A 23-year-old recent college graduate with $10k debt on maxed-out credit cards represents a challenging financial situation that requires careful planning and strategic decision-making. This comprehensive guide will provide a step-by-step approach to help tackle the debt, build a solid financial foundation, and set you on a path to financial success.
1. Assess your current financial situation:
– Begin by gathering all the necessary information about your debts, including the outstanding balances, interest rates, and minimum monthly payments. This will help you understand the depth of the situation and prioritize your approach.
2. Create a budget:
– Start by tracking your income, expenses, and spending habits to identify areas where you can cut back and potentially allocate more funds towards debt repayment. This will also help you build a strong foundation for managing your finances in the future.
3. Prioritize debt repayment:
– Organize your debts by interest rates, focusing on those with the highest rates first while maintaining minimum monthly payments on other cards. By paying off high-interest debt, you’ll save money in the long run and reduce the overall amount owed.
4. Consider debt consolidation:
– If you struggle with multiple credit cards, consider consolidating your debt into a personal loan with a lower interest rate. This can simplify your repayment process and potentially save you money on interest charges.
5. Negotiate with creditors:
– In some cases, creditors may be willing to negotiate lower interest rates or work out a repayment plan that better suits your financial capabilities. Reach out to them and explain your situation, demonstrating your commitment to paying off the debt.
6. Increase your income:
– Consider exploring additional income sources to accelerate your debt repayment. This could involve taking on a part-time job, freelancing, or utilizing your skills for side projects. The extra income can significantly expedite your progress and ease the financial burden.
7. Create an emergency fund:
– It’s important to build financial resilience by setting aside some savings for unexpected expenses. Start small and gradually increase your emergency fund over time, aiming for at least three to six months’ worth of living expenses.
8. Improve your credit score:
– Maxed-out credit cards can have a severe impact on your credit score. Focus on making consistent, on-time payments and keeping credit utilization low. Additionally, mix credit types and avoid opening new accounts, as these factors can contribute positively to your creditworthiness.
9. Seek professional advice if needed:
– Consulting a financial advisor or credit counselor can provide expert guidance tailored to your specific situation. They can help you develop a comprehensive debt management plan, provide valuable insights, and ensure you’re on track to achieve your financial goals.
10. Practice responsible financial habits:
– Building healthy financial habits is essential for long-term success. Avoid unnecessary spending, review your budget regularly, and be mindful of any impulsive buying habits. Developing a disciplined approach to managing your finances will aid in attaining future financial goals.
11. Explore debt relief options:
– If your debt becomes overwhelming, it may be worth considering debt relief options such as debt settlement or bankruptcy. However, these should be seen as a last resort since they can have long-lasting consequences on your creditworthiness and financial future.
12. Stay motivated and celebrate milestones:
– Tackling substantial debt can be overwhelming, so it’s important to acknowledge and celebrate your progress along the way. Set small milestones and reward yourself when you reach them. This will help maintain your motivation and make the journey feel more manageable.
13. Continue learning about personal finance:
– Establish a habit of continuously educating yourself about personal finance. Read books, follow reputable financial blogs, and listen to podcasts to expand your knowledge on money management, investing, and building wealth. The more you learn, the better equipped you’ll be to make sound financial decisions.
Overall, it’s important for a 23-year-old recent college graduate with $10k in credit card debt to address the situation diligently and responsibly. By following the steps outlined in this guide, creating a budget, prioritizing debt, exploring consolidation options, seeking professional guidance when needed, and practicing responsible financial habits, you can work towards becoming debt-free and setting yourself up for financial success in the future. Remember, consistency, discipline, and a positive mindset are key to overcoming financial challenges and building a solid financial foundation.
Are you still using the credit cards for new purchases? If so, step one is to stop doing that.
Ultimately the way to pay off debt is to throw more money at it. If you are only making minimum payments, then it is going to take forever to pay off (your credit card statement will tell you how long it will take). The key to getting out of debt is to be paying more than the minimums toward your debt.
Find a consistant career where you can advance and build some financial stability. If you want to freelance or do gig economy work, it’s probably best this is your side gig until your customer base is large enough to fully support your needs and you have an emergency fund built. Until then a stable income that you can budget with, pay down high interest credit card debt and built up an emergency fund is going to be your best route.
Heck if I was you I would even go ask your parents if you could move back in, while you recover from these financial mistakes and work your tail off. If you left on good terms I think most parents would welcome you back, especially if you came back with a plan of what you are going to do differently this time.
Delete the food delivery apps, unsubscribe to their emails, and don’t carry your credit card with you. No one should be doing food delivery at a huge markup if they are in credit card debt.
Your first step is go back and track all your expenses and SEE where your money is going. Doordash twice a week + a bar or two a weekend, can EASILY add up to 200+ a week. With just 3 meals you could be spending 800+ a month. That is a lot of money, enough money to feed yourself and another person for a whole month.
Take your credit cards, and close the accounts. Stop spending so much, and start paying down the debt. Once you don’t have the monthly minimums, you will feel a lot better.
Also, I’m scared to ask, have you been saving money for taxes?
> I know I need to make some lifestyle changes — not doing Doordash for dinner twice a week, not going out to bars with friends anymore, but other than those types of things, I really don’t spend too much money, I’m not a very materialistic person, all my clothes are thrifted or free. And yet somehow the CC debt refuses to get smaller.
Personal finance is like nutrition. A single time ordering Door Dash doesn’t result in $10k of debt just like a single time eating cake doesn’t make you obese. But ultimately if you want to change you need to start making the correct decision in those scenarios, even if it doesn’t seem like a big deal at the time.
