2 Ways to Shed Millennial Debt This YearNov 07, 2018
Millennials are a unique group when it comes to finances. Nearly 30 per cent are carrying student loan debt, and with lower paying jobs in a competitive market, that debt can be difficult to shake. There are unique factors that millennials (and their debt) have when compared to other generations, and those differences can act as clues about how millennials can shed their debt.
Affordability is an ongoing battle for millennials — paying for post-secondary education, transportation and housing or starting a family common challenges.
Our recently released BDO Canada Affordability Index found that one-in-five millennials have put off having kids for the last two years because it’s unaffordable.
In fact, millennials may be the first generation to view having kids as a “want”, rather than a “need”, because supporting a family is something they consider beyond their financial reach.
We also found that eight-in-10 millennials believe they’ll have to work much longer than their parents and grandparents before they can afford to retire. Alarmingly, millennials are also less likely to see saving for retirement as a need, compared to other generations before them.
Putting off saving for retirement — even if you think retirement is farther off than age 65 — can mean you’re flirting with financial disaster.
November is Financial Literacy Month (FLM), and it’s a great time to give some much-needed attention to those ignored parts of your finances, like retirement planning. The Financial Consumer Agency of Canada has retirement plan information that can take some of the stress out of saving for retirement.
If you’re a millennial with debt struggles, here are two ways you can start to shed the debt this year.
- Review your “wants” with a critical eye
Millennials are more likely to admit that they spend more than they should on wants, rather than needs (43 per cent admit to overspending). One of the simplest ways to reduce overspending on non-essentials is to reframe how you view them in the first place.
Adopting a minimalist lifestyle has a lot of rewards. Many people claim they feel more mentally and emotionally stable and focused, and spending and debt are reduced.
Jordann from My Alternate Life talks about her journey to Stop Wanting Things.
Reducing the physical clutter in your life can clear the path to determining your most important financial goals. The more debt you reduce, the more savings you’ll gain, and the sooner you’ll be able to achieve those goals.
One of goals should be saving for retirement. (Nearly half of millennials (47 per cent) told us they have no retirement savings at all.) Start by opening up an RRSP if you don’t already have one, or contributing more to your company-sponsored pension plan, or other retirement investment.
Make your money mean something, instead of collecting dust in the form of under-utilized or unnecessary purchases. For some people, the “rule of 24” can get them on the right track. Before you make a purchase that is a want, give yourself 24 hours. You might find that the desire fades long before the 24 is up.
- Find your debt-fighting strategy
Debt can feel so overwhelming that it’s difficult to focus your efforts. But a good strategy can go a long way. It’ll help you to keep calm so that you can make an impact and see serious results.
The debt snowball and debt avalanche are two popular strategies that can help.
Give some thought to your debt reduction goals and what will motivate you to achieve them, so you feel excited rather than resentful of the process.
Making an effort to get your finances on track before year’s end can set you up for success in 2019. Millennials may face some very real financial struggles, but reducing debt can open up greater opportunities in the future.