How to Get Rid of Debt and Promote Your Financial Health

How to Get Rid of Debt and Promote Your Financial Health

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While living with mom and dad can have its perks, young adults eventually need to leave the nest and learn how to start foraging on their own. Stephanie Einseberg, 24, is currently working toward that goal, along with 14 million other millennials who still live with one or both parents. The major holdback? Finances. “I would love to move to Manhattan and get a roommate, but it’s also extremely expensive,” explained Einseberg.

Why 50% of Millennials Move Back in with their Parents After College

A 2019 study by TD Ameritrade found that even after college, 50% of young millennials move back in with their parents. One reason millennials are doing this is so that they can save money and come up with a financial plan so they can have a good head start in life. “When I first moved home, I realized how important it is to save up,” said Einseberg. “I would have to sacrifice going out with my friends, going for food, going to the movies, going wherever my friends want to go in order to finally reach my goal.” Thankfully, there are a few strategies that can help people like Stephanie reach financial independence.

Build a Budget

First and foremost, a budget needs to be made. Make a list of all money coming in, as well as expenses, and figure out what is really necessary and what isn’t. Create a goal and determine how much money you need to save each month in order to meet it. You can also try using cash or your debit card only so you aren’t tempted to reach for your credit card instead.

Tackle Your Debt

You’ll want to rid yourself of debt as fast as possible to avoid paying interest. If you owe a large amount of debt, you’ll want to come up with a strategy to start paying it down. Lawrence Sprung, a certified financial planner at Mitlin Financial Services had this advice: “Where is the highest interest rates? Where is the biggest impact that you can make on that debt? Start chipping away at it slowly but surely.”

Save and Invest Your Money

Not only should you save money as you’re able to, but if a 401(k) plan is available at the company you work for, take advantage of it. If not, you can open a traditional IRA or Roth IRA. That way you can automate your contributions without having to put too much thought into it. You should also adopt a mindset of “paying yourself first”. In other words, try to build in an amount you plan to put toward savings each month and stick to it.

Parents Should Help

We don’t mean parents should pay their child’s way through life. Instead, they should better prepare their child to become financially independent. “Start eliminating your [financial] involvement in the child’s life,” said Sprung. “Have them start taking ownership of things—maybe not everything at once, but slowly but surely taking responsibility for certain bills [and] expenses.” When all is said and done, the biggest goal is to simply start building healthy financial habits.