Millennial Debt: How to Improve Your Financial ReadinessNov 07, 2018
These days, it’s hard to hear the word “millennial” without “debt” far behind it, and with good reason. Being a millennial, especially in the GTA, comes with its own set of financial challenges, which is why being financially ready is key to staying afloat.
Dealt a tough hand?
Compared to older generations like the boomers, 81 per cent of millennials feel they are worse off financially than their parents – and they might be right. According to BDO Canada’s Affordability Index survey, the 30s are ranked as the most expensive decade.
As for significant milestones, which often happen in the late 20s and early 30s, millennials say they feel either poor or terribly prepared financially to purchase a home, have kids, save for retirement or cover unexpected costs.
When it comes to debt, nearly 30 per cent of millennials are still paying off student loans. In addition, 34 per cent say they are overwhelmed by their non-mortgage debt and don’t know what to do about it.
How to prepare your finances for what’s to come
Millennial and debt don’t need to be synonymous. Even though some expenses are outside your control, like housing prices or inflation, you can definitely take control of your personal finances. Here’s how:
- Set a budget and stick to it. Finding it hard to keep track of what you’re spending each month? Use a budgeting app (like Mint or YNAB) to keep your money goals mobile or jot out your monthly budget on a worksheet. Following a budget means you’ll be less likely to overspend, and it will also allow you to cut back in certain areas.
- Reduce impulse and mindless spending. Maybe your vice is new tech or Amazon Prime. The fact is, mindless spending can blow your budget every time. Millennials are the age group most likely to admit that they spend more on wants than they should. Assess your budget and see which areas are costing you the most, and become more mindful about your purchases. One way to curb your impulse might be to wait 24 hours before hitting checkout on your online shopping cart.
- Budget for your priorities. One-in-five millennials have delayed having kids over the past two years because they can’t afford it. Depending on your priorities, set aside savings each month or each paycheque for those big “wants” in your life. This might mean a down payment, a new car or a new couch. Whatever it is, make sure you’re adding to savings so you can afford it when the time comes.
Don’t let debt be an obstacle
Our survey outlined that lack of affordability is what’s holding millennials back from their goals, but debt is also a significant factor. When planning your budget, it’s essential to make debt repayment a priority along with savings, so you’re able to meet your goals. And, for those millennials who are overwhelmed by debt and don’t know what to do, there are options.
Besides budgeting and reducing expenses, you can commit to a DIY debt control method such as the debt snowball or debt avalanche so you can pay down those balances quicker. Another option is to speak with a debt professional such as a Licensed Insolvency Trustee who can recommend a variety of repayment methods. To compare your options online, use this handy repayment options calculator.