I recently asked my millennial son at what age a person is considered an adult. He replied, “When they’re a year older than me.” I guess he just doesn’t want to grow up—but the truth is, millennials are growing up, and believe it or not, so is their debt!
From credit card and cell phone bills to vehicle and payday loans, millennials have accumulated a lot of debt, and the amount is increasing year-over-year. According to a recent report from TransUnion, overall non-mortgage debt balances grew by 4.3 percent in 2017; however, millennials had an annual increase of 12.6 percent!
Financial Challenges for Millennials
Many people still think of millennials as very young adults—even teenagers—but that’s no longer true. Millennials are the generation born between 1981 and 1996, meaning the oldest are entering their late thirties and even the youngest are nearing their mid-twenties. So when it comes to their finances, they can no longer say, “It doesn’t matter, I have no responsibilities.” If they don’t already have them, they probably will very soon, whether it’s a mortgage or children. Like it or not, the carefree days of their youth are all but gone, replaced with today’s very real financial reality. Unfortunately, things aren’t looking too rosy for millennials.
A 2017 BMO Wealth Management report said millennials have poor financial literacy which could hold them back, impacting their ability to attain the financial independence and success they desire. According to that same BMO report, millennials indicated that addressing personal matters, such as job security, relationships, and other living situations, was more important than learning about finances.
Millennials are also facing a different set of financial challenges than previous generations, such as the rising shift to short-term contract work over long-term stable employment. Gone are the days of retiring from a job held since graduation, which means financial literacy is becoming a critical life skill. Before they find themselves trying to dig their way out of a financial hole, now is the time for millennials to learn to live within their means.
Millennials and Money Management
Financial literacy is more than just knowing how to budget. It’s about understanding expenses, assets and income, but also knowing about taxes, different types of bank accounts, and how to properly invest money to meet short- and long-term goals. As we move into different phases of our lives, there are a whole different set of financial skills and tools that we need to learn, such as how to save for a home and manage money in a relationship.
If you’re a millennial, know that despite poor financial decisions in the past, it’s never too late to turn things around (we all know life isn’t going to get any cheaper). That’s why it’s important to find ways to decrease your expenses and possibly increase your income to pay down debt.
6 Ways to Take Control of Debt
Getting control of your finances takes time and effort, but by starting now you'll be in a much better place when responsibility looms.
- Get a clear picture of where you stand financially by establishing your monthly income, expenses and monthly debt payments, as well as your overall debt balance. Lucky for you there are free tools to help you with this.
- Review your expenses to see where changes can be made; a Budget Calculator can work wonders in this area. A few other tips: Buy a thermos and take your coffee to work instead of stopping at Starbucks (this alone can save you over $700 a year); stream your movies at home and skip the theater prices; monitor your grocery expenses by menu planning; shop with a list and always price match.
- Be realistic about what you can afford to spend. Many recent graduates are anxious to get their own place, but a roommate can help share in the rental expenses. Or, perhaps you can live at home a bit longer and pay reduced room and board. This could help you pay down debts while saving for future goals.
- Review your transportation expenses. Public transit and possibly Uber can save you money compared to vehicle ownership. Remember, there’s more to owning a car than gas and loan payments; there’s also insurance, maintenance, and licensing to think about, which can really add up.
- Look at ways to increase your income, whether that’s getting a side hustle, joining the gig economy or getting a second part-time job.
- Look into different savings products and methods, including different types of bank accounts, TFSAs and RRSPs. Learn about different ways to invest your money and make it grow at the rate you need it to to achieve your goals, and how best to pay down your debt. There’s no such thing as too much research.
Debt affects everyone, whether you’re a millennial or getting ready to retire. Regardless of whatever debt issues you might be facing, just know that you are not alone. We have helped everyone from professional athletes, actors, and business executives to single mothers living on minimum wage. Debt doesn’t discriminate—it’s one of the few things that doesn’t—so it’s important to reach out for help whenever you need it. It’s never too late to learn to be debt free!