How Can Millennials Eliminate Their Debts?

Advisor February 6, 2018

You’re at the prime of your life and career and as a millennial, you’ve just graduated and starting your new job! You’re at that point in your life where you start earning money for yourself but while you’re excited to start buying all the things you want and do all the things you love – it does come as a fact that most millennials tend to go overboard with their spending habits. While that is understandable since you deserve to treat yourself for your hard work, this may also create an unnecessary problem for you!

For one, your hard earned income may not be enough to pay your bills, responsibilities, and your savings. Worse is if you start having bad debts because of it, as the nightmares start when you start piling up your debts, like a student loan (if you have one), and you’ll have a hard time paying all of them because your expenses are greater than your income. How can you assure yourself that you won’t be buried with debts? How to gain a financial stability? Here’s what you can do to eliminate your debts.

Pay Your Student Loan Debt First

Most millennials nowadays carry the burden of paying their student loans. We can say that student loan is a good debt because it helps you finish your education and obtain a degree, which becomes your ticket to land a good job. However, paying it back can be a huge burden on your side. According to studies, around 34% of the millennials expressed their doubts that they’ll be able to pay all of their student debts in due time, especially those with student loan debts amounting to $75,000. While those millennials who have a student loan amounting to only $25,000 are more confident they’ll be able to pay their debts.

Pay Your Student Loan As Soon as Possible

If you don’t have a student loan, then you’re lucky because you don’t have to carry the burden of paying student loans. However, if you have one, then we advise you to settle this debt first. As much as possible, minimize your expenses in order to accommodate paying for your student debt. It may be a burden to you but the sooner you complete paying your student loan, the sooner you can be free from your student loan debt.

List Down and Pay Off Your Debt Depending on the Interest Rate

Now, this advice can be more tricky. If you don’t have a student loan to pay but you have other debts like personal loan or credit card loan, then we’re going to recommend two ways on how to pay them off and eliminate it sooner then later.

The first method we’re going to recommend is to pay your debt which has the highest rate.

Pay Your Debts Using These Two Methods

An example for this is the credit card line. Interest rates on credit cards are insanely high that your debt can pile up if you miss to pay it even for a month. The strategy here is to not let your high-interest rate pile up, that’s why you need to pay it as soon as possible. Moreover, you’ll be able to budget your money with high allowance. The moment you finish paying the debt with high-interest rate, you can easily adjust your budget to pay your other debts with lower interest rates. We recommend that you apply this method if you have several major debts with high interest rates.

The second method is to pay off all your debts with lower interest rates.

Another method of paying debt is by scraping out all of your debts with lower interest rates first. This is recommended if you don’t have major debts and only have small debts. If you have three debts with only 5% interest rate and two debts with 8% interest rates, then it’s more appropriate to pay off your three debts first. The strategy here is to scrape off as many debts as possible so that you can minimize or downstream your financial duties.

Create Another Source of Income

If Possible, Try to Get Another Means of Income

Aside from your active job, it’s also recommended to have another source of income. You can do it by creating another means of income, like part-time jobs, sidelines, or have a small business. This will help you sustain and support your life if you’re financially constraint.