What Are the Best Strategies for Millennials in Debt?

For years, I worked hard but had nothing to show for it financially. Despite having a steady income since I was 19, I didn’t start saving until my final semester of college. I had no concept of budgeting, and no idea how credit cards worked, and I ignored my mother’s financial advice in favor of my bad shopping habits.

It wasn’t until I hit rock bottom—after making some costly mistakes—that I finally turned things around. In the past two years, I’ve cut my spending by more than half, rebuilt my savings, and developed healthy financial habits. Here’s how I did it and what I’ve learned along the way.

The Costly Mistake: Joining a Pyramid Scheme

One of my biggest financial regrets was joining a pyramid scheme. I paid a large sum upfront to become a member, plus additional costs for training and materials. I completed the training, only to realize the system was rigged to benefit those at the top. It was a hard lesson, but I quickly cut my losses and got out.

I mention this because many people—my past self included—are tempted by the idea of getting rich quickly. But the truth is, there’s no magic shortcut. Even winning the lottery won’t help if you don’t have solid financial habits. Wealth isn’t just about how much money you make; it’s about how you manage it.

Starting Over: Rebuilding My Financial Habits

After that financial disaster, I knew I had to change my approach to money. The first step? Reopening my savings account. I committed to always deposit my tax returns if I received one.

While living with my parents, I had a unique advantage—I didn’t have to worry about rent, utilities, or a phone bill. I took full advantage of this by splitting my income:

• 50% went into savings
• 50% went toward paying off debt

Additionally, I followed two simple but effective credit card tips from a banker I met at 20:

• Always pay your credit card bill two days before it’s due.
• Always pay more than the minimum balance.

Even with these habits, my debt wasn’t shrinking fast enough. That’s when I turned to debt consolidation—for the second time in one year. Through Credit Karma and Mint, I found options that helped me manage my payments more efficiently.

Tracking My Spending with Helpful Apps

One of the biggest wake-up calls for me was realizing how much money I was wasting on unnecessary expenses.

I started using an app called Clarity, which tracks my subscriptions and spending habits. It was eye-opening to see how much I was spending on takeout, particularly on Seamless. Having that data in front of me made it easier to cut back on impulse spending.

If you struggle with overspending, I highly recommend using budgeting apps like:

• Mint – Tracks your spending and helps with budgeting.
• You Need a Budget (YNAB) – Helps allocate every dollar to a category.
• PocketGuard – Shows how much money you have left after bills and savings.

The 50/30/20 Rule: A Simple Guide to Better Finances

One of the most effective budgeting methods I’ve adopted is the 50/30/20, which divides your income into three categories:

• 50% for needs – Rent, utilities, groceries, insurance, and debt payments.
• 30% for wants – Dining out, shopping, entertainment, and hobbies.
• 20% for savings and investments – Emergency funds, retirement accounts, and extra debt payments.

By following this rule, I’ve avoided the embarrassment of borrowing money and improved my financial health significantly.

My Step-by-Step Guide to Getting Out of Debt

If you’re struggling with debt, here’s a simple approach that worked for me:

1. Calculate Your Total Monthly Income

Before making any changes, you need to know exactly how much money you’re bringing in. This includes:

• Your Salary
• Side Hustles
• Tax returns
• Any other income sources

Knowing this number will help you set realistic budgeting goals.

2. List Your Monthly Bills

Write down all your fixed expenses, including due dates. I use an Excel spreadsheet to keep track. Every time I get paid, I update the sheet and subtract bills from my balance. This helps me avoid late fees and overdrafts.

3. Adjust Your Bill Due Dates (If Possible)

If your accounts allow it, move due dates to align with your pay schedule. For example, if you get paid twice a month, try to have bills due shortly after payday to ensure they’re covered.

4. Identify Necessary vs. Unnecessary Spending

Break down your monthly expenses into two categories:

• Necessities – Rent, groceries, gas, insurance, medications, etc.
• Non-essentials – Streaming services, takeout, online shopping, etc.

Cut back where possible and focus on needs first.

5. Allocate Leftover Money Wisely

Once your bills and necessities are covered, distribute any leftover money strategically:

• Pay extra toward debt.
• Add to your emergency fund.
• Save for future goals.
• Treat yourself—just within reason!

Tackling Credit Card Debt: Two Effective Strategies

One of my biggest challenges was paying off credit card debt. Here are two strategies that helped me:

1. Use a 0% Interest Balance Transfer Card

If you qualify, transferring your balance to a 0% APR card can save you money on interest. Just be sure to:

• Pay off the balance before the promotional period ends.
• Avoid using the card for new purchases.

2. Consider a Personal Loan for Debt Consolidation

Taking out a personal loan to pay off high-interest credit cards can lower your payments. But only do this if you’re disciplined enough to avoid new credit card debt. If necessary, cancel some credit cards to remove the temptation.

Changing Your Habits for Financial Success

The biggest financial lesson I’ve learned is that your income isn’t the problem—your spending habits are. By tracking expenses, budgeting wisely, and being intentional with money, you can take control of your finances and avoid falling into debt.

These changes have transformed my financial life, and I hope they can help you too.

Frequently Asked Questions (FAQ)

What are your best tips for improving financial health? Share them in the comments below!