It’s no surprise that millennials have gotten a bad rap over the years. This generation sandwiched between Generations X and Z has been hit with quite the reputation over the years.
Many see millennials as well-educated dreamers, entitled job seekers, and (our favorite) opinionated bloggers—who still live in their parents’ basement. When you look closely, you’ll find that all three of these harsh labels are connected by one nasty truth: millennial debt (to the tune of over one trillion dollars).1
And while these stereotypes might be true for a small portion of millennials, they’re definitely not true for all.
Most Common Types of Millennial Debt
Despite what you may think, the most common type of millennial debt isn’t willy-nilly spending on avocado toast and music festival tickets. It’s student loans (ahem, have you heard of a little something called the student loan crisis?).2
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Millennials are highly educated—even more so than their grandparents’ generation.3 But those fancy degrees (and letters behind your name) always come wrapped in a huge price tag . . . and don’t always pay off. Not only did millennials opt for higher degrees, but they also opted into years of chipping away at a mountain of debt, whether they are using their fancy degrees or not. Ouch.
At the end of 2018, the average millennial debt (for 18–29-year-olds) reached a record high of over one trillion dollars—one trillion dollars! That’s the highest it’s been since 2007.4 Here’s the breakdown of millennial debt, from greatest to least:
- Student loans (taking up the majority)
- Home mortgages
- Credit cards
- Auto loans5
Sounds pretty bleak, right? Sure—if you don’t do anything about it.
Whether you are a millennial living paycheck to paycheck or you’re only able to pay minimum balances on your loans, there’s hope! You can pay off your debt once and for all!
Tips for Millennials to Get Out of Debt
That’s right, if you’re a millennial and staring bleakly into a future of paying back that expensive degree (that you may or may not be using), you’re not alone. Don’t give in to the lie that it’ll always be that way. You may have made bad decisions with money, or maybe you’ve been dealt a bad hand, but you can turn it around!
Let’s start by shifting mindsets. It’s time to get mad (at your debt), make a plan (and stick to it), and then run after it until it’s gone for good! We’ve got some tips that will help you do just that:
1. Get on a Zero-Based Budget
Did you ever see your mom or dad sit at the kitchen table with the calculator and checkbook every week? Yep, they were probably doing the family budget. Those weekly budget sessions let them know how much they were going to spend on groceries (and if you could, in fact, get those Oreos you were whining about).
Your mom or dad hopefully set the tone for how you should (or shouldn’t) handle your own finances now that you’re under your own roof and maybe even have a family to take care of. And if they didn’t? No problem—we’re here to show you how!
But seriously—we can’t stress enough how important it is to do a monthly budget. And we’re not just talking about a spreadsheet that you update once and never come back to. That’s not a budget. We’re talking about a zero-based budget.
When you do your budget, you should feel like you’ve just gotten a raise and maybe even find yourself thinking, Where did that money even come from? Not only that, a zero-based budget gives you control over your money by telling every single dollar where to go. Yep—it’s time to get bossy and take control of your money.
Don’t worry, you can still have that avocado toast—just make sure it’s in the budget! Check out EveryDollar and start your free budget (but maybe after you finish reading).
2. Use the Debt Snowball Method to Pay Off All Your Debts
This one might feel like we’re pouring salt in your wound. But as obvious as it is, we need to say it. When life happens, it’s so easy to believe that pushing those loans into forbearance is the best idea . . . for now.
But the longer those suckers are around, the more interest compounds and, well, the longer they’ll be around. No friend’s wedding, new car, or two-year backpacking trip is worth the amount of headache it will cost you later. Plus, now that you’ve done a budget, it’s time to get to work. What areas can you cut back in your spending temporarily so you can pay down your loans?
That’s where the debt snowball method comes in. List your debts, from smallest to largest (don’t worry about interest rates), and start attacking them with a vengeance. Once you get that first one paid off, roll that minimum payment into the next payment, and watch as it snowballs you toward debt freedom!
This is where a side hustle, working extra hours, and selling everything that’s not nailed down comes in. Trust us—it pays off.
3. Follow the 7 Baby Steps
Dave Ramsey put together a little something called the 7 Baby Steps when he was getting out of debt himself. And guess what—they work! Once you’re debt-free from everything (except the house), it’s time to start saving, investing and saving some more. And despite what you might have heard, you can become a millionaire.
The National Study of Millionaires speaks to this exactly: “But this does not mean that members of younger generations do not have the potential to become net-worth millionaires at some point. They may just need more time to earn and invest money so they can build more wealth. This research indicates that if members of younger generations are diligent over time, they can become net-worth millionaires in their own right.”
The future isn’t so bleak after all, is it? With some hard work (over time), you can live and give like no one else. Want more where this came from? Check out Financial Peace University. In nine lessons, you’ll learn how to save, pay off debt, and build wealth so you, too, can hit that million-dollar mark.