Before we dive into getting rid of debt id like to start off by clarifying that not all debt is bad debt. Throughout the years of American history there has been a black cloud of personal finance in the American household. Have you ever heard that money is taught in the home? We don’t teach children as a society how money is created, or how interest rates will affect borrowing power. Essentially when I graduated high school in 2012 I felt immense pressure to go to college, essentially taking out high interest loans I didn’t understand for an education I didn’t really need, going into a world I wasn’t even close to prepared for. Naturally by 20 years old like a staggering amount of young adults in this country I had defaulted on my student loans and dropped out of a college I shouldn’t have gone to in the first place. I had a 480 credit score no job and know 20k worth of student loan debt. There is only one thing to do if you find yourself in this situation, GO TO WORK/ CREATE INCOME. You need income. Find the highest paying job for the least amount of time, put your head down and go to work. at one point in my career I was doing (preload) at ups going into work at midnight working until 9am and then landscaping. My ups checks were getting garnished meaning my 250$ a week part time job was only 150$. I had to literally dig my way out of that situation solely through time and work. it took me about 5-7 years for my credit to recover. For someone to be wealthy I truly believe they need to understand how money works. Its all debt. So it is vital to be able to identify Bad debt from cash flowing debt. for example your credit cards with 20-25% variable interest that you carry a balance on every month is very bad debt. The 4 unit apartment complex your uncle Jim bought and rents out is cash flowing debt. The difference is easy one debt costs you money and the other makes you money. Maybe I wasn’t paying attention in school but nobody told me anything about debt really… good or bad. charts because money is taught in the home, and the less you have the less you know. Wealth is knowledge and the first step in this pivotal personal finance journey we all go down is being able to get yourself on a budget, identify how, (where, what, when) you are spending money and then identify wants and needs. For example if you are on amazon every night when you get home from work buying new gadgets those are probably wants. Food, housing, transportation, all examples of needs. We can go further into breaking down what you actually need for food, you don’t need to be paying uber eats or door dash 10$-15$ in fees for a McDonalds quarter pounder meal. Im not saying you need to peanut butter and jelly 3 times a day but if you really want to take control of your finances you need to be aware of how, when, and why you are spending money. Money is debt, every dollar is circulation is owed to someone else. Using debt to build wealth has been used for centuries. Understanding the difference between consumer debt, and debt/ leverage used to buy appreciating assets that will cash flow was a pivotal step in my own learning curve for personal wealth building. If you find yourself in a situation where you have multiple credit cards with thousands of dollars collecting interest every month while you just struggle to make it to the next paycheck. Consider these options… Avalanche method. The avalanche method focuses on your highest interest loans first while still making minimum payments on all other monthly debt obligations. Making extra payments on the loans that carry higher balances combined with high interest would be especially useful for this method.
The opposite but still very useful method is the Snowball Method. Ive used both the Avalanche method of paying off debt as well as the Snowball there is no right or wrong way to putting yourself into a better personal finance situation. The snowball method worked more effectively for me because I could see more progress faster. I paid off my lowest balance and essentially gained momentum into the next lowest balance, I made it like a game. How fast could I play this debt off? How much money could I save this month? I became motivated because I saw progress sooner. Personal finance is personal… literally whatever works for you personally, roll with that. Both of these methods have proved helpful not only to me but thousands of other like minded individuals.
Another popular strategy for eliminating bad debt for your life, is debt consolidation. At this point in my life I haven never used a loan like this, I have done extensive research on how and why they would be beneficial in your situation. A debt consolidation loan Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others, the only situation I would see this being beneficial is if you were in a really tough situation with a lot of high interest debt and it would be impossible to come back or get ahead if you will. You generally need decent credit (689) to qualify for these types of loans. By the time most people would need this type of loan they generally don’t qualify for it. A very sad truth that I’ve read countless times again. More and more Young adults find themselves in crippling consumer debt I’ve read stories of 25-26yr olds with 120k credit card debt with interest rates averaging 24%!! If you find yourself in this situation and you can’t get a consolidation loan I think the only other option it too consider bankruptcy. The absolute worst thing we can do if we’re trying to get out of debt is pretending it docent exist. The worst thing we can do is be blissfully ignorant when it comes to OUR OWN finances…
Millennial Money Takes 