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BUSINESS Wednesday 8 May 2019
A25

Millennial Money:

Break free of debt without paying a price

By AMRITA JAYAKUMAR
Associated Press
Samantha Ealy graduated
with a bachelor's degree
and $70,000 in debt. She
worked multiple jobs to
pay off student loans, a
car, medical bills and cred-
it cards in three years. But
looking back, Ealy sees a
few missteps.
For example, one job of-
fered a 401(k), but she
didn't put in enough to
qualify for an employer
contribution, which she
now regrets. "That was free
money," she says.
Young people buried un-
der the weight of student
loans recognize that pay-
ing off their debt is crucial
to financial freedom — and
for some, to their financial
future, too.
In a 2018 NBC News/Gen-
Forward survey of 18- to
34-year-olds, a third said In this Feb. 12, 2019 file photo, a pedestrian passes beneath City Hall in Philadelphia during a
debt caused them to put winter storm.
off buying a home and Associated Press
31% to delay saving for re-
tirement. In addition, 14% Rightirement Wealth Part- Urban Institute, a Washing- mulate enough money for
percent said they delayed ners in Harrison, New York. ton, D.C.-based think tank. retirement, you need to
getting married, and 16% SAVE FOR EMERGENCIES DON'T FORGET ABOUT RE- give it a long time to grow.
delayed having children. While paying off debt, it TIREMENT CHOOSE A METHOD THAT
Taking steps to get debt- may seem counterintui- Thomas Nitzsche l earned FITS YOU
free and set yourself up for tive to put money away for his own hard financial les- Two strategies to pay off
success also means mak- emergencies. But an emer- sons before he began work- debt include the debt
ing the right moves now to gency fund can prevent ing for Money Manage- snowball and debt ava-
avoid costly trade-offs lat- you from going deeper into ment International, where lanche. With snowball,
er. Three people who paid debt when an unexpected he's now spokesman. you pay off debts from
off debt share lessons they expense hits. Nitzsche, 40, lost his job dur- the smallest amount to the
learned, which may help Laura Olear, 32, a substi- ing the 2008 recession. He largest by taking care of
you refine your own strat- tute public schoolteacher stopped contributing to his the little one first, while pay-
egy. in Los Angeles, said her 401(k) and withdrew all of ing minimums on the oth-
TRACK YOUR SPENDING emergency fund saved her it to pay off about $12,000 ers. Once it's paid, you roll
Ealy, now 31 and pursuing while she was paying off in credit card debt instead. what you had been paying
an MBA at Stanford Univer- close to $31,000 in debt. Soon after, he landed his on it into your payments on
sity in California, realizes Olear used both do-it-your- current job and realized his the next debt, and so on.
she was hyper-focused on self methods and a debt mistake. The avalanche approach
earning more when she management plan from "I had to start over at 28 or prioritizes paying off the
should have paid better at- the nonprofit credit coun- so with building for retire- debt with the highest in-
tention to spending less. seling agency Money Man- ment," he says. terest rate first and pay-
"From day zero, I should agement International to Olear had a similar experi- ing minimums on others. A
have been maintaining a tackle student loans, a car ence. "Retirement for me credit card would be paid
budget," she says. "Had I loan and credit card debt. sounded so far away," she off before a student loan,
done that sooner, I prob- She had saved $1,000, says. "I withdrew my mon- for example.
ably would have realized some of which she need- ey, paid all the fines and "The snowball works better
I could have cut some ed for car repairs during blew it." for behavioral purposes,"
spending that was ridicu- her six-year journey to pay While paying her debt, she Brancaccio says. If you
lous and done without as down her debt. came to understand the need quick wins to stay
many jobs as I was work- "I am grateful that money value of retirement. Olear motivated, choose snow-
ing." was there," she says. now contributes to a 403(b) ball.
Tip: Build a budget and use Tip: Contributing even a retirement plan through her But if you're committed
one of the many free apps few hundred dollars to an job. for the long haul, use ava-
like Mint to stay on top of emergency fund can insu- Tip: While retirement may lanche. "The avalanche
spending, says Bill Brancac- late you from common fi- seem far off, you can't af- mathematically will gen-
cio, a certified financial nancial shocks, according ford to ignore it while you're erally work out better," he
planner and co-founder of to a 2016 study from the paying off debt. To accu- says.q