How to become debt free by age 30

The average amount of student loan debt for the Class of 2013 (Institute for College Access and Success)

What is even more shocking is recent research by the One Wisconsin Institute. The research shows that the average amount of time to pay off the debt for a bachelor’s degree is 21 years with advanced degrees taking even longer to pay off.

How can it take longer to raise a child to adulthood than to pay off student loan debt? For many, student loans take a back seat to life and are a low priority to pay off.

But student loan debt can hold people back, as the same report shows that those with student loan debt are much less likely to own a home than their peers who no longer have debt.

Measurable impact of student loan debt on the rate of renting, rather than home ownership, was statistically significant at every income level.

Student loan debt impact on home ownership

So here are some ways to remove the burden of student debt from your life with the goal of being debt free by 30.

1. Live a life you can afford

The simple truth is you can’t pay down debt while getting into more debt. There are many online systems that can now help you easily understand what you spend and what you make.

Try EveryDollar or Mint to have these systems track your spending. Make sure you are spending less than you make.

2. Make a plan

Set goals for debt repayment and make them automatic if possible. Some choose to double their payments or make payments twice a month to get debt repayment going.

It’s hard to spend money you don’t have it in your account. Automate debt payments so they become second nature.

3. Rethink your monthly expenses

Do you really need cable, Netflix, and Hulu?

Have you ever considered having a roommate?

Give some thought to the type of car you drive and the car payment you are making.

Can you trade the car in for one you can pay for in cash?

What are the interest rates you are paying on your credit cards and loans?

Can you get these rates lowered or even down to zero for a time?

Some of these ideas may sound extreme. But if you can live a very inexpensive life for a few years while really tackling your debt, you will be much freer to do as you like in the future.

Think of that poor 45-year-old still paying off his college debt.

4. Do the cash budget

It is not fun, but it will make you spend less. Check out this honest article on why the cash budget sucks – but you should do it anyway.

5. Pay your bills on time

Not only will paying your bills on time help you avoid late fees, but it will also help your credit score.

A better credit score will help you with the credit card interest rates you might be paying or the rate of interest on the car you drive.

6. Save money

Saving money may seem hard when you are already cutting back and paying down debt. But once again, try to put some money into savings every month automatically.

Savings can be a big help if something unexpected comes along and can help you avoid putting emergency expenses on credit cards. Read about how to start an emergency fund.

7. Get insured

Whether it is renter’s, auto or health insurance, make sure you have proper coverage so that a break-in or unexpected illness does not set you into a financial black hole.

As a young person, it’s easy to think that you won’t get sick, but a car accident that is not your fault could be very costly if you don’t have the proper coverage.

8. Be honest, creative, and happy

Cutting back can make life miserable. Since student loan debt can take years to pay off, try to set goals that are aggressive but livable.

Be honest with your friends and family. Instead of just saying that you can’t go to dinner or make that trip, spread the word that you have a mission to pay down your debt.

Your friends and family will understand and hopefully will be supportive. Get creative about gifts, time with friends and other events you enjoy so that you can live frugally without sacrificing your entire social life.

A quick example is to have people over for a BBQ potluck vs. going out to a fancy dinner. Make cookies or spend time with a person vs. feeling like you must buy them an expensive gift.

They will understand – especially if you have shared your goals.

9. Make marriage a motivator

If you have a lot of student loan debt and are thinking about marriage, make getting out of debt before the big day a motivator.

Financial stress can harm marriages and sometimes only one person is bringing debt to the relationship. Use the desire to enter marriage on a fresh start to keep you committed to your debt relief goals.

10. Celebrate your success

Debt repayment can take some time. Plan to celebrate your mini-successes.

Have you paid a quarter of the debt off? Buy a bottle of champagne and toast your success. Or spend the day with a friend or spouse doing things you enjoy.

Be reasonable of course in your spending, but take the time to celebrate your hard work.

I beat my debts down in my 20’s. As a result of making some small sacrifices early in my work career, I have much more freedom and peace in my life today. There’s nothing special about what I did – it’s something you can achieve too.

Question: How are your debt payments coming along? Please share your answer on Facebook or Twitter.

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