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Generation Debt: The High Debt Of 20-somethings

22 October 2008 5 Comments

The recent financial crisis in our country has truly revealed the dangers of too much debt in our society, both on the individual and corporate level. While our government seemingly can print money to continue its highly leveraged way of operating, individuals cannot. The level of debt in our country is at dangerous levels and we have just begun to see some of the dangerous results of it.

The housing mess is a large result of individuals borrowing too much money and then not being able to afford the payments. Creative mortgages and home equity lines of credit all fueled a housing boom that left individuals with crushing levels of debt. This is only one aspect of our economy, but is a gloomy example of our attitude towards debt.

Unfortunately for those in their 20s, this appetite for debt is very present and in some cases, even higher than the rest of the population. In this post, I want to take a hard look at the causes of debt for people in their 20s and some solutions to get out from under the crushing weight of debt.

Types of Debt

There are two major types of debt that I want to look at. First, let’s look at lifestyle debt. This is the worst kind of debt because it typically comes with higher credit card balances and also is something that can easily be avoided.

Lifestyle debt is caused by living beyond your means. Unfortunately, too many 20-somethings get caught up in trying to have the latest fashion, latest gadgets, a nice car, etc. Instead of creating a foundation of financial responsibility that will lead to financial success in the future, one who goes the route of lifestyle debt does the exact opposite. Accruing high interest debt in your 20s is disastrous for your financial future for reasons we will get into later.

The second type of debt is what I call “starting out” debt. This category revolves around financing things that are necessary to get you started in your career or in life. Student loans fall into this category. Also, some credit card debt for things like suits for your new job or a new computer can also fall into this category. Or maybe you need some furniture for your apartment or house just to live comfortably. The goal here though is to not splurge and buy the best of everything. This is where the line begins to blur between “starting out” debt and lifestyle debt. If you need a couple suits for work, buy some nice, but inexpensive ones. If you need furniture, check Craigslist. Use common sense here.

Both of these kinds of debt are very common for 20-somethings. Do you best to eliminate lifestyle debt and minimize starting out debt.

Why Is Debt In Your 20s Bad?

Simply put, high levels of debt in your 20s is bad because it delays all efforts to be financial responsible and push towards any financial goals. Basically, nothing starts until you pay off your debt. The more debt you accumulate early, the longer you wait to start saving and putting away good chunks of money toward you future.

For example, if you build ten grand in credit card debt between the ages of 20 and 25, it is probably a safe assumption that you didn’t save anything during those five years. If you decide to start being more responsible at 25, you have to first pay off that ten grand before you can start saving (for the most part). It may take a few years to pay that off, and then you can start saving money and pursuing some savings, investing goals.

Instead, why not minimize your starting out debt as much as possible so at worst, you only have a few thousand in debt very early in your 20s. Make it a goal to start saving money by the time you’re 25. Every dollar saved at this age is exponentially significant down the road. Sign up for the e-book at the top right of this page for more details on why saving in your 20 is so crucial.

How To Get Out Of The Hole

The harsh reality is that to get out of debt, it takes hard choices. Nobody is going to pay off the debt for you, so you either need to figure out how to make more money or cut some expenses. You might need to make some tough decisions to get rid of the debt in your life. It might be time to suck it up and make it happen. Let’s look at some possible options.

  • Move in with your parents. While this may be humbling, it could definitely help with living expenses for a few months. If your parents demand some sort of “rent”, offer to cook dinner for them a few nights a week instead of paying rent.
  • Extra Income. Perhaps, take a part time second job and wait tables a few nights a week. Yes, your social life might take a hit, but again, think of how freeing it will be to be debt free!
  • Borrow from your family. Maybe you can negotiate to borrow some money to pay off the high interest debt you have. You can probably negotiate better terms with your family member than with a credit card company. Just be sure to pay them back otherwise you can ruin a relationship.


Debt is something that plagues almost everybody today. Put together a plan to rid yourself of this burden and stick to it. The good news is that there are good things about your 20s that may help you along the way. Your 20s can be a time of rapid growth in terms of promotions and raises if you excel in your career. Also, you probably don’t have a family yet. Pay off your debt before you have dependents; trust me, your mandatory expenses are only going to increase down the road.

It’s time to separate yourself from the rest of society and get rid of the debt in your life. Your future financial success depends on it. Look, only you can make this happen. If it’s necessary, it’s time to take drastic measures and get out of debt. Do you want to accomplish your financial goals or not? The time is now. Do not wait. Start today and implement a plan to get completely out of debt… It’s time to turn 20s Debt into 20s Money!


  • Eric said:

    This is a huge problem in our generation. Consumerism is the first piece that needs to be addressed because its the wild spending our generation seems to be conducting that has partial blame in where we are. Everytime I goto the mall or a store to pick something up (which is not often) I cringe as I watch others my age spend lavishly. Despite my written advice, and spoken advice on person finance matters many of my friends spend their pay checks as soon as the check clears. Personally I am hoping that this financial crisis and the recession will push people to wake up. The unfortunate aspect is I know our generation, and I can’t help but feel it will have little if any impact.

  • MoneyGrubbingLawyer said:

    I fully agreed with this article until the “How to Get Out of the Hole” section. Extra income is a great tip, especially when paired with reducing expenses. However, moving in with parents and borrowing from family are terrible ways to save money. There’s no question that they will benefit you financially, but at a major cost.

    In your 20s you need to be focused on not just growing your bank account, but growing yourself as a person. This means moving towards independence, even if it costs you money. In fact, I can’t help but think that one of the biggest problems with our generation is that too many of us remain dependent on parents, rather than moving towards self sufficiency. Stand on your own two feet- you’ll be a better person for it.

  • kevin duffey said:


    I agree with your take on the independence issue. However, I also respect people that do what it takes to get out of their dire situation NOW rather than later. A 20-something who needs help getting rid of debt is a much lesser burden than someone older (perhaps with a person) in a tough financial situation.

    If such a move were warranted, I would encourage parents to have the agreement fully structured with a definite move out date. This is imperative to avoid an “mooching” situation with no end in site. Establish goals and time frame and encourage the action.

    Again, perhaps this is only needed in desperate situations, but I have no problem with it when done correctly.

  • Librada Gledhill said:

    Thanks for a really interesting read, learn quite a few tips here, trying hard to improve my credit , i did a consumer proposal 7 years ago and just now i am starting to rebuild my credit slowly but surely and trying to avoid that credit card trap.