They seek authentic connections and value experiences over material gain. They want to make a difference in their community, excel at their jobs and travel the world – and do it on their own terms. Instagram and Facebook are part of their DNA, and, if they want a meal or a ride, they turn to an app before they do anything else. Handy with technology, globally minded and aficionados of everything farm-to-table, they’re Millennials, and they’ve become the largest generation in the country with the most buying power.
On the surface, Millennials have a lot of advantages. But dig deeper and find a thorny problem. Many members of this generation are facing crippling personal debt, making it difficult for them to achieve the kind of long-term financial stability their parents and grandparents enjoyed. According to Northwestern Mutual’s 2018 Planning and Progress Study, Millennials between the ages of 25 and 34 carry a personal debt load of $42,000. And while student loans are part of the problem at an average of 16% of Millennial debt, the biggest single contributor is actually credit card debt, making up a full quarter of what this generation owes.
That finding doesn’t surprise Bank of St. Francisville Loan Assistant Shannon Felder, a Millennial herself. Shannon speculates that the ease by which young consumers can obtain a credit card, and the lack of education in schools about budgeting and how credit cards work, all contribute to Millennials falling too easily into debt.
“A lot of people my age are only making the minimum payment on their credit cards,” says Shannon. “They’re starting to get in over their heads, and they’ve got bad credit scores.”
Shannon has given a lot of thought to her generation’s financial situation, and believes it starts with a lack of awareness about budgeting.
“It’s so important to know what you have coming in, versus what you have going out,” she says. “If you’re aware of your budget, you can avoid a lot of problems.”
Shannon’s personal finance experience started with managing her student loans in college. She carefully tracked her expenses, income and debts, never allowing herself to spend more than she had.
“My friends used to laugh at me,” she said. “But now, being on this side of the business, I see how easy it is to let things get out of control. Before you buy something, you really have to ask, ‘how am I going to pay for this?’”
Indeed, with “free money” on every block and the internet, Millennials are susceptible to carrying multiple loans and credit cards. Say they want to make a new major purchase, like a new appliance, home repair or trip. If they’ve reached their credit card limit, they might seek out a cash infusion through a payday or unsecured loan. It brings in temporary money, but it really only introduces another monthly bill with a high interest rate. Moreover, as a borrower’s debt-to-income ratio grows further out of balance, his or her credit rating can further erode. This makes it more difficult to take that next step of buying a home, says Shannon.
“The best thing for a young person in this situation to do, is to come into the bank, and sit down with a loan officer,” says Shannon. “We can discuss how you can improve your debt to income ratio and work to raise your credit score.”
One of the most effective strategies for individuals with multiple loans is debt consolidation, says Shannon. Bank of St. Francisville offers competitive rates to help you consolidate your debts into a single monthly note that’s engineered to be affordable for your budget.
Shannon also suggests checking your credit scores regularly.
“Better credit is going to yield a better interest rate when you do buy your first home,” says Shannon, who checks her own credit score weekly. “That makes a big difference in what you spend over time, so it’s really important to keep good credit and to do anything you can to improve it.”
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