10 Things I Wish I Knew About Debt in My 20s

I’m not going to lie — life on the other side of debt is amazing. But I can remember a time in the not-so-distant past when I was struggling with debt and financial stress daily. If I could hop in a time machine and go back to see my 20-something-year-old self, here are ten things I would tell her about debt. 

1. Don’t hide from your debt or your spending.  

Debt is stressful. Trust me; I’ve been there. But ignoring my debt and overspending problems never made those issues go away. In fact, failing to acknowledge that I had a budgeting problem only made my debt situation worse. 

One of the first things I did when I started my debt pay off journey was to make a list of every dollar I owed. I also started tracking my spending, so I could see what I was doing with the money I earned. 

Confronting my financial shortcomings was uncomfortable. But acknowledging these issues also helped me to change. I gained control of my money and, little by little, started a budgeting journey that eventually leads to me paying off over $77,000 worth of debt in less than a year. 

• Read: Saving Money When You Have Debt – What You Need to Know

2. A solid budgeting plan is the best way to avoid new debt.

It’s hard to avoid debt without a plan for your money. In fact, I struggled with debt for years before I created a budgeting method that worked for me. Once I started using the Budget by Paycheck method over six years ago, however, I found a way to avoid new debt and pay down the debts I already owed. 

Money alone won’t solve all of your problems. You can earn a lot, but those earnings won’t pay down your debt or help you save for retirement if you spend carelessly. A successful budget is a necessary step to reaching your financial goals.   

• Read: Should You Consolidate Your Debt?

3. Getting out of debt is possible, with the right plan.

The Budget by Paycheck method helped me manage my money better. But I learned that paying off debt required a plan too. Figuring out the right debt payoff strategy enabled me to save a ton of money in interest. 

Personally, I’m a big fan of the debt avalanche method. It focuses on paying off debts with the highest interest first, so the savings can really pile up. 

The debt snowball approach is also worth considering. If you’re someone who’s motivated by small successes along the way (like paying off debts with lower balances first), the debt snowball could be a good fit. 

• Read: How to Choose A Debt Payoff Strategy

4. An emergency fund is crucial to avoid debt.

What happens when an unexpected expense comes up, and you don’t have the money saved to take care of it? If you’re like I was in my 20s, your first instinct may be to whip out your credit card to pay for it. 

Creating an emergency fund helped me to break this bad habit. At first, I focused on paying off my high-interest debt. Yet eventually, I began to save a small amount toward my emergency fund each month, even while I worked hard to eliminate my remaining debt. Building an emergency fund gave me the peace of mind to feel comfortable on my financial journey. 

5. All cash spending is the perfect way to fight debt. 

Although I’d already been budgeting for years, in 2016, I started using the cash envelope method to manage my spending. Let me tell you — it was a game-changer that helped my budget-by-paycheck method work better than ever.

As an all-cash spender, I was able to track and manage my expenses more easily. Because I wasn’t swiping credit cards for purchases, I could quickly see (down to the dollar) how much money I had available in each of my budgeting categories. 

Cash spending makes me think through my purchases. It helps me avoid overspending and gives me more control over where my money goes every paycheck. 

• Read: 4 Things You Need to Do Immediately If You Want to Pay off Debt

6. You can use a new account to help you get rid of old debt. 

It may sound crazy, but sometimes a new credit card can help you to pay off your existing credit card debt faster. Personally, I used balance transfers to pay off $7,500 worth of credit card debt. 

If you have a decent credit rating, you might be able to qualify for a 0% introductory APR on a credit card balance transfer. Although a balance transfer isn’t right for everyone, it can help some people to save money with a lower interest rate during part of their debt pay off journey.

7. You can build credit without going into debt.

Good credit is a valuable asset. It can save you money when you need a loan (like a mortgage) and may even help you save on your insurance premiums. 

While it’s important to build good credit, you don’t have to go into debt to do so. In fact, credit scoring models like FICO typically reward you when you have open credit cards but keep your balances low or paid off.  

8. Saying no to some purchases helps you say yes to what really matters.

In college, I had a spending problem. I took out more student loans than I needed and wasted the leftover money on unnecessary purchases. To compensate for self-confidence issues, I would buy new clothing, visit expensive hair and nail salons, and use money to try to make myself feel happy. When I graduated, I owed over $35,000 in student loans and more than $21,000 in credit card debt. 

As I started using the budget-by-paycheck method, I learned how to cut expenses. I discovered that doing without some things I don’t really need can help me afford the things that matter most to me. Cutting costs helped me to become debt-free. It helped me to save money for some amazing, debt-free vacations. And now, my money choices are helping me buy (and build) my first home with cash.

When I realize the amazing life that budgeting has helped me to lead, I don’t really miss my old cable bill or too-frequent shopping sprees. The tradeoff is totally worth it. 

• Read: My Debt Story – Accomplishing the Unimaginable

9. Don’t be afraid to work hard for your financial goals. 

Whether money is tight or you’re trying to find ways to pay down your debt faster, earning extra cash can help. When I started The Budget Mom in 2016, I was a single mom working a full-time job during the day and running my business in the morning and at night. 

Working extra to earn more income can be tough at times. Yet if you funnel your extra income toward a specific goal, it could change your life for the better. Just remember to pair any money you earn with a solid budgeting plan. Otherwise, you could find legitimate ways to make extra income, but not get any closer to your goals.   

10. You aren’t alone. 

After college, I was fortunate to get a job in the finance industry. However, my personal finances were in rough shape. As a financial professional, this was stressful. I felt like I was supposed to have it all together (or at least that people expected me to). So, I was embarrassed to talk about my financial challenges with others. 

In 2018, I finally decided to share my debt story with the world on Instagram. I knew deep down that I couldn’t stay silent any longer. If I was going to pay off $77,000+ in debt, I needed accountability. 

To this day, I’m so thankful that I made this decision. When I shared my debt payoff goal with the world, overnight countless people began to embrace me and encourage me. 

Not only did that encouragement lead me to get out of debt for good finally, but I was able to connect with so many others who wanted to gain control of their own financial lives. Now, I’m able to share the financial strategies that helped me succeed with others through The Budget Mom — and I wouldn’t change a thing.