Am I Financially Ruined at 23 With $96,000 in Debt and Just a $75,000 Salary?
If you're deep in debt, you can probably still dig yourself out of it.
Being very young can help your situation a lot, too.
A bright financial future can lie ahead if you start making some smart moves.
The $23,760 Social Security bonus most retirees completely overlook ›
As always, The Motley Fool cannot and does not provide personalized investing or financial advice. This information is for informational and educational purposes only and is not a substitute for professional financial advice. Always seek the guidance of a qualified financial advisor for any questions regarding your personal financial situation. If you'd like to submit your question for feedback, you can do so here.
Many of us occasionally worry that we're not doing a good job of saving and investing for the future -- something that is vital to do. A 2024 survey by SoFi Technologies found that 17% of respondents have no retirement savings and about 60% have saved less than $50,000. And per a 2024 Bankrate survey, fully 57% of American workers feel behind on their retirement savings.
But not everyone who's worried should be worried. Someone on Reddit, for example, asked whether she was financially ruined -- at age 23 -- because she is in debt to the tune of $96,000. Here's a look at that question.
A worried young person asks...
The Redditor said:
Am I Cooked? I'm 23 and 96k in debt.
by u/Little-Bass0600 in personalfinance
To summarize, the questioner is nearly 24 years old and has just started her first job, earning a salary of $75,000. She's living at home and has no savings. Her plan is to switch into a cheaper car as soon as she can and live on a strict budget, to help her pay down her debt.
Is the poster really "cooked"?
The questioner wonders whether she's "cooked." Many people responded to the post, with one person explaining that the situation might be "sizzling," but she's not cooked. That's very true. Here's why:
The poster is very young, with lots of time to fix her problem and improve her financial condition.
By living at home, presumably with her parents, she should have a low living costs; this allows her to used much (or most) of her earnings to pay down debt. (If her parents aren't charging anything for rent or food, the questioner is especially well situated.)
One issue, the $36,642 in car loans, might be addressed relatively quickly by switching from a presumably expensive vehicle to a less costly one.
Getting out of debt
Many, many people are deep in debt, and many have paid off much greater sums than $96,000, even while earning less than $75,000 and even while living on their own and raising a family. It's almost surprising what we can accomplish when we're determined enough.
There are many ways to pay off debts. Here are a few:
Use balance-transfer cards: You might move some or all of your credit card debt to a new balance-transfer credit card that offers a 0% interest rate for an introductory period (which could be a year and a half, or potentially more). Once you do so, aim to pay off that debt within the introductory period.
Start paying off your highest-interest-rate debts first because that will help you save the most in interest payments.
Alternatively, pay off your smallest debts first, just to get rid of them and reduce the number of debts you have. This can be satisfying psychologically.
Tap your home's equity, if you own one: If you know you will be disciplined about paying off your debt and you have some home equity you can borrow against, you might do so in order to pay off higher-interest-rate debts.
There are other ways to tackle debt, too -- including just calling up your credit card lender and asking for a lower rate. A little digging online can turn up additional debt-reduction strategies.
What else should the poster do?
As this young questioner pays off her debt, what else might she do? Well, the advice below is for her and for us older folks, as well:
Aim to live below your means, spending less than you bring in. This will leave you with extra earnings that can be used for savings and investments. A side hustle can be a big help, too.
Build an emergency fund, so that you can stay afloat in the event of a job loss or costly setback.
Read up on how to invest. Young people are in a particularly great position when it comes to investing in the stock market because their dollars have a long time in which to grow.
Open an account at a good brokerage and start investing!
The original questioner is actually in a pretty good place, having recognized and spelled out her financial problems and taken steps to start solving them. In a few years' time, she will likely be debt-free and have some money saved for her future.
The $23,760 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
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