How do you erase debt?
Public policy organization Demos released a report in 2010 that declared Generation Y (aka millennials) will likely be the first generation in the last 100 years to end up worse off than their parents financially. A good number of millennials’ parents bought their first home and started families in their late teens and early 20s. Today, 26 percent of Americans aged 25 to 34 still live with their parents, according to the report.
The reasons for this are not concrete, but many experts offer similar sentiments. A Huffington Post article called millennials “entitled yuppies” who simply expect everything to be handed to them. Forbes took it a step further, calling Generation Y “lazy and entitled.” Whether any of this ties to the mounting debt and gloomy financial outlook for millennials is debatable. But 70 percent of millennials said they are not saving any money at all, according to MetLife; and Fidelity found that the average young adult has three credit cards, with 20 percent of those individuals carrying balances exceeding $10,000.
Despite poor economic conditions and limited employment opportunities, it is ultimately the individual’s responsibility to take control of his or her financial situation. Here are three simple tips that can help get millennials started on a path toward a financially secure future.
1. Change Your Mindset
Researchers at San Diego State University concluded that millennials are more materialistic and less willing to work hard than previous generations. But professor and co-author of the study, Jean Twenge told CTV (Canada) that this is more a product of their environment. The constant inundation of advertising, along with a growing gap between work ethic and materialism, are the primary culprits, she said.
A simple solution to this: read more. Put the smartphone down, turn off the television and read about something that piques your interest. This will not only give your brain a break from advertising, but studies have shown that reading can fight off the onset of Alzheimer’s disease later in life.
Instead of playing video games or shopping at the mall for things you can’t afford anyway, volunteer at a local homeless shelter or the Boys & Girls Club. Volunteering boosts self-confidence and even career opportunities. The London School of Economics determined that the more people volunteered, the happier they were overall as well.
Now that your mind is thinking differently, it’s time to apply that to your finances. A new Coach purse or pair of Lebrons will impress your friends and maybe attract your next love interest, but these things will also add to your already-mounting credit card debt. Believe it or not, you can find practically new, brand-name clothing at your local Goodwill store for a fraction of the price you’ll pay at the mall. Some people cannot stand the idea of previously worn clothing, but even if you spend a few extra dollars to get them professionally cleaned, it will still come out less expensive in the long run.
The same principle goes for other luxuries in your life you currently may consider necessities. Once your car is paid off, simply maintain it. No sense in taking on another car payment because you want something new and stylish. Your iPhone 5 will work just fine even when the 6 and 7 come out. And eating out should be reserved for very special occasions only.
3. Take Financial Inventory
Pull a credit report from one of the many free websites and see where you stand. The more cards you have that are close to the credit limit, the lower your credit score will be. Find ways to pay off the smaller card balances completely and pay down the large ones in time. Are you due to receive future payments from a structured settlement or annuity policy? There are companies, such as the people behind 877cashnow.com, which can purchase future payments and give you a lump sum of cash sooner. This can be used to pay down debt or even for a down payment on a home. If student loan payments are eating too much into your monthly income, apply for a deferment or ask for an income-based payment plan.
Debt, and the stress that comes along with it, will not go away overnight. But the sooner you start the process, the sooner you’ll see results.