How to Avoid Debt: Tips for Today's Youth
Carrie Mylott
- Published Content: 6
- Total Views: 2,521
- Favorited By: 0 CPs
It's unfortunate that the majority of today's students graduate high school with virtually no knowledge of how to manage a checking or savings account, or how to manage their credit. 
In a country where its citizens are basically forced to live on credit, I think that public schools should be required to teach classes on how to effectively utilize credit.
In the meantime, here are my suggestions to young people on how to live debt-free:
1. Know your net income. Determine precisely how much money you make monthly and yearly, less taxes and other deductions. Understand that you should not spend as much as, or more than, you bring in.
2. Prioritize your money goals. What do you want to do with your money? Pay for college? Buy a laptop? An Ipod? Find out exactly how much money you need for each of your goals. Patience is key. Saving money to buy something is usually far less expensive than purchasing something with credit. As often as possible, pay for something directly - do not use credit.
3. If you do use credit to purchase an item: many credit cards, especially store-based credit cards, will offer an interest-free period of time in which to pay off your purchase amount. Say you spend $1200 on a credit card, and you have 6 months of interest-free time in which to pay off that amount. Make sure that you pay $200 a month, regardless of what the "minimum payment" amount is. Depending on the card's interest rate, you can save $80 or more of deferred interest.
4. Pay attention to due dates. Make sure that your payment is received by the due date, in order to avoid unnecessary late fees. Most banks and credit card companies offer online payment services, which can help ensure that you pay on time. Also, it's important to remember that a lot of credit card companies will significantly increase your interest rate if you make even one late payment.
5. If the company you work for offers a 401k retirement plan, be sure to enroll in it. The earlier you begin contributing, the less money you will need to contribute over the course of your lifetime.
In a country where its citizens are basically forced to live on credit, I think that public schools should be required to teach classes on how to effectively utilize credit.
In the meantime, here are my suggestions to young people on how to live debt-free:
1. Know your net income. Determine precisely how much money you make monthly and yearly, less taxes and other deductions. Understand that you should not spend as much as, or more than, you bring in.
2. Prioritize your money goals. What do you want to do with your money? Pay for college? Buy a laptop? An Ipod? Find out exactly how much money you need for each of your goals. Patience is key. Saving money to buy something is usually far less expensive than purchasing something with credit. As often as possible, pay for something directly - do not use credit.
3. If you do use credit to purchase an item: many credit cards, especially store-based credit cards, will offer an interest-free period of time in which to pay off your purchase amount. Say you spend $1200 on a credit card, and you have 6 months of interest-free time in which to pay off that amount. Make sure that you pay $200 a month, regardless of what the "minimum payment" amount is. Depending on the card's interest rate, you can save $80 or more of deferred interest.
4. Pay attention to due dates. Make sure that your payment is received by the due date, in order to avoid unnecessary late fees. Most banks and credit card companies offer online payment services, which can help ensure that you pay on time. Also, it's important to remember that a lot of credit card companies will significantly increase your interest rate if you make even one late payment.
5. If the company you work for offers a 401k retirement plan, be sure to enroll in it. The earlier you begin contributing, the less money you will need to contribute over the course of your lifetime.