4 Tips to Help 30-Somethings Manage Their Debt

Woman checking bills
Peter Dazeley, Getty Images

No matter what our age, we all have to be careful about the level of debt we hold, but for those in their 30s, managing debt can be especially challenging.

According to the most recent data from the Census Bureau, those ages 35 to 44 have the highest levels of household debt of any age group; their $108,000 in median debt weighs in 25 percent higher than the next most indebted age group.

Increasingly, student loan debt represents a big portion of overall debt for 30-somethings. A Federal Reserve Bank of New York study showed average student loan balances for those ages 30 to 39 topped those of other age groups, approaching the $30,000 mark as of the end of 2012.

It all adds up to an increasingly difficult financial balancing act. Even as their incomes begin to grow as their careers take root, 30-somethings are also in the highest-consumption phase of their lives, as they start families, consider buying a home for the first time or upgrading to a more family-friendly home, and improving their lifestyles as their incomes improve. Debt is a necessary part of meeting those challenges, but you have to handle it correctly.

Let's take a look at four tips for those in their 30s to keep control of debt and use it to your advantage.

1. Don't Let Dealing With Debt Derail Other Financial Demands.

Between student loan debt from your 20s and other types of debt you incur for vital purchases, you need to accept that you won't be able to pay down all your debt by the time you're 40. But debt management doesn't always mean avoiding debt entirely.

Once you take care of the most onerous and burdensome types of debt, it's also important to start funneling money to other long-term financial needs.

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Saving for your own retirement as well as your children's future expenses if you choose to have a family can give you an important head start that will make it a lot easier to manage your overall finances in the future.

2. Avoid Dumb Credit-Record Dings.

By the time you hit 30, you'll likely already have a well-established credit history. As your prospects improve, it's essential to have your credit score improve along with them. That means not making silly mistakes like having late payments or excessive balances on credit cards and other revolving debt.

By diligently checking your credit reports through annualcreditreport.com, the free online service that the government requires major credit reporting agencies to provide, you can correct any mistakes that slip through and see the impact smart decisions can have on your credit rating. That will make it easier to get the loans you need on the best possible terms.

3. Be Tax-Smart About Debt.

As your income rises, the benefits of tax breaks on certain types of debt also increase. In particular, most mortgage interest qualifies for an itemized tax deduction, reducing your after-tax financing costs even further from the generally low rates on mortgages. Similar tax breaks are sometimes available for student loans and investment interest expense, so be sure to check whether your loans qualify and, if so, how the tax break factors into your decision of whether to pay them off quickly or more slowly.

4. Get Rid of Credit Card Debt Entirely.

Finally, if there's one attainable goal to strive for by the time you hit 40, it's to eliminate credit card debt from your finances entirely. With high interest rates and draconian fees, the cost of carrying balances on credit cards is greater than with most other types of loans. The interest you save by paying down card balances and then paying off future charges every month is greater than the return on nearly any investment you could make. And best of all, it's a sure thing. In addition, getting credit card debt defeated will give you the confidence to tackle the rest of your debt picture as well.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.