Going out to bars and ordering delivery takeout are absolutely killers when you have $10k in CC debt. Dismissing those things is severely hurting you from making progress. Every dollar you throw at those unnecessary expenses compounds against you.
Frankly, your career, location, and choices are all antithetical to not being in debt at a young age. As in, most people trying to make it in the LA biz are either poor or independently wealthy before they get established.
If you’re freelancing, why not pick up a gig waiting tables or bartending?
edit: basically, I mean that the young people who are building themselves up just likely don’t live in one of the most expensive cities in America with an unstable source of income. Lots of my high school classmates owned houses and had family by the time they were 23, but they were working trades in BFE Florida
Consistent work, don’t go out, and just focus on paying debt and you’ll be aight
Some good comments here. My 2 cents:
Good job on realizing you have a drinking problem. Stick with that and that alone will save you a good chunk of money
Call your CC companies and discuss options. They might put the fees on hold to help pay you back. Their job is to make money off APR%, not ruin lives (that would be bad for business).
I’m going to go on a stretch and say you can do your freelance work remote? Look for a full-time job. Freelance work should be a side gig as passive income. If I am correct about the remote work, go on indeed, put the position title and area code. Set your filters and apply to as many as possible. Change the free lance title and keep the area code. Spam apply again. Change the area code once you’ve exhausted appropriate titles and then try a different area code and rinse and repeat. That’s what I did.
if you need more breathing room, can you live with more roommates to bring down rent to $1k a month – an extra $500 would help
I live in Boston which I think has even more expensive rent than LA – having 2 roommates is how I saved money when I was 23
Doordashing dinner is literally twice the price of picking it up, and you’re doing that twice a week.
You have debt, you gambled away all of your money, and you’re sort of handwaving away all of your behaviors and seem shocked your credit card bill doesn’t go down.
You’re in financial trouble and you have an inconsistent income. You need to stop living like your friends who have a 9-5. Stop doordashing immediately, that’s insane. Actually look at how your money comes in and goes out and act accordingly.
Also, realize that working in film, this is how it is. There are 45 year olds living the exact same life as you. Is this how you want to go from now on?
Either make more and/or spend less. Get roommates or relocate to cut the rent. Cut the “comfort” expenses. And get more temp work. You’re at least realizing your mistakes young and at 10K of debt, vs older with 50K+ in debt.
Start tracking your expenses.
Make a budget.
Make more $ than you spend + pay down debt.
There’s no magic here.
You got this!
Not sure if viable anymore but was in your situation after college (~20 years ago so ymmv). Thankfully I had good enough credit to play the balance transfer game while I got my $#!^ together.
go refi the all or some of the cc debt at a credit union through a personal loan. rate will be much lower than that of the cards. it will free up your % of credit used which will start to help your score climb back up. just don’t start using the cards again. if you’re nervous about it then close the accounts
If you can do your freelancing remotely you may try moving somewhere with a lower cost of living and pick up a job as a waiter until you get your debt dealt with as others here have mentioned
Get roommates, learn to cook basic meals that are cheap. Don’t splurge on basics. Get the store brand instead of name brand.
Read Dave Ramsey Total Money Makeover. Great starter pack for getting out of debt. The man is a religious asshole on the side, so dont join his stupid cult. Take it in and then move along
My ex got us into 18k of credit card easily really just by ordering Doordash all the time and not budgeting. It happens fast. I’d go through your bank statement and compare the price of each Doordash order or night at the bar to what your minimum payments are. I am guessing you could’ve doubled the minimum payment just with a Doordash free week. Add up how much you spend on per month and imagine putting that towards your cards. It adds up when you have the food + service fee + delivery fee + tip. Also, check your subscriptions and such, those can be sneaky too if you forget what all you’re charged for each month. Go through every expense and make sure you know what it is. Add up the % of the income you spend on “fun” vs debt. I’m a single 24 year old and even with cheap fast food, I can easily spend $20 on Doordash for one meal vs spending $30 on food for the whole week at Aldi. Watch Caleb Hammer on YouTube…he’s got some great suggestions and is very entertaining.
That said, you don’t have to give up all fun to pay off cards. Just do it smartly. Pregame instead of drinking at the bar, don’t pay for other people, make healthier and cheaper versions of your fav foods at home, find cheaper ways of having fun. Also, pay your bills right on pay day (rent, utilities, CC minimums, as much as you can towards debt etc.). That way, you have less money to splurge with and aren’t as tempted.
It’s because you live in LA, Midwest Illinois 2 bed 2 bath in a decent sized college town is 850 a month.
Speaking of doordash, maybe u can sign up doordash or uber as driver and drive while u are waiting on work.
I mean if you cut out doordash alone, its gotta come out to close to your minimum CC payment.. Ammirite??? Its like 30 bucks a pop. 30 x8 times a month = 240. Do literally anything to make money on days off.
Also if you refrain from bar and take out for like 2 months dude, you’ll have a big chunk of change.
What do you mean “the fog is lifting” I’m also recovering from drinking on day 9 tho. Keep going
People afford to live and save by:
– Not ordering door dash and cooking at home
– Not living in a HCOL area
– Not spending a ton of money on alcohol
– Not wasting savings on crypto gambling
– Working full time while finding a job in their field
Yeah dude, you had your rent paid off throughout college from your parents. You made all the wrong mistakes during this time and ended up with 10k in CC debt. Don’t ask “how people save” when you did all the wrong things. That statement would make more sense if you didn’t literally do everything wrong. Sorry for being an asshole but this is what you need to hear.
At least you’re acknowledging the bad habits, just live super humble for a bit and make your own meals. Do free entertainment things like the beach or video games. As for the drinking problem, remember health is the most important of all so take some time to get your mind right. Get some motivation flowing and work your job you’ll see results