Despite Owing $36,000 in Debt, Study Shows That Millennials Do Not Prioritize Debt Repayment
Many young people are deep in debt. Indeed, between all of life’s expenses, credit cards, and student loans
Indeed, new data released by Northwestern Mutual’s 2018 Planning and Progress Study has shown that millennials who have debt carry roughly $36,000 and a whopping 34 percent of their monthly expenditure is directed towards paying off the aforementioned debt.
Indeed, this is quite similar to the amount of debt that past generations have, as was recorded by the survey. That being said, baby boomers that have debt hold about $39,000 with Gen-Xers holding about 36,000.
Debt Not a Priority
Nevertheless, when compared to their slightly aged counterparts, a reduction in debt has not been the no. 1 priority for these millennials.
Instead, when questioned about their top priorities and goals, a majority of the individuals surveyed (about 54 percent of them) admitted that saving enough money to achieve a major goal in their life, such as buying a house, or even getting married, was the endgame.
Indeed, only have of the 49 percent acknowledged debt repayment as part of the answer.
In contrast, about 53 percent of boomers and 55 percent of Gen-Xers mentioned debt reduction as part of their priorities.
As a matter of fact, it was determined to be the most prevalent response in both generations.
That being said, other priorities of a financial manner that were deemed to be important for millennials included reviewing their tax strategies, analyzing their retirement plan contributions, and coming up with a relevant budget.
Dealing with the Tough Financial Environment
Nevertheless, these individuals have to accept the rising costs of key expenses such as rent and colleges. Moreover, Northwestern Mutual also understands that they have to focus on achieving their goals and not letting debt be a hindrance to them doing so.
Indeed, director of planning at Northwestern Mutual, Emily Holbrook comments on this, stating that a majority of millennials have understood and passed the most fundamental step required in securing their future, which is understanding that they need to have a plan in place so that they can make their goals a reality.
After this, it becomes much easier to ensure that they retain confidence in the path they have selected to ensure that they are able to shape their lives according to their own thoughts and actions.
That being said, if one is in the process of looking to end their debt, experts normally recommend that you utilize two common strategies; one of them being the snowball method while the other being the avalanche method.
How to Deal with Multiple Debts
In terms of the numbers, the most effective way to end your debt is to adopt the avalanche method, where you start by listing your debts starting from the highest one all the one to the lowest in terms of interest rates
After this, you start by then paying the minimum balance on all of them, and then pump as much money as you can to the one that contains the highest interest rate.
That being said, researchers from the Harvard Business Review discovered that the snowball method is actually quite an effective method primarily because it’s much simpler for individuals to stick with.
To make this strategy work, you will first need to list each and every debt and its amount on a piece of paper from the smallest to the largest.
After this is done, you then pay the minimum balance for all of the debts except the one with the least value. On this one, you then dedicate as much money as possible every month to sure that the smallest debts is finally settled. After completing it, you then move to the next smallest debt to repay it.
The idea behind the strategy is to ensure that you have the momentum to repay all your debts which will give you the motivation to have all of them completed.
Handling Debt Is up to You
Nevertheless, analysts have advises that at the end of the day, one should employ the strategy that works best for them.
Indeed, paying off one’s debts is one of the most fundamental ways to ensure that your financial freedom is secured in the future. With issues such as purchasing for a home and saving for a retirement being key, it is only logical that most generations are working hard to trim their debts off.
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