TOPIC # 2
It could be said that Millennials (people born between 1982 and 2004) are facing challenges that previous generations did not. Coming of age during a global financial recession, and a higher cost of living, are just a couple of examples of issues they have faced in the transition to adulthood. Financial security seems to be more difficult for this generation than previous ones. Large student loans, credit cards, student lines of credit and vehicle loans burden Millennials and can hold them back from pursuing financial independence.
Here are the top 5 challenges from a budgeting point of view:
#1 Debt - Many Millennials finish their post secondary education with a lot of debt. Obtaining credit while still in school has never been easier and in some cases, large lines of credit are offered to students pursuing certain career avenues. If you are not careful with this credit, you could graduate with crushing debt that can feel insurmountable.
#2 Underemployed - There was a time when a person could graduate with a degree and could find employment in their chosen field and work their way up or alternatively, they could work their way up in a company without any post secondary education. Now, at a minimum, you need that degree to even compete for that entry level position and often there’s nothing available in your chosen field.
Analyze where you are in your career. Are there opportunities in your current job with your current company? Can you make an impression on small tasks and stand out? Make a connection with a manager or partner who can mentor you. Can you connect with people in your field to see about making a switch? Networking within and outside of your company can help realize on your professional goals which translates into more income.
#3 Difficulty Achieving Financial Independence - Low-paying entry level jobs will prevent you from having financial independence. More and more 20-somethings have no choice but to live with their parents for longer and longer as their debt load and low income prohibit today’s cost of living, especially housing. A recent article describes a dramatic gap between the cost of owning a home and the ability of Canadian Millennials to afford one. For a typical Millennial, their income would have to double or average home prices would need to drop by 50% to become affordable.
What is the solution? After reviewing your career plans (see #2 above), set some realistic goals to help you plan to pay down debt and save towards moving out or purchasing a home. Write down your goals and value them. Over what time frame would you like to realize on those goals? It may mean having the support of your family a little longer while you tuck away those savings.
#4 Sticking to a budget - Sticking to a budget can be challenging at the best of times, but throw in underemployment, low income and high debt loads and it can be overwhelming. Having a plan to tackle the debt in a reasonable period of time will give you motivation to realize on your financial goals.
After setting financial goals, re-evaluate your budget to see if you can make it work. Go back to basics and ensure that you have a hold on your spending so that you can realize on your financial dreams. Adjust the timelines on your financial goals and debt repayment to make them work with your current income and adjust as your income grows.
#5 Re-evaluate - Every three months review your goals, your debt repayment plan and adjust accordingly. It is important to always know exactly what’s happening today and project for the future. Don’t be afraid to seek the advice of professionals to help you if you don’t feel you can do it on your own.
A Licensed Insolvency Trustee can assess your financial situation and help you determine the right course of action to deal with your debt.
Contact D. Thode & Associates today for a free consultation.