Tips for Avoiding Credit Card Debt in Your 20s and 30s

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The 20s and 30s are the years when most people start to accumulate credit card debt. The promise or realization of a good job out of college — along with life changes such as marriage, home ownership and having children — often come with the expectation that we need to “have more, do more, be more.” As such, it can be easy to fall into a habit of using credit to have the things we want now and yet be able to pay for them later.

It’s this mindset, however, that can cause people to fall into unmanageable amounts of debt which may later lead to the stresses that come with that debt. Divorce, bankruptcy and all types of other stressors often follow a bout with large amounts of outstanding debts and a tight budget due to having a lot of debt payments.

Here are some ways that you can avoid accumulating credit card and other unsecured debt as you begin to start and grow your adult lifestyle and responsibilities.

Have a Plan For Your Money

Having larger amounts of money come into your hands after you secure a good job can be exciting, but also overwhelming. High school and college students often live on strict budgets, and suddenly having so much extra money after securing a job can lead to a temptation to make up for all of the spending you couldn’t do during those college years.

By outlining a plan for your money, you can avoid the overwhelming feeling of having more money than you know what to do with, and also avoid the temptation to spend all of that extra money on instant gratification purchases.

Having a plan for your money begins with writing down your financial goals. What is it that you want out of life?

  • A debt free home?
  • A paid for in cash vehicle?
  • An early acquisition of financial independence?

Whatever your financial goals, write them down and display them prominently so that you always have a reminder of what it is that you’re working so hard for.

The next step in having a plan for your money is to make a budget that aligns with your financial goals. Consider a zero-based budget in which every dime of your paycheck is accounted for before the direct deposit hits the bank. Budgeting in monthly amounts of money to put toward both your financial goals and your monthly living expenses will ensure that the money you earn doesn’t disappear out the window of “I can’t remember” spending.

Having a concrete plan for your money and following the rules you set within that plan is a surefire way to avoid credit card debt and make sure you have the money to pay cash for the things you want and need.

Choose To Live on a Lower Percentage of Your Income

Another smart way to avoid credit card debt is to choose to live on a lower percentage of your income each month and to bank the difference. This is often called “Living Below Your Means”, but I like to call it “Living to Increase Your Means.” Choosing to make a habit of living on a lower percentage of your income, say, 70, 80 or 90 percent, and choosing to save and/or invest the other 10, 20 or 30 percent ensures that you’ll be able to avoid carrying credit card debt, and that you’ll always have enough in savings to fund bigger expenses such as houses and cars. If you start this habit at an early age, you’ll never know what it feels like to live on more money, making it even easier to spend less and save more.


Don’t Fall for Advertising Gimmicks

The consumer world of marketing and advertising is set up to encourage you to spend your money as opposed to save your money. Ads on television, electronic devices and in magazines cater to your every want, working to lure you into spending your hard-earned paycheck. Don’t fall for the gimmicks. Instead, impose a 24-hour waiting period if you’re tempted to spend on something you haven’t budgeted for, and if you really want or need an item, consider buying used instead of new. There’s significant money to be saved by not falling for the temptation of “new and shiny.”

Have Boundaries on Your Credit Card Usage

Another way to avoid accumulating credit card debt is to set boundaries on your credit card usage. There can be advantages to using credit cards, such as travel and cash rewards, but those rewards only benefit you if you avoid paying interest on your credit card transactions.

For that reason, it’s wise to consider setting boundaries on your credit card use, such as:

  • Only buying on credit if you have the cash to pay for it.
  • Paying off your credit cards in full each month.
  • Consider only using a credit card for recurring payments like your cell phone, Netflix, etc.

By setting clear boundaries on your credit card use, you can avoid debt problems before they start. Give yourself the game-winning advantage with your finances and follow the above tips in order to avoid credit card debt.

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