debt. When it’s not paid on time it results in a late penalty and the late payment is reported to credit rating agencies. Credit card debt can hang around forever and a poor credit score can make it harder to get loans for a house or car.
STUDENT LOANS – Student loans are financial aid that typically must be repaid after graduation from college. Paying off student loans can take a really long time, but the sooner they’re paid off the more relaxed and stress-free you’ll be.
CAR PAYMENTS – Car payments are pretty self-explanatory, but the faster you can pay them off the better, especially since the second you drive a car off the lot it starts depreciating in value.
Terms & Definitions
Personal finance words can be confusing. The Nonprofit Finance Fund is a good bet for definitions of words like amortization and collateral.
All About Interest
Interest is a fee you pay as compensation to the lender for being allowed to borrow the money in the first place. Interest is usually paid back to the lender as a percentage of the principal (the amount owed). Simple interest is calculated on only the principal amount. A great interest rate calculator is Calculator.net.
Tips for Getting Out of Debt
STAY ORGANIZED AND PAY ON TIME – The biggest thing you can do to get yourself out of debt is to pay your bills on time. Late fees pile up and just create more debt. By keeping track of bills and when they are due you can make sure you’re avoiding unnecessary fees.
GET HEALTH INSURANCE – Even if it’s a basic plan, having health insurance is extremely important. Being covered just in case something happens is better than getting crazy medical bills because of an unexpected injury or a cold that turned into strep throat.
BUDGET YOURSELF – Knowing what you can spend and when you can spend it will help you be able to get out of debt. Keep a calendar of when bills are due as well as keeping track of spending. A great way to do this is by downloading an app (like the PNC one) that lets you see what your balance is as well as what you’re spending where.
How to Avoid Debt
SHOP SMARTER – There’s not always a need for the newest cell phone or laptop, but if it’s totally necessary, try to use a program that lets you exchange it for your old one so you can get some sort of credit toward a new one. Also, grab coupon codes and learn about promotions for all of your favorite stores from sites like Brad’s Deals and Retail Me Not.
ESTABLISH CREDIT – Once your debt is paid off, the best thing you can do is establish some legitimate credit. A good way to do this is open one credit card and only charge small payments that you know you’ll be able to pay off at the end of the month. This consistency will help your credit score so when it’s time to make a big purchase you can actually qualify for a loan.
BUILD AN EMERGENCY FUND – Keep a minimum of three to six months of living expenses in a savings account and don’t touch it. Ever. That way if there’s an emergency and you lose your job or there are unexpected medical bills, you have some money set aside and don’t have to charge everything to a credit card.
(Feature Photo via i2Mag)
