Crucial Tips to Avoid Falling Into a Debt Spiral in Your 20s

Young Woman in Her 20s Image for Crucial Tips to Avoid Falling Into a Debt Spiral in Your 20s

The financial health of millennials and the younger generation as a whole is a big concern these days. Reports about their financial literacy usually strike a cautionary tale, with many young people in their 20s struggling with basic management of money and long-term planning.

When you are young and recently employed, you would be flooded with offers to get loans and credit cards. It is natural to get tempted by these offers, but if you are not disciplined with your finances, it can prove to be a vicious trap.

For salaried people, getting credit products is very easy these days. And no matter how much you try to restrain yourself, people do end up spending money they cannot afford sometimes.

Not surprising, therefore, the amount of credit purchases has been growing in recent years, and the amount of loans has been exceeding the number of cumulative accounts out there. This signifies that people are borrowing much more than ever before, and more people today often end up falling into debt traps they find hard to come out of.


Steps to Steer Clear of the Debt Trap as a Young Person


While it is okay to use a credit card or take a loan, the repayment should be calculated as per your income beforehand. If your desires overwhelm you more often than it should, you would end up spending the next decade or so repairing your broken finance to be debt-free.

Here are crucial tips for young people to avoid getting into a debt spiral that has devastating impact on your life and future.


1. Gain Clarity


The problem with finances starts to occur when you are not clearly aware of your income and expenses. Take time out to sit with your income and expense statements, including your credit card records. It will give you a peek into unnecessary expenses that you might be doing that might be hurting your income beyond repair.

Once you know you are not in a position to spend unnecessarily anymore, it will become easier to restrict yourself from spending impulsively next time. And you’ll also see that you need to clear any installments running on loans and credit cards, and make that a priority.

Getting clarity about where your finances are and where they’re heading will make it easier to focus on savings rather than spending.


2. Focus on Savings


Save first and spend later—make that a habit.

There are many financial services options for saving available these days, like SIP and recurring deposits or mutual funds investments that would make it easier to save and invest. There are also many mutual funds like UTI mutual fund in which you can invest to get considerably high returns than in traditional investment tools.

When you sign-up for these automatic investments, the money is deducted from your account automatically. It helps with controlling your spending habits and keeps your impulsive splurging temptations in check.

Do not worry even if you are saving little amounts at first because the key is to start. Once you see how fast your savings can grow and become a lump sum in a couple of years, it will automatically generate interest in you and a desire to grow your savings amounts.


3. Plan in Advance for Big Expenses


During the 20s, especially in the age of online shopping, it can be hard to resist temptations completely. There are sales going on round the clock. So, if you really want something that you have been eyeing for long and it is considerably expensive, plan for it in advance.

Put aside some small amount each month to ensure that you can pay it in full and even if you pay from a credit card; you are able to clear any other EMI that’s already in progress. Try to avoid multiple simultaneous EMIs to keep your finances healthy.


4. Pay More than the Minimum Amount


Most people just pay the minimum due amount on their credit cards. Avoid that and instead try to pay a little more of the bill and on time. If you don’t on time, you are going to pay a high interest rate that will push the cost of whatever you purchased using it higher.

And when you go shopping, you will find many stores offering deals when you use a credit card. However, do not fall into the trap—avoid using your credit card just like that where unnecessary.

Always make sure that you are aware of your debt and how you accumulate your debts. Make a plan to clear your debts and stick to it. If you do not have a plan in place, your debt can get out of hand quite quickly, and you will find it harder to get back on track financially.

Use all of these tips to keep crippling debt at bay in your 20s, and to protect your income and savings for a brighter future when you are older and even when you’re in your retirement years.


George Mathews is a staff writer for He is passionate about personal growth and development.