Tips for Eliminating Your Young Family’s Debt Responsibly and Efficiently

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Typical young families have to contend with a lot more debt than they did in previous decades. As the wealth gap has increased, so has the cost of living. Homes are increasingly unaffordable for families, people struggle to afford transportation costs, and the average amount of student debt that young professionals carry with them for ten years or more is simply staggering. Meanwhile, typical wages have stayed stagnant across a variety of employment sectors.

Consider Refinancing Options

Loans and credit card debt that has variable interest rates attached can become difficult to stay current on. Moreover, a high interest rate will ultimately force families to pay an exorbitant amount of interest to fulfill an obligation. In some instances, interest payments can far exceed principal balances. It may be advantageous to pursue refinancing opportunities with an interest rate that is a fixed amount or a variable rate that has only a moderate range of movement.

Related: When Should You Refinance Your Mortgage? 

Protect Interests From Creditors

Without key safeguards, a family’s resources may be vulnerable to creditors. Some important assets such as financial savings accounts or settlement awards may be inaccessible if they are structured into a trust. By utilizing trust administration to manage and possibly grow resources, young families can avoid suddenly losing some or all of a key asset to creditors.

Pay Off High Interest Rate Debts First

The key factor that influences a family's approach to prioritizing payments should be obligations' respective interest rates. Putting dents in a big balance or simply doing away with a smaller balance so you don’t have to worry about it may seem like a good course of action, but it could end up increasing the total amount paid towards individual liabilities in the long run.

Work on Building Credit

Credit is a vital tool that can help families clear debts expediently. It is important to monitor your credit score regularly in order to measure progress building or repairing credit. By establishing good credit, young parents can access better interest rates for basic financial resources such as credit cards and auto financing. It can also help people qualify for employment and housing opportunities.

Spend Conservatively

Young families need to adopt a household budget that preempts the possibility that they will continually spend more than they earn. After creating a budget, it is imperative that everyone is steadfast about sticking to it. This entails judicious spending, competitive shopping, and disciplined distinctions between wants and needs.

Some people mistakenly blame certain types of governance for the average household’s susceptibility to accumulating debt. In reality, a small minority’s general unwillingness to make super wealthy corporations pay their fair share is a large part of why so many families struggle to make ends meet. Because young couples or single parents with children are likely to start their family’s financial trajectory with considerable debt, they need to be strategic about finding ways to get out from under debts and get ahead. Here are some simple tips that can help young families manage debt, avoid defaults, and safeguard their financial futures.