Living with debt isn’t just a personal struggle – it’s a reality that affects millions of Americans. The numbers tell a sobering story: 16% of young adults aged 18-24 are already facing debt collectors, their credit records marked before they’ve even had a chance to build their financial foundation. The burden only grows heavier with age, as interest compounds and manageable debt spirals into an overwhelming challenge.
What starts as a $1,000 credit card balance can double in just three years, leaving many feeling trapped in an endless cycle. But even the deepest financial holes have escape routes – it’s about finding the right strategies to climb out.
Handling debt collection is stressful. The constant calls from collectors and mounting interest as you see your credit score decline? It feels like you can never escape this difficult financial cycle.
But you can still turn your situation around with some alternative investment options. They won’t fix the problem overnight, but they can help you get on your feet back again and build financial security.
Debt and Its Challenges
Debt can come in many forms. Here are some examples to start with:
- Credit card – High interest rates are often your biggest enemy here. It quickly damages your credit score, and a missed payment can incur late fees fast.
- Personal loan – Similar to credit card debt, getting a personal loan can immediately balloon up from fees and interests.
- Student loan – Missing a student loan payment can also negatively impact your credit score. In some situations, other people faced wage garnishment and even legal action.
- Medical debt – Nearly 20% of Americans have medical debt due to high medical bills. As these situations can often be unplanned, even the most diligent financial planner can easily fall into one.
The challenge comes from conventional solutions. They often tell you to pay off your debt, you have to save. But you’re living paycheck to paycheck and barely covering your living expenses, it’s almost impossible to be able to:
- pay off your debt, and
- stash money into your savings account.
The income-debt gap is huge. “Skipping a coffee run” and “packing your lunch” advice doesn’t help.
Role of Alternative Investments
Think beyond stocks and bonds when it comes to building wealth. Alternatives can be especially valuable when you’re rebuilding your finances, offering different paths that might better suit your situation than traditional investments.
They are great options for building wealth while you pay off or recover from debt. Why? Diversification and the possibility of higher returns. Still, having a plan and starting small as you learn is important.
Alternative Investment Strategies
Putting money into real estate might appear unattainable if you’re handling debt. One of the most accessible entry points is through REITs (Real Estate Investment Trusts). This is the easiest option, starting at just $10 more or less. Additionally, it carries less risk. Other options include FHA loans and real estate crowdfunding. These are more liquid and require smaller initial investments.
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Commodities and Precious Metals
Next are precious metals and commodities, especially crucial during economic uncertainties. The great thing is that you can start small with American Silver Eagles. The entry point is more affordable than gold. You can start with a single ounce and even buy Silver Eagles online. Plus, it has government-backed security. Other options are physical metals like bullion or semi-numismatic coins. Something to keep in mind is having a secure storage solution for this route.
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Cryptocurrency and Blockchain Investments
Crypto is known to be volatile. But you can always build a secure plan. For one, start by being conservative. Small amounts like $5 to $10 are a good starting point, especially if you’re still learning. Go for dollar-cost averaging to minimize timing risks. You can also look into DeFi (Decentralized Finance) opportunities. Its liquidity gives you careful risk management, but you can still only spend funds you can afford to lose. Research, as always, is your best friend here.
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Peer-to-Peer (P2P) Lending and Crowdfunding
Investors (individual lenders) deal with borrowers directly. It’s a process that eliminates traditional banks in the picture. Here’s a twist: P2P lending lets you step into the lender’s shoes. Not just the borrower. Your savings account might earn a tiny 0.1% interest. However, lending through P2P platforms could earn 5-8% or more. You can start with as little as $25 and earn returns as borrowers make monthly payments. The annual returns of P2P lending could reach around 5-8%. The risks are higher as well.
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Private Equity and Venture Capital
Private equity and venture capital used to be exclusive for millionaires. But today, new platforms let you invest in promising startups with much smaller amounts of money. But we now have new platforms and regulations opening the doors for smaller investors. For example, small-scale private equities let you own shares in private businesses. Another is angel investing. The challenge? To start with, most startups fail. You have to face the reality that you might lose your invested money.
Key things to note:
- Never invest more than you can afford to lose
- They are illiquid, so commit for at least 5 to 10 years
- Spread risk and diversify
- Learn and only invest in industries you understand
- Have an emergency fund and build a debt management plan
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Side Hustles and Digital Assets
Side hustles and digital assets don’t require huge capital to start with. For instance, digital products are something you can sell repeatedly. Others are subscription models and creating content to earn extra income. They are scalable, and you can use that income to pay your debt or build your emergency savings.
Conclusion
Breaking free from debt involves making payments and building a new financial foundation. While alternative investments aren’t a quick fix for debt problems, they can be powerful tools in your long-term recovery strategy when approached thoughtfully and realistically.
The key is starting small where you are. If you’re dealing with debt collectors, first get your debt management plan in order. Then, choose one alternative investment strategy that fits your situation – whether that’s creating digital products from your experience, investing small amounts in REITs, or starting with a few silver coins. The goal isn’t to get rich quickly but to gradually build additional income streams that can help prevent future debt cycles.
Each small step moves you closer to your goals. Take action today, starting with whatever small step you can manage.
