Debt Traps and How to Avoid Them

Graduation brings great excitement — and an overwhelming amount of responsibility. Dorm life is replaced with apartment life –which means you owe rent money every time the first of the month comes around. And paying for life while you find a job or face the lower salary of an entry-level job isn’t easy.

If you’re not careful, you may find yourself in a debt trap, surrounded by stacks of unpaid bills.

This doesn’t have to be you. You can stay in control of your finances by following these guidelines for responsible post-college savings and spending.

  • Build an Emergency Fund

An emergency fund is your protective shield against debt traps. Start with a reasonable sum, like $100, and then work your way to a bigger goal, adding a little every month until you reach $1,000. This practice will get you in the habit of saving some of your income and not spending everything you have.

The other benefit of an emergency fund is that you won’t have to panic when you face unexpected expenses. Rather than stressing and taking out loans, opening credit cards and skipping bills, use your emergency fund.

Just remember to work toward replenishing it after you handle a crisis.

  • Pay Attention to the Grace Period for Student Loans

Your next step to staying in control is handling student loan debt. Most loans come with a six-month grace period during which no loan payments are due. After this time period, though, it is up to you to communicate with your student loan servicer to make sure you begin making your monthly payments.

Be sure to contact the company if you don’t know what date the first payment is due.

Before the grace period ends, evaluate your budget to make sure you can handle the payments you will owe. You may need to save money during your grace period, or see if you qualify for a long-term repayment plan. Other options for getting a head start on those pesky loans include using money from a retirement plan like a 401(k) or finding an annuity buyer to sell your annuity payments for a lump sum.

Whatever you do, don’t ignore your payments and let late fees and interest build.

  • Don’t Develop a Credit Habit

The third strategy for protecting your wallet is preventing yourself from accruing more debt than you already have. When you find yourself struggling, bail yourself out with your emergency fund rather than adding to your credit card bill. Other times that you are tempted to turn to credit, recognize that some items need to be put off; you should not buy what you cannot afford.

Another dangerous credit habit that’s easy to fall into with post-college spending and high credit limits is not paying your credit card bill or paying only the minimum. These kinds of habits will force you into paying late fees and facing higher interest rates. The bottom line: Use credit sparingly, and pay it off immediately.   

Alanna Ritchie works as a content writer for, where her primary focus is personal finance

One thought on “Debt Traps and How to Avoid Them

  1. To add to these, I think the key to avoid debt trap is self discipline and learning to live on what we can afford.

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