Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
Starting adulthood often comes with excitement and financial challenges. Many young adults in Wisconsin, especially in cities like Milwaukee, begin their independent lives with high hopes but soon face the reality of mounting debt. Credit cards, student loans, and easy online spending make it simple to fall into what experts call “living in the red.”
As a Milwaukee bankruptcy lawyer who has seen how quickly small debts can snowball, we know that most young people don’t end up in financial trouble because of bad choices; they simply lack the right guidance. This blog will help you understand how debt develops, how to take control of your finances, and what practical steps you can take before things spiral out of hand.
If you’ve ever wondered why it feels impossible to get ahead despite working hard, or if you’re already juggling credit card bills and student loan payments, this article is for you. By the end, you’ll learn how to avoid common financial traps, manage credit wisely, and protect your financial future.
For many people between 18 and 25, managing money is an entirely new experience. Easy access to credit cards, online shopping, and buy-now-pay-later offers often create a false sense of financial freedom. Low income, lack of budgeting skills, and peer pressure to maintain a lifestyle can make young adults vulnerable to overspending.
Financial mistakes young adults make often stem from limited financial education. According to recent data from the Federal Reserve, credit card debt among adults aged 18 to 24 has increased by over 30 percent in the last few years. As a result, many are spending nearly one-third of their monthly income on debt payments.
Young adults who learn how to manage credit card debt responsibly early on are less likely to struggle later. Simple budgeting, setting savings goals, and understanding the cost of borrowing can help create long-term stability.
The phrase “living in the red” describes spending more than you earn, leading to negative cash flow and growing debt. It’s not just about numbers, it’s a lifestyle pattern that can quickly spiral out of control.
When expenses consistently exceed income, credit cards often become the solution to fill the gap. Unfortunately, this borrowed money can accumulate faster than expected. Buy-now-pay-later programs, payday loans, and unnecessary subscriptions contribute to the problem.
Living on borrowed money may seem manageable at first, but the long-term impact includes stress, poor credit scores, and limited financial flexibility. Recognizing the early signs of financial trouble is key to breaking the cycle.
Credit cards can be valuable tools when used wisely, but they often lead to financial pitfalls for young users. The Credit CARD Act of 2009 was designed to protect young consumers, limiting how credit card companies market to minors and requiring proof of income or a co-signer before approval. Despite this, many companies still find loopholes that expose inexperienced borrowers to risky financial products.
Common credit card traps include:
Borrowers often underestimate how quickly interest accumulates. Paying only the minimum balance can nearly double the amount owed due to compounding interest.
According to the Federal Reserve’s 2022 Survey of Consumer Finances, adults aged 18 to 24 carry an average of $2,800 in credit-card debt, a 30 percent increase since 2016.
Developing financial literacy is one of the most important steps toward independence. Learning to manage credit, understand interest rates, and build good spending habits can prevent years of financial stress.
Start with a simple budget that tracks income, expenses, and savings goals. Prioritize essential expenses like rent, food, and transportation before entertainment or luxury spending. Maintaining a credit utilization ratio below 30 percent of the available limit helps build a strong credit score.
Checking credit reports regularly ensures accuracy and protects against fraud. Under the Fair Credit Reporting Act, every individual is entitled to one free credit report per year from each of the three major bureaus through AnnualCreditReport.com.
Roughly one-third of college students say finances are a leading reason for pausing or dropping out, according to the National Center for Education Statistics.
Wisconsin residents have specific legal protections under both state and federal law. Understanding these rights can help prevent unfair treatment from creditors or debt collectors.
The Fair Debt Collection Practices Act (FDCPA) prohibits harassment or deceptive collection tactics. If a creditor threatens or misleads you, you have the right to dispute the debt and request written verification. Wisconsin law also restricts how much of your paycheck can be taken to pay off debt.
Wisconsin law limits most wage garnishments to 20 percent of disposable earnings (Wis. Stat. § 812.34).
The statute of limitations for most debts in Wisconsin is six years, meaning creditors cannot legally pursue collections after that period. Being aware of these timelines can help individuals make informed decisions before considering drastic measures like bankruptcy.
Once debt starts building, it’s never too late to regain control. Begin by identifying where your money goes and create a realistic debt payoff plan. Some people prefer the debt snowball method (paying off smaller debts first), while others choose the avalanche method (targeting higher-interest debts).
Consolidation loans or credit counseling can simplify multiple debts into one manageable payment. However, borrowers should always research fees and terms before signing any agreement.
While bankruptcy is a legal option for those facing extreme financial hardship, it’s not the only one. Non-bankruptcy strategies, financial counseling, and budgeting support are often effective in helping young adults rebuild stability.
| Age Group | Avg. Monthly Income | Avg. Debt Payment | % of Income on Debt |
| 18-24 yrs | $2,400 | $700 | 29% |
| 25-34 yrs | $3,800 | $900 | 24% |
| 35-44 yrs | $5,000 | $1,000 | 20% |
This data highlights how younger adults spend a larger portion of their income on debt payments compared to older age groups, leaving little room for savings or emergencies.
It means spending more than you earn, resulting in debt and a negative cash flow each month.
Pay bills on time, keep credit balances low, and check credit reports regularly to ensure accuracy.
Having multiple cards isn’t harmful if balances are paid on time and usage stays below 30 percent.
Contact creditors early to discuss hardship options or seek advice from a credit counselor.
Bankruptcy can discharge some debts, but it depends on the type and circumstances of the case.
Most negative entries remain for seven years under federal credit reporting laws.
Financial independence comes with responsibility. The early years of adulthood are when habits form, and understanding how to manage money wisely can prevent years of debt stress. By recognizing financial mistakes, building financial literacy, and learning about legal rights, young adults can secure a stronger financial future.
If your debt feels overwhelming and you’re unsure about the next step, professional guidance can help you explore your options. Debt Advisors Law Offices has been helping Wisconsin residents since 1995 with both legal and non-legal solutions for debt relief. Take the first step toward financial freedom today with a free consultation and get the clarity you deserve.
Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.
