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Get Out of Debt in Your 20s

If you're twenty-something and already in debt, you are by no means alone. In fact, according to bankruptcy expert Elizabeth Warren of Harvard University, more than 110,000 adults aged 25 and under filed bankruptcy last year. Credit card debt among this age group has skyrocketed in the past decade and shows no signs of slowing down.

Plenty of factors are contributing to the rise of debt for those just starting out, including escalating college costs, an unstable job market, and inflation. Many students graduate from college with more than a degree. They also have thousands of dollars in debt.

So how can a smart twenty-something lead a normal social life, buy the things he or she needs, and still have money left to pay the bills and even (gasp) save?

1. Shop smarter.

Do you really need that new, state-of-the-art cell phone, or could you use your old one for another six months until the price goes down? At the supermarket, do you buy name brands just because your parents did? They probably had more money to spend. You don't, so buy generic. That goes for designer clothing, too. If you must wear pricey labels, buy them at close-out stores or consignment shops. Always comparison shop, even for items you're in the habit of buying from the same place. Try online price finders, like www.mysimon.com or www.nextag.com. You'll be surprised to see how you can find lower prices on everything, from toasters to toothpaste.

2. Watch your "luxury" spending.

Okay, everyone defines the word "luxury" differently, but we're talking about the non-essentials: going out for dinner or drinks, ordering pay-per-view movies, getting your hair professionally colored, going tanning, having a manicure, etc. You don't have to cut these expenses out completely, but set a combined limited budget every month and stick to it. If your budget runs out, compromise. Buy a box of at-home hair color or a six-pack to drink with friends instead of going to the bar.

3. Don't open store charge accounts just to get a discount.

It has probably happened to you: you're at the register, and as the clerk is totaling your purchases, he or she asks if you want to "save 10% today by opening a store credit card!" Sure, it may take only a minute, but there are plenty of reasons why you should say no. The small percentage you could save off that single purchase, usually just 10-15%, would soon be gone if you don't pay the balance in full within one or two billing periods, thanks to the interest rates, which are typically higher for store credit cards and average 20% or more. Plus, having new, available credit can be too much of a temptation. Remember, you're trying to get out of debt.