If you’re in a room of six millennials (people born between 1981 and 1996) at least four of them are making payments on one form of debt or another. The stress of financial debt is causing many millennials to delay milestones in life such as buying a home, getting married and starting a family. We’re taking a look at how the cycle affects millennials in their efforts to find financial success in an economy that is not exactly favorable for younger generations.
Not only are more people experiencing debt, but they are also taking out much larger loan amounts. This is largely due to low net worth combined with the inability to build up savings due to a mountain of bills and debts.
According to Business Insider, the average American millennial has a net worth of less than $8,000. This is a decrease of 34% since 1996, making millennials much worse off financially than their older counterparts. Those aged 18-35 are significantly less wealthy than any other generations were at their age – and this is true at any point in time from 1989 to 2007.
Even more, the annual salary of a millennial today is an estimated 20% lower than the average salary for a baby boomer at the same age (adjusted for inflation in 2015).
Because of this, millennials are facing financial burdens that previous generations haven’t had to navigate.
Compared to previous generations, millennials are much less likely to be able to buy a home. In the past few years, the U.S. has seen a drastic decline in homeownership among young people. Between 2005 and 2014 the housing market saw an 8% decrease in young people purchasing homes. The Federal Reserve references this decline to a steep rise in debt among young people. This kind of interruption in the status quo has ripple effects that reach far beyond one generation.
Millennials face three major types of debt: credit card debt, auto loans and student loans.
According to Experian, millennials have an average credit card debt of $4,700. Credit card debt has massively increased between 2018 and 2019, and while these smaller debts might go unnoticed for a while, they can add up quickly.
Auto loans are also a growing commitment among millennials. In 2019, the average auto debt among millennials reached $18,000. Like credit card debt, millennials saw the largest increase in auto debt between 2018 and 2019.
Student loans are the most significant source of debt for millennials. This is due to the record level price tags attached to earning a college education. The cost of attending university has doubled since the 1980s, according to Business Insider.
This spike in college prices is more than a marginal increase, and it is leaving an entire generation with crippling debt. Goalposts have shifted: Where previous generations’ idea of financial success was to become wealthy through savings and investments, most millennials simply want to become debt-free. This mentality has led to younger people delaying life milestones like marriage, having kids, and of course, buying a house.
There is no magic wand capable of erasing debt - doing so requires attention and consistent budgeting. However, there are apps designed to help manage debt.
Acorns helps users roll pennies and dimes into big-time investments. The app specializes in “micro-investing,” allowing you to begin savings and investment portfolios without sacrificing large chunks of income. The idea is that anyone can begin investing with whatever extra income they have available, even if it only means a single dollar a month. Acorn also offers a means of putting this towards retirement by pairing users with compatible Individual Retirement Accounts (IRA’s).
Another option is Mint¸ which lets you keep track of all your payments and bills while also budgeting for investments. Users can create a dashboard featuring daily reports on how their money is being spent, invested, and saved. The app even gives you current credit scores, and for a generation that has an average FICO score of 668, this is important for managing debt.
Money management apps are a great way to relieve some of the stress that comes with debt. However, there is a way to start knocking out your debt without spending any extra money or cutting back on expenses!
Debt Free Life is a life insurance vehicle that eliminates your debt while building your savings. This type of policy would be useful to any millennial struggling to break the shackles of debt while planning for a retirement that’s more fulfilling than spending your golden years paying off loans.
Debt Free Life is an insurance solution that builds cash value over time. As your cash value grows, you will be able to eliminate your debts one by one, and then save the remaining balance for retirement – without spending any additional money. Get in Touch With a Debt Free Life Consultant
The money you put into the policy is tax-free, which works towards creating retirement wealth after you’ve paid off debts. In nine years or less, you will be able to erase debt completely and have retirement savings to fund the lifestyle you deserve. Best of all, Debt Free Life is an affordable policy that doesn’t require any additional payments than you’re already making.
Beyond managing your debt, the Debt Free Life program could lessen the financial burden on your loved ones if you were to pass away unexpectedly.
Escaping the looming cloud of debt allows millennials a chance to focus on the more important things in life.
There’s no reason to delay purchasing a home or starting a family, and Debt Free Life will give you the power to take control over debt without having to navigate your financial burdens alone. You’re steps away from beginning your journey to a debt free life, so let’s get started today!