How to Stay Out of Debt in your 20s

By Jenn Heflin


The average college graduate leaves school with some $30,000 in debt, so even if you’re one of the fortunate few who gets a great job straight out of the gate, you’ll still be starting out your adult life in the red. If you didn’t grow up with parents who taught you about money (or you did but you just weren’t paying attention), it’s not too late. In fact, it is the perfect time to build good money habits. Managing your own finances can be overwhelming at first, but you’ll be better prepared for life if you learn the basics now. Here are five things you can do today to make your money work for you and stay out of debt in your twenties. 

1. Pay Yourself First. “Out of sight, out of mind” — it’s a saying we’re all familiar with and it applies to money, too. If you don’t have it handy, you won’t spend it on $5 lattes, so hide at least some of your money from yourself in a way that benefits you down the road. If you haven’t done so already, set up an appointment with your company’s HR person and tell them you want to contribute to a 401(k) account (a tax-free retirement plan where the money comes out of your paycheck before you even see it). If your company matches 401(k) contributions, start with whatever amount they match — it’s a completely free way to double your money at your employer’s expense. And even if they don’t match, start off with a 5-10 percent contribution. The more you contribute, the less money you’ll have to pay taxes on now and the more investment income you’ll earn on your contributions down the road (once again, free money for you!).While you’re in your company’s HR office, ask them for a direct deposit form. Send 90 percent of your check (after the amount already deducted for your 401(k), of course!) to your checking account, and the other 10 percent to a savings account. If you think you’ll be tempted to dip into that savings for your latte habit, take a few minutes extra to set up your savings account at a different bank from where your checking/ATM is. Remember: you won’t spend what you can’t see and the idea is to bake in habits that grow your savings for tomorrow without tempting yourself to cheat today.
2. Create a Budget & Set Goals. To stay out of debt, you’ll need a plan. That plan is your budget. Fortunately, modern tools make the budgeting process much easier than it used to be (think spreadsheets…). is a free and super-simple website/app that connects to your bank account, credit cards, loans and investment accounts to give you the total picture of what you owe and what you spend your money on.’s best feature is being able to create a budget, set goals, and remind yourself of upcoming payments that need to be made. You’ll be shocked at first by what you actually spend your money on, but once you know, you’ll start to see obvious places where you can cut back relatively painlessly without turning yourself into a monk. Bye-bye, $5 lattes.
3. Pay Your Bills Immediately After You Get Paid. Whether you get paid weekly or bi-monthly, do yourself a huge favor and setup your main account to auto-pay your rent, loans and credit cards one or two days after your paycheck hits your checking account. Auto-pay can be set up through your bank or through your individual credit accounts. Paying your bills when they’re due will keep you from paying dreaded late fees…read more.
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