I was overwhelmed by debt in my 20s so I know how millennials feel. I didn’t have as much student loan debt as the average 22-to-33-year-old has today, but I probably had a lot more credit card debt. In the early ’90s, it seemed credit card companies would give credit cards to anyone who could fill out a form. I filled out a lot of forms in college, which left me drowning in debt. According to a recent article by CNN Money, 4 in 10 millennials are overwhelmed because of their debt. Only half as many of the boomers between ages 49 and 59 feel overwhelmed by their debt. A member of Generation X in between those two generations, I spend very little money on my debt. Evidently, 47 percent of millennials surveyed by Wells Fargo said they spend half their paycheck on debt repayment. In contrast, my family spends only about 25 percent of our income on debt including our mortgage.
Getting out of debt
I made a goal to get out of debt by age 30. My plan was to work 7 days a week so that I would have the extra money to pay off my student and car loan. I rented an inexpensive duplex for about $500 a month in the 1990s while my peers spent about $800 to $1,000 on rent to live in luxury apartment communities. I held off on buying a home until I was 30 and out of debt.
Staying out of debt
After paying off all my debt, I didn’t want to take on any new debt. I began contributing to a Roth IRA and 401(k) in my 20s. Since I no longer had credit card and student loan payments to make, I could focus on saving up for retirement in my 30s. I also invested in a taxable investment account. I educated myself about investing during the “individual investor revolution.”
Surviving tough times
After surviving my 20s, I was better prepared to handle the Great Recession. I cut back my spending instead of relying on credit cards. Although I couldn’t contribute as much to my retirement, I continued to save for emergencies. I’m glad I paid down my mortgage before health insurance premiums went up since I can no longer afford to accelerate my mortgage loan payoff.
Perhaps the No. 1 thing I did to alleviate the stress of debt was to refinance our home to a lower interest rate after paying down the mortgage. Ever since our mortgage payment went from about $1,500 to $900 a month, I’ve had financial peace. According to the surveys, millennials are confident they will have the lifestyle they want in the future. In fact, 68 percent even think they will have a life that is better than their parent’s lives. I hope my children, who are just a few years younger than those surveyed, will be just as optimistic. Most people don’t get it together until they are in their 30s unless they don’t learn the financial lessons that only being broke and 20-something can teach.
More from this contributor:
Financial Setbacks for my Sandwich Generation
The Myth of the New Rich
Investing Again after a 401(k) Wipeout