Alright, now that you’re all grown up (right?), you’ve got an education, and you’re on your way to a building a budding career, it’s time to get on your feet financially.
There are a few key goals you can begin to achieve right now that will set you up for financial success in life. By following these goals myself, I was able to go from having thousands of dollars of debt when I graduated college, to having a net worth of over $300,000 just 10 years later.
Let’s explore those goals here, with action steps along the way.
- Set up an aggressive credit card debt payoff plan
- Set up an aggressive student loan payoff plan
- Pay off the remainder of your debt
- Save for one upcoming large expense
- Get your first raise, without even negotiating
- Start a legitimate retirement plan – Seriously!
Set up an aggressive credit card debt payoff plan
While credit card usage by students has been declining in recent years due to the Credit CARD Act, a full 56% of college students still carry credit cards. Of these students, they graduate with an average of over $1,000 in debt that they carry each month, with 5% carrying over $2,500 in debt and 3% over $5,000.
Credit cards have ridiculous interest rates which add up horrifyingly fast. Even with a balance of just $1,000, this will cost you hundreds of dollars per year in interest.
Get aggressive with this debt bucket. Pay the minimum on everything else to avoid interest and late fees and pay as much as you can on your credit cards until they are paid off. This payment should be A LOT higher than the minimum.
Use a debt payoff calculator to help you figure out how quickly you can do this and what your payment should be. If you have more than one card, start with the one with the lowest balance and pay it off first, then stop using it.
Once you figure your monthly payments, set up automated payments by using your bank’s online tools. This will increase the chances you’ll follow-through on your plan.
Your goal is to pay off everything, then get yourself down to one credit card that you pay off each month in full. This will help you maintain a good credit score while ensuring you do not rack up additional debt.
TIP: Credit cards can get a lot of negative press, but they’re only bad if they’re not used correctly. They have a lot of benefits if you use them right, such as signup bonuses, travel rewards for every day spending, purchase protection, and of course simple cash flow management.
Check out some of the best credit cards to take advantage of these benefits.
From here, you can move onto the next debt bucket, your student loans!
- Debt Payoff Calculator
- Top 3 Ways to Crush Your Debt
- Financial Automation Checklists (includes paying off debt)
- Seven Silly Personal Finance Myths That Are Making You Poor
Set up an aggressive student loan payoff plan
The reality of student loan debt can be hard to stomach, but for a lot of us at least some kind of loan is a necessity to get through college.
A lot of students fall into the trap of only making minimum payments on their loans, or deferring them for a higher rate down the road. This is a big mistake because it can come back to haunt you later.
Your expenses will only increase as you age, so start paying these off aggressively immediately after graduating while your life is relatively simple, and before you start getting tempted with additional forms of debt (cars, houses, electronics, furniture, etc).
While paying off 4, 5, or even 6 figures of debt in your 20s may seem like an outlandish task, I’m here to tell you that it can be done with the right plan.
I was fortunate to have scholarships, support from my family, and worked a few summers to keep my debt low, and ended up with only about $6,500 in student loan debt. I was able to pay this off in about a year after graduating (I also lived with my parents while working a full-time job, which allowed me to pay nearly everything towards my loans).
That said, even 10x that or more is doable with an aggressive plan.