Beating Millennial Debt: How to Get Ready to Move OutOct 21, 2018
For a millennial generation saddled with debt, the roadmap of life milestones isn’t as simple as The Game of Life made it out to be. The gaps in time between education, moving out, getting married, buying a home, and retiring are getting longer for some, and more challenging for many.
In fact, according to our inaugural Affordability Index, young Canadians aged 18 to 34 are having a hard time affording major life events every step of the way. While roughly half of Canadians feel they’re not sufficiently prepared for life events, the majority of millennials say they’re “poorly” or “terribly unprepared” for purchasing a home (64 per cent), having children (57 per cent), and retirement (67 per cent).
According to this Canadian Affordability Index, one indicator of thilack of savings comes in how much debt those in Generation X are carrying. A concerning 83 per cent of those in generation have some debt — the largest percentage of any age group. Among that portion, six in ten are carrying credit card debt.
Pressuring millennials and Gen Xers into this predicament are rising tuition costs and challenging cost of living increases. Backed into a corner, one-third of millennial respondents to the Index say that they have overwhelming amounts of debt and don’t know what to do about it.
So, what can this generation do to afford major milestones?
New mortgage rules in Canada require a stress test, even for those with a down payment of 20 per cent or more. This means many are changing plans to settle for a less expensive house or waiting even longer for taking the plunge. For millennials, getting to this point of savings means finding better ways to get debt relief.
Start by reviewing your finances. According to the Affordability Index, half of Canadians say that reducing debt is a top-three priority for them. Turning this priority into getting help with debt starts by reviewing your finances. Ensure you have a household budget and start making a log of your purchases. Over time, you’ll be able to see spending trends and be able to adjust your lifestyle. Apps like Mint and You Need a Budget can make this easier.
Seek help from a professional. Once you decide you want to save for your first home, talking to a financial advisor can help. An advisor can help you set savings goals and reinforce life-long financial literacy.
For re-structuring your budget, a non-profit credit counsellor can help you create better spending goals. This can help you establish an emergency fund and put more money toward buying a home.
For dealing with overwhelming debt, a Licensed Insolvency Trustee (LIT) can present a bevy of solutions. Some of these are formal, such as declaring bankruptcy or a consumer proposal, but an LIT can also point you in the direction of counselling, a consolidation loan, or even do-it-yourself budgeting methods.
These professionals act as financial education for young people who may not otherwise know what to do with their debt. While the Affordability Index shows that there are bright sides to millennial debt — 4-in-10 Canadians have made some sacrifice to reduce debt — there is a lot of literacy needed before you’re financially prepared to buy a home.