Millennials, those born between 1981 and 1996, are buckling under debt.
One of the most common traits among this demographic is their struggle to keep on top of student and credit card related debt. Millennials are deeply impacted by issues such as the rising cost of living, work shortages, job insecurity, and exorbitant university fees.
A generation most stereotyped as being lazy and more likely to spend their savings on avocado toast, millennials are feeling the brunt of nontraditional living by carrying a significant amount of financial strain and having difficulty managing it.
The Most Common Debt Among Millennials
Student loan debts are ubiquitous among the millennial generation, but it isn’t the main perpetrator behind their debt.
Instead, the biggest source of debt for one in four millennials is credit card debt.
In a recent study about generational spending habits, the most common type of debts across millennials surveyed are credit cards (52% of survey respondents), personal loans (29% of survey respondents), and car loans (18% of survey respondents).
These findings are interesting considering credit card ownership among youths has declined in recent years, with a study by Afterpay revealing 90% of millennials who were avoiding credit cards were doing so because of a preference to use their own money, to avoid interest and extra fee payments, and to have more control over their spending.
One of the reasons so many millennials are struggling with credit card debt, despite lower numbers of credit cardholders among the generation, is due to financial mismanagement.
In a survey that polled 2,096 Americans about their financial habits, more than half of millennial respondents have credit card debt. Of those surveyed, 68% stated they have some or a lot of stress about this debt, while 30% stated they have little or no stress about their credit card debt at all.
This may be because of the millennials who do have credit card debt, many of them don’t owe a lot. Another reason is those who do owe credit card debt, don’t know how expensive it really is.
Why Are Young People Struggling To Manage Their Debt?
Despite credit card debt being the most common debt among millennials, around 22% don’t know the interest rate they’re being charged.
Furthermore, many of these millennials are unaware of how much their monthly income goes toward paying off their personal debt.
The millennial generation is constantly struggling to find a balance between spending and saving, with many spending more than their income allows.
The buy now, pay later schemes aren’t helping to instill good financial management among these younger generations, either. These platforms are attractive to a lot of consumers, but it exacerbates an already unhealthy habit among millennials of spending more than they can afford.
On top of this financial mismanagement prevalent among millennials, they also face unique financial burdens. Unlike the generations prior, millennials face higher student debt and job insecurity.
Where boomers lived in an era of free education and affordable housing, millennials are struggling to find enough work to pay off their bills and save. 12% of millennials are currently underemployed while owing twice the student debt than that of their predecessors. They also face housing costs eight times the average household income.
How Millennials Can Get On Top Of Their Debt
Taking the right steps toward avoiding debt is the best thing millennials can do to scrap debt altogether.
One of these actions for the millennials and a chance to make some extra money or even to earn a higher salary to cover their expenses and to reduce the use of the credit card is to look for a job outside of their living area, or even outside the country. Many worldwide companies offer relocation packaging or for the candidates who cannot or would not move remote job possibilities. Multilingual jobs get on top of this type of search, since speaking English and at least one additional language can put the candidate in high demand. So, the first step to get out of debt is to find the right job, possibly in another country with lower taxes and lower housing costs. Multilingual jobs can help millennials not just earn some money, but also travel which is very much desirable by a big part of them.
While statistics on credit card debt can make credit cards appear evil, millennials can still own a credit card granted they learn to use it more responsibly.
Having a good idea about the different credit cards available as well as how to stay on top of debt is essential for millennials who wish to avoid financial hardship.
For those who are currently facing credit card debt, there are ways to take control.
Credit cards often have higher interest rates, which can prolong your repayment schedule if you don’t stay on top of it. Credit card debt can also damage your credit score, affecting future financial decisions such as getting a home loan.
To pay off debt quickly, you can ask for a lower interest rate, consolidate your debts into one single loan (if you have multiple credit card debt) or take out a personal loan which will give you cash to pay off your outstanding balance.
The most important thing is to take immediate action in reducing these debts now and to prevent debt from accumulating in the future.
Make A Change
Millennials face rising debts due to credit cards and their inability to properly manage their finances. Credit cards make it easier to justify overspending, leading to a vicious cycle of debt among younger generations.
While millennials are slowly doing away with credit cards, a lot of those who do still use them are unaware of how much they owe. In the end, millennials can get rid of credit card debt by learning to not spend more than they earn and to not spend more than they pay off. Changing spending habits and practicing better financial management can help millennials to ease the financial burden they face.