Four Strategies for Managing Debt as a Young Adult

Young asian man using calculator, holding receipt and managing debt As a young adult, you might have an existing student loan or other kinds of debt you want to pay off. Even if you’re financially responsible, life’s unpredictable nature can sometimes push you off the path to financial independence and can potentially lead to you to credit card bills.

The good news is there are some strategies for managing debt. Here are Clark County Credit Union’s four debt strategies that you can choose from to become debt-free.  

  1. Debt Snowball Method

Just like when you make a snowball, as you roll it, the snowball gets bigger. If you apply this analysis to your debt, you first start with your smallest debt and build up momentum and excitement as you pay off your debts.  Here’s how it works:

  • Step 1: List all your debts from smallest to largest
  • Step 2: Make minimum payments on all your debts except the smallest one
  • Step 3: Focus on paying the smallest one until it’s paid in full
  • Step 4: Now take that same payment and pay it towards your next smallest debt.

  1. Debt Avalanche Method

With this method, you focus on paying off the largest debt first and then work your way down to the smallest debt. Here’s how it works:

  • Step 1: List all your debts from largest to smallest
  • Step 2: Set a certain amount of payment on the largest debt and pay the minimum payments on the rest
  • Step 3: Focus on paying the largest one until it’s paid in full
  • Step 4: Take that same payment and pay it towards your next largest debt 

  1. Debt Management Plan

Another option is to work with a nonprofit or credit counseling agency to set-up a plan for you to help pay off your debts. Your counselor negotiates and works with lenders to get you a lower interest rate. Once it’s set up, you will pay directly to your chosen agency, and they will handle the rest.

  1. Debt Consolidation

This option allows you to combine all your debts by taking out a new loan with a lower interest rate. When you consolidate your debts, pledge not to use your credit card or take out another loan until it’s fully paid.

Getting out of debt isn’t a piece of cake but with commitment and the right set of strategies, you can pay off your debt faster and improve your overall financial health. CCCU has a collection of articles and tools that can help you with debt management.