Debt Management Tips
4 Debt Management TIPS for 30-Something Year Olds
Having debt is never easy or fun. In your 20’s, studies show this age group seem to be able to manage their debt without too much stress and struggle. This all seems to change once people hit their mid-30’s.
There is almost a tipping point that defines the future in the years between 35-44. This age group appears to have the highest level of debt than any other age group according to the Census Bureau. This age carries 25% more debt than the next highest debt age grouping.
Coming in at more than $100,000 in debt, it is easy to see why the 30 something year olds feel like they are at a tipping point.
If they do not get their debt under control now, it appears to carry forward, along with the related bad habits, stress, and unhappiness.
[bctt tweet=”The 30 year old group seems to have the highest debt. Student loans are the highest…” username=”HBSMoneyTips”]
Sadly, a big chunk of the debt this age group carries is from school loans. Roughly $30,000 of their debt goes to student loans.
In your 30’s is when a career tends to solidify. This age group may be making good money but they are at the highest spending phase of the entire age groups. This is the time that families are started, bigger homes and nicer cars bought, and general standard of living increases. This compounds the problems associated with carrying debts, driving the numbers even higher. Debt management is crucial.
More responsibility and pressure combined with mounting debt leaves people feeling like they are often reeling out of control. If debt can be managed properly, people will not have to drown in their debt and financial woes.
Here are 4 ways that you can manage your 30 – something debt:
- Deal with debt directly. Chances are you will not completely eradicate your debt by the time you are 40. However, this is not bad news. By the time you reach the age of 40, you will be in a much better financial position, and you will be able to see the proverbial light at the end of the tunnel.Work on paying your highest interest rate debts first. Also go for low hanging fruit. Very small debts being paid off will give you a great sense of accomplishment.As the higher interest rate debts are paid off, begin to funnel money towards your retirement years. This will start you on the road to living a much easier, carefree life as time passes.
- Avoid harming your credit. To be honest, most credit bumps and bruises could have been easily avoided. As your financial situation improves, so should your credit score. Do not ever be late with a payment. Most late payments can easily be avoided with proper planning.Stop spending with your credit card. Carrying high or higher balances harms your credit. Pay for everything with cash to avoid the credit card debt trap.Check for errors on your credit report every 6 months. Annualcreditreport.com allows you access to a free credit report. Correct any mistakes or errors on your credit report by writing to the credit reporting agency with an explanation of the error.
- Get tax savvy. Take advantage of itemized tax returns and deduct the interest from qualifying debt. Tax breaks can even be found in school loans and investment interest. Check with an accountant to find out what tax breaks you are eligible for. Extra money that the government pays back to you should always go towards paying off your debt.
- No more credit card debt…ever. Credit card debt is a waste of your hard earned money. The interest rates on credit cards are generally very high. You pay interest on any balance that you do not pay off each month.I recommend cutting all but 1 card. Keep that card for emergencies only. No more paying for Starbucks coffee with your credit card.
Once you have some success with paying off your debt, you will begin to feel more confident. The more debt free you become, the less you are ever willing to get back into debt again.