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Young families often acquire a large amount of debt from unpaid student loans, car payments and credit card usage. Things get worse financially, when they add in the responsibilities of starting a family. If you are a young adult who is yet to find a high-paying job or cannot afford to have his own home or car and constantly struggling with his family debt burden, then make a move right away. Financial planning and an effective debt management plan can always help you in this regard and can save you from crumbling under harrowing debts. Read on, to know about the financial fiasco which you must evade in order to attain a debt free life ahead. These following preconceived notions of young families are mainly responsible for their financial disaster and debt chaos in future so make sure you avoid them strictly.
‘Professional help is not required’
Young families with debt, especially those who have children, should consider meeting a financial planner to put their finances in order. A financial planner not only set a proper budget for you but also advises you to invest your money for the best possible returns. With a financial planner there to guide you, you can easily set your financial priorities. Saving for a home must be the top priority amongst all. They might suggest you to make a college fund for your kids and a rainy day fund for unexpected emergency crisis. Only a certified and reputed financial planner can guide you the best and can help you to meet your financial targets.
‘What is so wrong with a little credit card Debt?’
The greatest financial blunder a family makes is carrying too many credit cards and their huge credit card bills. It is particularly difficult to mitigate and manage credit card debts because they have the highest rate of interest which is more than 17 %. Being inexperienced, young families often commit the mistake of making the minimum monthly credit card payments. What they fail to understand is if they continue to do this it will take them more than a decade to pay off the entire balance. Ideally, they should attempt to make at least $100 more than the minimum payment on each credit card account. Young and yet to be settled families should strive to use cash instead of card as much as possible and in case family members face difficulty controlling their use of credit cards, they should look for assistance from a licensed credit counselor regarding in this regard.
‘Fly without a Budget’
A close kin to any debt issue is poor budgeting. Young couples tend to overspend mostly because they often underestimate their expenses. The problem originates from their flawed spending habit which is to spend first and then plan to save the amount left. Unfortunately enough, after spending incessantly there is hardly any amount left at the end of the month. As a remedy to this problem make a frugal budget keeping in mind all your daily expenses and saving plans and follow it sincerely.
‘Retirement is Far Away’
Many young couples just don’t decipher the significance of saving for retirement and skip investing in their 401k retirement plans or IRAs. As these youngest wage earners are under a misconception, that retirement is a long way away from them, they prefer to focus on short-term goals, like buying a new car and fail to contribute for long time investment like retirement plan. Those who invest at least 15 percent of their income in retirement savings consistently from an early age remain far ahead financially after retirement than those who don’t.
Keep in mind the above mentioned points and avoid repeating these mistakes in future. Steer your financial life to the right direction as soon as possible.