According to a recent Forbes article, Millennials may not be doing so badly when it comes to handling their finances. That’s interesting news considering about one-third of Americans—77 million people—have a report of a debt in collections. Further, the average adult owes around $5,178. Despite a poor economic outlook since Millennials began entering the workforce (rising student loan debt, higher month-to-month credit card balances, historically lower wages, etc.) a more recent study found at least two surprising things. First, the average Millennial credit score increased by 4 points since 2016. Second, Millennials lowered their household debt by 8% during the same time.
But at least Millennials may be using their tech savviness to slowly begin digging themselves out of a hole. The article notes that online support communities are popping up, where people are posting budget spreadsheets and goals to encourage others looking for guidance. While this has been the case likely beyond the Millennial generation, it’s obvious to me that Millennials view debt as a necessary way to obtain quality of life. In other words, Millennials already have so much debt entering adulthood, they think, how is a little more debt going to hurt? I have even heard this logic in law school. A class mate stood up when referring to their student loan obligations and funding a study abroad trip and stated “[w]e are already going to have X amount in student loans, what’s a few thousand dollars more?” Because financing a car or getting an education is not generally paid for out-of-pocket, this type of “sinking cost fallacy” is all to a reality for most Millennials as the article points out.
I guess the baby steps comment I made earlier was appropriate, as many Millennials are using Dave Ramsey’s “7 baby steps” as the best way to slowly but surely start to change your financial outlook. The baby steps include:
- save $1,000 in an emergency fund;
- pay off all debt using the snowball method;
- save 3-6 months of living expenses;
- invest 15% of your household income into retirement;
- start saving for college;
- pay off your home early; and
- build wealth and give generously.
The old saying that you have to start somewhere is aptly appropriate for us as Millennials and debt. Still, you may have tried these steps (or others) and cannot get relief from your debt problems. If so, we can help. Don’t hesitate to call one of our offices nearest you and set up an appointment to speak with an attorney.