How Young People Can Avoid The Debt Trap

The debt industry actively targets young adults because they know you'll get in over your head. This is why it's so important for you to know about debt and practice healthy borrowing habits. This article provides some ideas to help keep you out of the debt trap.

When you are a young adult, it seems like debt is stalking you everywhere you go. Everybody seems so eager to lend you money, and you know there must be a catch! Of course, there is. The catch is that young people are known to be irresponsible and inexperienced with money, and that's just the kind of borrower they are looking for. In order to stay out of debt trouble, young people have to be careful. There are some good habits you can get into before you get into debt.

Pay Up Front

We live in a society that's all about instant gratification. "You can have it NOW!" It's not easy, but we have to learn to resist this urge. Simply put, if you don't have the money for it, don't buy it. One area where young people end up in lots of debt is cell phones. Everybody has to have one, and they're improving the technology all the time. But, when you rely on a cell phone, it gets tough to keep track of all the minutes you spend, and then you find yourself selling your prized possessions to pay for all those calls. One way out of this is to use pre-paid minutes. Most companies now offer this deal, and it's a safe alternative to running your phone bill sky high.

There Is Nothing Wrong With Expecting To Get The Money Back

The Bible tells us that there is nothing wrong with expecting to get the money back. As Christians, we must always be generous, but it is reasonable to expect re-payment. With friends and family, this might be a little more difficult, but still it is alright. On the other hand, a good Christian can forgive a debt when the situation calls for it. It was not uncommon for lenders in Biblical times to forgive debts. In fact, it was a tradition in Israel for debts to be forgiven once every 50 years, on a day called "Jubilee." When you forgive a debt, remember that this debt may be repaid in the future by some other means. The next time you need something, your friend or loved one might be there to provide for you.

Good Vs. Bad Debts

Debt isn't all bad. Some debts are worth taking out, and some aren't. You shouldn't be borrowing money to pay for little, everyday expenses. Save it for big purchases, or things you really need. For example, college and college expenses are well worth borrowing money for. College is an investment, and afterwards you will be able to pay it back. But just because you are in college living the student life doesn't mean you should charge an entire vacation to Florida during spring break. If you do borrow money to make a big purchase, set up a deal where you borrow less than half of the initial amount. Rather than buying it "no money down," where you are borrowing 100%, pay a big chunk of money and then leave 30% or so to pay off later.

This All Goes On Your Permanent Record

Even in high school, money decisions you make can come back to haunt you. You begin building credit as early as 18, and whatever troubles you have then may make it harder to borrow money at decent interest rates in the future. Establishing good credit helps you get good loans when you need them, rather than having to go with the guys that loan to everybody, and charge outrageous interest rates. One way to establish good credit is to get a credit card and use it to buy groceries. Every time you go to the store, use your card. When you get home, immediately write a check for the amount and send it to the credit card company. Making these prompt payments, even for something as small as a grocery bill, will build up good credit for the future.

Develop A Budget

You may think, "But I'm just a college student living on an hourly wage making pizza's, what do I need a budget for?" Well, budgeting can keep you out of debt and save you money, and it's much simpler than everyone makes it out to be. The key is to keep track of all the money you bring in, and all the money you spend. You might be shocked to see some of the things you waste money on, and if you can trim a few dollars here and there, you can spend your money on something you'll really enjoy.

Stick To The Plan

Here is the #1 tip to keeping you out of debt trouble. When you make a plan for spending, budgeting, saving, paying back debts or anything else, stick to it. Don't allow yourself a little indiscretion here and there. If you need more money, or if you're not happy with your plan, you should go back to the drawing board and make a new one, rather than cheating.

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