10 Tips to Live Debt Free on a 25k Salary

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As promised, here is a post about living debt free. Unfortunately, debt is an epidemic among 20something year olds thanks to mix of bad luck, a shaky economy, and terrible spending skills. Know that you are in good company.

Below you will find an excerpt of an article I wrote for the Yahoo Contributor Network entitled 10 Tips to Live Debt Free on a 25k Salary. No worries, I won’t leave you hanging, there is a link at the end if you want to read the entire article (for legal reasons I can’t post the entire thing here).

10 Tips to Live Debt Free on a 25k Salary

With the current wobbly economy many Americans find themselves living paycheck to paycheck. People seem to think that if only they made more money their financial woes would be solved. Unfortunately, unless you actually plan out your budget and stick to it, it really doesn’t matter how much money you make, you are still going to encounter the same problems. That’s why whether you make $25,000 or $125,000 you need to plan your finances so that you get the most out of your income.

1. Collect all the data and put it on paper.

You may need to dedicate and entire day to this task depending on how messy your finances are. Simply collect all your financial data (income, credit cards, accounts, IRA, expenses, etc.) and put it into two separate charts. The first chart will include all of your income: salary, side business, and otherwise. The second chart will list off all of your current expenses. You can also use free financial websites like Mint.com to help you see exactly where your money is going.

2. Cut unnecessary expenses.

Do you really need an expensive gym membership? Can you cut some of your electricity and water use? The truth is that many times we are paying for more than we actually need. Find out where you can make some cuts and adjust accordingly.

3. The 60% Budget

A popular budget is the 60/40 theory. That is to say, 60% of your pay goes toward expenses and the other 40% goes into savings. You will be surprised at how easy it is to cut your expenses to 60% of what you make. You will also be surprised at how quickly your will savings grow.

4. Have some sort of secondary income.

Many financial experts will tell you that depending on one income is not enough. For this reason, you should start finding ways to make some extra money on the side.The Simple Dollar has an entire list of businesses that you can start on your own.

5. Keep your accounts simple.

There really is no reason to have multiple checking accounts unless you have a separate account for business expenses. With multiple accounts and no organization you will have a hard time keeping up with everything and may not even be able to track how much you spend.

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• 2011 Money Goals for Gen Y
• 5 Money Saving Tactics for Gen Y
• Taking the Red Pill: 5 Steps for Taking Control of Your Finances
• Tips for Paying Off Student Loans