Tuesday, October 31, 2017
Debt Do’s and Don’ts for Anyone Under 30
A common theme amongst young people these days is debt. The amount of debt being heaped onto people under 30 is scary, many of whom have never worked a day in their life. It seems commonplace to be young poor and in debt. It’s a scary scene. In 2015, the average student debt stood at $13,331 in Canada, according to the Canadian University Survey Consortium. But when you exclude from the headcount students lucky enough to have no debt, the average load doubled to $26,819. What can be done to curb this trend? Young people have to be vigilant, strong and educated on the circumstances. This segment will be aimed at giving young people the straight goods on debt. In this post, I will give you 5 Debt Do’s and 5 Debt Don’t for anyone under 30. Debt is a beast that needs to be tamed, so let’s get started.
1) Do take out a student loan
Having been too poor to afford school on my own, I needed a student loan. While I regret having done it, I do understand that it is some people’s only means to get a higher education, which I am all for. In this economy, the university degree has become to the new high school diploma. Even a Master’s is needed for many. Take out that student loan if you have no other means to go to school. But…
Don’t…
Take out more than you need. There is a temptation to borrow as much as possible in order to pay for school and live comfortable during those years. If you only need 5K for tuition, only borrow 5K. Better yet, have the discipline to save and invest the rest while you are in school. Make sure they are guaranteed investments such as Bond’s or GIC’s. Remember you have to pay this back; seriously you have to pay it back. Work like a dog during school and after to be debt free as soon as possible.
The Student Debt Crisis Is Bigger Than Your Loans – Huffington Post
2) Do get a credit card when you are young
Everyone should have a credit card. I love my credit card! I use it for everything including groceries, bills and day to day expenses. It is a great way to build credit and look attractive to lenders. Remember that if you have no bills in your name and don’t have a credit card, you have ZERO credit history. You need a credit history when it comes time to buy a home or get a loan. But…
Don’t…
Leave a balance on your card at the end of the month. This takes a special kind of discipline, but you can’t have a balance on your card every month. The interest rates for these cards are insane, sometimes around the 20% range. They are hoping you rack them up and take forever to pay them back. Use it wisely during the month and then pay it off. Think about your purchases and have a budget that fits paying off credit card use. Credit Cards can be a wonderful thing, or they can be your worst nightmare. For some, a pre-authorized card is the way to go. Even I have one!
3) Do buy a home if you can afford it
Buying a home is a great investment most of the time. They almost always go up in value and also provide you equity that you can borrow against for future endeavors. You have to have a down payment which can be a costly amount of cash. If you have that saved up and don’t want to rent anymore, get that house and start working your way towards full home ownership. But…
Don’t…
Get a home if you can’t fully afford it. What do I mean? That means that the mortgage payments, insurance, taxes, fees, utilities, maintenance, all have to fit in your budget. You also don’t want to get a home that is way out of your price range just because the bank says you can afford it. Don’t let anyone tell you what you can afford! Being house poor is really, really shitty. Don’t be house poor just so you can throw sick parties. A house is only an investment if you pay it off.
Why You Should Buy Less House Than You Can Afford – The Simple Dollar
4) Do buy a car if you need it to get to work
Sometimes you have to take a job out of your area because that is what’s available to you. Commuting is a pain, but sometimes the job is worthwhile and that is alright. Commuting can sometimes save you money if the car is fuel efficient or the job pays very well. But…
Don’t…
Buy a fancy car that you can’t afford. Your first car should not be new in my opinion, but if you insist get an affordable, fuel efficient vehicle that will last you a long time. Financing a vehicle is only okay if the payments are super affordable. If you are trying to pay back debt and save for the future how are you supposed to afford $400 a month for payments, another $200 for insurance and another $200 for gas? That is $800 a month that could be going against your student debt or saving for a down payment on a house. Think about living closer to work and taking transit. There is no shame in it and in fact it is better for you and the environment.
13 Wastes of Your Money – Budget Boss
5) Do marry the love of your life
You have been with this person through thick and thin. This is the Ying to your Yang and what better way to say I love you than spending the rest of your lives together. Living with your significant other can save you money as well. Sharing bills is a great way to save money and plan for the future. But…
Don’t…
Get married because you think you should. While sharing bills is great, are you going to share the huge bill for the wedding or the rings? How about the honeymoon and the new home because everyone else did it? Maybe it’s the matching cars and brand new leather sofas for the amazing new home. You see where I am going with this? Loving someone is alright, but loving them means being able to take care of them. Taking care of them means not putting yourselves in a position where your marriage is strained because of stupid debts. Don’t rush into anything, let alone marriage. If you love the person, what are you afraid of? There is nothing wrong with getting married at 30 or 40 or even never…..Just saying.
Debt can crush you like a bug so do the right steps to get ahead of it and avoid the wrong steps that can set you back. The deck is stacked against young people these days. With consumer debts at all-time highs, you have to make sure you are not just another statistic. Get control of your money, or it will get control of you.
Thanks for reading my post today and don’t forget to tune in tomorrow as Millennials Week rolls along at Budget Boss. If you want to get started eliminating debt and saving for the future, shoot me a message at joe@budgetboss.ca. Have a great day friends!
“The cost of college education today is so high that many young people are giving up their dream of going to college, while many others are graduating deeply in debt.” – Bernie Sanders
Email – joe@budgetboss.ca
Follow Budget Boss on – Facebook LinkedIn Twitter Instagram Pinterest Quora