Debt-free revolution: How to overcome student loans, credit card balances, and rising living costs?
Learn how to overcome the debt dilemma and how to approach your financial future
How do you overcome debt from student loans, credit card balances, and rising living costs?
Learn how young adults today are increasingly rallying around the concept of achieving financial independence through aggressive debt elimination.
This ‘debt-free revolution’ represents a significant shift in how younger generations are approaching their financial futures. But can it really be done? And what strategies are proving effective for those seeking to break free from the shackles of debt?
The dilemma
Debt has become a major concern for younger generations, particularly millennials, born roughly between 1981 and 1996, and Generation Z (Gen Z), born roughly between 1997 and 2012.
The Institute for College Access and Success, an advocate for student-centered public policies that promote affordability, accountability, and equity in higher education, reports that 65 per cent of United States college graduates in 2023 carried student loan debt, with the average balance nearing $40,000 (Dh146,000).
Arun Leslie John, chief market analyst of a Dubai-based investment company shared some statistics to prove the severity of the debt dilemma.
Debt has become a defining feature of financial life for many young adults. The total student loan debt in the United States exceeded $1.7 trillion (Dh6.2 trillion) in 2023, impacting over 44 million borrowers. Debt can feel overwhelming, especially for those just starting their careers.
The financial burdens faced by these younger cohorts are significant. Rising education costs, coupled with the increasing expense of living, have created a debt landscape that many struggle to navigate.
Dr Pallavi Kishore, head of accounting and finance, Middlesex University Dubai said, “Rising living costs — rent, healthcare, and education — coupled with economic uncertainty, have made debt a pressing issue for younger generations, particularly millennials and Gen Z.
“This often delays financial goals like homeownership or retirement savings. Many young adults rely on credit cards, leading to high-interest debt that can quickly spiral out of control without careful management.
“This has sparked a growing interest in financial literacy, budgeting, and movements like the debt-free revolution, which promotes the psychological and emotional freedom that comes with being debt-free.
“The movement emphasises reducing reliance on credit, strict budgeting, and prioritsing savings over spending.”
This environment has fueled a burgeoning movement aimed at escaping the cycle of debt and achieving what proponents call financial indigence, which is a state of financial independence free from the weight of borrowed money.
Where did the debt-free movement come from?
The debt-free revolution is not just a financial strategy; it’s a cultural shift. Social media platforms are overloaded with influencers and personal finance experts promoting various methods to achieve debt freedom.
A key strategy in the debt-free movement is the snowball method, popularised by the host of a personal finance radio show Dave Ramsey.
This approach involves paying off debts from smallest to largest, regardless of interest rates. The psychological boost from eliminating smaller debts first can provide the motivation to tackle larger balances.
Conversely, the avalanche method focuses on paying off debts with the highest interest rates first, potentially saving more money in the long run.
There are strategies that are proven to be effective to either help you prevent falling into the endless loop of debt or help you see the light at the end of the debt tunnel.
Here are some tips for you.
Budgeting and expense tracking: Establishing a clear budget and tracking expenses meticulously is foundational. There are tools that can help you visualise spending patterns and identify areas where you can cut back.
Increasing income: Many debt-free advocates emphasise the importance of boosting income. This might involve side hustles, freelance work, or negotiating a raise. The extra funds can be directed towards debt repayment.
Debt consolidation: If you have multiple high-interest debts, consolidation can offer relief. This involves taking out a lower-interest loan to pay off existing debts, simplifying payments and potentially reducing the overall interest burden.
Emergency funds: Building an emergency fund is crucial. Having savings set aside can prevent individuals from accruing more debt when unexpected expenses arise.
Financial education: Educating yourself about personal finance is vital. Many people fall into debt due to a lack of understanding about how interest works, how to budget, and the implications of credit scores.
Kishore added another tip saying, “Start early, reap big, begin investing early in life, even with a small amount, so your investment has time to grow with you.”
John also shared another tip for surviving and breaking free from this vicious cycle. “Automating payments by setting up automatic payments for debts ensures they are paid consistently and on time, reducing the risk of missed payments and late fees.
“Automating transfers from checking accounts to debt accounts helps maintain discipline in debt repayment and eliminates the temptation to spend available funds elsewhere.”
Debt affects different generations in varying ways. Millennials have been hit particularly hard by student loan debt. As they enter their late twenties and early thirties, they face the dual pressures of student loans and a challenging housing market.
Meanwhile is grappling with the legacy of high student loan balances and rising living costs, while also facing economic uncertainties such as inflation and job market instability.
The impact of debt is profound, influencing not only financial stability but also life choices. Young adults burdened by debt often delay major milestones like buying homes or starting families. The strain can also affect mental health, with stress and anxiety being common among those struggling with financial obligations.
Breaking free from debt and being financially free is not the end of the journey. Maintaining this status is even harder than achieving it. There is no point in paying all your debt to then falling into the same trap again.
John said, “Investing in long-term financial growth is focusing on investment opportunities can help build wealth over time once debt is under control.
“Learning about basic investment options like stocks, bonds, and mutual funds can improve financial stability and growth. Investing early and consistently allows compound interest benefits to work in one's favour.”
Can you break free once and for all from debt?
The success of the debt-free revolution hinges on several factors. While many individuals have made significant strides in eliminating debt and achieving financial freedom, systemic issues such as the high cost of education and stagnant wages continue to pose challenges.
However, the movement’s growing popularity suggests a positive shift. By adopting strategic financial practices, leveraging available resources, and fostering a culture of financial literacy, many young adults are making meaningful progress towards a debt-free future.
The debt-free revolution is more than just a trend, it’s a necessary response to the financial challenges faced by younger generations.
“The debt-free revolution among young adults is not just a dream — it’s a feasible goal with the right approach and mindset.
“Young adults can achieve financial freedom by embracing effective debt management strategies, maintaining disciplined spending habits, focusing on long-term financial growth, and cultivating a habit of saving and postponing purchases,” said John.
Through disciplined budgeting, informed debt management strategies, and a commitment to financial education, achieving financial freedom is increasingly within reach.
As this movement continues to evolve, it holds the potential to reshape how future generations approach money, debt, and financial independence.