Alex is a typical 20-year-old full-time college student with typical full-time college debt. The…Alex is a typical 20-year-old full-time college student with typical full-time college debt. The menial pay he acquired during his summer job provided a tenth of what a doctor’s paycheck would amount to. As Alex notes the lack of zeros in his paycheck’s “amount” section, he wonders if he will ever be able to pay off his Mount Vesuvius-sized debt.

But Alex has hope. He uses several money-management strategies to get a head start on his financial situation while still in college. And so can you.

In the midst of distractions, ranging from hours of studying during the week to hours of partying on the weekend, Alex has an excuse, just like you, to avoid beginning to climb the debt mountain. But he’s prepared himself for life after college, nonetheless.

Use less plastic

Money is always a little tight for Alex and swiping a credit card is a quick way to settle a large receipt total. He uses his credit card to assist with his books as well, adding to the debt mountain. And he’s not alone.

With the average undergraduate carrying $3,173 in credit card debt, according to a 2009 national study conducted by Sallie Mae, it’s easy for Alex to put off climbing the mountain of debt for another day. The same study found that a staggering 92 percent of undergraduates use credit cards to pay for educational expenses, with 30 percent of that number specifically allocated to college tuition.

But Alex knows he must resist. By getting into the habit of using cash instead of a credit card, Alex will very rarely be tempted to pay for another large amount in a quick-fix fashion. By knowing what your finances are before you spend them, you, too, can resist the urge to keep yourself out of further debt.

Create a cost-of-living budget

To know his finances, Alex maintains a cost-of-living budget outlining his monthly and yearly bills. He compares monies owed to his income. A computer software program with the ability to edit rows and columns — such as Microsoft Excel — proves to be a useful tool when creating a budget. With this budget in place, he can cut certain costs and allocate certain funds for his priorities — number one being getting his mountain of debt paid off.

With a better understanding of his finances and a plan in place to pay off his debt, Alex can allocate a certain portion of his income to a savings account.

Establish an emergency savings fund

There is no greater stress than feeling that you are balancing on a tightrope in which one catastrophic financial event could wipe your account clean. Alex takes a hard look at his budget and manages to cut his entertainment costs by $20 per paycheck. Alex is paid biweekly, so this strategy saves him $40 a month.

The beauty of having emergency money on hand should be obvious, and it only takes a little discipline to compile some. Stick to a monetary amount or perhaps a percentage of every dollar of income (whether this be from a paycheck or mowing the lawn), and you’ll be well on your way to establishing an emergency savings fund and possibly even opening another kind of fund as well.

Invest in a mutual fund

Investing in a company through the stock market can be risky. It’s usually associated with a high-risk, high-reward gamble, win which money invested relies on the invested-in company’s performance. Alex has had very limited exposure to the stock market, but he knows that a little money now can be worth more in the future.

A mutual fund is a group of stocks or other types of assets that are professionally managed. While there are a few different types of mutual funds, they tend to usually associate themselves with a lower-risk, lower-reward type of gamble. The beauty of Alex being only 20 is that he can choose a “low-risk” mutual fund and still have significant gains over the course of a lifetime.

Typically the longer money stays invested, the more it grows. Many who have been investing for some time usually come to the same conclusion: “I wish I had started earlier.”

In a simple Certificate-of-Deposit (CD) scenario, Alex’s initial investment of $10,000 over 10 years could be turned into $14,800 with an annual interest rate of 4 percent. If Alex had delayed investing and started five years later, the annual interest rate would drop to 2 percent, leaving him with only $11,000 in ten years.

Sticking to the plan

Even when Alex is a bit tight on cash, with funds tied up in mutual and emergency funds, he strongly resists the urge to borrow additional money for everyday items such as college tuition, a car and rent. His cost-of-living budget is his guide and a great starting point for Alex to truly discover what funds he has available.

The earlier you act like Alex and stick to a newly acquired plan to start climbing the mountain, the faster you, too, will be able to conquer the large task at hand.

Write Jonathan at [email protected].