Today’s post is a guess post by Andy Masaki from Penny less Dad. The thoughts expressed are his and not mine (The Budget Girl). Paying off debt is a major concern for a lot of families and should be done as quickly as possible. He has done a very good job of listing different options however, keep in mind that if you are intense about paying off debt, it will be quicker.
TIPS FOR PAYING OFF DEBT
Generation Y, Generation Me, the boomerang gen, or whatever name you wanna give, you are free to do so, because we are the millennial and we live life careless and carefree!
We have redefined culture, and we have given new shape to Arts and Sciences!
But there’s one thing for which we are blamed for quite often. Which is, we can’t handle money the good way!
We overspend and fall into big amounts of debts!
Today we will try to put an end to this myth and will dig out some fruitful strategies for paying off debt for millennials!
Well the first thing that I want to point out is the habits and lifestyle of millennials.
Generation X and the baby boomers were born in the period of World Wars and other situations of political unrest.
On the other hand, we came to this world, when the wars have subsided and people were more interested in peace and love.
Which is why, all we have seen and touched is freedom, and an abundance of happiness!
But amidst all these, only a few of us were taught good money management because we are pampered by our elders and parents!
Money habits for millennial to avoid debts:
Regulate your spending behavior and use of Credit cards:
You should respect money. Only rich money habits can get you rich in life! There are many ways to win the debt battle by improving your spending behavior.
You can surely make minimal use of your credit cards and for the most of your purchases you can either use cash or utilize prepaid store cards!
Of all the major consumer debts in US, credit card debt tops the list!
Maintain a proper budget and a good savings plan:
Well the recent trendy budgeting strategy goes by the name of backward budgeting!
All you need to do, is set aside the amount you want to save each month from your salary, and then make room for your expenses.
If you have debts to pay off, then give it a main priority, while your other expenses can come next as per their degree of importance!
The main motive is to make full use of your salary!
Even if after subtracting your savings and expenses from your salary, you are left with a few more bucks, then you can use it to make extra payments for your debts, or count it as luxury spending or use it to increase your savings!
I know a millennial 28 yr old single mom who paid off her $25,000 debt in 14 months. You should read her story to get motivated in clearing your debts!
But is that all? The biggest problem for the millennial is student loan debt!
As of 2017, the total student loan debt stands at $1.4 trillion, which has become a critical debt situation for our country’s economy!
tips for millennial to deal with Student loan debt:
Student loan debt settlement:
This is the toughest option to get rid of student loan debts.
First thing is, you probably can’t negotiate if you have a federal student loan which is not yet handled by a collection agency.
Next, you can actually negotiate as per only 3 common terms.
One is if you agree to pay the remaining principal amount and the interest on it. Second, if you are ready to pay the principal in full and half of the unpaid interest. The third, if you want to pay 90% of your total student loan!
Hence it is always advised to get help from financial advisors, if you want a better negotiation!
Student loan consolidation:
This is the most convenient process to pay back your student loan. Consolidation allows you to make only one loan payment instead of several. Private student loans usually don’t qualify for consolidation. For more information on federal loan consolidation click here.
Student loan forgiveness:
There are various criteria you need to fulfill if you want your student loan to be forgiven or cancelled.
Student loan forgiveness and cancellation can be good for you, if you don’t get any help regarding consolidation or loan modification, and refinancing. There is a lot of criteria that you have to meet in order to qualify for forgiveness. However, with this option, you won’t be paying back your student loan debt.
But it’s not only student loan debt that millennials have. There are other consumer debts that many millennials have to deal with.
Strategies for paying off debt for millennials in general:
For credit cards, personal loans, and other unsecured debts:
You can choose debt settlement, where you and your lender agree to clear the debt by accepting a lump sum amount!
You can also go for debt consolidation, where you will pay your debts in full but in an organized manner.
For credit cards, I would suggest you to go for a balance transfer, where you bring all your existing credit card balances on one card, and start doing your payments for this card only.
For secured debts like mortgage or auto loans.
You can choose loan modification or loan refinancing. You maybe able to lower your rate and payments through refinancing. However, refinancing may not be the best option in the long run.
Remember that debt settlement will not help you out with secured loans.
You should also review your options with an attorney or a financial counselor before handling secured debts.
Bankruptcy should be your last option.
Chapter 13 bankruptcy will help you to rearrange your debt portfolio, where no assets will be liquidated and many of your unsecured debts will be forgiven.
With chapter 7 bankruptcy, your assets will be liquidated and there will be no debts around you.
But try to avoid bankruptcy as it will hurt your reputation, and getting good prospects in the future will be difficult!
Also bankruptcy will have no impact on your student loans. So even after bankruptcy, student loans are not forgiven!
As a summary I would like to give you some short tips to deal with debts being a millennial:
- Always maintain a budget, as I have stated earlier in this post.
- Never get carried away and take abrupt financial decisions. Think first, then act.
- Credit cards are to be used and not to be abused! The money on credit cards are not yours. You will have to pay back the amount for sure!
- Don’t feel shy to go for financial counselling if you find your financial situation is going out of hand and is affecting your mental and physical health!
- The more you save, the more you have!
That’s all my millennial folks, enjoy life and be sensible and alert when it comes to money matters!
Author Bio: Andy Masaki is a blogger at Penny Less Dad and financial writer associated with the Oak View Law Group. He is a debt expert and a member of several online forums where he shares his advice as well as tips to lead a financially independent life.
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