3 Top Debt Problems Millennials Face And How To Effectively Avoid Them
Millennials are entering the workforce at increasing rates, and that’s a good thing! A fresh perspective and a sense of deep purpose can help revitalize a company, but there’s one major area where the millennials are struggling, and this has to do with debts.
The average millennial has a negative net-worth! Whether it’s an expensive four-year degree, credit card balances, or failure to comply with a complex tax codes, financial burdens can seriously narrow the horizons of a millennial in the early stages of their lives.
The cost of education is a weight that is drowning graduates entering the workforce
The cost of a college education has dramatically outpaced the rate of inflation in America. This is due, in large part, to the Federal Government’s subsidization of higher-education. Guaranteed loans to a very risky class of borrowers, creates an education market that isn’t motivated to remain cost-effective for students holding a blank check. Most college students lack the life experience to understand the crushing impact of debt.
The prevention of debt accumulation as part of the education system is important, but it’s equally important to focus on the types of degrees students are earning. An NBC report called attention to the dangerous trendline in education: students selecting a degree that doesn’t match their skills, personality or interest. This can be a recipe for failure in college, or a series of expensive degree changes.
Minimizing the cost of education, and focusing it on a track that a student will be successful at throughout their lifetime is important. A passionate-educated citizen is key to the prevention of unemployment or career stagnation.
Plastic money isn’t cheap, and it gets more expensive when times are tough
Credit cards are aggressively marketed on college campuses. The results were so damaging that US congress actually did something for once; passing the CARD Act of 2009. While blunted, the credit card brands and products remain one of the most aggressively marketed products in the country. Does it come as any surprise that millennials are facing a large credit card balance as part of their debt snowball?
With sky-high interest rates, late fees and deceivingly small minimum monthly payments, credit cards are the first thing millennials reduce payments on when times are tough. This multiplies the amount of interest charged; making difficult times even more expensive. Getting out of this financial hole is tough, and credit cards only make it more expensive.
Millennials lead hectic lives, but the IRS has just one job making sure taxes are paid in-full and on-time
Finding a place to live, traveling for weddings and family functions, finding a great job and just doing this thing called life, takes a huge amount of time and energy. It’s easy to miss a tax filing deadline, or forget to pay a tax bill in full, but the one agency that will always notice is the IRS, even if it takes them a few years to start hounding the delinquent taxpayer.
According to CuraDebt; a tax debt resolution agency, there are a variety of measures in place to help with both tax debt prevention and resolution. Requesting for Stay of Enforcement is usually the first step to take while untangling a tax debt disaster. This gives the taxpayer more time while investigating the source of the debt, penalties and interest.
But how can millennials prevent debt from becoming an issue in the first place?
Prevention of future financial difficulties in 3 simple steps
Debt prevention is key to creating long-term financial independence. Can you imagine a day when, instead of having to see what you can do, the only question that remains is what you want to do? Debt-free life is the way to go. And it’s even better once you have a well-funded emergency fund and retirement plan in place. Let’s take a closer look at a few of the steps for getting there:
1. Aggressively Focus on Debt Prevention
Easy Payments, Interest-Free Financing, Interest-Free Balance Transfers, and Fast Cash Now, should become phrases that make the hairs on the back of your neck stand on end. The debt cycle is real, and taking advantage of these offers only extends the time spent on the debt treadmill.
Want to know the golden rule to financial planning and success? Live on less than you earn, and if you can’t pay cash for it, you can’t afford it. More than 50% of Americans are living paycheck to paycheck. They could eliminate a lot of the stress in their life by following this simple rule.
2. Act to Quickly Resolve Unexpected Problems
Burying your head in the sand is the worst way to resolve a problem in your life. The prevention of a major disaster down the road starts with acting NOW! If you feel like you’re in over your head, reaching out to a qualified professional is an excellent way to get a fresh perspective on the problem, and develop a plan of action.
Not only do you gain a fresh perspective, but working with a pro can help you to avoid common pitfalls in resolving a financial burden.
3. Only Agree to Realistic Plans
Not all plans are created equal. Even the best plans can become unaffordable or unrealistic due to unexpected changes. It’s important to take a step back and focus on how realistic an idea or strategy is, before signing on the dotted line.
For example, a debtor will be less likely to offer a flexible solution if you’ve had difficulty honoring past agreements. Part of making your word your bond is only agreeing to things you can absolutely follow-through on. Don’t make the mistake of agreeing to an unrealistic plan, just to make the collection calls stop.
At the end of the day, millennials have survived a turbulent time in the world’s economy. The Great Recession hit home, but thankfully our economy is well on its way to better days. As more jobs become available, and millennials gain more life experience, these setbacks will become distant memories.