I, and now my wife, have been in debt ever since enrolling into college.  After college, like many, we both got a good paying job.  However, you quickly find that being on your own results in many purchases, most of which are needs in order to live a comfortable life. We all have a cell phone contract, a rent (or mortgage) payment, high speed internet, and maybe even a car payment.  Don’t forget all those student loans and credit debt you we racked up while being in school.  Of course, add on all the gadgets and you’ll quickly find yourself deeper in debt. Then you get married and start to discuss having kids.  It’s official, you are in debt for the long haul if you don’t make lifestyle changes.

Here are seven lessons I’ve learned as a young adult while being in debt:

Don’t live above your means

It often gets extremely tempting to fall in a trap of buying all the latest and greatest things. The newest cell phones and Apple iPods or other fancy gadgets continually beckon for us to buy them as we see everyone that has one.  Create a splurge account in your budget to treat yourselves once in a while, but only if you have room for it. In fact, we rarely even spend ours each month and we don’t roll over those funds month to month.

Having a large bank account doesn’t matter

I admit that I check our bank accounts daily, hoping that I would maybe see a higher balance for some strange reason.  Alas, I see all the auto payment bills slowly draining our account day by day. In the end, the goal is to be stress free and enjoy life and not focusing on money.  Money supports our goals, but it really shouldn’t be a focus.  It will drive you crazy.

Setting aside money for a rainy day

My wife and I have been putting money away for a house down payment once we decide to make the move to take on a mortgage. Believe me when I say, we are in no hurry! We came to realize that it is important to have extra funds set aside for unexpected events in an emergency fund. Having those funds available will prevent you from falling further into debt. For now, that fund is acting as our pseudo emergency fund, but we  definitely understand it’s importance.

Debt is addicting

Sometimes is easy to think that if you have debt already, what’s the problem by buying that extra pair of shoes or new plasma TV? It’s an easy trap to fall into when you have $40,000 in debt, what is another $500? That $500 would be better served to make any extra payment on your existing debt! It’s time to kick the debt habit!

Know your priorities when it comes to money

As you start out, your first few paychecks will disappear quickly. As time goes on, you will get in a groove as you start your budget based on your typical expenses.  Pay yourself first and start to focus on retirement with an rIRA.  As money becomes scarce, you’ll have to make the tough decisions between whether you spend a night out with friends or hold back once in a while to pay off your high interest debt.

Small sacrifices will pay off in the end

This is compounding as it’s finest.  I learned very early, in high school even, that when you start to invest early, you will be way ahead of your peers when it comes to retirement.  I know plenty of people who are living a more lavish life, but have nothing set aside for retirement. I’m not saying that making sacrifices equals a boring life, but when the time comes, you’ll know what to do.

It’s OK to live frugally in your 20’s

I sometimes get the ‘look’ when I go grocery shopping and use a handful of coupons at the checkout. It’s OK to buy something used on eBay rather than buying something new at the store. Living frugally, not being cheap, is definitely an art that is surprisingly simple to master. I know in the back of my mind when I save $10 here and $20 there, I’m able to focus on our debt more.

As we get older and that more wiser, I’m sure there are plenty of other obstacles we’ll need to bust through in order to reach our goals. Knowing where you stand financially is the first step to becoming debt free. Young and stupid? No, not us!

What lessons have you learned as you fight the debt battle?

Stupidly Yours,

Matt