How-to Avoid The Cash Advance Trap Facing College Graduates

This is likely the first summer that many of you guys are out of school and in “the real world” earning an income. Feels great doesn’t it? You worked hard for so many years and now you’re finally earning an income where you can buy anything you want. Well that’s actually the good and the bad part about what new young professionals are going through right now.

After speaking with some friends and readers it seems like cash advances are slowly becoming an issue for young professionals that have recently graduated from college. Before I get into the discussion let me tell you about two common cash advance options:

Payday loans/cash advances. With the rise of so many new bills and overhead costs it seems like pride will only allow you to cover these bills through the help of cash advances and not with the help of those around you. There are many companies out there willing to give you a cash advance so accessibility is definitely not an issue. Before you read the rest of the article keep in mind that I see nothing wrong with requiring financial assistance at some point in your life.

Credit card cash advances. Most credit card companies provide you with the option of pulling out cash from your credit card. What a great credit card provider you have; they increase your limit, they let you shop online, and now they give you a cash advance that you can get from any bank machine.

What can do you to avoid the payday loan trap? How can you stop the cash advance curse? Below are some very practical and realistic tips for getting out of the payday loan trap: (Keep in mind I’m a brutally honest kind of guy)

Tip #1: Pay your bills first. I know some of you will roll your eyes and say that this is common sense but what happens many times is that people slack with paying their bills and then end up needing a 30 day payday loan. Once the month is up the same bills come in by “surprise” again and another cash advance is required, it can be a viscous cycle. Don’t put off paying your rent just because it’s not due for a few weeks.

Tip #2: Take an honest look at your monthly spending. Do you need the full Blackberry data plan? Is making your own food so bad? Do you have to drink Alize? How often do you use that gym membership? How many channels do you really need?

These are all questions you should ask yourself when looking over your monthly spending. The hardest thing for me was to eliminate a subscription that I was emotionally attached to but wasn’t really getting any value out of.

Tip #3: If you’re low on cash, party at home. I’m not a hypocrite so I won’t tell you to stay inside all the time because I know how hard that can be in your 20s. To make sure you don’t miss out on much, you should try staying in or going to a friends place to drink. It may not be the funnest idea but it will help you get out of the trap of payday loans. To be very honest here- chances are that unless you experience some sort of emergency it’s your partying that keeps you in the cash advance cycle.

Tip #4: If all else fails- try being cheap for once. Not frugal but cheap. I would normally not advise anyone to be cheap but if you find yourself at the point where you need payday loans to survive and frugality tips don’t work then your lifestyle needs to be altered until the point that you feel it’s “cheap.”

Stuff happens in life so I know I’m in no position to be judging anyone that needs a short term loan. Payday loans definitely serve their purpose. However, one must be aware that these cash advances can become very dangerous when used all of the time.

photo: taberandrew

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